NOTE 11 — SUBSEQUENT EVENTS

Stockholder Rights Plan

The Company entered into a Second Amendment to Rights Agreement on February 4, 2014, and a Restated Second Amendment to Rights Agreement on March 17, 2014, (together the “Amendment”), which amends the terms of the Rights Agreement, dated as of December 31, 1998 between the Company and Computershare Trust Company, N.A. (as successor right agent to U.S. Stock Transfer Company), as amended by that certain Amendment to Rights Agreement, dated as of December 19, 2008 (the "Rights Agreement"). The Amendment increases the threshold percentage of shares of the Company's common stock that must be acquired or proposed to be acquired to cause the distribution of rights certificates in accordance with the Rights Agreement, from 15% to 20%. Further discussion of the stockholder rights plan is disclosed in Note 8 – Stockholders’ Equity.

February 2014 Subscription Agreement

On February 10, 2014, the Company entered into the February 2014 Subscription Agreement with Oracle Partners L.P., Oracle Institutional Partners, L.P., and Oracle Ten Fund Master L.P. under which the Company offered an aggregate of 1,945,525 unregistered shares of common stock in a private placement at a price of $2.57 per share. Gross proceeds from the sale totaled $5 million, and net proceeds, after offering expenses of approximately $208,000, totaled approximately $4.8 million. Further discussion of the offering is disclosed in Note 8 – Stockholders’ Equity.

January 2014 Shelf Registration

On January 17, 2014, the Company filed a registration statement to register an indeterminate number of shares of common stock, preferred stock, and warrants with a total offering price not to exceed $12.5 million. Further discussion of the related registration is disclosed in Note 8 – Stockholders’ Equity.

Credit Agreements

On March 4, 2014, the Company received a waiver from Comerica Bank to waive noncompliance with certain financial and nonfinancial covenants as of January 31, 2014 and December 31, 2013. In connection with the waiver, the Company incurred a fee of $10,000 and Comerica Bank reduced the total aggregate available borrowings on the lines of credit to $5 million. See further discussion in Note 5 — Lines of Credit and Other Borrowings.

Stock Dividend

In February 2014, the Board announced a 2% annual stock dividend policy for 2014 and declared a one-half percent stock dividend (the “March Stock Dividend”) payable March 28, 2014 to stockholders of record on March 14, 2014. The Company expects to record the effects of the March Stock Dividend in the first quarter ending March 31, 2014.

Director Dispute and Shareholder Litigation

On March 3 and 6, 2014, the Company disclosed that the Board had appointed Paul N. Clark and Jeffrey M. Nugent to the Board and Dr. Alexander K. Arrow and Dr. Sam Low had tendered their resignations.  Subsequent to this disclosure, questions were raised as to whether these changes were effected.

On March 7, 2014, the Company received from Oracle, which reports that it is a 16 % shareholder, a notice pursuant to the Company’s Bylaws, stating that Oracle intended to nominate four independent directors for election to the Board at the Company’s 2014 Annual Meeting of Stockholders. Oracle’s nominees are Messrs. Clark and Nugent, Frederic H. Moll, and Eric Varma, M.D.

On March 11, 2014, Oracle  filed a lawsuit in the Delaware Court of Chancery seeking a determination of the composition of the Board and a temporary restraining order that would preclude the Board from taking any action without the approval of four purported directors whose directorships Oracle claims to be undisputed.

The Company has reason to believe that Oracle and individuals who may be, depending on the outcome of the foregoing dispute, members of the Company’s Board will seek to make changes in the Company’s senior management and the composition of the Company’s Board and its committees.