**Exhibit10.91**

 

**PURCHASEAGREEMENT**

 

THIS PURCHASE AGREEMENT (“**Agreement**”) is made as of the 23rd dayof March 2004 by and among VCampus Corporation, a Delaware corporation (the “**Company**”),the Purchasers set forth on the signature pages affixed hereto (each a “**Purchaser**”and collectively the “**Purchasers**”), and Sherleigh Associates,LLC, in its capacity as the collateral agent (together with its successors insuch capacity, the “**Collateral Agent**”).

 

**Recitals**

 

A.                                   TheCompany and the Purchasers are executing and delivering this Agreement inreliance upon the exemption from securities registration afforded bySection 4(2) under the Securities Act of 1933, as amended (“**1933 Act**”),and the provisions of Regulation D (“**Regulation D**”), as promulgated by theU.S. Securities and Exchange Commission (the “**SEC**”) under the 1933Act;

 

B.                                     ThePurchasers have agreed to purchase, and the Company has agreed to sell andissue to the Purchasers, upon the terms and subject to the conditions stated inthis Agreement, 20.25 units of the Company’s securities (each a “**Unit**” and, collectively, the “**Units**”)at a purchase price of $200,000 per Unit. Each Unit consists of (i) $118,500 in principal amount of the Company’s2004 Series A Senior Secured Convertible Notes due April 1, 2009 in theform annexed hereto as **Exhibit****A**(each a “**Series A Note**”and, collectively, the “**Series A Notes**”), which Series A Notesshall be convertible into shares of common stock of the Company, $0.01 parvalue per share (the “**Common Stock**”), in accordance with theterms of the Series A Notes; (ii) 50,000 shares of Common Stock (the “**Unit Shares**”); and (iii) a warrant(each a “**Series A Warrant**”and, collectively, the “**Series A Warrants**”) to purchase anaggregate of 61,350 shares of Common Stock in the form annexed hereto as **Exhibit B**. Each Purchaser shall purchase the number of Units at the Closing as setforth on the Purchasers’ signature page attached hereto;

 

C.                                     Certainof the Purchasers have agreed to purchase, and the Company has agreed to selland issue to such Purchasers, upon the terms and subject to the conditionsstated in this Agreement, up to (i) $1,250,000 in aggregate principal amount ofthe Company’s 2004 Series B Senior Secured Convertible Notes due April 1,2009 in the form annexed hereto as **Exhibit****C**(each a “**Series B Note**”and, collectively, the “**Series B Notes**”, and the Series A Notestogether with the Series B Notes, the “**Notes**”), which Series B Notes shall beconvertible into shares of the Common Stock, in accordance with the terms ofthe Series B Notes; and (ii) warrants, substantially in the form attachedhereto as **ExhibitB** (each a “**Series B**Warrant”and, collectively, the “**Series B Warrants**”, and the Series AWarrants together with the Series B Warrants, the “**Warrants**”), topurchase an aggregate of 30,675 shares of Common Stock for each $100,000principal amount of the Series B Notes. The Purchasers shall purchase the Series B Notes and the Series BWarrants at the Closing as set forth on the Purchasers’ signature page attachedhereto; and

 

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D.                                    Contemporaneouswith the execution and delivery of this Agreement, the parties hereto areexecuting and delivering (a) a Registration Rights Agreement, in the formannexed hereto as **Exhibit****D**(the “**RegistrationRights Agreement**”), pursuant to which the Company has agreed toprovide certain registration rights under the 1933 Act and the rules andregulations promulgated thereunder, and applicable state securities laws; and(b) a Security Agreement, and financing statement, in the form annexed hereto as**Exhibit****E** (the “**Security Agreement**”)granting to the holders of the Notes a first priority lien on all assets of theCompany.

 

In consideration of the mutual promises made herein and for other goodand valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows:

 

1.                                       Definitions.  In addition to those terms defined above andelsewhere in this Agreement, for the purposes of this Agreement, the followingterms shall have the meanings here set forth:

 

1.1.      “AdditionalSecurities” means the additional Common Stock and the additional Warrantsissuable to the Purchasers in the event the Milestone is not achieved.

 

1.2.      “Affiliate”means, with respect to any Person, any other Person which directly or indirectlycontrols, is controlled by, or is under common control with, such Person, where“control” means the possession, direct or indirect, of the power todirect or cause the direction of the management and policies of a Person,whether through the ownership of voting securities, by contract or otherwise.

 

1.3.      “Agreements”means this Agreement, the Registration Rights Agreement, the SecurityAgreement, the Notes, the Warrants and any other agreement entered into, now orin the future, by the Company in connection with this Agreement or any of theother Agreements.

 

1.4.      “Closing”means the consummation of the transactions contemplated by this Agreement.

 

1.5.      “ClosingDate” is defined in Section 3.1.

 

1.6.      “CollateralAgent” means Sherleigh Associates,LLC, in its capacity as Collateral Agent under the Security Agreement,and any successor thereto in such capacity.

 

1.7.      The“Company” shall refer to the Company (as defined in the first paragraphhereof).

 

1.8.      “ConversionPrice” shall have the meaning as defined in the Notes.

 

1.9.      “DisclosureSchedule” is defined in Section 4.

 

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1.10.              “Holder” means (i) any Person inwhose name a Note or a Warrant is registered from time to time, or (ii) if theNote or the Warrant is held by a financial intermediary for the benefit ofother Persons, such other Persons as indicated in the records of such financialintermediary.

 

1.11.              “Material Adverse Effect” means amaterial adverse effect on the (i) condition (financial or otherwise),business, assets or results of operations of the Company; (ii) ability of theCompany to perform any of its material obligations under the terms of theAgreements; or (iii) material rights and remedies of a Purchaser under theterms of the Agreements.

 

1.12.              “Milestone” means the execution onor before September 30, 2004, of definitive agreements between the Companyand at least six new “Premier Partners” for the co-publishing of content whichwill be hosted by the Company, each of which agreements is expected, based uponthe good faith projections of the Company and the Premier Partner, to ramp upto an annual rate of $500,000 of revenue for the Company by September 1,2005.  A Premier Partner shall mean acompany that provides a credential or test, which can be ported on line, to amembership or number of corporate enterprise employees, greater than 5,000 in agrowing global market.

 

1.13.              “Notes” shall have the meaning setforth in the recitals to this Agreement.

 

1.14.              “Person” means an individual,corporation, partnership, limited liability company, trust, business trust,association, joint stock company, joint venture, pool, syndicate, soleproprietorship, unincorporated organization, governmental authority or anyother form of entity not specifically listed herein.

 

1.15.              “Required Holders” means theHolders of not less than 50% in aggregate principal amount of the Notes thenoutstanding exclusive of any Notes then owned by either the Company or any ofits Affiliates.

 

1.16.              “SEC” means the U.S. Securitiesand Exchange Commission.

 

1.17.              “SEC Filings” is defined inSection 4.6.

 

1.18.              “Securities” means the UnitShares, Notes, Warrants, Underlying Shares and Warrant Shares.

 

1.19.              “Series A Notes” shall have themeaning set forth in the recitals to this Agreement.

 

1.20.              “Series A Warrants” shall have themeaning set forth in the recitals to this Agreement.

 

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1.21.              “Series B Notes” shall have themeaning set forth in the recitals to this Agreement.

 

1.22.              “Series B Warrants” shall have themeaning set forth in the recitals to this Agreement.

 

1.23.              “Shareholder Approval” means theapproval of the stockholders of the Company at a duly convened meeting ofstockholders, of the issuance of all the Securities and Additional Securities,each as defined in this Agreement, including the Unit Shares, the Notes and theWarrants.

 

1.24.              “Technology Collateral EscrowAgreement” means the Technology Collateral Escrow Agreement, among theCompany, the Collateral Agent and DSI Technology Escrow Services, Inc., datedas of the date hereof.

 

1.25.              “Underlying Shares” means theshares of Common Stock issued or issuable upon conversion of, as payment forinterest under, or otherwise pursuant to, the Notes.

 

1.26.              “Unit Shares” shall have themeaning set forth in the recitals to this Agreement.

 

1.27.              “Warrants” shall have the meaningset forth in the recitals to this Agreement.

 

1.28.              “Warrant Price” shall have themeaning set forth in the Warrants.

 

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

 

1.30.              “1933 Act” shall have the meaningset forth in the recitals to this Agreement.

 

1.31.              “1934 Act” means the SecuritiesExchange Act of 1934, as amended, and the rules and regulations promulgatedthereunder.

 

2.                                       Purchaseand Sale of the Units.  Subject tothe terms and conditions of this Agreement and on the basis of therepresentations and warranties made herein, each of the Purchasers herebyseverally, and not jointly, agrees to purchase, and the Company hereby agreesto sell and issue to each of the Purchasers, (a) the number of Units set forthon such Purchaser’s signature page attached hereto at the Closing for apurchase price of $200,000 per Unit (the “**Series A Purchase Price**”), and (b) theSeries B Notes in the aggregate principal amount set forth on such Purchaser’ssignature page, along with the related Series B Warrants for a purchase priceequal to the aggregate principal amount of the Series B Notes purchased by suchPurchaser  (the “**Series B Purchase Price**”,and together with the Series A Purchase Price,the “**Purchase**

 

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**Price**”).  The Purchase Price shall be payable bycheck, wire transfer, cancellation of indebtedness or as otherwise agreed to bythe Company and the Purchaser.

 

3.                                       Closing.

 

3.26.                        ClosingProcedure.  Upon receipt by theCompany of executed signature pages to this Agreement from Purchasers for thepurchase of 20 Units, the Company shall promptly notify such Purchasers and seta date for the Closing, which shall be on or before March 23, 2004 or asotherwise mutually agreed to by the Company and the Purchasers (the “**ClosingDate**”).

 

3.27.                        ClosingDate Deliveries.

 

(a)                                  Onthe Closing Date, the Company shall deliver to the Purchasers:

 

(i)                                     TheSeries A Notes in the form attached as **Exhibit****A**;

 

(ii)                                  TheSeries B Notes, if applicable, in the form attached hereto as **Exhibit C**;

 

(iii)                               The Warrants in the formattached as **Exhibit****B**;

 

(iv)                              TheUnit Shares;

 

(v)                                 Theexecuted Registration Rights Agreement in the form attached as **Exhibit****D**;

 

(v)                                 Theexecuted Security Agreement, and financing statement, in the form attached as **Exhibit E** and such other documents,instruments and agreements and delivery of such property as may be necessaryor, in the opinion of the Collateral Agent, desirable to perfect the CollateralAgent’s security interest in and on the Collateral (as such term is defined inthe Security Agreement), including, without limitation, the TechnologyCollateral Escrow Agreement;

 

(vi)                              Acertificate executed by the Chief Executive Officer and Chief Financial Officerof the Company, in the form attached as **Exhibit****F**;

 

(vii)                           The opinion of counsel tothe Company in the form attached as **Exhibit G**;

 

(viii)                        All consents and waiversrequired under or in respect of any agreement or instrument to which theCompany is a party or by which any of its properties or assets is bound, or

 

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under any applicable law, that are necessary orappropriate in connection with the transactions contemplated by the Agreements,in form and substance satisfactory to the Purchasers and the Collateral Agent;and

 

(ix)                                Aconsent to the sale and issuance of the Securities in the form attached heretoas **Exhibit****H**, executed by the holders of at least 40%of the issued and outstanding shares of Common Stock.

 

(b)                                 Onthe Closing Date, the Purchasers shall deliver to the Company:

 

(i)                                     Theaggregate Purchase Price set forth on the Purchasers’ signature pages heretofor the Units to be purchased; and

 

(ii)                                  Theexecuted Registration Rights Agreement.

 

4.                                       Representationsand Warranties of the Company. Except as disclosed in the Company’s SEC Filings (as defined below) orin the Company disclosure schedule delivered herewith (the “**Disclosure Schedule**”), the Companyhereby represents and warrants to the Purchasers that:

 

4.1                                 Organization,Good Standing and Qualification. The Company is a corporation validly existing and in good standing underthe laws of Delaware and has all requisite corporate power and authority tocarry on its business as now conducted and own its properties.  The Company is duly qualified to do businessas a foreign corporation and is in good standing in each jurisdiction in whichthe conduct of its business or its ownership or leasing of property makes suchqualification or licensing necessary unless the failure to so qualify would notresult in a Material Adverse Effect.

 

4.2                                 Authorization.  The Company has full corporate power andauthority and has taken all requisite action on the part of the Company (otherthan obtaining the Shareholder Approval) necessary for (i) the authorization,execution and delivery of the Agreements, (ii) authorization of the performanceof all obligations of the Company hereunder and thereunder, and (iii) theauthorization, issuance (or reservation for issuance) and delivery of theSecurities.  The Agreements constitutethe legal, valid and binding obligations of the Company, enforceable againstthe Company in accordance with their terms, subject to bankruptcy, insolvency,fraudulent transfer, reorganization, moratorium and similar laws of generalapplicability, relating to or affecting creditors’ rights generally and generalprinciples of equity that restrict the availability of equitable or legalremedies.

 

4.3                                 Capitalization.  Set forth in Section 4.3 of theDisclosure Schedule is (a) a description of the authorized capital stockof the Company on the date hereof; (b) the number of shares of capital stockissued and outstanding on the date hereof; (c) the number of shares of capitalstock issuable pursuant to the Company’s stock plans; and (d) the number ofshares of capital stock issuable and reserved for issuance pursuant tosecurities (other than the Notes and

 

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the Warrants) exercisable for, or convertible into orexchangeable for any shares of capital stock (assuming the transactionscontemplated herein have been effected solely for the purpose of computingantidilutive provisions in any such securities).  All of the issued and outstanding shares of the Company’s capitalstock have been duly authorized and validly issued and are fully paid andnonassessable.  No Person is entitled topreemptive or similar statutory or contractual rights with respect to anysecurities of the Company.

 

4.4                                 ValidIssuance.  As of the Closing, theCompany has reserved a sufficient number of shares of Common Stock for theissuance of the Securities, the Additional Securities and any additional sharesissuable pursuant to the Agreements. The Notes, Unit Shares, Warrants, Underlying Shares, Warrant Shares andAdditional Securities are duly authorized, and such Securities, when issued inaccordance herewith and, in respect of the Underlying Shares and WarrantShares, pursuant to the terms of the Notes and Warrants, respectively, will bevalidly issued, fully paid, non-assessable and free and clear of allencumbrances and restrictions imposed by or through the Company, except forrestrictions on transfer imposed by applicable securities laws.

 

4.5                                 Consents.  The execution, delivery and performance bythe Company of the Agreements and, subject to the truth and accuracy of therepresentations made by the Purchasers in Section 5 of this Agreement, theoffer, issuance and sale of the Securities, require no consent of, action by orin respect of, or filing with, any Person, agency, or official, other than theShareholder Approval contemplated hereunder and filings that have been madepursuant to applicable state securities laws and post-sale filings pursuant toapplicable state and federal securities laws.

 

4.6                                 SECFilings; Business.   TheCompany has filed all reports, schedules, forms, statements and other documentsrequired to be filed by it with the SEC pursuant to the reporting requirementsof the 1934 Act (all of the foregoing filed prior to or on the date hereof andall registration statements and exhibits included therein and financialstatements and schedules thereto and documents incorporated by referencetherein being hereinafter referred to as the “**SEC Filings**”).  As of the date of filing of such SECFilings, each such SEC Filing, as it may have been subsequently amended byfilings made by the Company with the SEC prior to the date hereof, complied inall material respects with the requirements of the 1934 Act and the rules andregulations of the SEC promulgated thereunder applicable to such SECFiling.  None of the SEC Filings, as ofthe date filed and as they may have been subsequently amended by filings madeby the Company with the SEC prior to the date hereof, contained any untruestatement of a material fact or omitted to state a material fact required to bestated therein or necessary in order to make the statements therein, in thelight of the circumstances under which they were made, not misleading.  As of their respective dates, the financialstatements of the Company included in the SEC Filings complied as to form inall material respects with applicable accounting requirements and publishedrules and regulations of the SEC with respect thereto.  Such financial statements have been preparedin accordance with generally accepted accounting principles, consistentlyapplied, during the periods involved (except (i) as may be otherwiseindicated in such financial statements or the notes thereto, or (ii) inthe case of unaudited interim statements, to the extent they may excludefootnotes or may be condensed or summary statements) and fairly present in allmaterial respects the financial position of the Company as of the dates thereofand the results of

 

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its operations and cash flows for the periods thenended (subject, in the case of unaudited statements, to normal year-end auditadjustments).  The Company is engagedonly in the business described in the SEC Filings and the SEC Filings contain acomplete and accurate description of the business of the Company in allmaterial respects.  Except as set forthin Section 4.6 of the Disclosure Schedule, the Company has not provided toany Purchaser (i) any information required to be filed under the 1934 Act thathas not been so filed or (ii) any material nonpublic information.

 

4.7                                 Useof Proceeds.  The proceeds of thesale of the Units, the Series B Notes and the Series B Warrants hereunder shallbe used by the Company for the following purposes: (a) the repayment ofindebtedness disclosed in the SEC Filings or otherwise disclosed inSection 4.7 of the Disclosure Schedule, and (b) general corporate purposesand working capital.

 

4.8                                 NoMaterial Adverse Change.  Except asdisclosed and described in the Company’s SEC Filings or in Section 4.8 ofthe Disclosure Schedule, since December 31, 2002, there has not been:

 

(a)                                  anychange in the consolidated assets, liabilities, financial condition oroperating results of the Company, except changes in the ordinary course ofbusiness which have not had, in the aggregate, a Material Adverse Effect;

 

(b)                                 anydeclaration or payment of any dividend, or any authorization or payment of anydistribution, on any of the capital stock of the Company, or any redemption orrepurchase of any securities of the Company;

 

(c)                                  anymaterial damage, destruction or loss, whether or not covered by insurance, toany assets or properties of the Company;

 

(d)                                 anywaiver by the Company of a material right or of a material debt owed to it;

 

(e)                                  anysatisfaction or discharge of any lien, claim or encumbrance or payment of anyobligation by the Company, except in the ordinary course of business and whichis not material to the assets, properties, financial condition, operatingresults or business of the Company taken as a whole (as such business ispresently conducted and as it is proposed to be conducted);

 

(f)                                    anymaterial change or amendment to or breach or default of a material contract orarrangement by which the Company or any of its assets or properties is bound orsubject;

 

(g)                                 anymaterial labor difficulties or labor union organizing activities with respectto employees of the Company;

 

(h)                                 any  material transaction entered into by theCompany other than in the ordinary course of business; or

 

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(i)                                     anyother event or condition of any character that the Company believes will have aMaterial Adverse Effect.

 

4.9                                 NoConflict, Breach, Violation or Default; Compliance with Law. The execution,delivery and performance of the Agreements by the Company and the issuance andsale of the Securities and the Additional Securities will not conflict with orresult in a breach or violation of any of the terms and provisions of,constitute a default under, require any consent, approval or filing under,result in or require the creation or imposition of any lien or encumbrance uponor with respect to the Company’s property under (i) the Company’s Certificateof Incorporation (including any certificates of designation) or the Company’sBylaws, both as in effect on the date hereof, (ii) any statute, rule, regulation or order of any governmental agencyor body or any court, domestic or foreign, having jurisdiction over the Companyor any of its properties; or (iii) any material contract, loan or instrument bywhich the company or its property is bound. The Company (i) is not to its knowledge in violation of any statute,rule or regulation applicable to the Company or its assets or its activities,(ii) is not in violation of any judgment, order or decree applicable to theCompany or its assets; and (iii) has not received notice from any Person of anyclaim, investigation or inquiry, that, if adversely determined, would renderthe preceding sentence untrue or incomplete and the Company is aware of nofacts or circumstances which could give rise to such a claim, investigation orinquiry.

 

4.10                           TaxMatters.  Except as set forth inSection 4.10 of the Disclosure Schedule, the Company has timely preparedand filed all material tax returns required to have been filed by the Companywith all appropriate governmental agencies and timely paid all material taxesowed by it, in each case taking into account permitted extensions andassessments challenged in good faith and disclosed in the SEC Filings.  The charges, accruals and reserves on thebooks of the Company in respect of taxes for all fiscal periods are adequate inall material respects, and there are no material unpaid assessments against theCompany nor, to the knowledge of the Company, any basis for the assessment ofany additional taxes, penalties or interest for any fiscal period or audits by anyfederal, state or local taxing authority except such as which are notmaterial.  All material taxes and otherassessments and levies that the Company is required to withhold or to collectfor payment have been duly withheld and collected and paid to the propergovernmental entity or third party when due. Except as set forth in Section 4.10 of the Disclosure Schedule,there are no tax liens or claims pending or threatened against the Company orany of its respective assets or property. There are no outstanding tax sharing agreements or other sucharrangements between the Company and any other corporation or entity.

 

4.11                           Titleto Properties and Securities. Except as disclosed in the SEC Filings or as set forth inSection 4.11 of the Disclosure Schedule, the Company has good andmarketable title to all properties and assets owned by it and material to itsoperations, in each case free from liens, encumbrances and defects that wouldmaterially affect the value thereof or materially interfere with the use madeor currently planned to be made thereof by them; and except as disclosed in theSEC Filings, the Company holds any leased real or personal property material tothe Company’s operations under valid and enforceable leases with no exceptionsthat would materially interfere with the use made or currently planned to bemade thereof by them.

 

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4.12                           Certificates,Authorities and Permits.  TheCompany possesses adequate certificates, authorities or permits issued byappropriate governmental agencies or bodies necessary to conduct the businessnow operated by it and has not received any notice of proceedings relating tothe revocation or modification of any such certificate, authority or permitthat, if determined adversely to the Company, would individually or in theaggregate have a Material Adverse Effect.

 

4.13                           NoLabor Disputes.  No material labordispute with the employees of the Company exists or, to the knowledge of theCompany, is imminent.

 

4.14                           IntellectualProperty.  Except as set forth inSection 4.14 of the Disclosure Schedule, the Company owns or possessesadequate rights or licenses to the inventions, know-how, patents, patentrights, copyrights, trademarks, trade names, licenses, approvals, governmentalauthorizations, trade secrets confidential information and other intellectualproperty rights necessary to conduct the business now operated by it andpresently contemplated to be operated by it (collectively, “**IntellectualProperty Rights**”), free and clear of all liens, securityinterests, charges, encumbrances, equities and other adverse claims, and theCompany has not received any notice of infringement of or conflict withasserted rights of others with respect to any Intellectual Property Rights.  Section 4.14 of the DisclosureSchedule includes a complete and accurate description of the Company’smaterial Intellectual Property Rights, other than off-the-shelf commercial orshrinkwrap software and excluding all software or other material that is distributedas “free software,” “open source software” or under a similar licensing ordistribution model.  Except as set forthin Section 4.14 of the Disclosure Schedule, none of the Company’sIntellectual Property Rights have expired or terminated, or are expected toexpire or terminate within three years from the date of this Agreement, exceptwhere such expirations or termination would not result, either individually orin the aggregate, in a Material Adverse Effect. To the knowledge of theCompany, the Company’s patents and other Intellectual Property Rights and thepresent activities of the Company do not infringe any patent, copyright,trademark, trade name or other proprietary rights of any third party where suchinfringement may cause a Material Adverse Effect on the Company, and there isno claim, action or proceeding being made or brought against, or to theCompany’s knowledge, being threatened against, the Company regarding itsIntellectual Property Rights, and the Company is unaware of any facts or circumstanceswhich might give rise to any of the foregoing. The Company has no knowledge of the material infringement of itsIntellectual Property Rights by third parties and has no reason to believe thatany of its Intellectual Property Rights is unenforceable, and the Company isunaware of any facts or circumstances which might give rise to any of theforegoing.  The Company has takencommercially reasonable security measures to protect the secrecy, confidentialityand value of all of its intellectual properties.

 

4.15                           EnvironmentalMatters.  The Company is not inviolation of any statute, rule, regulation, decision or order of anygovernmental agency or body or any court, domestic or foreign, relating to theuse, disposal or release of hazardous or toxic substances or relating to theprotection or restoration of the environment or human exposure to hazardous ortoxic substances (collectively, “**Environmental Laws**”), does not own oroperate any real property contaminated with any substance that is subject toany Environmental Laws, is not liable for any off-site disposal orcontamination pursuant to any Environmental Laws, and is not subject to anyclaim

 

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relating to any Environmental Laws, which violation,contamination, liability or claim would individually or in the aggregate have aMaterial Adverse Effect; and the Company is not aware of any pendinginvestigation that might lead to such a claim.

 

4.16                           Absenceof Litigation.  Except as set forthin the Company’s SEC Filings or in Section 4.16 of the DisclosureSchedule, there is no action, suit, proceeding, inquiry or investigation beforeor by any court, public board, government agency, self-regulatory organizationor body pending or, to the knowledge of the Company, threatened against theCompany or any of the Company’s officers or directors in their capacities assuch, that would reasonably be expected to result in judgments against theCompany in an amount, individually or in the aggregate, in excess of $50,000.

 

4.17                           FinancialStatements.  The financialstatements included in the Company’s SEC Filings present fairly and accuratelyin all material respects the consolidated financial position of the Company asof the dates shown and its consolidated results of operations and cash flowsfor the periods shown, and such financial statements have been prepared inconformity with generally accepted accounting principles applied on aconsistent basis with the Company’s past practices, except as set forth in Section 4.17of the Disclosure Schedule.  Except asset forth in the SEC Filings filed prior to the date hereof, the Company has noliabilities, contingent or otherwise, except those (a) not required undergenerally accepted accounting principles to be reflected in the Company’sfinancial statements, (b) incurred in the ordinary course of business, or (c)which individually or in the aggregate are not material to the financialcondition or operating results of the Company.

 

4.18                           InsuranceCoverage.  The Company maintains infull force and effect insurance coverage that the Company reasonably believesto be adequate against all liabilities, claims and risks against which it iscustomary for comparably situated companies to insure.

 

4.19                           Brokersand Finders.  The Purchasers shallhave no liability or responsibility for the payment of any commission orfinder’s fee to any third party in connection with or resulting from thisagreement or the transactions contemplated by this Agreement by reason of anyagreement of or action taken by the Company.

 

4.20                           NoGeneral Solicitation.  Neither theCompany nor any Person acting on its behalf has conducted any generalsolicitation or general advertising (as those terms are used in Regulation D)in connection with the offer or sale of any of the Securities.

 

4.21                           Issuanceof Securities.  The Securities andthe Additional Securities are duly authorized and, upon issuance in accordancewith the terms of the applicable agreements, shall be (i) validly issued, fullypaid and non-assessable and (ii) free from all taxes, liens and charges withrespect to the issuance thereof (other than any such taxes, liens and chargescreated by any Purchaser or assignee or transferee), and shall not be subjectto pre-emptive rights or other similar rights of shareholders of theCompany.  As of the Closing, asufficient number of shares of Common Stock will have been duly authorized andreserved for issuance of the Unit Shares, the Additional Securities, and uponconversion of the Notes and exercise of the Warrants.  Upon their issuance, the Unit Shares, Additional Securities,Underlying Shares and the Warrant Shares,

 

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as the case maybe, will be validly issued, fully paid and non-assessable and free from alltaxes, liens and charges with respect to the issue thereof (other than any suchtaxes, liens and charges created by any Purchaser or any assignee ortransferee), with the holders being entitled to all rights accorded to a holderof Common Stock.

 

5.                                       Representationsand Warranties of the Purchaser. Each of the Purchasers hereby severally, and not jointly, represents andwarrants to the Company that:

 

5.1                                 Organization,Good Standing, Authorization. If Purchaser is an entity, it is a corporation, limited liabilitycompany, trust or partnership or other similar entity duly organized, validlyexisting 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 andthe Registration Rights Agreement.  Theexecution, delivery and performance by the Purchaser of this Agreement and theRegistration Rights Agreement have been duly authorized and this Agreement andthe Registration Rights Agreement will each constitute the valid and legallybinding obligation of the Purchaser, enforceable against the Purchaser inaccordance with their terms, subject to bankruptcy, insolvency, fraudulenttransfer, reorganization, moratorium and similar laws of general applicability,relating to or affecting creditors’ rights generally and general principles ofequity that restrict the availability of equitable or legal remedies.

 

5.2                                 PurchaseEntirely for Own Account.  TheSecurities (and Additional Securities, as applicable) to be received by thePurchaser hereunder will be acquired for the Purchaser’s own account, not asnominee or agent, and not with a view to the resale or distribution of any partthereof and the Purchaser has no present intention of selling, granting anyparticipation in, or otherwise distributing the same.  The Purchaser is not a registered broker dealer or an entityengaged in the business of being a broker dealer.

5.3                                 InvestmentExperience.  The Purchaseracknowledges that it can bear the economic risk and complete loss of itsinvestment in the Securities and has such knowledge and experience in financialor business matters and in private placement transactions of companies similarto the Company so that it is capable of evaluating the merits and risks of thepurchase contemplated hereby.

 

5.4                                 Disclosureof Information.  The Purchaser hashad an opportunity to receive documents related to the Company and to askquestions of and receive answers from the Company regarding the Company, itsbusiness and the terms and conditions of the offering of the Securities and hasreceived and read the SEC Filings filed via EDGAR.  Neither such inquiries nor any other due diligence investigationconducted by the Purchaser shall modify, amend or affect the Purchaser’s rightto rely on the Company’s representations and warranties contained in thisAgreement or made pursuant to this Agreement.

 

5.5                                 RestrictedSecurities.  The Purchaser understandsthat the Securities (and, when issued, the Additional Securities) arecharacterized as “restricted securities” under the U.S. federal securities lawsinasmuch as they are being acquired from the Company in a transaction notinvolving a public offering and that under such laws and applicable state lawsand regulations

 

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such securities may be resold without registrationunder the 1933 Act only in certain limited circumstances.

 

5.6                                 Legends.  It is understood that, until registrationfor resale pursuant to the Registration Rights Agreement or until sales underRule 144(k) are permitted, certificates evidencing the Securities (andAdditional Securities, as applicable) may bear one or all of the followinglegends or legends substantially similar thereto:

 

(a)                                  “Theshares represented by this certificate may not be transferred without (i) theopinion of counsel reasonably satisfactory to the corporation that suchtransfer may lawfully be made without registration under the Securities Act of1933 or qualification under applicable state securities laws; or (ii) suchregistration or qualification.”

 

(b)                                 Ifrequired by the authorities of any state in connection with the issuance ofsale of the Securities, the legend required by such state authority.

 

Upon registration for resale pursuant to the Registration RightsAgreement or upon Rule 144(k) under the 1933 Act becoming available, theCompany shall promptly cause certificates evidencing the Unit Shares,Underlying Shares and Warrant Shares previously issued to be replaced withcertificates which do not bear such restrictive legends, and all UnderlyingShares and Warrant Shares subsequently issued shall not bear such restrictivelegends and each Purchaser will certify to the Company that it will thereaftersell the Common Stock evidenced by such unlegended certificates only pursuantto the Prospectus (as defined in the Registration Rights Agreement) aspermitted under the Registration Rights Agreement or pursuant to Rule 144(k).

 

5.7                                 AccreditedInvestor.  The Purchaser is an“accredited investor” as defined in Rule 501(a) of Regulation D, as amended,under the 1933 Act.

 

5.8                                 NoGeneral Solicitation.  The Purchaserdid not learn of the investment in the Securities as a result of any publicadvertising or general solicitation.

 

5.9                                 NoShorting.  Neither the Purchaser norany of its affiliates and investment partners has, directly or indirectly,engaged in “short sales” of the Company’s Common Stock or any hedgingstrategies.  Each Purchaser agrees thaton any business day prior to the time such Purchaser no longer holds any UnitShares, such Purchaser shall not maintain a Net Short Position.  For purposes hereof, “Net Short Position”shall mean circumstances in which the aggregate number of shares of CommonStock held in a short position by such Purchaser exceeds the sum of the numberof Unit Shares and the number of Underlying Shares and Warrant Shares thenissuable (without regard to any limitations on conversions or exercise) to suchPurchaser.

 

6.                                       SecurityAgreement.     As security for the payment andperformance of the Notes, the Company shall execute a Security Agreement andfinancing statement in the form annexed hereto as **Exhibit E**, granting to the Purchasers collectively, a firstlien and security interest in all of the assets of the Company.  The Company shall deliver such property andexecute such additional documents agreements and forms as may be required fromtime to time to perfect and

 

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to maintain such lien and security interest on behalfof the Purchasers, and the Company hereby designates the Collateral Agent asits attorney in fact to execute any such documents, agreements or forms.

 

7.                                       Covenantsand Agreements of the Company and the Purchasers.

 

7.1                                 ProxyStatement.     Within 30 days following theClosing, the Company shall call for its annual meeting of stockholders for thepurpose of approving not only its customary annual meeting matters plus anyother agenda items determined in the Company’s sole discretion, but also the issuanceof the Securities and Additional Securities, and shall file a Proxy Statementwith the SEC, which Proxy Statement shall solicit each stockholder’saffirmative vote at such stockholders’ meeting for approval of the Company’sissuance of all of the Securities and Additional Securities in accordance withapplicable law and the rules and regulations of the principal market on whichthe Company’s Common Stock is traded, and shall use its reasonable best effortsto solicit and obtain its stockholders’ approval of such issuance of theSecurities and  Additional Securitiesand to cause the Board of Directors of the Company to recommend to thestockholders that they approve such proposal.

 

7.2                                 Obligationto Issue Additional Securities.     In the eventthat the Company does not achieve the Milestone, and conditioned upon andfollowing the date of Shareholder Approval, (i) the Company shall issue to eachPurchaser, for each Unit purchased by such Purchaser, an additional 9,058shares of Common Stock and an additional 11,113 Warrants; and (ii) theConversion Price with respect to the Notes and the Warrant Price with respectto the Warrants, shall be reset in accordance with the terms of the Notes andthe Warrants.

 

7.3                                 Reservationof Common Stock Issuable upon Conversion of Notes and Exercise of Warrants.     TheCompany hereby agrees at all times to reserve and keep available out of itsauthorized but unissued shares of Common Stock, solely for the purpose ofproviding for the full conversion of Notes (including payment of interestthereon) and the exercise of the Warrants, such number of shares of CommonStock as shall equal the number of shares sufficient to permit the fullconversion of Notes (including payment of interest thereon) and to permit thefull exercise of the Warrants in accordance with the terms of the Warrants.

 

7.4                                 PressReleases.     Any press release or other publicityoriginating from the Company concerning this Agreement or the transactionscontemplated by this Agreement shall be submitted to the Collateral Agentforcomment one business day prior to issuance. No press release or other publicdisclosure relating to this Agreement or the transactions contemplated by thisAgreement may be issued or made by or on behalf of any Purchaser without priorconsultation with and written consent from the Company.

 

7.5                                 NoConflicting Agreements.     The Company will not,without obtaining prior approval from the Required Holders, take any action,enter into any agreement or make any commitment that would conflict orinterfere in any material respect with the obligations to the Purchasers underthe Agreements.

 

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7.6                                 Insurance.     Forso long as any Purchaser beneficially owns any of the Securities, the Companyshall have in full force and effect (a) insurance reasonably believed by theCompany to be adequate on all assets and activities, covering property damageand loss of income by fire or other casualty, and (b) insurance reasonablybelieved to be adequate protection against all liabilities, claims and risksagainst which it is customary for companies similarly situated as the Companyto insure (other than key man insurance).

 

7.7                                 Compliancewith Laws.     So long as the Purchasersbeneficially own any Securities, the Company will use reasonable efforts tocomply with all applicable laws, rules, regulations, orders and decrees of allgovernmental authorities, except to the extent non-compliance (in one instanceor in the aggregate) would not have a Material Adverse Effect.

 

7.8                                 CorporateExistence.     So long as any Notes or Warrantsremain outstanding, the Company shall maintain its corporate existence, exceptin the event of a merger, consolidation or sale of all or substantially all ofthe Company’s assets so long as the surviving or successor entity in suchtransaction (a) assumes the Company’s obligations hereunder and under theagreements and instruments entered into in connection herewith, regardless ofwhether or not the Company would have had a sufficient number of shares ofCommon Stock authorized and available for issuance in order to fulfill itsobligations hereunder and effect the conversion (including payment on) andexercise in full of all Notes and Warrants outstanding as of the date of such transaction;(b) has no legal, contractual or other restrictions on its ability to performthe obligations of the Company hereunder and under the agreements andinstruments entered into in connection herewith; and (c)(i) is a publiclytraded corporation whose common stock and the shares of capital stock issuableupon conversion and exercise of the Notes and Warrants are (or would be uponissuance thereof) listed for trading on the Nasdaq National Market, New YorkStock Exchange or the American Stock Exchange or (ii) if not such a publiclytraded corporation, then the buyer agrees that it will, at the election of thePurchasers, purchase such Purchasers’ Securities at a price equal to thegreater of (a) 120% of the Purchase Price of such Securities or (b) the fairmarket value of such Securities on an as-converted and as-exercised basis basedon the closing price immediately preceding such transaction or the redemptiondate, whichever is greater.

 

7.9                                 NonpublicInformation.     On or before the 5th business day following the Closing Date, theCompany shall file a Current Report on Form 8-K (or include in its upcomingfiling of its Annual Report on Form 10-K due March 30, 2004) with the SECdescribing the material terms of the transactions contemplated by the Agreementsand including as exhibits to such report this Agreement, the form of the Notes,the form of Warrants, the Registration Rights Agreement and the SecurityAgreement in the form required by the 1934 Act (with such exhibits, a “RequiredReport”).  Upon the filing of theRequired Report with the SEC, to the knowledge of the Company, no Purchasershall be in possession of any material, nonpublic information received from theCompany or any of its officers, directors, employees or agents, that is notdisclosed in the Form 8-K.  The Company shall not, and shall not knowinglycause any of its officers, directors, employees and agents, to provide anyPurchaser with any material nonpublic information regarding the Company fromand after the filing of the Required Report with the SEC without the expresswritten consent of such recipient.

 

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7.10                           PurchaserCovenants.     Each Purchaser covenants and agreeswith the Company as follows:

 

(a)                                  Confidentiality.     ThePurchaser agrees that it will not disclose, and will not include in any publicannouncement, the name of the Company, unless expressly agreed to by theCompany or unless and until such disclosure is required by law or applicableregulation, and then only to the extent of such requirement.

 

(b)                                 Non-PublicInformation.     The Purchaser agrees notto effect any purchases or sales in the shares of the Company’s Common Stockwhile in possession of material, non-public information regarding the Companyif such sales would violate applicable securities law.

 

(c)                                  ConfidentialInformation.     The Company from time to time maydisclose to the Purchaser pursuant to this Agreement certain confidentialtechnical and nontechnical business information (“Confidential Information”).  Notwithstanding any other provision of thisAgreement, including provisions regarding the termination of this Agreement orparticular terms of this Agreement, the Purchaser shall not disclose suchConfidential Information to third parties until the earliest of (i) thedate upon which such information ceases to be Confidential Information throughno fault of the Purchaser, (ii) the date such information is required tobe disclosed by law or a court of competent jurisdiction, or (iii) thefifth anniversary of the date of disclosure by the Company to thePurchaser.  In the event that thePurchaser or any of its representatives is requested or required to discloseany of the Confidential Information referred to above, the Purchaser willprovide the Company with prompt notice of such request or requirement so thatthe Company (if it so desires) may seek a protective order.  The Purchaser further acknowledges andunderstands that any information so obtained which may be considered “inside”non-public information will not be utilized by the Purchaser in connection withpurchases and/or sales of the Company’s securities except in compliance withapplicable state and federal securities laws. Confidential Information shall not include information that (A) waspreviously known to the receiving party prior to disclosure thereof by theother party, (B) is independently developed without the use of suchConfidential Information, (C) at the time of disclosure to the receivingparty is, or thereafter becomes, generally available to the public other thanas a result of a disclosure by the receiving party or its representatives inviolation of this Section 7.9(g), or (D) becomes available to thereceiving party on a non-confidential basis from a third party provided thatsuch third party is not bound by an obligation of confidentiality to theCompany.

 

8.                                       Survival.     Allrepresentations and warranties contained in this Agreement shall survive foreighteen (18) months following the Closing of the transactions contemplatedhereby.

 

9.                                       Appointmentand Duties of Collateral Agent.

 

9.1                                 Appointment.   Eachof the Holders, by its execution of this Agreement, its purchase or otheracquisition of a Note or its acceptance of the benefits of this Agreement,hereby irrevocably appoints the Collateral Agent, in each case, as its agentand attorney-in-fact to do all of the following:

 

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(a)                                  enterinto, deliver and perform the Security Agreement, and any other instruments andagreements securing the whole or any part of the Notes (collectively, the “**SecurityDocuments**”), and all other instruments and agreements as may nowor at any time hereafter be incidental to or in furtherance of the foregoing(collectively, the “**Related Documents**”); and

 

(b)                                 totake such other actions as the Collateral Agent shall be directed to take,either by the terms of the Related Documents or as the Required Holders (orsuch other percentage of Holders as may be required by the terms hereof or theterms of any Related Document) may direct in writing to carry out the foregoingand to perform the duties and obligations set forth in the Related Documentsand to effect the purposes hereof and thereof.

 

9.2                                 Acceptanceby Collateral Agent.   The Collateral Agent hereby agrees toact as Collateral Agent for the Holders pursuant to the terms and conditionsof, and to perform its duties under, this Agreement, and the Related Documentsuntil the satisfaction in full and discharge of the Secured Obligations (asdefined in the Security Agreement).  Byits execution and delivery of this Agreement, the Collateral Agent accepts itsappointment as Collateral Agent and agrees to, among other things:  (i) take the actions and otherwise exercisethe rights and perform the duties described for it herein and in the RelatedDocuments; (ii) execute and cause to be filed all financing statements,continuation statements and financing statement amendments, if any, at thewritten direction of the Required Holders, and all other documents, necessaryor appropriate to perfect and maintain the security interest of the CollateralAgent, for the benefit of the Secured Parties (as defined in the SecurityAgreement), in the Collateral at the written direction of the Required Holders;(iii) release Collateral in accordance with the terms of the SecurityDocuments; (iv) upon the occurrence of a Default or Event of Default of whichit has actual knowledge, solicit direction from the Required Holders (or all orsuch other portion of the Holders as the Collateral Agent shall determine isrequired) as to any disposition or other action with respect to the Collateral;(v) effectuate any actions called for in writing by this Agreement or theRelated Documents.

 

9.3                                 Dutiesand Responsibilities.   The Collateral Agent shall have onlysuch powers, and such duties on behalf of the Holders as are expressly setforth herein and in the Related Documents. Notwithstanding any provision to the contrary elsewhere in this Agreementor in any Related Document, the Collateral Agent shall not have any duties orresponsibilities except those expressly set forth herein and in the RelatedDocuments, and no implied covenants, functions, responsibilities, duties,obligations or liabilities shall be read into this Agreement or any RelatedDocument.

 

9.4                                 Delegationof Duties, Etc.   The Collateral Agent may exercise any ofits powers and perform any of its duties hereunder or under any RelatedDocument by or through agents or attorneys and shall be entitled to consultwith legal counsel, accountants and other experts selected by it.  Any action taken or omitted to be taken orsuffered in good faith by the Collateral Agent in accordance with the opinionof such counsel, accountants or other experts shall be full justification andprotection to it. The Collateral Agent shall not be responsible for

 

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any misconduct or negligence on the part of anyCollateral Agent or attorney appointed with due care by it hereunder.

 

9.5                                 Indemnification.     ThePurchasers and the Company hereby agree, severally, and not jointly, toindemnify the Collateral Agent, in its capacity as the Collateral Agent fromand hold it harmless against any and all claims, liabilities, obligations,losses, damages, penalties, actions, judgments, suits, and costs, expenses ordisbursements (including reasonable attorney’s fees and expenses to the extentactually incurred) of any kind or nature whatsoever (“**Losses**”) to the extentactually imposed on, incurred by, or asserted against the Collateral Agent inconnection with or arising out of any action taken or omitted to be taken orsuffered in good faith by the Collateral Agent under this Agreement; providedthat the Purchasers and the Company shall not be liable for any portion of anyLosses determined by a court of competent jurisdiction to have been caused bythe gross negligence or willful misconduct of the Collateral Agent.  The agreements in this Section shallsurvive the termination of this Agreement and any Related Document.

 

9.6                                 ExculpatoryProvisions.     Neither the Collateral Agent norany of its officers, directors, employees or agents shall be liable to anyHolder or any third party for any action taken or omitted to be taken orsuffered by it or them hereunder or in connection herewith, except for its ortheir own gross negligence or willful misconduct.  The Collateral Agent shall not be liable for the effectiveness,enforceability, value, sufficiency, or validity of this Agreement, any of theother Agreements or any item of Collateral. The Collateral Agent shall be entitled to conclusively rely on anycommunication, instrument, paper or other document (whether in its original,facsimile form or electronic form), including without limitation anycertificates provided by any Holder or the Company, believed by it to begenuine and correct and to have been signed or sent by the proper parties.Except as expressly set forth in this Agreement or any Related Document, theCollateral Agent shall be under no duty or responsibility to ascertain or toinquire into the performance or observance by the Company or any other party ofany of the provisions of any Related Document or any other document.  No provision of this Agreement or theRelated Documents shall require the Collateral Agent to expend or risk its ownfunds or otherwise incur any financial liability in the performance of any ofits duties hereunder, or in the exercise of any of its rights or powers.  Under no circumstance shall the CollateralAgent be liable for special, punitive, indirect or consequential damages.  The Collateral Agent shall have no liabilityfor any loss arising from (i) the investment of any funds or property held inaccordance with the provisions hereof and the provisions of any Related Document,(ii) the liquidation, sale or redemption of any Collateral or any investmentsor (iii) the sale of any Collateral pursuant to the terms hereof or any RelatedDocument.  The Collateral Agent shall beunder no obligation to inquire into, and shall not be liable for, any lossesincurred by any Person as a result of the delivery or assignment of fraudulent,forged or invalid Collateral which is not fully transferable or deliverablewithout encumbrance.

 

9.7                                 Instructionsof Required Holders.     The Collateral Agentshall in all cases be fully justified in acting, or in failing or refusing toact, under this Agreement or any of the Related Documents unless it shall firsthave received the written consent or written direction from the RequiredHolders or, if required pursuant to the terms hereof or thereof, such otherpercentage thereof, and shall have offered to the Collateral Agent security orindemnity

 

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satisfactory to the Collateral Agent against the costs,expenses and liabilities which might be incurred by it in compliance with suchrequest or direction.  In particular,the Collateral Agent shall be under no obligation to institute, conduct ordefend any litigation or proceeding hereunder or in relation hereto or withrespect to the Collateral, except upon the written request, order or directionof the Required Holders.

 

9.8                                 Resignationor Removal of the Collateral Agent.     TheCollateral Agent may resign hereunder at any time by giving 30 days’ priorwritten notice thereof to the Holders and the Company, and may be removed atany time with or without cause by an instrument in writing delivered to theCollateral Agent and signed by the Required Holders.  Upon any such resignation or removal, the Required Holders shallhave the right to appoint a successor Collateral Agent.  If no successor shall have been so appointedby the Required Holders and shall have accepted such appointment within 30 daysafter the retiring Collateral Agent gives notice of its resignation, then theretiring Collateral Agent may, upon not less than ten days’ notice, on behalfof the Holders, appoint a successor Collateral Agent.  Upon the acceptance of its appointment as Collateral Agent hereunderby a successor, such successor shall succeed to and become vested with all therights, powers, privileges and duties of the retiring (or retired) CollateralAgent and the retiring Collateral Agent shall be discharged from its duties andobligations hereunder.  After theCollateral Agent’s resignation hereunder, the provisions of thisSection shall continue in effect for its benefit in respect of any actionstaken or omitted to be taken by it while it was acting as Collateral Agent.

 

9.9                                 Amendmentsof Related Documents.     The Collateral Agentmay, with the prior consent of the Required Holders (but not otherwise),consent to any amendment, restatement, supplement, waiver or other modificationunder any of the Agreements to which it is a party in its capacity asCollateral Agent.

 

9.10                           Feesand Expenses.     The Company will pay to theCollateral Agent on demand from time to time the reasonable, documented feesand disbursements of its legal counsel and such other expenses, includingdocumentation fees and filing fees, incurred by it in connection with thetransactions contemplated by this Agreement.

 

10.                                 Miscellaneous.

 

10.1                           Successorsand Assigns.   This Agreement may not be assigned by theCompany. A Purchaser may assign its rights and delegate its duties hereunder inwhole or in part to any Person (who is not a competitor or vendor of theCompany) to which such Purchaser has transferred or assigned all or part of itsNotes or Warrants in accordance with the terms of the Notes and Warrants,provided in each case that such transferee or assignee acknowledges in writingto the Company that the representations and warranties contained herein shallapply to such  transferee orassignee.  The terms and conditions ofthis Agreement shall inure to the benefit of and be binding upon the respectivepermitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended toconfer upon any party other than

 

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the parties hereto or their respective successors andassigns any rights, remedies, obligations, or liabilities under or by reason ofthis Agreement, except as expressly provided in this Agreement.

 

10.2                           Counterparts.   ThisAgreement may be executed in two or more counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameinstrument.

 

10.3                           Titlesand Subtitles.   The titles and subtitles used in thisAgreement are used for convenience only and are not to be considered inconstruing or interpreting this Agreement.

 

10.4                           Notices.   Unlessotherwise provided, any notice required or permitted under this Agreement shallbe given in writing and shall be deemed effectively given only upon delivery toeach party to be notified by (i) personal delivery, (ii) facsimile, withelectronic confirmation of transmittal, (iii) certified mail, return receiptrequested, or (iv) an internationally recognized overnight air courier,addressed to the party to be notified at the address as follows, or at suchother address as such party may designate by ten days’ advance written noticeto the other party:

 
|   | If to the Company:                                                                                                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                            |
|   | VCampus Corporation                                                                                                                                                                                                                             |
|   | 1850 Centennial  Park Drive                                                                                                                                                                                                                     |
|   | Suite 200                                                                                                                                                                                                                                       |
|   | Reston, VA  20191                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                            |
|   | With a copy to:                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                            |
|   | Wyrick Robbins Yates & Ponton LLP                                                                                                                                                                                                           |
|   | 4101 Lake Boon Trail, Suite 300                                                                                                                                                                                                                 |
|   | Raleigh, North Carolina 27607                                                                                                                                                                                                                   |
|   | Attn:  Kevin  A. Prakke, Esq.                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                            |
|   | If to the Collateral Agent:                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                            |
|   | Sherleigh Associates, LLC                                                                                                                                                                                                                       |
|   | 660 Madison Avenue, 15th Floor                                                                                                                                                                                                                  |
|   | New York, New York 10021                                                                                                                                                                                                                        |
|   | Attn:                                        |
|   |                                                                                                                                                                                                                                            |
|   | If to the Purchasers, to the addresses set forth on  the signature pages hereto.                                                                                                                                                                |

 

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10.5                           Amendmentsand Waivers.  Any term of thisAgreement may be amended and the observance of any term of this Agreement maybe waived (either generally or in a particular instance and eitherretroactively or prospectively), only with the written consent of the Companyand the Required Holders.  Any amendmentor waiver effected in accordance with this Section shall be binding uponHolders, future Holders and the Company.

 

10.6                           Severability.  If one or more provisions of this Agreementare held to be unenforceable under applicable law, such provision shall beexcluded from this Agreement and the balance of this Agreement shall beinterpreted as if such provision were so excluded and shall be enforceable inaccordance with its terms.

 

10.7                           EntireAgreement.  This Agreement,including the exhibits and schedules hereto, the Registration Rights Agreement,the Notes and the Warrants, the Security Agreement and the other documentscontemplated hereby constitute the entire agreement among the parties hereofwith respect to the subject matter hereof and thereof and supersede all prioragreements and understandings, both oral and written, between the parties withrespect to the subject matter hereof and thereof.

 

10.8                           FurtherAssurances.  The parties shallexecute and deliver all such further instruments and documents and take allsuch other actions as may reasonably be required to carry out the transactionscontemplated hereby and to evidence the fulfillment of the agreements hereincontained.

 

10.9                           ApplicableLaw.  This Agreement shall begoverned by, and construed in accordance with, the laws of the State of NewYork without regard to principles of conflicts of laws.

 

10.10                     Remedies.  The Purchasers shall be entitled to specificperformance of the Company’s obligations under the Agreements.

 

10.11                     LikeTreatment of Purchasers and Holders. The Company shall not, directly or indirectly, redeem any Securitiesunless such offer of redemption is made pro rata to all Purchasers or holdersof Securities, as the case may be, on identical terms.  For clarification purposes, this provisionconstitutes a separate right granted to each Purchaser by the Company andnegotiated separately by each Purchaser, and shall not in any way be construedas the Purchasers acting in concert or as a group with respect to the purchase,disposition or voting of Securities or otherwise.

 

10.12                     Actionsof Purchasers.  The obligations ofeach Purchaser hereunder and under the documents contemplated hereby areseveral and not joint with the obligations of any other Purchaser, and noPurchaser shall in any way be responsible for the performance of theobligations of any other Purchaser under any such document.  Nothing contained herein or in any otherdocument contemplated hereby, and no action taken by any Purchaser pursuanthereto or thereto, shall be deemed to constitute any of the Purchasers as apartnership, an association, a joint venture or any other kind of entity, orcreate a presumption that the Purchasers are in any way acting in concert or asa group with respect to such obligations or the transactions

 

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contemplatedhereby or thereby.  Each Purchaserconfirms that it has independently participated in the negotiation of thetransaction contemplated hereby with the advice of its own counsel andadvisors.  Each Purchaser shall beentitled to independently protect and enforce its rights, including, withoutlimitation, the rights arising out of this Agreement or out of any otherdocument contemplated hereby, and it shall not be necessary for any otherPurchaser to be joined as an additional party in any proceeding for suchpurpose.

 

10.13                     No Strict Construction.* *The partieshereto have participated jointly in the negotiation and drafting of thisAgreement.  In the event an ambiguity orquestion of intent or interpretation arises, this Agreement shall be construedas if drafted jointly by the parties hereto and no presumption or burden ofproof shall arise favoring or disfavoring any party by virtue of the authorshipof any provisions of this Agreement.

 

**INWITNESS WHEREOF**, the parties have executed this Agreement asof the date first above written.

 

 
| **The Company:**            | **VCampus Corporation** |
|-----------------------------|-------------------------|
|                        |                    |
|                        |                    |
|                        | By:                     | /s/ Nat Kannan |   |
|                        | Name:                   | Nat Kannan |
|                        | Title:                  | CEO |
|                        |                    |
| The foregoing  Agreement is |                    |
| hereby agreed to  as of the |                    |
| date hereof.                |                    |
|                        |                    |
| Sherleigh  Associates, LLC  |                    |
|                        |                    |
|                        |                    |
| By:                         | /s/ Jack Silver         |   |   |
| Name:                       | Jack Silver             |   |
| Title:                      |                    |
|                             |                         |  |  |  |  |  |  |

 

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|                                           | **Purchaser:**  |
|------------------------------------------------|-----------------|
|                                           |            |
|                                           |            |
|                                           |            |   |
|                                           | Name            |
|                                           |            |
|                                           |            |
|                                           |            |   |
|                                           | By              |
|                                           |            |
|                                           |            |
|                                           |            |   |
|                                           | Title           |
|                                           |            |
|                                           |            |
| Number of Units  at $200,000 per Unit:         |            |   |
|                                           |            |
| Principal Amount  of Series B Notes:           |            |   |
|                                           |            |
| Number of Series  B Warrants:                  |            |   |
|                                           |            |
| Total Purchase  Price (No. of Units x $200,000 |            |
| plus principal  amount of Series B Notes):     |            | $ |   |
|                                           |            |
|                                           |            |
| Address:                                       |            |   |
|                                           |            |   |
|                                           |            |   |
|                                           |            |   |
|                                           |            |
|                                           |            |
|                                           | with a copy to: |
|                                           |            |
|                                           |            |   |
|                                           |            |   |
|                                           |            |   |
|                                           |            |   |
|                                                |                 |  |  |  |  |  |

 

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