8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

____________________________________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

____________________________________________________________

Date of Report (Date of earliest event reported): November 8, 2010

HealthWarehouse.com, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-13117	22-2413505
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)
100 Commerce Boulevard
Cincinnati, Ohio		45140
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:  (513) 618-0911

________________________

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 DFR 240.14a-12)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 DFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into A Material Definitive Agreement.

On November 8, 2010, HealthWarehouse.com, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with four accredited investors (the “Investors”) and sold certain securities to the Investors in a non-public offering under Section 4(2) and under Rule 506 of Regulation D under the Securities Act of 1933.  Under the terms of the Purchase Agreement, the Company sold a total of 349,392 newly authorized shares of $0.001 par value Series B preferred stock (the “Series B Preferred Stock”) to the Investors at $9.45 per share for an aggregate price of approximately $3,300,000.  The Company also entered into a separate Loan and Security Agreement dated November 8, 2010 with two of the Investors (the “Loan Agreement”).  Under the terms of the Loan Agreement and the Purchase Agreement, the Company sold convertible promissory notes to those Investors in the aggregate principal amount of $1,000,000 (the “Convertible Notes”).  Under the terms of the Purchase Agreement, the Company also issued warrants to the Investors, pro rata to their investment amounts, to purchase an aggregate of 1,228,744 shares of the Company’s $0.001 par value common stock (the “Common Stock”) at an exercise price of $3.00 per share (the “Warrants”).  The Purchase Agreement contains customary representations and warranties about the Company and its business operations, and customary post-closing indemnification and other covenants.  The net proceeds from the sale of the Series B Preferred Stock and Convertible Notes will be used by the Company to expand its online presence, upgrade its technology infrastructure, and pay existing indebtedness and accrued expenses, and for general working capital purposes.

On November 8, 2010, the Company’s Board of Directors approved and the Company filed a Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of Delaware fixing the rights, preferences and restrictions of the Series B Preferred Stock (the “Certificate of Designation”).  The Certificate of Designation designates 625,000 shares of the Company’s preferred stock as Series B Preferred Stock.  Each share of outstanding Series B Preferred Stock is entitled to an annual preferential dividend of 7% of the original issue price of $9.45 per share (the “Original Issue Price”), payable on January 1 of each year, or on a sale or liquidation of the Company or conversion of the Series B Preferred Stock (the “Annual Dividend”).  The Annual Dividend can be paid in cash or in additional shares of Series B Preferred Stock valued at the Original Issue Price.  The Certificate of Designation required the Company to expand its Board to five members, and the holders of Series B Preferred Stock have the right to elect one director.  The holders of Series B Preferred Stock are entitled to vote on an as-converted basis with the holders of the Company’s Common Stock as a single class on general matters requiring a stockholder vote, and are entitled to vote as a separate class on specific matters affecting the rights and preferences of Series B Preferred Stock.  The holders of Series B Preferred Stock are entitled to a preferential liquidating distribution upon the sale or liquidation of the Company, equal to the Original Issue Price per share plus accrued Annual Dividends (the “Liquidation Preference”).  After receiving the Liquidation Preference, the holders of Series B Preferred Stock are entitled to participate in any remaining liquidating distributions on an as-converted basis with the holders of the Common Stock.  The Series B Preferred Stock may be converted at any time, in whole or in part, into shares of Common Stock at an initial conversion price of $1.89 per share (the “Conversion Price”).  The Conversion Price is subject to customary adjustments and anti-dilution protection provisions.  The Series B Preferred Stock is subject to mandatory conversion to Common Stock at the Conversion Price by a vote of the holders of a majority of the Series B Preferred Stock, or if the Company achieves certain market capitalization, trading price, and trading volume targets.

The Convertible Notes bear interest at the rate of 7% per annum compounded annually.  The principal amount and all accrued interest on the Convertible Notes are payable on December 31, 2012, or earlier on an event of default or a sale or liquidation of the Company.  The principal amount and accrued interest on the Convertible Notes may be converted at any time into shares of Series B Preferred Stock at a conversion price equal to the Original Issue Price per share, as adjusted.  If all of the shares of Series B Preferred Stock are automatically converted into Common Stock under the terms of the Certificate of Designation, then the Convertible Notes will also be converted into shares of Common Stock at the same time and on the same basis.  The Convertible Notes may not be pre-paid prior to their maturity date without the consent of the Convertible Note holders.  Under the Loan Agreement, the Company granted the Convertible Note holders a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to pay the Convertible Notes.  The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Convertible Note Holders’ consent, including restrictions on incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses.  The payment of the Convertible Notes may be accelerated prior to their maturity dates upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties.

Each Warrant may be exercised in whole or in part and from time to time for a term of five years from its grant date.  The Warrants contain customary purchase price adjustment provisions.  The Warrants are transferable in whole or in part, so long as the transfers comply with applicable securities laws.

On November 8, 2010, the Company and the Investors also entered into an Investor Rights Agreement (the “Rights Agreement”).  Under the Rights Agreement, the Investors have certain demand registration rights with respect to the Common Stock underlying the Series B Preferred Stock, the Convertible Notes and the Warrants (the “Registerable Securities”).  The demand registration rights are applicable after the earlier of three years or after the Common Stock is first listed or quoted on a national securities exchange.  Upon exercise of the demand registration rights, the Company will be obligated to prepare and file with the U.S. Securities and Exchange Commission a registration statement sufficient to permit the resale of the Registerable Securities.  The Investors also have customary “piggy-back” registration rights with respect to the Registerable Securities, and certain additional demand registration rights with respect to registration statements on Form S-3.  The Rights Agreement also contains certain customary negative and affirmative covenants relating to the Company taking certain actions, including limits on incurring additional indebtedness and inspection rights.  The Rights Agreement also grants the Investors a right of first refusal to participate on a pro-rata basis in any future sale or offering of the Company’s equity securities, subject to certain customary exceptions.  The covenants and the right of first refusal terminate on the first date on which less than 20% of the Series B Preferred Stock issued pursuant to the Purchase Agreement remains outstanding.  The Rights Agreement also gives the Investors the right, under certain circumstances following the conversion of the Series B Preferred Stock, to designate one person to serve on the Company’s Board of Directors.

The foregoing description of the Certificate of Designation, the Warrants, the Convertible Notes, the Purchase Agreement, the Loan Agreement, and the Rights Agreement is not intended to be complete and is qualified in its entirety by reference to the full text of the Certificate of Designation, the Warrants, the Convertible Notes, the Purchase Agreement, the Loan Agreement, and the Rights Agreement, which are filed as Exhibits 3.1, 4.1, 4.2, 4.3, 10.1, 10.2, and 10.3 hereto and are incorporated herein by reference.

Item 1.02                      Termination of a Material Definitive Agreement.

One of the Investors described in Item 1.01 above, HWH Lending LLC (“HWH”), and the Company were parties to a Loan and Security Agreement dated December 15, 2009 (the “Original Loan Agreement”).  Under the Original Loan Agreement, the Company and its subsidiary borrowed a total of $1,015,000 from HWH, represented by two promissory notes dated December 15, 2009 and May 14, 2010 respectively (the “Old Notes”).  The Original Loan Agreement and the Old Notes are described in more detail in the Company’s Current Reports on Form 8K filed on December 17, 2009 and May 18, 2010.  Under the terms of the Purchase Agreement described in Item 1.01 above, HWH cancelled the principal and accrued interest on the Old Notes in partial payment for the Series B Preferred Stock and Convertible Note purchased by HWH.  As a result, the Original Loan Agreement, the Notes, and all related documents have been terminated effective November 8, 2010.

Item 2.03.                      Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

See Item 1.01, which is incorporated herein by reference.

Item 3.02.                      Unregistered Sales of Equity Securities.

See Item 1.01, which is incorporated herein by reference.

On October 29, 2010, the holders of all of the remaining shares of the Company’s $0.001 par value Series A Preferred Stock converted those shares into an aggregate total of 53,752 shares of Common Stock.  The issuance of the Common Stock upon the conversion of the Series A Preferred shares was made without registration  in reliance on the exemptions from registration afforded by Sections 3(a)(9) and 4(2) under the Securities Act and corresponding provisions of state securities laws, which exempt the exchange by an issuer of a security with an existing security holder where no commission or other remuneration is paid or given for soliciting the exchange, and exempt transactions by an issuer not involving any public offering.

On November 8, 2010, the holders of convertible promissory notes in the aggregate principal amount of $125,000 converted the notes at a conversion price of $2.00 per share and received a total of 62,500 shares of the Company’s Common Stock.  The issuance of the Common Stock upon conversion of the notes was made without registration in reliance on the exemptions from registration afforded by Section 4(2) under the Securities Act of 1933 and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering.

Item 5.03.                      Amendment to Articles of Incorporation as Bylaws; Change of Fiscal Year.

See Item 1.01, which is incorporated herein by reference, for a description of the Certificate of Designation and the rights, privileges and preferences of the Series B Preferred Stock.

Under the terms of the Purchase Agreement, the Company amended and restated its Bylaws effective November 8, 2010.  See Exhibit 3.2 hereto, which is incorporated herein by reference.

Item 9.01.                      Financial Statements and Exhibits.

(d)   Exhibits.

3.1           Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock Pursuant to Section 151 of the Delaware General Corporation Law.

3.2           HealthWarehouse.com, Inc. Amended and Restated Bylaws.

4.1           Form of Common Stock Purchase Warrant.

4.2           Senior Secured Convertible Promissory Note dated November 8, 2010 in the amount of $500,000 payable by the Company to the order of Milfam I L.P.

4.3           Senior Secured Convertible Promissory Note dated November 8, 2010 in the amount of $500,000 payable by the Company to the order of HWH Lending LLC.

10.1           Securities Purchase Agreement dated November 8, 2010.

10.2           Loan and Security Agreement dated November 8, 2010 among HealthWarehouse.com,Inc. and Hwareh.com, Inc., as Borrowers, HWH Lending LLC, and Milfam I L.P. as Lenders.

10.3           Investor Rights Agreement dated November 8, 2010.

99.1           Press Release dated November 10, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  November 12, 2010	HEALTHWAREHOUSE.COM, INC.
	By: /s/ Lalit Dhadphale
	Lalit Dhadphale
	President and Chief Executive Officer

EX-3.1

EXHIBIT 3.1

HEALTHWAREHOUSE.COM, INC.

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES B PREFERRED STOCK

PURSUANT TO SECTION 151 OF THE

DELAWARE GENERAL CORPORATION LAW

The undersigned, Lalit Dhadphale and Patrick E. Delaney do hereby certify that:

1.           They are the President and Chief Executive Officer, and Chief Financial Officer, Treasurer and Secretary, respectively, of HealthWarehouse.com, Inc., a Delaware corporation (the “Company”).

2.           The Company is authorized to issue 1,000,000 shares of preferred stock, $0.001 par value per share, of which 200,000 shares were previously designated as “Series A Preferred Stock,” of which no shares are issued and outstanding.

3.           All of the presently undesignated shares of preferred stock of the Company may be issued with such rights and powers as the board of directors of the Company (the “Board”) may designate.

4.           The following resolutions were duly adopted by the Board:

WHEREAS, the certificate of incorporation of the Company, as amended, provides for a class of its authorized stock known as preferred stock, consisting of 1,000,000 shares, $0.001 par value per share (“Preferred Stock”), issuable from time to time in one or more series;

WHEREAS, the Board of Directors is authorized to fix and determine or alter the powers, designations, preferences and relative, participating, optional and other rights and qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares constituting any such series and the designations thereof; and

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the Preferred Stock, which shall consist of up to 625,000 shares of the Preferred Stock which the Company has the authority to issue, as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:

TERMS OF SERIES B PREFERRED STOCK

1.           Definitions

In addition to capitalized terms defined elsewhere herein, the following terms shall have the following meanings:

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

“Common Stock” means the Company’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

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

“Equity Valuation” means the product obtained by multiplying (y) the number of shares of Company Common Stock outstanding on a fully-diluted basis (taking into account any then outstanding Common Stock Equivalents) and (z) the closing price of the Company’s Common Stock on its principal Trading Market as reported by Bloomberg, L.P. or such other reporting source designated by the Board of Directors.

“Junior Securities” means the Common Stock, the Series A Preferred Stock and all other Common Stock Equivalents of the Company other than those securities which are explicitly senior or pari passu to the Series B Preferred Stock in dividend rights or redemption or liquidation preference.

“Major Exchange” shall mean  the NYSE Amex Equities, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing)

“Preferred Stock” shall mean the Series A Preferred Stock, $0.001 par value per share, of the Company and the Series B Preferred Stock.

“Stated Price” shall mean $1.89.

“Trading Day” means a day on which the principal Trading Market is open for business.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: a Major Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

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2.           Designation

The series of preferred stock established hereunder shall be designated as Series B Preferred Stock (the “Series B Preferred Stock”) and the number of shares so designated shall be up to 625,000 (which shall not be subject to increase without the written consent of the holders of the Series B Preferred Stock in accordance with Section 4(b) hereof).  Each share of Series B Preferred Stock shall have a par value of $0.001 per share, and an original issue price equal to $9.45 per share (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to such shares after the filing date hereof, the “Original Issue Price”).

3.           Dividend Right

(a)          The holders of Series B Preferred Stock, in preference to the holders of other Preferred Stock or Common Stock, shall be entitled to receive dividends at the rate of seven percent (7%)of the Original Issue Price per annum on each outstanding share of Series B Preferred Stock.  Such dividends shall accrue from day to day, whether or not declared by the Board and shall be cumulative, measured in each case of each share on which such dividends are payable from the date each such share was issued by the Company (the “Accruing Dividend”).  The Company will declare and pay the Accruing Dividend annually (the “Annual Dividend”) and (i) upon a Liquidation Event or (ii) upon conversion (as provided in Section 7) of Series B Preferred Stock into Common Stock.  The Accruing Dividend will be payable in cash or in shares of Series B Preferred Stock (a “PIK Dividend”) as set forth below, as determined by the Board.

(i)           The first Annual Dividend will be paid on January 1, 2011, and all subsequent payments shall be made on January 1 of each succeeding year or, if earlier, (i) upon a Liquidation Event or (ii) upon conversion (as provided in Section 7) of Series B Preferred Stock into Common Stock.  If any dividend payment date is not a Trading Day, the applicable payment shall be due on the next succeeding Trading Day.

(ii)           With respect to the payment of any PIK Dividend, the number of shares of Series B Preferred Stock to be issued in payment of such PIK Dividend with respect to each outstanding share of Series B Preferred Stock shall be determined by dividing (x) the amount of the PIK Dividend (were it paid in cash) by (y) the Original Issue Price.  To the extent that any PIK Dividend would result in the issuance of a fractional share of Series B Preferred Stock to any holder of Series B Preferred Stock, then the amount of such fraction multiplied by the Original Issue Price shall be paid in cash (unless there are no legally available funds with which to make such cash payment, in which event such cash payment shall be made as soon as legally possible thereafter).

(b)          Dividends on the Series B Preferred Stock shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date, or, in the case of Series B Preferred Stock originally issued as a PIK Dividend, on the date such PIK Dividend was paid, and shall be deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends,

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(c)          So long as any shares of Series B Preferred Stock are outstanding, the Company shall not pay or declare any dividend, whether in cash or property, or make any other distribution on any Junior Security, or purchase, redeem or otherwise acquire for value any shares of any Junior Security until all dividends as set forth in Section 3(a) above on the Series B Preferred Stock shall have been paid or declared and set apart for payment, except for:

(i)           acquisitions of Common Stock by the Company pursuant to agreements which permit the Company to repurchase such shares at cost (or the lesser of cost or fair market value) upon termination of services to the Company;

(ii)           acquisitions of Common Stock in exercise of the Company’s right of first refusal to repurchase such shares; or

(iii)           distributions to holders of Common Stock in accordance with Sections 5 and 6.

(d)          In the event dividends are paid on any share of Common Stock, the Company shall pay an additional dividend on all outstanding shares of Series B Preferred Stock in a per share amount equal (on an as-if-converted to Common Stock basis) to the amount paid or set aside for each share of Common Stock.

(e)          The provisions of Sections 3(c) and 3(d) shall not apply to a dividend payable solely in Common Stock to which the provisions of Section 7(f) hereof are applicable, or any repurchase of any outstanding securities of the Company that is approved by the Board, including the Series B Director.

4.           Voting Rights.

(a)           General Rights.  Each holder of shares of the Series B Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such shares of Series B Preferred Stock could be converted (pursuant to Section 7 hereof) immediately after the close of business on the record date fixed for such meeting or the effective date of such written consent and shall have voting rights and powers equal to the voting rights and powers of the Common Stock and shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Company.  Except as otherwise provided herein or as required by law, the Series B Preferred Stock shall vote together with the Common Stock at any annual or special meeting of the stockholders and not as a separate class, and may act by written consent in the same manner as the Common Stock.

(b)           Separate Vote of Series B Preferred Stock.  For so long as anyshares of Series B Preferred Stock remain outstanding, in addition to any other vote or consent required herein or by law, the vote or written consent of the holders of at least a majority of the outstanding Series B Preferred Stock, voting as a separate class, shall be necessary for effecting or validating the following actions (whether by amendment, merger, consolidation, recapitalization or otherwise):

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(i)           Any amendment, alteration, or repeal of any provision of the Certificate of Incorporation or the Bylawsof the Company, that alters or changes the voting or other powers, preferences, or other special rights, privileges or restrictions of the Series B Preferred Stock or any other class of the Company’s preferred equity securities; or

(ii)           Any authorization, increase or decrease in the authorized number,  or issuance of (x) any new class or series of stock of the Company ranking senior to the Series B Preferred Stock in right of redemption, liquidation preference, voting, conversion or dividend rights or any increase in the authorized number of any such new class or series, (y) any Series A Preferred Stock, or (z) any Series B Preferred Stock.

(c)          Size and Election of Board of Directors.  For so long as any shares of Series B Preferred Stock remain outstanding, the Board shall consist of five (5) members, and holders of Series B Preferred Stock, voting as a separate class, shall be entitled to elect, as a separate class, one (1) member of the Board (the “Series B Director”) at each meeting or pursuant to each consent of the Company’s stockholders for the election of directors, and to remove from office such director and to fill any vacancy caused by the resignation, death or removal of such director.

5.           Liquidation Rights.

(a)           Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary (a “Liquidation Event”), before any distribution or payment shall be made to the holders of any Junior Security, the holders of Series B Preferred Stock shall be entitled to be paid out of the assets of the Company legally available for distribution for each share of Series B Preferred Stock held by them, an amount per share of such series of Series B Preferred Stock equal to the Original Issue Price plus any Accruing Dividends accrued but unpaid thereon, whether or not declared together with any other dividends declared but unpaid thereon.  If, upon any such Liquidation Event, the assets of the Company shall be insufficient to make payment in full to all holders of Series B Preferred Stock of the liquidation preference set forth in this Section 5(a), then such assets (or consideration) shall be distributed among the holders of Series B Preferred Stock at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled.

(b)           After the payment of the full liquidation preference of the Series B Preferred Stock as set forth in Section 5(a) above, the assets of the Company legally available for distribution in such Liquidation Event (or the consideration received by the Company or its stockholders in such Acquisition or Asset Transfer), if any, shall be distributed ratably to the holders of any Junior Securities and Series B Preferred Stock on an as-if-converted to Common Stock basis.

6.           Asset Transfer or Acquisition Rights.

(a)           In the event that the Company is a party to an Acquisition or Asset Transfer (as hereinafter defined), then each holder of Series B Preferred Stock shall be entitled to receive, for each share of Series B Preferred Stock then held, out of the proceeds of such Acquisition or Asset Transfer, the amount of cash, securities or other property to which such holder would be entitled to receive in a Liquidation Event pursuant to Section 5(a) and 5(b)above.

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(b)           For the purposes of this Section 6, and except as otherwise determined by the written consent of a majority of the outstanding shares of Series B Preferred Stock voting separately as a class: (i) “Acquisition” shall mean (A) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, other than any such consolidation, merger or reorganization in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such consolidation, merger or reorganization; or (B) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred; provided that an Acquisition shall not include any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof; and (ii)  “Asset Transfer” shall mean a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

(c)           In any Acquisition or Asset Transfer, if the consideration to be received is securities of a corporation or other property other than cash, its value will be deemed its fair market value as determined in good faith by the Board, including the Series B Director, on the date such determination is made.

7.           Conversion Rights.

The holders of the Series B Preferred Stock shall have the following rights with respect to the conversion of the Series B Preferred Stock into shares of Common Stock (the “Conversion Rights”):

(a)           Optional Conversion.  Subject to and in compliance with the provisions of this Section 7, any shares of Series B Preferred Stock may, at the option of the holder, be converted at any time into fully-paid and nonassessable shares of Common Stock.  The number of shares of Common Stock to which a holder of Series B Preferred Stock shall be entitled upon conversion shall be the product obtained by multiplying the applicable “Series Preferred Conversion Rate” then in effect (determined as provided in Section 7(b)) by the number of shares of the Series B Preferred Stock being converted.

(b)           Series B Preferred Stock Conversion Rate.  The conversion rate in effect at any time for conversion of shares of Series B Preferred Stock (the “Series Preferred Conversion Rate”) shall be the quotient obtained by dividing the Original Issue Price by the “Series Preferred Conversion Price”, calculated as provided in Section 7(c).

(c)           Series B Preferred Stock Conversion Price.  The conversion price for the Series B Preferred Stock shall initially be the Stated Price (the “Series Preferred Conversion Price”).  The Series Preferred Conversion Price shall be adjusted from time to time in accordance with this Section 7.

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(d)           Mechanics of Conversion.  Each holder of Series B Preferred Stock who desires to convert the same into shares of Common Stock pursuant to this Section 7 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for the Series B Preferred Stock, and shall give written notice to the Company at such office that such holder elects to convert the same.  Such notice shall state the number of shares of each series of Series B Preferred Stock being converted.  Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay (i) in cash or in shares of Common Stock as a PIK Dividend pursuant to the provisions of Section 3(a)(ii), as determined by the Board, any Accruing Dividends accrued but unpaid thereon, whether or not declared, (ii) in cash, any other cash dividends declared but unpaid on the shares of Series B Preferred Stock being converted and (iii) in cash (at the Common Stock’s fair market value determined by the Board as of the date of conversion) the value of any fractional share of Common Stock otherwise issuable to any holder of Series B Preferred Stock.  Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series B Preferred Stock to be converted, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

(e)           Adjustment for Stock Splits and Combinations.  If at any time or from time to time on or after the date that the first share of Series B Preferred Stock is issued (the “Original Issue Date”) the Company effects a subdivision of the outstanding Common Stock without a corresponding subdivision of the Series B Preferred Stock, the Series Preferred Conversion Price in effect immediately before such subdivision shall be proportionately decreased.  Conversely, if at any time or from time to time after the Original Issue Date the Company combines the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of the Series B Preferred Stock, the Series Preferred Conversion Price in effect immediately before the combination shall be proportionately increased.  Any adjustment under this Section 7(e) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f)           Adjustment for Common Stock Dividends and Distributions.  If at any time or from time to time on or after the Original Issue Date the Company pays to holders of any class or series of Company’s stock a dividend or other distribution in additional shares of Common Stock without a corresponding dividend or other distribution to the holders of Series B Preferred Stock, the then-effective Series Preferred Conversion Price shall be decreased as of the time of such issuance, as provided below:

(i)           The Series Preferred Conversion Price shall be adjusted by multiplying such Series Preferred Conversion Price then in effect by a fraction equal to:

(A)           the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance, and

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(B)           the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance plus the number of shares of Common Stock issuable to the holders of such class or series of the Company’s stock in payment of such dividend or distribution;

(ii)          If the Company fixes a record date to determine which holders of such class or series of the Company’s stock are entitled to receive such dividend or other distribution, the applicable Series Preferred Conversion Price shall be fixed as of the close of business on such record date and the number of shares of Common Stock shall be calculated immediately prior to the close of business on such record date; and

(iii)         If such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series Preferred Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Series Preferred Conversion Price shall be adjusted pursuant to this Section 7(f) to reflect the actual payment of such dividend or distribution.

(g)          Adjustment for Reclassification, Exchange, Substitution, Reorganization, Merger or Consolidation.  If at any time or from time to time on or after the Original Issue Date the Common Stock issuable upon the conversion of the Series B Preferred Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification, merger, consolidation or otherwise (other than an Acquisition or Asset Transfer as defined in Section 6 or a subdivision or combination of shares or stock dividend provided for elsewhere in this Section 7), in any such event each holder of Series B Preferred Stock shall then have the right to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification, merger, consolidation or other change by holders of the maximum number of shares of Common Stock into which such shares of Series B Preferred Stock could have been converted immediately prior to such recapitalization, reclassification, merger, consolidation or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.  In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 7 with respect to the rights of the holders of Series B Preferred Stock after the capital reorganization to the end that the provisions of this Section 7 (including adjustment of the Series Preferred Conversion Price then in effect and the number of shares issuable upon conversion of the Series B Preferred Stock) shall be applicable after that event and be as nearly equivalent as practicable.

(h)          Sale of Shares Below Series Preferred Conversion Price.

(i)          If at any time or from time to time on or after the Original Issue Date the Company issues or sells, or is deemed by the express provisions of this Section 7(h) to have issued or sold, Additional Shares of Common Stock (as defined below), other than as provided in Section 7(e), 7(f) or 7(g) above, for an Effective Price (as defined below) less than the then effective Series Preferred Conversion Price (a “Qualifying Dilutive Issuance”), then and in each such case, the then effective Series Preferred Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to a price determined by multiplying the Series Preferred Conversion Price in effect immediately prior to such issuance or sale by a fraction equal to:

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(A)           the numerator of which shall be (A) the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale, plus (B) the number of shares of Common Stock which the Aggregate Consideration (as defined below) received or deemed received by the Company for the total number of Additional Shares of Common Stock so issued would purchase at such then-effective Series Preferred Conversion Price, and

(B)           the denominator of which shall be the number of shares of Common Stock deemed outstanding (as determined below) immediately prior to such issue or sale plus the total number of Additional Shares of Common Stock so issued.

For the purposes of the preceding sentence, the number of shares of Common Stock deemed to be outstanding as of a given date shall be the sum of (A) the number of shares of Common Stock outstanding, (B) the number of shares of Common Stock into which the then outstanding shares of Series B Preferred Stock could be converted if fully converted on the day immediately preceding the given date, and (C) the number of shares of Common Stock which are issuable upon the exercise or conversion of all other rights, options and convertible securities outstanding on the day immediately preceding the given date.

(ii)          No adjustment shall be made to the Series Preferred Conversion Price in an amount less than one cent per share.  Any adjustment required by this Section 7(h) shall be rounded to the nearest one cent $0.01per share. Any adjustment otherwise required by this Section 7(h) that is not required to be made due to the preceding two sentences shall be included in any subsequent adjustment to the Series Preferred Conversion Price.

(iii)         For the purpose of making any adjustment required under this Section 7(h), the aggregate consideration received by the Company for any issue or sale of securities (the “Aggregate Consideration”) shall be defined as: (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection with such issue or sale and without deduction of any expenses payable by the Company, (B) to the extent it consists of property other than cash, be computed at the fair value of that property as determined in good faith by the Board, and (C) if Additional Shares of Common Stock, Convertible Securities (as defined below) or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options.

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(iv)          For the purpose of the adjustment required under this Section 7(h), if the Company issues or sells (x) Preferred Stock or other stock, options, warrants, purchase rights or other securities convertible into Additional Shares of Common Stock (such convertible stock or securities being herein referred to as “Convertible Securities”) or (y) rights or options for the purchase of Additional Shares of Common Stock or Convertible Securities and if the Effective Price of such Additional Shares of Common Stock is less than the Series Preferred Conversion Price, then the Company shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such rights or options or Convertible Securities plus:

(A)           in the case of such rights or options, the minimum amounts of consideration, if any, payable to the Company upon the exercise of such rights or options; and

(B)           in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company upon the conversion thereof (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities); provided that if the minimum amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company shall be deemed to have received the minimum amounts of consideration without reference to such clauses.

(C)           If the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced; provided further, that if the minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using the increased minimum amount of consideration payable to the Company upon the exercise or conversion of such rights, options or Convertible Securities.

(D)           No further adjustment of the Series Preferred Conversion Price, as adjusted upon the issuance of such rights, options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock or the exercise of any such rights or options or the conversion of any such Convertible Securities.  If any such rights or options or the conversion privilege represented by any such Convertible Securities shall expire without having been exercised, the Series Preferred Conversion Price as adjusted upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Series Preferred Conversion Price which would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such rights or options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities, provided that such readjustment shall not apply to prior conversions of Series B Preferred Stock.

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(v)          For the purpose of making any adjustment to the Conversion Price required under this Section 7(h), “Additional Shares of Common Stock” shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 7(h) (including shares of Common Stock subsequently reacquired or retired by the Company), other than:

(A)           shares of Common Stock issued upon conversion of the Series B Preferred Stock or shares of Series B Preferred Stock issued as a PIK Dividend on the Series B Preferred Stock;

(B)           shares of Common Stock or Convertible Securities issued after the Original Issue Date to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary pursuant to stock purchase or stock option plans or other arrangements (“Plans”) when (i) such Plans have been approved by the Board on or prior to the Original Issue Date, or (ii) are approved by the Board after the Original Issue Date, including the Series B Director;

(C)           shares of Common Stock issued pursuant to the exercise of Convertible Securities outstanding as of or issued on the Original Issue Date, or issued as a result of any anti-dilution provision in any Convertible Security outstanding as of or issued on the Original Issue Date;

(D)           shares of Common Stock or Convertible Securities issued for consideration other than cash pursuant to a bona fide merger, consolidation, acquisition, strategic alliance or similar business combination approved by the Board, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Series B Director;

(E)           shares of Common Stock or Convertible Securities issued pursuant to any bonafide equipment loan or leasing arrangement, real property leasing arrangement or debt financing from a bank or similar financial institution approved by the Board, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Series B Director;

(F)           shares of Common Stock or Convertible Securities issued in connection with strategic transactions involving the Company and other entities, including (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that the issuance of shares therein (a) has been approved by the Company’s Board, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Series B Director, and (b) is not primarily for equity financing purposes; or

(G)           shares of Common Stock or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services; provided that such transaction is not primarily for equity financing purposes and is approved by the Board of Directors, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Series B Director.

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References to Common Stock in the subsections of this clause (v) above shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this Section 7(h).  The “Effective Price” of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 7(h), into the Aggregate Consideration received, or deemed to have been received by the Company for such issue under this Section 7(h), for such Additional Shares of Common Stock.  In the event that the number of shares of Additional Shares of Common Stock or the Effective Price cannot be ascertained at the time of issuance, such Additional Shares of Common Stock shall be deemed issued immediately upon the occurrence of the first event that makes such number of shares or the Effective Price, as applicable, ascertainable.

For purposes hereof, the terms “Affiliate” and “Related Person” shall have the same meanings ascribed to such terms in Rule 12b-2 promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 404 of Regulation S-K promulgated pursuant to the Exchange Act, respectively, and, in each case, any successor provisions

(vi)           In the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance (the “First Dilutive Issuance”), then in the event that the Company issues or sells, or is deemed to have issued or sold, Additional Shares of Common Stock in a Qualifying Dilutive Issuance other than the First Dilutive Issuance as a part of the same transaction or series of related transactions as the First Dilutive Issuance (a “Subsequent Dilutive Issuance”), then and in each such case upon a Subsequent Dilutive Issuance the Series Preferred Conversion Price shall be reduced to the Series Preferred Conversion Price that would have been in effect had the First Dilutive Issuance and each Subsequent Dilutive Issuance all occurred on the closing date of the First Dilutive Issuance.

(i)                      Waiver of Anti-dilution Protection.  Notwithstanding anything to the contrary, any provision of Section 7(h) and any adjustments made or required to be made to the Series Preferred Conversion Price pursuant hereto may be waived on behalf of all shares of Series B Preferred Stock by the vote or written consent of the holders of at least a majority of the outstanding shares of Series B Preferred Stock.

(j)                      Certificate of Adjustment.  In each case of an adjustment or readjustment of the Series Preferred Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and shall, upon request, prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series B Preferred Stock so requesting at the holder’s address as shown in the Company’s books.  The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (ii) the Series Preferred Conversion Price at the time in effect, (iii) the number of Additional Shares of Common Stock and (iv) the type and amount, if any, of other property which at the time would be received upon conversion of Series B Preferred Stock.  Failure to request or provide such notice shall have no effect on any such adjustment.

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(k)           Notices of Record Date.  Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any Acquisition (as defined in Section 6) or other capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other corporation, or any Asset Transfer (as defined in Section 6), or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series B Preferred Stock at least ten (10) days prior to (x) the record date, if any, specified therein; or (y) if no record date is specified, the date upon which such action is to take effect (or, in either case, such shorter period approved by the holders of a majorityof the outstanding Series B Preferred Stock) a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such Acquisition, reorganization, reclassification, transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or winding up.

(l)           Automatic Conversion.

(i)           For a period of time beginning on the Original Issue Date and ending on the three year anniversary thereof (the “Initial Conversion Period”), each share of Series B Preferred Stock shall automatically be converted into shares of Common Stock, based on the then-effective Series Preferred Conversion Price, (A) at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of the Series B Preferred Stock, or (B) if (w) the Equity Valuation of the Company, on a fully diluted basis, reaches or exceeds $100,000,000 for ten (10) consecutive Trading Days and the closing price of the Common Stock is not less than $8.00 for such ten (10) consecutive Trading Days, (x) the closing price of the Common Stock as reported by the Trading Market exceeds $8.00 (as adjusted) for such ten (10) days consecutive Trading Days, (y) the average daily trading volume of Common Stock for such ten (10) consecutive Trading Days exceeds 20,000 shares per day (as adjusted), and (z) the Common Stock is listed on a Major Exchange.  After the Initial Conversion Period, each share of Series B Preferred Stock shall automatically be converted into shares of Common Stock, based on the then-effective Series Preferred Conversion Price, (I) at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of the Series B Preferred Stock, or if (II) the Equity Valuation of the Company, on a fully diluted basis, reaches or exceeds $100,000,000 for thirty (30) consecutive Trading Days and the closing price of the Common Stock as reported by the Trading Market exceeds $8.00 (as adjusted) for such thirty (30) consecutive Trading Days.  Upon such automatic conversion, any Accruing Dividends accrued but unpaid, whether or not declared, together with any other dividends declared but unpaid shall be paid in accordance with the provisions of Section 7(d).

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(ii)           Upon the occurrence of either of the events specified in Section 7(l)(i) above, the outstanding shares of Series B Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series B Preferred Stock are either delivered to the Company or its transfer agent as provided below, or the holder notifies the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates.  Upon the occurrence of such automatic conversion of the Series B Preferred Stock, the holders of Series B Preferred Stock shall surrender the certificates representing such shares at the office of the Company or any transfer agent for the Series B Preferred Stock.  Thereupon, there shall be issued and delivered to such holder promptly at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of such series of Series B Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred, and any declared and unpaid dividends shall be paid in accordance with the provisions of Section 7(d).

(m)          Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of Series B Preferred Stock.  All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series B Preferred Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share.  If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the fair market value of one share of Common Stock (as determined by the Board) on the date of conversion.

(n)          Reservation of Stock Issuable Upon Conversion.  The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock.  If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock, the Company will take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(o)          Notices.  Any notice required by the provisions of this Section 7 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next Business Day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with verification of receipt.  All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company.

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(p)           Payment of Taxes.  The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of shares of Series B Preferred Stock, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of Series B Preferred Stock so converted were registered.

8.           No Reissuance Of Series B Preferred Stock.  No share or shares of Series B Preferred Stock acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued.

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RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Company be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

[remainder of page intentionally left blank; signature page follows]

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IN WITNESS WHEREOF, the undersigned have executed this Certificate this 8th day of November, 2010.

/s/ Lalit Dhadphale	/s/ Patrick E. Delaney
Name: Lalit Dhadphale	Name: Patrick E. Delaney
Title:  President & CEO	Title:  Chief Financial Officer,
	Treasurer and Secretary

Certificate of Designation – Series B Preferred Stock

Signature Page

EX-3.2

EXHIBIT 3.2

HEALTHWAREHOUSE.COM, INC.

(a Delaware Corporation)

AMENDED AND RESTATED BYLAWS

Article I: Stockholders

Section 1.1.      Annual Meeting.

An annual meeting of the stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting shall be held at the place, if any, on the date, and at the time as the Board of Directors shall each year fix, which date shall be within 13 months of the last annual meeting of stockholders.

Section 1.2.      Advance Notice of Nominations and Proposals of Business.

(a)        Nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation’s proxy materials with respect to such meeting, (ii) by or at the direction of the Board of Directors, or (iii) by any stockholder of record of the Corporation (the “Record Stockholder”) at the time of the giving of the notice required in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this section. For the avoidance of doubt, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”)) at an annual meeting of stockholders.

(b)       For nominations or business to be properly brought before an annual meeting by a Record Stockholder pursuant to clause (iii) of the foregoing paragraph, (i) the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and (ii) any such business must be a proper matter for stockholder action under Delaware law. To be timely, a Record Stockholder’s notice shall be received by the Secretary at the principal executive offices of the Corporation not less than 45 or more than 75 days prior to the one-year anniversary of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders; provided, however, that, subject to the last sentence of this paragraph (b), if the meeting is convened more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, notice by the Record Stockholder to be timely must be so received not later than the close of business on the later of (i) the 90th day before such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made. Notwithstanding anything in the preceding sentence to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there has been no public announcement naming all of the nominees for director or indicating the increase in the size of the Board of Directors made by the Corporation at least 10 days before the last day a Record Stockholder may deliver a notice of nomination in accordance with the preceding sentence, a Record Stockholder’s notice required by this bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. In no event shall an adjournment, or postponement of an annual meeting for which notice has been given, commence a new time period for the giving of a Record Stockholder’s notice.

(c)        Such Record Stockholder’s notice shall set forth:

1.        if such notice pertains to the nomination of directors, as to each person whom the Record Stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Exchange Act, and such person’s written consent to serve as a director if elected;

2.        as to any business that the Record Stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such Record Stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and

3.        as to (a) the Record Stockholder giving the notice and (b) the beneficial owner, if any, on whose behalf the nomination or proposal is made each, a “party”):

(i)             the name and address of each such party;

(ii)            (A) the class, series, and number of shares of the Corporation that are owned, directly or indirectly, beneficially and of record by each such party, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which either party has a right to vote, directly or indirectly, any shares of any security of the Corporation, (D) any short interest in any security of the Corporation held by each such party (for purposes of this Section 1.2(c), a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Corporation owned beneficially directly or indirectly by each such party that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which either party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) that each such party is directly or indirectly entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of each such party’s immediate family sharing the same household (which information set forth in this paragraph shall be supplemented by such stockholder or such beneficial owner, as the case may be, not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date); and

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(iii)          any other information relating to each such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act.

(d)       A person shall not be eligible for election or re-election as a director at an annual meeting unless (i) the person is nominated by a Record Stockholder in accordance with clause (iii) of Section 1.2(a) or (ii) the person is nominated by or at the direction of the Board of Directors. Only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this section. The chair of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defectively proposed business or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

(e)        Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting by or at the direction of the Board of Directors. The notice of such special meeting shall include the purpose for which the meeting is called. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (a) by or at the direction of the Board of Directors or (b) by any stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who delivers a written notice to the Secretary setting forth the information set forth in Section 1.2(c)(1) and (3) of this Article I. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders only if such stockholder of record’s notice required by the preceding sentence shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall an adjournment, or postponement of a special meeting for which notice has been given, commence a new time period for the giving of a stockholder of record’s notice. A person shall not be eligible for election or reelection as a director at a special meeting unless the person is nominated (i) by or at the direction of the Board of Directors or (ii) by a stockholder of record in accordance with the notice procedures set forth in this Article I.

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(f)         For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(g)        Notwithstanding the foregoing provisions of this Section 1.2, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 1.2. Nothing in this Section 1.2 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 1.3.        Special Meetings; Notice.

Subject to the rights of the holders of any series of Preferred Stock, and to the requirements of applicable law, special meetings of stockholders may be called only by either (a) the Chair of the Board of Directors, (b) the President, (c) the Board of Directors pursuant to a resolution adopted by the directors, or (d) by the holders of not less than ten percent (10%) of the total votes entitled to be cast by the holders of all the outstanding capital stock of the Corporation entitled to vote generally in an election of directors. Upon request in writing sent by registered mail to the President by any stockholder or stockholders entitled to call a special meeting of stockholders pursuant to this Section 1.3, the Board of Directors shall determine a place and time for such meeting, which time shall be not less than 90 nor more than 100 days after the receipt and determination of the validity of such request, and a record date for the determination of stockholders entitled to vote at such meeting in the manner set forth in Section 5.5 hereof. Following such receipt and determination, it shall be the duty of the secretary to cause notice to be given to the stockholders entitled to vote at such meeting, in the manner set forth in Section 1.4 hereof, that a meeting will be held at the time and place so determined. Notice of every special meeting shall state the purpose of the meeting and the business conducted at a special meeting of stockholders shall be limited to the business set forth in the notice of meeting. The Board of Directors may postpone or reschedule any previously called special meeting.

Section 1.4.        Notice of Meetings.

(a)        Notice of the place, if any, date and time of all meetings of the stockholders, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed present in person and vote at such meeting, and, in the case of all special meetings of stockholders, the purpose of the meeting, shall be given, not less than 10 nor more than 60 days before the date on which the meeting is to be held, to each stockholder entitled to vote at the meeting, except as otherwise provided in these bylaws or required by law (meaning in these bylaws, as required from time to time by the Delaware General Corporation Law or the Corporation’s Certificate of Incorporation).

(b)        When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof and the means of remote communication, if any, by which stockholder and proxyholders may be deemed to be present in person of such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, notice of the place, if any, date and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity herewith. At any adjourned meeting, any business may be transacted that might have been transacted at the original meeting.

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Section 1.5.        Quorum.

(a)     At any meeting of the stockholders, the holders of shares of stock of the Corporation entitled to cast a majority of the total votes entitled to be cast by the holders of all outstanding capital stock of the Corporation, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number is required by law. Where a separate vote by one or more classes or series is required, the holder of shares entitled to cast a majority of the total votes entitled to be cast by the holders of the shares of the class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.

(b)     If a quorum shall fail to attend any meeting, the chair of the meeting may adjourn the meeting to another place, if any, date and time.

Section 1.6.        Organization.

The Chair of the Board or, in his or her absence, the person whom the Board of Directors designates or, in the absence of that person or the failure of the Board of Directors to designate a person, the Chief Executive Officer of the Corporation or, in his or her absence, the person chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chair of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be the person the chair appoints.

Section 1.7.        Conduct of Business.

The chair of any meeting of stockholders shall determine the order of business and the rules of procedure for the conduct of the meeting, including the manner of voting and the conduct of discussion as the chair determines to be in order. The chair shall have the power to adjourn the meeting to another place, if any, date and time. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.

Section 1.8.        Proxies; Inspectors.

(a)     At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section 1.8 may be substituted or used in lieu of the original writing or transmission that could be used, provided that the copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

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(b)     The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of inspectors.

Section 1.9.        Voting.

All elections of directors shall be determined by a plurality of the votes cast, and except as otherwise required by law or these bylaws, all other matters shall be determined by a majority of the votes cast on the matter affirmatively or negatively.

Section 1.10.      Stock List.

(a)     A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting as required by law.

(b)     The stock list shall also be open to the examination of any such stockholder during the whole time of the meeting as provided by law. The corporation may look to this list as the sole evidence of the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

Section 1.11.Written Consents.

(a)     In the event of the delivery, as required by law, to the Corporation of the requisite written consent or consents to take corporate action and/or any related revocation or revocations, the Corporation shall engage independent inspectors of election for the purpose of performing promptly a ministerial review of the validity of the consents and revocations. For the purpose of permitting the inspectors to perform such review, no action by written consent without a meeting shall be effective until the date as the independent inspectors certify to the Corporation that the consents properly delivered to the Corporation represent at least the minimum number of votes that would be necessary to take the corporate action. Nothing contained in this Section 1.11 shall in any way be construed to suggest or imply that the Board of Directors or any stockholders shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after the certification by the independent inspectors, or to take any other action (including without limitation the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in the litigation).

(b)     Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent received in accordance with applicable law, a written consent or consents signed by a sufficient number of holders to take such action are delivered to the Corporation as required by law.

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Section 1.12.      Meetings by Remote Communication.

If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxy holders not physically present at a meeting of stockholders may, by means of remote communication:

(a)     participate in a meeting of stockholders; and

(b)     be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication,

provided, that

(i)      the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder;

(ii)       the Corporation shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and

(iii)       if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

Article II: Board of Directors

Section 2.1.        Number, Election, Term and Qualifications of Directors.

(a)     Subject to the special right of the holders of any class or series of stock to elect directors, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies.

(b)     Directors need not be stockholders to be qualified for election or service as a director of the Corporation.

Section 2.2.        Removal; Resignation.

Any director or the entire Board of Directors may be removed, with or without cause by the holders of a majority of the shares then entitled to vote at an election of directors. Any director may resign at any time upon notice given in writing or by election transmission to the Corporation A resignation is effective when the resignation is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. A resignation that is conditioned upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable.

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Section 2.3.        Newly Created Directorships and Vacancies.

Except as otherwise required by law and subject to the rights of the holders of any series of preferred stock with respect to such series of preferred stock, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled by a majority vote of the directors then in office, though less than a quorum, or by a sole remaining director, or by the stockholders. Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until the director’s successor shall have been duly elected and qualified. No decrease in the number of authorized directors constituting the entire Board of Directors shall shorten the term of any incumbent director.

Section 2.4.        Regular Meetings.

Regular meetings of the Board of Directors shall be held at the place, on the date and at the time as shall have been established by the Board of Directors and publicized among all directors. A notice of a regular meeting the date of which has been so publicized shall not be required.

Section 2.5.        Special Meetings.

Special meetings of the Board of Directors may be called by the President or by two or more directors then in office and shall be held at the place, on the date, and at the time as they or he or she shall fix. Notice of the place, date, and time of each special meeting shall be given each director either (a) by mailing written notice not less than five days before the meeting, or (b) by telephone or by telegraphing or telexing or by facsimile or electronic transmission of the same not less than twenty-four hours before the meeting. Unless otherwise stated in the notice thereof, any and all business may be transacted at a special meeting.

Section 2.6.        Quorum.

At any meeting of the Board of Directors, a majority of the total number of the whole Board of Directors shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time, without further notice or waiver thereof.

Section 2.7.        Participation in Meetings by Conference Telephone or Other CommunicationsEquipment.

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of the Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at the meeting.

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Section 2.8.        Conduct of Business.

At any meeting of the Board of Directors, business shall be transacted in the order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided in these bylaws or required by law. The Board of Directors may take action without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 2.9.        Compensation of Directors.

Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of the directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or paid a stated salary or paid other compensation as directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of standing or special committees may be allowed compensation for attending committee meetings.

Article III: Committees

Section 3.1.        Committees of the Board of Directors.

The Board of Directors may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

Section 3.2.        Conduct of Business.

Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; 1/3rd of the members shall constitute a quorum unless the committee shall consist of 1 or 2 members, in which event 1 member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or transmission or transmissions are filed with the minutes of the proceedings of the committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 3.3.        Executive Committee.

The Board of Directors may have an Executive Committee at least one of the members of which shall be the President. The Executive Committee has the authority to exercise all of the powers of the Board of Directors that may be delegated to a committee of the Board of Directors and perform such other duties and exercise such other powers as may be delegated to it expressly by the Board of Directors.

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Section 3.4.        Audit Committee.

The Board of Directors shall have an Audit Committee composed of three or more directors, each of whom shall satisfy any securities exchange independence requirements then in effect and applicable to the Corporation The responsibilities of the Audit Committee shall be stated in the committee’s charter, as approved by the board of directors.

Section 3.5.        Compensation Committee.

The Board of Directors may have a Compensation Committee composed of three or more directors, each of whom shall satisfy any securities exchange independence requirements then in effect and applicable to the Corporation. The responsibilities of the Compensation Committee shall be stated in the committee’s charter, as approved by the board of directors.

Section 3.6.        Nominating Committee.

The Board of Directors may have a Nominating Committee composed of three or more directors, each of whom shall satisfy any securities exchange independence requirements then in effect and applicable to the Corporation. The responsibilities of the Nominating Committee shall be stated in the committee’s charter, as approved by the board of directors.

Article IV: Officers

Section 4.1.        Generally.

The officers of the Corporation shall consist of a Chair of the Board (if elected by the Directors), President, one or more Vice Presidents (if elected by the Directors), a Secretary, a Treasurer and the other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person. The salaries of officers elected by the Board of Directors shall be fixed from time to time by the Board of Directors or by the officers as may be designated by resolution of the Board.

Section 4.2.        Chair of the Board.

The Chair of the Board (if any) shall preside at all meetings of stockholders and the Board of Directors. The chair shall have the other powers and duties as may be delegated from time to time by the Board of Directors.

Section 4.3.        President.

The President shall be the Chief Executive Officer of the Corporation. Subject to the provisions of these bylaws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors. He or she shall have the power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation.

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Section 4.4.        Vice President.

Each Vice President shall have the powers and duties as may be delegated to him or her by the Board of Directors. One (1) Vice President shall be designated by the Board to perform the duties and exercise the powers of the President in the event of the President’s absence or disability.

Section 4.5.        Treasurer.

The Treasurer shall have the responsibility for maintaining the financial records of the Corporation. He or she shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Corporation. The Treasurer shall also perform the other duties as the Board of Directors may from time to time prescribe.

Section 4.6.        Secretary.

The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. He or she shall have charge of the corporate books and shall perform the other duties as the Board of Directors may from time to time prescribe.

Section 4.7.        Delegation of Authority.

The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof.

Section 4.8.        Removal.

The Board of Directors may remove any officer of the Corporation at any time, with or without cause.

Section 4.9.        Action with Respect to Securities of Other Corporations.

Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders or equity holders of any other corporation or entity or in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in the other corporation or entity.

Article V: Stock

Section 5.1.        Certificates of Stock.

Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chair of the Board, the Vice Chair of the Board, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her unless the Board of Directors provides by resolution that some or all of any or all classes or series of stock shall be uncertificated shares. Any or all of the signatures on the certificate may be by facsimile.

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Section 5.2.        Transfers of Stock.

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5.3 of these bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefore.

Section 5.3.        Lost, Stolen or Destroyed Certificates.

In the event of the loss, theft, or destruction of any certificate of stock, another may be issued in its place pursuant to the regulations that the Board of Directors may establish concerning proof of the loss, theft, or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

Section 5.4.        Regulations.

The issue, transfer, conversion and registration of certificates of stock shall be governed by the other regulations as the Board of Directors may establish.

Section 5.5.        Record Date.

(a)     In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may, except as otherwise required by law, fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than 60 nor less than 10 days before the date of any meeting of stockholders, nor more than 60 days prior to the time for the other action described above; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.

(b)     A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

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(c)     In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within 10 days after the date on which such a request is received, adopt a resolution fixing the record date (unless the Board of Directors has previously fixed a record date pursuant to the first sentence hereof). If no record date has been fixed by the Board of Directors pursuant to the first sentence hereof or otherwise within 10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, where no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered agent in Delaware, its principal place of business, or to any officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are reported. Delivery shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking the prior action.

Article VI: Notices

Section 6.1.        Notices.

If mailed, notice to stockholder shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in Section 232 of the DGCL.

Section 6.2.        Waivers.

A written waiver of any notice, signed by a stockholder or director, or a waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in the waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

Article VII: Miscellaneous

Section 7.1.        Corporate Seal.

The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.

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Section 7.2.        Facsimile Signatures.

In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

Section 7.3.        Reliance upon Books, Reports and Records.

Each director, each member of any committee designated by the Board of Directors, of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 7.4.        Fiscal Year.

The fiscal year of the Corporation shall be as fixed by the Board of Directors.

Section 7.5.        Time Periods.

In applying any provision of these bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

Article VIII: Indemnification

Section 8.1.        Right to Indemnification.

Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of the proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that the amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by the indemnitee in connection therewith; provided, however, that, except as provided in Section 8.3 with respect to proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by the indemnitee only if the proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

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Section 8.2.        Right to Advancement of Expenses.

The right to indemnification conferred in Section 8.1 shall include the right to be paid by the Corporation the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition (an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by the indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (an “undertaking”), by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “final adjudication”) that the indemnitee is not entitled to be indemnified for the expenses under this Section 8.2 or otherwise. The rights to indemnification and to the advancement of expenses conferred in Sections 8.1 and 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.

Section 8.3.        Right of Indemnitee to Bring Suit.

If a claim under Section 8.1 or 8.2 is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim to the fullest extent permitted by law. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by (i) the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met the applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to the suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section 8 or otherwise shall be on the Corporation.

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Section 8.4.        Non-exclusivity of Rights.

The rights to indemnification and to the advancement of expenses conferred in this Section 8 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation’s Certificate of Incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

Section 8.5.        Insurance.

The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify the person against the expense, liability or loss under the Delaware General Corporation Law.

Section 8.6.        Indemnification of Employees and Agents of the Corporation.

The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors of the Corporation.

Article IX: Amendments

In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to make, alter, amend and repeal these bylaws subject to the power of the stockholders of the Corporation to alter, amend or repeal the bylaws; provided, however, that, with respect to the powers of stockholders to make, alter, amend and repeal the bylaws, notwithstanding any other provision of these bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the stockholders of any particular class or series of the Corporation required by law, these bylaws or any preferred stock of the Corporation, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provisions of these bylaws.

16

Secretary’s Certificate of Amended and Restated

Bylaws of HealthWarehouse.com, Inc.

I hereby certify:

That I am the duly elected Secretary of HealthWarehouse.com, Inc., a Delaware corporation;

That the foregoing Bylaws constitute the amended and restated Bylaws of said Corporation as duly adopted by the Corporation on November 8, 2010.

IN WITNESS WHEREOF, I have hereunder subscribed my name this 8th day of November, 2010.

/s/ Patrick E. Delaney

Patrick E. Delaney

Secretary

17

EX-4.1

EXHIBIT 4.1

EXECUTION COPY

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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 OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

HealthWarehouse.com, Inc.

FORM OF COMMON STOCK PURCHASE WARRANT

Number of shares:	[                      ]
Holder:
Expiration Date:	November 8, 2015
Exercise Price per Share:	$3.00 (Three dollars per share)

HealthWarehouse.com, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, ____________________., or its registered assigns or permitted transferees (the “Warrant Holder”), is entitled, subject to the terms set forth below, to purchase from the Company _________ shares, as adjusted from time to time as provided in Section 7 hereof, of common stock, $0.001 par value (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at a price of $3.00 (three dollars) per Warrant Share (the “Exercise Price”), at any time and from time to time from and after the date hereof and through and including 5:00 p.m. New York City time on November 8, 2015 (the “Expiration Date”), and subject to the following terms and conditions.  This Warrant is being issued to the Holder pursuant to that certain Securities Purchase Agreement, dated as of November 8, 2010, by and between the Company and the Holder (the “Purchase Agreement”).  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Purchase Agreement.

1.             Registration of Warrant.  The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Warrant Holder hereof from time to time.  The Company may deem and treat the registered Warrant Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Warrant Holder, and for all other purposes, and the Company shall not be affected by notice to the contrary.

2.             Investment Representation.  The Warrant Holder by accepting this Warrant represents that the Warrant Holder is acquiring this Warrant for its own account or the account of an accredited investor affiliate for investment purposes and not with the view to any offering or distribution and that the Warrant Holder will not sell or otherwise dispose of this Warrant or the underlying Warrant Shares in violation of applicable securities laws.  Subject to Section 10 hereof, the Warrant Holder acknowledges that the certificates representing any Warrant Shares will bear a legend indicating that they have not been registered under the United States Securities Act of 1933, as amended (the “1933 Act”) and may not be sold by the Warrant Holder except pursuant to an effective registration statement or pursuant to an exemption from registration requirements of the 1933 Act and in accordance with federal and state securities laws. 

3.             Validity of Warrant and Issue of Shares.  The Company represents and warrants that this Warrant has been duly authorized and validly issued and warrants and agrees that all of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, when issued upon such exercise, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.  The Company further warrants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of Common Stock to provide for the exercise of the rights represented by this Warrant.

4.Registration of Transfers and Exchange of Warrants.

a.  All or any portion of this Warrant shall be assignable or transferable by Warrant Holder to a subsidiary, parent, general partner, limited partner, retired partner, affiliate, member or retired member, or stockholder of a Holder that is a corporation, partnership or limited liability company,  subject to such terms and conditions with respect to such assignment or transfer as Warrant Holder shall determine.

b. Subject to compliance with the legend set forth on the face of this Warrant, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 12.  Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Warrant Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance of such transferee of all of the rights and obligations of a Warrant Holder of a Warrant.

c.This Warrant is exchangeable, upon the surrender hereof by the Warrant Holder to the office of the Company specified in or pursuant to Section 12 for one or more New Warrants, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder.  Any such New Warrant will be dated the date of such exchange.

5.Exercise of Warrants.

a.  Upon surrender of this Warrant with the Form of Election to Purchase attached hereto duly completed and signed to the Company, at its address set forth in Section 12, and upon payment and delivery of the Exercise Price per Warrant Share multiplied by the number of Warrant Shares that the Warrant Holder intends to purchase hereunder, in lawful money of the United States of America, in cash or by certified or official bank check or checks, to the Company, all as specified by the Warrant Holder in the Form of Election to Purchase, the Company shall promptly (but in no event later than 7 business days after the Date of Exercise (as defined herein)) issue and deliver or cause to be issued  and cause to be delivered to or upon the written order of the Warrant Holder and in such name or names as the Warrant Holder may designate (subject to the restrictions on transfer described in the legend set forth on the face of this Warrant), a stock certificate for the number of Warrant Shares issuable upon such exercise, with such restrictive legend as required by the 1933 Act.  Any person so designated by the Warrant Holder to receive Warrant Shares shall be deemed to have become holder of record of such Warrant Shares as of the Date of Exercise.  In connection with such exercise, the Warrant Holder, or such person so designated by the Warrant Holder in accordance with this paragraph, shall be deemed a stockholder of record with respect to the Warrant Shares purchaser pursuant to such exercise, with all rights of a stockholder, including voting rights and rights to receive dividends.

b.          A “Date of Exercise” means the date on which the Company shall have received (i) this Warrant (or any New Warrant, as applicable), with the Form of Election to Purchase attached hereto (or attached to such New Warrant) appropriately completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares so indicated by the Warrant Holder to be purchased.

c.          This Warrant shall be exercisable at any time and from time to time for such number of Warrant Shares as is indicated in the attached Form of Election To Purchase.  If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares for which no exercise has been evidenced by this Warrant.

d.          Cashless Exercise. The Warrant Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

Net Number =  (A x B) — (A x C)

  B

For purposes of the foregoing formula:

A = the total number of shares with respect to which this Warrant is then being exercised.

B = the closing sale price of the shares of Common Stock (as reported by Bloomberg) on the date immediately preceding the date of the Form of Election to Purchase (the “Closing Price”).

C = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

e.          Deemed Exercise.  If, at the Expiration Date for any Warrant Shares, this Warrant has not theretofore been exercised with respect to such Warrant Shares, and the Closing Price on the business day immediately prior to the Expiration Date is greater than the Exercise Price, then the Warrant Holder shall be deemed to have exercised this Warrant in whole with respect to such Warrant Shares immediately prior to such Expiration Date and shall be deemed to have elected to pay the aggregate Exercise Price pursuant to paragraph d. (Cashless Exercise) of this Section 5, and the Date of Exercise with respect to such deemed exercise shall be the date on which such Expiration Date occurs.

6.             Adjustment of the Number of Shares.  The character of the shares of stock or other securities at the time issuable upon exercise of this Warrant, are subject to adjustment upon the occurrence of the following events, and all such adjustments shall be cumulative:

 a.             Adjustment for Stock Splits, Stock Dividends, Recapitalizations, Etc.  The Exercise Price and the number of shares of Common Stock or other securities at the time issuable upon exercise of this Warrant shall be appropriately adjusted to reflect any stock dividend, stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of stock or securities.

b.            Reserved

c.             Reserved

d.   Distributions of Other Property.  If, at any time while this Warrant  remains outstanding and unexpired with respect to any Warrant Shares, the Company shall distribute to all holders of Company Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) evidences of its indebtedness or assets (excluding ordinary cash dividends or distributions payable out of consolidated earnings or earned surplus and dividends or distributions referred to in paragraph (a) of this Section 6), then, in lieu of an adjustment to the number of shares Company Common Stock purchasable upon the exercise of this Warrant, the Warrant Holder, upon the exercise hereof at any time after such distribution shall be entitled to receive from the Company the stock or other securities to which the Warrant Holder would have been entitled if the Warrant Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Section 6.

e.  Certificate as to Adjustments.  In case of any adjustment or readjustment in the number or kind of securities issuable on the exercise of this Warrant, or the Exercise Price, the Company will promptly give written notice thereof (but in no event later than 5 business days thereafter) to the holder of this Warrant in the form of a certificate, certified and confirmed by the Board of Directors of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

7.             Fractional Shares.  The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant.  The number of full Warrant Shares that shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrants Shares purchasable on exercise of this Warrant so presented.  If any fraction of a Warrant Share would, except for the provisions of this Section 7, be issuable on the exercise of this Warrant, the Company shall, at its option, (i) pay an amount in cash equal to the Exercise Price multiplied by such fraction or (ii) round the number of Warrant Shares issuable, up to the next whole number.

8.          Sale or Merger the Company.  The Company will give Warrant Holder 15-day written notice before the event of a sale of all or substantially all of the assets of the Company or the merger or consolidation of the Company in a transaction in which the Company is not the surviving entity (a “Fundamental Transaction”).  The Company shall not enter into or be party to such Fundamental Transaction unless the surviving entity assumes in writing all of the obligations of the Company under this Warrant pursuant to written agreements in form and substance satisfactory to the Warrant Holder and approved by the Warrant Holder prior to such Fundamental Transaction, including agreements to deliver to the Warrant Holder in exchange for this Warrant a security of the surviving entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and satisfactory to the Warrant Holder.

9.          Issuance of Substitute Warrant.   In the event of a merger, consolidation, recapitalization or reorganization of the Company or a reclassification of Company shares of stock, which results in an adjustment to the number of shares subject to this Warrant hereunder, the Company agrees to issue to the Warrant Holder a substitute Warrant reflecting the adjusted number of shares upon the surrender of this Warrant to the Company.

10.           Listing of Shares.   The Company shall promptly secure the listing of all of the Warrant Shares issuable hereunder 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, so long as any other shares of Common Stock shall be so listed, such listing of Warrant Shares.

11.           Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Warrant Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the this Warrant, 100% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of this Warrant  (without regard to any limitations on exercise).

12.           Notice.  All notices and other communications hereunder shall be in writing and shall be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the date initially received if delivered by facsimile transmission followed by registered or certified mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid as follows:

If to the Company:

HealthWarehouse.com, Inc.

100 Commerce Boulevard,

Cincinnati, OH  45140

Fax: (513) 618-0925

Attn: Chief Executive Officer

with a copy (for informational purposes only) to:

Mark J. Zummo, Esq.

Kohnen & Patton LLP

800 PNC Center

201 E. Fifth Street

Cincinnati, OH 45202

Telephone:  (513) 381-0656

Facsimile: (513) 381-5823

If to the Warrant Holder:

_________________________

_________________________

_________________________

_________________________

With a copy (for informational purposes only) to:

_________________________

_________________________

_________________________

_________________________

           13.           Loss of Warrant.  Upon receipt by the Company of satisfactory evidence of loss, theft, destruction or mutilation of this Warrant and of indemnity satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date and any such lost, stolen or destroyed Warrant shall thereupon become void.

14.Miscellaneous.

a.  This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Warrant may be amended only in writing and signed by the Company and the Warrant Holder.

b.  Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Warrant Holder any legal or equitable right, remedy or cause of action under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company and the Warrant Holder.

c. This Warrant shall be governed by, 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 irrevocably submits and consent to the exclusive jurisdictions of the United States District Courts of the State of Delaware, or, if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in the State of Delaware, and hereby agrees that such courts shall be the exclusive proper forum for the determination of any dispute arising hereunder.

d.  The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

 e. In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceablilty of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonably substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

f.           The Warrant Holder shall not, by virtue hereof, be entitled to any voting or other rights of a shareholder of the Company, either at law or equity, and the rights of the Warrant Holder are limited to those expressed in this Warrant.

g.            The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Warrant Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Warrant Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.  If any action, suit, or other proceedings is instituted concerning or arising out of this Warrant, the prevailing party shall recover all of such party’s costs and reasonable attorney’s fees incurred in each such action, suit, or other proceeding, including any and all appeals or petitions from any such action, suit or other proceeding.

h.           From and after the date of this Warrant, upon the request of the Warrant Holder or the Company, the Company and the Warrant Holder shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Warrant.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by the authorized officer as of the date first above stated.

HealthWarehouse.com, Inc.

By:

Name:

Title:

FORM  OF  ELECTION  TO  PURCHASE

(To be executed by the Warrant Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant)

To:  HealthWarehouse.com, Inc.

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase                          shares of Common Stock (“Common Stock”), $0.___ par value, of HealthWarehouse.com, Inc. and encloses one warrant and $                      for each Warrant Share being purchased or an aggregate of $                           in cash or certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) together with any applicable taxes payable by the undersigned pursuant to the Warrant.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of:

(Please print name and address)

(Please insert Social Security or Tax Identification Number)

If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the shares of Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to:

(Please print name and address)

Dated: Name of Warrant Holder:

(Print)

(By:)

(Name:)

(Title:)

Signature must conform in all respects to name of Warrant Holder as specified on the face of the Warrant

 [FORM OF ASSIGNMENT PURSUANT TO SECTION 4(a)]

(To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.)

FOR VALUE RECEIVED hereby sells, assigns and transfers unto

(Please print name and address of transferee)

this Warrant Certificate, together with all right, title and interest therein, and hereby irrevocably constitutes and appoints                                                         Attorney, to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution.

Dated:

Signature:

(Signature must confirm in all respects to name of holder as specified on the face of the Warrant Certificate.)

(Insert Social Security or Other Identifying Number of Assignee).

EX-4.2

EXHIBIT 4.2

THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE BORROWERS OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE BORROWERS TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

HEALTHWAREHOUSE.COM, INC.

HWAREH.COM, INC.

7% Senior Secured Convertible Promissory Note

$500,000.00 As of November 8, 2010

FOR VALUE RECEIVED, Healthwarehouse.com, Inc., a Delaware corporation (“Parent”), and HWAREH.com, Inc. a Delaware corporation (“Subsidiary” and, collectively with Parent, the “Borrowers”) with principal executive offices at 100 Commerce Blvd., Cincinnati, OH 45140, jointly and severally promise to pay to the order of Milfam I L.P. (the “Holder”), or registered assigns,  on the earliest to occur of (the “Maturity Date”) (i) December 31, 2012, (ii) an Event of Default or (iii) upon the occurrence of a Liquidation Event (as defined in the Certificate of Designation), the principal amount of five hundred thousand dollars ($500,000.00) (the “Principal Amount”) in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest on this Note shall accrue on the Principal Amount outstanding at a rate equal to seven percent (7.0%) per annum, compounded on the first day of each calendar year during which this Note is outstanding, beginning January 1, 2011, and based on a 360 day year, and shall be payable on the Maturity Date.  Nothing in this paragraph shall be construed as the consent by the Holder to any action otherwise prohibited by the terms of this Note or as a waiver of any such prohibition.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Loan Agreement (as hereinafter defined).

1.           Loan and Security Agreement.  This Note is one of two Notes issued pursuant to that certain Loan and Security Agreement dated as of November 8, 2010, by and among Parent, Subsidiary, Holder and HWH Lending LLC (the “Loan Agreement”).  Reference is hereby made to the Loan Agreement for a statement of all of the terms and conditions under which the Principal Amount evidenced hereby is made and the Principal Amount and all accrued interest pursuant hereto is to be repaid and of the Collateral securing the Borrowers’ obligations hereunder.  Notwithstanding any provision to the contrary contained herein, this Note is subject and entitled to the terms, conditions, covenants and agreements contained in the Loan Agreement. Any transferee of this Note, by its acceptance hereof, assumes the obligations of the Holder in the Loan Agreement with respect to the conditions and procedures for transfer of this Note.  Reference to the Loan Agreement shall in no way impair the absolute and unconditional obligation of the Borrowers to pay both the Principal Amount hereof and interest hereon as provided herein.

-1-

2.           Each payment by the Borrowers pursuant to this Note shall be made without set-off or counterclaim and in immediately available funds.  With the prior written consent of Holder the Borrowers may prepay (in whole or in part) without penalty any amounts owing under this Note.

3.           Borrowers (i) waives presentment, demand, protest or notice of any kind in connection with this Note and (ii) agrees, in the event of an Event of Default, to pay to the Holder of this Note, on demand, all costs and expenses (including legal fees and expenses) incurred in connection with the enforcement and collection of this Note.

4.           Conversion.  At any time when this Note is outstanding, the Note may be converted into shares of Parent’s Series B Preferred Stock  (the “Series B Preferred Stock”) as follows:

A.           Mandatory Conversion.  In the event that all shares of Series B Preferred Stock are automatically converted into shares of Parent’s Common Stock (the “Common Stock”) pursuant to Section 7(l) of the Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock (the “Certificate of Designation”), immediately prior, but in any event contingent upon, such automatic conversion, all principal owing under this Note and accrued and unpaid interest shall automatically be converted into that number of shares of Series B Preferred Stock as is determined by dividing (i) the aggregate principal owing under this Note and accrued and unpaid interest by (ii) $9.45 (as the same may be appropriately adjusted for any stock splits, stock dividends, recapitalizations and the like with respect to the Series B Preferred Stock).

B.           Voluntary Conversion.  All principal owing under this Note and accrued and unpaid interest may be converted at the option of the Holder into that number of shares of Series B Preferred Stock as is determined by dividing (i) the aggregate principal owing under this Note and accrued and unpaid interest by (ii) $9.45 (as the same may be appropriately adjusted for any stock splits, stock dividends, recapitalizations and the like with respect to the Series B Preferred Stock).  The shares of Series B Preferred Stock issuable upon the conversion of this Note will, upon such issuance be validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof.

C.           Mechanics of Conversion.

(1)           In connection with a Mandatory Conversion pursuant to Section 4A, Parent shall give Holder written notice of the occurrence of the mandatory conversion of the Series B Preferred Stock and the shares of Series B Preferred Stock issuable pursuant to Section 4A shall be automatically converted into shares of Common Stock without further action by Holder pursuant to the terms of the Certificate of Designation.

-2-

(2)           The Holder shall give the Parent at least three (3) business days prior written notice of Holder’s intention to convert this Note in accordance with Section 4B.  The Holder shall provide written notice thereof to the Parent of its election to convert the Note and shall state therein the name or names in which the certificate or certificates for the shares of Series B Preferred Stock are to be issued.  Parent shall, as soon as practicable after receipt of such notice and the original executed version of this Note, take such actions necessary to issue the shares of Series B Preferred Stock  and deliver to the Holder, or to the nominee or nominees of the Holder, a certificate or certificates for the number of shares of Series B Preferred Stock to which the Holder shall be entitled against surrender to it of the Note to be converted.  Such conversion shall be deemed to have been made on the date of such written notice, and the party or parties entitled to receive the shares of Series B Preferred Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of Series B Preferred Stock as of such date.

D.           No Impairment.  Borrowers will not, by amendment of its organizational or governing documents or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms hereunder applicable to it, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the Holders’ conversion rights against impairment.

E.           No Fractional Shares.  No fractional shares shall be issued upon the conversion of the Note, and the aggregate number of shares of Series B Preferred Stock to be issued to Holder shall be rounded down to the nearest whole share and the Borrowers shall pay in cash the fair market value (as determined in good faith by its Board of Directors) of any fractional shares as of the time when entitlement to receive such fractions is determined.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of all Notes that the Holder is at the time converting into shares of Series B Preferred Stock and the number of shares of Series B Preferred Stock issuable upon such conversion.

5.           Other Terms.

A.           All covenants, agreements and undertakings in this Note binding upon the Borrowers or the Holder shall bind and inure to the benefit of the successors and permitted assigns of the Borrowers and the Holder, respectively, whether so expressed or not.

B.           The Borrowers and the Holder hereby expressly and irrevocably agree that this Note shall be governed by and construed solely and exclusively in accordance with the laws of the State of New York without regard to the conflicts of laws principles thereof.  The Borrowers and the Holder hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this instrument or the consummation of the transactions contemplated hereby, shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereby covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agrees that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York City. The parties hereto waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto.

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C.           All notices and other communications from the Borrowers to the Holder of this Note shall be mailed by first class, registered or certified mail, postage prepaid, and/or a nationally recognized overnight courier service to the Holder’s address listed in the Loan Agreement or such other address furnished to the Borrowers in writing by the Holder.

D.           THE HOLDER AND THE BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE HOLDER OR THE BORROWERS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER’S PURCHASE OF THIS NOTE.

E.           Upon an Event of Default, the Holder of this Note shall have all of the rights set forth in section of the Loan Agreement titled “Events of Default” which is incorporated herein by reference.

F.           No terms of this Note may be amended, waived or modified except by the express written consent of the Borrowers and the Holder.

G.           All the covenants, agreements, representations and warranties contained in this Note shall bind the parties hereto and their respective heirs, executors, administrators, distributes, successors, assigns, and transferees.

H.           In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

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IN WITNESS WHEREOF, this Note has been executed and delivered on the date specified above by the duly authorized representatives of the Borrowers.

HEALTHWAREHOUSE.COM, INC.
By:	/s/ Lalit Dhadphale
Name:	Lalit Dhadphale
Title:	President and CEO
HWAREH.COM, INC.
By:	/s/ Lalit Dhadphale
Name:	Lalit Dhadphale
Title:	President and CEO

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EX-4.3

EXHIBIT 4.3

THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE BORROWERS OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE BORROWERS TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

HEALTHWAREHOUSE.COM, INC.

HWAREH.COM, INC.

7% Senior Secured Convertible Promissory Note

$500,000.00 As of November 8, 2010

FOR VALUE RECEIVED, Healthwarehouse.com, Inc., a Delaware corporation (“Parent”), and HWAREH.com, Inc. a Delaware corporation (“Subsidiary” and, collectively with Parent, the “Borrowers”) with principal executive offices at 100 Commerce Blvd., Cincinnati, OH 45140, jointly and severally promise to pay to the order of HWH Lending LLC (the “Holder”), or registered assigns,  on the earliest to occur of (the “Maturity Date”) (i) December 31, 2012, (ii) an Event of Default or (iii) upon the occurrence of a Liquidation Event (as defined in the Certificate of Designation), the principal amount of five hundred thousand dollars ($500,000.00) (the “Principal Amount”) in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest on this Note shall accrue on the Principal Amount outstanding at a rate equal to seven percent (7.0%) per annum, compounded on the first day of each calendar year during which this Note is outstanding, beginning January 1, 2011, and based on a 360 day year, and shall be payable on the Maturity Date.  Nothing in this paragraph shall be construed as the consent by the Holder to any action otherwise prohibited by the terms of this Note or as a waiver of any such prohibition.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Loan Agreement (as hereinafter defined).

1.           Loan and Security Agreement.  This Note is one of two Notes issued pursuant to that certain Loan and Security Agreement dated as of November 8, 2010, by and among Parent, Subsidiary, Holder and Milfam I L.P. (the “Loan Agreement”).  Reference is hereby made to the Loan Agreement for a statement of all of the terms and conditions under which the Principal Amount evidenced hereby is made and the Principal Amount and all accrued interest pursuant hereto is to be repaid and of the Collateral securing the Borrowers’ obligations hereunder.  Notwithstanding any provision to the contrary contained herein, this Note is subject and entitled to the terms, conditions, covenants and agreements contained in the Loan Agreement. Any transferee of this Note, by its acceptance hereof, assumes the obligations of the Holder in the Loan Agreement with respect to the conditions and procedures for transfer of this Note.  Reference to the Loan Agreement shall in no way impair the absolute and unconditional obligation of the Borrowers to pay both the Principal Amount hereof and interest hereon as provided herein.

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2.           Each payment by the Borrowers pursuant to this Note shall be made without set-off or counterclaim and in immediately available funds.  With the prior written consent of Holder the Borrowers may prepay (in whole or in part) without penalty any amounts owing under this Note.

3.           Borrowers (i) waives presentment, demand, protest or notice of any kind in connection with this Note and (ii) agrees, in the event of an Event of Default, to pay to the Holder of this Note, on demand, all costs and expenses (including legal fees and expenses) incurred in connection with the enforcement and collection of this Note.

4.           Conversion.  At any time when this Note is outstanding, the Note may be converted into shares of Parent’s Series B Preferred Stock  (the “Series B Preferred Stock”) as follows:

A.           Mandatory Conversion.  In the event that all shares of Series B Preferred Stock are automatically converted into shares of Parent’s Common Stock (the “Common Stock”) pursuant to Section 7(l) of the Certificate of Designation of Preferences, Rights and Limitations of Series B Preferred Stock (the “Certificate of Designation”), immediately prior, but in any event contingent upon, such automatic conversion, all principal owing under this Note and accrued and unpaid interest shall automatically be converted into that number of shares of Series B Preferred Stock as is determined by dividing (i) the aggregate principal owing under this Note and accrued and unpaid interest by (ii) $9.45 (as the same may be appropriately adjusted for any stock splits, stock dividends, recapitalizations and the like with respect to the Series B Preferred Stock).

B.           Voluntary Conversion.  All principal owing under this Note and accrued and unpaid interest may be converted at the option of the Holder into that number of shares of Series B Preferred Stock as is determined by dividing (i) the aggregate principal owing under this Note and accrued and unpaid interest by (ii) $9.45 (as the same may be appropriately adjusted for any stock splits, stock dividends, recapitalizations and the like with respect to the Series B Preferred Stock).  The shares of Series B Preferred Stock issuable upon the conversion of this Note will, upon such issuance be validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof.

C.           Mechanics of Conversion.

(1)           In connection with a Mandatory Conversion pursuant to Section 4A, Parent shall give Holder written notice of the occurrence of the mandatory conversion of the Series B Preferred Stock and the shares of Series B Preferred Stock issuable pursuant to Section 4A shall be automatically converted into shares of Common Stock without further action by Holder pursuant to the terms of the Certificate of Designation.

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(2)           The Holder shall give the Parent at least three (3) business days prior written notice of Holder’s intention to convert this Note in accordance with Section 4B.  The Holder shall provide written notice thereof to the Parent of its election to convert the Note and shall state therein the name or names in which the certificate or certificates for the shares of Series B Preferred Stock are to be issued.  Parent shall, as soon as practicable after receipt of such notice and the original executed version of this Note, take such actions necessary to issue the shares of Series B Preferred Stock  and deliver to the Holder, or to the nominee or nominees of the Holder, a certificate or certificates for the number of shares of Series B Preferred Stock to which the Holder shall be entitled against surrender to it of the Note to be converted.  Such conversion shall be deemed to have been made on the date of such written notice, and the party or parties entitled to receive the shares of Series B Preferred Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of Series B Preferred Stock as of such date.

D.           No Impairment.  Borrowers will not, by amendment of its organizational or governing documents or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms hereunder applicable to it, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the Holders’ conversion rights against impairment.

E.           No Fractional Shares.  No fractional shares shall be issued upon the conversion of the Note, and the aggregate number of shares of Series B Preferred Stock to be issued to Holder shall be rounded down to the nearest whole share and the Borrowers shall pay in cash the fair market value (as determined in good faith by its Board of Directors) of any fractional shares as of the time when entitlement to receive such fractions is determined.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of all Notes that the Holder is at the time converting into shares of Series B Preferred Stock and the number of shares of Series B Preferred Stock issuable upon such conversion.

5.           Other Terms.

A.           All covenants, agreements and undertakings in this Note binding upon the Borrowers or the Holder shall bind and inure to the benefit of the successors and permitted assigns of the Borrowers and the Holder, respectively, whether so expressed or not.

B.           The Borrowers and the Holder hereby expressly and irrevocably agree that this Note shall be governed by and construed solely and exclusively in accordance with the laws of the State of New York without regard to the conflicts of laws principles thereof.  The Borrowers and the Holder hereby expressly and irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this instrument or the consummation of the transactions contemplated hereby, shall be brought solely in a federal or state court located in the City, County and State of New York. By its execution hereof, the parties hereby covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the City, County and State of New York and agrees that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in New York City. The parties hereto waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto.

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C.           All notices and other communications from the Borrowers to the Holder of this Note shall be mailed by first class, registered or certified mail, postage prepaid, and/or a nationally recognized overnight courier service to the Holder’s address listed in the Loan Agreement or such other address furnished to the Borrowers in writing by the Holder.

D.           THE HOLDER AND THE BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE HOLDER OR THE BORROWERS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER’S PURCHASE OF THIS NOTE.

E.           Upon an Event of Default, the Holder of this Note shall have all of the rights set forth in section of the Loan Agreement titled “Events of Default” which is incorporated herein by reference.

F.           No terms of this Note may be amended, waived or modified except by the express written consent of the Borrowers and the Holder.

G.           All the covenants, agreements, representations and warranties contained in this Note shall bind the parties hereto and their respective heirs, executors, administrators, distributes, successors, assigns, and transferees.

H.           In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

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IN WITNESS WHEREOF, this Note has been executed and delivered on the date specified above by the duly authorized representatives of the Borrowers.

HEALTHWAREHOUSE.COM, INC.
By:	/s/ Lalit Dhadphale
Name:	Lalit Dhadphale
Title:	President and CEO
HWAREH.COM, INC.
By:	/s/ Lalit Dhadphale
Name:	Lalit Dhadphale
Title:	President and CEO

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EX-10.1

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 Lettersets 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.

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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;

 

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(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.

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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.

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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.

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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.

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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.

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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.

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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.

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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:		28,564

EX-10.2

EXHIBIT 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.

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“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.

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“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.

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“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).

EX-10.3

EXHIBIT 10.3

EXECUTION COPY

HEALTHWAREHOUSE.COM, INC.

INVESTOR RIGHTS AGREEMENT

This Investor Rights Agreement (the “Agreement”) is entered into as of the 8th day of November, 2010, by and among HealthWarehouse.com, Inc., a Delaware corporation (the “Company”), each of the persons and entities listed on Exhibit A hereto (referred to hereinafter as the “Investors” and each individually as an “Investor).

Recitals

Whereas, certain of the Investors are purchasing shares of the Company’s Series B Preferred Stock (the “Series B Preferred Stock”) and warrants to purchase common stock (“Warrants”) pursuant to that certain Securities Purchase Agreement of even date herewith, as amended from time to time (the “Purchase Agreement,” and the transactions provided for in the Purchase Agreement, the “Financing”);

Whereas, certain of the Investors are also purchasing 7% secured convertible promissory notes (“Convertible Notes”) and Warrants pursuant to the Purchase Agreement and that certain Loan and Security Agreement of even date herewith, as amended from time to time (the “Loan Agreement”);

Whereas, the obligations in the Purchase Agreement and Loan Agreement are conditioned upon the execution and delivery of this Agreement; and

Whereas,in connection with the consummation of the Financing, the parties desire to enter into this Agreement in order to grant registration rights, information rights, and other rights to the Investors as set forth below.

Agreement

Now, Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. GENERAL.

1.1         Definitions.  As used in this Agreement the following terms shall have the following respective meanings:

(a)           “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated pursuant to the Exchange Act and any successor provision.

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

(c)           “Form S-3”means such form under the Securities Act as in effect on the date hereof or any successor or similar registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

(d)           “Holder”means any person owning of record Registrable Securities that have not been sold to the public or any assignee of record of such Registrable Securities in accordance with Section 2.9 hereof.

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

(f)           “Indebtedness” means without duplication, with respect to each of the Company or Old HW:  (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes or similar instruments, (c) all obligations upon which interest charges are customarily paid, (d) all obligations under conditional sale or other title retention agreements relating to property acquired by the Company or Old HW, (e) all obligations 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 the Company or Old HW, whether or not the Indebtedness secured thereby has been assumed, (g) all guaranties or endorsements of others, (h) all obligations under capitalized leases attributable to the payment of principal, (i) all obligations, contingent or otherwise, as an account party in respect of letters of credit and letters of guaranty, and (j) all obligations, contingent or otherwise, in respect of bankers’ acceptances.

(g)          “National Securities Exchange” shall mean the New York Stock Exchange, the NYSE Amex Equities, the Nasdaq Global Market, the Nasdaq Global Select Market or the Nasdaq Capital Market, or any successor to any of the foregoing.

(h)          “Old HW” means Hwareh.com, Inc., a Delaware corporation, and a wholly-owned subsidiary of the company.

(i)           “Preferred Director” means any director of the Company that the holders of the Preferred Stock are entitled to elect pursuant to the Company’s Amended and Restated Certificate of Incorporation, as may be amended from time to time.

(j)           “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.

(k)          “Register,”“registered,” and “registration”refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document.

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(l)           “Registrable Securities”means (a) Common Stock of the Company issuable or issued upon conversion of the Shares or the conversion or exercise of any Warrants to purchase Common Stock and (b) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such above-described securities. Notwithstanding the foregoing, Registrable Securities shall not include any securities (i) sold by a person to the public either pursuant to a registration statement or Rule 144 or (ii) sold in a private transaction in which the transferor’s rights under Section 2 of this Agreement are not assigned.

(m)         “Registrable Securities then outstanding”shall be the number of shares of Common Stock that are Registrable Securities and either (a) are then issued and outstanding or (b) are issuable pursuant to then outstanding exercisable or convertible securities.

(n)          “Registration Expenses”means all expenses incurred by the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

(o)           “Related Person” shall have the meaning set forth in Rule 404 of Regulation S-K as promulgated pursuant to the Exchange Act, and any successor provision.

(p)           “SEC” or “Commission”means the Securities and Exchange Commission.

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

(r)           “Selling Expenses”means all underwriting discounts and selling commissions applicable to the sale.

(s)           “Shares”means the Company’s Preferred Stock issued (i) pursuant to the Purchase Agreement, (ii) issued as a PIK Dividend on the Company’s Preferred Stock, (iii) issued upon conversion of Convertible Notes,and(iv)shares of Preferred Stock held from time to time by the Investors listed on Exhibit A hereto and their permitted assigns.

(t)           “Special Registration Statement” means (i) a registration statement relating solely to any employee benefit plan or (ii) with respect to any corporate reorganization or transaction under Rule 145 of the Securities Act, any registration statements related solely to the issuance or resale of securities issued in such a transaction or (iii) a registration related solely to stock issued upon conversion of debt securities.

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SECTION 2.   REGISTRATION; RESTRICTIONS ON TRANSFER.

2.1        Restrictions on Transfer.

(a)          Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until:

(i)           there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

(ii)         (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act.  It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144, except in unusual circumstances (provided that the transferor provides the Company with reasonable assurances (in the form of seller and broker representation letters) that such securities may be sold pursuant to such rule).  The Company will not require any transferee pursuant to Rule 144 to be bound by the terms of this Agreement if the shares so transferred do not remain Registrable Securities hereunder following such transfer.

(b)          Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, or (D) an individual transferring to the Holder’s family members or trust for the benefit of an individual Holder; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder.

(c)          Each certificate representing Shares or Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):

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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THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

(d)           The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder if the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.

(e)           Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

2.2        Demand Registration.

(a)           Following the earlier of (i) the third anniversary of the date of this Agreement, or (ii) six months after the initial listing or quotation of the Company’s Common Stock on any National Securities Exchange, and subject to the conditions of this Section 2.2, if (i) the Company shall receive a written request from the Holders of forty percent (40%)of the Registrable Securities then outstanding (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the registration of Registrable Securities then outstanding, and (ii) if the anticipated gross aggregate offering price, without regard to any underwriting discounts and commissions of the Registrable Securities being registered, would exceed $5,000,000 (a “Qualified Public Offering”), then the Company shall, within thirty (30) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2.2, effect, as expeditiously as reasonably possible, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.

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(b)          If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 or any request pursuant to Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.2(a) or Section 2.4(a), as applicable.  In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities held by all Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company).  Notwithstanding any other provision of this Section 2.2 or Section 2.4, if the underwriter advises the Company that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

(c)          The Company shall not be required to effect a registration pursuant to this Section 2.2:

(i)           after the Company has effected two (2)registrations pursuant to this Section 2.2, and such registrations have been declared or ordered effective;

(ii)         if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.2 a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided that such right to delay a request shall be exercised by the Company not more than oncein any twelve (12) month period;

(iii)        if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.4 below; or

(iv)         in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

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2.3        Piggyback Registrations.  The Company shall notify all Holders of Registrable Securities in writing at least fifteen (15) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding Special Registration Statements) and will afford each such Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by such Holder.  Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall, within fifteen (15) days after the above-described notice from the Company, so notify the Company in writing.  Such notice shall state the intended method of disposition of the Registrable Securities by such Holder.  If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

(a)           Underwriting.  If the registration statement of which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Holders of Registrable Securities.  In such event, the right of any such Holder to include Registrable Securities in a registration pursuant to this Section 2.3 shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company.  Notwithstanding any other provision of this Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the Holders on a pro rata basis based on the total number of Registrable Securities held by the Holders; and third, to any stockholder of the Company (other than a Holder) on a pro rata basis; provided, however, that no such reduction shall reduce the amount of securities of the selling Holders included in the registration below twenty-five percent (25%) of the total amount of securities included in such registration.In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by Holders without the written consent of Holders of not less than a majority of the Registrable Securities proposed to be sold in the offering.  If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement.  Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.  For any Holder which is a partnership, limited liability company or corporation, the partners, retired partners, members, retired members, stockholders and affiliates of such Holder, or the estates and family members of any such partners, retired partners, members and retired members and any trusts for the benefit of any of the foregoing person shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder,” as defined in this sentence.

(b)           Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 whether or not any Holder has elected to include securities in such registration, and shall promptly notify any Holder that has elected to include shares in such registration of such termination or withdrawal.  The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.5 hereof.

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2.4        Form S-3 Registration.  In case the Company shall receive from any Holder or Holders of Registrable Securities a written request or requests that the Company effect a registration on Form S-3 (or any successor to Form S-3) or any similar short-form registration statement and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will:

(a)          promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders of Registrable Securities; and

(b)          as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this Section 2.4:

(i)           if Form S-3 is not available for such offering by the Holders,

(ii)         if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less thantwo million dollars ($2,000,000),

(iii)        if within thirty (30) days of receipt of a written request from  any Holder or Holders pursuant to this Section 2.4, the Company gives notice to such Holder or Holders of the Company’s intention to makea public offering within ninety (90) days, other than pursuant to a Special Registration Statement,

(iv)         if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board of Directors of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than thirty (30) days after receipt of the request of the Holder or Holders under this Section 2.4; provided, that such right to delay a request shall be exercised by the Company not more than once in any twelve (12) month period,

(v)           if the Company has, within the twelve (12) month period preceding the date of such request,already effected one (1)registration on Form S-3 for the Holders pursuant to this Section 2.4, or

(vi)         in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

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(c)          Subject to the foregoing, the Company shall file a Form S-3 registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the requests of the Holders.  Registrations effected pursuant to this Section 2.4 shall not be counted as demands for registration or registrations effected pursuant to Section 2.2.

2.5        Expenses of Registration.  Except as specifically provided herein, all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 2.2, 2.3 or 2.4 herein shall be borne by the Company.  All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered.  The Company shall not, however, be required to pay for expenses of any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is based upon material adverse information concerning the Company of which the Initiating Holders were not aware at the time of such request or (b) the Holders of a majority of Registrable Securities agree to deem such registration to have been effected as of the date of such withdrawal for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) or 2.4(b)(v), as applicable, to undertake any subsequent registration, in which event such right shall be forfeited by all Holders).  If the Holders are required to pay the Registration Expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested.  If the Company is required to pay the Registration Expenses of a withdrawn offering pursuant to clause (a) above, then such registration shall not be deemed to have been effected for purposes of determining whether the Company shall be obligated pursuant to Section 2.2(c) or 2.4(b)(v), as applicable, to undertake any subsequent registration.

2.6        Obligations of the Company.  Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a)           prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to ninety (90) days or, if earlier, until the Holder or Holders have completed the distribution related thereto; provided, however, that at any time, upon written notice to the participating Holders and for a period not to exceed sixty (60) days thereafter (the “Suspension Period”), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation (as defined below).  In the event that the Company shall exercise its right to delay or suspend the filing or effectiveness of a registration hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period.  The Company may extend the Suspension Period for an additional consecutive sixty (60) days with the consent of the holders of a majorityof the Registrable Securities registered under the applicable registration statement, which consent shall not be unreasonably withheld. No more than one (1) such Suspension Periods shall occur in any twelve (12) month period.In no event shall any Suspension Period, when taken together with all prior Suspension Periods, exceed one hundred twenty (120) days in the aggregate.If so directed by the Company, all Holders registering shares under such registration statement shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension; and (ii) use their best efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in such Holders’ possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.  Notwithstanding the foregoing, the Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement other than a registration statement on Form S-3 that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

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(b)          Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in subsection (a) above.

(c)          Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d)          Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e)          In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriters of such offering.  Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

(f)          Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. The Company will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

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(g)          Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed.

(h)          Provide a transfer agent and registrar for all Registrable Securities pursuant hereunder and a CUSIP number of all such Registrable Securities.

(i)           Use its reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter, dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

2.7         Delay of Registration; Furnishing Information.

(a)          No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

(b)          It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be reasonably required to effect the registration of their Registrable Securities.

(c)          The Company shall have no obligation with respect to any registration requested pursuant to Section 2.2 or Section 2.4 if the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in Section 2.2 or Section 2.4, whichever is applicable.

2.8         Indemnification.  In the event any Registrable Securities are included in a registration statement under Sections 2.2, 2.3 or 2.4:

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(a)          To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, stockholders, members, officers and directors of each Holder, legal counsel, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, including, but not limited to, any of the foregoing incurred in any actions, proceedings or settlements in respect thereof), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”) by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference  in any prospectus (whether preliminary or final thereto), offering circular, or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement, qualification or compliance; and the Company will reimburse each such Holder, partner, member, stockholder, officer, director, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, underwriter or controlling person of such Holder.

(b)          To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder’s partners, directors or officers or any person who controls such Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other such Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any of the following statements: (i) any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in any prospectus (whether preliminary or final thereto), offering circular, or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act  (collectively, a “Holder Violation”), in each case to the extent (and only to the extent) that such Holder Violation occurs in reliance upon and in conformity with written information furnished by such Holder under an instrument duly executed by such Holder and stated to be specifically for use in connection with such registration, qualification or compliance; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, officer, director or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Holder Violation; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.8 exceed the net proceeds from the offering received by such Holder.

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(c)          Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses thereof to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8 to the extent, and only to the extent, prejudicial to its ability to defend such action, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

(d)          If the indemnification provided for in this Section 2.8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violations or Holder Violations that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder.

(e)          The obligations of the Company and Holders under this Section 2.8 shall survive completion of any offering of Registrable Securities in a registration statement and, with respect to liability arising from an offering to which this Section 2.8 would apply that is covered by a registration filed before termination of this Agreement, such termination.  No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

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2.9         Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned by a Holder to a transferee or assignee of Registrable Securities (for so long as such shares remain Registrable Securities) that (a) is a subsidiary, parent, general partner, limited partner, retired partner, affiliate, member or retired member, or stockholder of a Holder that is a corporation, partnership or limited liability company, (b) is a Holder’s family member or trust for the benefit of an individual Holder, (c) acquires at least fifty thousand (50,000)shares of Registrable Securities (as adjusted for stock splits and combinations); or (d) acquires at least ten percent (10%) of theshares of Registrable Securities (as adjusted for stock splits and combinations);provided, however, (i) the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned and (ii) such transferee shall agree to be subject to all restrictions set forth in this Agreement.

2.10       Limitation on Subsequent Registration Rights. After the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder rights to demand the registration of shares of the Company’s capital stock, or to include such shares in a registration statement without the written consent of the holders of a majority of Registrable Securities.

2.11       Agreement to Furnish Information.  Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter that are consistent with the Holder’s obligations under Section 2.11 or that are necessary to give further effect thereto.  In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act.  The obligations described in Section 2.11 and this Section 2.12 shall not apply to a Special Registration Statement.  The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said day period.  Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by  Sections 2.11 and 2.12.  The underwriters of the Company’s stock are intended third party beneficiaries of Sections 2.11 and 2.12 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.

2.12       Rule 144 Reporting.  With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

(a)          Make and keep public information available, as those terms are understood and defined in SEC Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times;

(b)          File with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

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(c)          So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request:  a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company filed with the Commission; and such other reports and documents as a Holder may reasonably request in connection with availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration.

2.13       Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.2, Section 2.3, or Section 2.4 hereof shall terminate at such time as such Holder, as reflected on the Company’s list of stockholders, holds less than 1% of the Company’s outstanding Common Stock (treating all shares of Preferred Stock on an as converted basis), the Company’s Common Stock is then listed or quoted on a National Securities Exchange and all Registrable Securities of the Company issuable or issued upon conversion of the Shares held by and issuable to such Holder (and its affiliates) may be sold pursuant to Rule 144 during any ninety (90) day period.  Upon such termination, such shares shall cease to be “Registrable Securities” hereunder for all purposes.

SECTION 3. COVENANTS OF THE COMPANY.

3.1         [Reserved]

3.2         Inspection Rights.  Each Holder shall have the right to visit and inspect any of the properties of the Company or any of its subsidiaries, and to discuss the affairs, finances and accounts of the Company or any of its subsidiaries with its officers, and to review such information as is reasonably requested all at such reasonable times as may be reasonably requested, but not more often than once per quarter; provided, however, that the Company shall not be obligated under this Section 3.2 with respect to a competitor of the Company or with respect to information which the Board of Directors determines in good faith is confidential or attorney-client privileged and should not, therefore, be disclosed.

3.3         Confidentiality of Records.  Each Holder agrees to use the same degree of care as such Holder uses to protect its own confidential information to keep confidential any information furnished to such Holder that the Company identifies as being confidential or proprietary (so long as such information is not in the public domain), except that such Holder may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent of such Holder as long as such partner, subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.3 or comparable restrictions; (ii) at such time as it enters the public domain through no fault of such Investor; (iii) that is communicated to it free of any obligation of confidentiality; (iv) that is developed by Investor or its agents independently of and without reference to any confidential information communicated by the Company; or (v) as required by applicable law.

3.4         Reservation of Common Stock.  The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock or the exercise of any warrants, all Common Stock issuable from time to time upon such conversion or exercise.

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3.5         [Reserved]

3.6         Director and Officer Insurance.  The Company will maintain in full force and effect director and officer liability insurance in the amount of five million dollars ($5,000,000).

3.7         Errors and Omissions Insurance.  The Company will maintain in full force and effect errors and omissions liability insurance in the amount of two million dollars ($2,000,000).

3.8         Proprietary Information and Inventions Agreement. The Company shall require all officers, employees and consultants to execute and deliver a Proprietary Information and Inventions Agreement substantially in a form approved by the Board of Directors including the Preferred Director then serving on the Board of Directors.

3.9         Incurrence of Indebtedness.  Neither the Company nor Old HW shall incur, create, assume, become liable in any manner with respect to, or permit to exist any Indebtedness that is in excess of $1,000,000 in the aggregate on a consolidated basis, except for Indebtedness incurred in the ordinary course of business consistent with past practices, without the approval of the Board of Directors, including the Preferred Director then serving on the Board of Directors.

3.10       Directors’ Liability and Indemnification.  The Company’s Certificate of Incorporation and Bylaws shall provide (a) for elimination of the liability of director to the maximum extent permitted by law and (b) for indemnification of directors for acts on behalf of the Company to the maximum extent permitted by law.

3.11       Board of Directors.

(a)           The Company shall at all times maintain an authorized Board of Directors at five (5) directors, with one of such directors elected by the holders of the Company’s Preferred Stock voting separately as a class.  The Company shall promptly reimburse in full each director of the Company who is not an employee of the Company for all of his or her reasonable out of pocket expenses incurred in attending each meeting of the Board of Directors or any out-of-pocket expenses incurred in attending any non-Board of Directors functions for which the Company requests attendance.  In addition, the Company will promptly reimburse in full, each director of the Company who is not an employee of the company for all of his or her reasonable out-of-pocket expenses incurred in connection with performing any act on behalf of the Company or any of its subsidiaries that is requested by the Company or any such subsidiary.

(b)           Meetings of the Board of Directors shall take place no less than six times per year provided that the Board of Directors, with the consent of the Preferred Director then serving on the Board of Directors, may resolve to meet less frequently.

3.12       Reservation of Shares.  The Company shall reserve and at all times keep available a sufficient number of shares of Common Stock out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock and exercise or conversion of the Warrants, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock and exercise or conversion of the Warrants.

 

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3.13      Qualified Small Business.  The Company will use reasonable efforts to comply with the reporting and recordkeeping requirements of Section 1202 of the Internal Revenue Code of 1986, as amended (the “Code”), any regulations promulgated thereunder and any similar state laws and regulations, and agrees not to repurchase any stock of the Company if such repurchase would cause the Shares not to so qualify as “Qualified Small Business Stock,” so long as the Company’s Board of Directors determines that it is in the best interests of and not unduly burdensome to the Company to comply with the provisions of Section 1202 of the Code.

3.14       Termination of Covenants.  The covenants contained in Sections 3.2, 3.6, 3.7, 3.8, 3.9, 3.11 and 3.13 shall terminate at the later of (i) the first date on which less than twenty percent (20%) of the Shares of Series B Preferred Stock issued pursuant to the Purchase Agreement remain outstanding, or (ii) the expiration of the Appointment Period as defined in Section 5 hereof, if Section 5 becomes applicable.

SECTION 4. RIGHTS OF FIRST REFUSAL.

4.1         Subsequent Offerings.  Subject to applicable securities laws, each Investor shall have a right of first refusal to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell and issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.6 hereof.  Each Investor’s pro rata share is equal to the ratio of (a) the number of shares of Common Stock (including all shares of Common Stock issuable or issued upon conversion of the Shares or upon the exercise of outstanding warrants or options) of which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Shares or upon the exercise of any outstanding warrants or options) immediately prior to the issuance of the Equity Securities.  The term “Equity Securities” shall mean (i) any Common Stock, Preferred Stock or other security of the Company, (ii) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other security or (iv) any such warrant or right.

4.2         Exercise of Rights.  If the Company proposes to issue any Equity Securities, it shall give each Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same.  Each Investor shall have fifteen (15)days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased.  Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.

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4.3         Issuance of Equity Securities to Other Persons.  If not all of the Investors elect to purchase their pro rata share of the Equity Securities, then the Company shall promptly notify in writing the Investors who do so elect and shall offer such Investors the right to acquire such unsubscribed shares on a pro rata basis.  The Investors shall have five (5) days after receipt of such notice to notify the Company of its election to purchase all or a portion thereof of the unsubscribed shares.  The Company shall have ninety (90)days thereafter to sell the Equity Securities in respect of which the Investor’s rights were not exercised, at a price and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company’s notice to the Investors pursuant to Section 4.2 hereof.  If the Company has not sold such Equity Securities within one hundred twenty (120) days of the notice provided pursuant to Section 4.2, the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Investors in the manner provided above.

4.4         Termination and Waiver of Rights of First Refusal.  The rights of first refusal established by this Section 4 shall terminate at the later of (i) the first date on which less than twenty percent (20%) of the Shares of Series B Preferred Stock issued pursuant to the Purchase Agreement remain outstanding, or (ii) the expiration of the Appointment Period as defined in Section 5 hereof, if Section 5 becomes applicable. The rights of first refusal established by this Section 4 may be amended, or any provision waived with and only with the written consent of the Company and the Investors holding a majorityof the Registrable Securities held by all Investors.

4.5         Assignment of Rights of First Refusal.  The rights of first refusal of each Investor under this Section 4 may be assigned to the same parties, subject to the same restrictions as any transfer of registration rights pursuant to Section 2.9.

4.6         Excluded Securities.  The rights of first refusal established by this Section 4 shall have no application to any of the following Equity Securities:

(a)           shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights issued after the date of this Agreement to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements (the “Plans”) when (i) such Plans have been approved by the Board of Directors on or prior to the date hereof, or (ii) such Plans are approved by the Board of Directors after the date hereof, including the affirmative approval of the Preferred Director;

(b)           Any Equity Securities issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement; and any Equity Securities issued pursuant to any such rights or agreements granted after the date of this Agreement, so long as the rights of first refusal established by this Section 4 were complied with, waived, or were inapplicable pursuant to any provision of this Section 4.6 with respect to the initial sale or grant by the Company of such rights or agreements;

(c)           any Equity Securities issued for consideration other than cash pursuant to a bona fide merger, consolidation, acquisition, strategic alliance or similar business combination, provided that such transaction is not primarily for equity financing purposes and is approved by the Board of Directors, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Preferred Director;

(d)           any Equity Securities issued in connection with any stock split or stock dividend by the Company;

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(e)           any Equity Securities issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement, or debt financing from a bank or similar financial or lending institution; provided that such transaction is not primarily for equity financing purposes, and is approved by the Board of Directors, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Preferred Director;

(f)           any Equity Securities that are issued by the Company pursuant to a registration statement relating to a firm commitment underwritten offering filed under the Securities Act;

(g)           any Equity Securities issued pursuant to Section 2 of the Purchase Agreement;

(h)           any Equity Securities issued in connection with bona fide strategic transactions involving the Company and other entities, including (i) joint ventures, manufacturing, marketing or distribution arrangements or (ii) technology transfer or development arrangements; provided that such transaction is not primarily for equity financing purposes and is approved by the Board of Directors, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Preferred Director ; and

(i)           any Equity Securities issued to suppliers or third party service providers in connection with the provision of goods or service; provided that such transaction is not primarily for equity financing purposes and is approved by the Board of Directors, which shall include, in the case of any such issuance to an Affiliate or Related Person of the Company, approval by the Preferred Director.

4.7         Limitation on Subsequent Rights of First Refusal.  After the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder rights to purchase its pro rata share of Equity Securities that would reduce the number of shares allocated to the Holders.

19.

SECTION 5. HWH NOMINEE

5.1         Appointment of HWH Nominee. If, within three (3) years of the date of this Agreement (the “Appointment Period”) (a) the Shares are converted into Company Common Stock in accordance with the Company’s Amended and Restated Certificate of Incorporation and no one has a right to elect a Series B Director pursuant to the terms of the Series B Preferred Stock, and (b) the Investors and their affiliates hold, at the time of conversion, at least ten percent (10%) of the then outstanding Company Common Stock, then the Investors holding a majority of the Registrable Securities then outstanding may identify to the Company in writing one candidate (the “HWH Designee”) to serve on the Board of Directors of the Company.  The Company will promptly appoint the HWH Designee to the Board and agrees, if necessary, to promptly take all necessary corporate action to expand the Board by up to one member to create a vacancy for such purpose.  The Company further agrees during the Appointment Period to promptly nominate the HWH Designee as a member of the Company’s Board in accordance with the Exchange Act and the rules and regulations promulgated thereunder, and to solicit proxies, consents and votes in favor of such HWH Designee serving on the Board.  The HWH Designee will (i) be qualified to serve as a member of the Board under all applicable corporate governance policies or guidelines of the Company and the Board effective on the date of this Agreement (copies of which have been made available or delivered to HWH prior to the execution of this Agreement) and applicable legal, regulatory and stock market requirements, (ii) meet the standard for an “independent director” with respect to service on the Board of Directors pursuant to Section 5605(a)(2) of the Rules of The Nasdaq Stock Market or any successor thereto, and (iii) be reasonably acceptable to the Board (including the Nominating Committee of the Board, if any) in its good faith discretion.  Subject to the foregoing standards, the Board will not unreasonably oppose the appointment of the HWH Designee.  Following receipt of the identification of the HWH Designee, the Board (including the Nominating Committee of the Board, if any) will review and evaluate the HWH Designee as soon as reasonably practicable.  Promptly following approval, the Board shall take all corporate action necessary to appoint the HWH Designee that has been approved to the Board.  If the Board does not accept any HWH Designee, the Investors holding a majority of the Registrable Securities then outstanding will have the right to identify a replacement for such HWH Designee for appointment by the Board in accordance with the provisions of this Section 5.1, provided that notwithstanding the criteria set forth above, such person may be affiliated with at least one of the Investors and provided further that Matthew Stecker shall be deemed acceptable to the Board in such circumstance.  At the expiration of the Appointment Period, or earlier, if HWH and its Affiliates hold less than 10% of the outstanding Common Stock (other than as a result of repurchases of Common Stock by the Company or any Subsidiary), HWH will have no further rights to a HWH Designee under this Section 5.1.

5.2         Successor HWH Nominee.If at any time during the Appointment Period a HWH Designee shall cease to be a member of the Board for any reason, the Investors holding a majority of the Registrable Securities then outstanding shall be entitled to designate another person (an “HWH Successor Designee”), to serve as a director in place of such HWH Designee for the same term as the HWH Designee whom is being replaced.  Any HWH Successor Designee will be required in all cases to be approved by the Board (including the Nominating Committee of the Board, if any) in the manner set forth in and subject to the provisions set forth in Section 5.1 of this Agreement.  If the Board does not accept any HWH Successor Designee, the Investors holding a majority of the Registrable Securities then outstanding will have the right to recommend an additional HWH Successor Designee in accordance with this Section 5.  The Board will appoint such HWH Successor Designee to the Board no later than three business days after the Board’s approval of such HWH Successor Designee.  Upon becoming a member of the Board, any HWH Successor Designee will become a HWH Designee for all purposes under this Agreement.

20.

SECTION 6. MISCELLANEOUS

6.1         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 (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 this Agreement, 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.

6.2         Successors and Assigns.  Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors, and administrators and shall inure to the benefit of and be enforceable by each person who shall be a holder of Registrable Securities from time to time; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.

6.3         Entire Agreement.  This Agreement, the Exhibits and Schedules hereto, the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein.  Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.

6.4         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.

21.

6.5         Amendment and Waiver.

(a)           Except as otherwise expressly provided, this Agreement may be amended or modified, and  the obligations of the Company and the rights of the Holders under this Agreement may be waived, only upon the written consent of the Company and the holders of at least a majority of the then-outstanding Shares, provided however, that if such amendment, modification or waiver by its terms treats any Holder adversely and in a manner different than such amendment treats any other Investors, the separate approval of such adversely treated Holder shall also be required. Any such amendment, modification or waiver effected in accordance with this Section 6.5 shall be binding upon each Holder and each future holder of all securities of such Holder.

(b)           For the purposes of determining the number of Holders or Investors entitled to vote or exercise any rights hereunder, the Company shall be entitled to rely solely on the list of record holders of its stock as maintained by or on behalf of the Company.

6.6         Delays or Omissions.  It is agreed that no delay or omission to exercise any right, power, or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring.  It is further agreed that any waiver, permit, consent, or approval of any kind or character on any party’s part of any breach, default or noncompliance under the Agreement or any waiver on such party’s part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Agreement, by law, or otherwise afforded to any party, shall be cumulative and not alternative.

6.7         Notices.  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or Exhibit A hereto or at such other address or electronic mail address as such party may designate by ten (10) days advance written notice to the other parties hereto.

6.8         Specific Performance.  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 this Agreement. 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 each Investor 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.

6.9         Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

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22.

6.10       Additional Investors.  Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares of Preferred Stock shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor,” a “Holder” and a party hereunder.  Notwithstanding anything to the contrary contained herein, if the Company shall issue Equity Securities in accordance with Section 4.6 (g) of this Agreement, any purchaser of such Equity Securities may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor,” a “Holder” and a party hereunder.

6.11       Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

6.12       Aggregation of Stock.  All shares of Registrable Securities held or acquired by affiliated entities or persons or persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

6.13      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.

6.14      Pronouns.  All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require.

[Signature Pages Follow]

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23.

In Witness Whereof, the parties hereto have executed this Investor Rights Agreement as of the date set forth in the first paragraph hereof.

COMPANY:

HealthWarehouse.com, Inc.
Signature:	/s/ Lalit Dhadphale
Name: Lalit Dhadphale
Title: Chief Executive Officer
Address:   100 Commerce Blvd. Cincinnati, OH 45140

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24.

In Witness Whereof, the parties hereto have executed this Investor Rights Agreement as of the date set forth in the first paragraph hereof.

INVESTOR:

Signature:	/s/ Janice Marra
Name: Janice Marra

 

In Witness Whereof, the parties hereto have executed this Investor Rights Agreement as of the date set forth in the first paragraph hereof.

INVESTOR:

Signature:	/s/ David S. Oros
Name: David S. Oros
Signature:	Marla T. Oros
Name: Marla T. Oros

 

 In Witness Whereof, the parties hereto have executed this Investor Rights Agreement as of the date set forth in the first paragraph hereof.

INVESTOR:

HWH Lending, LLC
By:	/s/ Gary Singer
Name:  Gary Singer
Title:  President

 

In Witness Whereof, the parties hereto have executed this Investor Rights Agreement as of the date set forth in the first paragraph hereof.

INVESTOR:

Milfam I L.P.
By:  Milfam LLC
Its: General Partner
By:	/s/ Lloyd I. Miller III
Name: Lloyd I. Miller, III
Title: Manager

EX-99.1

EXHIBIT 99.1

HealthWarehouse.com Places $3.3 Million in Preferred Stock and

$1 Million in Convertible Debt

Additional Capital Will Be Used To Further Accelerate Growth

CINCINNATI, November 10, 2010— HealthWarehouse.com, Inc. (OTC Bulletin Board: HEWA), a leading VIPPS accredited retail mail-order pharmacy, announced today that it has placed a total of $4.3 million in equity and convertible debt with independent investors.

The investment will be used primarily to expand the company’s online presence while upgrading its technology infrastructure to keep pace with rising demand for its FDA-approved generic prescription drugs, as well as pay for indebtedness, expansion and working capital.

HealthWarehouse.com delivers more than 4,500 FDA-approved prescription and over-the-counter medications with free shipping to consumers in 49 states, often at lower prices than traditional retailers and average insurance co-pays. Consumers on maintenance medications for conditions such as asthma, diabetes, high blood pressure and high cholesterol can obtain a 1 year supply of medications, if prescribed by their doctor, eliminating the need for visits to the pharmacy and inconvenient refills.

In 2009, HealthWarehouse.com became one of only 24 pharmacies to receive VIPPS accreditation (Verified Internet Pharmacy Practice Sites issued by the National Association of Boards of Pharmacy). Since that time, the company has doubled its customer base while receiving two consecutive Bizrate Circle of Excellence Awards for exceptional customer service and satisfaction.

“As a result of the new health care legislation, consumers across the nation are increasingly taking control of their healthcare decisions, leading to a shift away from insurance-centric healthcare to patient-directed healthcare, “said Lloyd I. Miller III, an independent investor participating in this transaction.  “HealthWarehouse.com is at the right place at the right time by selling prescription medications direct to the consumer, in a convenient way, at a price lower than most insurance co-pays.”

Shipped from its 20,000 square foot warehouse in Cincinnati, Ohio, HealthWarehouse.com delivers over 4,500 products to the consumer’s doorstep including:

100 Commerce Blvd • Cincinnati, OH 45140

Tel: (866) 885-0508 • Fax: (866) 821-3784 • www.HealthWarehouse.com

EXHIBIT 99.1

· Generic and brand name prescription medications such as Simvastatin (generic Zocor), Fluoxetine (generic Prozac), Levothyroxine (generic Synthroid), Anastrazole (generic Armidex), as well as brand names such as Lipitor, Viagra, Lyrica, and Propecia.

· Diabetic supplies including test strips, blood glucose meters, insulin syringes and pen needles from companies such as Bayer, Johnson & Johnson and Abbott.

· Over-The-Counter medications to treat allergies, nasal congestion, fevers as well as oral care, digestive health and hair care products.

“The way Americans have filled their prescriptions and purchase their medical supplies has not changed in decades; we simply identified a direct path to the consumer eliminating unnecessary layers of distribution in the supply chain which add cost,” said Lalit Dhadphale, co-founder, President and CEO of HealthWarehouse.com.  “Most Americans have relied on their employers to provide health insurance, but as employers struggle to contain their healthcare costs, more of the burden is being passed to employees in the form of expensive drug co-pays. As a result, consumers are taking increased control over their well being and shifting to lower-cost alternatives for their healthcare needs without compromising on quality or convenience.”

Kaufman Bros, L.P. acted as the sole placement agent to HealthWarehouse.com, Inc. for this transaction.

About HealthWarehouse.com

HealthWarehouse.com, Inc. (OTC Bulletin Board: HEWA) is a trusted, VIPPS accredited retail mail-order pharmacy based in Cincinnati, Ohio. HealthWarehouse.com offers 300 prescription drugs for $3.50 with 100% FREE shipping and is a 2009 & 2010 winner of the Bizrate Circle of Excellence Award for outstanding customer satisfaction and service. With a mission to provide affordable healthcare to every American by eliminating inefficiencies in the drug distribution chain, HealthWarehouse.com has become one of the fastest growing online pharmacies in the United States. HealthWarehouse.com is licensed in 49 states and only sells drugs which are FDA-approved and legal for sale in the United States.  Visit HealthWarehouse.com online at http://www.HealthWarehouse.com.

100 Commerce Blvd • Cincinnati, OH 45140

Tel: (866) 885-0508 • Fax: (866) 821-3784 • www.HealthWarehouse.com