Document:

Exhibit
10.88

 

AMENDMENT NO. 2

to

EMPLOYMENT AGREEMENT

This Amendment No. 2
to Employment Agreement is entered into as of June 25, 2003 (“Amendment
No. 2”) by and among VCampus Corporation, a Delaware corporation (the “Company”
or “VCampus”), and Christopher Louis Nelson (“Nelson”).  All capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Employment Agreement
dated as of June 3, 2002 between the Company and Nelson (the “Employment Agreement”)
and/or the Amendment No. 1 thereto executed by the Company and Nelson on or
about December 13, 2002 (“Amendment No. 1”).

 

WHEREAS, the parties signatory hereto desire to amend
the Employment Agreement in accordance with the terms hereof to amend the terms
of certain bonus amounts and performance criteria agreed upon by the parties
following the execution of the Employment Agreement and Amendment No. 1.

 

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

 

1.             Amendment
of Exhibit B.  Exhibit B of the
Employment Agreement, as amended by Amendment No. 1, is hereby deleted in its
entirety and replaced with the following:

 

This Exhibit B includes the calculations for the
performance bonus due Nelson in accordance with Section 3 (b) of the
Employment Agreement.  All bonus amounts
referenced herein are subject to any withholdings required by law.  These criteria and bonus determinations are
valid only for the time period from May 31, 2003 to May 31, 2004.

 

A.            Subjective Bonus: $25,000 Total Opportunity

 

A bonus ranging from $0 to up to a maximum of $25,000
will be paid based on overall executive management and leadership of the
Finance, CST & content departments. 
The Subjective Bonus will be payable on May 31, 2004, conditioned upon
Nelson’s achievement of the performance criteria.  Special consideration will be given to the following assignments:

 

1.             Creating
a solid management team by mentoring and training and/or upgrading the talent
pool in CS&T.  To the extent this
goal is accomplished, a bonus from $0 to $10,000 will be payable to Nelson on
May 31, 2004.

 

2.             Outsourcing
all software maintenance, documentation, enhancements, bug fixes, quality
assurance, and back office functions to the extent possible to high quality and
low-cost sources while maintaining quality of services delivered
internally and to customers.  To the
extent that this goal is accomplished, a bonus from $0 to $15,000 will be
payable to Nelson on May 31, 2004.

 

B.            Objective Bonus:
$75,000 Total Opportunity.

 

A bonus from $0 up to a maximum of $75,000 will be
paid if the following goals are achieved:

 

1.             The average daily trading dollar volume of the
Company’s stock exceeds $100,000 (closing stock price times the daily volume)
for 20 consecutive days.  Nelson shall
be paid a $10,000

 

 

bonus on a one-time basis for any such occurrence, payable at the end
of any month in which this goal is accomplished.

 

2.             The average stock price growth rate of the Company’s
common stock for the following specified time periods exceeds the overall
performance of the Company’s eLearning peer group of companies that are listed
on the NASDAQ SmallCap or National Market as: 
CLKS, ECLG, SABA, DCNT:

 

(a)                                  $750
paid on August 31, 2003 if achieved from May 15, 2003 through August 14, 2003.

(b)                                 $750
paid on November 30, 2003 if achieved from August 15, 2003 through November 14,
2003.

(c)                                  $750
paid on February 28, 2004 if achieved from November 15, 2003 through February
14, 2004.

(d)                                 $750
paid on May 31, 2004 if achieved from February 15, 2003 through May 14, 2003.

(e)           $2,000 paid on May 31, 2004 if
achieved from May 15, 2003 through May 14, 2004.

 

3.             If the (a) the Company is listed on the NASDAQ
SmallCap Market as of May 14, 2004; and (b) if sufficient capital, if
considered separately from capital raised from sources which were not new, was
raised from new sources to maintain the listing as of May 14, 2004, Nelson
shall receive a $5,000.00 bonus payable on May 31, 2004.  Provided, however, that if the
Company’s Board of Directors (the “Board”) resolves to voluntarily delist the
Company from the NASDAQ SmallCap Market on or before May 14, 2004 and the
Company was eligible for continued listing as measured by NASDAQ’S Stockholder
Equity Test as of the date of such Board resolution, then the bonus of $5,000
will be earned and payable to Nelson within five (5) business days of such
Board resolution.

 

4.             If the Company reaches P&L profitability for any
four months, Nelson shall receive a one-time bonus payment of $10,000.00
payable within thirty (30) days of the end of the fourth month.

 

5.             If at least one analyst 
initiates coverage of VCampus, Nelson shall receive a one-time bonus
payment of $5,000, payable at the end of the month in which the analyst
initiates coverage.

 

6.             If all expectations on functions and features by Park
University (“Park”) of a new system are met as evidenced by Park renewing its
contract with the Company for at least one year with the expectation of a
continuing relationship that permits VCampus to provide substantially the same
services and for the same term as it provides to Park under the current
contract, Nelson shall receive a one-time bonus payment of $15,000, payable at
the end of the month in which Park University renews its contract with the
Company.

 

7.             If expectations on functions, features and service
quality by NCSBN, VA, State Farm, ICC/BOCA, and NYIF are met as evidenced by a
satisfactory or better rating (or non-response) to a customer survey to be
conducted on or about April 1, 2004, Nelson shall receive a bonus of $3,000 for
each such customer who rates the Company satisfactory or better (or
non-response) and who remains a customer of the Company on May 15, 2004,
payable on May 31, 2004.

 

8.             If the Company’s help desk efficiency and customer
service responsiveness is improved over their current state (as of May
2003), Nelson shall be eligible for a $5,000 bonus payable on May 31, 2004, so
long as the Company’s system availability and help desk efficiency and
responsiveness from June 2003 to April 2004 meet or exceed their corresponding
levels as of May 2003, which are as follows

 

2

 

•                  Average Abandon
Rate – For all customer calls into Customer Service, achieve an average abandon
rate of 7.5% or less.

 

•                  Mean Time to
Respond to emails – For all emails, achieve an MTTRespond of 5 hours or less.

 

•                  Mean Time to
Deploy Courses – For all custom courses achieve an MTTDeploy of 5 hours or
less.

 

•                  Mean Time to
Create Course Shells – For all custom courses achieve an MTTCreate Course
Shells of 7 hours or less.

 

9.             If
a new LMS from a third party replaces the Company’s current LMS and the
Informix database is selected and implemented by April 1, 2004, Nelson shall be
entitled to a bonus as described below, subject to the following
conditions:  (a) the new LMS must be
fully integrated with the new system under development; and (b) the new LMS
must also able to run the Company’s entire marketable library of courses
(courses which were sold by the Company between June 1, 2002 and May 31, 2003)
and offer classroom management functionality. 
If the foregoing criteria are substantially accomplished, Nelson shall
receive a $5,000 bonus payable on May 31, 2004.

 

2.     Continuing
Force and Effect.  The Employment
Agreement and Paragraph 1 of Amendment No. 1 are hereby ratified and affirmed
in all respects, and shall continue in full force and effect to the extent of
and in accordance with their terms.

 

3.     Counterparts.  This Amendment No. 2 may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

 

4.     Governing
Law.  This Amendment No. 2 shall be
governed by and construed in accordance with the internal laws of the State of
Virginia (without reference to conflicts of law provisions thereof).

 

5.     Headings.  The various headings of this Amendment No. 2
are inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment No. 2 or any provision hereof.

 

[Remainder of Page Intentionally Left
Blank]

 

3

 

IN WITNESS WHEREOF, the
parties hereto have executed this Amendment
No. 2 to Employment Agreement as of the date first written above.

 

 

	
  VCampus Corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Narasimahan P. Kannan

  	
   

  	
   

  
	
  Narasimhan P. Kannan

  	
   

  
	
  Chairman of the Board
  and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Christopher Nelson

  	
   

  	
   

  
	
  Christopher Nelson

  	
   

  
					

 

4Exhibit
10.89

 

THIS WARRANT AND
THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933.  THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

 

WARRANT TO PURCHASE COMMON STOCK

of

VCAMPUS CORPORATION

 

This Warrant
(the “Warrant”) is issued to
                      
or his permitted assigns (“Holder”) by VCampus Corporation, a Delaware
corporation (the “Company”), on June 6, 2003 (the “Warrant Issue Date”) in
consideration of the Holder’s conversion of preferred stock into common stock,
receipt of which consideration is hereby acknowledged.

 

1.             Purchase Shares.  Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant
at the principal office of the Company (or at such other place as the Company
shall notify the holder hereof in writing), to purchase from the Company up to
                    shares
of Common Stock of the Company (the “Warrant Shares”) at the Exercise Price
(defined below), subject to adjustment as provided in Section 8 (and subject to
adjustment as provided in Section 5 in the event the Holder elects the
“cashless exercise” procedure in Section 5).

 

2.             Exercise Price.  The purchase price for the Shares shall be
$3.85 per Warrant Share, as adjusted from time to time pursuant to
Section 8 hereof (the “Exercise Price”).

 

3.             Exercise Period.

 

(a)           This Warrant shall
be exercisable commencing immediately upon issuance and ending at 5:00 p.m. on
the earlier of: (i) the fifth anniversary of the Warrant Issue Date; or (ii)
fifteen (15) days after the Company notifies the Holder in writing that the
average closing bid price of the Company’s Common Stock on its Principal Market
for twenty (20) consecutive trading days was a price equal to at least three
(3) times the Exercise Price.

 

(b)           Notwithstanding any
other provision herein, the Company shall not be obligated to issue any Warrant
Shares upon exercise of this Warrant if and to the extent the issuance of such
Warrant Shares would exceed the number of shares of the Company’s Common Stock
(the “Exchange Cap”) then permitted to be issued without violation of the rules
or regulations of the Principal Market, except that such limitation shall not
apply in the event that the Corporation obtains the approval of its stockholders
as required by applicable rules and regulations of the Principal Market for
issuances of

 

 

the Company’s
Common Stock in excess of the Exchange Cap. 
If and to the extent the Exchange Cap applies, no Holder shall be
issued, upon exercise of this Warrant, shares of Common Stock in an amount
greater than the product of (x) the Exchange Cap amount multiplied by (y) a
fraction, the numerator of which is the number of Warrant Shares originally
obtainable upon exercise of this Warrant and the denominator of which is the
aggregate amount of all Warrant Shares obtainable upon exercise by all holders
of warrants of like tenor issued in connection with the conversion of preferred
stock into common stock of the Company (the “Cap Allocation Amount”).  In the event that any Holder shall sell or
otherwise transfer all or a portion of this Warrant, the transferee shall be
allocated a pro rata portion of such Holder’s Cap Allocation Amount.  In the event that a requested exercise would
violate the aforementioned rules, the Corporation agrees to undertake best
efforts to obtain such approval within 180 days of such request for
exercise.  For the purposes of this
Warrant, “Principal Market” shall mean the American Stock Exchange, the New
York Stock Exchange, the Nasdaq National Market, or the Nasdaq Smallcap Market,
whichever is at the applicable time the principal trading exchange or market
for the Company’s Common Stock, based upon share volume.

 

4.             Method of Exercise.  While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the Holder may exercise,
in whole or in part, the purchase rights evidenced hereby.  Such exercise shall be effected by:

 

(a)           the surrender of the
Warrant, together with a duly executed copy of the form of Notice of Exercise
attached hereto, to the Secretary of the Company at its principal offices; and

 

(b)           the payment to the
Company of an amount equal to the aggregate Exercise Price for the number of
Warrant Shares being purchased.

 

5.             Net Exercise.  In lieu of exercising this Warrant pursuant
to Section 4, the Holder may elect to receive, without the payment by the
Holder of any additional consideration, Warrant Shares equal to the value of
this Warrant (or the portion thereof being canceled) by surrender of this Warrant
at the principal office of the Company together with the Notice of Exercise
attached hereto indicating such election, in which event the Company shall
issue to the holder hereof a number of Warrant Shares computed using the
following formula:

 

Y (A - B)

X =                A

 

Where:         X =          The number of Warrant Shares to be
issued to the Holder pursuant to this net exercise;

 

Y =                              The number of Warrant
Shares in respect of which the net issue election is made;

 

A =                            The fair market value of
one Warrant Share at the time the net issue election is made;

 

2

 

B =                              The Exercise Price (as
adjusted to the date of the net issuance).

 

For purposes of this Section 5, the fair
market value of one Warrant Share as of a particular date shall be determined
as follows:  (i) if traded on a
securities exchange or through the Nasdaq National Market or the Nasdaq
SmallCap Market, the value shall be deemed to be the average of the closing
sale prices of the securities on such exchange over the five (5) trading day
period ending one day prior to the net exercise election; (ii) if traded
over-the-counter, the value shall be deemed to be the average of the closing
bid or sale prices (whichever is applicable) over the five (5) trading day period
ending one day prior to the net exercise; and (iii) if there is no active
public market, the value shall be the fair market value thereof, as determined
in good faith by the Board of Directors of the Company.

 

6.             Certificates
for Shares.  Upon the exercise of
the purchase rights evidenced by this Warrant, one or more certificates for the
number of Warrant Shares so purchased shall be issued as soon as practicable
thereafter (with appropriate restrictive legends, if applicable), and in any
event within ten (10) days of the delivery of the subscription notice.

 

7.             Issuance
of Shares.  The Company covenants
that the Warrant Shares, when issued pursuant to the exercise of this Warrant,
will be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens, and charges with respect to the issuance thereof.

 

8.             Adjustment
of Exercise Price and Kind and Number of Shares.  The number and kind of securities purchasable upon exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to
time as follows:

 

(a)           Subdivisions,
Combinations and Other Issuances. 
If the Company shall at any time prior to the expiration of this Warrant
(i) subdivide its Common Stock, by split-up or otherwise, or combine its Common
Stock, (ii) issue additional shares of its Common Stock or other equity
securities as a dividend with respect to any shares of its Common Stock, or
(iii) declare a cash dividend with respect to any shares of its Common Stock,
the number of shares of Common Stock issuable on the exercise of this Warrant
shall forthwith be proportionately increased in the case of a subdivision or
stock or cash dividend, or proportionately decreased in the case of a
combination.  Appropriate adjustments
shall also be made to the purchase price payable per share, but the aggregate
purchase price payable for the total number of Warrant Shares purchasable under
this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 8(a) shall become
effective at the close of business on the date the subdivision or combination
becomes effective, or as of the record date of such dividend, or in the event
that no record date is fixed, upon the making of such dividend.

 

(b)           Reclassification,
Reorganization and Consolidation. 
In case of any reclassification, capital reorganization, or change in
the Common Stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 8(a) above), then,
as a condition of such reclassification, reorganization, or change, lawful
provision shall be made, and duly executed documents evidencing the same from
the Company or its successor shall be delivered to the Holder, so that the
Holder shall have the right at any time prior to the expiration of this Warrant
to purchase,

 

3

 

at a total
price equal to that payable upon the exercise of this Warrant (subject to
adjustment of the Exercise Price as provided in Section 8), the kind and amount
of shares of stock and other securities and property receivable in connection
with such reclassification, reorganization, or change by a holder of the same
number of shares of Common Stock as were purchasable by the Holder immediately
prior to such reclassification, reorganization, or change.  In any such case appropriate provisions
shall be made with respect to the rights and interest of the Holder so that the
provisions hereof shall thereafter be applicable with respect to any shares of
stock or other securities and property deliverable upon exercise hereof, and
appropriate adjustments shall be made to the purchase price per share payable
hereunder, provided the aggregate purchase price shall remain the same.

 

(c)           Notice of
Adjustment.  When any adjustment is
required to be made in the number or kind of shares purchasable upon exercise
of the Warrant, or in the Exercise Price, the Company shall promptly notify the
holder of such event and of the number of shares of Common Stock or other
securities or property thereafter purchasable upon exercise of this Warrant.

 

(d)           Issuance of New
Warrant.  Upon the occurrence of any
of the events listed in this Section 8 that results in an adjustment of the
type, number or exercise price of the securities underlying this Warrant, the
Holder shall have the right to receive a new warrant reflecting such adjustment
upon the Holder tendering this Warrant in exchange.  The new warrant shall otherwise have terms identical to this
Warrant.

 

9.             No Impairment.  Pursuant to the terms and conditions of this
Warrant, the Company shall: (i) reserve an appropriate number of shares of the
Company’s Common Stock to facilitate the issuance of shares to Holder pursuant
to this Warrant, (ii) not amend its articles or take any other action that
would materially impair Company’s ability to comply with the terms of the
Warrant or otherwise unfairly impair the rights of the Holder, and (iii)
provide Holder with reasonable notice before Company undertakes any significant
corporate action that would have a material impact upon Holder’s rights under
the Warrant or upon the rights of the holders of Common Stock generally.

 

10.           Representations and Warranties.  Pursuant to the terms and conditions of this
Warrant, the Company represents and warrants that (i) the Company is properly
organized and structured  pursuant to
all applicable corporate laws of the State of Delaware, (ii) the issuance of
this Warrant has been duly authorized by all necessary corporate action of the
Company and does not conflict with the terms any of the bylaws, articles of
incorporation or material agreements of the Company, and (iii) all reports and
other information filed with the United States Securities Exchange Commission
were, on the date they were filed,  complete
and accurate in all material respects, and do not make any material
misstatement or omit to state any facts that are material to the operations,
financial results or prospects of the Company.

 

11.           No
Fractional Shares or Scrip.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant, but in lieu of such fractional shares the Company
shall make a cash payment therefor on the basis of the Exercise Price then in
effect.

 

4

 

12.           No
Stockholder Rights.  Prior to
exercise of this Warrant, the Holder shall not be entitled to any rights of a
stockholder with respect to the shares of Common Stock issuable on the exercise
hereof, including (without limitation) the right to vote such shares of Common
Stock, receive dividends or other distributions thereon, exercise preemptive
rights or be notified of stockholder meetings, and such holder shall not be
entitled to any notice or other communication concerning the business or
affairs of the Company.  However,
nothing in this Section 12 shall limit the right of the Holder to be provided
the Notices required under this Warrant.

 

13.           Successors and Assigns.  The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the Holder
and their respective successors and assigns.

 

14.           Amendments and Waivers.  Any term of this Warrant may be amended and
the observance of any term of this Warrant may be waived (either generally or
in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the Holder. 
Any waiver or amendment effected in accordance with this Section shall
be binding upon each holder of any shares of Common Stock purchased under this
Warrant at the time outstanding (including securities into which such shares
have been converted), each future holder of all such Shares, and the Company.

                

15.           Notices.  All notices required under this Warrant and
shall be deemed to have been given or made for all purposes (i) upon
personal delivery, (ii) upon confirmation receipt that the communication
was successfully sent to the applicable number if sent by facsimile;
(iii) one day after being sent, when sent by professional overnight
courier service, or (iv) five days after posting when sent by registered
or certified mail.  Notices to the
Company shall be sent to the principal office of the Company (or at such other
place as the Company shall notify the Holder hereof in writing).  Notices to the Holder shall be sent to the
address of the Holder on the books of the Company (or at such other place as
the Holder shall notify the Company hereof in writing).

 

16.           Attorneys’
Fees.  If any action of law or
equity is necessary to enforce or interpret the terms of this Warrant, the
prevailing party shall be entitled to its reasonable attorneys’ fees, costs and
disbursements in addition to any other relief to which it may be entitled.

                

17.           Captions.  The section and subsection headings of this
Warrant are inserted for convenience only and shall not constitute a part of
this Warrant in construing or interpreting any provision hereof.

 

18.           Governing Law.  This Warrant shall be governed by the laws
of the State of Delaware as applied to agreements among Delaware residents made
and to be performed entirely within the State of Delaware.

5

 

IN WITNESS WHEREOF, VCampus
Corporation caused this Warrant to be executed by an officer thereunto duly
authorized.

                

	
   

  	
   

  	
  VCAMPUS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address: 1850
  Centennial Park Drive, Suite 200

  
	
   

  	
   

  	
  Reston, Virginia 20191

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax Number:
  (703) 654-7311

  

 

6

 

NOTICE OF EXERCISE

 

To:

The
undersigned hereby elects to [check applicable subsection]:

 

o                                    (a)     Purchase
               
shares of Common Stock of
               ,
pursuant to the terms of the attached Warrant and payment of the Exercise Price
per share required under such Warrant accompanies this notice;

 

OR

 

o                                    (b)     Exercise
the attached Warrant for [all of the shares]  [               
of the shares]  [cross out inapplicable phrase]
purchasable under the Warrant pursuant to the net exercise provisions of
Section 5 of such Warrant.

 

The
undersigned hereby represents and warrants that the undersigned is acquiring
such shares for its own account for investment purposes only, and not for
resale or with a view to distribution of such shares or any part thereof.

 

	
   

  	
  WARRANTHOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
  Date:

  	
   

  

 

Name in which shares should be registered:

 

7

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