PURCHASE AGREEMENT

Exhibit 10.91

 

PURCHASE AGREEMENT

 

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

 

Recitals

 

A.                                    The Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) under the Securities Act of 1933, as amended (“ 1933 Act ”), and the provisions of Regulation D (“ Regulation D ”), as promulgated by the U.S. Securities and Exchange Commission (the “ SEC ”) under the 1933 Act;

 

B.                                      The Purchasers have agreed to purchase, and the Company has agreed to sell and issue to the Purchasers, upon the terms and subject to the conditions stated in this Agreement, 20.25 units of the Company’s securities (each a “ Unit ” and, collectively, the “ Units ”) at a purchase price of $200,000 per Unit.  Each Unit consists of (i) $118,500 in principal amount of the Company’s 2004 Series A Senior Secured Convertible Notes due April 1, 2009 in the form annexed hereto as Exhibit A (each a “ Series A Note ” and, collectively, the “ Series A Notes ”), which Series A Notes shall be convertible into shares of common stock of the Company, $0.01 par value per share (the “ Common Stock ”), in accordance with the terms of the Series A Notes; (ii) 50,000 shares of Common Stock (the “ Unit Shares ”); and (iii) a warrant (each a “ Series A Warrant ” and, collectively, the “ Series A Warrants ”) to purchase an aggregate of 61,350 shares of Common Stock in the form annexed hereto as Exhibit B .  Each Purchaser shall purchase the number of Units at the Closing as set forth on the Purchasers’ signature page attached hereto;

 

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

 

 

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

 

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

 

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

 

1.1.       “ Additional Securities ” means the additional Common Stock and the additional Warrants issuable to the Purchasers in the event the Milestone is not achieved.

 

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

 

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

 

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

 

1.5.       “ Closing Date ” is defined in Section 3.1.

 

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

 

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

 

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

 

1.9.       “ Disclosure Schedule ” is defined in Section 4.

 

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

 

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

 

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

 

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

 

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

 

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

 

1.16.               “ SEC ” means the U.S. Securities and Exchange Commission.

 

1.17.               “ SEC Filings ” is defined in Section 4.6.

 

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

 

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

 

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

 

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

 

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

 

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

 

1.24.               “ Technology Collateral Escrow Agreement ” means the Technology Collateral Escrow Agreement, among the Company, the Collateral Agent and DSI Technology Escrow Services, Inc., dated as of the date hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

1.31.               “ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

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

 

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

 

3.                                        Closing .

 

3.26.                         Closing Procedure .  Upon receipt by the Company of executed signature pages to this Agreement from Purchasers for the purchase of 20 Units, the Company shall promptly notify such Purchasers and set a date for the Closing, which shall be on or before March 23, 2004 or as otherwise mutually agreed to by the Company and the Purchasers (the “ Closing Date ”).

 

3.27.                         Closing Date Deliveries .

 

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

 

(i)                                      The Series A Notes in the form attached as Exhibit A ;

 

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

 

(iii)                                The Warrants in the form attached as Exhibit B ;

 

(iv)                               The Unit Shares;

 

(v)                                  The executed Registration Rights Agreement in the form attached as Exhibit D ;

 

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

 

(vi)                               A certificate executed by the Chief Executive Officer and Chief Financial Officer of the Company, in the form attached as Exhibit F ;

 

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

 

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

 

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

 

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

 

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

 

(i)                                      The aggregate Purchase Price set forth on the Purchasers’ signature pages hereto for the Units to be purchased; and

 

(ii)                                   The executed Registration Rights Agreement.

 

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

 

4.1                                  Organization, Good Standing and Qualification .  The Company is a corporation validly existing and in good standing under the laws of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and own its properties.  The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or licensing necessary unless the failure to so qualify would not result in a Material Adverse Effect.

 

4.2                                  Authorization .  The Company has full corporate power and authority and has taken all requisite action on the part of the Company (other than obtaining the Shareholder Approval) necessary for (i) the authorization, execution and delivery of the Agreements, (ii) authorization of the performance of all obligations of the Company hereunder and thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities.  The Agreements constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally and general principles of equity that restrict the availability of equitable or legal remedies.

 

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

 

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the Warrants) exercisable for, or convertible into or exchangeable for any shares of capital stock (assuming the transactions contemplated herein have been effected solely for the purpose of computing antidilutive provisions in any such securities).  All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid and nonassessable.  No Person is entitled to preemptive or similar statutory or contractual rights with respect to any securities of the Company.

 

4.4                                  Valid Issuance .  As of the Closing, the Company has reserved a sufficient number of shares of Common Stock for the issuance of the Securities, the Additional Securities and any additional shares issuable pursuant to the Agreements.  The Notes, Unit Shares, Warrants, Underlying Shares, Warrant Shares and Additional Securities are duly authorized, and such Securities, when issued in accordance herewith and, in respect of the Underlying Shares and Warrant Shares, pursuant to the terms of the Notes and Warrants, respectively, will be validly issued, fully paid, non-assessable and free and clear of all encumbrances and restrictions imposed by or through the Company, except for restrictions on transfer imposed by applicable securities laws.

 

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

 

4.6                                  SEC Filings; Business .    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 or on the date hereof and all registration statements and exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ SEC Filings ”).  As of the date of filing of such SEC Filings, each such SEC Filing, as it 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 such SEC Filing.  None of the SEC Filings, as of the date filed and 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 dates, the financial statements of the Company included in the SEC Filings complied as to form in all material respects with applicable accounting requirements and 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

 

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its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  The Company is engaged only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description of the business of the Company in all material respects.  Except as set forth in Section 4.6 of the Disclosure Schedule, the Company has not provided to any Purchaser (i) any information required to be filed under the 1934 Act that has not been so filed or (ii) any material nonpublic information.

 

4.7                                  Use of Proceeds .  The proceeds of the sale of the Units, the Series B Notes and the Series B Warrants hereunder shall be used by the Company for the following purposes: (a) the repayment of indebtedness disclosed in the SEC Filings or otherwise disclosed in Section 4.7 of the Disclosure Schedule, and (b) general corporate purposes and working capital.

 

4.8                                  No Material Adverse Change .  Except as disclosed and described in the Company’s SEC Filings or in Section 4.8 of the Disclosure Schedule, since December 31, 2002, there has not been:

 

(a)                                   any change in the consolidated assets, liabilities, financial condition or operating results of the Company, except changes in the ordinary course of business which have not had, in the aggregate, a Material Adverse Effect;

 

(b)                                  any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company;

 

(c)                                   any material damage, destruction or loss, whether or not covered by insurance, to any assets or properties of the Company;

 

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

 

(e)                                   any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results or business of the Company taken as a whole (as such business is presently conducted and as it is proposed to be conducted);

 

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

 

(g)                                  any material labor difficulties or labor union organizing activities with respect to employees of the Company;

 

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

 

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(i)                                      any other event or condition of any character that the Company believes will have a Material Adverse Effect.

 

4.9                                  No Conflict, Breach, Violation or Default; Compliance with Law . The execution, delivery and performance of the Agreements by the Company and the issuance and sale of the Securities and the Additional Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, constitute a default under, require any consent, approval or filing under, result in or require the creation or imposition of any lien or encumbrance upon or with respect to the Company’s property under (i) the Company’s Certificate of Incorporation (including any certificates of designation) or the Company’s Bylaws, both as in effect on the date hereof,  (ii) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its properties; or (iii) any material contract, loan or instrument by which the company or its property is bound.  The Company (i) is not to its knowledge in violation of any statute, rule or regulation applicable to the Company or its assets or its activities, (ii) is not in violation of any judgment, order or decree applicable to the Company or its assets; and (iii) has not received notice from any Person of any claim, investigation or inquiry, that, if adversely determined, would render the preceding sentence untrue or incomplete and the Company is aware of no facts or circumstances which could give rise to such a claim, investigation or inquiry.

 

4.10                            Tax Matters .  Except as set forth in Section 4.10 of the Disclosure Schedule, the Company has timely prepared and filed all material tax returns required to have been filed by the Company with all appropriate governmental agencies and timely paid all material taxes owed by it, in each case taking into account permitted extensions and assessments challenged in good faith and disclosed in the SEC Filings.  The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company nor, to the knowledge of the Company, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except such as which are not material.  All material taxes and other assessments and levies that the Company is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due.  Except as set forth in Section 4.10 of the Disclosure Schedule, there are no tax liens or claims pending or threatened against the Company or any of its respective assets or property.  There are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity.

 

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

 

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4.12                            Certificates, Authorities and Permits .  The Company possesses adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it and has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company, would individually or in the aggregate have a Material Adverse Effect.

 

4.13                            No Labor Disputes .  No material labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent.

 

4.14                            Intellectual Property .  Except as set forth in Section 4.14 of the Disclosure Schedule, the Company owns or possesses adequate rights or licenses to the inventions, know-how, patents, patent rights, copyrights, trademarks, trade names, licenses, approvals, governmental authorizations, trade secrets confidential information and other intellectual property rights necessary to conduct the business now operated by it and presently contemplated to be operated by it (collectively, “ Intellectual Property Rights ”), free and clear of all liens, security interests,