SECURITIES PURCHASE AGREEMENT

By and Between

OPTIMIZERx CORPORATION

and

VICIS CAPITAL MASTER FUND

 

 DATED SEPTEMBER 16, 2011

 

 

 

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated this 16th day of
September 2011, is made by and between OPTIMIZERx CORPORATION, a Nevada
corporation (the “Company”), and VICIS CAPITAL MASTER FUND (the “Purchaser”), a
sub-trust of Vicis Capital Series Master Trust, a unit trust organized and
existing under the laws of the Cayman Islands.

R E C I T A L S

WHEREAS, pursuant to the terms and conditions of this Agreement, the Company
wishes to issue and sell to the Purchaser the following securities
(collectively, the “Securities”): (a) up to 50 shares (the “Preferred Shares”)
of the Company’s Series B Convertible Preferred Stock, par value $.001 per share
(the “Series B Preferred Stock”), with such terms, rights and preferences as are
set forth in the Certificate of Designation for the Series B Preferred Stock, as
amended by the Amendment to Certificate of Designation for the Series B
Preferred Stock set forth on Exhibit A attached hereto; and (b) Series B
Warrants to purchase up to an aggregate of 3,333,334 shares of common stock, par
value $.001 per share (the “Common Stock”), of the Company initially at an
exercise price of $3.00 per share in the form attached hereto as Exhibit B (the
“Series B Warrant” or “Warrant”).

WHEREAS, the Purchaser desires to purchase such Securities from the Company
according to the terms hereinafter set forth.

NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:

ARTICLE I
Purchase and Sale OF THE SECURITIES

1.1                Purchase and Sale of the Securities. Subject to the terms and
conditions hereof and in reliance on the representations and warranties
contained herein, or made pursuant hereto, the Company will issue and sell to
the Purchaser, and the Purchaser will purchase from the Company at the closings
of the transactions contemplated hereby (each a “Closing” and collectively, the
“Closings”), an amount of Securities for the consideration as set forth in
Section 1.3 hereof (the total consideration paid, the “Purchase Price”).

1.2                Closing. Each Closing shall be deemed to occur at such place,
date and time as mutually agreeable to the parties (each a “Closing Date”).

1.3                Closing Matters.

(a)                 Initial Closing. At the first Closing (the “Initial
Closing”, and the date thereof, the “Initial Closing Date”), which shall occur
within 5 days of the date of execution of that certain Termination Agreement and
Release by and among the Company, OptimizeRx Corporation, a Michigan
corporation, the Purchaser, Physicians Interactive Holdings, LLC, a Delaware
limited liability company and Physicians Interactive Inc., a Delaware
corporation, in the form of Exhibit H attached hereto (the “Termination
Agreement”), subject to the terms and conditions hereof, the following actions
shall be taken:

 

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(i)                   The Company, against delivery of payment of the $1,500,000
in accordance with Section 1.3(a)(ii), will deliver to the Purchaser the
documents set forth in Section 5.4(a) hereof.

(ii)                 The Purchaser shall deliver to the Company $1,500,000 in
immediately available funds by wire transfer in accordance with the instructions
of the Company.

(b)                 First Optional Subsequent Closing. Upon 10 days’ prior
written notice from the Company to the Purchaser, the Company may issue and sell
at its option, and the Purchaser agrees to purchase, exactly 15 shares of the
Company’s Series B Preferred Stock and a Warrant to purchase 1,000,000 shares of
Common Stock at a subsequent Closing (the “First Optional Subsequent Closing”)
which Closing may only occur during the period commencing on December 1, 2011 to
and including April 30, 2012. At the First Optional Subsequent Closing, if any,
subject to the terms and conditions hereof, the following actions shall be
taken:

(i)                   the Company, against delivery of payment of the $1,500,000
in accordance with Section 1.3(b)(ii), will deliver to the Purchaser the
documents set forth in Section 5.4(b) hereof; and

(ii)                 the Purchaser shall deliver to the Company $1,500,000 in
immediately available funds by wire transfer in accordance with the instructions
of the Company.

Notwithstanding anything to the contrary contained herein, the Purchaser shall
have no obligation to purchase any securities from the Company under this
Section 1.3(b) prior to December 1, 2011 or after April 30, 2012.

(c)                 Second Optional Subsequent Closing. Upon 10 days’ prior
written notice from the Company to the Purchaser, the Company may issue and sell
at its option, and the Purchaser agrees to purchase, exactly 20 shares of the
Company’s Series B Preferred Stock and a Warrant to purchase 1,333,334 shares of
Common Stock at a subsequent Closing (the “Second Optional Subsequent Closing”)
which Closing may only occur during the period commencing on May 1, 2012 to and
including August 31, 2012. At the Second Optional Subsequent Closing, if any,
subject to the terms and conditions hereof, the following actions shall be
taken:

(i)                   the Company, against delivery of payment of the $2,000,000
in accordance with Section 1.3(c)(ii), will deliver to the Purchaser the
documents set forth in Section 5.4(c) hereof; and

(ii)                 the Purchaser shall deliver to the Company $2,000,000 in
immediately available funds by wire transfer in accordance with the instructions
of the Company.

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Notwithstanding anything to the contrary contained herein, the Purchaser shall
have no obligation to purchase any securities from the Company under this
Section 1.3(c) prior to May 1, 2012 or after August 31, 2012.

1.4                Most Favored Nations Exchange.  If the Company completes a
private equity or equity-linked financing at any time while any share of Series
B Preferred Stock is outstanding, the Purchaser will have the right to exchange
all or any such shares at their stated value, plus all accrued but unpaid
dividends thereon, for securities in such financing.

1.5                Subsequent Financings.

(a)                 Other than in connection with a Permitted Issuance (defined
below), for the two-year period following the Closing Date, the Purchaser shall
have the right to participate up to 100% of each such subsequent financing that
involves the sale of securities of the Company (each such financing, a
“Subsequent Financing”).  At least 15 days prior to the making or accepting of
an offer for a Subsequent Financing, the Company shall deliver to the Purchaser
a written notice of its intention to effect a Subsequent Financing and the
details of such Subsequent Financing (a “Subsequent Financing Notice”). The
Subsequent Financing Notice shall describe in reasonable detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder and the Person (as defined in Section 2.13) with whom such Subsequent
Financing is proposed to be effected, and shall include, as an attachment
thereto, a term sheet or similar document relating thereto, if any exists.   If
the Purchaser elects to participate in the Subsequent Financing, the closing of
such Subsequent Financing shall be as mutually agreed between the parties
participating in such Subsequent Financing. If by 6:30 p.m. (Eastern Time) on
the fifteenth day after the Purchaser has received the Subsequent Financing
Notice, the Purchaser fails to notify the Company of its election to participate
or elects to participate in an amount that is less than the total amount of the
Subsequent Financing, then the Company may effect the remaining portion of such
Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.  The Company must provide the Purchaser with a
second Subsequent Financing Notice, and the Purchaser will again have the right
of participation set forth above in this Section 1.5(a), if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
90 days after the date of the initial Subsequent Financing Notice.

(b)                 Notwithstanding the foregoing, Section 1.5(a) shall not
apply in respect to the issuance of the following (each, a “Permitted
Issuance”):

(i)                   shares of Common Stock or Options (defined below) issued
or issuable in connection with any Approved Stock Plan (defined below), provided
that the aggregate amount of Common Stock and Options issued and issuable under
all such plans does not exceed ten percent (10%) of the then outstanding shares
of Common Stock of the Company;

(ii)                 shares of Common Stock issued upon conversion or exercise
of any Options or Convertible Securities (defined below) that are outstanding on
the day immediately preceding the Closing Date, provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or
after the Closing Date to lower the conversion or exercise price thereof and so
long as the number of shares of Common Stock underlying such securities is not
otherwise increased; and

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(iii)                shares of Common Stock issued in an underwritten public
offering in which the gross cash proceeds to the Company (before underwriting
discounts, commissions and fees) are at least $10,000,000.

For purposes of this Agreement, “Approved Stock Plan” means any employee benefit
plan which has been approved by the Board of Directors of the Company, pursuant
to which the Company’s securities may be issued to any employee, consultant,
officer or director for services provided to the Company, “Convertible
Securities” means any stock or other securities (other than Options) directly or
indirectly convertible into or exercisable or exchangeable for shares of Common
Stock, and “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

1.6                No Subsequent Closings under 2010 Purchase Agreement. The
Company and the Purchaser hereby agree and acknowledge that after June 30, 2011,
the Purchaser no longer had any obligation to purchase the Company’s Series B
Preferred Stock pursuant to Section 1.3(b) of the Securities Purchase Agreement
dated June 4, 2010, by and between the Company and the Purchaser (the “2010
Purchase Agreement”). The Company and the Purchaser hereby agree that Section
1.3(b) of the 2010 Purchase Agreement is and shall be null and void to the
extent it imposes any obligation on the Purchaser to purchase any of the
Company’s Series B Preferred Stock.

ARTICLE II
COMPANY SECURITY DOCUMENTS

2.1                Security Agreement. All of the obligations of the Company
under the Preferred Shares shall be secured by a lien on all the personal
property and assets of the Company now existing or hereinafter acquired granted
pursuant to a Third Amended and Restated Security Agreement dated of even date
herewith between the Company and the Purchaser in the form attached hereto as
Exhibit D (“Security Agreement”).

2.2                Guaranty. All of the obligations of the Company under the
Preferred Shares shall be guaranteed pursuant to an Amended and Restated
Guaranty Agreement in the form attached hereto as Exhibit E (“Guaranty
Agreement”) by each of the subsidiaries of the Company set forth on Schedule 2.2
hereto.

2.3                Guarantor Security Documents. All of the obligations of each
Subsidiary under its Guaranty Agreement shall be secured by a lien on all the
personal property and assets of such Subsidiary now existing or hereinafter
acquired granted pursuant to a Third Amended and Restated Guarantor Security
Agreement dated of even date herewith between such Subsidiary and the Purchaser
in the form attached hereto as Exhibit F (“Guarantor Security Agreement”).

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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Purchaser as of the date of
this Agreement as follows:

3.1                Organization and Qualification. The Company is a corporation
duly organized and validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, and has all requisite corporate power
and authority to carry on its business as now conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,
operations, results of operations, or condition (financial or otherwise) of the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the Company to perform
its obligations in all material respects under the Transaction Documents (as
defined in Section 3.6 hereof).

3.2                Subsidiaries. The Company has no subsidiaries other than
those disclosed on Schedule 2.2 attached hereto (each a “Subsidiary”, and
collectively, the “Subsidiaries’). 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. Each Subsidiary is a corporation duly organized and validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, and has all requisite corporate power and authority to carry on
its business as now conducted. Each Subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse Effect.

3.3                Compliance.

(a)                 Except as disclosed in Schedule 3.3(a) attached hereto,
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 such that,
individually or in the aggregate, such default(s) and violations(s) would not
have or reasonably be expect to have a Material Adverse Effect, (ii) is in
violation of any order of any court, arbitrator or governmental body, or
(iii) is in violation of any of the provisions of its certificate or articles of
incorporation, bylaws or other organizational or charter documents.

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(b)                 The business of the Company and each Subsidiary is presently
being conducted in accordance with all applicable foreign, federal, state and
local governmental laws, rules, regulations and ordinances (including, without
limitation, rules and regulations of each governmental and regulatory agency,
self regulatory organization and Trading Market applicable to the Company or any
Subsidiary), except such that, individually or in the aggregate, the
noncompliance therewith would not have or reasonably be expect to have a
Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, would not have or reasonably be expect to have a Material Adverse
Effect, and the Company has not received any written notice of proceedings
relating to the revocation or modification of any of the foregoing. For purposes
of this Agreement, “Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the NYSE Arca, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq Global Select Market, Nasdaq Global Market, the Nasdaq Capital Market, or
any tier of the over-the-counter (“OTC”) market.

3.4                Capitalization.

(a)                 The authorized capital stock of the Company, the number of
shares of such capital stock issued and outstanding, and the number of shares of
capital stock reserved for issuance upon the exercise or conversion of all
outstanding warrants, stock options, and other securities issued by the Company,
as of the date hereof, are set forth on Schedule 3.4(a) attached hereto. All of
such outstanding shares have been, or upon issuance will be, validly issued, are
fully paid and nonassessable.

(b)                 Except for the Securities, or as disclosed in Schedule
3.4(b) attached hereto:

(i) no holder of shares of the Company’s capital stock has any preemptive rights
or any other similar rights or has been granted or holds any Liens or
encumbrances suffered or permitted by the Company;

(ii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any shares of
capital stock of the Company or any Subsidiary, 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 of the Company or any
Subsidiary or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any Subsidiary;

(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
(as defined in Section 3.13 hereof) of the Company or any Subsidiary in excess
of $100,000 or by which the Company or any Subsidiary is or may become bound and
involves Indebtedness in excess of $100,000;

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(iv) there are no financing statements securing obligations in any material
amounts, either singly or in the aggregate, filed in connection with the Company
or its Subsidiaries;

(v) there are no agreements or arrangements under which the Company or any
Subsidiary is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended (the “Securities Act”);

(vi) there are no outstanding securities or instruments of the Company or any
Subsidiary that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to redeem a security of the Company or a
Subsidiary;

(vii) there are no securities or instruments containing antidilution or similar
provisions that will be triggered by the issuance of the Securities; and

(viii) the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement.

3.5                Issuance of Securities.

(a)                 The Securities to be issued hereunder are duly authorized
and, upon payment and issuance in accordance with the terms hereof, shall be
free from all taxes, Liens and charges with respect to the issuance thereof. As
of the Closing Date, the Company has authorized and has reserved free of
preemptive rights and other similar contractual rights of stockholders, a number
of its authorized but unissued shares of Common Stock equal to one hundred
percent (100%) of the aggregate number of shares of Common Stock to effect the
conversion of the Preferred Shares (the “Conversion Shares”) and one hundred
percent (100%) of the aggregate number of shares of Common Stock to effect the
exercise of the Warrant (the “Warrant Shares”).

(b)                 The Conversion Shares and Warrant Shares, when issued and
paid for upon conversion of the Preferred Shares and exercise of the Warrant, as
the case may be, will be validly issued, fully paid and nonassessable and free
from all taxes, Liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of the Common Stock.

(c)                  Assuming the accuracy of each of the representations and
warranties made by the Purchaser and set forth in Article IV hereof (and
assuming no change in applicable law and no unlawful distribution of the
Securities by the Purchaser or other Persons), the issuance by the Company to
the Purchaser of the Securities is exempt from registration under the Securities
Act.

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3.6                Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Second Amended and Restated Registration
Rights Agreement to be entered into between the Company and the Purchaser on
even date herewith in the form attached hereto as Exhibit C (the “Registration
Rights Agreement”), the Certificate of Designation for the Series B Preferred
Stock, and the Warrant, and each of the other agreements or instruments entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities (including without limitation, the Conversion Shares and Warrant
Shares) in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Preferred Shares and the Warrant, have been duly
authorized by the Board, and no further consent or authorization is required by
the Company, the Board or its stockholders. This Agreement and the other
Transaction Documents have been duly executed and delivered by the Company, and
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws of general
application affecting enforcement of creditors’ rights and remedies generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law or
by principles of public policy thereunder.

3.7                Dilutive Effect. The Company understands and acknowledges
that its obligation to issue the Conversion Shares and Warrant Shares upon
conversion of the Preferred Shares and exercise of the Warrant, as the case may
be, is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.

3.8                No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance of the Conversion Shares and Warrant Shares) will not
(i) result in a violation of any articles or certificate of incorporation, any
certificate of designation, preferences and rights of any outstanding series of
preferred stock, bylaws or similar charter or organizational document of the
Company or any Subsidiary or (ii) conflict with, or constitute a default (or an
event which 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 of, any material agreement, indenture or instrument to which the
Company or any Subsidiary is a party (except where such defaults, conflicts,
rights of termination, amendment, acceleration or cancellation have been waived
or postponed until the fulfillment of the Company’s obligations under the
Transaction Documents), or (iii) result in a violation of any federal, state,
local or foreign statute, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and rules and regulations of
any governmental or any regulatory agency, self-regulatory organization, or
Trading Market applicable to the Company) or by which any property or asset of
the Company are bound or affected, except in the case of clauses (ii) and (iii),
for such breaches, violations or defaults as would not be reasonably expected to
have a Material Adverse Effect.

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3.9                Governmental Consents. Except for (i) the filing of a
registration statement pursuant to the Registration Rights Agreement,
(ii) application(s) to each Trading Market for the listing of the Conversion
Shares and Warrant Shares for trading thereon in the time and manner required
thereby, and (iii) the filing of Form D with the Commission and such filings as
are required to be made under applicable state securities laws, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental or any regulatory agency,
self-regulatory organization or any other Person in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case, in accordance with the terms hereof or
thereof. The Company is unaware of any facts or circumstances relating to the
Company or its Subsidiaries which might prevent the Company from obtaining or
effecting any of the foregoing.

3.10            Registration and Approval of Sale of Securities. Based in
material part upon the representations and warranties herein (and in the other
Transaction Documents) of the Purchaser, the Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Assuming the accuracy
of the representations and warranties in Article VI hereof (and assuming no
change in applicable law and no unlawful distribution of the Securities by the
Purchaser or other Persons), no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the
Purchaser as is contemplated hereby. Neither the Company nor any Person acting
on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers with respect thereto from, or enter into any negotiations relating
thereto with, any Person, or has taken or will take any action so as to either
(a) bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act or applicable state securities laws, or
(b) trigger stockholder approval provisions under the rules or regulations of
any Trading Market. Neither the Company nor any of its affiliates that it
controls, nor any Person acting on its or their behalf, has: (x) engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
any of the Securities; or (y) directly or indirectly made any offers or sales of
any security or solicited any offers to buy any security under circumstances
that would cause the offering of the Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the Securities
Act in a manner that would prevent the Company from selling the Securities
pursuant to Regulation D and Rule 506 thereof under the Securities Act, nor will
the Company or any of its affiliates that it controls or Persons acting on its
or their behalf engage in any form of general solicitation or take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.

3.11            Placement Agent’s Fees. Except as set forth on Schedule 3.11, no
brokerage or finder’s fee or commission are or will be payable to any Person
with respect to the transactions contemplated by this Agreement based upon
arrangements made by the Company or any of its affiliates. The Company agrees
that it shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or brokers’ commissions (other than for Persons engaged
by the Purchaser or any of its affiliates) relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold the Purchaser
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any claim for any such fees or commissions.

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3.12            Litigation. Except as disclosed in Schedule 3.12 attached
hereto, there is no action, suit, written notice of violation, or written notice
of any proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Common Stock or the Company, any Subsidiary or any of
their respective executive officers, directors or properties before or by any
court, arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), self regulatory authority or Trading
Market (collectively, an “Action”) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) would, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. To the Company’s
knowledge, neither the Company nor any Subsidiary, nor any director or executive
officer thereof (in his/her capacity as such), is or, within the last five
years, 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. To the knowledge of the Company, there has not been, and there
is not pending or threatened in writing, any investigation by the United States
Securities and Exchange Commission (the “Commission” or “SEC”) involving the
Company or any current director or executive officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the
Securities Act. There is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or other proceeding pending or, to the
knowledge of the Company, threatened in writing against or involving the Company
or any of its properties or assets, which individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
executive officers or directors of the Company in their capacities as such,
which individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

3.13            Indebtedness and Other Contracts. Except as disclosed in
Schedule 3.13 attached hereto, neither the Company nor any Subsidiary (a) has
any outstanding Indebtedness (as defined below in this Section 3.13), (b) is a
party to any contract, agreement or instrument, the violation of which, or
default under, by any other party to such contract, agreement or instrument
would result in a Material Adverse Effect, (c) is in violation of any term of or
in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (d) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement:
(x) “Indebtedness” of any Person means, without duplication (i) all indebtedness
for borrowed money, (ii) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (iii) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (iv) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, Lien, pledge, change, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above; (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; and
(z) “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

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3.14            Securities Periodic Reporting. Except as set forth in Schedule
3.14 hereto, The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). As of their respective dates, the Company’s reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act prior to the date
hereof (the “SEC Documents”) complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of such SEC
Documents, at the time they were filed with the SEC, 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 the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in such
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Purchaser that is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading.

3.15            Absence of Certain Changes or Developments. Except as disclosed
in Schedule 3.15 attached hereto or as contemplated herein and in the
Transaction Documents, since December 31, 2010:

(a)                 there has been no Material Adverse Effect, and no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, operations or financial condition, which, under the
Exchange Act, Securities Act, or rules or regulations of any Trading Market,
required or requires public disclosure or announcement by the Company, but which
has not been so publicly announced or disclosed;

(b)                 the Company has not:

(i)                   issued any stock, bonds or other corporate securities or
any right, options or warrants with respect thereto, except pursuant to the
exercise or conversion of securities outstanding as of such date;

(ii)                 borrowed any amount in excess of $250,000 or incurred or
become subject to any other liabilities in excess of $250,000 (absolute or
contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
business of the Company;

(iii)                discharged or satisfied any Lien or encumbrance in excess
of $250,000 or paid any obligation or liability (absolute or contingent) in
excess of $250,000, other than current liabilities paid in the ordinary course
of business;

(iv)               declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock,
in each case in excess of $50,000 individually or $100,000 in the aggregate;

(v)                 sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, in each case in excess of $250,000, except in the
ordinary course of business;

(vi)               sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $250,000, or disclosed any proprietary
confidential information to any person except to customers in the ordinary
course of business;

(vii)              suffered any material losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;

12

 

(viii)            made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;

(ix)               made capital expenditures or commitments therefor that
aggregate in excess of $250,000;

(x)                 entered into any material transaction outside the ordinary
course of business;

(xi)               made charitable contributions or pledges in excess of
$10,000;

(xii)              suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;

(xiii)            experienced any material problems with labor or management in
connection with the terms and conditions of their employment;

(xiv)            altered its method of accounting, except to the extent required
by GAAP;

(xv)             issued any equity securities to any officer, director or
affiliate (as such term is defined in Rule 144 of the Securities Act), except
pursuant to existing Company stock, option, equity incentive or similar
incentive plans; or

(xvi)            entered into an agreement, written or otherwise, to take any of
the foregoing actions.

3.16            Solvency. The Company has not taken, nor does it have any
intention to take, any steps to seek protection pursuant to any bankruptcy or
similar law. The Company does not have any actual knowledge nor has it received
any written notice that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact that, as of the date hereof,
would reasonably lead a creditor to do so. After giving effect to the
transactions contemplated hereby to occur at the Closing, the Company will not
be Insolvent (as hereinafter defined). For purposes of this Agreement,
“Insolvent” means (i) the present fair saleable value of the Company’s assets is
less than the amount required to pay the Company’s total Indebtedness,
contingent or otherwise, (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

3.17            Off-Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company 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 or that if made or not made
would be reasonably likely to have a Material Adverse Effect.

13

 

3.18            Foreign Corrupt Practices. None of the Company, any Subsidiary,
nor any of their respective directors, officers, agents, employees or other
Persons acting on behalf of such subsidiaries has, in the course of their
respective actions for or on behalf of the Company or any of its subsidiaries
(a) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity, (b) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds, (c) violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended or (d) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.

3.19            Transactions With Affiliates. Except as disclosed in Schedule
3.19 attached hereto, 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 or
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 such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

3.20            Insurance. Except as disclosed in Schedule 3.20 attached hereto,
the Company and each Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company and each Subsidiary are engaged. Neither the Company nor any
Subsidiary has been refused any insurance coverage sought or applied for and
neither the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.

3.21            Employee Relations. Neither the Company nor any Subsidiary is a
party to any collective bargaining agreement or employs any member of a union.
No Executive Officer of the Company (as defined in Rule 501(f) of the Securities
Act) has notified the Company that such officer intends to leave the Company or
otherwise terminate such officer’s employment with the Company. No Executive
Officer of the Company, to the knowledge of the Company, is, or is now, 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, to the actual
knowledge of the Company, the continued employment of each such executive
officer does not subject the Company or any Subsidiary to any liability with
respect to any of the foregoing matters. The Company and each Subsidiary are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

14

 

3.22            Title. Except as set forth in Schedule 3.22, the Company and
each Subsidiary have good and marketable title to all personal property owned by
them which is material to their respective business, in each case free and clear
of all Liens. Any real property and facilities held under lease by the Company
or any Subsidiary are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
or any Subsidiary.

3.23            Intellectual Property Rights. The Company and its Subsidiaries
own or possess the rights to use all patents, trademarks, domain names (whether
or not registered) and any patentable improvements or copyrightable derivative
works thereof, websites and intellectual property rights relating thereto,
service marks, trade names, copyrights, licenses and authorizations which are
necessary for the conduct of its business as now conducted (collectively, the
“Intellectual Property Rights”) without any conflict with the rights of others,
except any failures as, individually or in the aggregate, are not reasonably
likely to have a Material Adverse Effect. Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable measures to protect the value of the Intellectual Property Rights.

3.24            Environmental Laws. The Company and each of its Subsidiaries
(a) are in compliance with any and all Environmental Laws (as hereinafter
defined), (b) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses
and (c) are in compliance with all terms and conditions of any such permit,
license or approval where, in each of the foregoing clauses (a), (b) and (c),
the failure to so comply could be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

3.25            Tax Matters. The Company and each of its Subsidiaries (a) have
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (b) have
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 (c) have set aside
on its books reasonably adequate provision for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply, except where such failure would not have a Material Adverse Effect. 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.

15

 

3.26            Sarbanes-Oxley Act; Internal Accounting and Disclosure Controls.
The Company is in compliance in all material respects with the requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof and
applicable to it, and any and all rules and regulations promulgated by the SEC
thereunder that are effective and applicable to it as of the date hereof. The
Company maintains a system of internal accounting controls sufficient, in the
judgment of the Company’s board of directors, to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company’s most recently filed periodic report under the Exchange Act,
as the case may be, is being prepared. The Company’s certifying officers have
evaluated the effectiveness of the Company’s controls and procedures as of the
date prior to the filing date of the most recently filed periodic report under
the Exchange Act (such date, 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, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 307(c) of Regulation S-K
under the Exchange Act) or, to the Company’s knowledge, in other factors that
could significantly affect the Company’s internal controls. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the Exchange Act.

3.27            Investment Company Status. The Company is not, and immediately
after receipt of payment for the Securities will not be, an “investment
company,” an “affiliated person” of, “promoter” for or “principal underwriter”
for, or an entity “controlled” by an “investment company,” within the meaning of
the Investment Company Act of 1940, as amended.

3.28            Material Contracts. Each contract of the Company that involves
expenditures or receipts in excess of $500,000 (each, a “Material Contract”) is
in full force and effect and is valid and enforceable in accordance with its
terms. The Company is and has been in material compliance with all applicable
terms and requirements of each Material Contract and no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with or result in a violation or breach of, or give the
Company or any other entity the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Contract. The Company has not given or received
from any other Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible or potential violation or
breach of, or default under, any Material Contract.

3.29            [Intentionally Omitted].

16

 

3.30            No Disagreements with Accountants. There are no disagreements of
any kind presently existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants formerly or presently employed by the
Company.

3.31            Ranking of Series B Preferred Stock. No capital stock or other
security issued by the Company is senior to the Series B Preferred Stock in
right of payment, whether with respect of payment of redemptions, interest,
damages or upon liquidation or dissolution or otherwise.

3.32            Manipulation of Price. The Company has not, and to its knowledge
no one acting on its behalf has, taken, directly or indirectly, any action
designed to cause or to result or that could reasonably be expected to cause or
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.

3.33            Listing and Maintenance Requirements. Except as set forth on
Schedule 3.33, the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is in
compliance with all such maintenance requirements.

3.34            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 Company’s Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchaser as a result of the Purchaser and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company’s issuance of
the Securities and the Purchaser’s ownership of the Securities.

3.35            OFAC. Neither the issuance of the Securities to the Purchaser,
nor the use of the respective proceeds thereof by the Company, shall cause the
Company to violate the U.S. Bank Secrecy Act, as amended, and any applicable
regulations thereunder or any of the sanctions programs administered by the U.S.
Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) of the
United States Department of Treasury, any regulations promulgated thereunder by
OFAC or under any affiliated or successor governmental or quasi-governmental
office, bureau or agency and any enabling legislation or executive order
relating thereto. Without limiting the foregoing, the Lender (i) is not a person
whose property or interests in property are blocked or subject to blocking
pursuant to Section 1 of Executive Order 13224 of September 23, 200l Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) does not engage
in any dealings or transactions prohibited by Section 2 of such executive order,
or is otherwise associated with any such person in any manner violative of
Section 2, or (iii) is not a person on the list of Specially Designated
Nationals and Blocked Persons or subject to the limitations or prohibitions
under any other OFAC regulation or executive order.

3.36            Disclosure. All disclosure provided to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; provided however, the Company makes no representation as to studies
and reports prepared by third parties not engaged by the Company and included in
the materials delivered to Purchaser.

17

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Company as of the date of
this Agreement as follows:

4.1                Organization; Authority. The Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution, delivery and performance by the Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of the Purchaser. Each Transaction
Document to which it is a party has been duly executed by the Purchaser, and
when delivered by the Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

4.2                Own Account. The Purchaser understands that the Securities
are “restricted securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof except in compliance with the
Securities Act, has no present intention of distributing any of such Securities
and has no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
the Purchaser’s right to sell the Securities pursuant to a Registration
Statement (defined below) or otherwise in compliance with applicable federal and
state securities laws), except in compliance with the Securities Act. The
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business. The Purchaser does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.

4.3                Purchaser Status. At the time the Purchaser was offered the
Securities, it was, and at the date hereof it is, either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.

18

 

4.4                Experience of Such Purchaser. The Purchaser, 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. The Purchaser 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.

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

ARTICLE V
CONDITIONS TO CLOSING OF THE PURCHASER

The obligation of the Purchaser to purchase the Securities at each Closing is
subject to the fulfillment to the Purchaser’s satisfaction on or prior to such
Closing Date of each of the following conditions, any of which may be waived by
such Purchaser:

5.1                Representations and Warranties Correct. The representations
and warranties in Article III hereof shall be true and correct when made, and
shall be true and correct on such Closing Date with the same force and effect as
if they had been made on and as of such Closing Date.

5.2                Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to such Closing Date shall have been performed or complied with by the
Company in all material respects.

5.3                No Impediments. Neither the Company nor the Purchaser shall
be subject to any order, decree or injunction of a court or administrative
agency of competent jurisdiction that prohibits the transactions contemplated
hereby or would impose any material limitation on the ability of such Purchaser
to exercise full rights of ownership of the Securities. At the time of the
Closing, the purchase of the Securities to be purchased by the Purchaser
hereunder shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.

5.4                Other Agreements and Documents.

(a)                 With respect to the Initial Closing, the Company shall have
delivered the following agreements and documents:

(i)                   Certificates, registered in the name of the Purchaser,
representing 15 Preferred Shares;

(ii)                 A Series B Warrant to purchase an aggregate of 1,000,000
shares of Common Stock of the Company initially at an exercise price of $3.00 in
the form of Exhibit B attached hereto;

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(iii)                The Registration Rights Agreement in the form of Exhibit C
hereto, executed by the Company;

(iv)               The Security Agreement in the form of Exhibit D hereto,
executed by the Company;

(v)                 The Guaranty Agreement in the form of Exhibit E attached
hereto executed by each Subsidiary;

(vi)               The Guarantor Security Agreement in the form of Exhibit F
attached hereto, executed by each Subsidiary;

(vii)              An opinion of counsel to the Company, dated the date of the
Closing, substantially in the form of Exhibit G hereto, with such exceptions and
limitations as shall be reasonably acceptable to counsel to the Purchaser;

(viii)            A Certificate of Good Standing from the state of incorporation
of the Company and each Subsidiary;

(ix)               A certificate of an officer of the Company, dated such
Closing Date, certifying (i) the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement, (ii) the Board resolutions approving
this Agreement and the transactions contemplated hereby, (iii) the articles of
incorporation and bylaws of the Company, each as amended as of such Closing
Date; (iv) the names of each officer and director of the Company as of such
Closing Date; and (v) such other matters as the Purchaser shall reasonably
request; and

(x)                 The Termination Agreement in the form of Exhibit H attached
hereto.

(b)                 With respect to the First Subsequent Optional Closing, if
any, the Company shall have delivered the following agreements and documents:

(i)                   Certificates, registered in the name of the Purchaser,
representing 15 Preferred Shares;

(ii)                 A Series B Warrant to purchase an aggregate of 1,000,000
shares of Common Stock of the Company initially at an exercise price of $3.00 in
the form of Exhibit B attached hereto;

(iii)                An opinion of counsel to the Company, dated the date of the
Closing, substantially in the form of Exhibit G hereto, with such exceptions and
limitations as shall be reasonably acceptable to counsel to the Purchaser;

(iv)               A Certificate of Good Standing from the state of
incorporation of the Company and each Subsidiary; and

(v)                 A certificate of an officer of the Company, dated such
Closing Date, certifying (i) the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement, (ii) the Board resolutions approving
this Agreement and the transactions contemplated hereby, (iii) the articles of
incorporation and bylaws of the Company, each as amended as of such Closing
Date; (iv) the names of each officer and director of the Company as of such
Closing Date; and (v) such other matters as the Purchaser shall reasonably
request.

20

 

(c)                 With respect to the Second Subsequent Optional Closing, if
any, the Company shall have delivered the following agreements and documents:

(i)                   Certificates, registered in the name of the Purchaser,
representing 20 Preferred Shares;

(ii)                 A Series B Warrant to purchase an aggregate of 1,333,334
shares of Common Stock of the Company initially at an exercise price of $3.00 in
the form of Exhibit B attached hereto;

(iii)                An opinion of counsel to the Company, dated the date of the
Closing, substantially in the form of Exhibit G hereto, with such exceptions and
limitations as shall be reasonably acceptable to counsel to the Purchaser;

(iv)               A Certificate of Good Standing from the state of
incorporation of the Company and each Subsidiary; and

(v)                 A certificate of an officer of the Company, dated such
Closing Date, certifying (i) the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement, (ii) the Board resolutions approving
this Agreement and the transactions contemplated hereby, (iii) the articles of
incorporation and bylaws of the Company, each as amended as of such Closing
Date; (iv) the names of each officer and director of the Company as of such
Closing Date; and (v) such other matters as the Purchaser shall reasonably
request.

5.5                Certificate of Designation. The Company shall have filed the
Amendment to Certificate of Designation for the Series B Preferred Stock in the
form attached hereto as Exhibit A with the Nevada Secretary of State.

5.6                [Intentionally Omitted].

5.7                Intellectual Property Assignment. The Company shall have
delivered evidence reasonably satisfactory to the Purchaser that Mr. David
Harrell has transferred certain patent applications and rights identified by the
Purchaser to the Company.

5.8                Due Diligence Investigation. No fact shall have been
discovered, whether or not reflected in the Schedules hereto, which in the
Purchaser’s determination would make the consummation of the transactions
contemplated by this Agreement not in the Purchaser’s best interests.

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ARTICLE VI
CONDITIONS TO CLOSING OF THE COMPANY

The Company’s obligation to sell the Securities at each Closing is subject to
the fulfillment to its satisfaction on or prior to such Closing Date of each of
the following conditions:

6.1                Representations. The representations made by the Purchaser
pursuant to Article VI hereof shall be true and correct when made and shall be
true and correct on such Closing Date.

6.2                No Impediments. Neither the Company nor the Purchaser shall
be subject to any order, decree or injunction of a court or administrative
agency of competent jurisdiction that prohibits the transactions contemplated
hereby or would impose any material limitation on the ability of the Purchaser
to exercise full rights of ownership of the Securities. At the time of such
Closing, the purchase of the Securities to be purchased by the Purchaser
hereunder shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.

ARTICLE VII
AFFIRMATIVE COVENANTS

The Company hereby covenants and agrees, so long as any Preferred Share remains
outstanding, as follows:

7.1                Maintenance of Corporate Existence. The Company shall and
shall cause its subsidiaries to, maintain in full force and effect its corporate
existence, rights and franchises and all material terms of licenses and other
rights to use licenses, trademarks, trade names, service marks, copyrights,
patents or processes owned or possessed by it and necessary to the conduct of
its business, except where the failure to maintain such corporate existence,
rights, franchises, licenses and rights to use licenses, trademarks, trade
names, service marks, copyrights, patents or processes would not (a) result in a
Material Adverse Effect or (b) materially adversely affect the rights of
Purchaser under any Transaction Document.

7.2                Maintenance of Properties. The Company shall and shall cause
its subsidiaries to, keep each of its properties necessary to the conduct of its
business in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company shall and
shall cause its subsidiaries to at all times comply with each material provision
of all material leases to which it is a party or under which it occupies
property.

7.3                Payment of Taxes. The Company shall and shall cause its
subsidiaries to, promptly pay and discharge, or cause to be paid and discharged
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, assets, property or business of the
Company and its subsidiaries; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall be contested
timely and in good faith by appropriate proceedings, if the Company or its
subsidiaries shall have set aside on its books adequate reserves with respect
thereto, and the failure to pay shall not be prejudicial in any material respect
to the holders of the Securities, and provided, further, that the Company or its
subsidiaries will pay or cause to be paid any such tax, assessment, charge or
levy forthwith upon the commencement of proceedings to foreclose any Lien which
may have attached as security therefor.

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7.4                Payment of Indebtedness. The Company shall, and shall cause
its subsidiaries to, pay or cause to be paid when due all Indebtedness incident
to the operations of the Company or its subsidiaries (including, without
limitation, claims or demands of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehousemen and landlords) which, if unpaid might become a
Lien (except for Permitted Liens) upon the assets or property of the Company or
its subsidiaries, except where the Company (or its subsidiary, as the case may
be) disputes the payment of such Indebtedness in good faith by appropriate
proceedings.

7.5                Reservation of Common Stock. The Company shall continue to
reserve, free of preemptive rights and other similar contractual rights of
stockholders, a number of its authorized but unissued shares of Common Stock not
less than one hundred percent (100%) of the aggregate number of shares of Common
Stock to effect the conversion of the Preferred Shares and one hundred percent
(100%) of the aggregate number of shares of Common Stock to effect the exercise
of the Warrant.

7.6                Maintenance of Insurance. The Company shall and shall cause
its subsidiaries to, keep its assets which are of an insurable character insured
by financially sound and reputable insurers against loss or damage by theft,
fire, explosion and other risks customarily insured against by companies in the
line of business of the Company or its subsidiaries, in amounts sufficient to
prevent the Company and its subsidiaries from becoming a co-insurer of the
property insured; and the Company shall and shall cause its subsidiaries to
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated or as
may be required by law, including, without limitation, general liability, fire
and business interruption insurance, and product liability insurance as may be
required pursuant to any license agreement to which the Company or its
subsidiaries is a party or by which it is bound.

7.7                Notice of Adverse Change. The Company shall promptly give
notice to all holders of any Securities (but in any event within seven (7) days)
after becoming aware of the existence of any condition or event which
constitutes, or the occurrence of, any of the following:

(a)                 any event of noncompliance by the Company or its
subsidiaries under this Agreement in any material respect;

(b)                 the institution of an action, suit or proceeding against the
Company or any subsidiary before any court, administrative agency or arbitrator,
including, without limitation, any action of a foreign government or
instrumentality, which, if adversely decided, would result in a Material Adverse
Effect whether or not arising in the ordinary course of business; or

23

 

(c)                  any information relating to the Company or any subsidiary
which would reasonably be expected to result in a material adverse effect on its
inability to perform its obligations of under any Transaction Document.

Any notice given under this Section 7.7 shall specify the nature and period of
existence of the condition, event, information, development or circumstance, the
anticipated effect thereof and what actions the Company has taken and/or
proposes to take with respect thereto.

7.8                Compliance With Agreements. The Company shall and shall cause
its subsidiaries to comply in all material respects, with the terms and
conditions of all material agreements, commitments or instruments to which the
Company or any of its subsidiaries is a party or by which it or they may be
bound.

7.9                Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company under any Transaction Document.

7.10            Compliance With Laws. The Company shall and shall cause each of
its subsidiaries to duly comply in all material respects with any material laws,
ordinances, rules and regulations of any foreign, federal, state or local
government or any agency thereof, or any writ, order or decree, and conform to
all valid requirements of governmental authorities relating to the conduct of
their respective businesses, properties or assets.

7.11            Protection of Licenses, etc. The Company shall and shall cause
its subsidiaries to, maintain, defend and protect to the best of their ability
licenses and sublicenses (and to the extent the Company or a subsidiary is a
licensee or sublicensee under any license or sublicense, as permitted by the
license or sublicense agreement), trademarks, trade names, service marks,
patents and applications therefor and other proprietary information owned or
used by it or them, (except where the failure to defend and protect such
licenses and sublicenses would not (a) result in a Material Adverse Effect or
(b) materially adversely affect the rights of Purchaser under any Transaction
Document) and shall keep duplicate copies of any licenses, trademarks, service
marks or patents owned or used by it, if any, at a secure place selected by the
Company.

7.12            Accounts and Records; Inspections.

(a)                 The Company shall keep true records and books of account in
which full, true and correct entries will be made of all dealings or
transactions in relation to the business and affairs of the Company and its
subsidiaries in accordance with GAAP applied on a consistent basis.

(b)                 The Company shall permit each holder of any Securities or
any of such holder’s officers, employees or representatives during regular
business hours of the Company, upon reasonable notice and as often as such
holder may reasonably request, to visit and inspect the offices and properties
of the Company and its subsidiaries and to make extracts or copies of the books,
accounts and records of the Company or its subsidiaries at such holder’s
expense.

24

 

(c)                  Nothing contained in this Section 7.12 shall be construed
to limit any rights which a holder of any Securities may otherwise have with
respect to the books and records of the Company and its subsidiaries, to inspect
its properties or to discuss its affairs, finances and accounts.

7.13            Maintenance of Office. The Company will maintain its principal
office at the address of the Company set forth in Section 12.6 of this Agreement
where notices, presentments and demands in respect of this Agreement and any of
the Securities may be made upon the Company, until such time as the Company
shall notify the holders of the Securities in writing, at least thirty (30) days
prior thereto, of any change of location of such office.

7.14            Payment of the Preferred Share Dividends. The Company shall pay
the dividends on, and redeem, the Preferred Shares, in the time, the manner and
the form as provided in the Certificate of Designation for the Series B
Preferred Stock.

7.15            SEC Reporting Requirements. For so long as the Purchaser
beneficially owns any of the Securities, and until such time as all the
Conversion Shares and Warrant Shares are saleable by the Purchaser without
restriction as to volume or manner of sale under Rule 144 under the Securities
Act, the Company shall, once it has filed a registration statement pursuant to
the Registration Rights Agreement, timely file all reports required to be filed
with the Commission pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination. As long as the Purchaser owns Securities, Conversion
Shares or Warrant Shares, the Company will prepare and furnish to the Purchaser
and make publicly available in accordance with Rule 144 or any successor rule
such information as is required for the Purchaser to sell the Securities under
Rule 144 without regard to the volume and manner of sale limitations. The
Company further covenants that it will take such further action as any holder of
Securities, Conversion Shares or Warrant Shares may reasonably request, all to
the extent required from time to time to enable such Person to sell such
Securities, Conversion Shares or Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144 or
any successor rule thereto.

7.16            Listing Maintenance. The Company hereby agrees to use best
efforts to maintain the listing or trading of the Common Stock on a Trading
Market, and once the Conversion Shares or Warrant shares are registered under an
effective registration statement or are saleable under Rule 144, the Company
agrees to promptly to take such action as may be necessary to have such shares
approved for trading on the Trading Market by the applicable Trading Market
Authority. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Conversion Shares and Warrant Shares, and will take such other action
as is necessary to cause all of the Conversion Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on, and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of, each such Trading
Market on which the Company’s Common Stock is listed or trades.

25

 

7.17            Implementation of Series B Preferred Stockholders’ Rights to
Elect Directors. Promptly after Closing, the Company shall, to the extent it has
not already done so, take the following actions:

(a)                 amend its bylaws and take such other action at any such time
as necessary to implement the rights of holders of Series B Preferred Stock to
nominate and elect one member of the Board of Directors as set forth in the
Certificate of Designation for the Series B Preferred Stock beginning with the
first meeting of the stockholders of the Company following Closing; and

(b)                 if necessary, expand the current size of the Board by one
(1) member and appoint the person who will be designated by the Purchaser, to
the Board of Directors; provided that, the Company shall not be obligated to
appoint any designee if (i) the nomination of such designee would violate rules,
regulations or other standards of the Commission or the Trading Market, or
(ii) the designee does not meet the Company’s reasonable written director
qualification standards.

7.18            Use of Proceeds. The Company shall use all the proceeds received
from the sale of the Securities in the Initial Closing pursuant to this
Agreement first, to the repayment in full of all amounts owing to PI and/or PIH
pursuant to the Termination Agreement, and thereafter (to the extent any
proceeds from such Initial Closing remain) for working capital purposes and not
for the repayment of any debt. The Company shall use all the proceeds received
from the sale of any Securities in any subsequent Closing for working capital
purposes and not for the repayment of any debt.

7.19            Further Assurances. From time to time the Company shall execute
and deliver to the Purchaser and the Purchaser shall execute and deliver to the
Company such other instruments, certificates, agreements and documents and take
such other action and do all other things as may be reasonably requested by the
other party in order to implement or effectuate the terms and provisions of this
Agreement and any of the Securities.

For purposes of Articles VII–IX, the term “subsidiary” shall be deemed to
include each Subsidiary and any subsidiary of the Company acquired or formed
after the date hereof.

ARTICLE VIII
NEGATIVE COVENANTS

The Company hereby covenants and agrees, so long as any Preferred Share remains
outstanding, it will not (and not allow any subsidiary to), without the prior
written consent of the holder(s) of more than 50% of the number of shares of
Series B Preferred Stock outstanding (the “Majority Holders”), directly or
indirectly:

8.1                Distributions and Redemptions. (i) Except with respect to the
Series B Preferred Stock, or forward stock splits in the form of a dividend,
declare or pay any dividends or make any distributions to any holder(s) of any
shares of capital stock of the Company or (ii) purchase, redeem or otherwise
acquire for value, directly or indirectly, any shares of Common Stock of the
Company or warrants or rights to acquire such Common Stock, except as may be
required by the terms of the Series B Preferred Stock; or (iii) purchase, redeem
or otherwise acquire for value, directly or indirectly, any shares of preferred
stock of the Company or warrants or rights to acquire such stock, except as may
be required by the terms of such preferred stock.

26

 

8.2                Reclassification. Effect any reclassification, combination or
reverse stock split of the Common Stock.

8.3                Liens. Except as otherwise provided in this Agreement,
create, incur, assume or permit to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of the Company or any subsidiary
under any conditional sale or other title retention agreement or any capital
lease, upon or with respect to any property or asset of the Company or any
subsidiary (each a “Lien” and collectively, “Liens”), except that the foregoing
restrictions shall not apply to:

(a)                 liens for taxes, assessments and other governmental charges,
if payment thereof shall not at the time be required to be made, and provided
such reserve as shall be required by generally accepted accounting principles
consistently applied shall have been made therefor;

(b)                 liens of workmen, materialmen, vendors, suppliers,
mechanics, carriers, warehouseman and landlords or other like liens, incurred in
the ordinary course of business for sums not then due or being contested in good
faith, if an adverse decision in which contest would not materially affect the
business of the Company;

(c)                 liens securing indebtedness of the Company or any
subsidiaries which is in an aggregate principal amount not exceeding $100,000
and which liens are subordinate to liens on the same assets held by the
Purchaser;

(d)                 statutory liens of landlords, statutory liens of banks and
rights of set-off, and other liens imposed by law, in each case incurred in the
ordinary course of business (i) for amounts not yet overdue or (ii) for amounts
that are overdue and that are being contested in good faith by appropriate
proceedings, so long as such reserves or other appropriate provisions, if any,
as shall be required by generally accepted accounting principles shall have been
made for any such contested amounts;

(e)                 liens incurred or deposits made in the ordinary course of
business in connection with workers’ compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);

(f)                  any attachment or judgment lien not constituting an Event
of Default (as defined below);

(g)                 easements, rights-of-way, restrictions, encroachments, and
other minor defects or irregularities in title, in each case which do not and
will not interfere in any material respect with the ordinary conduct of the
business of the Company or any of its subsidiaries;

27

 

(h)                 any (i) interest or title of a lessor or sublessor under any
lease, including liens relating to Indebtedness identified in Section 8.4(f),
(ii) restriction or encumbrance that the interest or title of such lessor or
sublessor may be subject to, or (iii) subordination of the interest of the
lessee or sublessee under such lease to any restriction or encumbrance referred
to in the preceding clause (ii), so long as the holder of such restriction or
encumbrance agrees to recognize the rights of such lessee or sublessee under
such lease;

(i)                   liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with the
importation of goods;

(j)                  any zoning or similar law or right reserved to or vested in
any governmental office or agency to control or regulate the use of any real
property;

(k)                 liens securing obligations (other than obligations
representing debt for borrowed money) under operating, reciprocal easement or
similar agreements entered into in the ordinary course of business of the
Company and its subsidiaries; and

(l)                   the replacement, extension or renewal of any lien
permitted by this Section upon or in the same property theretofore subject or
the replacement, extension or renewal (without increase in the amount or change
in any direct or contingent obligor) of the indebtedness secured thereby.

All of the Foregoing Liens described in subsections (a) – (l) above shall be
referred to as “Permitted Liens”.

8.4                Indebtedness. Create, incur, assume, suffer, permit to exist,
or guarantee, directly or indirectly, any Indebtedness, excluding, however, from
the operation of this covenant:

(a)                 Indebtedness to the extent existing on the date hereof or
any replacement Indebtedness to existing Indebtedness;

(b)                 Indebtedness which may, from time to time be incurred or
guaranteed by the Company which in the aggregate principal amount does not
exceed $500,000;

(c)                  the endorsement of instruments for the purpose of deposit
or collection in the ordinary course of business;

(d)                 Indebtedness relating to contingent obligations of the
Company and its subsidiaries under guaranties in the ordinary course of business
of the obligations of suppliers, customers, and licensees of the Company and its
subsidiaries;

(e)                  Indebtedness relating to loans from the Company to its
subsidiaries;

(f)                  Indebtedness relating to capital leases in an amount not to
exceed $500,000;

(g)                  accounts or notes payable arising out of the purchase of
merchandise, supplies, equipment, software, computer programs or services in the
ordinary course of business;

28

 

(h)                 Common Stock issued or issuable to financial institutions,
or lessors, pursuant to a commercial credit arrangement, equipment financing
transaction, accounts receivable factoring, or a similar transaction.

The foregoing Indebtedness described in subsections (a) – (h) above shall be
referred to as “Permitted Indebtedness”.

8.5                Capital Stock. Except for issuances to the Purchaser and
issuances required by securities issued and outstanding on the date hereof,
issue any security that is senior to or ranks pari passu with the Series B
Preferred Stock, whether with respect to right of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.

8.6                Liquidation or Sale. Sell, transfer, lease or otherwise
dispose of 20% or more of its consolidated assets (as shown on the most recent
financial statements of the Company or the subsidiary, as the case may be) in
any single transaction or series of related transactions (other than the sale of
inventory in the ordinary course of business), or liquidate, dissolve,
recapitalize or reorganize in any form of transaction.

8.7                Change of Control Transaction. Enter into a Change in Control
Transaction. For purposes of this Agreement, “Change in Control Transaction”
means the occurrence of (a) an acquisition by an individual or legal entity or
“group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of fifty percent
(50%) of the voting securities of the Company, (b) a replacement at one time or
over time of more than one-half of the members of the Board of the Company which
is not approved by a majority of those individuals who are members of the Board
on the date hereof (or by those individuals who are serving as members of the
Board on any date whose nomination to the Board was approved by a majority of
the members of the Board who are members on the date hereof), (c) the merger or
consolidation of the Company or any subsidiary of the Company in one or a series
of related transactions with or into another entity (except in connection with a
merger involving the Company solely for the purpose, and with the sole effect,
of reorganizing the Company under the laws of another jurisdiction; provided
that the certificate of incorporation and bylaws (or similar charter or
organizational documents) of the surviving entity are substantively identical to
those of the Company and do not otherwise adversely impair the rights of the
Purchaser), or (d) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (a), (b) or (c).

8.8                Board Changes; Amendment of Charter Documents.

(a)                 Expand the size of the Board of Directors, except as may be
required hereunder; or

(b)                 Amend or waive any provision of its Articles of
Incorporation or Bylaws in any way that materially adversely affects the rights
of the Purchaser without the prior written consent of the Purchaser.

29

 

8.9                Transactions with Affiliates.

(a)                 Engage in any transaction with any of the officers,
directors, employees or affiliates of the Company or of its subsidiaries, except
on terms no less favorable to the Company or the subsidiary as could be obtained
in an arm’s length transaction.

(b)                 Divert (or permit anyone to divert) any business or
opportunity of the Company or subsidiary to any other corporate or business
entity.

8.10            Registration Statements. File any registration statement with
the Commission until the earlier of: (i) 60 Trading Days following the date that
a registration statement or registration statements registering all the
Conversion Shares, Warrant Shares and other Registrable Securities is declared
effective by the Commission; and (ii) the date the Conversion Shares and Warrant
Shares are saleable by Purchaser under Rule 144 under the Securities Act without
limitation as to volume or manner of sale; provided that this Section shall not
prohibit the Company from filing a registration statement on Form S-4 or other
applicable form for securities to be issued in connection with acquisitions of
businesses by the Company or its subsidiaries, or post effective amendments to
registration statements that were declared effective prior to the date hereof or
to a registration statement filed with the Commission on Forms S-4 or S-8.

ARTICLE IX
EVENTS OF DEFAULT

9.1                Events of Default. The occurrence and continuance of any of
the following events shall constitute an event of default under this Agreement
(each, an “Event of Default” and, collectively, “Events of Default”):

(a)                 if the Company shall default in the payment of any dividend
on or redemption of any Preferred Share when the same shall become due and
payable; and in each case such default shall have continued without cure for
five (5) Trading Days after written notice (a “Default Notice”) is given to the
Company of such default;

(b)                 subject to any grace periods and the ability of the Company
to delay the effectiveness of the Registration Statement pursuant the
Registration Rights Agreement, any registration statement (each a “Registration
Statement”) providing for the resale of Conversion Shares and Warrant Shares is
not declared effective by the Commission on or prior to the date which is thirty
(30) days after the date required therefor by the Registration Rights Agreement,
unless the failure of such Registration Statement to become effective results
from the Commission’s refusal to grant effectiveness by reason of its
application of Rule 415 under the Securities Act;

(c)                 the suspension from listing, without subsequent listing on
any one of, or the failure of the Common Stock to be listed or quoted on at
least one of the following: the OTC Bulletin Board or Pink Sheets Market, the
American Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market or
The New York Stock Exchange, Inc. for a period of ten (10) consecutive Trading
Days and such suspension from listing (or listing on an alternate exchange or
quotation system) is not cured within ten (10) days after the tenth (10th)
consecutive day of such suspension from listing;

30

 

(d)                 the Company shall fail to (i) timely deliver the shares of
Common Stock upon conversion of the Preferred Shares or exercise of a Warrant by
the tenth (10th) Trading Day after the date of delivery required therefor or
otherwise in accordance with the provisions of the Transaction Documents, (ii)
file a Registration Statement in accordance with the terms of the Registration
Rights Agreement, or (iii) make the payment of any fees and/or liquidated
damages under this Agreement or any Transaction Document, which failure in the
case of items (i) and (iii) of this Section is not remedied within ten (10)
Trading Days after the incurrence thereof and, solely with respect to item (iii)
above, ten (10) Trading Days after the Purchaser delivers a Default Notice to
the Company of the incurrence thereof;

(e)                 while a Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Purchaser for sale of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten (10)
consecutive Trading Days, provided that the Company has not exercised its rights
pursuant to Section 3(n) of the Registration Rights Agreement;

(f)                  the Company’s notice to the Holder, including by way of
public announcement, at any time, of its inability to comply for any reason or
its intention not to comply with proper requests for issuance of, or its failure
to timely deliver, Conversion Shares upon conversion of Preferred Shares or
Warrant Shares upon exercise of the Warrant;

(g)                 if the Company or any subsidiary shall default in the
performance of any of the covenants contained this Agreement or the Transaction
Documents and (i) such default shall have continued without cure for ten (10)
Trading Days after a Default Notice is given to the Company or (ii) such default
shall have materially adversely affected the Purchaser regardless of any action
taken by the Company to cure such default;

(h)                 if any of the Company or its subsidiaries shall default in
the observance or performance of any term or provision of a material agreement
to which it is a party or by which it is bound, which default will have or could
reasonably be expected to have a Material Adverse Effect and such default is not
waived or cured within the applicable grace period provided for in such
agreement;

(i)                   if any representation or warranty made in this Agreement,
any Transaction Document or in or any certificate delivered by the Company or
its subsidiaries pursuant hereto or thereto shall prove to have been incorrect
in any material respect when made;

(j)                  the Company shall (i) default in any payment of any amount
or amounts of principal of or interest on any Indebtedness and the aggregate
principal amount of which Indebtedness is in excess of $500,000 or (ii) default
in the observance or performance of any other agreement or condition relating to
any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders or beneficiary or beneficiaries of such
Indebtedness to cause with the giving of notice if required, such Indebtedness
to become due prior to its stated maturity;

31

 

(k)                 if a final judgment which, either alone or together with
other outstanding final judgments against the Company and its subsidiaries,
exceeds an aggregate of $500,000 shall be rendered against the Company or any
subsidiary and such judgment shall have continued undischarged or unstayed for
thirty-five (35) days after entry thereof;

(l)                   the Company or any of its subsidiaries shall (i) apply for
or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or assets, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the United States Bankruptcy
Code (as now or hereafter in effect) or under the comparable laws of any
jurisdiction (foreign or domestic), (iv) file a petition seeking to take
advantage of any bankruptcy, insolvency, moratorium, reorganization or other
similar law affecting the enforcement of creditors’ rights generally, (v)
acquiesce in writing to any petition filed against it in an involuntary case
under United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), or admit in writing
its inability to pay its debts (vi) issue a notice of bankruptcy or winding down
of its operations or issue a press release regarding same, or (vii) take any
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing;

(m)               a proceeding or case shall be commenced in respect of the
Company o r any of its subsidiaries, without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
moratorium, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets in connection with
the liquidation or dissolution of the Company or any of its subsidiaries or
(iii) similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of sixty
(60) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Company or
any of its subsidiaries or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Company or any of its subsidiaries and shall continue undismissed, or unstayed
and in effect for a period of sixty (60) days; or

(n)                 the occurrence of any “Event of Default” under the 2010
Purchase Agreement or the Securities Purchase Agreement dated as of September 8,
2008, by and between the Purchaser and the Company.

9.2                Remedies.

(a)                 Upon the occurrence and continuance of an Event of Default,
the Purchaser may at any time (unless all defaults shall theretofore have been
remedied) at its option, by written notice or notices to the Company require the
Company to immediately redeem in cash all or a portion of the Preferred Shares
held by the Purchaser at a price per share equal to one hundred twenty-five
percent (125%) of the Stated Value of the Series B Preferred Stock plus all
accrued and unpaid dividends thereon at the time of such request.

32

 

(b)                 The Purchaser, by written notice or notices to the Company,
may in its own discretion waive an Event of Default and its consequences and
rescind or annul such declaration; provided that, no such waiver shall extend to
or affect any subsequent Event of Default or impair any right resulting
therefrom.

(c)                 In case any one or more Events of Default shall occur and be
continuing, the Purchaser may proceed to protect and enforce its rights by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Transaction
Document or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law. In case of a default in the payment of any dividend on or redemption of any
Preferred Share, the Company will pay to the Purchaser such further amount as
shall be sufficient to cover the cost and the expenses of collection, including,
without limitation, actual attorney’s fees, expenses and disbursements. No
course of dealing and no delay on the part of a Purchaser in exercising any
rights shall operate as a waiver thereof or otherwise prejudice such Purchaser’s
rights.

(d)                 Any remedy conferred by this Section shall not be exclusive
of any other remedy provided by this Agreement or any other Transaction Document
or now or hereafter available at law, in equity, by statute or otherwise.

ARTICLE X CERTIFICATE LEGENDS

10.1            Legend. Each certificate representing the Securities shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or “blue sky”
laws):

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE 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.

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Prior to registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in this Section 10.1. Certificates evidencing the Conversion Shares
and Warrant Shares shall not contain any legend (including the legend set forth
in Section 10.1 hereof), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Conversion Shares or
Warrant Shares pursuant to Rule 144, or (iii) if such Conversion Shares or
Warrant Shares are eligible for sale under Rule 144 by the Purchaser without
limitation as to volume or manner of sale, or (iv) if such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the Company’s
transfer agent promptly after the effective date of a registration statement
covering such Conversions Shares or Warrant Shares, if required by the Company’s
transfer agent, to effect the removal of the legend hereunder. If all or any
portion of the Preferred Shares or a Warrant is exercised at a time when there
is an effective registration statement to cover the resale of the Conversion
Shares or the Warrant Shares, such Conversions Shares and Warrant Shares, as the
case may be, shall be issued free of all legends. The Company agrees that
following the effective date of the registration statement covering Conversion
Shares or Warrant Shares or at such time as such legend is no longer required
under this Section 10.1, it will, no later than five (5) Trading Days following
the delivery by the Purchaser to the Company or the Company’s transfer agent of
a certificate representing Conversion Shares or Warrant Shares, as the case may
be, issued with a restrictive legend (such date, the “Delivery Date”), deliver
or cause to be delivered to the Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. 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. Whenever a certificate representing the Conversion Shares or Warrant
Shares is required to be issued to the Purchaser without a legend, in lieu of
delivering physical certificates representing the Conversion Shares or Warrant
Shares, provided the Company’s transfer agent is participating in the Depository
Trust Company (“DTC”) Fast Automated Securities Transfer program, the Company
shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Conversion Shares or Warrant Shares to the Purchaser
by crediting the account of such Purchaser’s Prime Broker with DTC through its
Deposit Withdrawal Agent Commission (“DWAC”) system (to the extent not
inconsistent with any provisions of this Agreement).

10.2            Liquidated Damages. The Company understands that a delay in the
delivery of unlegended certificates for the Conversion Shares or the Warrant
Shares as set forth in Section 10.1 hereof beyond the Delivery Date could result
in economic loss to the Purchaser. If the Company fails to deliver to a
Purchaser such shares via DWAC or a certificate or certificates pursuant to this
Section hereunder by the Delivery Date, the Company shall pay to the Purchaser,
in cash, as partial liquidated damages and not as a penalty, for each $500 of
Conversion Shares or Warrant Shares (based on the closing price of the Common
Stock reported by the principal Trading Market on the date such Securities are
submitted to the Company’s transfer agent) subject to Section 10.1, $10 per
Trading Day (increasing to $15 per Trading Day five (5) Trading Days after such
damages have begun to accrue and increasing to $20 per Trading Day ten (10)
Trading Days after such damages have begun to accrue) for each Trading Day after
the Legend Removal Date until such certificate is delivered. Nothing herein
shall limit the Purchaser’s right to pursue actual damages for the Company’s
failure to deliver certificates representing any Securities as required by the
Transaction Documents, and the Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

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10.3            Sales by the Purchaser. The Purchaser agrees that the removal of
the restrictive legend from certificates representing Securities as set forth in
Section 10.1 is predicated upon the Company’s reliance that the Purchaser will
sell any Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements, or an
exemption therefrom.

ARTICLE XI
INDEMNIFICATION

11.1            Indemnification by the Company. The Company agrees to defend,
indemnify and hold harmless the Purchaser and shall reimburse the Purchaser for,
from and against each claim, loss, liability, cost and expense (including
without limitation, interest, penalties, costs of preparation and investigation,
and the actual fees, disbursements and expenses of attorneys, accountants and
other professional advisors) (collectively, “Losses”) directly or indirectly
relating to, resulting from or arising out of (a) any untrue representation,
misrepresentation, breach of warranty or non-fulfillment of any covenant,
agreement or other obligation by or of the Company contained in any Transaction
Document or in any certificate, document, or instrument delivered by the Company
to the Purchaser; or (b) any action instituted against the Purchaser or its
affiliates, by any stockholder of the Company who is not an affiliate of the
Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of the
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings the Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance).

11.2            Procedure.

(a)                 The indemnified party shall promptly notify the indemnifying
party of any claim, demand, action or proceeding for which indemnification will
be sought under this Agreement; provided, that the failure of any party entitled
to indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article XI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice.

(b)                 In case any such action, proceeding or claim is brought
against an indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate in and,
unless in the reasonable, good-faith judgment of the indemnified party a
conflict of interest between it and the indemnifying party exists with respect
to such action, proceeding or claim (in which case the indemnifying party shall
be responsible for the reasonable fees and expenses of one separate counsel for
the indemnified party), to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. If the indemnifying party elects to
defend any such action or claim, then the indemnified party shall be entitled to
participate in such defense (but not control) with counsel of its choice at its
sole cost and expense (except that the indemnifying party shall remain
responsible for the reasonable fees and expenses of one separate counsel for the
indemnified party in the event in the reasonable, good-faith judgment of the
indemnified party a conflict of interest between it and the indemnifying party
exists).

35

 

(c)                  In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party’s costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be Losses subject to indemnification hereunder.

(d)                 The parties shall cooperate fully with each other in
connection with any negotiation or defense of any such action or claim and shall
furnish to the other party all information reasonably available to such party
which relates to such action or claim. Each party shall keep the other party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto.

(e)                  Notwithstanding anything in this Article XI to the
contrary, the indemnifying party shall not, without the indemnified party’s
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the indemnified party of a
release from all liability in respect of such claim. The indemnification
obligations to defend the indemnified party required by this Article XI shall be
made by periodic payments of the amount thereof during the course of
investigation or defense, as and when the Loss is incurred, so long as the
indemnified party shall refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

ARTICLE XII
MISCELLANEOUS

12.1            Governing Law. This Agreement and the rights of the parties
hereunder shall be governed in all respects by the laws of the State of Florida
wherein the terms of this Agreement were negotiated.

36

 

12.2            Survival. Except as specifically provided herein, the
representations, warranties, covenants and agreements made herein shall survive
the Closing.

12.3            Amendment. This Agreement may not be amended, discharged or
terminated (or any provision hereof waived) without the written consent of the
Company and the Purchaser.

12.4            Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding upon
and enforceable by and against, the successors, assigns, heirs, executors and
administrators of the parties hereto. The Purchaser may assign its rights
hereunder, and the Company may not assign its rights or obligations hereunder
without the consent of the Purchaser.

12.5            Entire Agreement. This Agreement, the Transaction Documents and
the other documents delivered pursuant hereto and simultaneously herewith
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof.

12.6            Notices, etc. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered
either personally, by facsimile, or by a nationally recognized courier service
marked for next business day delivery or sent in a sealed envelope by first
class mail, postage prepaid and either registered or certified with return
receipt, addressed as follows:

if to the Company:

OptimizeRx Corporation

407 Sixth Street

Rochester, MI 48307

Attention: H. David Lester

Phone: (248) 651-6558

Fax: (248) 651-6748

 

with a copy to:

Scott Doney, Esq.

Cane Clark, LLP

3273 E. Warm Springs Rd.

Las Vegas, NV 89120

Phone: (702) 312-6255

Fax: (702) 944-7100

Email: sdoney@caneclark.com

37

 

 

if to the Purchaser:

Vicis Capital Master Fund

445 Park Avenue

Suite 1901

New York, NY 10022

Attn: Shad Stastney

Phone: (212) 909-4600

Fax: (212) 909-4601

 

with a copy to:

Hoyt R. Stastney, Esq.

Quarles & Brady LLP

411 East Wisconsin Avenue

Milwaukee, WI 53202

Phone: (414) 277-5143

Fax: (414) 978-8968

 

Such communications shall be effective immediately if delivered in person or by
confirmed facsimile, upon the date acknowledged to have been received in return
receipt, or upon the next business day if sent by overnight courier service.

 

12.7            Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Securities upon any breach or
default of the Company under this Agreement shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence, therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be, made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.

12.8            Severability. The invalidity of any provision or portion of a
provision of this Agreement shall not affect the validity of any other provision
of this Agreement or the remaining portion of the applicable provision. It is
the desire and intent of the parties hereto that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
to be invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made.

12.9            Expenses. Each party shall bear its own expenses and legal fees
incurred on its behalf with respect to the negotiation, execution and
consummation of the transactions contemplated by this Agreement. The Company
shall pay all documentary stamp or similar taxes imposed by any authority upon
the transactions contemplated by this Agreement or any Transaction Document. The
Company shall pay all reasonable, documented third-party fees and expenses
incurred by the Purchaser in connection with the enforcement of this Agreement
or any of the other Transaction Documents, including, without limitation, all
actual reasonable attorneys’ fees and expenses.

38

 

12.10         Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties
to this Agreement hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of the state and federal courts located IN the State of
Florida for purposes of all legal proceedings arising out of or relating to this
Agreement and the Transaction Documents. Each of the parties to this Agreement
irrevocably waives, to the fullest extent permitted by law, any objection which
such party may now or hereafter have to the laying of the venue of any such
proceeding brought in any such courts and any claim that any such proceeding
brought in any such courts has been brought in an inconvenient forum. Each of
the parties hereto irrevocably waives, to the fullest extent permitted by law,
any right to trial by jury in any such legal proceeding. Each of the parties to
this Agreement hereby consents to service of process by notice in the manner
specified in Section 12.6 and irrevocably waives, to the fullest extent
permitted by law, any objection such party may now or hereafter have to service
of process in such manner.

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

12.12         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.

 

(signature page follows)

39

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Securities
Purchase Agreement, as of the day and year first above written.

 

COMPANY: OPTIMIZERx CORPORATION By: /s/ H. David Lester Name: H. David Lester
Title: Chief Executive Officer PURCHASER:

VICIS CAPITAL MASTER FUND

By: Vicis Capital, LLC, its investment adviser

By: /s/ Keith W. Hughes Name: Keith W. Hughes Title: CFO

 

40

 

EXHIBIT A

 

FORM OF AMENDMENT TO CERTIFICATE OF DESIGNATION OF

SERIES B CONVERTIBLE PREFERRED STOCK

 

41

 

EXHIBIT B

 

FORM OF SERIES B WARRANT

 

42

 

EXHIBIT C

 

 

FORM OF REGISTRATION RIGHTS AGREEMENT

 

43

 

EXHIBIT D

 

FORM OF SECURITY AGREEMENT

 

44

 

EXHIBIT E

 

FORM OF GUARANTY AGREEMENT

 

45

 

EXHIBIT F

 

FORM OF GUARANTOR SECURITY AGREEMENT

 

 

46

 

EXHIBIT G

 

FORM OF OPINION OF COUNSEL

47

 

EXHIBIT H

 

FORM OF TERMINATION AGREEMENT AND RELEASE

48

 

 

OptimizeRx Corporation

Schedules