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Exhibit 10.103

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this Agreement") is dated as of June
14, 2002, among Versar, Inc., a Delaware corporation (the Company"), and the
purchasers identified on the signature pages hereto (each a Purchaser" and
collectively the Purchasers").

WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company, shares of the Companys common stock, $0.01 par value per
share with an aggregate value of $1,000,000 as determined hereunder and
Warrants (as defined below), as more fully described in this Agreement.

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

ARTICLE I.
DEFINITIONS

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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of
such Purchaser.
|
| | Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other governmental action to close.                                                                                                                                                                                               
|
| | Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.                                                                                                                                                                                                                                                                                                                                                
|
| | Closing Date" means the date of the Closing which shall occur
within 2 Trading Days of the date hereof.                                                                                                                                                                                                                                                                                                                                       
|
| | Commission" means the Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                                                                                                     

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| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Common Stock" means the common stock of the Company, $0.01 par
value per share, and any securities into which such common stock may
hereafter be reclassified.



| |                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
|
| | Company Counsel" means Paul, Hastings, Janofsky & Walker LLP,
counsel to the Company.                                                                                                                                                                                                                                                                                                            
|
| | Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.                                                                                                                                                                                                                                                                                    
|
| | Exchange Act" means the Securities Exchange Act of 1934, as
amended.                                                                                                                                                                                                                                                                                                                             
|
| | Long Term Warrants" means the 5year Common Stock purchase
warrants, in the form of Exhibit E, issuable to the Purchasers at
Closing, which warrants shall have an exercise price equal to 115% of the
average of the VWAPs during the 10 Trading Days immediately prior to the
date hereof or $4.002, subject to adjustment therein.                                                            
|
| | Material Adverse Effect" shall have the meaning ascribed to such
term in Section 3.1(b).                                                                                                                                                                                                                                                                                                         
|
| | Per Share Purchase Price" means 80% of the average of the daily
VWAPs during the 10 Trading Days immediately prior to the date hereof or
$2.7841.                                                                                                                                                                                                                                                
|
| | Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.                                                                                                                                         
|
| | Principal Market means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market.                                                                                                                                    
|
| | Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.                                                                                                                                                                                            
|
| | Purchasers Counsel" means Feldman &Weinstein LLP with offices
located at 36 West 44th Street, New York, New York 10036, Attn: Robert
Charron, Fax No. (212) 401-4741.                                                                                                                                                                                                                           

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| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares and the Warrant Shares.
|
| | Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and
the Purchasers, in the form of Exhibit B hereto.                        



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Rule 144, means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rules may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Securities" means the Shares, the Warrants and the Warrant Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | Securities Act" means the Securities Act of 1933, as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Shares" means the shares of Common Stock issued or issuable to the
Purchasers pursuant to this Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Short Term Warrants" means the 120-day Common Stock purchase
warrants, in the form of Exhibit D, issuable to the Purchasers at
Closing, which warrants shall have an exercise price equal to the average
of the VWAPs during the 10 Trading Days immediately prior to the date
hereof or $3.4801, subject to adjustment therein.                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | Subsidiary" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a) of the Disclosure Schedules.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Trading Day" means (i) a day on which the Common Stock is traded on
a Principal Market, or (ii) if the Common Stock is not listed on a
Principal Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii)
if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted
as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.
|
| | Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Warrants, the Instructions to
Transfer Agent and any other documents or agreements executed in
connection with the transactions contemplated hereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | VWAP means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on an Trading Market, the daily volume weighted average price of
the Common Stock for such date (or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the nearest preceding date) on the
primary Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg Financial L.P. (based on a trading day from 9:30
a.m. ET to 4:02 p.m. Eastern Time) using the VAP function; (b) if the
Common Stock is not then listed or quoted on an Trading Market and if
prices for the
Common Stock are then quoted on the OTC Bulletin Board, the volume
weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is
not then listed or quoted on the OTC Bulletin Board and if prices for the
Common Stock are then reported in the Pink Sheets published by the
National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent
bid price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Purchasers.



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Warrants" means the Long Term Warrants and the Short Term Warrants.                     
|
| | Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.

ARTICLE II.
PURCHASE AND SALE

2.1      Closing. Subject to the terms and conditions set forth in this Agreement,
at the Closing the Company shall issue and sell to each Purchaser, and each
Purchaser shall, severally and not jointly with the other Purchasers, purchase
from the Company, (a) a number of Shares equal to the subscription amount set
forth below such Purchasers address on the signature pages to this Agreement
divided by the Per Share Purchase Price for such subscription amount, and (b)
the Warrants as determined in accordance with Section 2.2(a). The aggregate
subscription amount of all the Purchasers shall be $1,000,000. The Closing
shall take place at the offices of the Escrow Agent on the date hereof or at
such other location or time as the parties may agree.

2.2      Closing Deliveries. At the Closing, the Company shall deliver or cause to
be delivered to the Escrow Agent on behalf of each Purchaser the following:



| |                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)      this Agreement duly executed by the Company.                                                                                                                                                                                                  
|
| | (ii)      a certificate evidencing a number of Shares equal to the
subscription amount indicated below such Purchasers name on the
signature page of this Agreement divided by the Per Share Purchase Price,
registered in the name of such Purchaser;
|
| | (iii)      a legal opinion from Company Counsel, in the form of Exhibit C
hereto, addressed to the Purchasers;                                                                                                                                         
|
| | (iv)      the Registration Rights Agreement duly executed by the Company;                                                                                                                                                                              

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| |                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (v)      a Short Term Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire up to
the number of shares of Common Stock equal to 50% of the Shares to be
issued to such Purchaser at the Closing;    
|
| | (vi)      a Long Term Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire up to
the number of shares of Common Stock equal to 50% of the Shares to be
issued to such Purchaser at the Closing; and



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (vii)      Instructions to Transfer Agent executed by the Company and
delivered to and acknowledged by the Companys transfer agent in the form
annexed hereto as Exhibit A.

(b)      At the Closing, each Purchaser shall deliver or cause to be delivered
to the Escrow Agent the following:



| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)      this Agreement duly executed by such Purchaser;                                                                                                                                                                                       
|
| | (ii)      the subscription amount indicated below such Purchasers
address for notice on the signature page of this Agreement, in United
States dollars and in immediately available funds, by wire transfer to
the account of the Company; and
|
| | (iii)      the Registration Rights Agreement duly executed by such
Purchaser.                                                                                                                                                                  

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

3.1      Representations and Warranties of the Company. Except as set forth under
the corresponding section of the Disclosure Schedules attached hereto and the
SEC Reports and except as otherwise would not have a Material Adverse Effect,
the Company hereby makes the following representations and warranties to each
Purchaser:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)      Subsidiaries. Except as disclosed in Schedule 3.1(a), the
Company has no direct or indirect subsidiaries. The Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free
and clear of any lien, charge, security interest, encumbrance, right of
first refusal or other restriction (collectively, Liens), except for
such Liens as are listed in Schedule 3.1(a), and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar
rights.
|
| | (b)      Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of                                               

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | incorporation, bylaws or other organizational
or charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary,
except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any
Transaction Document, (ii) have or reasonably be expected to result in a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the Subsidiaries,
taken as a whole, or (iii) adversely impair the Companys ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a Material Adverse
Effect).



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c)      Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company in connection therewith. Each
Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and transfer, moratorium or other
laws now or hereafter in effect relating to or affecting the rights or
remedies of creditors generally and by general principles of equity
(whether applied in a proceeding at law or in equity) including, without
limitation, standards of materiality, good faith and reasonableness in
the interpretation and enforcement of contracts, and the application of
such principles to limit the availability of equitable remedies such as
specific performance.
|
| | (d)      No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict
with or violate any provision of the Companys or any Subsidiarys
certificate or articles of incorporation, bylaws or other organizational
or charter documents, or (ii) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by
which any                                                                                                                                                                                                                              

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | property or asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as
would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (e)      Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than the filing with the Commission of a
Form D and the Registration Statement following the Closing, the
application(s) to each Principal Market for the listing of the Shares and
Warrant Shares underlying the Parent Warrant for trading thereon in the
time and manner required thereby, and applicable Blue Sky filings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (f)      Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (g)      Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set
forth in Schedule 3.1(g) of the Disclosure Schedules. No securities of
the Company are entitled to preemptive or similar rights, and no Person
has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by
the Transaction Documents. Except as a result of the purchase and sale
of the Securities and as set forth in Schedule 3.1(g), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock,
or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock
or other securities to any Person (other than the Purchasers) and will
not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.
|
| | (h)      SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the SEC Reports" and,
together with the Schedules to this Agreement, the Disclosure
Materials") on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Reports prior to the expiration
of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the 10 days preceding the date
hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of
the Commission promulgated thereunder, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (GAAP), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, year-end audit adjustments and
the absence of certain footnotes.
|
| | (i)      Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports or set forth in Schedule
3.1(i), (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Companys financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not
declared or made any dividend or distribution of cash or other property
to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company
has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for
confidential treatment of information.                                                                                                                                                                                                                                             
|
| | (j)      Litigation. Except as specifically disclosed in the SEC
Reports, there is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an Action)
 which (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Subsidiary, nor any director or officer
thereof, is or has been within the past five years the subject of any
Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending or
threatened, any investigation by the
Commission involving the Company or any current or former director
or officer of the Company.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (k)      Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the
employees of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (l)      Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case
as would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.
|
| | (m)      Regulatory Permits. The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits would not, individually
or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (Material Permits), and neither the Company nor
any Subsidiary has received any written notice of proceedings relating to
the revocation or modification of any Material Permit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (n)      Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free
and clear of all Liens, except for Liens as do not materially affect the
value of such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in
material compliance.                                                                                                                                                                                                                                                                                                                       

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (o)      Patents
and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses
and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have could, individually or in the
aggregate, have or
reasonably be expected to result in a Material Adverse Effect
(collectively, the Intellectual Property Rights"). Neither the Company
nor any Subsidiary has received a written notice that the Intellectual
Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. Except as set forth in the SEC
Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.
|
| | (p)      Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged. Neither the
Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | (q)      Transactions With Affiliates and Employees. Except as set forth
in the SEC Reports and in Schedule 3.1(o), none of the officers or
directors of the Company and, to the knowledge of the Company, none of
the employees of the Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.                                                                                                                                                                             



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (r)      Certain Fees. Except as set forth in Schedule 3.1(p), no
brokerage or finders fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated
by this Agreement.
|
| | (s)      Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Principal Market and no shareholder approval                                                                                                                                                                     

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| |                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | is required for the Company to fulfill its obligations under the
Transaction Documents, including issuing and delivering to the Purchasers
the maximum number of Securities contemplated by this Agreement and the
maximum number of Warrant Shares issuable upon exercise in full of the
Warrants based on their present exercise price.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (t)      Listing and Maintenance Requirements. The Company has not, in
the 24 months preceding the date hereof, received written notice, from
any Principal Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Principal Market. The Company
is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements.



| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (u)      Investment Company. The Company is not, and is not an Affiliate
of, an investment company within the meaning of the Investment Company
Act of 1940, as amended.                                                                           
|
| | (v)      Registration Rights. The Company has not granted or agreed to
grant to any Person any rights (including piggy-back registration
rights) to have any securities of the Company registered with the
Commission that have not been satisfied.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (w)      Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Companys Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including
without limitation the Companys issuance of the Securities and the
Purchasers ownership of the Securities.
|
| | (x)      Disclosure. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, furnished by or on
behalf of the Company, taken as a whole, are true and correct and do not
contain any untrue statement of a material fact or, except to the extent
non-public information was withheld at the Purchasers request, omit to
state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.                                                                                                                                                                 
|
| | (y)      Form S-3 Eligibility. The Company is eligible to register for
resale of its Common Stock for resale by the Purchasers under Form S-3
promulgated under the Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

3.2      Representations and Warranties of the Purchasers. Each Purchaser hereby,
for itself and for no other Purchaser, represents and warrants to the Company
as follows:
115



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)      Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement has been duly authorized
by all necessary corporate action on the part of such Purchaser.
Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with terms hereof, will constitutes the valid and legally
binding obligation of such Purchaser, enforceable against it in
accordance with its terms.



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



| |                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c)      Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an accredited investor
as defined in Rule 501(a) under the Securities Act. The Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.



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



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



| |                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (f)      Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms
and conditions of the offering of the Securities and the merits and risks
of investing in the Securities; (ii) access to information about the

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Company and the Subsidiaries and their respective financial condition,
results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted
by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or
affect such Purchasers right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Companys
representations and warranties contained in the Transaction Documents.

The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4.1      Transfer Restrictions. (a) Securities may only be disposed of
in compliance with state and federal securities laws. In connection with
any transfer of Securities other than pursuant to an effective
registration statement, to the Company or to an Affiliate of a Purchaser
or in connection with a pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the
effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | (b)      The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of the following legend on any the Securities:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | [NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH

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| |                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities and, if required under
the terms of such arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties; provided that the
Purchaser provides prior notice to the Company and such pledge or
security interest is structured in compliance with state and federal
securities laws. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith. At the Purchasers expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer
of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the
list of Selling Stockholders thereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (c)      Certificates evidencing Securities shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering
the resale of such security is effective under the Securities Act, or
(ii) following any sale of such Securities pursuant to Rule 144, or (iii)
if such Securities are eligible for sale under Rule 144(k), or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements
issued by the Staff of the Commission). The Company shall cause its
counsel to issue the legal opinion to the Companys transfer agent on the
Effective Date. If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the
resale of the Warrant Shares, such Warrant Shares shall be issued free of
all legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c),
it will, no later than five Trading Days following the delivery by a
Purchaser to the Company or the Companys transfer agent of a certificate
representing Securities issued with a restrictive legend and notice of
such delivery via facsimile transmissionto Companys Counsel, deliver or
cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to
any transfer agent of the Company that enlarge the restrictions on
transfer set forth in this Section.
|
| | (d)      If the Company fails to deliver or cause to be delivered to any
Purchaser a certificate representing any Securities without legend as set
forth above by the tenth (10th) Trading Day after the date on which
delivery of such certificate is required by any Transaction Document, the
Company shall pay to such Purchaser, in cash, as liquidated                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | damages and
not as a penalty, $50 for each $5,000 of Securities so delivered (based
upon the original purchase price of the Securities) for each day after
such tenth (10th) Trading Day until such certificate is delivered.
Nothing herein shall limit such Purchasers right to pursue actual
damages for the Companys failure to deliver certificates representing
any Securities as required by the Transaction Documents, and such
Purchaser shall have
the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

4.2      Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. Upon the
request of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the
Securities under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell such Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

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

4.4      Subsequent Equity Sales. From the date hereof until the Effective
Date, except for (i) upon the exercise of the Warrant; (ii) upon the exercise
of or conversion of any Common Stock Equivalents, options or warrants issued
and outstanding on the date hereof; (iii) upon the grant or exercise of any
Common Stock or Common Stock Equivalents which may hereafter be granted or
exercised under any employee benefit plan of the Company now existing or to be
implemented in the future, so long as the issuance of such securities is
approved by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose; or (iv) in connection with any
strategic partnership or joint venture or acquisition or key consulting
agreements (the primary purpose of which is not to raise equity capital for the
Company), neither the Company nor any Subsidiary shall issue additional shares
of Common Stock or Common Stock Equivalents (Subsequent Financing).

4.5      Participation in Future Financing. From the date hereof until six
months after the Effective Date, the Company shall not effect any Subsequent
Financing unless (i) the Company delivers to each of the Purchasers a written
notice (the Subsequent Financing Notice") of its
119

intention to effect such
Subsequent Financing, which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount
of proceeds intended to be raised thereunder, the Person with whom such
Subsequent Financing is proposed to be effected, and attached to which shall be
a term sheet or similar document relating thereto and (ii) such Purchaser shall
not have notified the Company by 6:30 p.m. (New York City time)
on the fifth (5th) Trading Day after its receipt of the Subsequent
Financing Notice of its willingness to provide (or to cause its designee to
provide), subject to completion of mutually acceptable documentation, up to
$1,000,000 of such financing to the Company on the same terms set forth in the
Subsequent Financing Notice. If the Purchasers shall fail to so notify the
Company of their willingness to participate in the full Subsequent Financing,
the Company may effect the remaining portion of such Subsequent Financing on
the terms and to the Persons set forth in the Subsequent Financing Notice;
provided that the Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of first refusal
set forth above in this Section, if the Subsequent Financing subject to the
initial Subsequent Financing Notice is not consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 45 Trading Days
after the date of the initial Subsequent Financing Notice with the Person
identified in the Subsequent Financing Notice. If the Purchasers indicate a
willingness to provide financing in excess of the amount set forth in the
Subsequent Financing Notice, then each Purchaser will be entitled to provide
financing pursuant to such Subsequent Financing Notice up to an amount equal to
such Holders pro rata portion of the Purchase Price, but the Company shall not
be required to accept financing from the Purchaser in an amount in excess of
the total amount of the offering set forth in the Subsequent Financing Notice.
Notwithstanding anything herein to the contrary, prior to the delivery of a
Subsequent Financing Notice and if required by U.S. securities laws, the
Company may require each Purchaser to enter into a confidentiality agreement
with the Company, which agreement shall be reasonably acceptable to the
purchaser and shall be limited in scope to the details of the Subsequent
Financing Notice. Each Purchaser shall have the right to waive a Subsequent
Financing Notice rather than enter into a confidentiality agreement.

4.6      Securities Laws Disclosure; Publicity. The Company may issue a press
release or file a Current Report on Form 8-K, in each case reasonably
acceptable to the Purchasers disclosing the transactions contemplated hereby
and (ii) make such other filings and notices in the manner and time required by
the Commission. The Company and the Purchasers shall consult with each other
in issuing any press releases with respect to the transactions contemplated
hereby, and neither party shall issue any such press release or otherwise make
any such public statement without the prior consent of the other, which consent
shall not unreasonably be withheld, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior
written consent of such Purchaser, except to the extent such disclosure is
required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure.

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4.7      Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an Acquiring Person under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between
the Company and the Purchasers.

4.8      Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information, including information necessary for the
Purchasers to exercise their rights under Section 4.5, that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

4.9      Reservation and Listing of Securities.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)      The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may be required to fulfill its obligations in full
under the Transaction Documents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (b)      The Company shall: (i) in the time and manner required by each
Principal Market, prepare and file with such Principal Market an
additional shares listing application covering a number of shares of
Common Stock at least equal to the shares of Common Stock issuable under
this Agreement and pursuant to the Warrants, (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing
on each Principal Market as soon as possible thereafter, (iii) provide to
the Purchasers evidence of such listing, and (iv) maintain the listing of
such Common Stock on each such Principal Market or another Principal
Market. Failure to obtain such listing prior to the Effective Date shall
be deemed an Event under the Registration Rights Agreement.

ARTICLE V.MISCELLANEOUS

5.1      Fees and Expenses. The Company agrees to pay $15,000 to Purchasers
Counsel as reimbursement for the Purchasers legal, escrow and other fees and
expenses incurred in connection with the investigation and negotiation of the
transaction and the preparation and negotiation of the Transaction Documents.
Accordingly, in lieu of the foregoing payments, on the Closing Date, the
aggregate amount that the Purchasers are to pay for the Securities at the
Closing will be reduced by $15,000. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Securities.

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

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

5.4      Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

5.5      Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

5.6      Successors
and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company
may not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Purchasers. Any Purchaser may assign any or
all of its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the Purchasers.

5.7      No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.6 and 4.7.

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

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

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

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

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

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

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

5.15      Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

5.16      Independent Nature of Purchasers Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible
in any way for the performance of the obligations of any other Purchaser under
any Transaction Document. Nothing contained herein or in any Transaction
Document, and no action taken by any Purchaser pursuant thereto, shall be
deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,

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including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

*******************************

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

|                                      |  |                            |                         
|------------------------------------- |  | -------------------------- | ------------------------
|                                      |  | COMPANY:                  
|                                      |  |                            |                         
|Address for Notice:                   |  | VERSAR, INC               
|6850 Versar Center                    |  |                            |                         
|Springfield, VA 22151                 |  |                            |                         
|Attn: James Dobbs                     |  |                            |                         
|Tel: (703) 642-6712                   |  | By:/S/  Theodore M. Prociv
|Fax: (703) 642-6942                   |  |                            | Name: Theodore M. Prociv
|                                      |  |                            | Title: President & CEO  
|With a copy to:                       |  |                            |                         
|Paul, Hastings, Janofsky & Walker LLP |  |                            |                         
|600 Peachtree Street, NE, Suite 2400  |  |                            |                         
|Atlanta, GA 30308-2222                |  |                            |                         
|Tel: (404) 815-2287                   |  |                            |                         
|Fax: (404) 815-2424                   |  |                            |                         
|Attn: Elizabeth Hardy, Esq            |  |                            |                         

PURCHASERS:

RADYR INVESTMENTS LIMITED

|                   
|-------------------
|By:  /S/ David Sims
|                   
|Name:  David Sims  
|                   
|Title:  Director   

Subscription Amount: $1,000,000Number of Shares: 359,183Short Term Warrant Shares: 179,591 @ $3.4801Long Term Warrant Shares: 179,591 @ $4.002

Address for Notice of Purchaser:
c/o Beacon Capital Management
Harbour House, 2nd Floor
Waterfront Drive
Road Town, Tortola
British Virgin Islands
Attn: Director
Fax: (284) 494-4090

With a copy to Purchasers Counsel as set forth in Section 1.1.

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