optimizerx_s1-ex1002.htm


    EXHIBIT
10.2

    
    

     

    
      	

               

               

               

               

               

               

               

               

               

               

              SECURITIES
      PURCHASE AGREEMENT

               

              By
      and Between

               

              OPTIMIZERx
      CORPORATION

               

              and

               

              VICIS
      CAPITAL MASTER FUND

               

              


               

              


               

              


               

              DATED
      SEPTEMBER 5, 2008

               

               

               

               

               

               

               

               

               

               

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECURITIES
PURCHASE AGREEMENT

     

    This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated
this 5th day of September 2008, is made by and between OPTIMIZERx CORPORATION, a
Nevada corporation (the “Company”), and VICIS
CAPITAL MASTER FUND (the “Purchaser”), a
sub-trust of Vicis Capital Series Master Trust, a unit trust organized and
existing under the laws of the Cayman Islands.

     

    R E C I T A L
S

     

    WHEREAS,
pursuant to the terms and conditions of this Agreement, the Company wishes to
issue and sell to the Purchaser the following securities (collectively, the
“Securities”):
(a) 35 shares (the “Preferred Shares”) of
the Company’s Series A Convertible Preferred Stock, par value $.001 per share
(the “Series A
Preferred Stock”), with such terms, rights and preferences as are set
forth in the Certificate of Designation for the Series A Preferred Stock set
forth on Exhibit
A attached hereto; and (b) a Series A Warrant to purchase an
aggregate of 6,000,000 shares of common stock, par value $.001 per share (the
“Common
Stock”), of the Company initially at an exercise price of $2.00 per share
in the form attached hereto as Exhibit B (the “Series A Warrant” or
“Warrant”).

     

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

     

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

     

    ARTICLE
I

    PURCHASE
AND SALE OF THE SECURITIES

     

    1.1    Purchase and Sale of the
Securities.  Subject to the terms and conditions hereof and in
reliance on the representations and warranties contained herein, or made
pursuant hereto, the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company at the closing of the transactions
contemplated hereby (the “Closing”), the
Securities for $3,500,000 (the “Purchase Price”) in cash.

     

    1.2    Closing.  The
Closing shall be deemed to occur at the offices of Quarles & Brady, LLP, 411
East Wisconsin Avenue, Milwaukee, Wisconsin, at 5:00 p.m. CDT on September 5,
2008, or at such other place, date or time as mutually agreeable to the parties
(the “Closing
Date”).

     

    1.3    Closing Matters. On
the Closing Date, subject to the terms and conditions hereof, the following
actions shall be taken:

     

    (a)    The
Company, against delivery of payment of the Purchase Price in accordance with
Section 1.3(b), will deliver to the Purchaser the documents set forth in Section
5.4 hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b)    The
Purchaser shall deliver to the Company the Purchase Price, subject to the
holdback of fees pursuant to Section 12.9 hereof, in immediately available
funds by wire transfer of immediately available funds in accordance with the
instructions of the Company.

     

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

     

    1.5    Subsequent
Financings.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    ARTICLE
II

    COMPANY
SECURITY DOCUMENTS

     

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

     

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

     

    2.3    Guarantor Security
Documents.  All of the obligations of each Subsidiary under its
Guaranty Agreement shall be secured by a lien on all the personal property and
assets of such Subsidiary now existing or hereinafter acquired granted pursuant
to a 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”).

     

    ARTICLE
III

    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

     

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

     

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

     

    
      
        
        

      

      
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    3.2    Subsidiaries.  The
Company has no subsidiaries other than those disclosed on Schedule 2.2 attached
hereto (each a “Subsidiary”, and
collectively, the “Subsidiaries’).  The
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary, free and clear of any and all liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar
rights.  Each Subsidiary is a corporation duly organized and validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, and has all requisite corporate power and authority to carry on
its business as now conducted.  Each Subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing would not have a Material Adverse
Effect.

     

    3.3    Compliance.

     

    (a)    Except as
disclosed in Schedule
3.3(a) attached hereto, neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred that
has not been waived that, with notice or lapse of time or both, would result in
a default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, except such that, individually or in the aggregate, such default(s) and
violations(s) would not have or reasonably be expect to have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any of the provisions of its
certificate or articles of incorporation, bylaws or other organizational or
charter documents.

     

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

     

    
      
        
        

      

      
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    3.4    Capitalization.

     

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

     

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

     

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

     

    (ii)    there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of capital stock of the Company or any
Subsidiary or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any Subsidiary;

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    3.5    Issuance of
Securities.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    3.10    Registration and Approval of
Sale of
Securities.  Based in material part upon the representations
and warranties herein (and in the other Transaction Documents) of the Purchaser,
the Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the
Securities hereunder.  Assuming the accuracy of the representations
and warranties in Article VI hereof (and assuming no change in applicable law
and no unlawful distribution of the Securities by the Purchaser or other
Persons), no registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchaser as is contemplated
hereby. Neither the Company nor any Person acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the
Securities or similar securities to, or solicit offers with respect thereto
from, or enter into any negotiations relating thereto with, any Person, or has
taken or will take any action so as to either (a) bring the issuance and
sale

     

    
      
        
        

      

      
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    of any of
the Securities under the registration provisions of the Securities Act or
applicable state securities laws, or (b) trigger shareholder approval
provisions under the rules or regulations of any Trading
Market.  Neither the Company nor any of its affiliates that it
controls, nor any Person acting on its or their behalf, has: (x) engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
any of the Securities; or (y) directly or indirectly made any offers or sales of
any security or solicited any offers to buy any security under circumstances
that would cause the offering of the Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the Securities
Act in a manner that would prevent the Company from selling the Securities
pursuant to Regulation D and Rule 506 thereof under the Securities Act, nor will
the Company or any of its affiliates that it controls or Persons acting on its
or their behalf engage in any form of general solicitation or take any action or
steps that would cause the offering of the Securities to be integrated with
other offerings.

     

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

     

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

     

    
      
        
        

      

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

     

    
      
        
        

      

      
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    3.14    Securities Periodic
Reporting.  The Company is not required to file reports under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
including pursuant to Section 13(a) or 15(d) thereof, and has not been so
required since August 1, 2006.

     

    3.15    Absence of Certain Changes
or Developments.  Except as disclosed in Schedule 3.15 attached hereto or
as contemplated herein and in the Transaction Documents, since December 31,
2006:

     

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

     

    (b)    the
Company has not:

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    3.17    Off-Balance Sheet
Arrangements.  There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off-balance
sheet entity that is required to be disclosed by the Company in its Exchange Act
filings and is not so disclosed or that if made or not made would be reasonably
likely to have a Material Adverse Effect.

     

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

     

    3.19    Transactions With
Affiliates.  Except as disclosed in Schedule 3.19 attached hereto,
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or any Subsidiary (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    3.25    Tax
Matters.  The Company and each of its Subsidiaries
(a) have made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (b) have paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (c) have set aside on its books reasonably adequate provision for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply, except where such failure would not have
a Material Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

      
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    3.29    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 unaudited consolidated balance sheet of the
Company and its Subsidiaries as of June 30, 2008.  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.

     

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

     

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

     

    3.32    Manipulation of
Price.  The Company has not, and to its knowledge no one acting
on its behalf has, taken, directly or indirectly, any action designed to cause
or to result or that could reasonably be expected to cause or result, in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities.

     

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

     

    3.34    Application of Takeover
Protections.  The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchaser as a
result of the Purchaser and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company’s issuance of the Securities and the Purchaser’s
ownership of the Securities.

     

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

     

    
      
        
        

      

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

     

    ARTICLE
IV

    REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    4.4    Experience of Such
Purchaser.  The Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  The Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.

     

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

     

    ARTICLE
V

    CONDITIONS
TO CLOSING OF THE PURCHASER

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    5.4    Other Agreements and
Documents.  The Company shall have delivered the following
agreements and documents:

     

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

     

    (b)    The
Series A Warrant in the form of Exhibit B attached
hereto;

     

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

     

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

     

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

     

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

     

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

     

    (h)    Reserved;

     

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

     

    (j)    A
certificate of an officer of the Company, dated the 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 articles of incorporation and bylaws
of the Company, each as amended as of the Closing Date; (iv) the names of each
officer and director of the Company as of the Closing Date; and (v) such
other matters as the Purchaser shall reasonably request.

     

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

     

    5.6    Trading
Markets.  The listing or trading of the Conversion Shares and
Warrant Shares on each Trading Market shall have been approved by such Trading
Market authority.

     

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

     

    
      
        
        

      

      
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    ARTICLE
VI

    CONDITIONS
TO CLOSING OF THE COMPANY

     

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

     

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

     

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

     

    ARTICLE
VII

    AFFIRMATIVE
COVENANTS

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    (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.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    7.12   Accounts and Records;
Inspections.

     

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

     

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

     

    (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.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    7.17    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.

     

    
      
        
        

      

      
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    ARTICLE
VIII

    NEGATIVE
COVENANTS

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

    8.5    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.

     

    8.6    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).

     

    8.7    Amendment of Charter
Documents.  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.

     

    8.8    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.

     

    
      
        
        

      

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

     

    ARTICLE
IX

    EVENTS
OF DEFAULT

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    9.2    Remedies.

     

    (a)    Upon the
occurrence and continuance of an Event of Default, the Purchaser may at any time
(unless all defaults shall theretofore have been remedied) at its option, by
written notice or notices to the Company require the Company to immediately
redeem in cash all or a portion of the Preferred Shares held by the Purchaser at
a price per share equal to one hundred twenty-five percent (125%) of the Stated
Value of the Series A Preferred Stock plus all accrued and unpaid dividends
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 any dividend on or redemption of any
Preferred Share, the Company will pay to the Purchaser such further amount as
shall be sufficient to cover the cost and the expenses of collection, including,
without limitation, actual attorney’s fees, expenses and
disbursements.  No course of dealing and no delay on the part of a
Purchaser in exercising any rights shall operate as a waiver thereof or
otherwise prejudice such Purchaser’s rights.

     

    
      
        
        

      

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

     

    ARTICLE
X

    CERTIFICATE
LEGENDS

     

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

     

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

     

    Prior to
registration of the Conversion Shares and the Warrant Shares under the
Securities Act, all such certificates shall bear the restrictive legend
specified in this Section 10.1. Certificates evidencing the Conversion
Shares and Warrant Shares shall not contain any legend (including the legend set
forth in Section 10.1 hereof), (i) while a registration statement
(including the Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Conversion Shares or Warrant Shares pursuant to Rule 144, or (iii) if such
Conversion Shares or Warrant Shares are eligible for sale under Rule 144 by the
Purchaser without limitation as to volume or manner of sale, or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission).  The Company shall cause its counsel to issue a legal
opinion to the Company’s transfer agent promptly after the effective date of a
registration statement covering such Conversions Shares or Warrant Shares, if
required by the Company’s transfer agent, to effect the removal of the legend
hereunder.  If all or any portion of the Preferred Shares or a Warrant
is exercised at a

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    time when
there is an effective registration statement to cover the resale of the
Conversion Shares or the Warrant Shares, such Conversions Shares and Warrant
Shares, as the case may be, shall be issued free of all legends.  The
Company agrees that following the effective date of the registration statement
covering Conversion Shares or Warrant Shares or at such time as such legend is
no longer required under this Section 10.1, it will, no later than five (5)
Trading Days following the delivery by the Purchaser to the Company or the
Company’s transfer agent of a certificate representing Conversion Shares or
Warrant Shares, as the case may be, issued with a restrictive legend (such date,
the “Delivery
Date”), deliver or cause to be delivered to the Purchaser a certificate
representing such Securities that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section. Whenever a certificate representing the
Conversion Shares or Warrant Shares is required to be issued to the Purchaser
without a legend, in lieu of delivering physical certificates representing the
Conversion Shares or Warrant Shares, provided the Company’s transfer agent is
participating in the Depository Trust Company (“DTC”) Fast Automated
Securities Transfer program, the Company shall use its reasonable best efforts
to cause its transfer agent to electronically transmit the Conversion Shares or
Warrant Shares to the Purchaser by crediting the account of such Purchaser’s
Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system (to the
extent not inconsistent with any provisions of this Agreement).

     

    10.2    Liquidated
Damages.  The Company understands that a delay in the delivery
of unlegended certificates for the Conversion Shares or the Warrant Shares as
set forth in Section 5.1 hereof beyond the Delivery Date could result in
economic loss to the Purchaser.  If the Company fails to deliver to a
Purchaser such shares via DWAC or a certificate or certificates pursuant to this
Section hereunder by the Delivery Date, the Company shall pay to the
Purchaser, in cash, as partial liquidated damages and not as a penalty, for each
$500 of Conversion Shares or Warrant Shares (based on the closing price of the
Common Stock reported by the principal Trading Market on the date such
Securities are submitted to the Company’s transfer agent) subject to Section
10.1, $10 per Trading Day (increasing to $15 per Trading Day five (5) Trading
Days after such damages have begun to accrue and increasing to $20 per Trading
Day ten (10) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered.  Nothing herein shall limit the Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing
any Securities as required by the Transaction Documents, and the Purchaser shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. 

     

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

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    ARTICLE
XI

    INDEMNIFICATION

     

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

     

    11.2    Procedure.

     

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

     

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

     

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

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    ARTICLE
XII

    MISCELLANEOUS

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

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

     

    if to the
Company:

     

    OptimizeRx
Corporation

    407 Sixth
Street

    Rochester,
MI 48307

    Attention:
David Harrell

    Phone:
(248) 651-6558

    Fax:
(248) 651-6748

     

    with a
copy to:

     

    Darrin M.
Ocasio, Esq.  

    Sichenzia
Ross Friedman Ference LLP

    61
Broadway

    New York,
NY 10006

    Phone:
(212) 930-9700

    Fax:
(212) 930-9725

    


    if to the
Purchaser:

     

    Vicis
Capital Master Fund

    Tower 56,
Suite 700

    126 E.
56th Street, 7th Floor

    New York,
NY 10022

    Phone:  (212)
909-4600

    Fax:  (212)
909-4601

    Attn:
Shad Stastney

     

    with a
copy to:

     

    Andrew D.
Ketter, Esq.

    Quarles
& Brady LLP

    411 East
Wisconsin Avenue

    Milwaukee,
WI 53202

    Phone:  (414)
277-5629

    Fax:  (414)
978-8972

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

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

    


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

     

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

     

    12.9    Expenses.  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.  Without requiring any
documentation therefor, the Company will reimburse the Purchaser $105,000 for
all fees and expenses incurred by it with respect to the negotiation, execution
and consummation of the transactions contemplated by this Agreement and the
transactions contemplated hereby and due diligence conducted in connection
therewith, including the fees and disbursements of counsel and auditors for the
Purchaser.  Such reimbursement shall be paid on the Closing Date by
the Purchaser deducting such $105,000 from the Purchase Price. 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.

     

    12.10   Consent to Jurisdiction;
Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF FLORIDA FOR PURPOSES OF ALL
LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTION DOCUMENTS.  EACH OF THE PARTIES TO THIS AGREEMENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN ANY SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN ANY SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL
PROCEEDING.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY CONSENTS TO
SERVICE OF PROCESS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 12.6 AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION SUCH
PARTY MAY NOW OR HEREAFTER HAVE TO SERVICE OF PROCESS IN SUCH
MANNER.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

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

     

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

     

     

     

     

    [Signature Page
Follows]

    
 

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

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

     

     

     

    
      	 	

              COMPANY:

               

              OPTIMIZERx
      CORPORATION

               

               

              By:________________________________

              Name:  David
      Harrell

              Title:    Chief
      Executive Officer

              


               

              PURCHASER:

               

              VICIS
      CAPITAL MASTER FUND

              By:
      Vicis Capital LLC

              


              


              By:________________________________

              Name:
      Chris Phillips

              Title:   Managing
      Director

            


    

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

    


    FORM
OF CERTIFICATE OF DESIGNATION OF

    SERIES
A CONVERTIBLE PREFERRED STOCK

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
B

    


    FORM
OF SERIES A WARRANT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
C

     

    FORM
OF REGISTRATION RIGHTS AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
D

    


    FORM
OF SECURITY AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
E

    


    FORM
OF GUARANTY AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
F

    


    FORM
OF GUARANTOR SECURITY AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
G

    


    FORM
OF OPINION OF COUNSEL

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    OptimizeRx
Corporation

    Schedules

     

    
      	

              ·

            	

              Schedule 2.2 –
      Subsidiaries.

            


    

    
       

      
        	
                o  

              	
                OptimizeRx
      Corporation, a Michigan corporation (the “Subsidiary”), is a subsidiary of
      OptimizeRx Corporation, a Nevada corporation (the
    “Company”).

              


      

       

    

    
      	
              ·

            	
              Schedule 3.3(a) –
      None.

            


    

     

    
      	
              ·

            	
              Schedule 3.4(a) –
      Capitalization.

            


    

     

    
      	
              o  

            	
              Outstanding
      Warrants:

            


    

     

    
      	
              §  

            	
              Emergent
      Financial:  Warrants to purchase up to 100,000 shares of
      Common Stock exercisable until 5 years from the date of issuance October
      21, 2007 at a purchase price of $1.00 per
share.

            


    

     

    
      	
              §  

            	
              Investor Relations
      Group:  Warrants to purchase 100,000 shares of Common
      Stock exercisable until 5 years from the date of issuance October 2007 at
      a purchase price of $1.00 per
share.

            


    

     

    
      	
              §  

            	
              Jonathan
      Sakier:  Warrants to purchase 50,000 shares of Common
      Stock exercisable until 10 years from the date of issuance of June 10th,
      2008 at a purchase price of $1.00 per
share.

            


    

     

    
      	
              o  

            	
              Outstanding
      Options:

            


    

     

    
      	 
      	 
      	
              Average

            	 
      
	 
      	 
      	
              Exercise

            	 
      
	
              Name

            	
              Qty

            	
              Price
      $

            	
              Notes

            
	
              Options
      Outstanding under Company Stock Option Plan

            	 
      	 
      	 
      
	
              David
      Harrell

            	
              100,000

            	
              $1.00

            	
              President
      and CEO

            
	
              Terry
      Hamilton

            	
              150,000

            	
              $1.00

            	
              Sr.
      Vice President/Director

            
	
              Vernon
      Hartman

            	
              50,000

            	
              $1.00

            	
              Vice
      President

            
	
              Andrew
      Dahl

            	
              20,000

            	
              $1.00

            	
              Business
      Advisor

            
	
              Jay
      Pinney, MD

            	
              25,000

            	
              $1.00

            	
              Medical
      Advisor

            
	
              Thomas
      Majerowicz

            	
              20,000

            	
              $1.00

            	
              Director
      and Legal Advisor

            
	 
      	 
      	 
      	 
      
	
              Total
      Issued

            	
              365,000

            	
              $1.00

            	 
      
	 
      	 
      	 
      	 
      
	
              Total
      Remaining Stock Options for future use:

            	
              625,000

            	 
      	 
      
	
              Total
      Remaining Stock Grants:

            	
              500,000

            	 
      	 
      
	 
      	 
      	 
      	 
      
	
              Total
      Stock Options and Stock Grants

            	
              1,490,000

            	 
      	 
      


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              ·

            	
              Schedule
      3.4(b)

            


    

     

    
      	
              o  

            	
              Schedule
      3.4(b)(iii) - The Company has personal loans from private investors to
      Richard Kraniak and Jillene Pinella, each consisting of $160,000, which
      represent the only debt of company.

            


    

     

    
      	
              ·

            	
              Schedule 3.11 –
      Placement Agent Fees

            


    

     

    In
consideration for the performance of the Services of Midtown Partners LLC
hereunder, the Company hereby agrees to pay to the Placement Agent such fees
(“The “Placement Agent Fee” or the “Financing Fee”) as outlined
below:

     

    (a) The
Company shall pay to the Placement Agent a non-refundable due
diligence/background check fee of two thousand dollars (US$2,000).

     

    (b) If
either the Company or the Placement Agent receives subscriptions for financing
(the “Financing”) as a part of the Offering (the “Investors”), the Company
shall:

     

    1) Pay to
the Placement Agent in US dollars via wire from the third party agent’s escrow
at closing an amount equal to ten percent (10%) of the principal amount of the
Financing purchased by the Investors (the “Financing Fee”), and pay to the
Placement Agent a warrant solicitation fee equal to ten percent (10%) of the
gross proceeds received by the Company on the exercise of any Warrants purchased
by the Investors, which shall be payable immediately following such
exercise.

     

    2) The
Company shall issue to the Placement Agent or its permitted assigns warrants
(the “PA Warrants”) to purchase such number of shares of the common stock of the
Company equal to ten percent (10%) of the aggregate number of (x) shares of
common stock of the Company issued at each such Closing and (y) issuable by the
Company under the terms of any convertible securities issued in connection with
the Financings, which shall include the issuance to the Placement Agent of all
Series of Warrants equal to ten percent (10%) of the number of Warrants issued
to the  Investors.

     

    3) An
escrow with a third party agent approved by the parties hereto will be used for
each closing to which the Placement Agent shall be a party.  All
consideration due the Placement Agent shall be paid to the Placement Agent
directly there from.  Any fee charged by the escrow agent in the
performance of its duties as escrow agent shall be borne by the
Company.

     

    4) Cause
its affiliates to pay to the Placement Agent all compensation with respect to
all securities sold to a purchaser or purchasers at any time prior to the
expiration of thirty-six (36) months after the expiration of the Placement Agent
Agreement (the “Tail Period”) if (i) such purchaser or purchasers were
identified to the Company by the Placement Agent during the Term authorized,
(ii) the Placement Agent advised the Company with respect to such purchaser or
purchasers during the Term authorized or (iii) the Company or the Placement
Agent had discussions with such purchaser or purchasers during the Term
authorized.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5) the
Company agrees to pay for entertainment expenses, travel, etc. The Company also
agrees to pay for the legal and due diligence fees of the investor(s) as
outlined in a final term sheet to be set forth at a later date to be approved by
the Company.

     

    
      	
              ·  

            	
              Schedule 3.12 –
      Litigation

            


    

     

    None.

     

    
      	
              ·  

            	
              Schedule 3.13 –
      Outstanding Indebtedness

            


    

     

    The
Company has personal loans from private investors to Richard Kraniak and Jillene
Pinella, each consisting of $160,000, which represent the only debt of
company.

     

    
      	
              ·  

            	
              Schedule 3.15(b)(iv) –
      Payments or Distributions:

            
	 	 
	 	The
      Company has made a one-time founder payout to limit dilution and fund
      raise.  This has been completely satisified.
	 	 
	      
              ·  

            	      
              Schedule 3.19 –
      Transactions With Affiliates

            
	 	 
	 	None.
	 	 
	      
              ·  

            	      
              Schedule 3.20 –
      Insurance

            
	 	 
	 	None.
	 	 
	      
              ·  

            	      
              Schedule 3.22
      –  Title

            
	 	 
	 	None.
	 	 
	      
              ·  

            	      
              Schedule
      10.1

            
	 	 
	 	The
      Company is not participating in the Depository Trust Company (“DTC”) Fast
      Automated Securities Transfer program.