Document:

Exhibit
10.16

 

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

 

AEROGEN, INC.

 

WARRANT

 

	
  Warrant No. 1

  	
   

  	
  Date of Original Issuance: September 9, 2003

  

 

Aerogen, Inc., a Delaware corporation (the “Company”),
hereby certifies that, for value received, SF Capital Partners, Ltd. or its
registered assigns (the “Holder”), is entitled to purchase from the
Company up to a total of 1,357,143 shares of common stock (in accordance with
the Warrant Shares Exercise Log referenced in Section 5(a) below), par
value $0.001 per share, (the “Common Stock”) of the Company (each such
share, a “Warrant
Share” and all such shares, the “Warrant Shares”) at an exercise price
equal to $.35 per share (as adjusted from time to time as provided in
Section 9, the “Exercise Price”), at any time and from
time to time from and after the date hereof and through and including
September 9, 2007 (the “Expiration Date”), and subject to the
following terms and conditions:

 

1.                                      Definitions.  In addition to the terms defined elsewhere
in this Warrant, capitalized terms that are not otherwise defined herein shall
have the meanings given to such terms in the Loan and Securities Purchase
Agreement of even date herewith to which the Company and the original Holder
are parties (the “Purchase Agreement”).

 

2.                                      Registration
of Warrant.  The Company shall
register this Warrant, upon records to be maintained by the Company for that
purpose (the “Warrant Register”), in the name of the record Holder hereof
from time to time.  The Company may deem
and treat the registered Holder of this Warrant as the absolute owner hereof
for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.

 

 

3.                                      Registration
of Transfers.  The Company shall
register the transfer of any portion of this Warrant in the Warrant Register,
upon surrender of this Warrant, with the Form of Assignment attached hereto
duly completed and signed, to the Company at its address specified herein.  Upon any such registration or transfer, a
new Warrant to purchase Common Stock, in substantially the form of this Warrant
(any such new Warrant, a “New Warrant”), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant
by the transferee thereof shall be deemed the acceptance by such transferee of
all of the rights and obligations of a holder of a Warrant. 

 

4.                                      Exercise
and Duration of Warrants.  This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the date hereof to and including the Expiration Date.  At 6:30 p.m., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value, provided, that if the closing sales
price of the Common Stock on the Expiration Date is greater than 102% of the
Exercise Price on the Expiration Date, then this Warrant shall be deemed to
have been exercised in full (to the extent not previously exercised) on a “cashless
exercise” basis at 6:30 P.M. New York City time on the Expiration Date. The
Company may not call or redeem all or any portion of this Warrant without the
prior written consent of the Holder.

 

5.                                      Delivery
of Warrant Shares.

 

(a)                                  To
effect conversions hereunder, the Holder shall not be required to physically
surrender this Warrant unless the aggregate Warrant Shares represented by this
Warrant is being exercised.  Upon
delivery of the Exercise Notice to the Company (with the attached Warrant
Shares Exercise Log) at its address for notice set forth herein and upon
payment of the Exercise Price multiplied by the number of Warrant Shares that
the Holder intends to purchase hereunder, the Company shall promptly (but in no
event later than five Trading Days after the Date of Exercise (as defined
herein)) issue and deliver to the Holder, a certificate for the Warrant Shares
issuable upon such exercise.  The
Company shall, upon request of the Holder and subsequent to the date on which a
registration statement covering the resale of the Warrant Shares has been
declared effective by the Securities and Exchange Commission, use its best
efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions,  if
available, provided, that, the Company may, but will not be required to change
its transfer agent if its current transfer agent cannot deliver Warrant Shares
electronically through the Depository Trust Corporation.  A “Date of Exercise” means, subject to
Section 11 hereof, the date on which the Holder shall have delivered to
Company: (i) the Exercise Notice (with the Warrant Exercise Log attached to
it), appropriately completed and duly signed and (ii) if such Holder is not
utilizing the cashless exercise provisions set forth in this Warrant, payment
of the Exercise Price for the number of Warrant Shares so indicated by the
Holder to be purchased.

 

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(b)                                  If
by the fifth Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to
Section 5(a), then the Holder will have the right to rescind such exercise

 

(c)                                  If
by the fifth Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to
Section 5(a), and if after such fifth Trading Day and prior to the receipt
of such Warrant Shares, the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder
the amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y)
the amount obtained by multiplying (A) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise
at issue by (B) the closing bid price of the Common Stock at the time of the
obligation giving rise to such purchase obligation and (2) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent number of
Warrant Shares for which such exercise was not honored or deliver to the Holder
the number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations
hereunder.  The Holder shall provide the
Company written notice in a form reasonably satisfactory to the Company
indicating the amounts payable to the Holder in respect of the Buy-In.

 

(d)                                  The
Company’s obligations to issue and deliver Warrant Shares in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the
Warrant  as required pursuant to the
terms hereof.

 

6.                                      Charges,
Taxes and Expenses.  Issuance and
delivery of certificates for shares of Common Stock upon exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer tax,
withholding tax, transfer agent fee or other incidental tax or expense in
respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Warrant Shares or Warrants
in a name other than that of the Holder. 
The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

 

3

 

7.                                      Replacement
of Warrant.  If this Warrant is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation hereof, or in
lieu of and substitution for this Warrant, a New Warrant, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity (which shall not include a
surety bond), if requested.  Applicants
for a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe.  If
a New Warrant is requested as a result of a mutilation of this Warrant, then
the Holder shall deliver such mutilated Warrant to the Company as a condition
precedent to the Company’s obligation to issue the New Warrant.

 

8.                                      Reservation
of Warrant Shares.  The Company
covenants that it will at all times reserve and keep available out of the
aggregate of its authorized but unissued and otherwise unreserved Common Stock,
solely for the purpose of enabling it to issue Warrant Shares upon exercise of
this Warrant as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant, free from
preemptive rights or any other contingent purchase rights of persons other than
the Holder (taking into account the adjustments and restrictions of Section 9).
The Company covenants that all Warrant Shares so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.

 

9.                                      Certain
Adjustments.  The Exercise Price and
number of Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 9.

 

(a)                                  Stock
Dividends and Splits.  If the
Company, at any time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class of
capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i)
of this paragraph shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph
shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this paragraph
occurs during the period that an Exercise Price is calculated hereunder, then
the calculation of such Exercise Price shall be adjusted appropriately to
reflect such event.

 

(b)                                  Fundamental
Transactions.  Subject to the
provisions of this paragraph, if, at any time while this Warrant is
outstanding, (1) the Company effects any merger or consolidation of the Company
with or into another Person, (2) the Company effects any sale of

 

4

 

all or substantially all of its assets in one or a
series of related transactions, (3) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of
Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (4) the Company effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (in any such case, a “Fundamental Transaction”), then the Holder
shall have the right thereafter to receive, upon exercise of this Warrant, the
same amount and kind of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant
(the “Alternate
Consideration”).  For
purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner reflecting
the relative value of any different components of the Alternate
Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. 
The successor to the Company or surviving entity in such Fundamental
Transaction shall, either (1) issue to the Holder a new warrant substantially
in the form of this Warrant and consistent with the foregoing provisions and
evidencing the Holder’s right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof, or (2) purchase the Warrant
from the Holder for a purchase price, payable in cash within five Trading Days
after the consummation of the Fundamental Transaction), equal to the Black
Scholes value of the remaining unexercised portion of this Warrant on the date
of such request. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

 

(c)                                  Subsequent
Equity Sales.  

 

(i)                                    While
any portion of this Warrant is outstanding, if the Company issues any shares of
Common Stock or the Company or any subsidiary thereof issues any rights,
warrants, options or other securities or debt that is convertible into,
exchangeable for (any such securities, “Common Stock Equivalents”) entitling any
Person to acquire shares of Common Stock, at a price per share less than the
Exercise Price (if the holder of the Common Stock or Common Stock Equivalent so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or
otherwise, or due to warrants, options or rights issued in connection with such
issuance, be entitled to receive shares of Common Stock at a price less than
the Exercise Price, such issuance shall be deemed to have occurred for less
than the Exercise Price), then, at the option of the Holder for such exercises
as it shall indicate, the Exercise Price shall be adjusted to equal the
conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including 

 

5

 

any reset provisions thereof) at issue and which
adjusted Exercise Price shall continue for as long as this Warrant remains
outstanding.  Such adjustment shall be
made whenever such Common Stock or Common Stock Equivalents are issued.  The Company shall notify the Holder in
writing, no later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalent subject to this section, indicating therein
the applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms.

 

(ii)                                If,
at any time while this Warrant is outstanding, the Company or any Subsidiary
issues Common Stock Equivalents at a price per share that floats or resets or
otherwise varies or is subject to adjustment based on market prices of the
Common Stock (a “Floating Price Security”), then for purposes of applying the
preceding paragraph in connection with any subsequent exercise, the Exercise
Price will be determined separately on each Exercise Date and will be deemed to
equal the lowest price per share at which any holder of such Floating Price
Security is entitled to acquire shares of Common Stock on such Exercise Date
(regardless of whether any such holder actually acquires any shares on such
date).

 

(iii)                            Notwithstanding
the foregoing, no adjustment will be made under this Section 9(d) as a
result of: (i) the issuance of securities upon the exercise or conversion of
any Common Stock Equivalents issued by the Company prior to the date of this
Agreement (but will apply to any amendments, modifications and reissuances
thereof), (ii) the grant of options or warrants, or the issuance of additional
securities, under any duly authorized company stock option, restricted stock
plan or stock purchase plan including any amendments or other modifications
thereto, (iii) the issuance of Common Stock in connection with a restructuring
of the Company’s lease for its principal business office in Mountain View, CA,
(iv) the issuance of Common Stock Equivalents pursuant to a Strategic
Transaction, or (v) the issuance of Common Stock or Common Stock Equivalents in
the Additional Closing or any other such issuance to Holder or Holder’s
Affiliates.

 

(d)                                  Number
of Warrant Shares.  Simultaneously
with any adjustment to the Exercise Price pursuant to paragraph (a) of this
Section, the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that after
such adjustment the aggregate Exercise Price payable hereunder for the adjusted
number of Warrant Shares shall be the same as the aggregate Exercise Price in
effect immediately prior to such adjustment.

 

(e)                                  Calculations.  All calculations under this Section 9
shall be made to the nearest cent or the nearest share, as applicable.  The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

 

(f)                                    Notice
of Adjustments.  Upon the occurrence
of each adjustment pursuant to this Section 9, the Company at its
expense will promptly compute such adjustment in accordance with the terms of
this Warrant and prepare a certificate setting forth such adjustment, including
a statement of the adjusted Exercise Price and adjusted number or type of
Warrant 

 

6

 

Shares or other securities issuable upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is
based.  Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder and
to the Company’s Transfer Agent.

 

(g)                                 Notice
of Corporate Events.  If the Company
(i) declares a dividend or any other distribution of cash, securities or other
property in respect of its Common Stock, including without limitation any
granting of rights or warrants to subscribe for or purchase any capital stock
of the Company or any Subsidiary, (ii) authorizes or approves, enters into any
agreement contemplating or solicits stockholder approval for any Fundamental
Transaction or (iii) authorizes the voluntary dissolution, liquidation or
winding up of the affairs of the Company, then the Company shall deliver to the
Holder a notice describing the material terms and conditions of such
transaction, at least 20 calendar days for transactions described in
subsections (i) and (iii), above and at least 10 calendar days for transactions
described in subsection (ii) above, prior to the applicable record or
effective date on which a Person would need to hold Common Stock in order to
participate in or vote with respect to such transaction, and the Company will take
all steps reasonably necessary in order to insure that the Holder is given the
practical opportunity to exercise this Warrant prior to such time so as to
participate in or vote with respect to such transaction; provided, however,
that the failure to deliver such notice or any defect therein shall not affect
the validity of the corporate action required to be described in such notice.

 

10.                               Payment
of Exercise Price. The Holder may pay the Exercise Price in one of the
following manners:

 

(a)                                  Cash
Exercise.  The Holder may deliver
immediately available funds; or

 

(b)                                  Cashless
Exercise.  The Holder may notify the
Company in an Exercise Notice of its election to utilize cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:

 

X = Y [(A-B)/A]

 

where:

 

X = the number of Warrant Shares to be issued to the Holder.

 

Y = the number of Warrant Shares with respect to which this Warrant is
being exercised.

 

A = the average of the closing prices for the five Trading Days
immediately prior to (but not including) the Exercise Date.

 

B = the Exercise Price.

 

7

 

For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued.

 

11.                               Limitations
on Exercise.  

 

(a)                                  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares
of Common Stock then beneficially owned by such Holder and its Affiliates and
any other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder’s for purposes of Section 13(d) of the Exchange Act, does
not exceed 4.999% of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise).  For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number
of shares of Common Stock which a Holder may receive or beneficially own in
order to determine the amount of securities or other consideration that such
Holder may receive in the event of a merger or other business combination or
reclassification involving the Company as contemplated in Section 9 of this
Warrant. By written notice to the Company, the Holder may waive the provisions
of this Section but any such waiver will not be effective until the 61st
day after such notice is delivered to the Company.

 

(b)                                  Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Warrant (or
otherwise in respect hereof) shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares
of Common Stock then beneficially owned by such Holder and its Affiliates and
any other Persons whose beneficial ownership of Common Stock would be
aggregated with the Holder’s for purposes of Section 13(d) of the Exchange
Act, does not exceed 9.999% of the total number of issued and outstanding
shares of Common Stock (including for such purpose the shares of Common Stock
issuable upon such exercise).  For such
purposes, beneficial ownership shall be determined in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number
of shares of Common Stock which a Holder may receive or beneficially own in order
to determine the amount of securities or other consideration that such Holder
may receive in the event of a merger or other business combination or
reclassification involving the Company as contemplated in Section 9 of
this Warrant.  This restriction may not
be waived.

 

12.                               No
Fractional Shares.  No fractional
shares of Warrant Shares will be issued in connection with any exercise of this
Warrant.  All issued shares shall be
rounded to the nearest whole share.

 

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13.                               Notices.  Any and all notices or other communications
or deliveries hereunder (including, without limitation, any Exercise Notice)
shall be in writing and shall be deemed given and effective on the earliest of
(i) 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, (ii) 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, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.  The addresses for such communications shall
be:  (i) if to the Company, to Aerogen,
Inc., 2071 Stierlin Court, Mountain View, CA 94043, Attn: Chief Financial
Officer, Facsimile No. (650) 864-7433,
or (ii) if to the Holder, to the address or facsimile number appearing on the
Warrant Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section.

 

14.                               Warrant
Agent.  The Company shall serve as
warrant agent under this Warrant.  Upon
30 days’ notice to the Holder, the Company may appoint a new warrant
agent.  Any corporation into which the
Company or any new warrant agent may be merged or any corporation resulting
from any consolidation to which the Company or any new warrant agent shall be a
party or any corporation to which the Company or any new warrant agent
transfers substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant without any
further act.  Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Warrant Register.

 

15.                               Miscellaneous.

 

(a)                                  This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns. 
Subject to the preceding sentence, nothing in this Warrant shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing
signed by the Company and the Holder and their successors and assigns.

 

(b)                                  All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant 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 this Warrant and the transactions
herein contemplated (“Proceedings”) (whether brought against a
party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the New York Courts for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any 

 

9

 

claim that it is not personally subject to the
jurisdiction of any New York Court, or that such Proceeding has been commenced
in an improper or inconvenient forum. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any
such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.  Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial
by jury in any legal proceeding arising out of or relating to this Warrant or
the transactions contemplated hereby. 
If either party shall commence a Proceeding to enforce any provisions of
this Warrant, then the prevailing party in such Proceeding shall be reimbursed
by the other party for its attorney’s fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
Proceeding.

 

(c)                                  The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

 

(d)                                  In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed by its authorized officer as of the date first
indicated above.

 

	
   

  	
  Aerogen,
  Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Jane E. Shaw

  	
   

  
	
   

  	
  Name:

  	
  Jane E. Shaw

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  	
   

  
						

 

11

 

EXERCISE NOTICE

 

To Aerogen, Inc.:

 

The undersigned hereby irrevocably elects to purchase                            
shares of common stock, par value $0.001 per share, of Aerogen, Inc. (“Common
Stock”), pursuant to Warrant No. 1, originally issued
September 9, 2003 (the “Warrant”), and, if such Holder is not
utilizing the cashless exercise provisions set forth in the Warrant, encloses
herewith $             
in cash, certified or official bank check or checks or other immediately
available funds, which sum represents the aggregate Exercise Price (as defined
in the Warrant) for the number of shares of Common Stock to which this Exercise
Notice relates, together with any applicable taxes payable by the undersigned pursuant
to the Warrant.

 

By its delivery of this Exercise Notice, the
undersigned represents and warrants to the Company that in giving effect to the
exercise evidenced hereby the Holder will not beneficially own in excess of the
number of shares of Common Stock (determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934) permitted to be
owned under Section 11 of this Warrant to which this notice relates.

 

The undersigned requests that certificates for the
shares of Common Stock issuable upon this exercise be issued in the name of

 

	
   

  	
  PLEASE INSERT SOCIAL SECURITY OR

  
	
   

  	
  TAX IDENTIFICATION NUMBER

  

 

 

(Please print name and
address)

 

 

Warrant Shares Exercise
Log

 

 

	
  Date

  	
   

  	
  Number of Warrant 

  Shares Available to be 

  Exercised

  	
   

  	
  Number of Warrant Shares

  Exercised

  	
   

  	
  Number of

  Warrant Shares

  Remaining to

  be Exercised

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

FORM OF
ASSIGNMENT

 

[To be completed and signed only upon transfer of
Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto                                                                 
the right represented by the within Warrant to purchase                             
shares of Common Stock of Aerogen, Inc. to which the within Warrant relates and
appoints                               
attorney to transfer said right on the books of the Company with full power of
substitution in the premises.

 

	
  Dated:                    ,
           

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature must conform in all respects to name of

  holder as specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address of Transferee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

	
  In the presence of:Exhibit
10.91

 

PLACEMENT
AGENT AGREEMENT

 

 

September
30, 2003

 

Brean Murray & Co., Inc.

570 Lexington Avenue

New York, New York 10022

 

 

Gentlemen:

 

VCampus
Corporation, a Delaware corporation (the “Company”), hereby confirms its
agreement with Brean Murray & Co., Inc. (the “Placement Agent”), as
follows:

 

1.             Offering.  (a)  The Company shall offer (the “Offering”)
for sale through the Placement Agent, as exclusive agent for the Company, a
maximum (the “Maximum Offering”) of 2,000,000 units (the “Units”),
each Unit consisting of one share (collectively, the “Shares”) of the
Company’s common stock, par value $0.01 per share (the “Common Stock”),
and a warrant (collectively, the “Common Stock Warrants” to purchase one
share of Common Stock (the “Warrant Shares”) at an exercise price of
$2.59 per Share (subject to reduction as set forth in the Securities Purchase
Agreement).  The Common Stock Warrants
shall contain the terms and conditions, and be in substantially the form,
attached as Exhibit A hereto.

 

(b)           Placement of the Units shall be made on a “best
efforts” basis.  The Units will be
offered commencing on the date of the Executive Summary (as defined below) and
ending on September 30, 2003 (the “Offering Period”).  The date on which the Offering shall terminate
shall be referred to as the “Termination Date.”  The Offering Period may be terminated early
or extended for up to 30 days by the mutual consent of the parties.  The Company expressly acknowledges and
agrees that the Placement Agent’s obligations hereunder are on a reasonable
efforts basis only and that the execution of this Agreement does not in any way
constitute a commitment by the Placement Agent to purchase the Units and does
not ensure the successful placement of the Units or any portion thereof.

 

(c)           Subscriptions for the Units will be accepted by the
Company at a price of $2.59 per Unit (subject to reduction as set forth in the
Securities Purchase Agreement, the “Offering Price”); provided, however,
that the Company shall not accept subscriptions for, or sell Units to, any
persons or entities who do not qualify as “accredited investors,” as such term
is defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933, as amended (the “Securities Act”).

 

(d)           The Offering will be made by the Company solely
pursuant to the Executive Summary and the Commission Documents in accordance
with Section 4(b) of this Agreement. 
The Executive Summary, at all times, will be in form and substance
reasonably

 

 

acceptable to the
Placement Agent and its counsel and contain such legends and other information
as the Placement Agent and its counsel may, from time to time, deem necessary
and desirable to be set forth therein. 
“Executive Summary” as used in this Agreement means the Company’s
Confidential Executive Summary, dated September 2003, inclusive of all
exhibits, and all amendments, supplements and attachments thereto.  Unless otherwise defined, each term used in
this Agreement will have the same meaning as set forth in the Executive
Summary.

 

(e)           As more particularly described in that certain
Securities Purchase Agreement by and among the Company and the purchasers (the
“Purchasers”) in the Offering (the “Securities Purchase Agreement,”
together with this Agreement and the Warrants, the “Transaction Documents”),
the Company shall prepare and file, within thirty (30) days after the Closing
Date (as defined below), a registration statement under the Securities Act,
which registration statement shall cover the offer and resale of the Shares,
the Common Stock Warrants and the Warrant Shares.  The Company shall use its best efforts to cause the registration
statement to become effective under the Securities Act in accordance with the
Securities Purchase Agreement.

 

2.             Representations and Warranties of the Placement Agent. 
In offering the Units for sale, the Placement Agent proposes to offer
the Units solely as agent for the Company for sale to accredited investors upon
the terms set forth in the Executive Summary. 
The Placement Agent represents and warrants to the Company that,
assuming compliance by the Company with all relevant provisions of the
Securities Act, the Placement Agent will conduct all offers and sales of the
Units in compliance with the relevant provisions of the Securities Act and the
Rules and Regulations, all applicable state securities laws and regulations and
the bylaws and rules of the National Association of Securities Dealers, Inc.
(the “NASD”).  The Placement
Agent represents and warrants to the Company that the Placement Agent is
authorized to enter into this Agreement and to act in the manner provided in
this Agreement.

 

3.             Representations and Warranties. 
The Company (which for purposes of this Section 3 includes its
subsidiaries, as applicable) hereby represents and warrants to the Placement
Agent that, except as disclosed in the Commission Documents:

 

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

 

2

 

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

 

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

 

(d)           Subject to receiving the consent of its Board of
Directors for up to 100% warrant coverage and the price reduction provisions
contained in the Securities Purchase Agreement, the Company has full corporate
power and authority to execute, deliver and enter into this Agreement and the other
Transaction Documents and to consummate the transactions contemplated hereby
and thereby.  Except with respect to any
stockholder approvals as may be required under Nasdaq Marketplace rules and
related interpretations and subject to receiving the consent of the Company’s
Board of Directors for 100% warrant coverage and the price reduction provisions
contained in the Securities Purchase Agreement, all action required to be taken
prior

 

3

 

to closing on the part of
the Company, its directors or stockholders necessary for the authorization,
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company, the authorization, sale, issuance and delivery of the
Units contemplated by the Securities Purchase Agreement and the performance of
the Company’s obligations hereunder and thereunder has been taken.  The Units and Common Stock Warrants to be
purchased on the Closing Date and the Warrant Shares to be purchased upon exercise
of the Common Stock Warrants have been duly authorized and, when issued in
accordance with the Securities Purchase Agreement and, in the case of the
Warrant Shares, the Common Stock Warrants, will be validly issued, fully paid
and nonassessable and will be free and clear of all Liens imposed by or through
the Company other than restrictions imposed by the Securities Purchase
Agreement, the Common Stock Warrants and applicable securities laws.  No preemptive or other rights to subscribe
for or purchase equity securities of the Company exists with respect to the
issuance and sale of the Units or the Warrant Shares by the Company pursuant to
this Agreement or the other Transaction Documents.  This Agreement and the other Transaction Documents have been duly
executed and delivered by the Company and each such agreement constitutes a
legal, valid and binding obligation of the Company subject to receiving the
consent of its Board of Directors for 100% warrant coverage and the price
reduction provisions contained in the Securities Purchase Agreement.

 

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

 

(ii) The Company has
provided to the Placement Agent the 2002 10-K. 
A copy of each report, schedule, effective registration statement and
definitive proxy statement filed by the Company with the Commission since
December 31, 2002, including, but not limited to the Company’s Current Reports
on Form 8-K filed on January 24, 2003, February 25, 2003, May 28, 2003, June
11, 2003, August 12, 2003 and September 23, 2003 (as the documents may have
been amended since the time of their filing, the “Commission Documents”)
has also been made available to the Placement Agent either by physical delivery
or via the Commission’s EDGAR System. 
As of their respective filing dates, each Commission Document complied
in all material respects with the requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
applicable, and the rules and regulations of the

 

4

 

Commission thereunder
applicable to the Commission Documents, and no Commission Document, when filed,
contained any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.  As of their respective filing dates, the
financial statements of the Company included in the Commission Documents
complied as to form in all material respects with then applicable accounting
requirements and with the published rules and regulations of the Commission
with respect thereto, were prepared in accordance with generally accepted
accounting principles, applied consistently with the past practices of the
Company, and as of their respective dates, fairly presented in all material
respects the financial position of the Company and the results of its
operations as of the time and for the periods indicated therein (except as may
be indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Form 10-Q, and Regulations S-K and S-X of the Commission).

 

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

 

(iv)          Since December 31, 2002,
neither the Company nor any of the Company’s Subsidiaries has incurred any
liabilities or obligations of any nature, whether or not accrued, absolute,
contingent or otherwise, other than liabilities (A) disclosed in the Commission
Documents filed prior to the date of this Agreement, (B) adequately provided
for in the Balance Sheets or disclosed in any related notes thereto, (C) not
required under GAAP to be reflected in the Balance Sheets, or disclosed in any
related notes thereto, (D) incurred in connection with this Agreement, or (E)
incurred in the ordinary course of business.

 

(f)            Since December 31, 2002, except as disclosed in the
Commission Documents filed subsequent to that date, there has not been any material
adverse change in the business, financial condition or operating results of the
Company and its Subsidiaries.

 

(g)           Except as contemplated by or disclosed in this
Agreement, the Securities Purchase Agreement, the Schedules to the Securities
Purchase Agreement and the Commission Documents, since December 31, 2002,
through the date immediately preceding the Closing Date, neither the Company
nor any of its Subsidiaries has (a), in any material respects, issued any
stock, options, bonds or other corporate securities other than pursuant to the
Option Plans, (b), in any material respect, borrowed any amount or incurred or
became subject to any liabilities (absolute, accrued or contingent), other than
current liabilities incurred in the ordinary course of business or liabilities
under contracts entered into in the ordinary course of business, (c), in any
material respect, discharged or satisfied any lien or adverse claim or paid any
obligation or liability (absolute, accrued or contingent), other than current liabilities
shown on the Balance Sheets and current liabilities incurred in the ordinary
course of business, (d) declared or made any payment or distribution of cash or
other property to the stockholders of the Company or

 

5

 

purchased or redeemed any
securities of the Company, (e) , in any material respect, mortgaged, pledged or
subjected to any lien or adverse claim any of its properties or assets, except
for liens for taxes not yet due and payable or otherwise in the ordinary course
of business, (f) sold, assigned or transferred any of its assets, tangible or
intangible, except in the ordinary course of business or in an amount less than
$250,000, (g) suffered any extraordinary losses or waived any rights of
material value other than in the ordinary course of business, (h) made any
capital expenditures or commitments therefor other than in the ordinary course
of business or in an amount less than $250,000, (i) entered into any other
transaction other than in the ordinary course of business or in an amount less
than $250,000 or entered into any material transaction, whether or not in the
ordinary course of business, (j) made any material charitable contributions or
pledges, (k) suffered any damages, destruction or casualty loss, whether or not
covered by insurance, affecting any of the properties or assets of the Company
or any other properties or assets of the Company which reasonably could,
individually or in the aggregate, have or result in a Material Adverse Effect,
(l) made any material change in the nature or operations of the business of the
Company, or (m) entered into any agreement or commitment to do any of the
foregoing.

 

(h)           (i)            The execution and delivery by the Company
of this Agreement and the consummation of the transactions contemplated hereby
will not (A) result in the violation of any provision of the Certificate of
Incorporation or By-laws of the Company, (B) result in any violation of any
law, statute, rule, regulation, order, writ, injunction, judgment or decree of
any court or governmental authority to or by which the Company or any of its
Subsidiaries is bound, or (C) conflict with, or result in a breach or violation
of, any of the terms or provisions of, or constitute (with due notice or lapse
of time or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement to which the Company or any of
its Subsidiaries is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of
any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries, in the case of clauses (B) and (C), only to the extent such
conflict, breach or violation reasonably could, individually or in the
aggregate, have or result in a Material Adverse Effect.

 

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

 

(i)            The Company and its Subsidiaries have all licenses,
permits and other governmental authorizations currently required for the
conduct of its current business and the ownership of its properties and is in
all respects complying therewith, except where the failure to

 

6

 

have such licenses,
permits and other governmental authorizations would not have a Material Adverse
Effect.

 

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

 

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

 

(l)            Except as described in Schedule 6.11 to the
Securities Purchase Agreement, neither the Company nor any of its Subsidiaries
is (i) in default under or in violation of any indenture, loan or credit
agreement or , in any material respect, under any other agreement or instrument
to which it is a party of by which it or any of its properties is bound or (ii)
in violation of any order, decree or judgment of any court, arbitrator or
governmental body.

 

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

 

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

 

(o)           The Company and its Subsidiaries have obtained all
permits, licenses and other authorizations which are required under United
States federal, state and local laws relating to pollution or protection of the
environment, including laws related to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic material
or wastes into ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling or pollutants, contaminants or hazardous or
toxic materials or wastes (“Environmental Laws”).  The

 

7

 

Company and its
Subsidiaries are in compliance with all terms and conditions of the required
permits, licenses and authorizations and are also in full compliance with all
other limitations, restrictions, conditions and requirements contained in the
Environmental Laws or contained in any plan, except where the failure to so
comply would not have a Material Adverse Effect.  The Company is not aware of, nor has the Company received notice
of, any events, conditions, circumstances, actions or plans which may interfere
with or prevent continued compliance or which would give rise to any liability
under any Environmental Laws.

 

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

 

(q)           The Company has good title to all the properties and
assets reflected as owned by it in the consolidated financial statements
included in the Executive Summary, subject to no lien, mortgage, pledge, charge
or encumbrance of any kind except (i) those, if any, reflected in such
consolidated financial statements or (ii) those which are not material in
amount and do not adversely affect the use made and intended to be made of such
property by the Company.  The Company
holds its leased properties under valid and binding leases, with such
exceptions as are not materially significant in relation to its business.  Except as disclosed in the Executive
Summary, the Company owns or leases all such properties as are necessary to its
operations as now conducted.

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

(x)            Other than Brean Murray & Co., Inc. (as placement
agent on behalf of the Company) and any subagents it may appoint pursuant to
the Executive Summary, no finder, broker, agent, financial person or other
intermediary has acted on behalf of the Company in connection with the sale of
the Units by the Company or the consummation of this Agreement or any of the
transactions contemplated hereby.  The
Company has not had any direct or indirect

 

9

 

contact with any other
investment banking firm (or similar firm) with respect to the offer of the
Units by the Company to the Purchasers or the Purchasers’ subscription for the
Units.

 

4.             Placement Agent Appointment and Compensation. 
(a)  The Company hereby appoints
the Placement Agent and the Placement Agent agrees to act on a best efforts
basis with respect to the Maximum Offering, as the Company’s exclusive agent in
connection with the Offering.  The
Company has not and will not make, or permit to be made, any offers or sales of
the Units other than through the Placement Agent without its prior written
consent.  The Placement Agent has no
obligation to purchase any of the Units. 
The agency of the Placement Agent hereunder shall continue until the
later of the Termination Date or the Closing (as defined below).

 

(b)           The Company has caused to be delivered, or made
available via EDGAR, to the Placement Agent copies of the Executive Summary and
the Commission Documents and has consented, and hereby consents, to the use of
such copies for the purposes permitted by the Securities Act and applicable
securities laws, and hereby authorizes the Placement Agent to use the Executive
Summary and the Commission Documents in connection with the sale of the Units
until the Termination Date, and no person other than the Placement Agent is or
will be authorized to give any information or make any representations other
than those contained in the Executive Summary or the Commission Documents or to
use any information or representations other than those contained in the
Executive Summary or the Commission Documents in connection with the sale of
the Units.

 

(c)           The Company will cooperate with the Placement Agent by
making available to its representatives such information as may be requested in
making a reasonable investigation of the Company and its affairs and shall
provide access to such employees as shall be reasonably requested.

 

(d)           At the Closing (as defined below), the Company shall
pay to the Placement Agent a placement fee (the “Placement Agent’s Fee”)
equal to seven percent (7%) of the Offering Price of all the Units sold in such
Closing (as defined below) and for which funds are disbursed to the
Company.  The Placement Agent’s Fee
shall be paid in Units based upon the price per Unit of common stock of $2.59.

 

(e)           In addition to the Placement Agent’s Fee and
regardless of whether the Offering is consummated, the Company shall promptly,
upon request therefor, reimburse the Placement Agent for all reasonable,
documented and actual expenses (including without limitation fees and
disbursements of counsel and all travel, lodging, meal and other out-of-pocket
expenses) incurred by the Placement Agent in connection with the Offering up to
a maximum of $50,000.

 

(f)            At or before the Closing, the Company shall issue to
the Placement Agent a warrant (the “Placement Agent’s Warrant”) to
purchase 200,000 shares of Common Stock and

 

10

 

such Warrant shall
contain the terms and conditions, and be in substantially the form, attached as
Exhibit B
hereto.

 

5.             Subscription and Closing Procedures. 
(a)  Each prospective Purchaser
will be required to complete and execute the Securities Purchase Agreement and
a Confidential Purchaser Questionnaire, which will be forwarded or delivered to
the Placement Agent at the Placement Agent’s offices at the address set forth
in Section 12 hereof, together with the subscriber’s check or wire transfer of
immediately available United States funds in the full amount of the purchase
price for the number of Units desired to be purchased.

 

(b)           The closing (the “Closing”) of the purchase and
sale of the Units (the “Offering”) will take place at the offices of
Piper Rudnick LLP, 1251 Avenue of the Americas, New York, New York  10020, at or before 11:59 p.m., local time,
on September 30, 2003.  The Closing may
take place at another time, place or earlier date as is mutually agreed upon by
the Company and the Purchasers in the Offering.  The date of the Closing is referred to as the “Closing
Date.”  At the Closing, the Company will
register in the name of each Purchaser that number of Units and that number of
Common Stock Warrants being purchased by such Purchaser in accordance with Exhibit
A to the Securities Purchase Agreement, against payment of each Purchaser’s
Purchase Price (as defined in the Securities Purchase Agreement) by check or
wire transfer of immediately available United States funds payable to the
Company’s account.  The Units and the
Common Stock Warrants will be registered in the Purchasers’ names or the names
of the nominees of the Purchasers pursuant to instructions delivered to the
Company not less than two (2) business days prior to the Closing Date and will
be delivered to the Purchasers within ten (10) business days after the Closing
Date.

 

6.             Further Covenants.  The Company
hereby covenants and agrees that:

 

(a)           Except with the prior written consent of the Placement
Agent, the Company shall not, at any time prior to the Closing, take any action
which would cause any of the representations and warranties made by it in this
Agreement not to be complete and correct on and as of the Closing Date with the
same force and effect as if such representations and warranties had been made
on and as of each such date.

 

(b)           If, at any time prior to the Closing, any event shall
occur which does or may materially affect the Company or as a result of which
it might become necessary to amend or supplement the Executive Summary so that
the representations and warranties herein remain true, or in case it shall, in
the opinion of counsel to the Placement Agent, be necessary to amend or
supplement the Executive Summary to comply with Regulation D or any other
applicable securities laws or regulations, the Company will promptly notify the
Placement Agent and shall, at its sole cost, prepare and furnish to the
Placement Agent copies of appropriate amendments and/or supplements in such
quantities as the Placement Agent may request. 
The Company will not at any time, whether before or after the Closing,
prepare or use any amendment or supplement to the Executive Summary of which
the Placement Agent will not previously have been advised and furnished with a
copy, or to which the Placement Agent or its counsel will have

 

11

 

objected in writing or orally (confirmed in writing within twenty-four
(24) hours), or which is not in compliance with the Securities Act and the
requirements of all other rules and regulations (the “Regulations”) and other
applicable securities laws.  As soon as
the Company is advised thereof, the Company will advise the Placement Agent and
its counsel, and confirm the advice in writing, of any order preventing or
suspending the use of the Executive Summary, or the suspension of the
qualification or registration of the Units for offering or the suspension of
any exemption for such qualification or registration of the Units for offering
in any jurisdiction, or of the institution or threatened institution of any
proceedings for any of such purposes, and the Company will use commercially
reasonable efforts to prevent the issuance of any such order and, if issued, to
obtain as soon as reasonably possible the lifting thereof.

 

(c)           The Company shall comply with the Securities Act, the
Regulations, the Exchange Act and the rules and regulations thereunder, all
applicable state securities laws and the rules and regulations thereunder in
the states in which the Placement Agent’s counsel has advised the Placement
Agent that the Units are qualified or registered for sale or exempt from such
qualification or registration, so as to permit the continuance of the sales of
the Units, and will file with the Commission, and shall promptly thereafter
forward to the Placement Agent, any and all reports on Form D as are required.

 

(d)           The Company shall use its best efforts to qualify the
Units for sale under the securities laws of such jurisdictions (within the
United States and its territories) as may be mutually agreed to by the Company
and the Placement Agent, and the Company will make such applications and
furnish information as may be required for such purposes, provided that the
Company will not be required to qualify as a foreign corporation in any
jurisdiction.  The Company will, from
time to time, prepare and file such statements and reports as are or may be
required to continue such qualifications in effect for so long a period as the
Placement Agent may reasonably request.

 

(e)           The Company shall place a legend on the certificates
representing the Shares and the Warrant Shares stating that the securities
evidenced thereby have not been registered under the Securities Act or
applicable state securities laws, setting forth or referring to the applicable
restrictions on transferability and sale of such securities under the
Securities Act and applicable state laws.

 

(f)            The Company shall apply the net proceeds from the sale
of the Units for the payment of interest in the aggregate amount of $31,500 on,
and the potential repayment or redemption of, outstanding convertible debt, due
December 31, 2003, in the amount of approximately $250,000 and the remaining
proceeds to general corporate and working capital purposes.  Except with respect to the currently
outstanding convertible debt, and interest accruing thereon, and as
specifically set forth in the Executive Summary, the net proceeds of the
Offering shall not be used to repay indebtedness to officers, directors or
stockholders of the Company without the prior written consent of the Placement
Agent, except for the reimbursement for reasonable and necessary expenses which
are related to Company business or which are incurred in connection with
attendance at board, committee or stockholder meetings.

 

12

 

(g)           During the Offering Period, the Company shall make
available for review by prospective Purchasers of the Units during normal
business hours at the Company’s offices, upon their request, copies of the
Company’s material agreements filed with the Commission to the extent that such
disclosure shall not violate any obligation on the part of the Company to
maintain the confidentiality thereof and shall afford each prospective
Purchaser of Units the opportunity to ask questions of and receive answers from
an officer of the Company concerning the terms and conditions of the Offering
and the opportunity to obtain such other additional information necessary to
verify the accuracy of the Executive Summary and the Commission Documents to
the extent it possesses such information or can acquire it without unreasonable
expense.

 

(h)           In connection with the Placement Agent’s due diligence
investigation, the Company shall cooperate with the Placement Agent and the
Placement Agent’s counsel by making available to the Placement Agent’s
representatives such information as may be appropriate in making a reasonable
investigation of the Company and its affairs.

 

(i)            Subject to the provisions of Section 4(e) hereof, the
Company shall pay all reasonable expenses incurred in connection with the
preparation and printing of all necessary offering documents and instruments
related to the Offering and the issuance of the Units and will also pay the
Company’s own expenses for accounting fees, legal fees, and other costs
involved with the Offering.  The Company
will provide at its own expense such quantities of the Executive Summary and
other documents and instruments relating to the Offering as the Placement Agent
may reasonably request.  In addition,
subject to the provisions of Section 4(e) hereof, the Company will pay all
reasonable filing fees, costs and legal fees for Blue Sky services and related
filings and expenses of Placement Agent’s counsel with respect to Blue Sky
qualifications, if any, and the preparation and filing of the Form D referred
to in (l) below.

 

(j)            Until the Termination Date, neither the Company nor
any person or entity acting on its behalf will negotiate with any other
placement agent or underwriter with respect to a private or public offering of
the Company’s or any subsidiary’s debt or equity securities.  Neither the Company nor anyone acting on its
behalf will, until the Termination Date, without the prior written consent of
the Placement Agent, offer for sale to, or solicit offers to subscribe for
Units or other securities of the Company from, or otherwise approach or
negotiate in respect thereof with, any other person.

 

(k)           Prior to the Closing, the Company will not incur any
material indebtedness or dispose of any material assets or make any material
acquisition or change in its business or operations, except with the Placement
Agent’s knowledge.

 

(l)            The Company shall file a Notice of Sales of Securities
on Form D with the Commission no later than fifteen (15) days after the first
sale of the Units.  The Company shall
file promptly such amendments to such Notice on Form D as shall become
necessary and shall also comply with any filing requirement imposed by the laws
of any state of jurisdiction in which

 

13

 

offers and sales are made.  The
Company shall furnish the Placement Agent with copies of all filings.

 

(m)          The Company shall not, during the period commencing on
the date hereof and ending on the later of the Termination Date and the
Closing, issue any press release or other public communication, or hold any
press conference with respect to the Company, its financial condition, results
of operations, business, properties, assets or liabilities, or the Offering,
without the prior knowledge of the Placement Agent.

 

7.             Conditions of Placement Agent’s Obligations. 
The obligations of the Placement Agent hereunder are subject to the
fulfillment or waiver by the Placement Agent, at or before the Closing (unless
the Placement Agent specifically agrees in writing to accept fulfillment of
such condition after the Closing), of the following additional conditions:

 

(a)           Each of the representations and warranties of the
Company contained in this Agreement which are qualified as to materiality must
be true and correct as written and each of the representations and warranties
of the Company contained in this Agreement which are not qualified as to
materiality must be true and correct in all material respects as of the Closing
Date and there shall have been no material adverse changes in the financial
condition, business or prospects of the Company.

 

(b)           The Company shall have performed and complied in all
material respects with all agreements, covenants and conditions required to be
performed and complied with by it under the Transaction Documents at or before
the Closing.

 

(c)           No order suspending the use of the Executive Summary
or enjoining the offering or sale of the Units or the Common Stock Warrants
shall have been issued, and no proceedings for that purpose or a similar
purpose shall have been initiated or pending, or, to the best of the Company’s
knowledge, are contemplated or threatened nor has any order been issued halting
the trading of the Units or the Common Stock Warrants on the Nasdaq SmallCap
Market .

 

(d)           Immediately prior to the consummation of the Closing,
the Company will have an authorized capitalization as set forth in the
Commission Documents.

 

(e)           The Placement Agent shall have received certificates
of the Chief Executive Officer and Chief Financial Officer of the Company,
dated as of the Closing Date, certifying in their capacity as officers of the
Company, in such detail as the Placement Agent may reasonably request, as to
the fulfillment of the conditions set forth in subparagraphs (a), (b), (c) and
(d) above.

 

(f)            The Company shall have delivered to the Placement Agent
(i) a currently dated good standing certificate from the Secretary of
State of the State of Delaware, (ii) certified resolutions of the
Company’s Board of Directors approving this Agreement and the other

 

14

 

Transaction Documents, and the transactions and agreements contemplated
by this Agreement and the other Transaction Documents (iii) a copy of the
Certificate of Incorporation of the Company and all amendments thereto,
certified by the Secretary of State of the State of Delaware and the Secretary
of the Company, (iv) a copy of the Bylaws of the Company and all
amendments thereto, certified by the Secretary of the Company and (v) the
names of the officers of the Company authorized to sign this Agreement and the
other Transaction Documents to be executed by each such officer, together with
the true signatures of each such officer.

 

(g)           At Closing, the Chief Executive Officer and the Chief
Financial Officer of the Company shall have provided a certificate to the
Placement Agent confirming that there have been no material adverse changes in
the condition (financial or otherwise)of the Company from the date of the
financial statements included in the Executive Summary or the Commission
Documents other than as set forth or contemplated in the Executive Summary.

 

(h)           At Closing, the Company shall have (i) delivered to
the Placement Agent the Placement Agent’s Fee as set forth in Section 4(d)
hereof and the Placement Agent’s Warrant as set forth in Section 4(f) hereof
and (ii) reimbursed the Placement Agent for its expenses, including the fees
and disbursements of the Placement Agent’s counsel in accordance with Section
4(e) hereof.

 

(i)            There shall have been delivered to the Placement Agent
a signed opinion of counsel to the Company (the “Company Counsel”),
dated as of the Closing Date, in form and substance satisfactory to counsel to
the Placement Agent; a form of which is attached as Exhibit C hereto.

 

(j)            All proceedings taken at or prior to the Closing in
connection with the authorization, issuance and sale of the Units and the
Warrant Shares will be satisfactory in form and substance to the Placement
Agent and its counsel, and such counsel shall have been furnished with all such
documents and certificates as they may reasonably request upon reasonable prior
notice in connection with the transactions contemplated hereby.

 

8.             Indemnification.  (a)  The Company will (i) indemnify and hold
harmless the Placement Agent and its officers, directors, employees, agents and
each person, if any, who controls the Placement Agent (“Indemnitee”)
within the meaning of the Securities Act against any and all losses, claims,
damages, liabilities or expenses whatsoever (or actions or proceedings or
investigations in respect thereof), joint or several (which will, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all reasonable attorneys’ fees, including appeals
reasonably incurred by the Indemnitee) (the “Losses”), to which any
Indemnitee may become subject, under the Securities Act or otherwise, whether
or not involving a third-party claim, in connection with the performance of
this Agreement, including the delivery of the Executive Summary and Commission
Documents to each Purchaser; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, damage or liability
results from (A) an untrue statement or alleged untrue statement of a material
fact made in the Executive Summary or an omission or alleged

 

15

 

omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made in reliance upon and in conformity
with written information furnished to the Company by the Placement Agent or any
such controlling persons specifically for use in the preparation thereof, or
(B) any violations by the Placement Agent of the Securities Act or state
securities laws which do not result from a violation thereof by the Company or
any of its affiliates or (C) Placement Agent actions found by a court of
competent jurisdiction in a final determination to have been conducted in a
grossly negligent manner or to constitute gross misconduct in the performance
of its services hereunder.  In addition
to the foregoing agreement to indemnify and reimburse, the Company will
indemnify and hold harmless each Indemnitee against any and all Losses to which
any Indemnitee may become subject insofar as such costs, expenses, losses,
claims, damages or liabilities arise out of or are based upon the claim of any
person or entity that he or it is entitled to broker’s or finder’s fees from
any Indemnitee in connection with the Offering.  The Company agrees to reimburse any Indemnified Party for all
such Losses, other than third-party claims which procedure is described in
Section 8(c), as they are incurred or suffered by such Indemnified Party.  The foregoing indemnity agreements will be
in addition to any liability which the Company may otherwise have.

 

(b)           The Placement Agent will indemnify and hold harmless
the Company, its officers, directors, employees and each person, if any, who
controls the Company (“Company Indemnitee”) within the meaning of the
Securities Act against any and all Losses to which the Company Indemnitee may
become subject under the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Executive
Summary, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading (provided, however that the
indemnity of the Placement Agent will apply in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Executive Summary in reliance upon
and in conformity with written information furnished to the Company by the
Placement Agent specifi­cally for use in the preparation thereof) or (ii)
Placement Agent’s gross negligence or gross misconduct in connection with any
act or omission to act by Placement Agent as a result of its engagement under
this Agreement as found by a court of competent jurisdiction in a final
determination.  The Placement Agent agrees
to reimburse any Company Indemnitee for all such Losses, other than third-party
claims which procedure is described in 8(c), as they are incurred or suffered
by such Company Indemnitee.  The
foregoing indemnity agreements will be in addition to any liability which the
Placement Agent may otherwise have.

 

(c)           Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, claim, proceeding
or investigation (“Action”), such indemnified party, if a claim in
respect thereof is to be made against the indemnifying party under this Section
8, will notify the indemnifying party of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may

 

16

 

have to any indemnified party under this Section 8 unless the
indemnifying party has been substantially prejudiced by such omission.  The indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party, assume the defense thereof subject to the provisions herein
stated, with counsel reasonably satisfactory to such indemnifying party.  The indemnified party will have the right to
employ separate counsel in any such Action and to participate in the defense
thereof, but the fees and expenses of such counsel will not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the Action with counsel reasonably satisfactory to the indemnified party,
provided, however, that if the indemnified party shall be requested by the
indemnifying party to participate in the defense thereof or shall have
concluded in good faith and specifically notified the indemnifying party either
that there may be specific defenses available to it which are different from or
additional to those available to the indemnifying party, then the counsel
representing it, to the extent made necessary by such defenses, shall have the
right to direct such defenses of such Action on its behalf and in such case the
reasonable fees and expenses of such counsel in connection with any such
participation or defenses shall be paid by the indemnifying party (it being
acknowledged that in connection with any such action, the indemnifying party shall
not be liable for the expenses of more than one separate counsel).  No settlement of any Action against an
indemnified party will be made without the consent of the indemnifying party
and the indemnified party, which consent shall not be unreasonably withheld or
delayed in light of all factors of importance to such party and no indemnifying
party shall be liable to indemnify any person for any settlement of any such
claim effected without such indemnifying party’s consent.

 

9.             Contribution.  To provide
for just and equitable contribution, if (i) an indemnified party makes a claim
for indemnification pursuant to Section 8 hereof and it is finally determined,
by a judgment, order or decree not subject to further appeal, that such claims
for indemnification may not be enforced, even though this Agree­ment expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Securities Act, the Exchange
Act or otherwise, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company, on the one hand, and the Placement Agent, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations.  The relative benefits received by the Company, on the one hand,
and the Placement Agent, on the other hand, shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company bear to the total commissions and fees received
by the Placement Agent.  The relative
fault, in the case of an untrue statement, alleged untrue statement, omission
or alleged omission will be determined by, among other things, whether such
statement, alleged statement, omission or alleged omission relates to
information supplied by the Company or by the Placement Agent, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission.  The Company and the Placement Agent agree
that it would be unjust and inequitable

 

17

 

if the respective obligations of the Company and the Placement Agent
for contribution were determined by pro  rata allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method or allocation that does not reflect the equitable considerations
referred to in this Section 9.  No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.  For purposes of this Section 9, each person,
if any, who controls the Placement Agent within the meaning of the Securities
Act will have the same rights to contribution as the Place­ment Agent, and each
person, if any, who controls the Company within the meaning of the Securities
Act will have the same rights to contribution as the Company, subject in each
case to the pro­visions of this Section 9. 
Anything in this Section 9 to the contrary notwithstanding, no party
will be liable for contribution with respect to the settlement of any claim or
action effected without its prior written consent.  This Section 9 is intended to supersede, to the extent permitted
by law, any right to contribution under the Securities Act, the Exchange Act or
otherwise available.

 

10.           Termination.  (a)  The Offering may be terminated by the
Placement Agent at any time prior to the expiration of the Offering Period as
contemplated in Section 1(b) hereof (“Expiration Date”) in the
event (i) that the Closing shall not have been consummated on or before
September 30, 2003, (ii) that a court of competent jurisdiction or a
governmental, regulatory or administrative agency or commission shall have
issued a non-appealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, (iii) that a
breach is made by the Company of any representation or warranty contained in
this Agreement which is qualified as to materiality or a material breach is
made by the Company of any representation or warranty contained in this Agreement
which is not qualified as to materiality, in each case that cannot be or has
not been cured within ten (10) days after the giving of written notice to the
Company of such breach, (iv) of nonfulfillment by the Company of any
covenant or agreement contained in this Agreement that cannot be or has not
been cured within ten (10) days after the giving of written notice to the
Company of such breach, or (v) any event occurs which could adversely
affect the transactions contemplated hereby or the other Transaction Documents
or the ability of the parties to perform thereunder.  If the Offering is terminated pursuant to this Section 10(a), the
Company will reimburse the Placement Agent for any and all out-of-pocket
expenses incurred by the Placement Agent with respect to the Offering as set
forth in Section 4(e).

 

(b)           This Offering may be terminated by the Company at any
time prior to the Expiration Date in the event that (i) the Placement
Agent shall have failed to perform in any material respect any of its
obligations hereunder or (ii) there shall occur any event described in
Section 10(a)(ii) above not occasioned by or arising out of or in
connection with any material breach or failure hereunder on the part of the
Company.  In the event of any such
termination by the Company, the Placement Agent shall be entitled to be
reimbursed for its expenses in accordance with Section 4(e) hereof, but the
Company shall owe no other amounts whatsoever

 

18

 

except as may be due under any indemnity or contribution obligation
provided herein or any other Transaction Document, at law or otherwise.

 

(c)           Upon any such termination, at the request of the
Placement Agent, all monies received in respect of subscriptions for Units not
accepted by the Company shall be promptly returned to such subscribers without
interest, penalty, expense or deduction.

 

11.           Survival.  (a) 
The obligations of the parties to pay any costs and expenses hereunder
and to provide indemnification and contribution as provided herein shall
survive any termination hereunder until the later of (i) the eighteenth (18th)
month anniversary of the date hereof and (ii) the date that the Company files
its Form 10-K for the year ended December 31, 2004.

 

(b)           The respective indemnities, agreements,
representations, warranties and other statements of the Company set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of, and regardless of any
access to information by, the Company or the Placement Agent, or any of their
officers or directors or any controlling person thereof, and will survive the
offer and sale of the Units.

 

12.           Notices.  All
communications hereunder will be in writing and, except as otherwise expressly
provided herein or after notice by one party to the other of a change of
address, if sent to the Placement Agent, will be mailed by registered or
certified mail, postage prepaid, return receipt requested, sent by overnight
express delivery service, delivered personally, receipt acknowledged, or
telecopied and confirmed to Brean Murray & Co., Inc., 570 Lexington Avenue,
New York, New York 10022, Attn: Mr. A. Brean Murray, telecopy: (212) 702-6649;
with a copy to Piper Rudnick LLP, 1251 Avenue of the Americas, New York, New
York 10020, Attn: Michael Hirschberg, Esq., telecopy: (212) 835-6001; and if
sent to the Company, will be mailed by registered or certified mail, postage
prepaid, return receipt requested, sent by overnight express delivery service,
delivered personally, receipt acknowledged, or telecopied and confirmed to
VCampus Corporation, 1850 Centennial Park Drive, Suite 200, Reston, Virginia
20191-1517, Attn: Chief Financial Officer, telecopy: (703) 893-1905; with a
copy to Wyrick Robbins Yates & Ponton LLP, 4101 Lake Boone Trail, Suite
300, Raleigh, North Carolina 27607-7506, Attn: Kevin A. Prakke, Esq., telecopy:
(919) 781-4865, or at such other address or telecopy number as any party may
from time to time specify to the others. 
Such notice shall be deemed given when actually received by the
addressee; provided, if a notice is received other than during normal business
hours at the place of receipt it shall be deemed received at the opening of
business on the next regular business day at the place of receipt.

 

13.           Parties in Interest.  The
agreement herein set forth is made solely for the benefit of the Placement
Agent, the Company, any person controlling either of them, and their respec­tive
executors, administrators, successors and assigns; and no other person will
acquire or have any rights under or by virtue of this Agreement.  The term “successors and assigns” will not
include any Purchaser, as such Purchaser, of the Units.

 

19

 

14.           APPLICABLE LAW, COSTS, ETC. 
THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WHOLLY WITHIN SUCH STATE (WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW).  THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED HEREBY, AND
THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL COURT.  THE COMPANY FURTHER WAIVES ANY OBJECTION TO
VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE
ON THE BASIS OF A NON-CONVENIENT FORUM. 
THE COMPANY FURTHER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST
THE PLACEMENT AGENT SHALL BE BROUGHT ONLY IN NEW YORK STATE OR UNITED STATES
FEDERAL COURTS SITTING IN NEW YORK COUNTY. 
SERVICE OF PROCESS MAY BE MADE UPON THE COMPANY BY MAILING A COPY
THEREOF TO IT, BY CERTIFIED OR REGISTERED MAIL, AT ITS ADDRESS TO BE USED FOR
THE GIVING OF NOTICES UNDER THIS AGREEMENT. 
THE COMPANY AND THE PLACEMENT AGENT EACH AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.  THE PLACEMENT AGENT OR THE COMPANY, AS THE
CASE MAY BE, SHALL BE ENTITLED TO COSTS AND REASONABLE ATTORNEY’S FEES IN THE
EVENT IT PREVAILS IN ANY CLAIMS, ACTIONS, AWARDS OR JUDGMENT UNDER THIS
AGREEMENT.

 

15.           Advertisements.  Upon
completion of the Offering, the Placement Agent may place advertisements in
financial and other publications at its own expense describing its services to
the Company hereunder.

 

16.           Disclosure to Third Parties. 
Without the prior consent of the Placement Agent, the Company will not,
subject to applicable securities and the National Association of Securities
Dealers laws and/or rules and regulations, publicly refer to the Placement
Agent or publicly disclose or otherwise make available to third parties other
than to Purchasers (except the Company’s counsel or other advisers, provided
the Company informs them of this provision), and other than in the Executive
Summary any advice or opinion, either oral or written, which the Placement
Agent provides to the Company in connection with this engagement.

 

17.           Miscellaneous.  No provision
of this Agreement may be changed or terminated except by a writing signed by
the party or parties to be charged therewith. 
Unless expressly so pro­vided, no party to this Agreement will be liable
for the perfor­mance of any other party’s obligations hereunder.  Any party hereto may waive compliance by the
other with any of the

 

20

 

terms, provisions and conditions set forth herein; provided, however
that any such waiver shall be in writing specifically setting forth those
provisions waived thereby.  No such
waiver shall be deemed to constitute or imply waiver of any other term,
provision or condition of this Agreement. 
This Agreement contains the entire agreement between the parties hereto
and is intended to supersede any and all prior agreements between the parties
relating to the same subject matter. 
This Agreement may be executed in counterparts, each of which shall be
deemed an original and all of which shall constitute a single agreement.

 

[Remainder of page intentionally left
blank.]

 

21

 

If the
foregoing is in accordance with your understand­ing of our agreement, kindly
sign and return this Placement Agent Agreement, whereupon it will become a
binding agreement between the Company and the Placement Agent in accordance
with its terms.

 

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VCAMPUS
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and agreed to
  this

  30th day of September, 2003.

  	
   

  
	
   

  	
   

  
	
  BREAN MURRAY & CO.,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  A. Brean Murray

  	
   

  
	
   

  	
  Title:

  	
  Chairman and CEO

  	
   

  
							

 

22

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