Document:

Exhibit
10.118

SECURITIES
PURCHASE AGREEMENT

SECURITIES
PURCHASE AGREEMENT (the “Agreement”),
dated as of September 25, 2006, by and among VCampus Corporation, a Delaware
corporation, with headquarters located at 1850 Centennial Park Drive, Suite
200, Reston, VA 20191 (the ”Company”),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and
collectively, the “Buyers”).

WHEREAS:

A.  The Company and each Buyer is executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”)
as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.  The Company has authorized a new series of
senior secured convertible notes of the Company which notes shall be
convertible into the Company’s common stock, par value $0.01 per share
(the ”Common Stock”), in
accordance with the terms of the Notes (as defined below).

C.  Each Buyer wishes to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
(i) that aggregate principal amount of the Notes, in substantially the form
attached hereto as Exhibit A  (the
“Notes”), set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers attached hereto (which
aggregate amount for all Buyers shall be $3,000,000) (as converted into Common
Stock, collectively, the “Conversion Shares”),
and (ii) warrants, in substantially the form attached hereto as Exhibit B
(the “Warrants”), to acquire that
number of shares of Common Stock set forth opposite such Buyer’s name in column
(4) on the Schedule of Buyers.

D.  Contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, substantially in the form attached hereto as Exhibit
C (the “Registration Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Conversion Shares and the Warrant Shares under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.

E.  The Notes, the Conversion Shares, the
Warrants and the Warrant Shares collectively are referred to herein as the “Securities”.

F.  The Notes
will rank senior to all future indebtedness of the Company, subject to
Permitted Senior Indebtedness (as defined in the Notes) and will be secured by
a perfected security interest in all of the assets of the Company and each of
the Company’s subsidiaries, as evidenced by the security agreement attached
hereto as Exhibit D (the “Security
Agreement”) and together with the Pledge Agreement, and any
ancillary documents related thereto, collectively the “Security Documents”).

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NOW, THEREFORE, the Company and each Buyer
hereby agree as follows:

1.             PURCHASE AND SALE OF NOTES AND
WARRANTS.

(a)           Purchase of Notes and Warrants.

(b)           Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly,
will purchase from the Company on the Closing Date (as defined below), (x) a
principal amount of Notes as is set forth opposite such Buyer’s name in column
(3) on the Schedule of Buyers and (y) Warrants to acquire that number of
Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers (the “Closing”).

(i)            Closing.  The date and
time of the Closing (the “Closing Date”)
shall be 10:00 a.m., New York City Time, on September 25, 2006 (or such later
date as is mutually agreed to by the Company and the Required Holders (as
defined in the Note)) after notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below at the offices of
Gottbetter & Partners, LLP, 488 Madison Avenue, New York, NY 10022.

(ii)           Purchase Price.  The
aggregate purchase price for the Notes and the Warrants to be purchased by each
Buyer at the Closing (the “Purchase Price”)
shall be the amount set forth opposite such Buyer’s name in column (5) of the
Schedule of Buyers.  Each Buyer shall pay $0.94 for each $1.00 of
principal amount of Notes and related Warrants to be purchased by such Buyer at
the Closing.

(c)           Form of Payment.  On the
Closing Date, (i) each Buyer shall pay its Purchase Price to the Company for
the Notes and the Warrants to be issued and sold to such Buyer at the Closing
by wire transfer of immediately available funds in accordance with the Company’s
written wire instructions and (ii) the Company shall deliver to each Buyer
(A) the Notes (in the principal amounts as such Buyer shall have requested
prior to the Closing) which such Buyer is then purchasing and (B) the Warrants
(in the amounts as such Buyer shall have requested prior to the Closing) which
such Buyer is purchasing, in each case duly executed on behalf of the Company
and registered in the name of such Buyer or its permitted designee.

2.                                       BUYER’S
REPRESENTATIONS AND WARRANTIES.

Each
Buyer represents and warrants with respect to only itself that:

(a)           No Public Sale or Distribution.
 Such Buyer is (i) acquiring the Notes and the Warrants and (ii) upon
conversion of the Notes and exercise of the Warrants will acquire the
Conversion Shares issuable upon conversion of the Notes and the Warrant Shares
issuable upon exercise of the Warrants, for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempt from registration under the 1933
Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum

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or other specific
term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption from
registration under the 1933 Act.  Such Buyer is not a broker dealer or an
entity engaged in the business of being a broker dealer and is acquiring the
Securities hereunder in the ordinary course of its business.  Such Buyer
does not presently have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.

(b)           Accredited Investor Status.
 Such Buyer is an “accredited investor” as that term is defined in Rule
501(a) under the 1933 Act.  Such Buyer is not a registered broker-dealer
under Section 15 of the 1934 Act (as defined herein).

(c)           Reliance on Exemptions.
 Such Buyer understands that the Securities are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.

(d)           Information.  Such Buyer
and its advisors, if any, have been furnished with all materials relating to
the business, finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by such Buyer.
 Such Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and has received and read the SEC Documents
filed via Edgar.  Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein.  Such Buyer
understands that its investment in the Securities involves a high degree of
risk.  Such Buyer has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect
to its acquisition of the Securities.

(e)           No Governmental Review.
 Such Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.

(f)            Transfer or Resale.
 Such Buyer understands that except as provided in the Registration Rights
Agreement: (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder,
(B) such Buyer shall have delivered to the Company an opinion of counsel, in a
form reasonably acceptable to the Company, to the effect that such Securities
to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) such Buyer provides the
Company with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act,
as amended, (or a successor rule thereto) 

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(collectively, “Rule 144”); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the Person (as defined
in Section 3(s)) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some
other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.  The Securities may be pledged in connection with a bona fide
margin account or other loan or financing arrangement secured by the Securities
and such pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Buyer effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other
Transaction Document (as defined in Section 3(b)), including, without
limitation, this Section 2(f).

(g)           Legends.  Such Buyer
understands that the certificates or other instruments representing the Notes
and the Warrants and, until such time as the resale of the Conversion Shares
and the Warrant Shares have been registered under the 1933 Act as contemplated
by each of the Registration Rights Agreement, the stock certificates representing
the Conversion Shares and the Warrant Shares, except as set forth below, shall
bear any legend as required by federal law and the “blue sky” laws of any state
and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):

[NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN] [THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] 
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set
forth above shall be removed and the Company shall issue a certificate without
such legend to the holder of the Securities upon which it is stamped, if,
unless otherwise required by federal or state securities laws, (i) such
Securities are registered for resale under the 1933 Act, 

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(ii) in connection
with a sale, assignment or other transfer, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to the Company, to
the effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or
(iii) such holder provides the Company with reasonable assurance that the
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A.

(h)           Validity; Enforcement.
 The Transaction Documents (as defined below) to which such Buyer is a
party have been duly and validly authorized, executed and delivered on behalf
of such Buyer and shall constitute the legal, valid and binding obligations of
such Buyer enforceable against such Buyer in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

(i)            No Conflicts.  The
execution, delivery and performance by such Buyer of the Transaction Documents
to which such Buyer is a party and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment  or decree (including federal and
state securities laws) applicable to such Buyer, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of such Buyer to perform its obligations
hereunder.

(j)            Residency.  Such Buyer
is a resident of that jurisdiction specified below its address on the Schedule
of Buyers.

(k)           Independent Investment Decision.
 Such Buyer has independently evaluated the merits of its decision to
purchase the Securities pursuant to the Transaction Documents, and such Buyer
confirms that it has not relied on the advice of any other Buyer’s business
and/or legal counsel in making such decision.

(l)            Certain Trading Activities.
 Such Buyer has not directly or indirectly, nor has any Person acting on
behalf of or pursuant to any understanding with such Buyer, engaged in any
transactions in the securities of the Company (including, without limitations,
any Short Sales involving the Company’s securities) since the time that such
Buyer was first contacted by the Company regarding the transactions
contemplated hereby.  Such Buyer covenants that neither it nor any Person
acting on its behalf or pursuant to any understanding with it will engage in
any transactions in the securities of the Company (including Short Sales) prior
to the Maturity Date on the Notes.  For the purpose of this Agreement, “Short Sales” include, without limitation,
all “short sales” as defined in Rule 200 promulgated under Regulation SHO under
the 1934 Act and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, swaps and similar arrangements (including on a
total return basis), and sales and other transactions through non-US broker
dealers or foreign regulated brokers.

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

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

(o)           Organization; Authority.
 Such Buyer is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership or other entity power and authority to enter
into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder.

(p)           Prohibited
Transactions.  Since the time the
Buyer was first contracted by the Company regarding the transactions
contemplated hereby, including during the last ten (10) days prior to the
date  hereof,  neither 
such  Buyer  nor any 
Person  acting on behalf of or
pursuant  to any  understanding 
with such Buyer has, 
directly  or  indirectly, effected  or agreed to effect any short  sale, 
whether or not  against the box,
established any “put equivalent position” (as defined in Rule 16a-1(h) under
the Exchange  Act) with  respect 
to the  Common  Stock, 
granted  any  other 
right (including,  without  limitation, 
any put or call  option)  with respect to the Common  Stock or with 
respect  to any  security 
that  includes,  relates to or derived any  significant 
part of its value from the Common 
Stock or  otherwise sought to
hedge its position in the Securities (but not including any actions to
secure  available  shares to borrow in order to effect  short 
sales or  similar transactions  in the future)  (each, a “Prohibited  Transaction”).  Prior to the termination of this Agreement
such Buyer shall not, and shall cause any Person acting on behalf of or pursuant
to any understanding  with such Buyer not
to, engage, directly or indirectly, in a Prohibited Transaction.  Such Buyer acknowledges that the
representations, warranties and covenants contained in this Section 2(p) are
being made for the benefit of the Buyers as well as the Company.

3.             REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.

The
Company represents and warrants to each of the Buyers that, except as set forth
in the Disclosure Schedule attached hereto (the “Disclosure
Schedule”) or as disclosed in the SEC Documents:

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(a)           Organization and Qualification.
 The Company and its “Subsidiaries”
(which for purposes of this Agreement means any joint venture or any entity in
which the Company, directly or indirectly, owns capital stock or holds an
equity or similar interest of more than 50%) are entities duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are formed, and have the requisite power and authority to own their
properties and to carry on their business as now being conducted.  Each of
the Company and its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect.
 As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on the business,
properties, assets, operations, results of operations, condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below).  The
Company has no Subsidiaries except as set forth on Schedule 3(a).  The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and
clear of any liens (except as listed on Schedule 3(a)), and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

(b)           Authorization; Enforcement;
Validity.  The Company has the requisite power and authority to enter
into and perform its obligations under this Agreement, the Notes, the Warrants,
the Registration Rights Agreement, the Security Documents, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), and each of
the other agreements entered into by the Company in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction Documents”) and to issue the
Securities in accordance with the terms hereof and thereof.  The execution
and delivery of this Agreement and the other Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the Notes
and the Warrants, the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion of the Notes, the reservation for issuance and
issuance of Warrant Shares issuable upon exercise of the Warrants, and the
granting of a security interest in the Collateral (as defined in the Security
Documents) have been duly authorized by the Company’s Board of Directors and
(other than (i) the filing of appropriate UCC financing statements with the
appropriate states and other authorities pursuant to the Security Agreement,
(ii) the filing of a Form D under Regulation D of the 1933 Act, (iii) the
filing with the SEC of one or more Registration Statements in accordance with
the requirements of the Registration Rights Agreement and (iv) as described in Schedule
3(b)) no further filing, consent, or authorization is required by the
Company, its Board of Directors or its stockholders.  This Agreement and
the other Transaction Documents of even date herewith have been duly executed
and delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with 

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their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

(c)           Issuance of Securities.
 The issuance of the Notes and the Warrants are duly authorized and are
free from all taxes, liens and charges with respect to the issue thereof.
 As of the Closing, a number of shares of Common Stock shall have been
duly authorized and reserved for issuance which equals 100% of the maximum
number of shares Common Stock issuable upon conversion of the Notes and upon
exercise of the Warrants.  Upon conversion in accordance with the Notes or
exercise in accordance with the Warrants, as the case may be, the Conversion
Shares and the Warrant Shares, respectively, will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights, taxes, liens
and charges imposed by or through the Company with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock.  The offer and issuance by the Company of the Securities is
exempt from registration under the 1933 Act.

(d)           No Conflicts.  The
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Notes and the Warrants, the granting of a security interest
in the Collateral and reservation for issuance and issuance of the Conversion
Shares and the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation (as defined in Section 3(r)) of the Company or any
of its Subsidiaries, any capital stock of the Company or Bylaws (as defined in
Section 3(r)) of the Company or any of its Subsidiaries or (ii) except as set forth
in Schedule 3(d), conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the
Over-The-Counter Bulletin Board (the “Principal
Market”) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected.

(e)           Consents.  Other than as
set forth in Schedule 3(b) hereof or in Schedule 3(e), the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case in accordance with the terms hereof or
thereof.  All consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the Closing Date, and the Company and
its Subsidiaries are unaware of any facts or circumstances which might prevent
the Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence.  The Company is not in
violation of the applicable trading requirements of the Principal Market and
has no knowledge of any facts which would reasonably lead to suspension of the
Common Stock from trading thereon

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in the foreseeable
future.  The issuance by the Company of
the Securities shall not have the effect of suspending the Common Stock from
trading on the Principal Market.

(f)            Acknowledgment Regarding Buyer’s
Purchase of Securities.  The Company acknowledges and agrees that each
Buyer is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby and that no Buyer is (i) an officer or director of the Company,
(ii) to the knowledge of the Company, an “affiliate” of the Company (as defined
in Rule 144) or (iii) to the knowledge of the Company, a “beneficial owner” of
more than 10% of the shares of Common Stock (as defined for purposes of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”). 
 The Company further acknowledges that no Buyer is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer
or any of its representatives or agents in connection with this Agreement and
the other Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to such Buyer’s purchase of the Securities.  The Company further represents to each Buyer
that the Company’s decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.

(g)           No General Solicitation.
 Neither the Company, nor any of its Subsidiaries or Affiliates, nor, to
the Company’s knowledge, any Person acting on its or their behalf, has engaged
in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities.  The Company
shall be responsible for the payment of any placement agent’s fees, financial
advisory fees, or brokers’ commissions (other than for persons engaged by any
Buyer or its investment advisor) relating to or arising out of the transactions
contemplated hereby.  The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim (including any claim from the
Placement Agent (as defined below)).  The
Company acknowledges that it has engaged Carter Securities, LLC, as placement
agent (the “Placement Agent”) in connection
with the sale of the Securities.  Other
than the Placement Agent, the Company has not engaged any placement agent or
other agent in connection with the sale of the Securities.

(h)           No Integrated Offering.
 None of the Company, its Subsidiaries, or to its knowledge any of their
affiliates, or any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the 1933 Act
or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or
designated.  None of the Company, its Subsidiaries, their Affiliates or
any Person acting on its or their behalf will take any action or steps referred
to in the preceding sentence that would require registration of any of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings in a manner that would require such
registration.

 

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(i)            Dilutive Effect.  The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Notes and the Warrant Shares issuable upon
exercise of the Warrants will increase in certain circumstances.  The
Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Notes in accordance with this Agreement and the Notes
and its obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Warrant is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

(j)            Application of Takeover
Protections; Rights Agreement.  The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Articles of Incorporation or the laws of the jurisdiction of its
formation which is or could become applicable to any Buyer as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s ownership of the
Securities.  The Company has not adopted a stockholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Stock or a change in control of the Company.

(k)           SEC Documents; Financial
Statements.  Except as disclosed in Schedule 3(k), during the
two (2) years prior to the date hereof, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the 1934 Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements, notes and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC Documents”).  The Company has
delivered to the Buyers or their respective representatives true, correct and
complete copies of the SEC Documents not available on the EDGAR system if such
SEC Documents have been requested in writing by Buyers.  As of their
respective filing dates, the SEC Documents, as they may have been subsequently
amended by filings made by the Company with the SEC prior to the date hereof
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, as they may have been subsequently amended by filings made by the Company
with the SEC prior to the date hereof contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the 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 SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto.  Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).  No other  information 
provided by or on behalf of the Company to 

 10
 

 

the Buyers in connection with the transactions  contemplated hereby which is not
included  in the  SEC 
Documents,  including,  without 
limitation,  information referred
to in Section 2(d) of this  Agreement or
in any  disclosure  schedules, contains any untrue  statement of a material fact or omits to
state any material fact  necessary  in order to make the  statements 
therein,  in the light of the
circumstance under which they are or were made, not misleading.

(l)            Absence of Certain Changes.  Except as disclosed in Schedule 3(l)
or in the SEC Documents, since the date of the Company’s most recent audited
financial statements contained in a Form 10-K, there has been no material
adverse change and no material adverse development in the business, assets,
properties, operations, condition (financial or otherwise), or results of
operations of the Company. Except as disclosed in Schedule 3(l),
since the date of the Company’s most recent audited financial statements
contained in a Form 10-K, neither the Company nor any of its Subsidiaries has
(i) declared or paid any dividends on its Common Stock, (ii) except as
disclosed in the SEC Documents, sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
(iii) except as set forth in Schedule 3(l) or in the SEC
Documents, had capital expenditures, individually or in the aggregate, in
excess of $100,000.  Except as set forth
in Schedule 3(l), neither the Company nor any of its Subsidiaries has
taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to
occur at the Closing, will not be Insolvent (as defined below). For purposes of
this Section 3(l), “Insolvent”
means (i) the present fair saleable value of the Company’s assets is less
than the amount required to pay the Company’s total Indebtedness (as defined in
Section 3(s)), (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, or (iii) the Company intends to
incur or believes that it will incur debts that would be beyond its ability to
pay as such debts mature.

(m)          No Undisclosed Events, Liabilities,
Developments or Circumstances.  Except as disclosed in the Disclosure
Schedules, no event, liability, development or circumstance has occurred or
exists, or is contemplated to occur with respect to the Company, its
Subsidiaries or their respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement on Form SB-2 or
any other appropriate form filed with the SEC relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly announced.

(n)           Conduct of Business; Regulatory
Permits.  Neither the Company nor any of its Subsidiaries is in
violation of any term of or in default under its Certificate of Incorporation
or Bylaws or their organizational charter or certificate of incorporation or
bylaws, respectively.  Neither the Company nor any of its Subsidiaries is
in violation of any judgment, decree or order or any law, statute, ordinance, rule
or regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will knowingly conduct its business in
violation of any of the foregoing, except for possible violations which would
not, individually or in the aggregate, have a Material Adverse Effect.
 Without limiting the generality of the 

 11
 

 

foregoing, the
Company is not in violation of any of the rules, regulations or requirements of
the Principal Market and has no knowledge of any facts or circumstances which
would reasonably lead to suspension of the Common Stock from trading by the
Principal Market in the foreseeable future. 
Except as set forth in Schedule 3(n), during the two (2) years
prior to the date hereof, (i) the Common Stock has been designated for
quotation on the Principal Market, (ii) trading in the Common Stock has not
been suspended by the SEC or the Principal Market and (iii) the Company has
received no communication, written or oral, from the SEC or the Principal
Market regarding the suspension of the Common Stock from trading on the
Principal Market.  The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

(o)           Foreign Corrupt Practices.
 Neither the Company, nor any of its Subsidiaries, nor, to their
knowledge, any director, officer, agent, employee or other Person acting on
behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company or any of its Subsidiaries (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.

(p)           Sarbanes-Oxley Act.  The
Company is in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any
and all applicable rules and regulations promulgated by the SEC thereunder that
are effective as of the date hereof.

(q)            Transactions With Affiliates.
 Except as set forth in the SEC Documents filed at least ten days prior to
the date hereof and other than the grant of stock options disclosed on Schedule
3(q), none of the officers, directors or employees of the Company or any of
its Subsidiaries is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for ordinary course services as employees,
officers or directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any
of its Subsidiaries, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.

(r)            Equity Capitalization.
 As of immediately prior to Closing, the authorized capital stock of the
Company consists of (i) 50,000,000 shares of Common Stock, of which as of the
date hereof, 10,075,424 are issued and outstanding, up to 3,348,346 shares are
reserved for issuance pursuant to the Company’s stock option plans and
7,510,318 shares are reserved for 

 12
 

 

issuance pursuant
to warrants (other than the Warrants and the options covered above) exercisable
for shares of Common Stock, 667,831 shares of Common Stock issuable upon
conversion of outstanding convertible debt and (ii) a total of 6,008,536 shares
of Common Stock issuable upon conversion of preferred stock.  All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable.  Except as disclosed herein or in the
Company’s filings with the SEC as available on EDGAR (the “SEC Filings”)
or as disclosed in Schedule 3(r): (i) none of the Company’s capital
stock is subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries is or may
become bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit or loan agreements, credit facilities or other
agreements, documents or instruments evidencing Indebtedness (as defined below)
of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either singly or in the
aggregate, filed in connection with the Company or any of its Subsidiaries; (v)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except pursuant to the Registration Rights Agreement); (vi) there
are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to purchase, repurchase,
retire or redeem a security of the Company or any of its Subsidiaries; (vii)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; (viii) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement; and (ix) the Company and its
Subsidiaries have no liabilities or obligations required to be disclosed in the
SEC Documents but not so disclosed in the SEC Documents, other than those
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect.  The Company has furnished to the Buyer true, correct and
complete copies of the Company’s Articles of Incorporation, as amended and as
in effect on the date hereof (the “Articles
of Incorporation”), and the Company’s Bylaws, as amended and as in
effect on the date hereof (the “Bylaws”),
and the terms of all securities convertible into, or exercisable or
exchangeable for, shares of Common Stock and the material rights of the holders
thereof in respect thereto are disclosed in the SEC Filings.

(s)           Indebtedness and Other Contracts.
 Except as disclosed in Schedule 3(s) or in the SEC Documents,
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness,
the performance of 

 13
 

 

which, in the
judgment of the Company’s officers, has or is expected to have a Material
Adverse Effect. Schedule 3(s) provides a detailed description of the
material terms of any such outstanding Indebtedness.  For purposes of this
Agreement:  (x) “Indebtedness”
of any Person means, without duplication and to the extent material (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services including
(without limitation) “Capital Leases” in accordance with generally accepted
accounting principles (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; and (z) “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

(t)            Absence of Litigation.
 There is no action, suit, proceeding, inquiry or investigation before or
by the Principal Market, any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its
Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any of
the Company’s or its Subsidiaries’ officers or directors, except as set forth
in Schedule 3(t).

(u)           Insurance.  The Company
and each of its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company and its Subsidiaries are engaged.  Neither the Company nor any
such Subsidiary has been refused any insurance coverage sought or applied for
and neither the Company nor any such Subsidiary has any reason to believe that
it will not be able to renew its existing insurance 

 14
 

 

coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a Material
Adverse Effect.

(v)           Employee
Relations.

(i)
 Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union. The Company
and its Subsidiaries believe that their relations with their employees are
good. Except as disclosed in Schedule 3(v), no executive officer of the Company
or any of its Subsidiaries (as defined in Rule 501(f) of the 1933 Act) has
notified the Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Subsidiary. No executive officer of the
Company or any of its Subsidiaries, to the knowledge of the Company or any such
Subsidiary, is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and, to the Company’s knowledge, the continued employment
of each such executive officer does not, in any material respect, subject the
Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters.

(ii)  The Company and its Subsidiaries are in compliance
with all federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and conditions
of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.

(w)          Title.  The Company and
its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case, except as disclosed in Schedule 3(w), free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries. Any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not substantially interfere with the use made and
proposed to be made of such property and facilities by the Company and its
Subsidiaries.

(x)            Intellectual Property Rights.
 The Company and its Subsidiaries own or possess adequate rights or
licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and other
intellectual property rights necessary to conduct their respective businesses
as now conducted (“Intellectual Property
Rights”).  Except as set forth in Schedule 3(x), none of
the Company’s Intellectual Property Rights have expired or terminated, or are
expected to expire or terminate, within three years from the date of this
Agreement, except where such expirations or terminations would not result in a
Material Adverse Effect.  The Company
does not have any knowledge of any infringement by the 

 15
 

 

Company or its
Subsidiaries of Intellectual Property Rights of others where such infringement
may cause a Material Adverse Effect.  There is no claim, action or
proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company or any of its Subsidiaries regarding its
Intellectual Property Rights.  The Company is unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings.  The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property
Rights.

(y)           Environmental Laws.  The
Company and its Subsidiaries (i) are in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval where, in each
of the foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.  The term “Environmental
Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

(z)            Subsidiary Rights.  The
Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.

(aa)         Investment Company.  The
Company is not, and is not an affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended.

(bb)         Tax Status.  Except as
disclosed on Schedule 3(bb), the Company and each of its Subsidiaries
(i) has made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and (iii)
has set aside on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply.  Except as disclosed on Schedule 3(bb), there
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  Except as disclosed
on Schedule 3(bb), no liens have
been filed and no claims are being asserted by or against the Company or any of
its Subsidiaries with respect to any taxes of a material amount (other than
liens for taxes not yet due and payable). Neither the Company nor it
Subsidiaries has received notice of assessment or proposed 

 16
 

 

assessment of any taxes of a material amount claimed to be owed by it or
any other Person on its behalf. Except as disclosed on Schedule 3(bb),
neither the Company nor any Subsidiary is a party to any tax sharing or tax
indemnity agreement or any other agreement of a similar nature that remains in
effect. Except as disclosed on Schedule 3(bb), each of the Company and its Subsidiaries has complied
in all material respects with all applicable legal requirements relating to the
payment and withholding of taxes and, within the time and in the manner
prescribed by law, has withheld from wages, fees and other payments and paid
over to the proper governmental or regulatory authorities all amounts required.

(cc)         Internal Accounting and Disclosure
Controls.  The Company and each of its Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference (the “Internal
Accounting Controls”).  The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the 1934
Act) that are effective in ensuring that information required to be disclosed
by the Company in the reports that it files or submits under the 1934 Act is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the SEC, including, without limitation, controls and
procedures designed in to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer and its principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.

(dd)         Off Balance Sheet Arrangements.
 There is no transaction, arrangement, or other relationship between the
Company or any of its Subsidiaries and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its Exchange
Act filings and is not so disclosed or that otherwise would be reasonably
likely to have a Material Adverse Effect.

(ee)         Ranking of Notes.  Except
as set forth on Schedule (ee), no Indebtedness of the Company is senior
to or ranks 
pari passu  with the
Notes in right of payment, whether with respect of payment of redemptions,
interest, damages or upon liquidation or dissolution or otherwise.

(ff)           Transfer Taxes.  On the
Closing Date, all stock transfer or other taxes (other than income or similar
taxes) which are required to be paid in connection with the sale and transfer
of the Securities to be sold to each Buyer hereunder will be, or will have
been, fully paid or provided for by the Company, and all material laws imposing
such taxes will be or will have been complied with.

(gg)         Manipulation of Price.  The
Company and its Subsidiaries have not, and to its 

 17
 

 

knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result or that could reasonably be expected to cause or
result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii) other
than the Placement Agent, sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) other than the
Placement Agent, paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.

(hh)         U.S. Real Property Holding
Corporation.  The Company is not, nor has ever been, a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify upon Buyer’s
request.

(ii)           Disclosure.  The Company
confirms that neither it nor any other Person acting on its behalf has provided
any of the Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, nonpublic
information other than the existence of the transactions contemplated by this
Agreement or the other Transaction Documents.  The Company understands and
confirms that each of the Buyers will rely on the foregoing representations in effecting
transactions in the Securities.  All disclosure provided to the Buyers
regarding the Company, its business and the transactions contemplated by this
Agreement and the other Transaction Documents, including the Schedules and
Exhibits hereto and thereto, furnished by or on behalf of the Company is true
and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
herein or herein, in the light of the circumstances under which they were made,
not misleading.  Each press release issued by the Company or its
Subsidiaries during the twelve (12) months preceding the date of this Agreement
did not at the time of release contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

(jj)           Lien
Searches. Within 6 Business Days
prior to the date hereof, the Company shall have delivered or caused to be
delivered to each Buyer certified copies of UCC financing statement search
results listing any and all effective financing statements filed within five
years prior to such date in any applicable jurisdiction that name the Company
or any of its Subsidiaries as a debtor to perfect an interest in any of the
assets thereof, together with copies of such financing statements, none of
which financing statements, except for any financing statements filed with
respect to the Senior Indebtedness and as otherwise agreed to in writing by the
Buyers, shall cover any of the “Collateral” (as defined in the Security
Documents), and the results of searches for any effective tax liens and
judgment liens filed against any such Person or its property in any applicable
jurisdiction, which results, except as otherwise agreed to in writing by the
Buyers, shall not show any such effective tax liens and judgment liens.

4.             COVENANTS.

(a)           Best Efforts.  Each party
shall use its best efforts timely to satisfy each of the conditions to be
satisfied by it as provided in Sections 6 and 7 of this Agreement.

 18
 

 

(b)           Form D and Blue Sky.  The
Company agrees to file a Form D with respect to the Securities as required
under Regulation D and to provide a copy thereof to each Buyer promptly after
such filing.  The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary in order to
obtain an exemption for or to qualify the Securities for sale to the Buyers at
the Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.  The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following the Closing Date.

(c)           Reporting Status.  Until
the date on which the Investors (as defined in the Registration Rights
Agreement) shall have sold all the Conversion Shares and Warrant Shares and
none of the Notes or Warrants is outstanding (the “Reporting Period”), the Company shall undertake best efforts
to file all reports required to be filed with the SEC pursuant to the 1934 Act,
and the Company shall undertake best efforts to not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination.

(d)           Use of Proceeds.  The
Company will use the proceeds from the sale of the Securities as set forth on Schedule
4(d).

(e)           Financial Information.
 The Company agrees to send the following to each Investor (as defined in
the Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through EDGAR and are available to the public
through the EDGAR system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K or 10-KSB, any interim
reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as
the release thereof, facsimile or e-mailed copies of all press releases issued
by the Company or any of its Subsidiaries, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.  As used herein “Business
Day” means any other day other than a Saturday, Sunday, or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

(f)            Listing.  The Company
shall promptly secure the listing of all of the Registrable Securities (as
defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms of the Transaction Documents.  The Company shall maintain the Common
Stock’s authorization for quotation on the Principal Market.  Neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market.  The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).

 19
 

 

(g)           Fees.  The Company shall
(i) pay Gottbetter & Partners, LLP (“G&P”)
$25,000 in legal fees plus reasonable expenses and (ii) shall pay Gottbetter
Capital Master, Ltd. (a Buyer) (“GCF”) or its
designee(s) $10,000 for due diligence and all reasonable expenses incurred in
connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), which amounts
shall be withheld by such Buyer from its Purchase Price at the Closing. GCF and
G&P acknowledge receipt of $22,500 delivered prior to the date hereof as an
advance against GCF and G&P fees. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or
arising out of the transactions contemplated by the Transaction Documents
including, without limitation, any fees or commission payable to the Placement
Agent. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney’s
fees and out-of-pocket expenses) arising in connection with any claim against a
Buyer relating to any such payment.  Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.

(h)           Pledge of Securities.
 The Company acknowledges and agrees that the Securities may be pledged by
an Investor (as defined in the Registration Rights Agreement) in connection
with a bona fide margin agreement or other loan or financing arrangement that
is secured by the Securities.  The pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, and no
Investor effecting a pledge of Securities shall be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including,
without limitation, Section 2(f) hereof; provided that an Investor and its
pledgee shall be required to comply with the provisions of Section 2(f) hereof
in order to effect a sale, transfer or assignment of Securities to such
pledgee.  The Company hereby agrees to execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.

(i)            Disclosure of Transactions and
Other Material Information.  On or before 5:00 p.m., New York Time, on
the fourth Business Day following the date of this Agreement, the Company shall
file a Current Report on Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act
and attaching the material Transaction Documents (including, without limitation,
this Agreement, the form of each of the Notes, the form of Warrant, the
Registration Rights Agreement and the Security Documents) as exhibits to such
filing (the “8-K Filing”).
 From and after the filing of the 8-K Filing with the SEC, to the
knowledge of the Company, no Buyer shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any
of their respective officers, directors, employees, stockholders,
representatives or agents, that is not disclosed in the 8-K Filing.  The
Company shall not, and shall not knowingly cause any of its Subsidiaries or its
and each of their respective officers, directors, employees and agents, not to,

 20
 

 

provide any Buyer
with any material, nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer. In
the event of a breach of the foregoing covenant by the Company, any of their
Subsidiaries, or any of their respective officers, directors, employees and
agents, in addition to any other remedy provided herein or in the Transaction
Documents, a Buyer shall have the right to make a public disclosure, in the
form of a press release, public advertisement or otherwise, of such material, nonpublic information without
the prior approval by the Company, their Subsidiaries, or any of their
respective officers, directors, employees or agents.  No Buyer shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure.
 Subject to the foregoing, none of the Company, its Subsidiaries or any
Buyer shall issue any press releases or any other public statements with respect
to the transactions contemplated hereby without the approval of all of the
Buyers; provided, however, that the Company shall be entitled,
without the prior approval of any Buyer, to make any press release or other
public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith or (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) the Required Holders shall be consulted by the Company in connection with
any such press release or other public disclosure prior to its release).
 Without the prior written consent of any applicable Buyer, the Company
shall not disclose the name of any Buyer in any filing, announcement, release
or otherwise.

(j)            Restriction on Redemption and
Cash Dividends.  So long as any Notes are outstanding, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, the Common Stock without the prior express written consent
of the Required Holders (as defined in the Notes) (except for any redemptions
or repurchases of shares from employees pursuant to the terms of employment
agreements or other benefit plans).

(k)           Additional Notes; Variable
Securities; Dilutive Issuances.  So long as any Buyer beneficially
owns any Securities, the Company will not issue any Notes (other than to the
Buyers as contemplated hereby) and the Company shall not issue any other
securities that would cause a breach or default under the Notes.  For so long
as any Notes or Warrants remain outstanding, the Company shall not, in any
manner, enter into or affect any Dilutive Issuance (as defined in the Notes) if
the effect of such Dilutive Issuance is to cause the Company to be required to
issue upon conversion of any Note or exercise of any Warrant any shares of
Common Stock in excess of that number of shares of Common Stock which the
Company has authorized and reserved for purposes of such conversions or
exercises or which the Company may issue upon conversion of the Notes and
exercise of the Warrants without breaching the Company’s obligations under the
rules or regulations of the Principal Market.

(l)            Corporate Existence.  So
long as any Buyer beneficially owns any Securities, the Company shall not be
party to any Fundamental Transaction (as defined in the Notes) unless the
Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants.

(m)          Reservation of Shares.  So
long as any Buyer owns any Securities, the Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of 

 21
 

 

issuance, no less
than 100% of the number of shares of Common Stock issuable upon conversion of
all of the Notes and issuable upon exercise of the Warrants then outstanding
(without taking into account any limitations on the conversion of the Notes or
exercise of the Warrants set forth in the Notes and Warrants, respectively); provided,
however that this number will be increased to 125% July 1, 2007.

(n)           Conduct of Business.  The
business of the Company and its Subsidiaries shall not be conducted in
violation of any law, ordinance or regulation of any government, or any
department or agency thereof or governmental entity, except where such violations
would not result, either individually or in the aggregate, in a Material
Adverse Effect.

(o)           Additional Issuances of Securities.

(i)            For purposes of this Section 4(o),
the following definitions shall apply.

(1)           “Convertible
Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.

(2)           “Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.

(3)           “Common
Stock Equivalents” means, collectively, Options and Convertible
Securities.

(ii)           From the date hereof until the date
that is 30 Trading Days (as defined in the Notes) following the Effective Date
(as defined in the Registration Rights Agreement) (the “Trigger Date”), the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of its or its Subsidiaries’ equity or equity
equivalent securities, including without limitation any debt, preferred stock
or other instrument or security that is, at any time during its life and under
any circumstances, convertible into or exchangeable or exercisable for shares
of Common Stock or Common Stock Equivalents (any such offer, sale, grant,
disposition or announcement being referred to as a “Subsequent Placement”).

(iii)          From the Trigger Date until the date
on which none of the Notes is outstanding, the Company will not, directly or
indirectly, effect any Subsequent Placement unless the Company shall have first
complied with this Section 4(o)(iii).

(1)           The Company shall deliver to each
Buyer who still holds Notes a written notice (the “Offer Notice”) of any proposed or intended issuance or sale or
exchange (the “Offer”) of the
securities being offered (the “Offered
Securities”) in a Subsequent Placement, which Offer Notice shall (w)
identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number
or amount of the Offered Securities to be issued, sold or exchanged,
(y) identify the persons or 

 22
 

 

entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to issue
and sell to or exchange with such Buyers all of the Offered Securities,
allocated among such Buyers (a) based on such Buyer’s pro rata portion of the
aggregate principal amount of Notes purchased hereunder (the “Basic Amount”), and (b) with respect to
each Buyer that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Buyers as
such Buyer shall indicate it will purchase or acquire should the other Buyers
subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

(2)           To accept an Offer, in whole or in
part, such Buyer must deliver a written notice to the Company prior to the end
of the tenth (10th ) Business Day after such Buyer’s receipt of
the Offer Notice (the “Offer Period”),
setting forth the portion of such Buyer’s Basic Amount that such Buyer elects
to purchase and, if such Buyer shall elect to purchase all of its Basic Amount,
the Undersubscription Amount, if any, that such Buyer elects to purchase (in
either case, the “Notice of Acceptance”).
 If the Basic Amounts subscribed for by all Buyers are less than the total
of all of the Basic Amounts, then each Buyer who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however
, that if the Undersubscription Amounts subscribed for exceed the difference
between the total of all the Basic Amounts and the Basic Amounts subscribed for
(the “Available Undersubscription Amount”),
each Buyer who has subscribed for any Undersubscription Amount shall be
entitled to purchase only that portion of the Available Undersubscription
Amount as the Basic Amount of such Buyer bears to the total Basic Amounts of
all Buyers that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent its deems reasonably necessary.

(3)           The Company shall have twenty (20)
Business Days from the expiration of the Offer Period above to offer, issue,
sell or exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the Buyers (the “Refused Securities”), but only to the
offerees described in the Offer Notice (if so described therein) or any
investor introduced to the Company by a placement agent described in the Offer
Notice and only upon terms and conditions (including, without limitation, unit
prices and interest rates) that are not more favorable to the acquiring person
or persons or less favorable to the Company than those set forth in the Offer
Notice.

(4)           In the event the Company shall
propose to sell less than all the Refused Securities (any such sale to be in
the manner and on the terms specified in Section 4(o)(iii)(3) above), then each
Buyer may, at its sole option and in its sole discretion, reduce the number or
amount of the Offered Securities specified in its Notice of Acceptance to an
amount that shall be not less than the number or amount of the Offered
Securities that such Buyer elected to purchase pursuant to 

 23
 

 

Section 4(o)(iii)(2) above multiplied by a fraction,
(i) the numerator of which shall be the number or amount of Offered Securities
the Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to Section 4(o)(iii)(3)
above prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities.  In the event that any Buyer so
elects to reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until such
securities have again been offered to the Buyers in accordance with
Section 4(o)(iii)(1) above.

(5)           Upon the closing of the issuance,
sale or exchange of all or less than all of the Refused Securities, the Buyers
shall acquire from the Company, and the Company shall issue to the Buyers, the
number or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4(o)(iii)(3) above if the Buyers have so
elected, upon the terms and conditions specified in the Offer.  The purchase
by the Buyers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Buyers of a purchase
agreement relating to such Offered Securities which, with respect to terms not
set forth in the Offer Notice, must be reasonably satisfactory in form and
substance to the Buyers and their respective counsel and to the Company and its
counsel.

(6)           Any Offered Securities not acquired
by the Buyers or other persons in accordance with Section 4(o)(iii)(3) above may
not be issued, sold or exchanged until they are again offered to the Buyers
under the procedures specified in this Agreement.

(iv)          The restrictions contained in
subsections (ii) and (iii) of this Section 4(o) shall not apply in connection
with the issuance of: (A) any Excluded Securities (as defined in the Notes);
(B) any shares of the Company’s preferred stock or common stock issued to the
Company’s holders of preferred stock in payment of existing dividend
obligations; or (C) up to 500,000 shares of common stock for other valid
corporate purposes approved by the Board of Directors.

(p)           Additional Registration Statements.
 Until the Effective Date (as defined in the Registration Rights
Agreement), the Company will not file a registration statement under the 1933
Act relating to securities that are not the Securities; provided, however,
that the Company shall have the right to include the securities listed on Schedule
4(p).

(q)           No Short Position. Each of the
Buyers and any of its Affiliates do not have an open short position in the
Common Stock.

(r)            Account Control Agreements.
 Upon the continuance of an Event of Default, the Company shall deliver to
the Buyer(s) within five (5) Business Days following the Buyer’s request, a
deposit account control agreement, in form and substance reasonably
satisfactory to 

 24
 

 

the Buyer(s), duly
executed by the Company, the Buyer(s) and Wachovia Bank, N.A. (the “Depository Bank”) with respect to the
accounts of the Company and, if applicable, the accounts of its Subsidiaries maintained
at the respective depository banks.

(s)           Transactions With
Affiliates.  So long as any Note or
Warrant is outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary
to enter into, amend, modify or supplement any agreement, transaction,
commitment, or arrangement with any of its or any Subsidiary’s officers,
directors, person who were officers or directors at any time during the
previous two (2) years, stockholders who beneficially own five percent (5%) or
more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a “Related
Party”), except for (a) customary employment arrangements and
benefit programs on reasonable terms, (b) any investment in an Affiliate of the
Company,  (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement.  “Affiliate” for purposes hereof means, with
respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a ten percent (10%) or more equity interest in that person
or entity, (ii) has ten percent (10%) or more common ownership with that person
or entity, (iii) controls that person or entity, or (iv) shares common
control with that person or entity.  “Control”
or “controls” for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.

(t)            Restriction on
Issuance of the Capital Stock. Except for Excluded Securities (as defined
in the Convertible Debentures), the Company shall not, without the prior
written consent of the Buyer, (i) enter into any security instrument granting
the holder a senior security interest in any and all assets of the Company,
(ii) file any registration statement on
Form S-8 prior to 90 days following the effectiveness of the
registration statement or (iii) file any registration statement on Form S-8 for
executives or members of the board of directors

 (u)          Removal
of Legend.  In addition to the Buyer’s
other available remedies, the Company shall pay to the Buyer, in cash, as
partial liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares and/or Conversion Shares (based on the closing price of the Common Stock
on the date such Warrant Shares and/or Conversion Shares are submitted to the
Company’s transfer agent), $5 per trading day (increasing to $10 per trading
day five (5) trading days after such damages have begun to accrue) for each
trading day after the third (3rd) trading day following delivery by a
Buyer to the Company or the Company’s transfer agent of a certificate
representing Warrant Shares and/or Conversion Shares issued with a restrictive
legend, until such certificate is delivered to the Buyer with such legend
removed (but only to the extent legend removal is authorized pursuant to this
Agreement or the Registration Rights Agreement). Nothing herein shall limit the
Buyer’s right to pursue actual damages for the failure of the Company and its
transfer agent to deliver certificates representing any securities as required
hereby or by the Irrevocable Transfer Agent Instructions, and the Buyer shall
have the 

 25
 

 

right to pursue
all remedies available to it at law or in equity, including, without
limitation, a decree of specific performance and/or injunctive relief.

(v)           Conduct of Business.  Neither the Company nor its Subsidiaries will
conduct its business in material violation of any term of or in default under
its Certificate or Articles of Incorporation or Bylaws.  Neither the Company nor any of its
Subsidiaries will conduct its business in material violation of any judgment,
decree or order or any statute, ordinance, rule or regulation applicable to the
Company or its Subsidiaries, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect.

5.             REGISTER; TRANSFER AGENT
INSTRUCTIONS.

(a)           Register.  The Company
shall maintain at its principal executive offices (or such other office or
agency of the Company as it may designate by notice to each holder of
Securities), a register for the Notes and the Warrants in which the Company
shall record the name and address of the Person in whose name the Notes and the
Warrants have been issued (including the name and address of each transferee),
the principal amount of Notes held by such Person, the number of Conversion
Shares issuable upon conversion of the Notes and the number of Warrant Shares
issuable upon exercise of the Warrants held by such Person.  The Company
shall keep the register open and available at all times during business hours
for inspection of any Buyer or its legal representatives following reasonable
written notice of not less than two Business Days.

(b)           Transfer Agent Instructions.
 The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates or credit shares to
the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each Buyer
or its respective nominee(s), for the Conversion Shares and the Warrant Shares
issued at the Closing or upon conversion of the Notes or exercise of the Warrants
in such amounts as specified from time to time by each Buyer to the Company
upon conversion of the Notes or exercise of the Warrants in the form of Exhibit
E attached hereto (the “Irrevocable
Transfer Agent Instructions”). Except as may be required by
applicable law or court order, the Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5(b), and stop transfer instructions to give effect to Section 2(g) hereof,
will be given by the Company to its transfer agent, and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement and the other Transaction
Documents.  If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall permit the
transfer and shall promptly instruct its transfer agent to issue one or more
certificates or credit shares to the applicable balance accounts at DTC in such
name and in such denominations as specified by such Buyer to effect such sale,
transfer or assignment.  In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, the transfer agent shall issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend.  The
Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to a Buyer.  Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event 

 26
 

 

of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.

6.             CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL.

Closing
Date.  The obligation of the Company hereunder to issue
and sell the Notes and the related Warrants to each Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:

(i)            Such Buyer shall have executed each
of the Transaction Documents to which it is a party and delivered the same to
the Company.

(ii)           Such Buyer and each other Buyer shall
have delivered to the Company the Purchase Price (less, in the case of GCF, the
amounts withheld pursuant to Section 4(g)) for the Notes and the related
Warrants being purchased by such Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.

(iii)          The representations and warranties of
such Buyer shall be true and correct in all material respects (other than reps
and warranties that are already qualified by materiality or Material Adverse
Effect, which shall be true and correct in all respects) as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the Closing
Date.

7.             CONDITIONS TO EACH BUYER’S
OBLIGATION TO PURCHASE.

Closing
Date.  The obligation of each Buyer hereunder to
purchase the Notes and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer’s sole benefit
and may be waived by such Buyer at any time in its sole discretion by providing
the Company with prior written notice thereof:

(i)            The Company shall have executed and
delivered to such Buyer (A) each of the Transaction Documents, (B) the
Notes (in such principal amounts as such Buyer shall request) being purchased
by such Buyer at the Closing pursuant to this Agreement, and (C) the
Warrants (in such amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement.

 27
 

 

(ii)           Such Buyer shall have received the
opinion of Maupin Taylor, P.A., the Company’s outside counsel, dated as of the
Closing Date, in substantially the form of Exhibit F  attached hereto and a letter stating that the
Company is in good standing with its attorneys.

(iii)          The Company shall have delivered to
such Buyer a true copy of the Irrevocable Transfer Agent Instructions, in the
form of Exhibit E  attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company’s transfer agent.

(iv)          The Company shall have delivered to
such Buyer a true copy of certificate evidencing the formation and good
standing of the Company and each of its Subsidiaries in such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction, as of a date within 10 days of the Closing Date.

(v)           The Company shall have delivered to
such Buyer a true copy of certificate evidencing the Company’s qualification as
a foreign corporation and good standing issued by the Secretary of State (or
comparable office) of each jurisdiction in which the Company conducts business,
as of a date within 10 days of the Closing Date.

(vi)          The Company shall have delivered to
such Buyer a certified copy of the Certificate of Incorporation as certified by
the Secretary of State of the State of Delaware within ten (10) days of the
Closing Date.

(vii)         The Company shall have delivered to
such Buyer a certificate, executed by the Chief Executive Officer of the
Company and dated as of the Closing Date, as to (i) the resolutions consistent
with Section 3(b) as adopted by the Company’s Board of Directors in a form
reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation and
(iii) the Bylaws, each as in effect at the Closing, in the form attached hereto
as  Exhibit G .

(viii)        The representations and warranties of
the Company shall be true and correct in all material respects (other than
representations and warranties that are already qualified by materiality or
Material Adverse Effect which shall be true and correct in all respects) as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer in the form attached hereto as
Exhibit H .

(ix)           The Company shall have delivered to
such Buyer a letter from the Company’s transfer agent certifying the number of
shares of Common Stock outstanding as of a date within five days of the Closing
Date.

 

 28

 

 

(x)            The Common Stock (I) shall be
designated for quotation on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Closing Date, either (A) in
writing by the SEC or the Principal Market.

(xi)           The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Securities.

(xii)          Within six (6) Business Days prior to
the Closing, the Company shall have delivered or caused to be delivered to each
Buyer (A) true copies of UCC search results, listing all effective financing
statements which name as debtor the Company or any of its Subsidiaries filed in
the prior five years to perfect an interest in any assets thereof, together
with copies of such financing statements, none of which, except for any
financing statements filed with respect to the Senior Indebtedness and as
otherwise agreed in writing by the Buyers, shall cover any of the Collateral
(as defined in the Security Documents) and the results of searches for any tax
lien and judgment lien filed against such Person or its property, which
results, except as otherwise agreed to in writing by the Buyers shall not show
any such Liens (as defined in the Security Documents); and (B) a perfection
opinion in form and substance satisfactory to the Buyers.

(xiii)         The Company shall have provided to the
Buyer an acknowledgement, to the satisfaction of the Buyer, from the Company’s
certified public accountant as to its ability to provide all consents required
in order to file a registration statement in connection with this transaction
and that the Company is in good standing with its auditors.

(xiv)        The Company shall have delivered to such
Buyer such other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.

8.             TERMINATION.  In the
event that the Closing shall not have occurred with respect to a Buyer on or
before five (5) Business Days from the date hereof due to the Company’s or such
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the nonbreaching party’s failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however,
that if this Agreement is terminated pursuant to this Section 8 (except by
virtue of a breach of the Agreement by the Buyer), the Company shall remain
obligated to reimburse the non-breaching Buyers for the expenses described in
Section 4(g) above.

9.             MISCELLANEOUS.

(a)           Governing Law; Jurisdiction; Jury
Trial.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would 

 29
 

 

cause the
application of the laws of any jurisdictions other than the State of New York.
 Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
 Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law.   EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

(b)           Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party; provided
that a facsimile signature shall be considered due execution and shall be
binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

(c)           Headings.  The headings
of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement.

(d)           Severability.  If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.

(e)           Entire Agreement; Amendments.
 This Agreement and the other Transaction Documents supersede all other
prior oral or written agreements between the Buyers, the Company, their
Affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the other Transaction Documents and the
instruments referenced herein and therein contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor any Buyer makes
any representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Required Holders, and any
amendment to this Agreement made in conformity with the provisions of this
Section 9(e) shall be binding on all Buyers and holders of Securities, as
applicable.  No provision hereof may be waived other than by an instrument
in writing signed by the party against whom enforcement is sought.  No
such amendment shall be effective to the extent that it applies to less than
all of the holders of the 

 30
 

 

applicable
Securities then outstanding.  No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration also is offered
to all of the parties to the Transaction Documents, holders of Notes or holders
of the Warrants, as the case may be.  The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.

(f)            Notices. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered:  (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the same.
 The addresses and facsimile numbers for such communications shall be:

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to the Company:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  VCampus Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1850 Centennial Park Drive

  
	
   

  	
   

  	
   

  	
  Suite 200

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Reston, VA 20191

  
	
   

  	
   

  	
   

  	
  Telephone:

  	
   

  	
  703-893-7800

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  703-893-1905

  
	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Copy to (for informational purposes only):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Maupin Taylor, P.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  3200 Beechleaf Court

  
	
   

  	
   

  	
   

  	
  Suite 500

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Raleigh, NC 27604

  
	
   

  	
   

  	
   

  	
  Telephone:

  	
   

  	
  919-981-4314

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  919-981-4300

  
	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Kevin A. Prakke

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to the Transfer Agent:

  	
   

  	
  American Stock Transfer & Trust

  
	
   

  	
   

  	
   

  	
  6201 15th Avenue

  
	
   

  	
   

  	
   

  	
  Brooklyn, NY 11219

  
	
   

  	
   

  	
   

  	
  Telephone:

  	
   

  	
  718-921-8522

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
   

  	
  718-765-8743

  
	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Topaze Miller

  
								

 

If
to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers, with a copy (for informational purposes only) to:

 31
 

 

 

	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
  Gottbetter & Partners, LLP   

  	
   

  	
     

  	
   

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
  488 Madison Avenue, 12th Floor   

  	
   

  	
     

  	
   

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
  New York, New York 10022   

  	
   

  	
     

  	
   

  	
   

  
	
     

  	
   

  	
     

  	
   

  	
  Telephone:

  	
  (212) 400-6900   

  	
   

  	
     

  
	
     

  	
   

  	
     

  	
   

  	
  Facsimile:

  	
  (212) 400-6901   

  	
   

  	
     

  
	
     

  	
   

  	
     

  	
   

  	
  Attention:

  	
  Jason M. Rimland, Esq.   

  	
   

  	
     

  
										

 

or to such other
address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by
an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.

(g)           Successors and Assigns.
 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any purchasers
of the Notes or the Warrants.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
Required Holders (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants).  A Buyer may assign some or all of its rights hereunder without
the consent of the Company, in which event such assignee shall be deemed to be
a Buyer hereunder with respect to such assigned rights; provided that such
assignee agrees in writing to be bound by all of the provisions contained
herein.

(h)           No Third Party Beneficiaries.
 This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.

(i)            Survival.  Unless this
Agreement is terminated under Section 8, the representations and warranties of
the Company and the Buyers contained in Sections 2 and 3 and the agreements and
covenants set forth in Sections 4, 5 and 9 shall survive the Closing.
 Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.

(j)            Further Assurances.
 Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

(k)           Indemnification.  In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the

 32
 

 

Company’s other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities
and all of their stockholders, partners, members, officers, directors,
employees and direct or indirect investors and any of the foregoing Persons’
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby or (c) any cause of action, suit or
claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (i) the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, (iii) any disclosure made by such Buyer
pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the
Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents.  To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
 Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the same
as those set forth in Section 6 of the Registration Rights Agreement.

(l)            No Strict Construction.
 The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

(m)          Remedies.  Each Buyer and
each holder of the Securities shall have all rights and remedies set forth in
the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law.  Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.  Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge
any or all of its obligations under the Transaction Documents, any remedy at
law may prove to be inadequate relief to the Buyers.  The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.

 33
 

 

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

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

[Signature
Page Follows]

 34
 

 

IN WITNESS WHEREOF, each Buyer and the
Company have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.

 

	
  

  	
  COMPANY:

  
	
   

  	
  VCAMPUS
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 35
 

 

IN WITNESS WHEREOF, each Buyer and the
Company have caused their respective signature page to this Securities Purchase
Agreement to be duly executed as of the date first written above.

 

	
   

  	
  BUYERS:

  
	
   

  	
  GOTTBETTER
  CAPITAL MASTER, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
    Adam
  S. Gottbetter

  
	
   

  	
  Title:

  	
    Director

  

 

 36
 

 

SCHEDULE OF BUYERS

 

	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  
	
  Buyer

  	
   

  	
   

  	
   

  	
  Address and

  Facsimile Number

  	
   

  	
  Aggregate

  Principal

  of Note

  	
   

  	
  Aggregate

  Number of

  Warrant

  Shares

  	
   

  	
  Purchase

  Price

  	
   

  	
  Legal Representative’s

  Address and

  Facsimile Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gottbetter Capital Master, Ltd.

  	
   

  	
  488 Madison Avenue 

  	
   

  	
  3,000,000

  	
   

  	
  2,500,000

  	
   

  	
  $   2,820,000

  	
   

  	
  Jason M. Rimland, Esq. : 

  	
   

  
	
   

  	
   

  	
  12th Floor 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Gottbetter & Partners, LLP  

  	
   

  
	
   

  	
   

  	
  New York, NY 10022 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  488 Madison Avenue 

  	
   

  
	
   

  	
   

  	
  Facsimile: 212.400.6999

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  12th Floor New 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  York, NY 10022 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Facsimile:  212.400.6901

  	
   

  
														

 

 

 37Exhibit
10.119

REGISTRATION
RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of September 25,
2006, by and among VCampus Corporation, a Delaware corporation, with
headquarters located at 1850 Centennial Park Drive, Suite 200, Reston, VA 20191
(the “Company”), and the
undersigned buyers (each, a “Buyer”,
and collectively, the “Buyers”).

WHEREAS:

A.   In connection with the Securities Purchase
Agreement by and among the parties hereto of even date herewith (the “Securities Purchase Agreement”), the
Company has agreed, upon the terms and subject to the conditions set forth in
the Securities Purchase Agreement, to issue and sell to each Buyer
(i) convertible notes of the Company (the “Notes”) which will, among other things, be convertible into
shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) (as converted, the “Conversion Shares”) in accordance with the
terms of the Notes, and (ii) warrants (the “Warrants”)
which will be exercisable to purchase up to that number of shares of Common
Stock (as exercised collectively, the “Warrant
Shares”).

B.   To induce the Buyers to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
“1933 Act”), and applicable state
securities laws.

NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and each of the Buyers hereby agree as follows:

1.             DEFINITIONS.

Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

a.    “Business
Day” means any day other than Saturday, Sunday or any other day on
which commercial banks in The City of New York are authorized or required by
law to remain closed.

b.    “Closing
Date” shall have the meaning set forth in the Securities Purchase
Agreement.

c.    “Effective
Date” means the date that the Registration Statement has been
declared effective by the SEC.

 

d.    “Effectiveness
Deadline” means the date which is one hundred twenty (120) calendar
days after the Closing Date.

e.    “Filing
Deadline” means the date forty five (45) calendar days after the
Closing Date.

f.     “Investor”
means a Buyer or any permitted transferee or assignee thereof to whom a Buyer
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

g.    “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.

h.    “Register,”
“registered,” and “registration” refer to a registration
effected by preparing and filing one or more Registration Statements (as
defined below) in compliance with the 1933 Act and pursuant to Rule 415
and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

i.     “Registrable
Securities” means (i) the Conversion Shares issued or issuable
upon conversion of the Notes, (ii) the Warrant Shares issued or issuable
upon exercise of the Warrants and (iii) any capital stock of the Company issued
or issuable with respect to the Conversion Shares, the Notes, the Warrant
Shares or the Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversions of the Notes or exercises of the Warrants.

j.     “Registration
Statement” means a registration statement or registration statements
of the Company filed under the 1933 Act covering the Registrable Securities.

k.    “Required
Holders” means the holders of at least a majority of the Registrable
Securities.

l.     “Required
Registration Amount” means the sum of (i) 100% of the number of
Conversion Shares issued and issuable pursuant to the Notes as of the trading
day immediately preceding the applicable date of determination, and
(ii) the number of Warrant Shares issued and issuable pursuant to the
Warrants as of the trading day immediately preceding the applicable date of
determination, all subject to adjustment as provided in Section 2(e) (without
regard to any limitations on conversion of the Notes or exercise of the
Warrants).

m.   “Rule 415”
means Rule 415 under the 1933 Act or any successor rule providing for
offering securities on a continuous or delayed basis.

n.    “SEC”
means the United States Securities and Exchange Commission.

 2
 

 

2.             REGISTRATION.

a.    Mandatory
Registration.  The Company shall
prepare, and, as soon as practicable, but in no event later than the Filing
Deadline, file with the SEC the Registration Statement on Form S-1 (or SB-2 or
such other form as may be available) covering the resale of all of the
Registrable Securities. The Registration Statement prepared pursuant hereto
shall register for resale at least the number of shares of Common Stock equal
to the Required Registration Amount as of date the Registration Statement is
initially filed with the SEC. The Company shall use its commercially reasonable
best efforts to have the Registration Statement declared effective by the SEC
as soon as practicable, but in no event later than the Effectiveness Deadline.
By 9:30 am on the second Business Day following the Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933 Act the
final prospectus to be used in connection with sales pursuant to such
Registration Statement.

b.    Allocation of Registrable Securities.  The initial number of Registrable Securities
included in any Registration Statement and any increase in the number of
Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor
at the time the Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor’s
Registrable Securities, each transferee shall be allocated a pro rata portion
of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any Shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration
Statement shall be allocated to the remaining Investors, pro rata based on the
number of Registrable Securities then held by such Investors which are covered
by such Registration Statement. In no event shall the Company include any securities
other than Registrable Securities on any Registration Statement without the
prior written consent of the Required Holders except for the securities on
Schedule 4(p) to the Securities Purchase Agreement.

c.    Legal Counsel.  Subject to Section 5 hereof, the
Required Holders shall have the right to select one legal counsel to review and
oversee, as counsel for the Required Holders, 
any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Gottbetter
& Partners, LLP or such other counsel as thereafter designated by the
Required Holders. The Company and Legal Counsel shall reasonably cooperate with
each other in the Company performing its obligations under this Agreement.

d.    [Intentionally left blank].

e.    Sufficient Number of Shares Registered.  In the event the number of shares available
under a Registration Statement filed pursuant to Section 2(a) is insufficient
to cover all of the Registrable Securities required to be covered by such
Registration Statement or an Investor’s allocated portion of the Registrable
Securities pursuant to Section 2(b), the Company shall amend the
applicable Registration Statement, or file a new Registration Statement (on the
short form available therefor, if applicable), or both, so as to cover at least
the Required Registration Amount as of the trading day immediately preceding
the date of the filing of such 

 3
 

 

amendment or new Registration Statement, in each case,
as soon as practicable, but in any event not later than forty-five
(45) days after the necessity therefor arises (or within 2 Business Days
of securing any required shareholder approval for increasing the number of
authorized shares, if applicable). The Company shall use its commercially
reasonable best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed “insufficient to cover
all of the Registrable Securities” if at any time the number of shares of
Common Stock available for resale under the Registration Statement is less than
the product determined by multiplying (i) the Required Registration Amount
as of such time by (ii) 0.9.  The
calculation set forth in the foregoing sentence shall be made without regard to
any limitations on the conversion of the Notes or the exercise of the Warrants
and such calculation shall assume that the Notes are then convertible into
shares of Common Stock at the then prevailing Conversion Rate (as defined in
the Notes) and that the Warrants are then exercisable for shares of Common
Stock at the then prevailing Exercise Price (as defined in the Warrants).

f.     Effect of Failure to File and Obtain and
Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering
all of the Registrable Securities required to be covered thereby and required
to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the respective Filing Deadline (a “Filing Failure”) or (B) not declared
effective by the SEC on or before the respective Effectiveness Deadline (an “Effectiveness Failure”); provided, however,
that for thirty (30) days following the Effective Deadline there will be no
Effectiveness Failure if the SEC is reviewing the Registration Statement and
the Company is using its best efforts to have the Registration Statement
declared effective or (ii) on any day after the Effective Date sales of
all of the Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(r)) pursuant to such Registration Statement
(including, without limitation, except as may be directly attributable to a
breach, fault or omission on the part of a Buyer, because of a failure to keep
such Registration Statement effective, to disclose such information as is
necessary for sales to be made pursuant to such Registration Statement or to
register a sufficient number of Shares of Common Stock) (a “Maintenance Failure”) then, as partial
relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell the underlying Shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall immediately reduce the then exercise price of each
of the Warrants by $0.11 and be reduced by an additional $0.05 for each
subsequent thirty (30) day period thereafter during which the Effectiveness
Failure or the Maintenance Failure remains uncured (each reduction as adjusted
for stock splits, stock dividends, stock combinations or other similar
transactions). Any reductions pursuant to Section 2(f) hereof shall survive the
curing of any Filing Failure, Effectiveness Failure or Maintenance Failure.

3.             RELATED OBLIGATIONS.

At
such time as the Company is obligated to file a Registration Statement with the
SEC pursuant to Section 2(a) or 2(e), the Company will use its
commercially reasonable best efforts to 

 4
 

 

effect the registration of the Registrable Securities
in accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:

a.    The Company shall promptly prepare and file
with the SEC a Registration Statement with respect to the Registrable
Securities and use its commercially reasonable best efforts to cause such
Registration Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event later than
the Effectiveness Deadline). The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earlier of
(i) the date as of which the Investors may sell all of the Registrable
Securities covered by such Registration Statement without restriction pursuant
to Rule 144(k) (or any successor thereto) promulgated under the 1933 Act or
(ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the “Registration Period”). The Company shall
ensure that each Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein, or necessary to make the statements therein (in the case
of prospectuses, in the light of the circumstances in which they were made) not
misleading. The term “commercially reasonable best efforts” shall mean, among
other things, that the Company shall submit to the SEC, within two (2) Business
Days after the later of the date that (i) the Company learns that no
review of a particular Registration Statement will be made by the staff of the
SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel
pursuant to Section 3(c) (which approval is immediately sought), a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request.

b.    The Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the
Company filing a report on Form 10-Q or Form 10-QSB, Form 10-K or Form 10-KSB
or any analogous report under the Securities Exchange Act of 1934, as amended
(the “1934 Act”), the Company
shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC on the same day (or within 2 Business Days) on which the 1934 Act report is
filed which created the requirement for the Company to amend or supplement such
Registration Statement.

c.    The Company shall permit Legal Counsel
to review and comment upon (i) a Registration Statement at least five
(5) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except for Annual
Reports on Form 

 5
 

 

10-K or Form 10-KSB, and Reports on Form 10-Q or Form
10-QSB and any similar or successor reports) within a reasonable number of days
prior to their filing with the SEC. The Company shall furnish to Legal Counsel,
without charge, (i) copies of any correspondence from the SEC or the staff
of the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the
SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated
therein by reference, if requested by an Investor, and all exhibits and (iii) upon
the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel in
performing the Company’s obligations pursuant to this Section 3.

d.    The Company shall furnish to each Investor
whose Registrable Securities are included in any Registration Statement,
without charge, (i) if the Company shall not have filed a final prospectus
in accordance with Rule 424 per Section 2(a), upon the effectiveness
of any Registration Statement, ten (10) copies of the prospectus included
in such Registration Statement and all amendments and supplements thereto (or
such other number of copies as such Investor may reasonably request) and
(ii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor.

e.    The Company shall use its commercially
reasonable best efforts to (i) register and qualify, unless an exemption
from registration and qualification applies, the resale by Investors of the
Registrable Securities covered by a Registration Statement under such other
securities or “blue sky” laws of all applicable jurisdictions in the United
States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary
to maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but for
this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction. The Company shall promptly notify Legal Counsel and each
Investor who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or “blue sky” laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.

f.     The Company shall notify Legal Counsel and
each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, 

 6
 

 

nonpublic information), and, subject to
Section 3(r), promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to Legal Counsel
and each Investor (or such other number of copies as Legal Counsel or such
Investor may reasonably request). The Company shall also promptly notify Legal
Counsel and each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to Legal Counsel and
each Investor by facsimile or e-mail on the same day of such effectiveness or
by overnight mail), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

g.    The Company shall use its commercially
reasonable best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.

h.    At the reasonable request of any Investor
described in the Registration Statement as an underwriter, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the Investors, and
(ii) an opinion, dated as of such date, of counsel representing the
Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the Investors.

i.     If any Investor may be required under
applicable securities law to be described in the Registration Statement as an
Underwriter, the Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or
other agents retained by the Investors (collectively, the “Inspectors”), all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the “Records”), as
shall be reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees, counsel and the Company’s independent
certified public accountants to supply all information which may be necessary
and any Inspector may reasonably request; provided, however, that each
Inspector shall agree to hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of
such Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act,
(b) the release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of competent
jurisdiction, or (c) the information in such 

 7
 

 

Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement of
which the Inspector has knowledge. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investors’ ability to sell Registrable Securities in a manner
which is otherwise consistent with applicable laws and regulations.

j.     The Company shall hold in confidence and
not make any disclosure of information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to comply
with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this Agreement or any other agreement. The Company agrees that it
shall, upon learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

k.    The Company shall use its commercially
reasonable best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed (which shall include the OTC Bulletin Board), if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure designation and quotation of all of the
Registrable Securities covered by a Registration Statement on the OTCBB and,
without limiting the generality of the foregoing, to use its commercially
reasonable best efforts to arrange for at least two market makers to register
with the National Association of Securities Dealers, Inc. (“NASD”) as such with respect to such
Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(k).

l.     The Company shall cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend, if applicable) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
Investors may reasonably request and registered in such names as the Investors
may request.

m.   If requested by an Investor, the Company
shall within ten (10) days of receipt of notice from such Investor
(i) incorporate in a prospectus supplement or post-effective amendment
such information as an Investor reasonably requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with 

 8
 

 

respect to the number of Registrable Securities being
offered or sold, the purchase price being paid therefor and any other terms of
the offering of the Registrable Securities to be sold in such offering; (ii)
make all required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

n.    The Company shall reasonably cooperate with
the Investors as may be necessary to consummate the disposition of such
Registrable Securities.

o.    The Company shall make generally available
to its security holders as soon as practical, but not later than ninety
(90) days after the close of the period covered thereby, an earnings
statement (in form complying with, and in the manner provided by, the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company’s fiscal quarter next
following the effective date of the Registration Statement.

p.    The Company shall otherwise use its
commercially reasonable best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.

q.    Within two (2) Business Days after a
Registration Statement which covers Registrable Securities is ordered effective
by the SEC, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement) confirmation that such Registration Statement has been
declared effective by the SEC in the form attached hereto as Exhibit A
..

r.     Notwithstanding anything to the contrary
herein, at any time after Effective Date, the Company may delay the disclosure
of material, non-public information concerning the Company the disclosure of
which at the time is not, in the good faith opinion of the Board of Directors
of the Company and its counsel, in the best interest of the Company and, in the
opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of
material, non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material,
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which
the Grace Period is expected to end; and, provided further, that no Grace
Period shall exceed twenty (20) consecutive trading days and during any three hundred
sixty five (365) day period such Grace Periods shall not exceed an
aggregate of forty-five (45) days and the first day of any Grace Period
must be at least two (2) trading days after the last day of any prior
Grace Period (each, an “Allowable Grace
Period”). For purposes of determining the length of a Grace Period
above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include
the later of the date the Investors receive the notice referred to in clause
(ii) and the date referred to in such notice. The provisions of Section
3(g) hereof shall not be applicable during the period of any Allowable Grace
Period. Upon 

 9
 

 

expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material, non-public information is
no longer applicable. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to
a transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale, and
delivered a copy of the prospectus included as part of the applicable
Registration Statement (unless an exemption from such prospectus delivery
requirement exists), prior to the Investor’s receipt of the notice of a Grace
Period and for which the Investor has not yet settled.

4.             OBLIGATIONS OF THE INVESTORS.

a.    At least ten (10) Business Days prior
to the first anticipated filing date of a Registration Statement, the Company
shall notify each Investor in writing of the information the Company requires
from each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it, as shall be reasonably required to effect and maintain the effectiveness of
the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request.

b.    Each Investor, by such Investor’s acceptance
of the Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor’s election to exclude all of
such Investor’s Registrable Securities from such Registration Statement.

c.    Each Investor agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 3(g) or the first sentence of 3(f), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor’s receipt
of the copies of the supplemented or amended prospectus contemplated by Section
3(g) or the first sentence of 3(f) or receipt of notice that no supplement or
amendment is required.

d.    Each Investor covenants and agrees that it
will comply with the prospectus delivery requirements of the 1933 Act as
applicable to or an exemption therefrom it in connection with sales of
Registrable Securities pursuant to the Registration Statement.

5.             EXPENSES OF REGISTRATION.

All reasonable
expenses, other than underwriting discounts and commissions, incurred by the
Company in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing
and qualifications fees, printers and 

 10
 

 

accounting fees,
and fees and disbursements of counsel for the Company related to registrations
shall be paid by the Company. The Company shall also reimburse the Investors
for the fees and disbursements of Legal Counsel in connection with
registration, filing or qualification pursuant to Sections 2 and 3 of this
Agreement which amount shall be limited to $5,000.

6.             INDEMNIFICATION.

In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:

a.    To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and defend each
Investor, the directors, officers, members, partners, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses,
claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or
several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other “blue sky” laws of
any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of
this Agreement by the Company (the matters in the foregoing clauses
(i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus 

 11
 

 

was timely made available by the Company pursuant to
Section 3(d) and (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9.

b.    In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within the meaning
of the 1933 Act or the 1934 Act (each, an “Indemnified
Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor
will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld or delayed; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented.

c.    Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 6 of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving a Claim, such Indemnified Person or Indemnified Party
shall, if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume control
of the defense thereof with counsel mutually satisfactory to the indemnifying
party and the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have
the right to retain its own counsel with the fees and expenses of not more than
one counsel for such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by 

 12
 

 

the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. In the case of an Indemnified
Person, legal counsel referred to in the immediately preceding sentence shall
be selected by the Investors holding at least a majority in interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate
reasonably with the indemnifying party in connection with any negotiation or
defense of any such action or Claim by the indemnifying party and shall furnish
to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such Claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
or Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action.

d.    The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

e.    The indemnity agreements contained herein
shall be in addition to (i) any cause of action or similar right of the
Indemnified Party or Indemnified Person against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

7.             CONTRIBUTION.

To
the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under
Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person involved in the sale of Registrable Securities which Person
is guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and 

 13
 

 

(ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.

8.             REPORTS UNDER THE 1934 ACT.

With
a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration (“Rule 144”),
the Company agrees to undertake commercially reasonable best efforts to:

a.     make and keep public information
available, as those terms are understood and defined in Rule 144;

b.    file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and the
1934 Act so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company’s obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of
Rule 144; and

c.    furnish to each Investor so long as such
Investor owns Registrable Securities, promptly upon request, (i) a written
statement by the Company, if true, that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the Investors to sell such
securities pursuant to Rule 144 without registration.

9.             ASSIGNMENT OF REGISTRATION
RIGHTS.

The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor’s Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment; (ii) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by
all of the provisions contained herein; and (v) such transfer shall have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement.

 14
 

 

10.           AMENDMENT OF REGISTRATION RIGHTS.

Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any provision
of any of this Agreement unless the same consideration also is offered to all
of the parties to this Agreement.

11.           MISCELLANEOUS.

a.    A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from such record owner of such Registrable
Securities.

b.    Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or
(iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

If
to the Company:

VCampus Corporation

1850 Centennial Park
Drive

Suite 200

Reston, VA 20191

Telephone:       703-893-7800

Facsimile:         703-893-1905

Attention:

 

If
to Legal Counsel:

Maupin Taylor, P.A.

3200 Beechleaf Court, Suite 500

Raleigh, NC 27604

Telephone:       919-981-4314

Facsimile:         919-981-4300

Attention:        Kevin
A. Prakke, Esq.

If to a Buyer, to
its address and facsimile number set forth on the Schedule of Buyers attached
hereto, with copies to such Buyer’s representatives as set forth on the
Schedule of Buyers, or to such other address and/or facsimile number and/or to
the attention of such other Person as the recipient party has specified by
written notice given to each other party five (5) days prior to the 

 15
 

 

effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt
from a nationally recognized overnight delivery service in accordance with
clause (i), (ii) or (iii) above, respectively.

c.    Failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.

d.    All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.  EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

e.    This Agreement, the other Transaction
Documents (as defined in the Securities Purchase Agreement) and the instruments
referenced herein and therein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement, the other Transaction
Documents and the instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.

 16
 

 

f.     Subject to the requirements of
Section 9, this Agreement shall inure to the benefit of and be binding
upon the permitted successors and assigns of each of the parties hereto.

g.    The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

h.    This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.

i.     Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

j.     All consents and other determinations
required to be made by the Investors pursuant to this Agreement shall be made,
unless otherwise specified in this Agreement, by the Required Holders.

k.    The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rules of strict construction will be applied against any party.

l.     This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

m.   The obligations of each Buyer hereunder are
several and not joint with the obligations of any other Buyer, and no provision
of this Agreement is intended to confer any obligations on any Buyer vis-à-vis
any other Buyer. Nothing contained herein, and no action taken by any Buyer
pursuant hereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated herein.

 17
 

 

IN WITNESS WHEREOF, each Buyer and the
Company have caused their respective signature page to this Registration Rights
Agreement to be duly executed as of the date first written above.

	
  

  	
   

  	
  COMPANY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  VCAMPUS CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BUYER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GOTTBETTER CAPITAL
  MASTER, LTD.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Adam S. Gottbetter

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Director

  
									

 

 18

 

 

SCHEDULE
OF BUYERS

 

	
  Buyer

  	
   

  	
  Buyer Address

  and Facsimile Number

  	
   

  	
  Buyer’s Representative’s

  Address and

  Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gottbetter Capital Master,
  Ltd.

  	
   

  	
  488 Madison Avenue, 12th Floor

  	
   

  	
  Gottbetter & Partners, LLP

  
	
  

  	
   

  	
  New York, NY 10022

  	
   

  	
  488 Madison Avenue, 12th Floor

  
	
  

  	
   

  	
  Facsimile:   212.400.6999

  	
   

  	
  New York, NY 10022

  
	
  

  	
   

  	
  Attention:    Adam S. Gottbetter

  	
   

  	
  Facsimile:   212.400.6901

  
	
  

  	
   

  	
   

  	
   

  	
  Attention:    Jason M. Rimland

  

 

 

EXHIBIT
A

FORM
OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

American Stock Transfer
& Trust Co.

AST/ Operations

6201 15th Avenue

Brooklyn, NY 11219

Attention:  Topaze Miller

Fax:  718-765-8743

Re:         VCampus Corporation

Ladies and
Gentlemen:

[We
are][I am] counsel to VCampus Corporation, a Delaware corporation (the “Company”), and have represented the
Company in connection with that certain Securities Purchase Agreement (the “Securities Purchase Agreement”)
entered into by and among the Company and the buyers named therein
(collectively, the “Holders”)
pursuant to which the Company issued to the Holders subordinated secured
convertible notes (the “Notes”)
convertible into the Company’s common stock, $0.01 par value (the “Common Stock”), warrants exercisable
for shares of Common Stock (the “Warrants”).
Pursuant to the Securities Purchase Agreement, the Company also has entered
into a Registration Rights Agreement with the Holders (the “ Registration Rights Agreement “)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon conversion of the Notes and
the shares of Common Stock issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on ___, 200_, the Company filed a Registration
Statement on Form S-1 (File No. 333-___) (the “ Registration Statement “) with the Securities and Exchange
Commission (the “SEC”) relating
to the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.

In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at  [
ENTER TIME OF EFFECTIVENESS ]  on  [ ENTER DATE OF EFFECTIVENESS ] 
and [we][I] have no knowledge, after telephonic inquiry of a member of
the SEC’s staff, that any stop order suspending its effectiveness has been
issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available for resale
under the 1933 Act pursuant to the Registration Statement.

 

This
letter shall serve as our standing opinion to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
September [    ], 2006. This letter shall
serve as our standing opinion with regard to this matter.

 

Very truly yours,

MAUPIN TAYLOR, P.A.

 

 

 

CC:          [LIST NAMES OF HOLDERS]

 2

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