**Exhibit 10.110**

 

**CERTIFICATEOF DESIGNATIONS,**

 

**PREFERENCESAND RIGHTS OF**

 

**SERIESB-1 CONVERTIBLE PREFERRED STOCK**

 

**OF**

 

**VCAMPUS CORPORATION**

** **

I.                                         Creationof Series B-1 Convertible Preferred Stock.

 

The undersigned officerof VCampus Corporation, a Delaware corporation (the “Corporation”), pursuant tothe provisions of Section 151 of the General Corporation Law of the State ofDelaware, does hereby make this Certificate of Designations, Preferences andRights (the “Series B-1 Certificate of Designations”) and does hereby state andcertify that pursuant to the authority expressly vested in the Board ofDirectors of the Corporation by the Certificate of Incorporation, as amended,the Board of Directors duly adopted the following resolutions:

 

RESOLVED, that, pursuantto the Amended and Restated Certificate of Incorporation of the Corporation(the “Amended Certificate of Incorporation”), which authorizes 171,586 sharesof undesignated preferred stock, par value $0.01 per share, of which prior tothe date hereof 5,000 shares have been designated as Series A-1 ConvertiblePreferred Stock, 2,342 of which are outstanding on the date hereof, and 166,586shares remain undesignated, the Board of Directors is authorized, within thelimitations and restrictions stated in the Amended Certificate ofIncorporation, to fix by resolution or resolutions the designation of eachseries of preferred stock and the powers, preferences and relativeparticipating, optional, or other special rights, and qualifications,limitations, and restrictions thereof; and

 

RESOLVED, that theCorporation hereby fixes the designations and preferences and relative,participating, optional, and other special rights, and qualifications,limitations, and restrictions of the preferred stock consisting of 5,000 sharesto be designated Series B-1 Convertible Preferred Stock, par value $0.01 pershare (the “Series B-1 Preferred Stock”); and

 

RESOLVED, that the SeriesB-1 Preferred Stock is hereby authorized on the terms and with the provisionsherein set forth:

 

II.                                     ProvisionsRelating to the Preferred Stock.

 

1.                                       Rank.Subject to the rights of additional series of Preferred Stock that may bedesignated by the Board of Directors from time to time, the Series B-1Preferred Stock shall, with respect to dividend rights and with respect torights upon liquidation, winding up or dissolution, rank parri passu with theCorporation’s Series A-1 Preferred Stock and senior and prior in right to(a) each class of common stock of the Corporation, (b) any series ofpreferred stock hereafter created (except for any parri passu preferred stockand except as may otherwise be consented to by holders of a majority of theSeries B-1 Preferred Stock) and (c) any other

 

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equity interests (including, without limitation, warrants, stockappreciation rights, phantom stock rights, or other rights with equityfeatures, calls or options exercisable for or convertible into such capitalstock or equity interests) in the Corporation that by its terms rank junior tothe Series B-1 Preferred Stock (all of such classes or series of capital stockand other equity interests, including, without limitation, all classes ofcommon stock of the Corporation, are collectively referred to as “JuniorSecurities”).

 

2.                                       Dividends.

 

(a)                                *Amount.*Subject to the parri passu rightsof the holders of Series A-1 Preferred Stock and the rights of additionalseries of Preferred Stock that may be designated by the board from time to timeand in preference to all holders of common stock, the holders of Series B-1Preferred Stock shall be entitled to receive quarterly dividends (the “SeriesB-1 Dividends”) for the shares of Series B-1 Preferred Stock still thenoutstanding at an annual rate equal to the greater of:

 

(i)                                                       sixteenpercent (16%) of the Series B-1 purchase price per share (as such dollar amountshall be appropriately adjusted for stock dividends, stock combinations,recapitalizations or the like); and

 

(ii)                                                    sixpercent (6%) of the Net Sales Proceeds (defined below) received by theCorporation from the sale, licensing or distribution of Covered Courses(defined below) during the applicable quarter (such 6% calculation to beprorated for any portion of the Series B-1 Preferred Stock that is redeemed orconverted – for example, if 25% of the shares of Series B-1 Preferred Stockwere redeemed, representing $575,000 of the original $2,300,000 Purchase Price,then the dividend calculated under this Section 2(a)(ii) would be based on 4.5%(25% less than the original 6% amount) of the Net Sales Proceeds),

 

(such higher amount, the “SeriesB-1 Quarterly Dividend Amount”), on each March 31, June 30, September 30 andDecember 31 (each, a “Quarterly Dividend Date”) after the date on which suchshares of Series B-1 Preferred Stock were issued (the “Series B-1 OriginalIssue Date” for such share), provided, however, the first quarterly dividendshall not be due and payable until June 30, 2006, and provided further that theamount of dividends on the first Quarterly Dividend Date shall equal the SeriesB-1 Quarterly Dividend Amount multiplied by a fraction (A) the numerator ofwhich shall equal the number of days from and including the Series B-1 OriginalIssue Date for such share to and including such first Quarterly Dividend Date(June 30, 2006), and (B) the denominator of which is ninety (90). The SeriesB-1 Dividend shall be paid in cash within 45 days after each Quarterly DividendDate. The Corporation shall be obligated to declare and pay each quarterlydividend as set forth above; provided, however, that the Corporation is, andmay continue to be, subject to:  (i)applicable Delaware law governing payment of cash dividends in the event ofinsolvency; and (ii) restrictions on the payment of cash dividends in the eventof default under the Corporation’s 2004 Series A and Series B Senior SecuredConvertible Notes due April 1, 2009, as issued in the Corporation’s March 2004financing.

 

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(b)                                 *Definitions**.***Forpurposes of this Section 2, “Net Sales Proceeds” shall mean the aggregatequarterly gross cash proceeds, if any, actually received by the Corporationfrom the sale, licensing, distribution or other disposition of Covered Courses,less any adjustments for third-party fees and royalties, discounts, refunds,returns, chargebacks, rebates, credit card fees, sales and use tax (includingany VAT tax) and similar items paid or payable by the Corporation in connectiontherewith. In the event the Corporation is required or has to litigate toobtain, maintain or collect such Net Sales Proceeds, the Corporation shall beentitled to deduct reasonable attorney’s fees, costs and expenses relatingthereto from the Net Sales Proceeds. “Covered Courses” shall mean two courses(whether in online or any other format used and marketed by the Corporation)that the Corporation now owns or subsequently acquires, as selected pursuant tothe mutual agreement of the Corporation and the holders of a majority of thethen outstanding shares of Series B-1 Preferred Stock, and the parties herebyauthorize and agree to the filing of an amendment to this Certificate ofDesignation to evidence such mutual agreement promptly following the executionthereof.

 

(c)                                  *Audit and Inspection Rights.*TheCorporation shall maintain, so long as the Series B-1 Preferred Stock remainsoutstanding and for at least one (1) year thereafter, records sufficient todemonstrate its compliance with its Series B-1 Dividends obligation. TheCorporation shall make such records available for inspection and copying by theSeries B-1 holders or their representatives, during normal business hours uponreasonable advance notice, for the purpose of confirming the Corporation’scompliance with its obligations under this Section 2. The Series B-1holders may at their election engage an independent public accounting firm toconduct an audit of amounts due the Series B-1 holders under thisSection 2. If in the written opinion of such auditors there has been anunder-reporting by the Corporation of more than ten percent (10%) of the totalamounts due during any quarter, the Corporation shall pay the costs of suchaudit (up to $10,000) in addition to all unpaid amounts then owing.

 

(d)                                 Solong as any shares of Series B-1 Preferred Stock are outstanding, theCorporation will not declare, pay or set apart for payment any dividends on(except dividends payable in common stock of the Corporation), or make anyother distribution on or redeem, purchase or otherwise acquire, any JuniorSecurities and will not permit any Subsidiary or other Affiliate (using funds ofthe Corporation or any Subsidiary) to redeem, purchase or otherwise acquire forvalue, any Junior Securities. Notwithstanding the foregoing provisions of thisSection 2(b), the Corporation or any Subsidiary may (i) make payments inrespect of fractional shares of Junior Securities and (ii) repurchase, redeemor otherwise acquire for value any Junior Securities from any employee orformer employee of the Corporation or any Subsidiary in connection with thetermination of employment by the Corporation or any Subsidiary or by suchemployee or former employee, whether by reason of death, disability, retirementor otherwise.

 

3.                                       Liquidation.Subject to the parri passu rights of the holders of Series A-1 Preferred Stockand the rights of additional series of Preferred Stock that may be designatedby the Board from time to time, upon a change in control pursuant to which thestockholders of the Corporation immediately prior to such change in controlpossess less than forty percent (40%) of the voting power of the acquiringentity immediately following such change in control, liquidation, dissolutionor winding up of the affairs of the Corporation, whether voluntary or

 

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involuntary (a “Liquidation Event”), the holders of the Series B-1Preferred Stock shall be entitled, before any assets of the Corporation shallbe distributed among or paid over to the holders of Junior Securities, toreceive from the assets of the Corporation available for distribution tostockholders, an amount per share equal to 150% of the purchase price per sharepaid for the Series B-1 Preferred Stock, as adjusted to reflect any and allsubdivisions (by stock split, stock dividend or otherwise) or combinations orconsolidations (by reclassification or otherwise) of the Series B-1 PreferredStock occurring after the Issue Date, plus all declared but unpaid dividends(the “Series B-1 Liquidation Preference”). If the assets of the Corporationlegally available for distribution shall be insufficient to permit the paymentin full to the holders of the Series A-1 and Series B-1 Preferred Stock oftheir Liquidation Preferences, then the entire assets of the Corporationlegally available for distribution shall be distributed ratably in accordancewith the respective Series A-1 and Series B-1 Liquidation Preferences amongsuch holders. For purposes of this Section 3, a Liquidation Event shall bedeemed to be occasioned by, and to include, (i) the Corporation’s sale of allor substantially all of its assets or capital stock or (ii) any transaction orseries or related transactions (including, without limitation, anyreorganization, merger or consolidation, but excluding the Series B-1financing) that will result in the holders of the outstanding voting equitysecurities of the Corporation immediately prior to such transaction or seriesof related transactions holding securities representing less than forty percent(40%) of the voting power of the surviving entity immediately following suchtransaction or series of related transactions.

 

4.                                       Voting.Except as expressly provided by law, the shares of Series B-1 Preferred Stockshall be non-voting.

 

5.                                       Conversionof Series B-1 Preferred Stock into Common Stock.

 

(a)                                  ConversionProcedure.

 

(i)                                     Atany time after the third anniversary of the Original Series B-1 Issue Date, orotherwise at any time during the pendency of any Redemption Notice (definedbelow), any holder of Series B-1 Preferred Stock may convert all or any portionof the Series B-1 Preferred Stock held by such holder into a number of sharesof Conversion Stock (as defined in Section 7) computed by multiplying thenumber of shares to be converted by the purchase price thereof and dividing theresult by the Conversion Price (as defined in subsection 5(b)) then in effect.

 

(ii)                                  Eachvoluntary conversion of Series B-1 Preferred Stock shall be deemed to have beeneffected as of the close of business on the date on which the notice ofelection of such conversion is delivered (which can be by facsimile) to the Corporationby such holder. Until the certificates representing the shares of Series B-1Preferred Stock which are being converted have been surrendered and newcertificates representing shares of the Conversion Stock shall have been issuedby the Corporation, such certificate(s) evidencing the shares of Series B-1Preferred Stock being converted shall be evidence of the issuance of suchshares of Conversion Stock. At such time as such conversion has been effected,the rights of the holder of such Series B-1 Preferred Stock as such holdershall cease and the Person or Persons in whose name or names any certificate orcertificates for shares of Conversion Stock are to be

 

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issued upon such conversion shall be deemed to have become the holderor holders of record of the shares of Conversion Stock represented thereby.

 

(iii)                               Notwithstandingany other provision hereof, if a conversion of shares is to be made inconnection with a Public Offering (as defined in Section 7), the conversion ofsuch shares may, at the election of the holder thereof, be conditioned upon theconsummation of the Public Offering, in which case such conversion shall not bedeemed to be effective until the consummation of the Public Offering.

 

(iv)                              Assoon as practicable, but in any event within five (5) business days, after aconversion has been duly effected in accordance with clause (i) above, theCorporation shall deliver to the converting holder:  (A) a certificate or certificates representing,in the aggregate, the number of shares of Conversion Stock issuable by reasonof such conversion, in the name or names and in such denomination ordenominations as the converting holder has specified; and (B) a certificaterepresenting any shares which were represented by the certificate orcertificates delivered to the Corporation in connection with such conversionbut which were not converted.

 

(v)                                 Theissuance of certificates for shares of Conversion Stock upon conversion ofSeries B-1 Preferred Stock shall be made without charge to the holders of suchSeries B-1 Preferred Stock for any issuance tax in respect thereof or othercost incurred by the Corporation in connection with such conversion and therelated issuance of shares of Conversion Stock, except for any transfer orsimilar tax payable as a result of issuance of a certificate to other than theregistered holder of the shares being converted. Upon conversion of any sharesof Series B-1 Preferred Stock, the Corporation shall use its best efforts totake all such actions as are necessary in order to insure that the ConversionStock issuable with respect to such conversion shall be validly issued, fullypaid and nonassessable.

 

(vi)                              TheCorporation shall not close its books against the transfer of Series B-1Preferred Stock or of Conversion Stock issued or issuable upon conversion ofSeries B-1 Preferred Stock in any manner that interferes with the timelyconversion of Series B-1 Preferred Stock. The Corporation shall assist andcooperate with any holder of shares of Series B-1 Preferred Stock required tomake any governmental filings or obtain any governmental approval prior to orin connection with any conversion of shares hereunder (including, withoutlimitation, making any filings reasonably required to be made by theCorporation).

 

(vii)                           Nofractional shares of Conversion Stock or scrip representing fractional sharesshall be issued upon conversion of shares of Series B-1 Preferred Stock. Ifmore than one share of Series B-1 Preferred Stock shall be surrendered forconversion at one time by the same record holder, the number of full shares ofConversion Stock issuable upon the conversion thereof shall be computed on thebasis of the aggregate number of shares of Series B-1 Preferred Stock so surrenderedby such record holder. Instead of any fractional share of Conversion Stockotherwise issuable upon conversion of any shares of the Series B-1 PreferredStock, the Corporation shall pay a cash adjustment in respect of such fractionin an amount equal to the same fraction of current per share fair market valueof the Conversion Stock as determined in good faith by the Board of Directorson such basis as it considers appropriate.

 

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(viii)                        TheCorporation shall at all times reserve and keep available out of its authorizedbut unissued shares of Conversion Stock, solely for the purpose of issuanceupon the conversion of the Series B-1 Preferred Stock, such number of shares ofConversion Stock as are issuable upon the conversion of all outstanding SeriesB-1 Preferred Stock. All shares of Conversion Stock which are so issuableshall, when issued, be duly and validly issued, fully paid and nonassessableand free from all taxes, liens and charges, other than those created or agreedto by the holder. The Corporation shall use its best efforts to take all suchactions as may be necessary (including soliciting shareholder approval at itsnext annual meeting) to assure that all such shares of Conversion Stock may beso issued without violation of any applicable law or governmental regulation orany requirements of any domestic securities exchange upon which shares ofConversion Stock may be listed (except for official notice of issuance whichshall be promptly delivered by the Corporation upon each such issuance).

 

(b)                                 ConversionPrice. “Conversion Price” for the Series B-1 Preferred Stock shall bedetermined based on the following formula:

 

where:

 

y  = Conversion Price

 

x  = lastclosing bid price of the common stock prior to conversion

 

Andwhen x is less than $1.64, then:

 

y = $1.64

 

Andwhere x is between $1.63 and $2.01, then:

 

y = 90% of x (subject to Conversion Price floor of$1.64)

 

Andwhen x is between $2.00 and $10.00, then:

 

y = -0.038x(2) + 1.04x – 0.2872

 

Andwhen x is $10.00 or more, then:

 

y  = 62.5% of x

 

(c)                                  Subdivisionor Combination of Common Stock. If the Corporation at any time subdivides(by any stock split, stock dividend, recapitalization or otherwise) one or moreclasses of its outstanding shares of common stock into a greater number ofshares, or if the Corporation at any time combines (by reverse stock split orotherwise) one or more classes of its outstanding shares of common stock into asmaller number of shares, the applicable Conversion Price (and/or the numbersin the Conversion Price formula set forth above, including the Conversion Pricefloor) in effect immediately prior to such subdivision or combination shall beproportionately adjusted.

 

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(d)                                 Consolidation,Merger or Sale for Assets. Any consolidation, merger, sale of all orsubstantially all of the Corporation’s assets to another Person or othertransaction which is effected in such a manner that holders of common stock areentitled to receive (either directly or upon subsequent liquidation) assetsother than Conversion Stock (“Assets”) with respect to or in exchange forcommon stock is referred to herein as a “Fundamental Change.” Prior to theconsummation of any Fundamental Change, the Corporation shall make appropriateprovisions to insure that each of the holders of Series B-1 Preferred Stockshall thereafter have the right to acquire and receive, in lieu of or inaddition to (as the case may be) the shares of Conversion Stock immediatelytheretofore acquirable and receivable upon the conversion of such holder’sSeries B-1 Preferred Stock, such Assets as such holder would have received inconnection with such Fundamental Change if such holder had converted its SeriesB-1 Preferred Stock into Conversion Stock immediately prior to such FundamentalChange. The Corporation shall not effect any Fundamental Change, consolidation,merger or sale unless prior to the consummation thereof, the successorcorporation (if other than the Corporation) resulting from consolidation ormerger or the corporation purchasing such assets assumes the obligation todeliver to each such holder such shares of stock, securities or assets as, inaccordance with the foregoing provisions, such holder may be entitled toacquire.

 

(e)                                  Notices.

 

(i)                                     Promptlyupon any adjustment of the applicable Conversion Price, the Corporation shallgive written notice thereof to all holders of Series B-1 Preferred Stock,setting forth in reasonable detail and certifying the calculation of suchadjustment.

 

(ii)                                  TheCorporation shall give written notice to all holders of Series B-1 PreferredStock at least 10 days prior to the date on which the Corporation closes itsbooks or takes a record (A) with respect to any dividend or distribution uponcommon stock, (B) with respect to any pro rata subscription offer to holders ofcommon stock, or (C) for determining rights to vote with respect to anyFundamental Change, dissolution or liquidation.

 

(iii)                               TheCorporation shall give written notice to the holders of Series B-1 PreferredStock at least ten (10) days prior to the date on which any Fundamental Changeshall take place, which notice may be one and the same as that required by (ii)above.

 

(f)                                    AutomaticConversion.

 

(i)                                     Eachshare of Series B-1 Preferred Stock shall automatically be converted intoshares of common stock at the then applicable Conversion Price (or upon suchother terms as the Corporation and holders of 75% or more of the thenoutstanding shares of Series B-1 Preferred Stock may agree) upon the writtenconsent of the Corporation and holders of 75% or more of the then outstandingshares of Series B-1 Preferred Stock.

 

(ii)                                  Followingcompletion of an automatic conversion pursuant to this Section 5(f), eachformer holder of Series B-1 Preferred Stock shall promptly surrender to theCorporation for cancellation such holder’s Series B-1 Preferred Stockcertificate(s), or lost instrument declarations and indemnifications reasonablysatisfactory to the Corporation, duly endorsed. The Corporation shall have noobligation to issue certificates representing the common stock issued uponconversion until such documents are delivered to the Corporation.

 

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(g)                                 ConversionCap. Notwithstanding any other provision herein, the Corporation shall notbe obligated to issue any shares of Common Stock upon conversion of the SeriesB-1 Preferred Stock if and to the extent the issuance of such shares of CommonStock would exceed the number of shares (the “Exchange Cap”) then permitted tobe issued without violation of the rules or regulations of the PrincipalMarket, except that such limitation shall not apply in the event that theCorporation obtains the approval of its stockholders as required by applicablerules and regulations of the Principal Market for issuances of Common Stock inexcess of the Exchange Cap. If and to the extent the Exchange Cap applies, nooriginal purchaser of Series B-1 Preferred Stock shall be issued, uponconversion of Series B-1 Preferred Stock, shares of Common Stock in an amountgreater than the product of (x) the Exchange Cap amount multiplied by (y) afraction, the numerator of which is the number of shares of Series B-1Preferred Stock originally issued to such Investor and the denominator of whichis the aggregate amount of all the Series B-1 Preferred Stock issued to theoriginal purchasers of such securities (the “Cap Allocation Amount”). In theevent that any original holder of Series B-1 Preferred Stock shall sell orotherwise transfer any of such holder’s Series B-1 Preferred Stock, thetransferee shall be allocated a pro rata portion of such holder’s CapAllocation Amount. In the event that a requested conversion would violate theaforementioned rules, the Corporation agrees to undertake best efforts toobtain such approval within 180 days of such request for conversion.

 

6.                                       CorporationRedemption Rights. At the option of the Corporation, upon at least 30 days’written notice to the holders of Series B-1 Preferred Stock, the Corporationmay redeem some or all of the Series B-1 Preferred Stock, at a redemption priceequal to the following percentage of the original Series B-1 purchaseprice (plus all accrued but unpaid dividends):

 
| **For Redemptions Effected Before  this Date** | ** ** | **% of Purchase Price** | ** ** |
|------------------------------------------------|------------|-------------------------|------------|
|                                           |       |                    |       |
| January 1, 2007                                |       | 120                     | %          |
|                                           |       |                    |       |
| July 1, 2007                                   |       | 130                     | %          |
|                                           |       |                    |       |
| January 1, 2008                                |       | 140                     | %          |
|                                           |       |                    |       |
| July 1, 2008                                   |       | 150                     | %          |

 

The redemption price forany redemptions effected after July 1, 2008 shall be equal to 160% of theoriginal Series B-1 purchase price (plus all accrued but unpaid dividends). Holdersof Series B-1 Preferred Stock shall be entitled to convert their shares ofSeries B-1 Preferred Stock into common stock during the 30-day notice period ofthis Section 6. Prior to the date fixed for any redemption of shares, a notice(the “Redemption Notice”) specifying the time and place of the redemption andthe number of shares to be redeemed shall be given by overnight courier or bycertified mail return receipt requested, to the holders of record of the sharesof Series B-1 Preferred Stock to be redeemed at their respective addresses asthe same shall appear on the books of the Corporation, calling upon each holderof record to surrender to the Corporation on the redemption date at the placedesignated in the notice such holder’s certificate or certificates representingthe number of shares specified in the notice of redemption; provided, however,the Corporation cannot provide notice of redemption unless and until theCorporation has available

 

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cash to effect the redemption and the registration statement coveringthe resale of the Conversion Stock has been declared effective and, to theextent required by the Registration Rights Agreement dated as of the ClosingDate, remains effective. Neither failure to mail such notice, nor any defecttherein or in the mailing thereof, to any particular holder shall affect thesufficiency of the notice or the validity of the proceedings for redemptionwith respect to the other holders. Any notice mailed in the manner hereinprovided shall be conclusively presumed to have been duly given whether or notthe holder receives the notice. On or after the redemption date, each holder ofshares of Series B-1 Preferred Stock to be redeemed shall present and surrendersuch holder’s certificate or certificates for such shares to the Corporation atthe place designated in the redemption notice and thereupon the redemptionprice of the shares, and any accumulated and unpaid dividends thereon to theredemption date, shall be paid to or on the order of the person whose nameappears on such certificate or certificates as the owner thereof, and eachsurrendered certificate shall be canceled. In case fewer than all the sharesrepresented by any such certificate are redeemed, a new certificate shall beissued representing the unredeemed shares.

 

7.                                       Definitions.The following terms have the meanings specified below:

 

(a)                                  Affiliate.The term “Affiliate” shall mean (i) any Person directly or indirectlycontrolling, controlled by or under direct or indirect common control with theCorporation (or other specified Person), (ii) any Person who is a beneficialowner of at least 10% of the then outstanding voting capital stock (or options,warrants or other securities which, after giving effect to the exercisethereof, would entitle the holder thereof to hold at least 10% of the thenoutstanding voting capital stock) of the Corporation (or other SpecifiedPerson), (iii) any director or executive officer of the Corporation (or otherSpecified Person) or Person of which the Corporation (or other SpecifiedPerson) shall, directly or indirectly, either beneficially or of record, own atleast 10% of the then outstanding equity securities of such Person, and (iv) inthe case of Persons specified above who are individuals, Family Members of suchPerson; provided, however, that no holder of Preferred Stock nor any of theirdesignated members of the Board of Directors shall be an Affiliate of theCorporation for purposes hereof.

 

(b)                                 Boardof Directors. The term “Board of Directors” shall mean the Board ofDirectors of the Corporation.

 

(c)                                  ConversionStock. The term “Conversion Stock” shall mean the shares of common stockissuable upon conversion of shares of Series B-1 Preferred Stock; provided thatif there is a change such that the securities issuable upon conversion of theSeries B-1 Preferred Stock are issued by an entity other than the Corporationor there is a change in the class of securities so issuable, then the term “ConversionStock” shall mean shares of the security issuable upon conversion of the SeriesB-1 Preferred Stock if such security is issuable in shares, or shall mean thesmallest unit in which such security is issuable if such security is notissuable in shares.

 

(d)                                 FamilyMembers. The term “Family Members” shall mean, as applied to anyindividual, any spouse, child, grandchild, parent, brother or sister thereof orany spouse of any of the foregoing, and each trust created for the benefit ofone or more of such Persons (other

 

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than any trust administered by an independent trustee) and eachcustodian of property of one or more such Persons.

 

(e)                                  Person.The term “Person” shall mean an individual, corporation, partnership, limitedliability company, association, trust, joint venture or unincorporatedorganization or any government, governmental department or any agency orpolitical subdivision thereof.

 

(f)                                    “PrincipalMarket” means the American Stock Exchange, the New York Stock Exchange, theNasdaq National Market, the Nasdaq Capital Market, or the Nasdaq OTC BulletinBoard, whichever is at the applicable time the principal trading exchange ormarket for the common stock, based upon share volume.

 

(g)                                 PublicOffering. The term “Public Offering” shall mean any offering by theCorporation of its equity securities to the public pursuant to an effectiveregistration statement under the Securities Act of 1933, as amended, or any successorfederal statute, and the rules and regulations of the Securities and ExchangeCommission promulgated thereunder, all as the same shall be in effect from timeto time, or any comparable statement under any similar federal statute then inforce, other than an offering in connection with an employee benefit plan.

 

(h)                                 Subsidiary.The term “Subsidiary” shall mean any Person of which the Corporation shall atthe time own, directly or indirectly through another Subsidiary, 50% or more ofthe outstanding voting capital stock (or other shares of beneficial interestwith voting rights), or which the Corporation shall otherwise control.

 

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IN WITNESS WHEREOF,VCampus Corporation has caused this certificate to be signed by its dulyauthorized officer as of the 13th day of March 2006.

 

 
|   | **VCAMPUS  CORPORATION** |
|--------|--------------------------|
|   |                     |
|   |                     |
|   | By:                      |        /s/  Christopher L. Nelson |   |
|   |                     |
|   | Name:                    | Christopher L. Nelson |
|   |                     |   |
|   | Title:                   | Chief Financial Officer |
|        |                          |  |  |  |

 

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