Exhibit
10.92


 


 


SECURITIES PURCHASE AGREEMENT


 

















 


THE SECURITIES SUBJECT TO THIS SECURITIES PURCHASE AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES OR “BLUE SKY” LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS:  (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS, OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.


 


 


SECURITIES
PURCHASE AGREEMENT


 


THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of September
30, 2003, by and among VCAMPUS CORPORATION, a Delaware corporation
(the “Company”), and the PURCHASERS listed in Exhibit A (each, a “Purchaser”
and collectively, “Purchasers”).


 


WHEREAS, the Company desires to issue and sell to
Purchasers, and Purchasers desire to purchase from the Company, a maximum (the
“Maximum Offering”) of 2,000,000 units 
(the “Units”), each Unit consisting of one share (collectively, the “Shares”)
of common stock, par value $0.01 per share (the “Common Stock”), of the
Company, and a warrant (collectively, the “Common Stock Warrants”) to
purchase one share of Common Stock (the “Warrant Shares”) at an exercise
price of $2.59 per Share, containing the terms and conditions in substantially
the form of Exhibit B attached hereto in a private placement transaction
as set forth in the Company’s Confidential Executive Summary, dated September
2003 (together with exhibits and attachments thereto, all as amended,
collectively referred to herein as the “Offering Materials”); and


 


WHEREAS, the Company distributed the Offering
Materials to a limited number of selected prospective investors in connection
with the offering of such Units (the “Offering”), on the terms and
conditions set forth herein.


 


NOW, THEREFORE, for and
in consideration of the foregoing premises and the mutual agreements and
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, intending to be
legally bound, the parties hereto do hereby agree as follows:


 

















 


Section 1.               Purchase of
Company Units.


 


1.1.          Purchase and Sale of
the Units.  Subject to the terms and
conditions of this Agreement, the Company will issue and sell to Purchasers,
and each Purchaser, severally and not jointly, will purchase from the Company the
number of Units set forth in Exhibit A opposite such Purchaser’s name
for the purchase price of $2.59 per Unit (“Purchase Price”).  Provided; however, in the event the Company
fails to raise gross proceeds of at least $2,000,000 in one or more equity financings
by November 15, 2003 at a purchase price per share (or conversion price, as
applicable) no less than the original purchase price for the Units sold
hereunder, then, effective on the close of business on that date and subject to
prior approval by the Company’s Board of Directors, the Company agrees to: (a)
issue additional shares of Common Stock to the Purchasers equal to the number
of additional shares of Common Stock the Purchasers would have been entitled to
receive at Closing had the purchase price been $2.00 Unit (instead of $2.59 per
Unit) (the “Price Reset Shares”); and (b) reprice the exercise price on the
Purchaser’s Warrants from $2.59 to $2.00 per share.   The Company covenants to undertake best efforts to solicit the
requisite approval from its Board of Directors for the actions described under
this Section 1.1


 


Section 2.               Closing.  The closing (the “Closing”) of the
purchase and sale of the Units will take place at the offices of Piper Rudnick
LLP, 1251 Avenue of the Americas, New York, New York 10020, on or before 11:59
p.m., local time, on September 30, 2003. 
The Closing may take place at another time, place or earlier date as is
mutually agreed upon by the Company and Purchasers.  The date of the Closing is referred to as the “Closing Date.”  At the Closing, the Company will register in
the name of each Purchaser that number of Shares and Common Stock Warrants
being purchased by such Purchaser in accordance with Exhibit A, against payment of
each Purchaser’s Purchase Price by check or wire transfer of immediately
available United States funds payable to the Company, and in the case of a wire
transfer, pursuant to the wire transfer instructions set forth in Exhibit A.  The Shares and Common Stock Warrants will be
registered in Purchasers’ names or the names of the nominees of Purchasers
pursuant to instructions delivered to the Company onthe Closing Date and will
be delivered to Purchasers within ten (10) business days after the Closing
Date.


 


2.1           Intentionally
Deleted.


 


2.2.          Intentionally Deleted.


 


Section 3.               Conditions to
the Obligations of Purchasers at Closing. 
The obligation of each Purchaser to purchase and pay for the Units at
the Closing is subject to the satisfaction on or prior to the Closing Date of
the following conditions, each of which may be waived by a majority-in-interest
of Purchasers:


 


3.1           Opinion of Counsel
to the Company.  Each Purchaser
shall have received from Wyrick Robbins Yates & Ponton LLP, counsel for the
Company, its opinion dated as of the Closing Date and addressed to each
Purchaser in substantially the form as attached hereto as Exhibit C.


 


2

















 


3.2           Representations and
Warranties.  The representations and
warranties of the Company contained in this Agreement which are qualified as to
materiality must be true and correct as written and the representations and
warranties of the Company contained in this Agreement which are not qualified
as to materiality must be true and correct in all material respects as of the Closing
Date except to the extent that the representations and warranties relate to an
earlier date in which case the representations and warranties must be true and
correct as written or true and correct in all material respects, as the case
may be, as of the earlier date.


 


3.3           Performance of
Covenants.  The Company will have
performed or complied with in all material respects all covenants and
agreements required to be performed by it on or prior to the Closing pursuant
to this Agreement.


 


3.4           No Injunctions; etc.  No court or governmental injunction, order
or decree prohibiting the purchase and sale of the Units will be in
effect.  There will not be in effect any
law, rule or regulation prohibiting or restricting the sale or requiring any
consent or approval of any person that has not been obtained to issue and sell
the Units to Purchasers.


 


3.5           Closing Documents.  The Company will have delivered to
Purchasers the following:


 


(a)           a certificate of the
President of the Company certifying that the conditions in Sections 3.2 and 3.3
have been satisfied.


 


(b)           a certificate of the
Secretary of the Company, dated as of the Closing Date, certifying (i) the
attached copies of the Certificate of Incorporation and By-laws of the Company,
(ii) the resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement and the issuance of the
Units and (iii) the incumbency of the officers duly authorized to execute this
Agreement and the other documents contemplated by this Agreement; and


 


(c)           a certificate of the
Secretary of State of the State of Delaware, dated a recent date, to the effect
that the Company is in good standing in the State of Delaware and that all
annual reports, if any, have been filed as required and that all taxes and fees
have been paid in connection therewith.


 


3.6           Waivers and Consents.  The Company will have obtained all consents
and waivers necessary to execute and deliver this Agreement and all related
documents and agreements and to issue and deliver the Shares, the Common Stock
Warrants and the Warrant Shares, and all consents and waivers will be in full
force and effect.


 


Section 4.               Conditions to
the Obligations of the Company at Closing. 
The obligation of the Company to issue and sell the Units to Purchasers
at the Closing is subject to the satisfaction on or prior to the Closing Date
of the following conditions, each of which may be waived by the Company:


 


3

















 


4.1           Receipt of Purchase
Price.  The Company shall have
received payment of the Purchase Price with respect to the Units purchased
hereunder.


 


4.2           Representations and
Warranties.  The representations and
warranties of Purchasers contained in this Agreement which are qualified as to
materiality must be true and correct as written and the representations and
warranties of Purchasers contained in this Agreement which are not qualified as
to materiality must be true and correct in all material respects as of the
Closing Date.


 


4.3           Questionnaire.  All of the information furnished by
Purchasers in the confidential purchaser questionnaire accompanying this
Agreement (the “Questionnaire”) shall have been accurate and complete in
all material respects.


 


4.4           No Injunctions.  No court or governmental injunction, order
or decree prohibiting the purchase or sale of the Units will be in effect.


 


4.5           Nasdaq Compliance.  The Company shall have determined, based on
the advice of its counsel, that the Units to be issued at Closing will not
violate Nasdaq Marketplace Rules requiring prior shareholder approval for
certain transactions.


 


Section 5.               Representations
and Warranties of Purchasers.  Each
Purchaser, severally and not jointly, represents and warrants to the Company
that:


 


5.1           Accredited Investor.  Purchaser is an “accredited investor” within
the meaning of Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”).  Purchaser is purchasing the
Units for its own account or for the account of its customers, each of whom is
an “accredited investor” and not with a view toward, or for sale in connection
with, any distribution thereof in violation of the registration requirements of
the Securities Act, without prejudice, however, to Purchaser’s right, subject
to the provisions of this Agreement, at all times to sell or otherwise dispose
of all or any part of the Units. 
Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to the Units.


 


5.2           No Brokers.  Other than Brean Murray & Co., Inc. (as
placement agent on behalf of the Company) and any subagents it may appoint
pursuant to the Offering Materials, no finder, broker, agent, financial person
or other intermediary has acted on behalf of Purchaser in connection with the
purchase of the Units by Purchaser or the consummation of this Agreement or any
of the transactions contemplated hereby. 
Purchaser has not had any direct or indirect contact with any other
investment banking firm (or similar firm) with respect to the offer of the
Units by the Company to Purchaser or Purchaser’s subscription for the Units.


 


5.3          Ability to Bear Risks
of Investment.  Purchaser confirms
that it is able to (i) bear the economic risk of this investment, as well as
other risk factors as more fully set forth herein and in the Offering
Materials, (ii) hold the Units for an indefinite period of time and (iii) bear
a complete loss of Purchaser’s investment; and Purchaser represents that it has
sufficient liquid


 


4

















 


assets so that the
illiquidity associated with this investment will not cause any undue financial
difficulties or affect Purchaser’s ability to provide for its current needs and
possible financial contingencies, and that Purchaser’s commitment to all high
risk investments (including this one if this subscription is accepted by the
Company) is reasonable in relation to Purchaser’s net worth and/or annual
income.


 


5.4          Access
to Information.  Purchaser acknowledges that it has (i)
received, read carefully and is fully familiar with the Offering Materials,
including, without limitation, the risk factors set forth in the Offering
Materials, this Agreement and all other materials furnished herewith; (ii) been
afforded the opportunity to ask the questions it deemed necessary of, and to
receive answers from, representatives of the Company concerning the Company and
the terms and conditions of the Offering; and (iii) been afforded the
opportunity to request additional information concerning the Company as the
Company possesses or can acquire without unreasonable effort or expense.  However, the Company agrees that such access
and opportunity shall in no way limit or modify the representations and warranties
of the Company in Section 6 or the right of any Purchaser to
rely on them.


 


5.5           No General
Solicitation.  Purchaser did not (i)
receive or review any advertisement, article, notice or other communication
published in a newspaper or magazine or similar media or broadcast over
television or radio, whether closed circuit, or generally available, with
respect to the Units or (ii) attend any seminar, meeting or investor or other
conference whose attendees were, to Purchaser’s knowledge, invited by any general
solicitation or general advertising with respect to the Units.


 


5.6           Investment
Experience.  Either by reason of
Purchaser’s business or financial experience or the business or financial
experience of its professional advisors (who are unaffiliated with and are not
compensated by the Company or any affiliate, finder or selling agent of the
Company, directly or indirectly), Purchaser has the capacity to protect
Purchaser’s interests in connection with the transactions contemplated by this
Agreement.


 


5.7           Organization, Good
Standing, Authorization.  If
Purchaser is an entity, it is a corporation, limited liability company, trust
or partnership or other similar entity duly organized, validly existing and in
good standing under the laws of its jurisdiction.  Purchaser has full power and authority (corporate or otherwise)
to execute, deliver and enter into this Agreement and to purchase the Units.
The execution and delivery by Purchaser of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate or other action on the part of Purchaser. If Purchaser is
an individual, Purchaser has the legal capacity to enter into this Agreement
and is a bona fide resident of the state shown in the address set forth in Exhibit A.  This Agreement constitutes a legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms.


 


5.8           No Conflicts.  No court or governmental injunction, order
or decree affecting Purchaser and prohibiting the execution and delivery by
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby is in effect, and the terms of this Agreement do not
conflict with the provision of the Certificate or Articles of Incorporation or


 


5

















 


By-laws (or comparable
charter, partnership or other organizational documents) of Purchaser, or
conflict with, or result in a material breach or violation of, any of the terms
or provisions of, or constitute (with due notice or lapse of time or both) a
material default under, any material lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which Purchaser
is a party.


 


5.9           Consents, Approvals, etc. 
No material consent, approval, license, permit, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, remains to be obtained or is otherwise required to be
obtained by Purchaser in connection with the authorization, execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, including, without limitation the purchase and sale of the Units.


 


5.10         No Registration.  Purchaser is aware that the Units have not
been registered under the Securities Act or any state or foreign securities or
“blue sky” laws, that the Units will be issued on the basis of the statutory
exemption provided by Section 4(2) of the Securities Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering and under similar exemptions under certain state
securities or “blue sky” laws, that neither the Offering Materials nor the
terms of the Offering have been reviewed by, passed on or submitted to any
federal or state agency or self-regulatory organization where an exemption is
being relied upon, and that the Company’s reliance thereon is based, in part,
upon the truth, completeness and accuracy of the representations made by
Purchaser in this Agreement.  In this
connection, Purchaser understands that it is the position of the Securities and
Exchange Commission (the “Commission”) that the statutory basis for such
exemption would not be present if Purchaser’s representation merely meant that
its present intention was to hold such securities for any specified period,
such as the capital gains period of tax statutes, for a deferred sale, for a
market rise or for any other fixed period. 
Purchaser realizes that, in the view of the Commission, a purchase now
with an intent to resell would represent a purchase with an intent inconsistent
with Purchaser’s representation to the Company, and the Commission might regard
such purchase by Purchaser as a transaction to which an exemption from the
registration requirements of the Securities Act would not be available.


 


5.11         Tax Consequences.  Purchaser acknowledges that the Offering may
involve tax consequences and that the contents of the Offering Materials do not
contain tax advice or related tax or economic information.  Purchaser confirms that it is not relying on
any statements or representations of the Company or any of its agents with
respect to the tax and other economic considerations of an investment in the
Units and acknowledges that Purchaser must retain its own professional advisors
to evaluate the federal, state and local tax and other economic considerations
of an investment in the Units. 
Purchaser also acknowledges that it is solely responsible for any of its
own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.


 


5.12         No Inquiry.  Purchaser acknowledges that the Company will
review this Agreement and the Questionnaire without making any independent
investigation and that the


 


6

















 


representations,
warranties and agreements made by Purchaser herein shall survive the execution
and delivery of this Agreement and the purchase of the Units.


 


5.13         Non-U.S. Persons.  If Purchaser is not a United States person,
such Purchaser hereby represents that it is satisfied as to the full observance
of the laws of its jurisdiction in connection with any invitation to subscribe
for the Units or any use of this Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Units, (ii) any
foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Units.  Such Purchaser further represents that its subscription and
payment for, and continued beneficial ownership of, the Units will not violate
any applicable securities or other laws of Purchaser’s jurisdiction.  Purchaser understands that the Company has
made no efforts and undertakes no responsibility or obligation to determine and
comply with the applicable laws of any non-U.S. jurisdiction relating to the
sale of the Units or the other transactions contemplated hereby.


 


Section 6.               Representations
and Warranties of the Company.  The
Company represents and warrants to each Purchaser that, except as disclosed in
the Commission Documents or in the Disclosure Schedules delivered herewith,:


 


6.1           Organization, Good
Standing and Qualification.  (a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company has full corporate power
and authority to own and hold its properties and to conduct its business.  The Company is duly licensed or qualified to
do business, and in good standing, in each jurisdiction in which the nature of
its business requires licensing, qualification or good standing, except for any
failure to be so licensed or qualified or in good standing that would not have
a material adverse effect on the Company and each subsidiary of the Company
taken as a whole (each such corporation, partnership or other entity being
referred to herein as a “Subsidiary” and, together, the “Subsidiaries”)
or its consolidated results of operations, assets, or financial condition or on
its ability to perform its obligations under this Agreement or the transactions
contemplated hereby (a “Material Adverse Effect”).


 


(b)           Schedule
6.1(b) contains a list of the names of each Subsidiary.  Schedule 6.1(b) sets forth, with respect to
each Subsidiary, its type of entity and the jurisdiction of its
organization.  Each Subsidiary is wholly
owned by the Company.  Each of the
outstanding shares of capital stock of each of the Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or another Subsidiary and is free and clear of all liens, claims,
encumbrances, options, pledges and security interests (collectively, “Liens”)
and were not issued in violation of, nor subject to, any preemptive,
subscription or similar rights.  There
are no outstanding warrants, options, subscriptions, calls, rights, agreements,
convertible or exchangeable securities or other commitments or arrangements
relating to the issuance, sale, purchase, return or redemption, voting or
transfer of any shares, whether issued or unissued, of any capital stock,
equity interest or other securities of any Subsidiary.  The Company and the Subsidiaries do not own
any equity interests in any person, other than the Subsidiaries.  Each active Subsidiary is duly organized,
validly existing and in good standing under the laws of the


 


7

















 


jurisdiction of
its organization and has all requisite power and authority to own, lease and
operate its properties and to conduct its business.


 


6.2           Capitalization.  As of the
date hereof, the authorized capital stock of the Company consists of 36,000,000
shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of
Preferred Stock, par value $0.01 per share. 
As of September 1, 2003, (i) 4,593,531 shares of Common Stock were
issued and outstanding, (ii) no shares of Preferred Stock were issued and
outstanding, (iii) 702,489 shares of Common Stock were reserved for issuance
upon exercise of outstanding options issued or issuable under the Company’s
1996 Stock Plan and its Amended and Restated Stock Option Plan (the “Option
Plans”), (iv) no shares of Common Stock are reserved for issuance under
stock options granted by the Company outside the Option Plans (v) 1,955,177
shares of Common Stock were reserved for issuance upon the exercise of
outstanding warrants and (vi) 64,285 shares of Common Stock are issuable upon
conversion of convertible debt.  All the
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable and free of preemptive rights created by
or through the Company.  There are no
other options, warrants or other rights, convertible debt, agreements,
arrangements or commitments of any character obligating the Company or any of
the Subsidiaries to issue or sell any shares of capital stock of or other
equity interests in the Company.  The
Company is not obligated to retire, redeem, repurchase or otherwise reacquire
any of its capital stock or other securities.


 


6.3           Corporate Power, Authorization;
Enforceability.  Subject to approval
of the Company’s Board of Directors for (a) the issuance of any Warrants to the
Purchasers to purchase in excess of one-half of one share of Common Stock per
Unit, and (b) the price reset provisions contained in Section 1.1 hereof, the
Company has full corporate power and authority to execute, deliver and enter
into this Agreement and to consummate the transactions contemplated
hereby.  Except as described in the prior
sentence and with respect to any stockholder approvals as may be required under
Nasdaq Marketplace rules and related interpretations, all action on the part of
the Company, its directors or stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Units contemplated hereby and
the performance of the Company’s obligations hereunder and thereunder has been
taken.  Except as noted above in this
Section 6.3, the Shares and Common Stock Warrants to be purchased on the
Closing Date and the Warrant Shares to be purchased upon exercise of the Common
Stock Warrants have been duly authorized and, when issued in accordance with
this Agreement and the Common Stock Warrants in the case of the Warrant Shares,
will be validly issued, fully paid and nonassessable and will be free and clear
of all Liens imposed by or through the Company other than restrictions imposed
by this Agreement and applicable securities laws.  No preemptive or other rights to subscribe for or purchase equity
securities of the Company exists with respect to the issuance and sale of the
Units by the Company pursuant to this Agreement.  Subject to the limitations described in this Section 6.3 above,
this Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.


 


8

















 


6.4           Financial Statements
and Commission Filings; Undisclosed Liabilities.  (a) Included in the Company’s Annual Report on Form 10-K, as
amended, for the year ended December 31, 2002 (the “2002 10-K”) are true
and complete copies of the audited consolidated balance sheets (the “Balance
Sheets”) of the Company as of December 31, 2001 and 2002, and the related
audited statements of income, changes in stockholders’ equity and cash flows
for the years ended December 31, 2000, 2001 and 2002 (the “Financial
Statements”), accompanied by the report of Ernst & Young LLP.  The Financial Statements have been prepared
in accordance with United States generally accepted accounting principles (“GAAP”),
applied consistently with the past practices of the Company (except as may be
indicated in the notes thereto), and as of their respective dates, fairly
present, in all material respects, the consolidated financial position of the
Company and the results of its operations as of the time and for the periods
indicated therein.  The Company keeps
proper accounting records in which all material assets and liabilities and all
material transactions of the Company are recorded in conformity with GAAP.


 


(b)           The Company has
provided to each Purchaser the 2002 10-K. 
A copy of each report, schedule, effective registration statement and
definitive proxy statement filed by the Company with the Commission since
December 31, 2002, including, but not limited to the Company’s Current Reports
on Form 8-K filed on January 24, 2003, February 25, 2003, May 28, 2003, June
11, 2003,August 12, 2003 and September 23, 2003 (as the documents may have been
amended since the time of their filing, the “Commission Documents”) has
also been made available to each Purchaser either by physical delivery or via
the Commission’s EDGAR System.  As of their
respective filing dates, each Commission Document complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder
applicable to the Commission Document, and no Commission Document, when filed,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  As of their respective
filing dates, the financial statements of the Company included in the
Commission Documents complied as to form in all material respects with then
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with GAAP,
applied consistently with the past practices of the Company, and as of their
respective dates, fairly presented in all material respects the financial position
of the Company and the results of its operations as of the time and for the
periods indicated therein (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Form 10-Q, and
Regulations S-K and S-X of the Commission).


 


(c)           The information
contained in the Offering Materials does not include, as of the date of such
information, any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.


 


(d)           Since December 31,
2002, neither the Company nor any of the Company’s Subsidiaries has incurred
any liabilities or obligations of any nature, whether or not accrued, absolute,
contingent or otherwise, other than liabilities (i) disclosed in the Commission
Documents filed prior to the date of this Agreement, (ii) adequately provided
for in the Balance


 


9

















 


Sheets or disclosed in
any related notes thereto, (iii) not required under GAAP to be reflected in the
Balance Sheets, or disclosed in any related notes thereto, (iv) incurred in
connection with this Agreement, or (v) incurred in the ordinary course of business.


 


6.5           No Material Adverse
Changes.  Since December 31, 2002,
except as disclosed in the Commission Documents filed subsequent to that date,
there has not been any material adverse change in the business, financial
condition or operating results of the Company and its Subsidiaries.


 


6.6           Absence of Certain
Developments.  Except as
contemplated by or disclosed in this Agreement, the Schedules hereto and the
Commission Documents, since December 31, 2002, through the date immediately
preceding the Closing Date, neither the Company nor any of its Subsidiaries has
(a) , in any material respect, issued any stock, options, bonds or other
corporate securities other than pursuant to the Option Plans, (b) , in any
material respect, borrowed any amount or incurred or became subject to any
liabilities (absolute, accrued or contingent), other than current liabilities
incurred in the ordinary course of business or liabilities under contracts
entered into in the ordinary course of business, (c) , in any material respect,
discharged or satisfied any lien or adverse claim or paid any obligation or
liability (absolute, accrued or contingent), other than current liabilities
shown on the Balance Sheets and current liabilities incurred in the ordinary
course of business, (d) declared or made any payment or distribution of cash or
other property to the stockholders of the Company or purchased or redeemed any
securities of the Company, (e) , in any material respect, mortgaged, pledged or
subjected to any lien or adverse claim any of its properties or assets, except
for liens for taxes not yet due and payable or otherwise in the ordinary course
of business, (f) sold, assigned or transferred any of its assets, tangible or
intangible, except in the ordinary course of business or in an amount less than
$250,000, (g) suffered any extraordinary losses or waived any rights of
material value other than in the ordinary course of business, (h) made any
capital expenditures or commitments therefor other than in the ordinary course
of business or in an amount less than $250,000, (i) entered into any other
transaction other than in the ordinary course of business or in an amount less
than $250,000 or entered into any material transaction, whether or not in the
ordinary course of business, (j) made any material charitable contributions or
pledges, (k) suffered any damages, destruction or casualty loss, whether or not
covered by insurance, affecting any of the properties or assets of the Company
or any other properties or assets of the Company which reasonably could,
individually or in the aggregate, have or result in a Material Adverse Effect,
(l) made any material change in the nature or operations of the business of the
Company or (m) entered into any agreement or commitment to do any of the foregoing.


 


6.7           No Conflict;
Governmental Consents.  (a) The
execution and delivery by the Company of this Agreement and the consummation of
the transactions contemplated hereby will not (i) result in the violation of
any provision of the Certificate of Incorporation or By-laws of the Company,
(ii) result in any violation of any law, statute, rule, regulation, order,
writ, injunction, judgment or decree of any court or governmental authority to
or by which the Company or any of its Subsidiaries is bound, or (iii) conflict
with, or result in a breach or violation of, any of the terms or provisions of,
or constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement to


 


10

















 


which the Company or any
of its Subsidiaries is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of
any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries, in the case of clauses (ii) and (iii) above, only to the extent
such conflict, breach or violation reasonably could, individually or in the
aggregate, have or result in a Material Adverse Effect.


 


(b)           No consent, approval, license, permit,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority
remains to be obtained or is otherwise required to be obtained by the Company
in connection with the authorization, execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, including, without
limitation the issue and sale of the Units, except filings as may be required
to be made by the Company after the Closing with (i) the Commission, (ii) the
National Association of Securities Dealers, Inc. (“NASD”), (iii) the
Nasdaq Stock Market, Inc. and (iv) state blue sky or other securities
regulatory authorities.


 


6.8           Licenses.  The Company and its Subsidiaries have all
licenses, permits and other governmental authorizations currently required for
the conduct of its current business and the ownership of its properties and is
in all respects complying therewith, except where the failure to have such
licenses, permits and other governmental authorizations would not have a
Material Adverse Effect.


 


6.9           Litigation.  Except as set forth in the Company’s
Commission Documents, there are no claims, actions, suits, investigations or
proceedings pending or, to the Company’s knowledge, threatened proceedings
against the Company and its Subsidiaries or their respective assets, at law or
in equity, by or before any governmental authority, or by or on behalf of any
third party.


 


6.10         Investment Company.  The Company is not, and following the
Closing of the Offering will not be, an “investment company” within the meaning
of that term under the Investment Company Act of 1940, as amended, and the
rules and regulations of the Commission thereunder.


 


6.11         No Default or
Violation.  Neither the Company nor
any of its Subsidiaries is (i) in default under or in violation of any
indenture, loan or credit agreement or, in any material respect, under any
other agreement or instrument to which it is a party of by which it or any of
its properties is bound or (ii) in violation of any order, decree or judgment
of any court, arbitrator or governmental body.


 


6.12         Listing and
Maintenance Requirements Compliance. 
Except as disclosed in the Commission Documents, the Company has not
since December 31, 2002, received notice (written or oral) from any stock
exchange or market on which the Common Stock is or has been listed (or on which
it has been quoted) to the effect that the Company is not in compliance with the
continuing listing or maintenance requirements of the exchange or market.


 


11

















 


6.13         Patents and Trademarks.  Except as set forth in the Company’s 2002
10-K, the Company and its Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights and licenses (collectively, the “Intellectual
Property Rights”) which are necessary for use in connection with its
business as presently conducted or which the failure to have would have a
Material Adverse Effect and, to the Company’s knowledge, there is no existing
infringement by another person or entity of any of the Intellectual Property
Rights which are necessary for use in connection with the Company’s business as
presently conducted.  There is no
pending or, to the Company’s knowledge, threatened action, suit, proceeding or
claim by others challenging the validity or scope of the Intellectual Property
Rights or alleging that the Company infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary right of others.


 


6.14         Environmental Matters.  The Company and its Subsidiaries have
obtained all permits, licenses and other authorizations which are required
under United States federal, state and local laws relating to pollution or
protection of the environment, including laws related to emissions, discharges,
releases or threatened releases of pollutants, contaminants or hazardous or
toxic material or wastes into ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling or pollutants, contaminants
or hazardous or toxic materials or wastes (“Environmental Laws”).  The Company and its Subsidiaries are in
compliance with all terms and conditions of the required permits, licenses and
authorizations and are also in full compliance with all other limitations,
restrictions, conditions and requirements contained in the Environmental Laws
or contained in any plan, except where the failure to so comply would not have
a Material Adverse Effect.  The Company
is not aware of, nor has the Company received notice of, any events,
conditions, circumstances, actions or plans which may interfere with or prevent
continued compliance or which would give rise to any liability under any
Environmental Laws.


 


6.15         Contracts.  All material agreements to which the Company
and its Subsidiaries are parties and which are required to have been filed by
the Company pursuant to the Securities Act, the Exchange Act and the rules and
regulations thereunder have been filed by the Company with the Commission.  As of the date hereof, except for those
agreements that by their terms are no longer in effect, each such agreement, to
the extent still material, is in full force and effect and is binding on the
Company and, to the Company’s knowledge, is binding upon such other parties, in
each case in accordance with its terms, and neither the Company nor, to the
Company’s knowledge, any other party thereto is, in any material respect, in
breach of or default under any such agreement. 
Except as disclosed in the Commission Documents,  the Company has not received any written
notice regarding the termination of any such agreements.


 


6.16         Properties.  The Company has good title to all the
properties and assets reflected as owned by it in the consolidated financial
statements included in the Offering Materials, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except (i) those, if any, reflected
in such consolidated financial statements or (ii) those which are not material
in amount and do not adversely affect the use made and intended to be made of
such property by the Company.  The
Company holds its leased properties under valid and binding leases.  Except as disclosed in


 


12

















 


the Offering
Materials, the Company owns or leases all such properties as are necessary to
its operations as now conducted.


 


6.17         Insurance.  The Company and its Subsidiaries maintain
insurance of the types, against such losses and in the amounts and with such
insurers as are customary in the Company’s industry and otherwise reasonably
prudent, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect.


 


6.18         Compliance.  The Company and its Subsidiaries are in
compliance in all material respects with all applicable laws and all orders of,
and agreements with, any governmental authority applicable to the Company, any
Subsidiary or any of their respective assets. 
The Company and the Subsidiaries have all permits, certificates,
licenses, approvals and other authorizations required under applicable laws or
necessary in connection with the conduct of their businesses, except where the
failure to have such permits, certificates, licenses, approvals and other
authorizations would not have a Material Adverse Effect.


 


6.19         Taxes.  The Company and its Subsidiaries have in all
material respects filed or obtained extensions of all federal, state, local and
foreign income, excise, franchise, real estate, sales and use and other tax
returns heretofore required by any law to which the Company is bound to be
filed by it.  All material federal,
state, county, local, foreign or other income taxes which have become due or
payable by the Company or any of its Subsidiaries (collectively, “Taxes”),
have been paid in full or are adequately provided for in accordance with GAAP
on the financial statements of the applicable Person.  No Liens arising from or in connection with Taxes have been filed
and are currently in effect against the Company or any of its Subsidiaries,
except for Liens for Taxes which are not yet due or which would not have a
Material Adverse Effect.  Except as disclosed in
the Commission Documents, no audits or investigations are pending
or, to the knowledge of the Company, threatened with respect to any tax returns
or Taxes of the Company or any of its Subsidiaries.


 


6.20         ERISA.  The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder (“ERISA”); no “reportable event”
(as defined in ERISA) has occurred with respect to any “pension plan” (as
defined in ERISA) for which the Company would have any material liability; the
Company has not incurred and does not expect to incur liability under (i) Title
IV of ERISA with respect to termination of, or withdrawal from, any “pension
plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the “Code”); and each “pension plan” for which the Company would have
any liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.


 


13

















 


6.21         Labor Disputes.  The Company
is not involved in any material labor dispute with its employees nor is any
such dispute, to the Company’s knowledge, threatened or imminent.


 


6.22         Private Offerings.  Assuming the truth of Purchasers’
representations and acknowledgments contained in Section 5 hereof, neither the
Company nor any person acting on its behalf (other than Purchasers, as to whom
the Company makes no representations) has offered or sold the Units by means of
any general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act.  The
Company has not sold the Units to anyone other than Purchasers designated in
this Agreement.  Each Share certificate
and Warrant Share certificate shall bear substantially the same legend set
forth in Section
8
hereof for at least so long as required by the Securities Act.


 


6.23         Broker’s or Finder’s
Commissions.  Other than Brean
Murray & Co., Inc. (as placement agent on behalf of the Company) and any
subagents it may appoint pursuant to the Offering Materials, no finder, broker,
agent, financial person or other intermediary has acted on behalf of the
Company in connection with the sale of the Units by the Company or the
consummation of this Agreement or any of the transactions contemplated
hereby.  The Company has not had any
direct or indirect contact with any other investment banking firm (or similar
firm) with respect to the offer of the Units by the Company to Purchasers or
Purchasers’ subscription for the Units.


 


Section 7.               Registration of
Common Stock.


 


7.1           Registrable Securities. 
For the purposes of this Agreement, “Registrable Securities” means (a)
the Shares, (b) the Common Stock Warrants, (c) the Warrant Shares, (d) the
Price Reset Shares and (e) shares of Common Stock issued as a dividend or other
distribution with respect to or in replacement of the Shares, the Common Stock
Warrants or the Warrant Shares; provided that (i) any shares of Common Stock
will cease to be Registrable Securities, and (ii) the Company will not be
obligated to maintain the effectiveness of the Resale Registration Statement
(as defined below), and the Company’s obligations under Section 7.2 will cease, with
respect to a holder’s (a “Holder”) Registrable Securities following the earlier
of (x) the date by which all Registrable Securities registered under the Resale
Registration Statement have been sold, (y) the date on which the Company
delivers an opinion of counsel in form and substance reasonably satisfactory to
the Holder and its counsel that the Holder may sell in a single transaction all
Registrable Securities then held or issuable to the Holder on a registered
securities exchange or Nasdaq market under an applicable exemption from the
registration requirements of the Securities Act (pursuant to Rule 144(k) under
the Securities Act or otherwise) without being subject to the volume
limitations of Rule 144(k) and (z) 5 years from the date of issuance of the
Units.  The period of time during which
the Company is required to keep the Resale Registration Statement (as defined
below) effective is referred to as the “Registration Period.”


 


7.2           Registration.  The Company will as soon as practicable
following the Closing Date but not later than thirty (30) days after the
Closing Date (the “Filing Period”), file with the Commission a resale
registration statement on Form S-1, S-2, S-3 or successor form or another form
selected by the Company that is available to it under the Securities Act (the “Resale


 


14

















 


Registration Statement”) with
respect to the Registrable Securities beneficially owned by Purchasers
following the Closing to permit the resale of such securities in accordance
with the methods of distribution provided by the Holders.  The Company may amend the Resale
Registration Statement from time to time to register securities other than
Registrable Securities for sale for the account of any person or entity; provided,
however, that the amendment will be permitted only so long as the Commission
rules provide that the amendment does not give the Commission the right to
review the Resale Registration Statement.


 


7.3           Registration
Procedures.  In connection with the
registration of any Registrable Securities under the Securities Act as provided
in this Section
7, the Company will use its best efforts to:


 


(a)           cause the Resale Registration Statement
(and any other related registrations, qualifications or compliance’s as may be
reasonably requested and as would permit or facilitate the sale and
distribution of all Registrable Securities until the distribution thereof is
complete) to become effective as soon as practicable following the filing
thereof but not later than December 31, 2003 (the “Scheduled Effective Date”)
and remain effective until no longer required under Section 7.1 (the “Effectiveness
Period”).  In the event the Company
fails to have the Resale Registration Statement declared effective by the SEC
by the Scheduled Effective Date (except where the failure to meet such deadline
is the result primarily of actions or omissions by the holders of the
Registrable Securities), then the Company shall pay each holder of Registrable
Securities for each 30-day period that the Resale Registration Statement
remains ineffective an amount equal to two percent (2%) of the original
purchase price attributable to those Registrable Securities.  This penalty shall be pro-rated for any
portion of a 30-day period that the Resale Registration Statement is not effective
after the Scheduled Effective Date.  The
Company shall pay such amount either in cash or in shares of Common Stock, at
the discretion of the Company, on demand by a holder of Registrable Securities
made at any time during the continuance or after termination of this
registration default.  If paid in Common
Stock, the Common Stock shall be valued at the average of the closing sale
price of the Common Stock on the Company’s principal market for the five most
recent trading days prior to the end of each 30-day period, or pro rata part
thereof.;


 


(b)           prepare and file with
the Commission the amendments and supplements to the Resale Registration
Statement and the prospectus used in connection therewith and take all other
actions as may be reasonably necessary to keep the Resale Registration Statement
continuously effective until the disposition of all securities in accordance
with the intended methods of disposition by the Holder or Holders thereof set
forth in the Resale Registration Statement will be completed, and to comply
with the provisions of the Securities Act (to the extent applicable to the
Company) with respect to the dispositions;


 


(c)           furnish to each Holder
of Registrable Securities a reasonable number of copies of the Resale
Registration Statement and of each amendment and supplement thereto, a number
of copies of the prospectus included in the Resale Registration Statement
(including each preliminary prospectus), in conformity with the requirements of
the Securities Act, and the other documents (including exhibits to any of the
foregoing), as the Holder may reasonably request, in order to facilitate the
disposition of the Registrable Securities owned by Holder;


 


15

















 


(d)           register or qualify the
Registrable Securities covered by the Resale Registration Statement under blue
sky laws of the various states as any Holder reasonably requests, and do any
and all other acts and things that may be reasonably necessary or advisable to
enable a Holder to consummate the disposition in the states the Registrable
Securities owned by Holder, except that the Company will not be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not, but for the requirements of this Section  7.3(d),
be obligated to be qualified, to subject itself to taxation in any the
jurisdiction, or to consent to general service of process in any the
jurisdiction;


 


(e)           provide a transfer
agent and registrar for the Registrable Securities covered by the Resale
Registration Statement not later than the effective date of the Resale
Registration Statement;


 


(f)            notify the Holders
promptly, and confirm such notice in writing, (i) when a prospectus as
contained in the Resale Registration Statement (“Prospectus”) or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Resale Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Resale Registration Statement or the initiation of any
proceedings for that purpose, (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification or any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (iv) of the existence of any fact or the happening of any event that
makes any statement made in such Resale Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in such Resale Registration Statement, Prospectus or documents so that,
in the case of the Resale Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (v) of the
Company’s reasonable determination that a post-effective amendment to a Resale
Registration Statement would be appropriate.


 


(g)           comply with all
applicable rules and regulations of the Commission and make generally available
its security holders earning statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder no later than 45 days after
the end of any twelve (12) month period (or ninety (90) days after the end of
any twelve (12) month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company, after the effective date
of the Resale Registration Statement, which statements shall cover said twelve
(12) month period.


 


(h)           cause all Registrable
Securities to be listed on each securities exchange or automated
over-the-counter trading system on which similar securities issued by the
Company


 


16

















 


are now listed and to
undertake commercially reasonable efforts to maintain such listing for so long
as any Purchaser holds any Shares or Warrant Shares;


 


(i)            enter into customary
agreements (including, in the event the Holders elect to engage an underwriter
in connection with the Resale Registration Statement, an underwriting agreement
containing customary terms and conditions) and take all other actions as
reasonably required in order to expedite or facilitate the disposition of
Registrable Securities; provided, however, that the Company will
not be liable for any underwriter’s fees, commissions and discounts or similar
expenses;


 


(j)            make every reasonable
effort to obtain the withdrawal of any order suspending the effectiveness of
the Resale Registration Statement at the earliest possible time; and


 


(k)           until the date of the
filing of the Resale Registration Statement, without the prior written consent
of the Placement Agent, refrain from selling, contracting to sell or otherwise
disposing of or issuing any securities of the Company, except pursuant to
previously issued options, warrants, any agreements providing for anti-dilution
or other share issuance rights in existence on the date hereof, any employee
benefit or similar plan of the Company in existence on the date hereof, or any
strategic investment and/or alliance transactions, acquisitions or joint
ventures into which the Company may enter.


 


7.4.         Rule 144.  With a view to making available to the
Holders the benefits of certain rules and regulations of the Commission that at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:


 


(a)           make and keep public
information available, as those terms are understood and defined in Rule 144
under the Securities Act;


 


(b)           file with the Commission
in a timely manner all reports and other documents required of the Company
under the Exchange Act; and


 


(c)           so long as a Holder
owns any unregistered Registrable Securities, furnish to the Holder upon any
reasonable request a written statement by the Company as to its compliance with
the public information requirements of Rule 144 under the Securities Act, and
or the Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and the other Commission reports and documents of the Company as
the Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any Registrable Securities without
registration (excluding any reports or documents of the Company that the
Company, in its sole discretion, deems confidential).


 


7.5           Registration and
Selling Expenses.  All expenses
incurred by the Company in connection with the Company’s performance of or
compliance with this Section 7, including, without limitation,
(i) all Commission registration and filing fees, (ii) blue sky fees and
expenses, (iii) all necessary printing and duplicating expenses and (iv) all
fees and disbursements of counsel and accountants retained on behalf of the
Company (all expenses being called


 


17

















 


“Registration Expenses”),
will be paid by the Company.  The
Company shall not be liable for any fees, discounts or commissions to any
underwriter or any fees or disbursements of counsel for any underwriter in
respect of the securities sold by each Holder. 
Each Holder may, at its election, retain its own counsel and other
representatives and advisors as it chooses at its own expense.


 


7.6           No Delay.  The Holders will have no right to take any
action to restrain, enjoin or otherwise delay any registration pursuant to Section 7.2 hereof
as a result of any dispute, controversy or other matter that may arise with
respect to the interpretation or implementation of this Agreement.


 


7.7          Certain Obligations
of Holders.  (a) Each Holder agrees
that, upon receipt of any notice from the Company of the happening of (i) any
event of the kind described in Sections 7.3(f)(ii), 7.3(f)(iii), 7.3(f)(iv) or
7.3(f)(v)
hereof, or (ii) a determination by the Company’s Board of Directors
that it is advisable to suspend use of the Prospectus for a discrete period of
time due to pending corporate developments such as negotiation of a material
transaction which the Company in its sole discretion after consultation with
legal counsel, determines it would be obligated to disclose in the Resale
Registration Statement, which disclosure the Company believes would be
premature or otherwise inadvisable at such time or would have a material
adverse effect on the Company and its stockholders, such Holder will forthwith
discontinue disposition of such Registrable Securities covered by the Resale
Registration Statement or Prospectus until such Holder’s receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 7.3(b) hereof, or
until such Holder is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.  The
period of time in which the use of a Prospectus or Resale Registration
Statement is so suspended shall be referred to as a “Black-Out Period.”  The Company agrees to so advise such Holder
promptly of the commencement and termination of any such Black-Out Period, and
Purchasers agree to keep the fact of such Black-Out Period confidential.  The Company shall not impose a Black-Out
Period under this Section 7.7 for more than forty-fix (45)
consecutive days and not more than twice in any given twelve (12) month period.


 


(b)           As a condition to the
inclusion of its Registrable Securities, each Holder will furnish to the
Company the information regarding the Holder and the intended method of
distribution of the securities as the Company may from time to time request and
as is legally required in connection with any registration, qualification or
compliance referred to in this Section 7.


 


(c)           Each Holder hereby
covenants with the Company not to make any sale of the Registrable Securities
without effectively causing the prospectus delivery requirements under the
Securities Act to be satisfied.


 


(d)          Each Holder acknowledges
and agrees that the Registrable Securities sold pursuant to the Resale
Registration Statement are not transferable on the books of the Company unless
the stock certificate submitted to the transfer agent evidencing the
Registrable Securities is


 


18

















 


accompanied by a
certificate reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with this Agreement and the
Resale Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.


 


(e)            Each Holder is hereby
advised that the anti-manipulation provisions of Regulation M under the
Exchange Act may apply to sales of the Registrable Securities offered pursuant
to the Resale Registration Statement and agrees not to take any action with
respect to any distribution deemed to be made pursuant to the Resale Registration
Statement that constitutes a violation of Regulation M under the Exchange Act
or any other applicable rule, regulation or law.


 


(f)            At the end of the
Registration Period, the Holders of Registrable Securities included in the
Resale Registration Statement shall discontinue sales of shares pursuant
thereto upon receipt of notice from the Company of its intention to remove from
registration the shares covered thereby which remain unsold, and the Holders
shall promptly notify the Company of the number of shares registered that
remain unsold immediately upon receipt of the notice from the Company.


 


(g)           The rights to cause the
Company to register Registrable Securities granted to the Holders by the
Company under Section 7.2 may be assigned in whole or in part by a Holder in
connection with the transfer of such Registrable Securities, provided, that:
(i) the transfer of the Registrable Securities and the rights to register such
Registrable Securities are effected in accordance with applicable securities laws,
(ii) the transfer involves not less than the lesser of all of the Holder’s
Registrable Securities or 25,000 shares of Common Stock of the Registrable
Securities, (iii) the Holder gives prior written notice to the Company, and
(iv) the transferee agrees to comply with the terms and provisions of this
Agreement in a written instrument satisfactory in form and substance to the
Company and its counsel.  Except as
specifically permitted by this Section 7.7, the rights of a Holder with
respect to Registrable Securities will not be transferable to any other person
or entity, and any attempted transfer will cause all rights of the Holder
therein to be forfeited, void ab initio and of no further force and
effect.


 


(h)           With the written
consent of the Company and the Holders holding at a majority interest of the
Registrable Securities that are then outstanding, any provision of this Section 7
may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) or amended. Upon the effectuation of each waiver or amendment,
the Company will promptly give written notice thereof to the Holders, if any,
who have not previously received notice thereof or consented thereto in
writing.


 


7.8                           Indemnification. 
(a) The Company agrees to indemnify and hold harmless each Purchaser,
and each person, if any, who controls such Purchaser within the meaning of the
Securities Act and the Exchange Act and each of its and their respective
directors, officers, partners, principals, trustees and attorneys
(individually, an “Indemnified Party” and collectively, the “Indemnified
Parties”) from and against any and all losses, claims, damages,
liabilities, costs (including cost of investigation and defense and reasonable
attorneys’ fees and expenses) and


 


19

















 


expenses
(collectively, “Losses”) to which any Indemnified Party may become
subject whether or not involving a third-party claim, insofar as such Losses
arise out of, in any way relate to, or result from (i) any breach of any
representation or warranty made by the Company contained in or made pursuant to
this Agreement, or (ii) the failure of the Company to fulfill any agreement or
covenant contained in or made pursuant to this Agreement.  The Company agrees to reimburse any
Indemnified Party for all such Losses, other than third-party claims which
procedure is described in Section 7.8(f), as they are incurred or suffered by
such Indemnified Party.  The representations
and warranties of the Company set forth in this Agreement shall survive until
the later of (i) the eighteenth (18th) month anniversary of the date
hereof and (ii) the date that the Company files its Form 10-K for the year
ended December 31, 2004, and thereafter shall be no further force or effect,
provided that the representations and warranties made by the Company contained
in Sections 6.14, 6.19 and 6.20 shall survive until the expiration of the
applicable statute of limitations, and the representations and warranties made
by the Company in Sections 6.1, 6.2 and 6.23 shall survive indefinitely.  Following the expiration of the periods set
forth above with respect to any particular representation or warranty, the
Company shall not have any further liability with respect to such
representation or warranty.


 


(b)           Each Purchaser,
severally and not jointly, agrees to indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of the
Securities Act and the Exchange Act and each of its and their respective
directors, officers, partners, principals, trustees and attorneys
(individually, a “Company Indemnified Party” and collectively, the “Company
Indemnified Parties”) from and against any and all Losses to which any
Company Indemnified Party may become subject whether or not involving a
third-party claim, insofar as such Losses arise out of, in any way relate to,
or result from (i) any breach of any representation or warranty made by the
indemnifying Purchaser contained in or made pursuant to this Agreement, or (ii)
the failure of the indemnifying Purchaser to fulfill any agreement or covenant
contained in or made pursuant to this Agreement.  Each Purchaser agrees to reimburse any Company Indemnified Party
for all such Losses, other than third-party claims which procedure is described
in Section 7.8(f), as they are incurred or suffered by such Company Indemnified
Party.


 


(c)           Except as set forth
herein, all of the covenants, agreements and obligations of the parties hereto
shall survive the Closing indefinitely (or if indefinite survival is not
permitted by law, then for the maximum period permitted by applicable law).


 


(d)           The Company will
indemnify and hold harmless each Holder of Registrable Securities, each person,
if any, who controls such Holder within the meaning of the Securities Act or
the Exchange Act, their respective officers, directors, partners, members,
stockholders and trustees, against any Losses to which they may become subject
under the Securities Act, the Exchange Act of other federal or state law,
insofar as such Losses (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations (any of the
following, a “Violation”): (i) any untrue statement or alleged untrue
statement of a material fact contained in a registration statement covering the
Registrable Securities, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities


 


20

















 


law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law.  The Company, however,
shall not be liable in any such case for any such Losses (or action in respect
thereof) to the extent that they arise out of or are based upon a Violation
which arises out of or is based upon information furnished in writing expressly
for use in connection with such registration by any such Holder or controlling
person, as the case may be; provided, further, that the Company
will not be liable to any Holder or its officers, directors, partners, members,
stockholders and trustees, with respect to any Losses arising out of or based
upon any untrue statement or alleged untrue statement or omission or alleged
omission to state a material fact in any preliminary prospectus which is
corrected in an amended, supplemented or final prospectus if the purchaser
asserting such Losses purchased from such Holder, and was not, due to the fault
of such Holder, sent or given a copy of such amended, supplemented or final
prospectus at or prior to the sale of Registrable Securities to such purchaser.


 


(e)           In connection with any registration statement in which
a Holder of Registrable Securities is participating, each Holder will furnish
to the Company in writing the information as is reasonably requested by the
Company for use in any the registration statement or prospectus and will
severally, but not jointly, indemnify, the Company Indemnified Parties, against
any Losses resulting from any untrue statement or omission or alleged untrue
statement or omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement thereto
or necessary to make the statements therein not misleading, but only to the
extent the Losses are caused by an untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with the
written information so furnished by such Holder and stated specifically for use
in connection with the preparation of the registration statement or prospectus;
provided, however, that such Holder shall not be liable in any
such case to the extent that prior to the filing of any such registration
statement or prospectus or amendment or supplement thereto, such Holder has
furnished in writing to the Company information expressly for use in such
registration statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading information previously furnished to the
Company.  Notwithstanding the foregoing
or any other provision of this Agreement, in no event will a Holder of
Registrable Securities be liable for any of the Losses in excess of the net
proceeds received by the Holder in connection with its disposition of
Registrable Securities.


 


(f)            Promptly after receipt by an indemnified
party under this Section 7.8 of notice of any claim as to which indemnity may
be sought, including, without limitation, the commencement of any action or
proceeding, the indemnified party will, if a claim in respect thereof may be
made against the indemnifying party under this Section, promptly notify the
indemnifying party in writing of the commencement thereof; provided that the
failure of the indemnified party to so notify the indemnifying party will not
relieve the indemnifying party from its obligations under this Section except
to the extent that the indemnifying party is adversely affected by the failure.
In case any action or proceeding is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the
indemnifying party and its counsel will conduct the defense of any action with
counsel approved by the indemnifying party 
although the indemnified party will be entitled to participate therein
at its own expense, and after notice from the indemnifying party to the
indemnified party of its


 


21

















 


election so to assume the
defense thereof, the indemnifying party will not be liable to the indemnified
party under this Section for any legal or any other expenses subsequently
incurred by the indemnified party in connection with the defense thereof unless
incurred at the written request of the indemnifying party. Notwithstanding the
above, the indemnified party will have the right to employ counsel of its own
choice in any action or proceeding (and be reimbursed by the indemnifying party
for the reasonable fees and expenses of the counsel and other reasonable costs
of the defense) if representation of the indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests or conflicts between the indemnified party and
any other party represented by the counsel in the action or proceeding or
counsel to the indemnified party is of the opinion that it would not be
desirable for the same counsel to represent both the indemnifying party and the
indemnified party because the representation might result in a conflict of
interest; provided, however, that the indemnifying party will not
in connection with any one action or proceeding or separate but substantially
similar actions or proceedings arising out of the same general allegations, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all indemnified parties, except to the extent that
local counsel, in addition to regular counsel, is required in order to
effectively defend against the action or proceeding.  An indemnifying party will not be liable to any indemnified party
for any settlement or entry of judgment concerning any action or proceeding
effected without the consent of the indemnifying party.


 


(g)           If the indemnification
provided for in this Section 7.8 is held by a court of competent
jurisdiction to be unavailable under applicable law to an indemnified party in
respect of any Losses, then each applicable indemnifying party, in lieu of
indemnifying the indemnified party, will contribute to the amount paid or
payable by the indemnified party as a result of the Losses in the proportion as
is appropriate to reflect the relative fault of the Company on the one hand and
of the Indemnified Parties on the other in connection with the statements or
omissions which resulted in the Losses, as well as any other relevant equitable
considerations including the relative benefits to the parties.  The relative fault of the Company on the one
hand and of the Indemnified Parties on the other will be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Company or by the Indemnified Parties and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent the statement or omission. The amount paid or payable by a
party as a result of the Losses referred to above will be deemed to include,
subject to the limitations set forth in Section 7.8(f), any legal or other fees or
expenses reasonably incurred by the party in connection with investigating or
defending any action or claim.  No
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity that is not guilty of fraudulent misrepresentation.  In no event will a Holder be liable under
this Section
7.8 for any amount in excess of the net proceeds received by the
Holder in connection with its sale of Registrable Securities.


 


Section 8.               Legends.  Purchaser acknowledges that the certificates
evidencing the Shares, the Warrants and the Warrant Shares shall bear the
following, or substantially similar, legends and such other legends as may be
required by state securities or “blue sky” laws:


 


22

















 


“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES
OR “BLUE SKY” LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS, OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.”


 


Section 9.               Termination.


 


9.1           Termination.  This Agreement may be terminated at any time
with respect to the applicable parties prior to the Closing:


 


(a)           by mutual written
agreement of the Company and Purchasers;


 


(b)           by a Purchaser, on the
one hand, or the Company, on the other hand (provided that the terminating
party (or parties) is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) if the
Closing shall not have been consummated on or before September 30, 2003;


 


(c)           by a Purchaser, on the
one hand, or the Company, on the other hand, if a court of competent
jurisdiction or a governmental, regulatory or administrative agency or
commission shall have issued a non-appealable final order, decree or ruling or
taken any other action having the effect of permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement;


 


(d)           by a Purchaser, on the
one hand, or the Company, on the other hand, (provided that the terminating
party (or parties) is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in the event
of a material breach by the other party (or parties) of any representation or
warranty contained in this Agreement that cannot be or has not been cured
within ten (10) days after the giving of written notice to the breaching party
of such breach; or


 


(e)           by a Purchaser, on the
one hand, or the Company, on the other hand, (provided that the terminating
party (or parties) is not then in material breach of any representation,


 


23

















 


warranty, covenant or
other agreement contained in this Agreement) in the event of a material breach
by the other party of any covenant or agreement contained in this Agreement
that cannot be or has not been cured within ten (10) days after the giving of
written notice to the breaching party of such breach.


 


9.2           Effect of
Termination.  In the event of the
termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void with respect to the applicable parties
and there shall be no liability on the part of any such party hereto (or any
stockholder, director, officer, partner, employee, agent, consultant or
representative of such party); provided, however, that nothing
contained in this Agreement shall relieve any party from liability for any
breach of this Agreement.


 


Section 10.             Miscellaneous.


 


10.1         Notices.  Any notice or other communication given
hereunder by any party hereto to any other party hereto shall be in writing and
delivered personally or by facsimile transmission or sent by registered or
certified mail or by any express mail or overnight courier service, postage or
fees prepaid:


 


If to
the Company:


 


VCampus
Corporation

1850 Centennial Park Drive

Suite 200

Reston, VA  20191

Attention:       Chief
Financial Officer


Facsimile:        (703) 893-1905


 


With a
copy to:


 


Wyrick Robbins
Yates & Ponton LLP

4101 Lake Boone Trail, Suite 300

Raleigh, NC  27607

Attention:       Kevin A.
Prakke, Esq.

Facsimile:        (919) 781-4865


 


24

















 


If to
Purchasers:


 


To the names and
addresses on Exhibit A.


 


With a copy to:


 


Brean Murray &
Co., Inc.

570 Lexington Avenue

New York, New York  10022

Attention:       A. Brean
Murray

Facsimile:        (212) 702-6649


 


With a copy to:


 


Piper Rudnick LLP

1251 Avenue of the Americas

New York, New York  10020

Attention:       Michael
Hirschberg, Esq.

Facsimile:        (212) 835-6001


 


Any notice that is delivered personally or by
facsimile transmission in the manner provided herein shall be deemed to have
been duly given to the party to whom it is directed upon actual receipt by such
party or its agent.  Any notice that is
addressed and mailed or sent by courier in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the fourth
business day after the day it is so placed in the mail or, if earlier, the time
of actual receipt.


 


10.2         Successors and Assigns. 
Subject to Section 7.7(g), this Agreement will be
binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and assigns.


 


10.3         Entire Agreement.  This
Agreement sets forth the entire agreement and understanding among the parties
as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them;
provided that any confidentiality agreement between the Company and any of
Purchasers shall remain in effect. This Agreement may be amended only by mutual
written agreement of the Company and Purchasers holding a majority interest of
the Registrable Securities, and the Company may take any action herein prohibited
or omit to take any action herein required to be performed by it, and any
breach of any covenant, agreement, warranty or representation may be waived,
only if the Company has obtained the written consent or waiver of Purchasers.


 


10.4         Governing Law; Consent
to Jurisdiction; etc.  (a)  Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the State of Delaware without regard to that
State’s conflicts of law principles.  In
the event that a judicial proceeding is necessary, the parties who are not
citizens or residents of the


 


25

















 


United States agree that
the sole forum for resolving disputes arising out of or relating to this
agreement is the federal or state courts in the State of Delaware, and all
related appellate courts (collectively, the “Courts”), and each
Purchaser irrevocably and unconditionally consents to the jurisdiction of the
Courts.


 


(b)           Each of the parties who
are not citizens or residents of the United States, irrevocably and
unconditionally consents to venue in the Courts, and irrevocably and
unconditionally waives any objection to the laying of venue of any judicial
proceeding in the Courts, and agrees not to plead or claim in any Court that
any judicial proceeding brought in any court has been brought in an
inconvenient forum.


 


10.5         Severability.  The holding of any provision of this
Agreement to be invalid or unenforceable by a court of competent jurisdiction
will not affect any other provision of this Agreement, which will remain in
full force and effect. If any provision of this Agreement is declared by a
court of competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the provision will be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law
and the remaining conditions and provisions or portions thereof will
nevertheless remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provisions will be deemed dependent
upon any other covenant or provision unless so expressed herein.


 


10.6         No Waiver.  A waiver by either party of a breach of any
provision of this Agreement will not operate, or be construed, as a waiver of
any subsequent breach by that same party.


 


10.7         Further Assurances.  The parties agree to execute and deliver all
further documents, agreements and instruments and take further action as may be
necessary or appropriate to carry out the purposes and intent of this
Agreement.  Any documentary, stamp tax
or similar issuance or transfer taxes due as a result of the conveyance,
transfer or sale of the Units between Purchasers (or any of their permitted
transferees), on the one hand, and the Company, on the other hand, pursuant to
this Agreement shall be borne by Purchasers (or their respective permitted
transferees).


 


10.8         Counterparts.  This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
will together constitute the same instrument.


 


10.9         Entire Agreement. 
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof, supersedes all prior written or oral
agreements, and may be amended or superseded only by a writing executed by the
parties.


 


10.10       No Third Party
Beneficiaries.  Nothing in this
Agreement creates in any person not a party to this Agreement any legal or
equitable right, remedy or claim under this Agreement, and this Agreement is
for the exclusive benefit of the parties hereto.  The parties expressly


 


26

















 


recognize that
this Agreement is not intended to create a partnership, joint venture or other
similar arrangement between any of the parties or their respective affiliates.


 


10.11       Headings.  The headings in this Agreement are solely
for convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.


 


10.12       Publicity Restrictions.  No press release or other public disclosure
relating to the transactions contemplated by this Agreement may be issued or
made by or on behalf of any Purchaser without prior consultation with and
written consent from the Company, except as required by applicable law, court
process or stock exchange rules, in which case Purchaser required to make the
disclosure will allow the Company reasonable time (to the extent practicable)
to comment thereon in advance of the issuance.


 


 


[Remainder of page intentionally left
blank.]


 


27

















 


IN WITNESS WHEREOF, the
parties hereto have executed this Securities Purchase Agreement as of the date
and year this subscription has been accepted by the Company as set forth below.


 


	
   

  	
   

  	
   

  
	
   

  	
  Print Name of Purchaser

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature of Purchaser
  or

  
	
   

  	
   

  	
  Authorized Signatory)

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dollar Amount Invested:
  $

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted on September
  30, 2003 by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  VCampus Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   Name:

  	
   

  	
   

  
	
   

  	
   Title:

  	
   

  	
   

  
						



 


28

















 


Exhibit A


 


 


29