Document:

Exhibit 10.110

 

CERTIFICATE
OF DESIGNATIONS,

 

PREFERENCES
AND RIGHTS OF

 

SERIES
B-1 CONVERTIBLE PREFERRED STOCK

 

OF

 

VCAMPUS CORPORATION

 

I.                                         Creation
of Series B-1 Convertible Preferred Stock.

 

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

 

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

 

RESOLVED, that the
Corporation 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 shares
to be designated Series B-1 Convertible Preferred Stock, par value $0.01 per
share (the “Series B-1 Preferred Stock”); and

 

RESOLVED, that the Series
B-1 Preferred Stock is hereby authorized on the terms and with the provisions
herein set forth:

 

II.                                     Provisions
Relating to the Preferred Stock.

 

1.                                       Rank.
Subject to the rights of additional series of Preferred Stock that may be
designated by the Board of Directors from time to time, the Series B-1
Preferred Stock shall, with respect to dividend rights and with respect to
rights upon liquidation, winding up or dissolution, rank parri passu with the
Corporation’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 of
preferred stock hereafter created (except for any parri passu preferred stock
and except as may otherwise be consented to by holders of a majority of the
Series B-1 Preferred Stock) and (c) any other

 

 

equity interests (including, without limitation, warrants, stock
appreciation rights, phantom stock rights, or other rights with equity
features, calls or options exercisable for or convertible into such capital
stock or equity interests) in the Corporation that by its terms rank junior to
the Series B-1 Preferred Stock (all of such classes or series of capital stock
and other equity interests, including, without limitation, all classes of
common stock of the Corporation, are collectively referred to as “Junior
Securities”).

 

2.                                       Dividends.

 

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

 

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

 

(ii)                                                    six
percent (6%) of the Net Sales Proceeds (defined below) received by the
Corporation from the sale, licensing or distribution of Covered Courses
(defined below) during the applicable quarter (such 6% calculation to be
prorated for any portion of the Series B-1 Preferred Stock that is redeemed or
converted – for example, if 25% of the shares of Series B-1 Preferred Stock
were 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 “Series
B-1 Quarterly Dividend Amount”), on each March 31, June 30, September 30 and
December 31 (each, a “Quarterly Dividend Date”) after the date on which such
shares of Series B-1 Preferred Stock were issued (the “Series B-1 Original
Issue Date” for such share), provided, however, the first quarterly dividend
shall not be due and payable until June 30, 2006, and provided further that the
amount of dividends on the first Quarterly Dividend Date shall equal the Series
B-1 Quarterly Dividend Amount multiplied by a fraction (A) the numerator of
which shall equal the number of days from and including the Series B-1 Original
Issue 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 Series
B-1 Dividend shall be paid in cash within 45 days after each Quarterly Dividend
Date. The Corporation shall be obligated to declare and pay each quarterly
dividend as set forth above; provided, however, that the Corporation is, and
may continue to be, subject to:  (i)
applicable Delaware law governing payment of cash dividends in the event of
insolvency; and (ii) restrictions on the payment of cash dividends in the event
of default under the Corporation’s 2004 Series A and Series B Senior Secured
Convertible Notes due April 1, 2009, as issued in the Corporation’s March 2004
financing.

 

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(b)                                 Definitions. For
purposes of this Section 2, “Net Sales Proceeds” shall mean the aggregate
quarterly gross cash proceeds, if any, actually received by the Corporation
from 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 (including
any VAT tax) and similar items paid or payable by the Corporation in connection
therewith. In the event the Corporation is required or has to litigate to
obtain, maintain or collect such Net Sales Proceeds, the Corporation shall be
entitled to deduct reasonable attorney’s fees, costs and expenses relating
thereto 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 to
the mutual agreement of the Corporation and the holders of a majority of the
then outstanding shares of Series B-1 Preferred Stock, and the parties hereby
authorize and agree to the filing of an amendment to this Certificate of
Designation to evidence such mutual agreement promptly following the execution
thereof.

 

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

 

(d)                                 So
long as any shares of Series B-1 Preferred Stock are outstanding, the
Corporation will not declare, pay or set apart for payment any dividends on
(except dividends payable in common stock of the Corporation), or make any
other distribution on or redeem, purchase or otherwise acquire, any Junior
Securities and will not permit any Subsidiary or other Affiliate (using funds of
the Corporation or any Subsidiary) to redeem, purchase or otherwise acquire for
value, any Junior Securities. Notwithstanding the foregoing provisions of this
Section 2(b), the Corporation or any Subsidiary may (i) make payments in
respect of fractional shares of Junior Securities and (ii) repurchase, redeem
or otherwise acquire for value any Junior Securities from any employee or
former employee of the Corporation or any Subsidiary in connection with the
termination of employment by the Corporation or any Subsidiary or by such
employee or former employee, whether by reason of death, disability, retirement
or otherwise.

 

3.                                       Liquidation.
Subject to the parri passu rights of the holders of Series A-1 Preferred Stock
and the rights of additional series of Preferred Stock that may be designated
by the Board from time to time, upon a change in control pursuant to which the
stockholders of the Corporation immediately prior to such change in control
possess less than forty percent (40%) of the voting power of the acquiring
entity immediately following such change in control, liquidation, dissolution
or winding up of the affairs of the Corporation, whether voluntary or

 

3

 

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

 

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

 

5.                                       Conversion
of Series B-1 Preferred Stock into Common Stock.

 

(a)                                  Conversion
Procedure.

 

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

 

(ii)                                  Each
voluntary conversion of Series B-1 Preferred Stock shall be deemed to have been
effected as of the close of business on the date on which the notice of
election of such conversion is delivered (which can be by facsimile) to the Corporation
by such holder. Until the certificates representing the shares of Series B-1
Preferred Stock which are being converted have been surrendered and new
certificates representing shares of the Conversion Stock shall have been issued
by the Corporation, such certificate(s) evidencing the shares of Series B-1
Preferred Stock being converted shall be evidence of the issuance of such
shares 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 holder
shall cease and the Person or Persons in whose name or names any certificate or
certificates for shares of Conversion Stock are to be

 

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

 

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

 

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

 

(v)                                 The
issuance of certificates for shares of Conversion Stock upon conversion of
Series B-1 Preferred Stock shall be made without charge to the holders of such
Series B-1 Preferred Stock for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Conversion Stock, except for any transfer or
similar tax payable as a result of issuance of a certificate to other than the
registered holder of the shares being converted. Upon conversion of any shares
of Series B-1 Preferred Stock, the Corporation shall use its best efforts to
take all such actions as are necessary in order to insure that the Conversion
Stock issuable with respect to such conversion shall be validly issued, fully
paid and nonassessable.

 

(vi)                              The
Corporation shall not close its books against the transfer of Series B-1
Preferred Stock or of Conversion Stock issued or issuable upon conversion of
Series B-1 Preferred Stock in any manner that interferes with the timely
conversion of Series B-1 Preferred Stock. The Corporation shall assist and
cooperate with any holder of shares of Series B-1 Preferred Stock required to
make any governmental filings or obtain any governmental approval prior to or
in connection with any conversion of shares hereunder (including, without
limitation, making any filings reasonably required to be made by the
Corporation).

 

(vii)                           No
fractional shares of Conversion Stock or scrip representing fractional shares
shall be issued upon conversion of shares of Series B-1 Preferred Stock. If
more than one share of Series B-1 Preferred Stock shall be surrendered for
conversion at one time by the same record holder, the number of full shares of
Conversion Stock issuable upon the conversion thereof shall be computed on the
basis of the aggregate number of shares of Series B-1 Preferred Stock so surrendered
by such record holder. Instead of any fractional share of Conversion Stock
otherwise issuable upon conversion of any shares of the Series B-1 Preferred
Stock, the Corporation shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of current per share fair market value
of the Conversion Stock as determined in good faith by the Board of Directors
on such basis as it considers appropriate.

 

5

 

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

 

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

 

where:

 

y  = Conversion Price

 

x  = last
closing bid price of the common stock prior to conversion

 

And
when x is less than $1.64, then:

 

y = $1.64

 

And
where x is between $1.63 and $2.01, then:

 

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

 

And
when x is between $2.00 and $10.00, then:

 

y = -0.038x(2) + 1.04x – 0.2872

 

And
when x is $10.00 or more, then:

 

y  = 62.5% of x

 

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

 

6

 

(d)                                 Consolidation,
Merger or Sale for Assets. Any consolidation, merger, sale of all or
substantially all of the Corporation’s assets to another Person or other
transaction which is effected in such a manner that holders of common stock are
entitled to receive (either directly or upon subsequent liquidation) assets
other than Conversion Stock (“Assets”) with respect to or in exchange for
common stock is referred to herein as a “Fundamental Change.” Prior to the
consummation of any Fundamental Change, the Corporation shall make appropriate
provisions to insure that each of the holders of Series B-1 Preferred Stock
shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Conversion Stock immediately
theretofore acquirable and receivable upon the conversion of such holder’s
Series B-1 Preferred Stock, such Assets as such holder would have received in
connection with such Fundamental Change if such holder had converted its Series
B-1 Preferred Stock into Conversion Stock immediately prior to such Fundamental
Change. The Corporation shall not effect any Fundamental Change, consolidation,
merger or sale unless prior to the consummation thereof, the successor
corporation (if other than the Corporation) resulting from consolidation or
merger or the corporation purchasing such assets assumes the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.

 

(e)                                  Notices.

 

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

 

(ii)                                  The
Corporation shall give written notice to all holders of Series B-1 Preferred
Stock at least 10 days prior to the date on which the Corporation closes its
books or takes a record (A) with respect to any dividend or distribution upon
common stock, (B) with respect to any pro rata subscription offer to holders of
common stock, or (C) for determining rights to vote with respect to any
Fundamental Change, dissolution or liquidation.

 

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

 

(f)                                    Automatic
Conversion.

 

(i)                                     Each
share of Series B-1 Preferred Stock shall automatically be converted into
shares of common stock at the then applicable Conversion Price (or upon such
other terms as the Corporation and holders of 75% or more of the then
outstanding shares of Series B-1 Preferred Stock may agree) upon the written
consent of the Corporation and holders of 75% or more of the then outstanding
shares of Series B-1 Preferred Stock.

 

(ii)                                  Following
completion of an automatic conversion pursuant to this Section 5(f), each
former holder of Series B-1 Preferred Stock shall promptly surrender to the
Corporation for cancellation such holder’s Series B-1 Preferred Stock
certificate(s), or lost instrument declarations and indemnifications reasonably
satisfactory to the Corporation, duly endorsed. The Corporation shall have no
obligation to issue certificates representing the common stock issued upon
conversion until such documents are delivered to the Corporation.

 

7

 

(g)                                 Conversion
Cap. Notwithstanding any other provision herein, the Corporation shall not
be obligated to issue any shares of Common Stock upon conversion of the Series
B-1 Preferred Stock if and to the extent the issuance of such shares of Common
Stock would exceed the number of shares (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 Common Stock in
excess of the Exchange Cap. If and to the extent the Exchange Cap applies, no
original purchaser of Series B-1 Preferred Stock shall be issued, upon
conversion of Series B-1 Preferred Stock, 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 shares of Series B-1
Preferred Stock originally issued to such Investor and the denominator of which
is the aggregate amount of all the Series B-1 Preferred Stock issued to the
original purchasers of such securities (the “Cap Allocation Amount”). In the
event that any original holder of Series B-1 Preferred Stock shall sell or
otherwise transfer any of such holder’s Series B-1 Preferred Stock, the
transferee shall be allocated a pro rata portion of such holder’s Cap
Allocation Amount. In the event that a requested conversion would violate the
aforementioned rules, the Corporation agrees to undertake best efforts to
obtain such approval within 180 days of such request for conversion.

 

6.                                       Corporation
Redemption Rights. At the option of the Corporation, upon at least 30 days’
written notice to the holders of Series B-1 Preferred Stock, the Corporation
may redeem some or all of the Series B-1 Preferred Stock, at a redemption price
equal to the following percentage of the original Series B-1 purchase
price (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 for
any redemptions effected after July 1, 2008 shall be equal to 160% of the
original Series B-1 purchase price (plus all accrued but unpaid dividends). Holders
of Series B-1 Preferred Stock shall be entitled to convert their shares of
Series B-1 Preferred Stock into common stock during the 30-day notice period of
this 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 and
the number of shares to be redeemed shall be given by overnight courier or by
certified mail return receipt requested, to the holders of record of the shares
of Series B-1 Preferred Stock to be redeemed at their respective addresses as
the same shall appear on the books of the Corporation, calling upon each holder
of record to surrender to the Corporation on the redemption date at the place
designated in the notice such holder’s certificate or certificates representing
the number of shares specified in the notice of redemption; provided, however,
the Corporation cannot provide notice of redemption unless and until the
Corporation has available

 

8

 

cash to effect the redemption and the registration statement covering
the resale of the Conversion Stock has been declared effective and, to the
extent required by the Registration Rights Agreement dated as of the Closing
Date, remains effective. Neither failure to mail such notice, nor any defect
therein or in the mailing thereof, to any particular holder shall affect the
sufficiency of the notice or the validity of the proceedings for redemption
with respect to the other holders. Any notice mailed in the manner herein
provided shall be conclusively presumed to have been duly given whether or not
the holder receives the notice. On or after the redemption date, each holder of
shares of Series B-1 Preferred Stock to be redeemed shall present and surrender
such holder’s certificate or certificates for such shares to the Corporation at
the place designated in the redemption notice and thereupon the redemption
price of the shares, and any accumulated and unpaid dividends thereon to the
redemption date, shall be paid to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued 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 indirectly
controlling, controlled by or under direct or indirect common control with the
Corporation (or other specified Person), (ii) any Person who is a beneficial
owner of at least 10% of the then outstanding voting capital stock (or options,
warrants or other securities which, after giving effect to the exercise
thereof, would entitle the holder thereof to hold at least 10% of the then
outstanding voting capital stock) of the Corporation (or other Specified
Person), (iii) any director or executive officer of the Corporation (or other
Specified Person) or Person of which the Corporation (or other Specified
Person) shall, directly or indirectly, either beneficially or of record, own at
least 10% of the then outstanding equity securities of such Person, and (iv) in
the case of Persons specified above who are individuals, Family Members of such
Person; provided, however, that no holder of Preferred Stock nor any of their
designated members of the Board of Directors shall be an Affiliate of the
Corporation for purposes hereof.

 

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

 

(c)                                  Conversion
Stock. The term “Conversion Stock” shall mean the shares of common stock
issuable upon conversion of shares of Series B-1 Preferred Stock; provided that
if there is a change such that the securities issuable upon conversion of the
Series B-1 Preferred Stock are issued by an entity other than the Corporation
or there is a change in the class of securities so issuable, then the term “Conversion
Stock” shall mean shares of the security issuable upon conversion of the Series
B-1 Preferred Stock if such security is issuable in shares, or shall mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.

 

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

 

9

 

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

 

(e)                                  Person.
The term “Person” shall mean an individual, corporation, partnership, limited
liability company, association, trust, joint venture or unincorporated
organization or any government, governmental department or any agency or
political subdivision thereof.

 

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

 

(g)                                 Public
Offering. The term “Public Offering” shall mean any offering by the
Corporation of its equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, all as the same shall be in effect from time
to time, or any comparable statement under any similar federal statute then in
force, 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 at
the time own, directly or indirectly through another Subsidiary, 50% or more of
the outstanding voting capital stock (or other shares of beneficial interest
with voting rights), or which the Corporation shall otherwise control.

 

10

 

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

 

 

	
   

  	
  VCAMPUS
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Christopher L. Nelson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Christopher L. Nelson

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
					

 

11Exhibit 10.111

 

THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR BY THE SECURITIES REGULATORY
AUTHORITY OF ANY OTHER JURISDICTION, NOR HAS ANY COMMISSION OR AUTHORITY PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL. THE SHARES MAY NOT BE TRANSFERRED OR RESOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

SUBSCRIPTION
AGREEMENT

Series
B-1 Preferred Stock

 

VCAMPUS
CORPORATION

 

1.             Subscription.
VCampus Corporation (the “Company”) is authorized to issue and sell up to 5,000
shares of its Series B-1 Convertible Preferred Stock (the “Series B-1 Preferred
Stock”), having substantially the rights, preferences, privileges and
restrictions set forth in the Certificate of Designations of the Series B-1
Preferred Stock in substantially the form attached hereto as Exhibit A.
The undersigned (hereinafter referred to as “Subscriber”) hereby subscribes for
and agrees to purchase the number of shares of Series B-1 Preferred Stock of
VCampus Corporation (the “Company”), par value $0.01 per share, set forth on
the signature page hereto (the “Shares”) in consideration for payment by the
Subscriber of a per Share purchase price of $1,000 (the “Purchase Price”) pursuant
to this Subscription Agreement (the “Agreement”). The Subscriber herewith
tenders the entire amount of such purchase price by check or wire transfer
payable to the order of the Company.

 

The Subscriber acknowledges that at the time of
issuance the Common Stock will not be registered under the Securities Act of
1933 (the “Act”), in reliance upon an exemption from registration contained in
the Act, and that the Company’s reliance upon such exemption is based, at least
partially, on the Subscriber’s representations and warranties contained in this
Subscription Agreement.

 

2.             Acceptance
or Rejection of Subscription. Subscriber acknowledges and agrees that this
subscription shall not be effective until accepted in writing by the Company,
and that the Company reserves the right to reject this subscription in whole or
in part. The Company is raising capital through the sale of up to approximately
5,000 Shares through one or more offerings, although it reserves the right to
sell any number of shares less than the 5,000 Shares authorized. Subscriptions
may be rejected for insufficient documentation or for such other

 

 

reason as the Company may determine, in its sole discretion, to be in
the best interests of the Company. The Company, in its sole discretion, reserves
the right to close this offering at any time. In the event the Subscriber’s
subscription is accepted by the Company, (the “Closing”) Subscriber’s Shares
shall be issued as of the date specified by the Company at the time of
acceptance.

 

3.             Warrants.
Subscriber shall receive 10-year warrants, (the “Warrants”) in substantially
the form attached hereto as Exhibit B, to purchase a number of shares of
Common Stock equal to a pro rata portion of 1,000,000 shares (based on an
assumed total investment of $2,300,000 for the Series B-1 Preferred Stock). The
Warrants shall become exercisable beginning four years from the date of
issuance at an exercise price equal to the then applicable Conversion Price for
the Shares.

 

4.             Registration
Rights. The shares of common stock issuable upon conversion of the Shares
purchased hereunder (the “Conversion Shares”), together with the shares
issuable upon exercise of the Warrants (the “Warrant Shares”), shall have
registration rights pursuant to the Registration Rights Agreement attached
hereto as Exhibit C.

 

5.             Subscriber’s
Representations and Warranties. Subscriber represents, warrants,
acknowledges and agrees to the following.

 

a.             Subscriber is a resident of the
state indicated on the signature page hereof, is legally competent to execute
this Agreement, and:

 

(i)                                     if
Subscriber is an individual, has his or her principal residence in such state
and is at least 21 years of age; or

 

(ii)                                  if
Subscriber is a corporation, partnership, trust or other form of business
organization, has its principal office in such state; or

 

(iii)                               if Subscriber is a
corporation, partnership, trust or other form of business organization,
Subscriber has not been organized for the specific purpose of acquiring the
Shares.

 

b.             This Agreement is and shall be irrevocable, except that
the Subscriber shall have no obligations hereunder in the event that the
subscription is not accepted by the Company in whole or in part.

 

c.             The Subscriber has read this Agreement carefully and, to
the extent believed necessary, has discussed the representations, warranties
and agreements and the applicable limitations upon the Subscriber’s resale of
the Shares, the Conversion Shares and Warrant Shares with counsel.

 

d.             The Subscriber understands that no federal or state
agency has made any finding or determination regarding the fairness of this
offering, or any recommendation or endorsement of this offering.

 

2

 

e.             The Subscriber is an “accredited investor” as defined in
Rule 501 of Regulation D promulgated under the Act. Entities that are
accredited investors under Rule 501 include, among others, certain banks,
savings and loan associations, registered securities broker-dealers, insurance
companies, registered investment companies and trusts. Individuals that are
accredited investors under Rule 501 include, among others, any natural person
whose individual net worth, or joint net worth with that person’s spouse,
exceeds $1 million; or who had income in excess of $200,000 in each of the two
most recent years or joint income with that person’s spouse in excess of
$300,000 in each of those years and who has a reasonable expectation of
reaching the same income level in the current year.

 

f.              The Subscriber has received from the Company or others
and has read copies of the Company’s filings with the U.S. Securities and
Exchange Commission (the “SEC”), and has had an adequate opportunity to ask
questions of and receive answers from the Company regarding these documents
(the “SEC Filings”).

 

g.             The
Subscriber represents that the Subscriber, if an individual, has adequate means
of providing for his/her current needs and personal and family contingencies
and has no need for liquidity in his/her investment in this offering.

 

h.             The
Subscriber is financially able to bear the economic risk of this investment,
including the ability to afford holding the Shares, the Conversion Shares, the
Warrants and Warrant Shares (collectively, the “Securities”) for an indefinite
period, or to afford a complete loss of its investment.

 

i.              The Subscriber is purchasing the Securities for the
Subscriber’s own account, and not for the purpose of reselling or otherwise
participating, directly or indirectly, in a distribution of the Securities, and
shall not make any sale, transfer or other disposition of any portion of the
Securities purchased hereby without registration under the Act and any
applicable securities act of any state or unless an exemption from registration
is available under such acts.

 

j.              The Subscriber’s overall commitment to investments that
are not readily marketable is not disproportionate to the Subscriber’s net
worth, and the Subscriber’s investment in the Securities will not cause such
overall commitment to become excessive.

 

k.             The Subscriber understands that an investment in the
Securities is a highly illiquid investment, and that, the Subscriber will have
to bear the economic risk of the investment indefinitely (or at least until
such shares may become registered for resale as provided under this Agreement)
because the Securities have not been registered under the Act and are being
issued pursuant to a private placement exemption under Regulation D, on the
grounds that no public offering is involved. Therefore, the Securities cannot
be offered, sold, transferred, pledged or otherwise disposed of to any person,
unless either it is subsequently registered under the Act and applicable state
securities laws or an exemption from registration is available and the
Subscriber obtains a favorable opinion of the Company’s counsel to that effect.

 

3

 

l.              Prior
to registration of the Shares by the Company pursuant to Section 4 hereof or
the availability of another exemption that might be available to the Subscriber,
the Subscriber understands that the provisions of Rule 144 promulgated under
the Act are not available for at least one (1) year to permit resale of the
Securities, and there can be no assurance that the conditions necessary to
permit routine sales of the Securities under Rule 144 will ever be satisfied,
and, if Rule 144 should become available, routine sales made in reliance on its
provisions could be made only in limited amounts and in accordance with the
terms and conditions of the Rule. The Subscriber further understands that in
connection with sales for which Rule 144 is not available, compliance with some
other registration exemption will be required, which may not be available.

 

m.            The Subscriber understands and agrees that stop transfer
instructions will be given to the Company’s transfer agent or the officer in
charge of its stock records and noted on the appropriate records of the Company
to the effect that the Securities may not be transferred out of the Subscriber’s
name unless either the Securities become registered for resale under the Act or
it is established to the satisfaction of counsel for the Company that an
exemption from the registration provisions of the Act and applicable state
securities laws is available therefor. The Subscriber further agrees that there
will be placed on the certificates for the Shares and Warrant Shares, or any
substitutions therefore, a legend stating in substance as follows, that the
Subscriber understands and agrees that the Company may refuse to permit the transfer
of the stock out of its name and that the stock must be held indefinitely in
the absence of compliance with the terms of such legend.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES ACT AND MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF
SUCH REGISTRATION UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH
MAY BE COUNSEL FOR THE CORPORATION) REASONABLY SATISFACTORY TO IT THAT SUCH
TRANSFER MAY BE MADE IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES
LAWS AND REGULATIONS.

 

n.             The
Subscriber has been given the opportunity to review the Company’s SEC Filings,
and to ask questions of, and receive answers from, Company representatives concerning
the Company and the terms and conditions of the offering and to obtain such
other information as the Subscriber desires in order to evaluate an investment
in the Securities.

 

o.             The
Subscriber did not learn of the investment in the Securities as a result of any
public advertising or general solicitation.

 

6.             Company
Representations and Warranties. Except as disclosed in the Company’s SEC
Filings, the Company represents and warrants to the Subscriber as follows:

 

4

 

a.             Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as now conducted.
The Company is duly qualified and authorized to do business, and is in good
standing as a foreign corporation, in Virginia and in each other jurisdiction
where the nature of its activities and of its properties makes such
qualification necessary, except where a failure to do so would not have a
material adverse effect on the Company.

 

b.             Capitalization. The authorized and outstanding capital of
the Company, as of immediately prior to filing of the Certificate of
Designation of the Series B-1 Preferred Stock, consisted of:  167,586 shares of undesignated and unissued
Preferred Stock, $0.01 par value per share, 5,000 authorized shares of Series
A-1 Preferred Stock, of which 2,342 shares were issued and outstanding; and
36,000,000 shares of Common Stock, $0.01 par value per share, 9,613,512 of
which were issued and outstanding.

 

All of
the outstanding shares of Common Stock and Preferred Stock that have been duly
authorized and validly issued are fully paid and nonassessable and were issued
in compliance with all applicable federal and state securities laws. The
Company has duly and validly reserved the Conversion Shares, the Shares and
Warrant Shares for issuance as contemplated hereby. Except as disclosed in the
SEC Filings (including the right of first refusal in favor of the March 2004
investors that does not apply to this financing), there are no outstanding
rights of first refusal, preemptive rights or other rights, options, warrants,
conversion rights or other agreements, either directly or indirectly, for the
purchase or acquisition from the Company of any shares of its capital stock.

 

c.             Authorization. Except
to the extent as may be required under Nasdaq Marketplace Rules to permit
conversion in full of the Conversion Shares and Warrant Shares, all corporate
action on the part of the Company and its directors and stockholders necessary
for the authorization, execution and delivery of this Agreement, the
performance of all the Company’s obligations hereunder and thereunder, and the
authorization, issuance, sale and delivery of the Securities has been taken. This
Agreement, when executed and delivered by the Company and the respective other
parties thereto, shall constitute a valid and legally binding obligation of the
Company enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors, rules
and laws governing specific performance, injunctive relief and other equitable
remedies.

 

d.             Validity of the Shares. The
Shares, when issued pursuant to the terms of this Agreement (and the Conversion
Shares and Warrant Shares, when issued pursuant to the terms of the Certificate
of Designations of the Series B-1 Preferred Stock and pursuant to the Warrants,
respectively), will be validly issued, and fully paid and nonassessable and
will be free of any liens or encumbrances; provided, however, that the
Securities will be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein.

 

e.             Compliance with Other
Instruments. The Company is not in violation of any provisions of
its Certificate of Incorporation or its Bylaws as amended, or, except as

 

5

 

disclosed in the Company’s SEC Filings, of any provisions of any
material agreement or any judgment, decree or order by which it is bound or any
statute, rule or regulation applicable to the Company. Subject to the
compliance with such filings as may be required to be made with the SEC, the
National Association of Securities Dealers, Inc. (the “NASD”) and certain state
securities commissions and except with respect to shareholder approval that
might be deemed to be required under Nasdaq Marketplace Rules, the execution,
delivery and performance of this agreement and the issuance and sale of the
Shares pursuant hereto, will not result in any such violation or be in conflict
with or constitute a default under any such provisions or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company.

 

f.              Governmental
Consents. All consents, approvals, orders or authorization of, or
registrations, qualifications, designations, declarations or filings with, any
federal or state governmental authority on the part of the Company required in
connection with the valid execution and delivery of this agreement, the offer,
sale or issuance of the Shares, or the consummation of any other transaction
contemplated hereby, have been obtained (other than post-sale filings pursuant
to applicable state and federal securities law).

 

g.             Accuracy of Reports. The
SEC Filings required to be filed by the Company within the year prior to the
date of this Agreement under the Securities Exchange Act of 1934 have been duly
filed, were in substantial compliance with the requirements of their respective
forms, were complete and correct in all material respects as of the dates at
which the information was furnished, and contained (as of such dates) no untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.

 

h.             Disclosure. No
representation or warranty of the Company contained in this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.

 

i.              Financial
Statements and Commission Filings; Undisclosed Liabilities.

 

(1)           Included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2004 (the “2004 10-K”) are
true and complete copies of the audited consolidated balance sheets (the “Balance
Sheets”) of the Company as of December 31, 2003 and 2004, and the related
audited statements of income, changes in stockholders’ equity and cash flows
for the years ended December 31, 2002, 2003 and 2004 (the “Financial Statements”),
accompanied by the reports of the Company’s auditors. The Financial Statements
have been prepared in accordance with United States generally accepted
accounting principles (“GAAP”), applied consistently with the past practices of
the Company (except as may be indicated in the notes thereto), and as of their
respective dates, fairly present, in all material respects, the consolidated
financial position of the Company and the results of its operations as of the
time and for the periods indicated therein. The Company keeps proper accounting
records in which all material assets and liabilities and all material
transactions of the Company are recorded in conformity with GAAP.

 

6

 

(2)           As of their respective filing dates,
the financial statements of the Company included in the SEC Filings required to
be filed by the Company within the year prior to the date of this Agreement
complied as to form in all material respects with then applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP, applied consistently
with the past practices of the Company, and as of their respective dates,
fairly presented in all material respects the financial position of the Company
and the results of its operations as of the time and for the periods indicated
therein (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q, and Regulations S-K and S-X of
the SEC).

 

(3)           Since December 31, 2004, neither the
Company nor any of the Company’s Subsidiaries has incurred any liabilities or
obligations of any nature, whether or not accrued, absolute, contingent or
otherwise, other than liabilities (i) disclosed in the SEC Filings filed prior
to the date of this Agreement, (ii) adequately provided for in the Balance
Sheets or disclosed in any related notes thereto, (iii) not required under GAAP
to be reflected in the Balance Sheets, or disclosed in any related notes
thereto, (iv) incurred in connection with this Agreement, or (v) incurred in
the ordinary course of business.

 

j.              Litigation. Except
as set forth in the Company’s SEC Filings, there are no claims, actions, suits,
investigations or proceedings pending or, to the Company’s knowledge,
threatened proceedings against the Company or its assets, at law or in equity,
by or before any governmental authority, or by or on behalf of any third party.

 

k.             Investment Company.
The Company is not, and following the Closing of the transactions contemplated
hereunder will not be, an “investment company” within the meaning of that term
under the Investment Company Act of 1940, as amended, and the rules and
regulations of the SEC.

 

l.              Listing and Maintenance
Requirements Compliance. Except as disclosed in the Company’s SEC
Filings, the Company has not received notice (written or oral) from any stock
exchange or market on which the Common Stock is listed to the effect that the
Company is not in compliance with the continuing listing or maintenance
requirements of the exchange or market.

 

m.            Compliance. The
Company is in compliance in all material respects with all applicable laws
(including the Sarbanes-Oxley At of 2002 and the rules promulgated thereunder)
and all orders of, and agreements with, any governmental authority applicable
to the Company or any of its assets. The Company has all permits, certificates,
licenses, approvals and other authorizations required under applicable laws or
necessary in connection with the conduct of its businesses, except where the
failure to have such permits, certificates, licenses, approvals and other
authorizations would not have a material adverse effect on the Company.

 

n.             No Integrated Offering.
The Company has not, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under

 

7

 

circumstances that would require registration of any of the Securities
under the Securities Act of 1933; nor will the Company take any action or steps
that would require registration of the Securities under the Securities Act of
1933 or cause the offering of the Securities to be integrated with other
offerings in a manner that would require such registration.

 

o.             Material Non-Public
Information. Except as disclosed on Schedule 6.o attached hereto,
the Company has not disclosed to the Subscriber any material non-public
information that (i) if disclosed, would reasonably be expected to have a material
effect on the price of the Company’s common stock or (ii) according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company prior to the date hereof, but which has not been so disclosed. The
Subscriber acknowledges and agrees that the Company’s disclosure to him of
material non-public information imposes certain restrictions on his trading in
Company securities.

 

p.             Valid Private Placement. Subject to the accuracy as to
factual matters of each Subscriber’s representations in Section 5 of each
Purchase Agreement, the Securities may be issued to the Subscribers pursuant to
the transaction documents without registration under the Securities Act of 1933
or the securities laws of any state.

 

7.             Assignment.
This Agreement is not transferable or assignable by the Subscriber.

 

8.             Expenses. The Company and the Subscriber shall
bear their own expenses with respect to this Agreement and the transactions
contemplated hereby.

 

9.             Correct
Information. All information which the Subscriber has provided concerning
the Subscriber or its financial position and the Subscriber’s knowledge of
financial and business matters is correct and complete as of the date hereof,
and if there should be any material change in such information prior to the
Company’s acceptance of the subscription, the Subscriber will immediately
provide the Company with such information.

 

10.           Miscellaneous.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.

 

11.           Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.

 

12.           Form
8-K Filing. On or before the fourth business day following the Closing, the
Company shall file a Current Report or Form 8-K with the SEC describing the
material terms of the transactions contemplated by this Agreement.

 

8

 

SUBSCRIPTION AGREEMENT SIGNATURE PAGE

 

IN
WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement
effective on this the         day
of March 2006.

 

	
  $

  	
  = total payment
  by Subscriber

  
	
   

  	
   

  
	
   

  	
  = Number of
  Shares of Series B-1 Preferred Stock purchased

  
	
   

  	
   

  
	
  $1,000.00

  	
  = per share
  purchase price

  
	
   

  	
   

  
	
   

  	
  = Number of
  Warrants to be issued to Subscriber

  

 

	
   

  	
   

  	
   

  	
   

  
	
  Signature of
  Subscriber

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address

  

Printed or typed name of
Subscriber (in

exactly the form in which
securities are to

be registered and issued)

 

	
   

  	
   

  
	
  Printed
  or Typed Name and Title of person

  

signing

 

 

For
Company Use Only:

 

ACCEPTED
effective on the        day of March 2006 on
behalf of VCampus Corporation for                     
Shares of Series B-1 Preferred Stock.

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

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