--------------------------------------------------------------------------------

Exhibit 10.1
 

 
 

 
 

 
 

 
 

 
 

 
 
SECURITIES PURCHASE AGREEMENT
 
By and Between
 
THE AMACORE GROUP, INC.
 
and
 
VICIS CAPITAL MASTER FUND
 

 
 

 

 
 

 
 

 
 
June 2, 2011
 
 

 

 
 

--------------------------------------------------------------------------------

 

 

 
 
SECURITIES PURCHASE AGREEMENT
 

 
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of June 2, 2011,
is made by and between THE AMACORE GROUP, INC., a Delaware corporation (the
“Company”), and VICIS CAPITAL MASTER FUND (the “Purchaser”), a series of the
Vicis Capital Master Trust, a trust formed 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 up to $2,500,000 in principal amount
of its 15% Senior Secured Convertible Notes due June 30, 2012, in the form
attached hereto as Exhibit A (each an “Acquired Note” and collectively, the
“Acquired Notes”), which are convertible into shares of the Company’s Class A
Common Stock (the “Common Stock”), par value $.001 per share (the “Conversion
Shares” and, together with the Acquired Notes, the “Securities”)
 
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
 
ARTICLE I
PURCHASE AND SALE OF THE ACQUIRED NOTES
 
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”), the Acquired Notes for $2,500,000 (the “Purchase Price”) in cash.
 
1.2           Closings.  Each Closing, if any, shall occur at such place, date
and time as mutually agreeable to the parties (each a “Closing Date”).
 
1.3           Intentionally Omitted
 
1.4           Holdback; Release.
 
(a)           As soon as reasonably practicable after the date hereof but in no
event later than the fifth business day thereafter, the Purchaser shall deposit
an amount equal to $2,500,000 (together with any interest accruing thereon, the
“Escrow Amount”) into the escrow account identified on Schedule 1.4(a) hereto
(the “Escrow Account”) until such time as funds may be released from the Escrow
Account pursuant to the terms of this Section 1.4 and that certain escrow
agreement dated August 16, 2010, as amended by the first amendment to escrow
agreement in the form attached hereto as Exhibit B (as so amended, the “Escrow
Agreement”).  Any and all withdrawals from the Escrow Account shall be subject
to the terms Escrow Agreement and shall require dual signatures authorizing
release, one signature being that of an officer of the Company and one signature
being that of a duly authorized representative of the Purchaser.
 

 
1

--------------------------------------------------------------------------------

 

(b)           At such time that either (i) the Company’s Available Cash (as
defined below) is insufficient to operate its business or (ii) the Company
desires to undertake a new marketing effort in promotion of the Company’s
business, the Company may make a written request to the Purchaser for a release
of funds from the Escrow Account, which written request must set forth in
reasonable detail how the Company will use such funds.  The Purchaser, in its
sole discretion, will then decide what amount, if any, should be released to the
Company (such amount, a “Release Amount”).  Upon each such release, the
Purchaser shall be entitled to the issuance of an Acquired Note from the Company
at a rate of $1 in principal amount for each $1 released from the Escrow Account
(each a “Tranche of Securities”). Upon each Closing of a transfer of a Release
Amount to the Company: (i) the Purchaser shall authorize the escrow agent to
release such Release Amount to such other account specified by the Company; and
(ii) the Company, against delivery of such Release Amount, will deliver to the
Purchaser a Tranche of Securities calculated in accordance with this Section
1.4(b) and the documents required to be delivered by Section 4.4 hereof. As used
herein, the term “Available Cash” shall mean the aggregate amount of all
immediately available funds that the Company has access to in bank accounts in
its name.
 
(c)           Notwithstanding anything to the contrary contained herein, if
funds remain in the Escrow Account after 5:00 p.m. Eastern Time on June 30, 2012
(the “Escrow Account Termination Time”), and the Purchaser and Company have not
mutually agreed to extend such Escrow Account Termination Time to a later time,
the Purchaser shall be entitled to the return of the full amount of the Escrow
Amount then remaining in the Escrow Account.  Upon written notice to the Company
from the Purchaser of such termination, the Company shall promptly authorize the
bank to release all such funds remaining in the Escrow Account to such other
account specified by the Purchaser.
 
(d)           Each of the parties hereto acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions of this
Section 1.4 were not performed by the Company, on the one hand, or the Purchaser
on the other hand, in accordance with the terms hereof or were otherwise
breached by the Company, on the one hand, or the Purchaser on the other hand.
The parties further agree that the Purchaser or the Company, as the case may be,
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions hereof and to compel specific performance of the terms hereof, in
addition to any other remedy at law or equity.
 
1.5           Security Documents.
 
(a)           Security Agreement.  All of the obligations of the Company under
the Acquired Notes and Transaction Documents shall be secured by a lien on all
the personal property and assets of the Company now existing or hereinafter
acquired granted pursuant to an amended and restated security agreement dated of
even date herewith between the Company and the Purchaser in the form attached
hereto as Exhibit C (“Security Agreement”), which Security Agreement amends and
restates that certain security agreement dated August 16, 2010 between the
Company and the Purchaser.
 
(b)           Stock Pledge and Escrow Agreement.  To secure the obligations of
the Company under this Agreement and the Acquired Notes, the Company shall
pledge, hypothecate, and assign, to the Purchaser all the capital stock or other
ownership interests of its Subsidiaries listed on Schedule 1.5(b) hereto (the
“Pledged Interests”), pursuant to a first amendment to stock pledge and escrow
agreement (“Pledge Amendment”) in the form attached hereto as Exhibit D, which
Pledge Amendment amends that certain stock pledge and escrow agreement dated
August 16, 2010 between the Company and the Purchaser.
 

 
2

--------------------------------------------------------------------------------

 

(c)           Guaranty.  All of the obligations of the Company under the
Acquired Notes 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 1.5(c) hereto,
which Guaranty Agreement amends and restates that certain guaranty agreement
dated August 16, 2010 by and between each subsidiary of the Company and
Purchaser.
 
(d)           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 an 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”), which
Guarantor Security Agreement amends and restates that certain guarantor security
agreement dated August 16, 2010 between each subsidiary and the Purchaser.
 
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company hereby represents and warrants to the Purchaser as of the date of
this Agreement as follows:
 
2.1           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, condition (financial or otherwise) or
prospects of the Company or its Subsidiaries (as defined below) 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 under the Transaction Documents (as
hereinafter defined).
 
2.2           Subsidiaries.  The Company has eight subsidiaries: JRM Benefits
Consulting, LLC (which does not have any current active operations), US Health
Benefits Group, Inc. (which does not have any current active operations), US
Healthcare Plans, Inc. (which does not have any current active operations), On
The Phone, Inc. (which does not have any current active operations), Zurvita
Holdings, Inc. (which as of the date hereof is owned 61% by the Company),
Lifeguard Benefit Services, Inc., TeleProtect 800, LLC, and Amacore Direct
Marketing, Inc. (each a “Subsidiary” and collectively, the “Subsidiaries”).
 

 
3

--------------------------------------------------------------------------------

 

2.3           No Violation.  Neither the Company nor any Subsidiary is in
violation of: (a) any of the provisions of its certificate of incorporation,
bylaws or other organizational or charter documents; or (b) any judgment, decree
or order or any statute, ordinance, rule or regulation applicable to the
Company, except for possible violations which would not, individually or in the
aggregate, have a Material Adverse Effect.
 
2.4           Capitalization.
 
(a)           As of the date hereof, the Company is currently authorized to
issue up to (i) 1,480 million shares of Common Stock, par value $.001 per share,
of which 1,047,725,428 shares are currently outstanding and 432,274,572 shares
have been reserved for issuance upon the exercise of all of the outstanding
options, warrants and other securities issued by the Company that are
convertible into Common Stock. All of such outstanding shares have been, or upon
issuance will be, validly issued, are fully paid and nonassessable; and (ii) 20
million shares of Preferred Stock, par value $.001 per share, of which 4,455
shares are currently outstanding.
 
(b)           Except as disclosed herein or in the Company’s reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the “SEC”) pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), prior to the date hereof (the “SEC Documents”):
 
(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)           except as disclosed on Schedule 2.4(ii), attached hereto, 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 are 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)           except as disclosed on Schedule 2.4(iii) attached hereto, there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness (as
defined in Section 2.14 hereof) of the Company or any Subsidiary or by which the
Company or its Subsidiary are or may become bound;
 
(iv)           there are no agreements or arrangements under which the Company
is obligated to register the sale of any of their securities under the
Securities Act of 1933, as amended, (the “Securities Act”);
 

 
4

--------------------------------------------------------------------------------

 

(v)           except as disclosed on Schedule 2.4(v) attached hereto,  attached
hereto, there are no outstanding securities or instruments of the Company that
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to redeem a security of the Company;
 
(vi)           except as disclosed on Schedule 2.4(vi) attached hereto, there
are no securities or instruments containing antidilution or similar provisions
that will be triggered by the issuance of the Securities; and
 
(vii)           the Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement.
 
2.5           Issuance of the Acquired Notes.
 
(a)           The Acquired Notes to be issued hereunder are duly authorized and,
upon payment and issuance in accordance with the terms hereof and thereof, shall
be free from all taxes, Liens and charges with respect to the issuance
thereof.  The Company has taken action, and promptly will take any and all
additional action and cooperate with any regulatory authority in connection with
such action, required to authorize and have reserved free of preemptive rights
and other similar contractual rights of stockholders, a number of its authorized
but unissued shares of Class A Common Stock equal to one hundred percent (100%)
of the aggregate number of shares of Class A Common Stock necessary to effect
the conversion of the Acquired Notes (the “Conversion Shares”).  Subject to the
filing and mailing of a definitive Information Statement on Schedule 14C (a
preliminary version of which was filed with the SEC on September 9, 2009 and
subsequently amended on April 6, 2010, the “Schedule 14C”) and the filing of an
amendment to amended and restated certificate of incorporation of the Company
increasing the Company’s authorized capital and/or effecting a reverse split of
the Company’s common stock as described in the Schedule 14C (the “Amendment”),
together with any action of the Board and/or the Company’s stockholders that may
be required to do so, all actions by the Board, the Company and its stockholders
necessary for the valid issuance of the Conversion Shares has been
taken.  Presently, the Company does not have sufficient capital to issue all of
the Conversion Shares.
 
(b)           The Conversion Shares, when issued upon conversion of the Acquired
Notes, 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 Class A Common Stock.
Assuming the accuracy of each of the representations and warranties set forth in
Article III hereof, the issuance by the Company to the Purchaser of the Acquired
Notes is exempt from registration under the Securities Act.
 
2.6           Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement delivered
pursuant to Section 4.4(f) hereof, the Escrow Agreement, the documents
identified in Section 1.4 hereof, and each of the other agreements or
instruments entered into or delivered by the parties hereto in connection with
the transactions contemplated by this Agreement (collectively, the “Transaction
Documents”) and to issue the Acquired Notes and the Conversion Shares in
accordance with the terms hereof. 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, and the issuance
of the Acquired Notes, have been duly authorized by the board of directors of
the Company (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
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies, or (ii) as any rights to indemnity or contribution
hereunder may be limited by federal and state securities laws and public policy
consideration.
 

 
5

--------------------------------------------------------------------------------

 

2.7           Dilutive Effect. The Company understands and acknowledges that its
obligation to issue the Conversion Shares upon conversion of the Acquired Notes
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
 
2.8           No Conflicts. Subject to the filing and mailing of the Schedule
14C and the filing of the Amendment, 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) will not (i) result in a
violation of any articles or certificate of incorporation, any certificate of
designations, preferences and rights of any outstanding series of preferred
stock or bylaws of the Company 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 is a party, or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except in the case of clauses (ii) and (iii), for
such breaches or defaults as would not be reasonably expected to have a Material
Adverse Effect.
 
2.9           Governmental Consents. Except for the filing and mailing of the
Schedule 14C, the filing of the Amendment, the filing of a Form D with the SEC,
and the registration of the Conversion Shares under the Securities Act for
resale by the Purchaser, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency or any regulatory or self-regulatory agency or any other
Person (as hereinafter defined) 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. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain at or prior to the Closing pursuant to the preceding sentence have
been obtained or effected. The Company is unaware of any facts or circumstances
which might prevent the Company from obtaining or effecting any of the
foregoing.
 

 
6

--------------------------------------------------------------------------------

 

2.10           No General Solicitation.  Neither the Company, its Subsidiaries,
nor any of their affiliates, nor any Person acting on its or their behalf, has
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 the Securities.
 
2.11           No Integrated Offering. None of the Company, its Subsidiaries,
their affiliates, or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Securities under the Securities Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable stockholder approval provisions.
 
2.12           Placement Agent’s Fees.  Except as set forth on Schedule 2.12, 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 Purchaser) 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, attorney’s fees and
out-of-pocket expenses) arising in connection with any claim for any such fees
or commissions.
 
2.13           Litigation.  Except as disclosed in the SEC Documents or Schedule
2.13, there is no material action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or its Subsidiaries, the transactions
contemplated by the Transaction Documents, the Class A Common Stock or any of
the Company’s respective current or former officers or directors in their
capacities as such. To the knowledge of the Company, there has not been within
the past two (2) years, and there is not pending, any investigation by the SEC
involving the Company or any current or former director or officer of the
Company (in his or her capacity as such). The SEC has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company under the Securities Act within the past two (2) years.
 
2.14           Indebtedness and Other Contracts. Except as disclosed in the SEC
Documents, the Company (a) does not have any outstanding Indebtedness (as
defined below), (b) is not 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 not 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 not 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.
 

 
7

--------------------------------------------------------------------------------

 

2.15           Financial Information; SEC Documents.  Except as set forth on
Schedule 2.15 attached 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 Exchange Act, for the two years
preceding the date hereof, the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively
referred to as the SEC Documents. Except as set forth on Schedule 2.15 attached
hereto, as of their respective dates, 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.
Except as set forth on Schedule 2.15 attached hereto, 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.
 

 
8

--------------------------------------------------------------------------------

 

2.16           Absence of Certain Changes. Except as disclosed in the SEC
Documents or on Schedule 2.16, since December 31, 2009, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Company or its Subsidiary. Since December 31,
2009, the Company has not (i) declared or paid any dividends, (ii) sold any
assets, individually or in the aggregate, in excess of $50,000 outside of the
ordinary course of business or (iii) had capital expenditures, individually or
in the aggregate, in excess of $100,000. The Company has not taken any steps to
seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. 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.
 
2.17           Foreign Corrupt Practices.  Neither the Company nor any
Subsidiary, nor any director, officer, agent, employee or other Person acting on
behalf of the Company or a Subsidiary has, in the course of its actions (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.
 
2.18           Transactions With Affiliates.  Except as set forth in the SEC
Documents or on Schedule 2.18, none of the officers, directors or employees of
the Company or any Subsidiary is presently a party to any transaction with the
Company (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.
 

 
9

--------------------------------------------------------------------------------

 

2.19           Insurance.  The Company and each Subsidiary is 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 such Subsidiary is
engaged.  The Company has not been refused any insurance coverage sought or
applied for and the Company has no 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.
 
2.20           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 the continued
employment of each such executive officer does not subject the Company to any
liability with respect to any of the foregoing matters. The Company is 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.
 
2.21           Title.  Each of the Company and its Subsidiaries has good and
marketable title to all personal property owned by it which is material to their
respective business, in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company. Any real property
and facilities held under lease by the Company and its Subsidiaries 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.
 
2.22           Intellectual Property Rights.  The Company’s and its
Subsidiaries’ patents, trademarks, trade names, service marks copyrights, and
registrations and applications therefor, trade secrets and any other
intellectual property right (collectively, “Intellectual Property Rights”), are,
to the best of the Company’s knowledge, fully valid and are in full force and
effect.  The Company does not have any knowledge of any infringement by the
Company or any Subsidiary of Intellectual Property Rights of others. There is no
claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or a Subsidiary regarding its
Intellectual Property Rights that could have a Material Adverse Effect. The
Company is unaware of any facts or circumstances which might give rise to any of
the foregoing infringements or claims, actions or proceedings. The Company has
taken reasonable security measures to protect the secrecy, confidentiality and
value of its Intellectual Property Rights.
 
2.23           Environmental Laws.  Each of Company and its Subsidiaries (a) is
in compliance with any and all Environmental Laws (as hereinafter defined),
(b) has received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (c) is
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.
 

 
10

--------------------------------------------------------------------------------

 

2.24           Tax Matters.  Each of Company and its Subsidiaries (a) has 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) has 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) has 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.
 
2.25           Sarbanes-Oxley Act. Except as set forth in Schedule 2.25, the
Company is in compliance with any and all 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, except where such
noncompliance would not have a Material Adverse Effect.
 
2.26           Investment Company Status.  The Company is not, and immediately
after receipt of payment for the Acquired Notes 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.
 
2.27           Material Contracts.  Except as disclosed on Schedule 2.27 or in
the SEC Documents, each contract of the Company that involves expenditures or
receipts in excess of $100,000 (each an “Applicable Contract”) is in full force
and effect and is valid and enforceable in accordance with its terms. The
Company is and has been in full compliance with all applicable terms and
requirements of each Applicable 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 Applicable Contract. The Company has not given or
received from any other entity any notice or other communication (whether oral
or written) regarding any actual, alleged, possible or potential violation or
breach of, or default under, any Applicable Contract.
 

 
11

--------------------------------------------------------------------------------

 

2.28           Inventory.  All inventory of the Company consists of a quality
and quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been or
will be written off or written down to net realizable value on the audited
consolidated balance sheet of the Company as of December 31, 2009.  The
quantities of each type of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable and warranted in the
present circumstances of the Company.
 
2.29           Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided the Purchaser or its agents or counsel
with any information that constitutes or might constitute material, nonpublic
information that has not been disclosed in the SEC Documents. The Company
understands and confirms that the Purchaser will rely on the foregoing
representations in effecting transactions in securities of the Company. 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.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
 
The Purchaser hereby represents and warrants to the Company as of the date of
this Agreement as follows:
 
3.1           Organization.  The Purchaser is an entity duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
 
3.2           Authorization.  This Agreement has been duly authorized, validly
executed and delivered by the Purchaser and is a valid and binding agreement and
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms, subject to limitations on enforcement by general principles of equity
and by bankruptcy or other laws affecting the enforcement of creditors’ rights
generally, and the Purchaser has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and to
perform its obligations hereunder and thereunder.
 
3.3           Investment Investigation.  The Purchaser understands that no
Federal, state, local or foreign governmental body or regulatory authority has
made any finding or determination relating to the fairness of an investment in
the Acquired Notes and that no Federal, state, local or foreign governmental
body or regulatory authority has recommended or endorsed, or will recommend or
endorse, any investment in the Acquired Notes. The Purchaser, in making the
decision to purchase the Acquired Notes, has relied upon independent
investigation made by it and has not relied on any information or
representations made by third parties.  The Purchaser understands and
acknowledges that it has received all the information set forth on Schedule 2.15
attached hereto and that the Company’s last periodic report filed with the SEC
was the Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2010.
 

 
12

--------------------------------------------------------------------------------

 

3.4           Accredited Investor.  The Purchaser is, and will be on each
Closing Date and upon conversion of each of the Acquired Notes, an “accredited
investor” as defined under Rule 501 of Regulation D promulgated under the
Securities Act.
 
3.5           No Distribution.  The Purchaser is and will be acquiring the
Acquired Notes for its own account, and not with a view to any resale or
distribution of the Acquired Notes in whole or in part, in violation of the
Securities Act or any applicable securities laws.
 
3.6           Resale.  The parties intend that the offer and sale of the
Acquired Notes be exempt from registration under the Securities Act, by virtue
of Section 4(2) and/or Rule 506 of Regulation D promulgated under the Securities
Act. The Purchaser understands that the Acquired Notes purchased hereunder have
not been, and may never be, registered under the Securities Act and that the
Acquired Notes cannot be sold or transferred unless they are first registered
under the Securities Act and such state and other securities laws as may be
applicable or in the opinion of counsel for the Company an exemption from
registration under the Securities Act is available (and then the Acquired Notes
may be sold or transferred only in compliance with such exemption and all
applicable state and other securities laws).
 
3.7           Reliance.  The Purchaser understands that the Acquired Notes are
being offered and sold to it in reliance on specific provisions of Federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein for purposes of qualifying for
exemptions from registration under the Securities Act, and applicable state
securities laws.
 
3.8           Waiver and Consent.  The Purchaser understands and acknowledges
the pendency of the matters set forth in Schedule 2.15 and the Company’s delay
in the filing of the Exchange Act reports set forth therein shall not cause a
breach under any of the Transaction Documents.
 
ARTICLE IV
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
the Purchaser:
 
4.1           Representations and Warranties Correct.  The representations and
warranties in Article II hereof shall be true and correct when made, and shall
be true and correct in all material respects on each Closing Date with the same
force and effect as if they had been made on and as of such Closing Date.   The
Company shall have delivered any update to the Schedules hereto to the Purchaser
not less than two business days prior to such Closing Date.
 
4.2           Performance.  All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
each Closing Date shall have been performed or complied with by the Company in
all material respects.
 
4.3           No Impediments.  Neither the Company nor any 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 Acquired Notes.  At the time of the
Closing, the purchase of the Acquired Notes 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.
 

 
13

--------------------------------------------------------------------------------

 

4.4           Other Agreements and Documents.  Company shall have executed and
delivered the following agreements and documents:
 
(a)           An Acquired Note corresponding to the applicable Release Amount as
determined in accordance with Section 1.4(b) hereof.
 
(b)           A certificate of good standing as of a recent date with respect to
the Company from the Secretary of State of Delaware;
 
(c)           A certificate of the Company’s Secretary, dated such Closing Date,
certifying (i) the fulfillment of the conditions specified in Sections 4.1 and
4.2 of this Agreement, (ii) the Board resolutions approving this Agreement and
the transactions contemplated hereby, (iii) the Company’s certificate of
incorporation, and (iv) other matters as the Purchaser shall reasonably request;
 
(d)           A written waiver, in form and substance satisfactory to the
Purchaser, from each person other than the Purchaser who has any of the
following rights:
 
(i)           any currently effective right of first refusal to acquire the
Acquired Notes; or
 
(ii)           any right to an anti-dilution adjustment of securities issued by
the Company that are held by such person that will be triggered as a result of
the issuance of the Acquired Notes;
 
(e)           All necessary consents or waivers, if any, from all parties to any
other material agreements to which the Company is a party or by which it is
bound immediately prior to the Closing in order that the transactions
contemplated hereby may be consummated and the business of the Company may be
conducted by the Company after the Closing without adversely affecting the
Company; and
 
4.5           Initial Documents.  As of the date of this Agreement, Company
shall have executed and delivered the following agreements and documents:
 
(a)           The First Amendment to Escrow Agreement in the form of Exhibit B
attached hereto;
 
(b)           The Security Agreement in the form of Exhibit C attached hereto;
 
(c)           The Pledge Amendment in the form of Exhibit D attached hereto;
 
(d)           The Guaranty Agreement in the form of Exhibit E attached hereto;
 

 
14

--------------------------------------------------------------------------------

 

(e)           The Guarantor Security Agreement in the form of Exhibit F attached
hereto;
 
(f)           The Registration Rights Agreement in the form of Exhibit G
attached hereto (the “Registration Rights Agreement”);
 
(g)           The Amended and Restated Notes in the form of Exhibit I attached
hereto (the “Amended Note”) pursuant to which Vicis shall agree to extend the
maturity date of each 15% Senior Secured Convertible Note due June 30, 2011 to
June 30, 2012, provided that the Company shall continue to be required to pay
all accrued interest accruing through June 30, 2011 with respect to such notes
on June 30, 2011.
 
4.6           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.
 
4.7           Pledged Interests.  The Company shall have delivered the Pledged
Interests to the escrow agent under the Pledge Amendment.
 
4.8           Post-Closing Deliveries.  Within five (5) days after each Closing,
the Company shall deliver to Purchaser a payment in an amount equal to the
amount of all documentary tax and other fees imposed by the State of Florida
upon the transactions contemplated hereby, together with a completed and
executed Florida Department of Revenue Documentary Stamp Tax Return Form DR-228,
or such other successor form specified by the Florida Department of Revenue.
 
ARTICLE V
CONDITIONS TO CLOSING OF THE COMPANY
 
The Company’s obligation to sell the Securities at the Closing is subject to the
fulfillment to its satisfaction on or prior to the Closing Date of each of the
following conditions:
 
5.1           Representations.  The representations made by the Purchaser
pursuant to Article III hereof shall be true and correct when made and shall be
true and correct on the Closing Date.
 
5.2           Other Agreements and Documents.  Purchaser shall have executed and
delivered the following agreements and documents:
 
(a)           The Registration Rights Agreement; and
 
(b)           The Waiver of Anti-Dilution Rights in the form of Exhibit H
attached hereto;
 
(c)           Each 15% Senior Secured Convertible Note due June 30, 2011 issued
to the Purchaser by the Company pursuant to that certain Securities Purchase
Agreement dated August 16, 2010 between the Company and Purchaser for
cancellation (each such canceled note to be replaced by an Amended Note).
 

 
15

--------------------------------------------------------------------------------

 

5.3           No Impediments.  Neither the Company nor any 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 Acquired Notes.  At the time of the
Closing, the purchase of the Acquired Notes 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           Payment of Release Amount.  The Company shall have received the
Release Amount.
 
ARTICLE VI
INDEMNIFICATION
 
6.1           Indemnification of the Purchaser.
 
(a)           Subject to the provisions of this Section 6.1, the Company will
indemnify and hold Purchaser and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, shareholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of
such controlling person (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to: (a) any untrue
representation, misrepresentation, breach of warranty or non-fulfillment of any
covenant, agreement or other obligation by or of the Company or any subsidiary
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 any Purchaser Party, or any of their respective affiliates,
by any stockholder of the Company who is not an affiliate of such Purchaser
Party, solely as a result of such Purchaser’s acquisition of the Securities
pursuant to this Agreement (unless such action is based upon a breach of such
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance).
 
(b)           The Purchaser shall promptly notify the Company 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 Company of its
obligations under this Section 6.1 except to the extent that the Company is
actually prejudiced by such failure to give notice.
 

 
16

--------------------------------------------------------------------------------

 

(c)           In case any such action, proceeding or claim is brought against
any Purchaser Party in respect of which indemnification is sought hereunder, the
Company shall be entitled to participate in and, unless in the reasonable,
good-faith judgment of the Purchaser a conflict of interest between it and the
Company exists with respect to such action, proceeding or claim (in which case
the Company shall be responsible for the reasonable fees and expenses of one
separate counsel for the Purchaser Parties), to assume the defense thereof with
counsel reasonably satisfactory to the Purchaser. If the Company elects to
defend any such action or claim, then the Purchaser Parties shall be entitled to
participate in such defense (but not control) with counsel of their choice at
their sole cost and expense (except that the Company shall remain responsible
for the reasonable fees and expenses of one separate counsel for the Purchaser
Parties in the event in the reasonable, good-faith judgment of the Purchaser a
conflict of interest between the Purchaser Parties and the Company exists).
 
(d)           In the event that the Company advises the Purchaser Parties 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 Purchaser Parties may, at their
option, defend, settle or otherwise compromise or pay such action or claim.  In
any event, unless and until the Company elects in writing to assume and does so
assume the defense of any such claim, proceeding or action, the Purchaser
Parties’ 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.
 
(e)           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.
 
(f)           Notwithstanding anything in this Section 6.1 to the contrary, the
Company shall not, without the Purchaser’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 any Purchaser Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Purchaser Parties of a release from all liability in respect of
such claim.  The indemnification obligations to defend the Purchaser Parties
required by this Section 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 Purchaser Parties 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
Purchaser Parties against the Company or others, and (ii) any liabilities the
Company may be subject to pursuant to applicable law.
 

 
17

--------------------------------------------------------------------------------

 

6.2           Indemnification of the Company.
 
(a)           Subject to the provisions of this Section 6.2, the Purchaser will
indemnify and hold Company and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such
controlling person (each, a “Company Party”) harmless from any and all Losses
that any such Company Party may suffer or incur as a result of or relating to a
breach of any warranty or representation of the Purchaser contained in this
Agreement or any non-fulfillment of any covenant, agreement or other obligation
by or of the Purchaser contained in this Agreement; provided that, the Purchaser
shall not have any indemnification obligation under this Section 6.2 to the
extent Losses are caused by or attributable to, in whole or in part, a breach of
the Company’s representations, warranties or covenants under the Transaction
Documents, a violation by the Company or a subsidiary of applicable law, or any
conduct by the Company or a subsidiary which constitutes fraud, gross
negligence, willful misconduct or malfeasance; and further provided that the
Purchaser’s aggregate liability hereunder shall not exceed the amount of the
Purchase Price.
 
(b)           The Company shall promptly notify the Purchaser 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 Purchaser of
its obligations under this Section except to the extent that the Purchaser is
actually prejudiced by such failure to give notice.
 
(c)           In case any such action, proceeding or claim is brought against
any Company Party in respect of which indemnification is sought hereunder, the
Purchaser shall be entitled to participate in and, unless in the reasonable,
good-faith judgment of the Company a conflict of interest between it and the
Purchaser exists with respect to such action, proceeding or claim (in which case
the Purchaser shall be responsible for the reasonable fees and expenses of one
separate counsel for the Company Parties), to assume the defense thereof with
counsel reasonably satisfactory to the Company. If the Purchaser elects to
defend any such action or claim, then the Company Parties shall be entitled to
participate in such defense (but not control) with counsel of their choice at
their sole cost and expense (except that the Purchaser shall remain responsible
for the reasonable fees and expenses of one separate counsel for the Company
Parties in the event in the reasonable, good-faith judgment of the Company a
conflict of interest between the Company Parties and the Purchaser exists).
 
(d)           In the event that the Purchaser advises the Company Parties 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 Company Parties may, at their
option, defend, settle or otherwise compromise or pay such action or claim.  In
any event, unless and until the Purchaser elects in writing to assume and does
so assume the defense of any such claim, proceeding or action, the Company
Parties’ 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.
 

 
18

--------------------------------------------------------------------------------

 

(e)           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.
 
(f)           Notwithstanding anything in this Section 6.2 to the contrary, the
Purchaser shall not, without the Company’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 any Company Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Company Parties of a release from all liability in respect of
such claim.  The indemnification obligations to defend the Company Parties
required by this Section 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 Company Parties 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 Company
Parties against the Purchaser or others, and (ii) any liabilities the Purchaser
may be subject to pursuant to applicable law.
 
ARTICLE VII
AFFIRMATIVE COVENANTS
 
The Company hereby covenants and agrees, so long as any Acquired Note remains
outstanding, as follows:
 
7.1           Maintenance of Corporate Existence.  Other than the shutdown of
the Company’s U.S. Health Benefits Group Division as more fully described in the
Company’s Current Report on Form 8-K filed with the SEC on July 21, 2010, 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.
 

 
19

--------------------------------------------------------------------------------

 

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.  Following the filing of the
Amendment, 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
Acquired Notes.
 
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
 

 
20

--------------------------------------------------------------------------------

 

(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.  Other than as disclosed in the SEC
Documents, 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.
 
(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.
 

 
21

--------------------------------------------------------------------------------

 

7.13           Maintenance of Office.  The Company will maintain its principal
office at the address of the Company set forth in Section 10.6 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 under Acquired Notes.  The Company shall pay the interest
on, and repay at maturity all amounts outstanding under, the Acquired Notes, in
the time, the manner and the form as provided in the Acquired Notes and the
Transaction Documents.
 
7.15           SEC Reporting Requirements.  The Company shall use its best
efforts to become current with all Exchange Act reports set forth in Schedule
2.15 of this Agreement within a reasonable period of time following the date of
this Agreement, and in any event shall so become within 90 days following the
request of Purchaser. For so long as the Purchaser beneficially owns any of the
Securities, and until such time as all the Conversion 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 become current with all
Exchange Act reports set forth in Schedule 2.15 (which it shall so become within
the time prescribed by and otherwise in accordance with the terms of this
Agreement) and 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 even if the Company is not then 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, 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 or Conversion Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities or
Conversion Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 or any successor rule thereto.
 
7.16           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.
 

 
22

--------------------------------------------------------------------------------

 

ARTICLE VIII
NEGATIVE COVENANTS
 
The Company hereby covenants and agrees, so long as any Acquired Note remains
outstanding, it will not (and not allow any subsidiary to), without the prior
written consent of the Purchaser, directly or indirectly:
 
8.1           Distributions and Redemptions.  (i) Except with respect to its
shares of preferred stock outstanding, 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 its
capital stock or warrants or rights to acquire such capital stock, except as may
be required by the terms of its shares of preferred stock outstanding.
 
8.2           Reclassification.  Except as contemplated by the Schedule 14C,
effect any reclassification, combination or reverse stock split of any of its
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);
 

 
23

--------------------------------------------------------------------------------

 

(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;
 
(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 $100,000;
 
(c)            the endorsement of instruments for the purpose of deposit or
collection in the ordinary course of business;
 

 
24

--------------------------------------------------------------------------------

 

(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 $100,000; or
 
(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.
 
The foregoing Indebtedness described in subsections (a) – (g) above shall be
referred to as “Permitted Indebtedness”.
 
8.5           Senior Securities.  Issue any security that is senior to or ranks
pari passu with the Acquired Notes, whether with respect to right of payment of
principal, 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           Amendment of Charter Documents.  Except for the Amendment, 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.
 

 
25

--------------------------------------------------------------------------------

 

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, other than a registration statement on Form S-8, until the
earlier of: (i) 60 Trading Days following the date that a registration statement
or registration statements registering all Registrable Securities (as that term
is defined in the Registration Rights Agreement) is declared effective by the
Commission; and (ii) the date the Conversion 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 interest or
principal on any Acquired Note when the same shall become due and payable; and
in each case such default shall have continued without cure for five (5) days
after written notice (a “Default Notice”) is given to the Company of such
default;
 
(b)            the Company shall fail to (i) timely deliver the shares of Common
Stock upon conversion of an Acquired Note by the tenth (10th) 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) days after the incurrence thereof and, solely with respect to
item (iii) above, ten (10) days after the Purchaser delivers a Default Notice to
the Company of the incurrence thereof;
 
(c)           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 twenty
(20) consecutive Trading Days;
 

 
26

--------------------------------------------------------------------------------

 

(d)           the Company’s notice to the Purchaser, 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 an Acquired Note;
 
(e)           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 five (5) 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
 
(f)           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, other than as disclosed in the SEC
Documents, 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;
 
(g)           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;
 
(h)           other than as disclosed in the SEC Documents, 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 $100,000 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;
 
(i)           if a judgment shall be rendered against the Company, its
subsidiaries or any of their respective current or former directors or officers
in their capacities as such and such judgment, either alone or together with
other such judgments, exceeds an aggregate of $100,000;
 
(j)           if the Company, its subsidiaries or any of their respective
current or former directors or officers in their capacities as such settle any
claim or demand, and such settlement, either alone or together with other such
settlements, requires the Company or its subsidiaries to pay (whether by reason
of indemnification or otherwise) in the aggregate  $100,000 or more;
 
(k)           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) provide notice of or 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; or
 

 
27

--------------------------------------------------------------------------------

 

(l)           a proceeding or case shall be commenced in respect of the Company
or 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, 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.
 
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 Acquired Notes
held by the Purchaser at a price equal to one hundred twenty-five percent (125%)
of the principal amount outstanding under each such Acquired Note (or portion
thereof) plus all accrued and unpaid interest thereon at the time of such
request.
 
(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 principal or interest on any
Acquired Note, 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.
 

 
28

--------------------------------------------------------------------------------

 

(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
 
MISCELLANEOUS
 
10.1           Governing Law.  This Agreement and the rights of the parties
hereunder shall be governed in all respects by the laws of the State of New York
wherein the terms of this Agreement were negotiated, without regard to the
conflicts of laws thereof.
 
10.2           Survival.  Except as specifically provided herein, the
representations, warranties, covenants and agreements made herein shall survive
the Closing.
 
10.3           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.
 
10.4           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 or any of its successors, assigns, heirs,
executors and administrators.
 
10.5           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.
 
10.6           Notices, etc.  All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered
either personally 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, addressed as follows:
 
(a)           if to the Company:
485 North Keller Road
Suite 450
Maitland, FL 32751
Attn: Chief Executive Officer
 
With a copy to:
 
Darrin M. Ocasio, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway
32nd Floor
New York, NY 10006

 
29

--------------------------------------------------------------------------------

 

(b)           if to a Purchaser:
 
Vicis Capital Master Fund
445 Park Avenue
Suite 1901
New York, NY 10022
Attn: Shad Stastney
 
with a copy to:
 
Hoyt R. Stastney, Esq.
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
 
10.7           Delays or Omissions.  No delay or omission to exercise any right,
power or remedy accruing to any holder of any Acquired Notes 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.
 
10.8           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.
 
10.9           Expenses.  The Company 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 and 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.
 

 
30

--------------------------------------------------------------------------------

 

10.10           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 THE STATE AND
COUNTY OF NEW YORK 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 7.6 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.
 
10.11           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.
 
10.12           Further Assurances.  The parties agree to execute and deliver
all such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.
 
10.13           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
 

 
[SIGNATURE PAGE FOLLOWS]
 

 
31

--------------------------------------------------------------------------------

 

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

 

 
COMPANY:
 
THE AMACORE GROUP, INC.
 
/s/ Jay Shafer                           
Jay Shafer
Chief Executive Officer
 
 
PURCHASER:
 
VICIS CAPITAL MASTER FUND
By: Vicis Capital LLC
 
 
/s/ Keith W. Hughes
Keith W. Hughes
Chief Financial Officer
Vicis Capital, LLC

 
 

 
32

--------------------------------------------------------------------------------

 

EXHIBIT A

FORM OF 15% SENIOR SECURED
CONVERTIBLE NOTE
 
 
 

--------------------------------------------------------------------------------

 
EXHIBIT B

FORM OF FIRST AMENDMENT TO ESCROW AGREEMENT
 
 
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT C

FORM OF AMENDED AND RESTATED SECURITY AGREEMENT

--------------------------------------------------------------------------------

EXHIBIT D

FORM OF FIRST AMENDMENT TO STOCK PLEDGE AND ESCROW AGREEMENT

--------------------------------------------------------------------------------

EXHIBIT E

FORM OF AMENDED AND RESTATED GUARANTY

--------------------------------------------------------------------------------

EXHIBIT F

FORM OF AMENDED AND RESTATED GUARANTOR SECURITY AGREEMENT

--------------------------------------------------------------------------------

EXHIBIT G

FORM OF REGISTRATION RIGHTS AGREEMENT

--------------------------------------------------------------------------------

EXHIBIT H

FORM OF ANTI-DILUTION WAIVER

--------------------------------------------------------------------------------

EXHIBIT I

FORM OF AMENDED AND RESTATED NOTE
 
 
 
 

--------------------------------------------------------------------------------

 
SCHEDULES

 
 
33
 

--------------------------------------------------------------------------------

 
 
 

--------------------------------------------------------------------------------