Exhibit 10.1

 

PURCHASE AGREEMENT

 

This Purchase Agreement (this “Agreement”) is dated as of August 30, 2004, among
ProsoftTraining, a Nevada corporation (the “Company”), and the investors
identified on the signature pages hereto (each an “Investor” and, collectively,
the “Investors”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to borrow certain sums from each of the Investors and, in
consideration thereof issue certain convertible notes and warrants to each of
the Investors, and each Investor, severally and not jointly, desires to make a
loan to the Company and accept such notes and warrants from the Company, all
pursuant to the terms set forth herein.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:

 

“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 144.

 

“Benefit Arrangement” means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan and
which is maintained or otherwise contributed by the Company.

 

“Benefit Plan” has the meaning set forth in Section 3.1(bb)(ii).

 

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

 

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Article II.

 

“Closing Date” means the date of this Agreement or such later date as the
parties agree.

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“Code” means the Internal Revenue Code of 1986, as amended.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $.001 per share,
and any securities into which such common stock may hereafter be reclassified.

 

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

 

“Company Counsel” means Hewitt & O’Neil, LLP.

 

“Company Deliverables” has the meaning set forth in Section 2.2(a).

 

“Contingent Liability” means, as to any Person, any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Debt or obligation of any other Person in any manner, whether
directly or indirectly, including without limitation any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt, (b)
to purchase property or services for the purpose of assuring the owner of such
Debt of its payment, or (c) to maintain the solvency, working capital, equity,
cash flow, fixed charge or other coverage ratio, or any other financial
condition of the primary obligor so as to enable the primary obligor to pay any
Debt or to comply with any agreement relating to any Debt or obligation.

 

“Debt” of any Person means at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes, or other similar instruments issued by such Person,
(iii) all obligations of such Person as lessee which (y) are capitalized in
accordance with GAAP or (z) arise pursuant to sale-leaseback transactions, (iv)
all reimbursement obligations of such Person in respect of letters of credit or
other similar instruments, (v) all Debt of others secured by a Lien on any asset
of such Person, whether or not such Debt is otherwise an obligation of such
Person and (vi) all Debt of others guaranteed by such Person.

 

“Disclosure Materials” has the meaning set forth in Section 3.1(h).

 

“Effective Date” means the date that the Registration Statement required by
Section 2(a) of the Registration Rights Agreement is first declared effective by
the Commission.

 

“Equity Interest” means (i) shares of corporate stock, partnership interests,
membership interests and any other interest that confers on a Person the right
to receive a share of the profits and losses of, or a distribution of the assets
of, the issuing Person and (ii) all warrants, options or other rights to acquire
any Equity Interest set forth in clause (i) of this defined term.

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
or any successor statute.

 

“ERISA Group” means the Company and each Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.

 

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

 

“GAAP” means U.S. generally accepted accounting principles.

 

“Hunt Group” shall have the meaning set forth in Section 4.3(b).

 

“Intellectual Property Rights” has the meaning set forth in Section 3.1(p).

 

“Intercreditor Agreement” has the meaning set forth in Section 2.2(a).

 

“Investment Amount” means, with respect to each Investor, the investment amount
indicated below such Investor’s signature page to this Agreement.

 

“Investor Deliverables” has the meaning set forth in Section 2.2(b).

 

“Investor Party” has the meaning set forth in Section 4.11.

 

“Lien” means any lien, charge, encumbrance, security interest, right of first
refusal or other restrictions of any kind.

 

“Losses” has the meaning set forth in Section 4.11.

 

“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company’s
ability to perform on a timely basis its obligations under any Transaction
Document.

 

“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.

 

“Notes” means the convertible promissory notes issuable by the Company to the
Investors pursuant to terms hereof, in the Form of Exhibit A, due on the two
year anniversary of the Closing Date which, among other things, give the Holders
thereof the right to acquire shares of Common Stock on the terms thereof.

 

“Oasis” has the meaning set forth in Section 7.1.

 

“Permitted Indebtedness” has the meaning set forth in Section 6.3.

 

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“Permitted Liens” means: (a) liens for taxes, assessments or governmental
charges not delinquent or being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with GAAP are
maintained on the books of the Company or the applicable Subsidiary; (b) liens
arising out of deposits in connection with workers’ compensation, unemployment
insurance, old age pensions or other social security or retirement benefits
legislation; (c) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds, and other obligations of like nature arising in the ordinary
course of business of the Company or a Subsidiary; (d) liens imposed by law,
such as mechanics’, workers’, materialmens’, carriers’ or other like liens
arising in the ordinary course of business of the Company or a Subsidiary which
secure the payment of obligations which are not past due or which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are maintained on the books of the
Company or the applicable Subsidiary; (e) liens existing on the Closing Date,
and described on Schedule 3.1(o); (f) purchase money security interests or liens
for the purchase of fixed assets to be used in the business of the Company or a
Subsidiary, securing solely the fixed assets so purchased and the proceeds
thereof; (g) capitalized leases which do not violate any provision of this
Agreement; (h) liens of commercial depository institutions, arising in the
ordinary course of business, constituting a statutory or common law right of
setoff against amounts on deposit with such institution; and (i) rights of way,
zoning restrictions, easements and similar encumbrances affecting the Company’s
real property which do not materially interfere with the use of such property.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“PBGC” means the Pension Benefit Guarantee Corporation or any entity succeeding
to any or all of its functions under ERISA.

 

“Plan” means at any time an employee pension plan benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under the Code
and either (i) is maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii) has at any time
within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

 

“Purchase Money Financing” has the meaning set forth in Section 6.3.

 

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Investors of the Underlying Shares and the Warrant Shares.

 

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“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the date of this Agreement, among the Company and the Investors, in the
form of Exhibit B hereto.

 

“Required Investors” means one or more Investors representing greater than 50%
of the aggregate principal amount of all Notes then outstanding.

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares
of Common Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents that the Company is obligated to issue, whether
contingently or otherwise, including, without limitation, any Underlying Shares
issuable upon conversion in full of all Notes or Warrant Shares issuable upon
exercise in full of all Warrants.

 

“Restricted Payment” means, with respect to any Person, (a) any direct or
indirect distribution, dividend or other payment on account of any equity
interest in, or shares of capital stock or other securities of, such Person and
(b) any management, consulting or other similar fees, or any interest thereon,
payable by such Person to any affiliate of such Person (other than the Company),
or to any other Person other than an unrelated third party; provided, however,
that Restricted Payments shall not include any arms length consulting agreements
with consultants of the Company which are approved by the Board of Directors of
the Company.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“SEC Reports” has the meaning set forth in Section 3.1(h).

 

“Securities” means the Notes, the Underlying Shares issuable under the Notes,
the Warrants and the Warrant Shares.

 

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

 

“Security Agreement” has the meaning set forth in Section 2.2(a).

 

“Short Sales” means “short sales” as defined in Rule 3b-3 of the Exchange Act or
any successor thereto promulgated by the Commission, and includes forward sale
contracts, options, puts, calls, short sales, swaps and similar arrangements
(including on a total return basis), and sales and other transactions through
non-US broker dealers or foreign regulated brokers.

 

“Strategic Transaction” means a transaction or relationship in which the Company
issues shares of Common Stock or other securities of the Company to a Person
which is, itself or through its Subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities.

 

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“Subsequent Placement” has the meaning set forth in the Section 4.3.

 

“Subsequent Placement Notice” has the meaning set forth in the Section 4.3.

 

“Subsidiary” means any subsidiary of the Company included in the SEC Reports.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading
Market, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

 

“Transaction Documents” means this Agreement, the Notes, the Registration Rights
Agreement, the Warrants, the Security Agreement, the Intercreditor Agreement and
any other documents or agreements executed in connection with the transactions
contemplated hereunder.

 

“2001 Notes Transaction” means the Subordinated Secured Convertible Notes of the
Company issued on or about October 16, 2001 to or held by members of the Hunt
Group, and the agreements and transactions entered into in connection therewith,
as previously or hereafter modified, amended or supplemented.

 

“Underlying Shares” means the shares of Common Stock issuable upon conversion of
the Notes.

 

“Warrants” means, collectively, the Series A and Series B Common Stock purchase
warrants in the form of Exhibit C and Exhibit D, respectively, which are
issuable to the Investors at the Closing.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at
the Closing the Company shall issue and sell to each Investor, and each Investor
shall, severally and not jointly, purchase from the Company, the Notes and the
Warrants representing such Investor’s

 

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Investment Amount. The Closing shall take place simultaneously with the signing
of this Agreement at the offices of Bryan Cave LLP, counsel for Oasis, 1290
Avenue of the Americas, New York, NY 10104 or at such other location or time as
the parties may agree.

 

2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause
to be delivered to each Investor the following (the “Company Deliverables”):

 

(i) Notes in the aggregate principal amount of the Investment Amount indicated
below such Investor’s name on its signature page of this Agreement, issued in
the name of such Investor;

 

(ii) a Series A Warrant, registered in the name of such Investor, pursuant to
which such Investor shall have the right to acquire the number of shares of
Common Stock equal to 25% of the Underlying Shares issuable upon an assumed
conversion of the Notes issuable to such Investor in accordance with Section
2.2(a)(i);

 

(iii) a Series B Warrant, registered in the name of such Investor, pursuant to
which such Investor shall have the right to acquire the number of shares of
Common Stock equal to 80% of the Underlying Shares issuable upon an assumed
conversion of the Notes issuable to such Investor in accordance with Section
2.2(a)(i);

 

(iv) the legal opinion of Company Counsel, in agreed form, addressed to the
Investors;

 

(v) the Registration Rights Agreement, duly executed by the Company;

 

(vi) a security agreement, duly executed by the Company, in the form attached
hereto as Exhibit E (as amended, supplemented or otherwise modified from time to
time, the “Security Agreement”);

 

(vii) an intercreditor agreement, duly executed by the Company, the Hunt Group
and each Investor in the form attached hereto as Exhibit F (as amended,
supplemented or otherwise modified from time to time (the “Intercreditor
Agreement”);

 

(viii) appropriate lien and record search reports showing that there are no
liens on the collateral security granted under the Security Agreement, other
than Liens expressly permitted thereby;

 

(ix) evidence that the Hunt Group shall have irrevocably waived, in a writing
reasonably acceptable to the Investors, any rights under any agreements or
understandings with or binding upon the Company (including as may be contained
within the 2001 Notes Transaction) (i) to participate in or otherwise provide
the financing to the Company that is contemplated by the Transaction Documents
or (ii) to declare an Event of Default or acceleration under any debt obligation
owed to it by the Company, including by virtue of the 2001 Notes Transaction, as
a result of the entering into and consummation of the transactions contemplated
by the Transaction Documents; and

 

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(x) any other documents reasonably requested by such Investor.

 

(b) At the Closing, each Investor shall deliver or cause to be delivered to the
Company the following (the “Investor Deliverables”):

 

(i) its Investment Amount indicated below such Investor’s name on the signature
page of this Agreement, in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing by the Company for
such purpose;

 

(ii) the Registration Rights Agreement, duly executed by such Investor;

 

(iii) the Security Agreement, duly executed by such Investor; and

 

(iv) the Intercreditor Agreement, duly executed by such Investor.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to each Investor:

 

(a) Subsidiaries. Except as disclosed in Schedule 3.1(a)(i), the Company has no
direct or indirect Subsidiaries other than as specified in the SEC Reports.
Except as disclosed in Schedule 3.1(a)(ii), the Company owns, directly or
indirectly, all of the capital stock of each Subsidiary free and clear of any
and all Liens (other than Permitted 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.

 

(b) Organization and Qualification. The Company and, except as disclosed in
Schedule 3.1(b), each Subsidiary are duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. The Company
and each Subsidiary are duly qualified to conduct its respective businesses and
are in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.

 

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection

 

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therewith. Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

 

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect. Payments
of cash on account of principal of or interest under the Notes, upon any Event
of Default under the Notes, as a result of liquidated damages under any
Transaction Document or upon a Buy-In under and as such term is defined in a
Warrant will not require the consent of, any payment to, or the springing of any
Lien in favor of any lender to or creditor of the Company or any Subsidiary
(under a credit facility, loan agreement or otherwise) and will not result in a
default under any such credit facilities, loans or other agreements. The
proceeds from the issuance and sale of the Securities will not count towards,
and the transactions contemplated hereby do not constitute, a “Material Equity
Financing” (as such term is used in the 2001 Notes Transaction).

 

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filing with the Commission of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement, (ii)
filings required by state securities laws, (iii) the filing of a Notice of Sale
of Securities on Form D with the Commission under Regulation D of the Securities
Act (iv) the filings required in accordance with Sections 2.2(a)(x), 4.6 and
4.9, and (iv) those that have been made or obtained prior to the date of this
Agreement.

 

(f) Issuance of the Securities. The Securities have been duly authorized and,
when issued and paid for in accordance with the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. The Company has

 

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reserved from its duly authorized capital stock a number of shares of Common
Stock issuable upon conversion of the Notes and upon exercise of the Warrants,
which number of reserved shares is not less than the Required Minimum calculated
as of the date hereof.

 

(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company, and all shares of Common Stock
reserved for issuance under the Company’s various option and incentive plans, is
specified in the SEC Reports. Except as specified in the SEC Reports, no
securities of the Company are entitled to preemptive or similar rights, and no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as specified in the SEC Reports and Schedule
3.1(g), there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as disclosed in Schedule 3.1(g), the issue and sale of the Securities
will not, immediately or with the passage of time, obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such securities.

 

(h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the “SEC Reports” and, together with the Schedules to this
Agreement (if any), the “Disclosure Materials”) on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(i) Press Releases. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading.

 

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(j) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The Company
does not have pending before the Commission any request for confidential
treatment of information.

 

(k) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) except as specifically disclosed in the SEC Reports, would,
if there were an unfavorable decision, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof (in his or her
capacity as such), is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as specifically disclosed in periodic reports
filed by the Company under the Exchange Act. There has not been, and to the
knowledge of the Company, there is not pending any investigation by the
Commission involving the Company or any current or former director or officer of
the Company (in his or her capacity as such). The Commission has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

 

(l) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.

 

(m) Compliance. Except as set forth in Schedule 3.1(m), 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 (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or reasonably be expected to result in a Material

 

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Adverse Effect. The Company is in compliance with all effective requirements of
the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations
thereunder, that are applicable to it, except where such noncompliance could not
have or reasonably be expected to result in a Material Adverse Effect.

 

(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.

 

(o) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to their
respective businesses and good and valid title in all personal property owned by
them that is material to their respective businesses, in each case free and
clear of all Liens, except for Permitted Liens and Liens that do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance, except as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.

 

(p) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). 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. Except as set forth in the
SEC Reports, 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.

 

(q) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. The Company has no reason to believe that it will
not be able to renew its and the Subsidiaries’ existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business on terms consistent with
market for the Company’s and such Subsidiaries’ respective lines of business.

 

(r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports or on Schedule 3.1(r), none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company is
presently a party to any

 

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transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

 

(s) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset 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 action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) 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 Form 10-K or 10-Q, as the
case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures in accordance with
Item 307 of Regulation S-K under the Exchange Act for the Company’s most
recently ended fiscal quarter or fiscal year-end (such date, the “Evaluation
Date”). The Company presented in its most recently filed Form 10-K or Form 10-Q
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 changes in the
Company’s internal controls that would be required to be disclosed pursuant to
Item 308(c) of Regulation S-K under the Exchange Act or, to the Company’s
knowledge, in other factors that could reasonably be expected to have a Material
Adverse Effect on the Company’s internal controls.

 

(t) Solvency. Based on the financial condition of the Company as of the Closing
Date (and assuming that the Closing shall have occurred), (i) the Company’s fair
saleable value of its assets exceeds the amount that will be required to be paid
on or in respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the Company’s
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company has no current intention
to incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its
debt).

 

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(u) Certain Fees. Except as specified in Schedule 3.1(u), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Investors shall have no obligation with respect to any fees
or with respect to any claims (other than such fees or commissions owed by a
Investor pursuant to written agreements executed by such Investor which fees or
commissions shall be the sole responsibility of such Investor) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.

 

(v) Certain Registration Matters. Assuming the accuracy of the Investors’
representations and warranties set forth in Section 3.2(b)-(e), no registration
under the Securities Act is required for the offer and sale of the Notes and
Warrants by the Company to the Investors under the Transaction Documents. The
Company is eligible to register the resale of its Common Stock for resale by the
Investors under Form S-3 promulgated under the Securities Act. Except as
specified in Schedule 3.1(v), the Company has not granted or agreed to grant to
any Person any rights (including “piggy-back” registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.

 

(w) Listing and Maintenance Requirements. Except as specified in the SEC
Reports, the Company has not, in the two years preceding the date hereof,
received notice from any Trading Market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof. Except for
matters disclosed in the SEC Reports and as a result of minimum stock price
requirements, the Company is, and has no reason to believe that it will not in
the foreseeable future continue to be, in compliance with the listing and
maintenance requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or quoted. The
issuance and sale of the Securities under the Transaction Documents does not
contravene the rules and regulations of the Trading Market on which the Common
Stock is currently listed or quoted, and no approval of the shareholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Securities contemplated by the Transaction Documents.

 

(x) Investment Company. The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

(y) Application of Takeover Protections. The Company has 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 Investors as a
result of the Investors 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 Investors’ ownership
of the Securities.

 

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(z) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.

 

(aa) Disclosure. The Company confirms that neither it nor any Person acting on
its behalf has provided any Investor or its respective agents or counsel with
any information that the Company believes constitutes material, non-public
information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company’s representations and warranties set forth in this
Agreement) are true and correct in all material respects 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.

 

(bb) Compliance with ERISA. (i) Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each Plan.
No member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any required contribution or payment to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.

 

(ii) The benefit plans not covered under clause (a) above (including profit
sharing, deferred compensation, stock option, employee stock purchase, bonus,
retirement, health or insurance plans, collectively the “Benefit Plans”)
relating to the employees of the Company are duly registered where required by,
and are in good standing in all material respects under, all applicable laws.
All required employer and employee contributions and premiums under the Benefit
Plans to the date hereof have been made, the respective fund or funds
established under the Benefit Plans are funded in accordance with applicable
laws, and no past service funding liabilities exist thereunder.

 

(iii) No Benefit Plans have any unfunded liabilities, either on a “going
concern” or “winding up” basis and determined in accordance with all applicable
laws and actuarial practices and using actuarial assumptions and methods that
are reasonable in the circumstances. No event has occurred and no condition
exists with respect to any Benefit Plans that has resulted or could reasonably
be expected to result in any pension plan having its registration revoked or
wound up (in whole or in part) or refused for the purposes of any applicable
laws or being placed under the administration of any relevant pension benefits
regulatory authority or being required to pay any taxes or penalties (in any
material amounts) under any applicable laws.

 

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(cc) Taxes. All United States federal, state, county, municipality local or
foreign income tax returns and all other material tax returns (including foreign
tax returns) which are required to be filed by or on behalf of the Company and
each Subsidiary, have been filed and all material taxes due pursuant to such
returns or pursuant to any assessment received by the Company and each
Subsidiary have been paid except those being disputed in good faith and for
which adequate reserves have been established. The charges, accruals and
reserves on the books of the Company and each Subsidiary in respect of taxes or
other governmental charges have been established in accordance with GAAP.

 

(dd) Secured Indebtedness. As of the Closing Date, other than as set forth in
Schedule 3.1(dd), the Company has no Debt that is secured by any Lien.

 

3.2 Representations and Warranties of the Investors. Each Investor hereby, for
itself and for no other Investor, represents and warrants to the Company as
follows:

 

(a) Organization; Authority. Such Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each Transaction Document to which such Investor is a party has been duly
executed by such Investor, and when delivered by such Investor in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

 

(b) Investment Intent. Such Investor is acquiring the Securities as principal
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor’s right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor is
acquiring the Securities hereunder in the ordinary course of its business. Such
Investor does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

 

(c) Investor Status. At the time such Investor was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises
Warrants it will be, an “accredited investor” as defined in Rule 501(a) under
the Securities Act. Such Investor is not a registered broker-dealer under
Section 15 of the Exchange Act. Each Investor represents that it has been
organized under the laws of the state or country set forth opposite its name on
its signature page.

 

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

 

(e) Access to Information. Such Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor’s right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company’s representations and warranties
contained in the Transaction Documents.

 

(f) Limited Ownership. The purchase by such Investor of the Securities issuable
to it at the Closing (including the Underlying Shares and Warrant Shares that
would be issuable upon the conversion and exercise of such Securities) will not
result in such Investor (individually or together with other Persons with whom
such Investor has identified, or will have identified, itself as part of a
“group” in a public filing made with the Commission involving the Company’s
securities) acquiring, or obtaining the right to acquire, in excess of 19.999%
of the Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred. Such Investor does not
presently intend to, alone or together with others, make a public filing with
the Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
Closing (when added to any other securities of the Company that it or they then
own or have the right to acquire), in excess of 19.999% of the Common Stock or
voting power of the Company on a post transaction basis that assumes that the
Closing shall have occurred.

 

(g) Certain Trading Activities. Such Investor has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Investor, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the earlier to occur of (1) the time that such Investor was
first contacted by the Company or any placement agent engaged by the Company
regarding an investment in the Company and (2) the 20th day prior to the date of
this Agreement. Such Investor covenants that neither it nor any Person acting on
its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed. Notwithstanding the foregoing, in the case of an Investor that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Investor’s assets and the portfolio managers have no
actual knowledge of the investment decisions made by the portfolio managers
managing other portions of such Investor’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement.

 

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The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 (a) The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b) (but such exclusion does not include the subsequent transfer
following default by the Investor transferee of such pledge), the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.

 

(b) Certificates evidencing the Securities will contain the following legend,
until such time as they are not required under Section 4.1(c):

 

[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OR
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT
BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. [THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE OF THESE
SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms

 

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of such agreement or account, such Investor may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval or consent of the Company and no legal opinion of
legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in connection
with a subsequent transfer following default by the Investor transferee of the
pledge. No notice shall be required of such pledge. At the appropriate
Investor’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request
in connection with a pledge or transfer of the Securities including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders thereunder.

 

(c) Certificates evidencing Underlying Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)): (i) while
a registration statement (including the Registration Statement) covering such
Underlying Shares or Warrant Shares is then effective; as long as the Holder
checks the certification box in the Conversion Notice or Exercise Notice, as the
case may be, and if such certification is not so provided, upon the resale of
such Underlying Shares or Warrant Shares, as the case may be, pursuant to a
Registration Statement, or (ii) following a sale or transfer of such Securities
pursuant to Rule 144 (assuming the transferor is not an Affiliate of the
Company), or (iii) while such Securities are eligible for sale under Rule
144(k). 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 4.1. The Company agrees that it shall,
within three Trading Days following a request by a Investor given at such time
as restrictive legends would not then be required under this Section 4.1(c),
issue and deliver to such Investor certificates that are free of restrictive
legends representing Underlying Shares or Warrant Shares in replacement of
Underlying Shares or Warrant Shares previously issued with restrictive legends.

 

4.2 Furnishing of Information. As long as any Investor owns the Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Investors and make
publicly available in accordance with Rule 144(c) such information as is
required for the Investors to sell the Underlying Shares and Warrant Shares
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell the Underlying Shares
and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

 

4.3 Subsequent Securities Offerings.

 

(a) Prior to the first year anniversary of the Closing Date, in the event the
Company, directly or indirectly, offers, sells, grants any option to purchase,
or otherwise disposes of (or announces any offer, sale, grant or any option to
purchase or other disposition of) any of Common Stock or Common Stock
Equivalents or any of its Subsidiaries’ equity or Common Stock Equivalents (such
offer, sale, grant, disposition or announcement being referred

 

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to as “Subsequent Placement”), the Company shall deliver to each Investor a
written notice (each, a “Subsequent Placement Notice”) of its intention to
effect such Subsequent Placement, which specifies in reasonable detail all of
the material terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the names of the investors (including the investment
manager of such investors, if any) and the investment bankers with whom such
Subsequent Placement is proposed to be effected, and attached to which shall be
a term sheet or similar document. Each Investor shall have until 6:30 p.m. (New
York City time) on the fifth Trading Day after its respective receipt of the
Subsequent Placement Notice to notify Company of its intention to provide,
subject to completion of mutually acceptable documentation, all or a portion of
such financing on the same terms as set forth in the Subsequent Placement
Notice; provided, that the Investors’ right to provide such financing will be
subject to pro rata apportionment (as set forth in Section 4.3(b)) with the
similar rights of the Hunt Group for so long as the Hunt Group has such rights
under the 2001 Notes Transaction. In the event that the Investors do not timely
elect to provide the entire financing subject to the Subsequent Placement Notice
and the Company shall not have consummated the portion of the Subsequent
Placement for which such elections shall not have been so made on the terms and
to the Persons specified in the Subsequent Placement Notice within 45 days
following the expiration of the time to so elect, the Company shall provide each
Investor with a second Subsequent Placement Notice and each Investor will again
have the right of first refusal set forth in this Section. If the Investors
indicate in the aggregate a willingness to provide financing in excess of the
amount set forth in the Subsequent Placement Notice, then each Investor will be
entitled to provide financing pursuant to such Subsequent Placement Notice up to
an amount of all such proceeds equal to such Investor’s pro rata portion of all
Investment Amounts hereunder.

 

(b) The Company’s obligations under this Section 4.3 shall not apply to any
grant or issuance by the Company of any of the following: (i) the issuance of
securities upon the exercise or conversion of any Common Stock Equivalents
issued by the Company prior to the date of this Agreement (but will apply to any
amendments, modifications and reissuances thereof), (ii) the grant of options or
warrants, or the issuance of additional securities, under any duly authorized
Company stock option, restricted stock plan or stock purchase plan whether now
existing or approved by the Board of Directors of the Company in the future, or
(iii) the issuance of Common Stock Equivalents pursuant to a Strategic
Transaction. The Investors acknowledge that Hunt Capital Growth Fund II L.P. and
its affiliates (the “Hunt Group”) have certain existing rights of participation
or refusal with respect to Subsequent Placements by virtue of the 2001 Notes
Transaction and the rights of Investors pursuant to this Section 4.3 shall be
apportioned with the Hunt Group on a pro rata basis, with reference to the
respective then outstanding principal and interest amounts under the Notes and
the promissory notes issued under the 2001 Notes Transaction, for so long as the
Hunt Group has such rights under the 2001 Notes Transaction.

 

4.4 Acknowledgment of Dilution. The Company acknowledges that the issuance of
Underlying Shares upon conversion of Notes and Warrant Shares upon exercise of
Warrants will result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial. The Company further acknowledges that its
obligation to honor conversions under the Notes is unconditional and absolute
and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim that the Company may
have against any Investor.

 

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4.5 Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investors, or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the securities to the Investors.

 

4.6 Reservation of Shares. The Company shall maintain a reserve from its duly
authorized shares of Common Stock to comply with its conversion obligations
under the Notes. If on any date the Company would be, if notice of conversion
were to be delivered on such date, precluded from issuing the number of (i)
Underlying Shares, as the case may be, issuable upon conversion in full of the
Notes or (ii) Warrant Shares, as the case may be, issuable upon exercise in full
of the Warrants, due to the unavailability of a sufficient number of authorized
but unissued or reserved shares of Common Stock, then the Board of Directors of
the Company shall promptly prepare and mail to the stockholders of the Company
proxy materials or other applicable materials requesting authorization to amend
the Company’s certificate of incorporation or other organizational document to
increase the number of shares of Common Stock which the Company is authorized to
issue so as to provide enough shares for issuance of the Underlying Shares and
Warrant Shares. In connection therewith, the Board of Directors shall (a) adopt
proper resolutions authorizing such increase, (b) recommend to and otherwise use
its best efforts to promptly and duly obtain stockholder approval to carry out
such resolutions (and hold a special meeting of the stockholders as soon as
practicable, but in any event not later than the 60th day after delivery of the
proxy or other applicable materials relating to such meeting) and (c) within
five Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company’s certificate of incorporation or other
organizational document to evidence such increase.

 

4.7 Conversion Procedures. The form of Conversion Notice included in and as
defined in the Notes sets forth the totality of the procedures required by the
Investors in order to convert the Notes. The Company shall honor conversions of
the Notes and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.

 

4.8 Subsequent Registrations. Other than pursuant to the Registration Statement,
prior to the ninetieth (90th) day following the Effective Date (plus one day for
each day during such period when a Registration Statement shall not be effective
and available to the Holders for the resale of Underlying Shares or Warrant
Shares), the Company may not file any registration statement with the Commission
with respect to any securities of the Company other than registration statements
on Form S-8 promulgated by the Commission.

 

4.9 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on the
Trading Day following the execution of this Agreement, the Company shall issue a
press release disclosing the transactions contemplated hereby and the Closing.
On the Trading Day following the execution of this Agreement the Company will
file a Current Report on Form 8-K disclosing the material terms of the
Transaction Documents and the Closing (and attach as exhibits thereto the
Transaction Documents). In addition, the Company will make such other filings
and notices

 

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in the manner and time required by the Commission and the Trading Market on
which the Common Stock is listed. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Investor, or include the name of any
Investor in any filing with the Commission (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic filing requirements under the Exchange Act) or any
regulatory agency or Trading Market, without the prior written consent of such
Investor, except to the extent such disclosure is required by law or Trading
Market regulations.

 

4.10 Limitation on Issuance of Future Priced Securities. During the six months
following the Closing Date, the Company shall not issue any “Future Priced
Securities” as such term is described by NASD IM-4350-1.

 

4.11 Indemnification of Investors. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the Investors
and their directors, officers, shareholders, partners, employees and agents
(each, an “Investor Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation (collectively, “Losses”) that any such Investor
Party may suffer or incur as a result of or relating to any misrepresentation,
breach or inaccuracy of any representation, warranty, covenant or agreement made
by the Company in any Transaction Document. In addition to the indemnity
contained herein, the Company will reimburse each Investor Party for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred.

 

4.12 Non-Public Information. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

 

4.13 Listing of Securities. The Company agrees, (i) if the Company applies to
have the Common Stock traded on a Trading Market other than the Nasdaq SmallCap
Market, it will include in such application the Underlying Shares and Warrant
Shares, and will take such other action as is necessary or desirable to cause
the Underlying Shares and Warrant Shares to be listed on such other Trading
Market as promptly as possible, and (ii) it will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

 

4.14 Use of Proceeds. The Company will use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction
of any portion of the Company’s indebtedness (other than payment of trade
payables and accrued expenses in the ordinary course of the Company’s business
and consistent with prior practices), or to redeem any Common Stock or Common
Stock Equivalents.

 

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4.15 Payment of Cash Dividend. The Company agrees, so long as any of the Notes
are outstanding, not to declare, pay or make any provision for any cash dividend
or distribution with respect to the Common Stock of the Company, without first
obtaining the approval of the Required Investors.

 

4.16 Existence; Conduct of Business. The Company will, and will cause each of
the Subsidiaries to, do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the conduct of its
business, provided that the foregoing shall not prohibit (a) any sale, lease,
transfer or other disposition permitted by this Agreement, or (b) any merger of
(i) any domestic Subsidiary with any other domestic Subsidiary, (ii) any
domestic Subsidiary with and into the Company, or (iii) any foreign Subsidiary
with any other foreign Subsidiary.

 

ARTICLE V.

[INTENTIONALLY OMITTED]

 

ARTICLE VI.

NEGATIVE COVENANTS

 

The Company hereby agrees that, from and after the date hereof until the date
that the Notes have either been repaid in their entirety and/or converted
entirely into Common Stock, the Company shall be bound according to the
restrictions set forth in each of following negative covenants unless any such
restriction shall have been expressly waived in writing by the Required
Investors:

 

6.1 Restrictions on Certain Amendments. The Company will not amend the rights
and privileges granted under the Notes, to adversely affect the rights or
privileges granted under the Notes.

 

6.2 Restricted Payment. The Company shall not make any Restricted Payment.

 

6.3 Debt. The Company shall not create, incur, assume, become or be liable in
any manner in respect of, or suffer to exist, any Debt, except (a) Debt in
existence on the date hereof, as shown on Schedule 6.3(a), (b) trade payables
incurred and paid in the ordinary course of business, (c) Contingent Liabilities
in existence on the date hereof, as shown on Schedule 6.3(c), (d) Contingent
Liabilities resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business, and (e) Debt incurred to finance
the acquisition of fixed or capital assets (whether pursuant to a loan, capital
lease obligation or otherwise) in an aggregate principal amount not to exceed
five-hundred thousand dollars ($500,000) at any time outstanding, provided that
such Debt is incurred simultaneously with such acquisition (the “Purchase Money
Financing”) (collectively (a) through (e) shall be referred to as the “Permitted
Indebtedness”).

 

6.4 Liens. The Company shall not create or suffer to exist any Lien upon any of
its properties, except (a) Liens created by the Security Agreement, (b) Liens in
existence on the date

 

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hereof, as disclosed herein, (c) tax, mechanics’, materialmen’s, warehousemen’s,
laborer’s and landlord and other similar Liens relating to amounts that are not
yet due and payable, or that are being contested in good faith by appropriate
proceedings, for which adequate reserves have been established, (d) Liens
incurred in the ordinary course of business in connection with worker’s
compensation, unemployment insurance or similar legislation and (e) Liens to
secure the Permitted Indebtedness, provided that (x) any Lien securing any
Purchase Money Financing shall be created substantially simultaneously with the
acquisition of such fixed or capital asset, (y) such Liens do not at any time
encumber any property other than the property that is the subject of the
Purchase Money Financing, and (z) the principal amount of Debt secured by any
such Purchase Money Financing shall at no time exceed one hundred percent (100%)
of the original purchase price of such property at the time it was acquired.
Except as provided in this Section 6.4, the Company shall not hereafter agree
with any Person (other than the Investors) to grant a Lien on any of its assets
or to permit the pledge of any of its equity interests.

 

6.5 Amendment of Organizational Documents. The Company shall not permit any
amendment to its articles of incorporation so as to adversely affect the rights
or privileges granted under the Notes.

 

6.6 Sale and Leaseback. The Company shall not enter into any arrangement whereby
it sells or transfers any of its assets, and thereafter rents or leases such
assets.

 

6.7 Business. The Company shall not change the nature of its business as now
conducted.

 

6.8 Transactions with Affiliates. The Company shall not, directly or indirectly,
pay any funds to or for the account of, make any investment (whether by
acquisition of stock or indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or participate in, or effect
any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate, except, on terms no less favorable than terms
that could be obtained by the Company from a Person that is not an Affiliate of
the Company upon negotiation at arms’ length, as determined in good faith by the
Board; provided that no determination of the Board of Directors shall be
required with respect to any such transactions entered into in the ordinary
course of business.

 

6.9 Limitation on Restrictions. The Company shall not enter into, or suffer to
exist, any agreement with any Person which prohibits or limits the ability of
the Company to pay Debt owed to the Investors, except as expressly permitted by
the Security Agreement.

 

ARTICLE VII.

MISCELLANEOUS

 

7.1 Fees and Expenses. At the Closing, the Company shall pay to Bryan Cave LLP
$40,000 (less previously delivered amounts) as partial reimbursement of DKR
SoundShore Strategic Holding Fund Ltd. and DKR SoundShore Oasis Holding Fund
Ltd. (collectively, “Oasis”) for their respective legal fees in connection with
the Transaction Documents (Oasis may deduct such amount from the Investment
Amount deliverable to the Company at Closing), it

 

24

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being understood that Bryan Cave LLP has only rendered legal advice to OASIS,
and not to the Company or any other Investor in connection with the transactions
contemplated hereby, and that each of the Company and the other Investors has
relied for such matters on the advice of its own respective counsel. Except as
specified in the immediately preceding sentence, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of the Transaction Documents.
The Company shall pay all stamp and other taxes and duties levied in connection
with the sale of the Notes.

 

7.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.

 

7.3 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as
follows:

 

If to the Company:    ProsoftTraining      410 N. 44th Street, Suite 600     
Phoenix, AZ 85008      Facsimile: (602) 794-4198      Attention: Chief Financial
Officer With a copy to:    Hewitt & O’Neil, LLP      19900 MacArthur Blvd.,
Suite 1050      Irvine, CA 92612      Facsimile: (949) 798-0511      Attention:
William L. Twomey, Esq. If to an Investor:    To the address set forth under
such Investor’s name      on the signature pages hereof;

 

25

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With a copy to for

any Oasis Investor:

   Bryan Cave LLP      1290 Avenue of the Americas      New York, NY 10104     
Facsimile: (212) 541-1432      Attention: Eric L. Cohen, Esq.

 

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

 

7.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Required Investors. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all
Investors who then hold Notes. Without the written consent of each Holder of
Securities affected thereby, an amendment or waiver under this Section 7.4 may
not:

 

(a) change the maturity of the principal amount of, or the interest payment date
under, or the payment of liquidated damages, which is due on, any Note or
Warrant;

 

(b) make any change that impairs the conversion or exercise rights of any
Securities;

 

(c) reduce the Event Equity Value under the Notes or amend or modify in any
manner adverse to the Holders of Securities the Company’s obligation to make
such payments;

 

(d) amend the definition of Required Investors;

 

(e) change the currency of any amount owed or owing under the Securities or any
interest thereon from U.S. Dollars;

 

(f) impair the right of any Investor to institute suit for the enforcement of
any payment with respect to, or conversion or exercise of, any Security; or

 

(g) modify the provisions of this Section 7.4.

 

It shall not be necessary for the consent of the Holders under this Section 7.4
to approve the particular form of any proposed amendment, but it shall be
sufficient if such consent approves the substance thereof.

 

7.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to

 

26

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express their mutual intent, and no rules of strict construction will be applied
against any party. This Agreement shall be construed as if drafted jointly by
the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement or any of the Transaction Documents.

 

7.6 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Notes, provided such transfer complies with Section
4.1(a) herein and such transferee agrees in writing to be bound, with respect to
the transferred Securities, by the provisions hereof that apply to the
“Investors.”

 

7.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.11 (as to each Investor
Party).

 

7.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.

 

7.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Securities.

 

27

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

 

7.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

7.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Investor exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Investor may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

 

7.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

 

7.14 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.

 

7.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any

 

28

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law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.

 

7.16 Limitation of Liability. Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of an Investor arising
directly or indirectly, under any Transaction Document of any and every nature
whatsoever shall be satisfied solely out of the assets of such Investor, and
that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.

 

PROSOFTRAINING By:  

/s/ Robert G. Gwin

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

Name:   Robert G. Gwin Title:   Chief Executive Officer

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR INVESTORS FOLLOW]

 

30

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IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.

 

NAME OF INVESTOR DKR SoundShore Oasis Holding Fund Ltd. By:  

/s/ Barbara Burger

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

Name:   Barbara Burger Title:   Alternate Director Investment Amount: $1,080,000
Tax ID No.: 98-0221468 Organized under the laws of: Bermuda

ADDRESS FOR NOTICE

c/o: DKR Oasis Management Company L.P. Street: 1281 East Main Street
City/State/Zip: Stamford, CT 06920 Attention: Barbara Burger/Rajni Narasi Tel:
203-324-8400 Fax: 203-324-8488 REGISTERED ADDRESS 29 Richmond Road Pembroke HM08
Bermuda

 

[Signatures continued on next page]

 

31

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IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.

 

 

NAME OF INVESTOR DKR SoundShore Strategic Holding Fund Ltd. By:  

/s/ Barbara Burger

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

Name:   Barbara Burger Title:   Alternate Director Investment Amount: $270,000
Tax ID No.: 98-0210934 Organized under the laws of: Bermuda ADDRESS FOR NOTICE
c/o: DKR Oasis Management Company L.P. Street: 1281 East Main Street
City/State/Zip: Stamford, CT 06920 Attention: Barbara Burger/Rajni Narasi Tel:
203-324-8400 Fax: 203-324-8488 REGISTERED ADDRESS 29 Richmond Road Pembroke HM08
Bermuda

 

32