<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment __)*
VCAMPUS CORPORATION
(Name of Issuer)
Common Stock
(Title of Class of Securities)
92240C 10 0
(CUSIP Number)
Jeffrey C. McCandless
Vice President, Finance and Chief Financial Officer
Mastech Corporation
1004 McKee Road
Oakdale, PA 15071
(412)-787-2100
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 11, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[_].
_________________________
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ----------------------- ---------------------
CUSIP: 92240C10 0 PAGE OF PAGES
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAMES OF REPORTING PERSONS
1 S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS;
Mastech Corporation
I.R.S. IDENTIFICATION NO: 25-1802235
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC
- ------------------------------------------------------------------------------
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED TO ITEMS 2(d) OR
2(e) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Pennsylvania
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 1,586,253*
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
N/A
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 1,586,253*
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
N/A
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,586,253 shares*
- ------------------------------------------------------------------------------
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
27.9%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON* (SEE INSTRUCTIONS)
14
CO
- ------------------------------------------------------------------------------
________________
* Includes 450,000 shares of Common Stock subject to a Warrant held by Mastech
Corporation. The Warrant vests in one-third (1/3) increments on the 2nd, 4th and
6th month anniversaries of January 11, 2000.
1
<PAGE>
CUSIP: 92240C 10 0
Item 1. Security and Issuer
(a) Name of Principal Executive Offices of the Issuer
VCampus Corporation
8251 Greensboro Drive, Suite 500
McClean, Virginia 22102
Item 2. Identity And Background
(a) Name of Person Filing:
Mastech Corporation
(b) Address of Principal Business Office:
1004 McKee Road
Oakdale, PA 15071
(c) Principal Business:
Information technology services including e-business solutions,
enterprise solutions implementation, network services, customer relationship and
supply chain management solutions and applications design, development and
maintenance.
(d) Criminal Proceedings
During the last five years, neither the Reporting Person nor any
executive officer or director of the Reporting Person has been convicted in any
criminal proceeding.
(e) Civil Proceedings
During the last five years, neither the Reporting Person nor any
executive officer or director of the Reporting Person has been party to any
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person was or is subject to any judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or State securities laws or finding any violation
with respect to such laws.
(f) Place of Organization
Pennsylvania
Attached hereto as Appendix A is information required by this Item 2 with
respect to the executive officers and directors of the Reporting Person. All
such individuals are U.S. citizens, except as otherwise indicated on Appendix A.
Item 3. Source And Amount Of Funds Or Other Consideration
(a) Source of Funds
2
<PAGE>
Funds for the purchase of the Shares (as defined in Item 4) were
derived from the Reporting Person's working capital.
(b) Amount of Funds
The Reporting Person paid Four Million One Hundred Thirteen Thousand
Two Hundred Thirty Five Dollars and Eighty Six Cents ($4,113,235.86) to acquire
the Shares (as defined in Item 4).
Item 4. Purpose Of Transaction
Pursuant to a Stock Purchase Agreement dated January 11, 2000, between
the Reporting Person and the Issuer, the Reporting Person agreed to purchase
from the Issuer 1,136,253 shares of Common Stock and a Warrant to purchase an
additional 450,000 shares of Common Stock for the aggregate consideration of
$4,113,235.86. This purchase price was determined by taking a fifteen (15) day
average of the Issuer's stock price for the period ending January 3, 2000 and
adding a 20% premium to arrive at a per share price of $3.62.
The Reporting Person will hold the Shares as an investment. Depending on
the Reporting Person's evaluation of market conditions, market price,
alternative investment opportunities, liquidity needs and other factors, the
Reporting Person will from time to time explore opportunities for liquidating
all or a portion of the Shares, through one or more sales pursuant to public or
private offerings or otherwise. In such event, the Reporting Person may
determine to retain some portion of the Shares as an investment.
For so long as the Reporting Person holds at least 5% of the Issuer's
issued and outstanding Common Stock, the Issuer will cause its Board of
Directors to nominate a representative selected by the Reporting Person for
election by the shareholders of the Issuer to serve on its Board of Directors.
Except as described above, the Reporting Person does not have any current
plans or proposals which relate to or would result in any of the actions set
forth in Item 4 of Schedule 13D.
Item 5. Interest In Securities Of The Issuer
The information contained in Item 4 is incorporated herein by this
reference.
(a) Number of Shares Beneficially Owned: 1,586,253/*/
Right to Acquire 450,000/*/
Percent of Class 27.9% (based on 5,684,110
shares of Common Stock
outstanding, determined
from the representations
and warranties made by the
Issuer to the
________________________
* Includes 450 shares of Common Stock subject to a Warrant held by Mastech
Corporation. The warrant vest in one-third (1/3) increments on the 2nd, 4th, and
6th month anniversaries of January 11, 2000.
3
<PAGE>
CUSIP: 92240C 10 0
Reporting in the Purchase
Agreement).
(b) Sole Power to Vote, Direct 1,586,253/*/
the Vote of, or Dispose of Shares:
(c) Recent Transactions See Item 4.
(d) Rights with Respect to Dividends N/A
or Sales Proceeds:
(e) Date of Cessation of Five Percent N/A
Beneficial Ownership:
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
Under the Registration Rights Agreement by and between the Issuer and
the Reporting Person, dated January 11, 2000, the Reporting Person has the right
to have all of its shares of the Issuer's Common Stock (including any shares
acquired pursuant to the terms of the Warrant), included in any registration
statement that the Issuer proposes to file (excluding registration statements on
Forms S-4 or S-8 or any successor or similar form). In the event that any
registration shall be, in whole or in part, an underwritten public offering of
Common Stock, the number of the Reporting Person's shares of Common Stock that
may be included in such an underwriting may be reduced to the extent that the
managing underwriter is of the opinion that such inclusion would materially
adversely affect the marketing of the securities to be sold by the Issuer under
such registration statement.
Also under the Registration Rights Agreement, the Reporting Person has
the right to demand that the Issuer register the Reporting Person's shares of
the Issuer's Common Stock. The Issuer is obligated to use its best efforts to
effect such registration as expeditiously as possible. Such demand may be made
once per year and no more than five times during the term of the Registration
Rights Agreement. During the first two years of the Registration Rights
Agreement, the Issuer can satisfy its obligations under these demand
registration rights by registering the offer and sale of the Reporting Person's
Common Stock of the Issuer on Form S-3 in the manner contemplated by Rule 415 of
the Securities Act (a "Shelf Registration"). After the two year period, the
Reporting Person can require the Issuer to register the Common Stock held by the
Reporting Person on any applicable form including Form S-1. The registration
rights of the Reporting Person are set forth more fully in the Registration
Rights Agreement attached hereto as an Exhibit.
Under the Stock Purchase Agreement by and between the Issuer and the
Reporting Person, dated January 11, 2000, the Reporting Person cannot take
certain actions without the consent of the Issuer including acquiring more than
5% of the Issuer's Common Stock in a twelve month period, initiating a proxy
solicitation regarding the election of directors, or initiating an Acquisition
Proposal as that term is defined in the Stock Purchase Agreement (the "Reporting
________________________
* Includes 450 shares of Common Stock subject to a Warrant held by Mastech
Corporation. The warrant vest in one-third (1/3) increments on the 2nd, 4th, and
6th month anniversaries of January 11, 2000.
4
<PAGE>
Person's Covenants"). The Reporting Person's Covenants terminate upon the
earlier of January 11, 2007 or upon the occurrence of certain other events
described more fully in the Stock Purchase Agreement attached hereto as an
Exhibit.
Also under the Stock Purchase Agreement by and between the Issuer and the
Reporting Person, dated January 11, 2000, the Reporting Person is obligated to
provide notice to the Issuer of any intent to transfer or privately sell more
than 10% of the Issuer's then outstanding Common Stock in any three month period
to any party who is not an Affiliate of the Reporting Person. The Issuer will
upon receipt of such notice have the right to purchase all but not part of the
Common Stock specified in the notice provided by the Reporting Person. If the
Issuer exercises this "right of first refusal," then the Reporting Person and
the Issuer will be obligated under the terms of the Stock Purchase Agreement to
consummate the purchase contemplated thereby. If the Issuer does not exercise
its "right of first refusal," then the Reporting Person is free, during the
period of ninety days following the expiration of the Issuer's time to exercise
such right, to sell the Common Stock that was specified in the Reporting
Person's Notice to the Issuer. This right of first refusal is more fully
explained in the Stock Purchase Agreement attached hereto as an Exhibit.
In addition, under the Stock Purchase Agreement by and between the Issuer
and the Reporting Person, dated January 11, 2000, the Reporting Person cannot
make any sale or exchange of the Issuer's Common Stock in response to a tender
offer initiated by a third party without first providing the Issuer with a right
of first refusal. This right to acquire such shares is more fully explained in
the Stock Purchase Agreement attached hereto as an Exhibit.
Item 7. Material To Be Filed As Exhibits
1. Stock Purchase Agreement, dated January 11, 2000, by and between VCampus
Corporation and Mastech Corporation.
2. Registration Rights Agreement, dated January 11, 2000, by and between
VCampus Corporation and Mastech Corporation.
3. Warrant dated January 11, 2000, issued by VCampus Corporation to Mastech
Corporation.
5
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 21, 2000 /s/ Ajmal Noorani
-----------------
Ajmal Noorani
Vice President, E Business Solutions Division
6
<PAGE>
CUSIP: 92240C 10 0
ANNEX A
-------
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF
MASTECH CORPORATION
The following table sets forth the name, business address and principal
occupation or employment at the present time for each director and executive
officer of Mastech Corporation. Unless otherwise noted, each person is a
citizen of the United States. In addition, unless otherwise noted, each
person's business address is Mastech Corporation, 1004 McKee Road, Oakdale PA
15071.
DIRECTORS OF MASTECH CORPORATION
Sunil Wadwhani Co-Chairman and Chief Executive Officer of Mastech
Corporation.
Ashok Trivedi Co-Chairman and President of Mastech Corporation.
Ed Yourdon Information Technology Consultant. His business
address is: P.O. Box 840, Arroy Seco, NM 87514,
Michel Berty Consultant. His business address is: MBY
Consultants, Inc., 40 Sayres Path, P.O. Box 466,
Wainscott, NY 11975
J. Gordon Garrett President & CEO of Ricoh - Canada, Inc. His
business address is: 4100 Younge Street, Suite
600, North York, Ontario M2P 2B5.
EXECUTIVE OFFICERS OF MASTECH CORPORATION
(WHO ARE NOT ALSO DIRECTORS)
Murali Balasubamanyam Co-Managing Director of Scott Systems, a wholly
owned subsidiary of Mastech Corporation
Jeffrey McCandless Vice President, Finance and Chief Financial
Officer
Ajmal Noorani Vice President, E Business Solutions
Sushma Rajagopalan Vice President, Global Resourcing and Recruiting
Steven Shangold Senior Vice President, U.S. Client Services
Michael Zugay Vice President, Corporate Development
1
<PAGE>
EXHIBIT 99.1
-----------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
dated as of January 11, 2000
by and between
VCAMPUS CORPORATION
and
MASTECH CORPORATION
-----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. DEFINITIONS.................................................................................. 1
2. ISSUANCE, SALE AND PURCHASE OF SECURITIES.................................................... 7
2.1 Issuance and Sale....................................................................... 7
2.2 Closing................................................................................. 7
2.3 Indemnity............................................................................... 8
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES................................................... 8
3.1 Investment Intention.................................................................... 8
3.2 Accredited Investor..................................................................... 9
3.3 Corporate Existence..................................................................... 9
3.4 Corporate Power; Authorization; Enforceable Obligations................................. 9
4. COMPANY'S REPRESENTATIONS AND WARRANTIES..................................................... 9
4.1 Authorized and Outstanding Shares of Capital Stock...................................... 9
4.2 Authorization and Issuance of Common Stock, Warrant and Warrant Shares.................. 10
4.3 Securities Laws......................................................................... 10
4.4 Corporate Existence; Compliance with Law................................................ 10
4.5 Subsidiaries............................................................................ 11
4.6 Corporate Power; Authorization; Enforceable Obligations................................. 11
4.7 Financial Statements.................................................................... 12
4.8 Ownership of Property................................................................... 12
4.9 Material Contracts...................................................................... 13
4.10 Environmental Protection................................................................ 13
4.11 Labor Matters........................................................................... 14
4.12 Other Ventures.......................................................................... 14
4.13 Taxes................................................................................... 14
4.14 No Litigation........................................................................... 15
4.15 Brokers................................................................................. 15
4.16 Patents, Trademarks, Copyrights and Licenses............................................ 15
4.17 No Material Adverse Effect.............................................................. 16
4.18 ERISA................................................................................... 16
4.19 SEC Documents........................................................................... 18
4.20 Ordinary Course of Business............................................................. 18
4.21 Insurance............................................................................... 18
4.22 Minute Books............................................................................ 18
4.23 Year 2000 Compliance.................................................................... 19
4.24 Full Disclosure......................................................................... 19
4.25 Certain Agreements...................................................................... 19
4.26 Anti-Takeover Provisions Inapplicable................................................... 19
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5. COVENANTS OF THE COMPANY..................................................................... 20
5.1 Affirmative Covenants................................................................... 20
5.2 Negative Covenants...................................................................... 22
6. CONDITIONS TO CLOSING........................................................................ 22
6.1 Conditions to the Purchaser's Obligation to Purchase.................................... 22
6.2 Conditions to Company's Obligation to Sell.............................................. 23
7. COVENANTS OF THE PURCHASER................................................................... 24
7.1 Limitation on Ownership of Voting Stock................................................. 24
7.2 Voting Trust, etc....................................................................... 24
7.3 Solicitation of Proxies................................................................. 24
7.4 Acquisition Proposal.................................................................... 24
7.5 Confidential Information................................................................ 24
7.6 Limitation on Covenants of Purchaser.................................................... 25
8. COMPANY RIGHT OF FIRST REFUSAL............................................................... 25
8.1 Right of First Refusal.................................................................. 26
8.2 Tender Offer Sale....................................................................... 26
8.3 Assignment of Rights.................................................................... 27
8.4 Acquisition Proposal.................................................................... 27
9. MISCELLANEOUS................................................................................ 27
9.1 Complete Agreement; Modification of Agreement........................................... 27
9.2 Fees and Expenses....................................................................... 28
9.3 No Waiver by Purchaser.................................................................. 28
9.4 Remedies................................................................................ 29
9.5 Waiver of Jury Trial.................................................................... 29
9.6 Severability............................................................................ 29
9.7 Binding Effect; Benefits................................................................ 29
9.8 Conflict of Terms....................................................................... 29
9.9 Governing Law........................................................................... 29
9.10 Notices................................................................................. 30
9.11 Survival................................................................................ 31
9.12 Section and Other Headings.............................................................. 31
9.13 Counterparts............................................................................ 31
9.14 Publicity............................................................................... 31
</TABLE>
-ii-
<PAGE>
Schedules
- ---------
Schedule 2.1 - Number of Shares of Common Stock
Schedule 4.1 - Stocks and Warrants
Schedule 4.5 - Subsidiaries
Schedule 4.7 - Financial Statements; Other Obligations
Schedule 4.9 - Material Contracts and Indebtedness
Schedule 4.10 - Environmental Matters
Schedule 4.12 - Other Ventures
Schedule 4.13 - Taxes
Schedule 4.14 - Litigation
Schedule 4.15 - Brokers
Schedule 4.18 - ERISA
Schedule 4.26 - Employment Agreements
Schedule 5.2(a) Affiliate Transactions
Exhibits
- --------
Exhibit A Registration Rights Agreement
Exhibit B Warrant
Exhibit C Opinion of Company Counsel
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT, dated as of January 11, 2000, by and between
VCampus Corporation, a Delaware corporation ("Company"), and Mastech
Corporation, a Pennsylvania corporation, through its Mastech eVentures business
unit ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from Company through its Mastech eVentures
business unit, upon the terms and conditions hereinafter provided, the number of
shares of Common Stock (as defined herein) of Company set forth on Schedule 2.1
------------
and the Warrant (as defined herein) pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and intending to be legally bound hereby, it is agreed as
follows:
1. DEFINITIONS.
-----------
"Acquisition Proposal" shall mean the initiation or occurrence of any
of the following without the consent or affirmative support of the Company's
Board of Directors: (i) a tender or exchange offer, merger, consolidation or
similar transaction involving a Change in Control of the Company; (ii) the sale,
lease or other disposition directly or indirectly by merger, consolidation, or
share exchange of assets of the Company representing substantially all of the
consolidated assets of the Company; and, (iii) a transaction in which any Person
other than Mastech Corporation or any Subsidiary of Mastech Corporation shall
acquire beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership or any "group" (as
such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 30% or
more of the outstanding Common Stock of the Company.
"Affiliate" shall mean, with respect to any Person, (i) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, (iii) each of such Person's officers, directors, joint
venturers and partners, (iv) any trust or beneficiary of a trust of which such
Person is the sole trustee or (v) any lineal descendants, ancestors, spouse or
former spouses (as part of a marital dissolution) of such Person (or any trust
for the benefit of such Person). For the purpose of this definition, "control"
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Stock Purchase Agreement including all
amendments, modifications and supplements hereto and any appendices, exhibits
and schedules
<PAGE>
hereto or thereto, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Balance Sheet" shall have the meaning set forth in Section 4.7(a)
hereof.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the Commonwealth
of Pennsylvania.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) taxes
at the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) Company's or any of its Subsidiaries'
employees, payroll, income or gross receipts, (ii) Company's or any of its
Subsidiaries' ownership or use of any of its assets, or (iii) any other aspect
of Company's or any of the Subsidiaries' business.
"Closing" shall have the meaning set forth in Section 2.2 hereof.
"Closing Date" shall have the meaning set forth in Section 2.2 hereof.
"Closing Price" shall mean, in respect of any share of Common Stock on
any date herein specified which is a Business Day, (i) the last sale price on
such day on the NASDAQ SmallCap Market System ("NASDAQ/SCS") or (ii) if no sale
takes place on such day on NASDAQ/SCS, the average of the last reported closing
bid and asked prices on such day as officially quoted on NASDAQ/SCS.
"COBRA" shall have the meaning set forth in Section 4.18(m) hereof.
"Common Stock" shall mean the common stock, $.01 par value per share,
of Company.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the average of the daily market prices for
the previous fifteen (15) consecutive Business Days. The daily market price for
each such Business Day shall be (i) the last sale price on such day on
NASDAQ/SCS, (ii) if no sale takes place on such day on NASDAQ/SCS, the average
of the last reported closing bid and asked prices on such day as officially
quoted on NASDAQ/SCS.
"DOJ" shall mean the Antitrust Division of the Department of Justice
of the United States.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation). Environmental Laws include but are not limited to the
-2-
<PAGE>
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. (S) 9601 et seq.) ("CERCLA"); the Hazardous Material
-- ---
Transportation Act, as amended (49 U.S.C. (S) 1801 et seq.); the Federal
-- ---
Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. (S) 136 et
--
seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. (S)
- ---
6901 et seq.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C.
-- ---
(S) 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. (S) 740 et seq.);
-- --- -- ---
the Federal Water Pollution Control Act, as amended (33 U.S.C. (S) 1251 et
--
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. (S) 651 et
- --- --
seq.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C. (S) 300f
- ---
et seq.), and any and all regulations promulgated thereunder, and all analogous
- -- ---
state and local counterparts or equivalents and any transfer of ownership
notification or approval statutes.
"Environmental Liabilities and Costs" shall mean all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim,
suit, action or demand by any person or entity, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law (including, without limitation, any thereof arising under any
Environmental Law, permit, order or agreement with any Governmental Authority)
and which relate to any health or safety condition regulated under any
Environmental Law or in connection with any other environmental matter or Spill
or the presence of a Hazardous Substance or threatened Spill of any Hazardous
Substance.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Company, any trade or
business (whether or not incorporated) under common control with Company and
which, together with Company, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding Purchaser and
each other person which would not be an ERISA Affiliate if Purchaser did not own
any issued and outstanding shares of Stock of Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements referred to in
Section 4.7(a) hereof.
"Fiscal Quarter" shall mean each three month period of Company ending
on March 31, June 30, September 30, and December 31. Subsequent changes of the
fiscal year of Company shall not change the term "Fiscal Quarter," unless the
Purchaser shall consent in writing to such changes which consent shall not be
withheld unreasonably.
"Fiscal Year" shall mean the twelve month period ending December 31.
Subsequent changes of the fiscal year of Company shall not change the term
"Fiscal Year,"
-3-
<PAGE>
unless the Purchaser shall consent in writing to such changes which consent
shall not be withheld unreasonably.
"FTC" shall mean the Federal Trade Commission of the United States.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, except that for
purposes of the covenants contained in Section 5.1(b) hereof, GAAP shall be as
in effect on the date of the most recent Financials and shall be applied in a
manner consistent therewith.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" shall have the meaning set forth in Section 4.10
hereof.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, preemptive right, assignment, deposit arrangement, lien, charge,
claim, security interest, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest as to assets owned by the relevant Person under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Mastech Corporation" shall mean Mastech Corporation, a Pennsylvania
corporation, or any successor corporation thereto.
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, operations, or financial condition or results of operations of
Company and its Subsidiaries, if any, taken as a whole.
"Material Contracts" means (i) all of Company's and its Subsidiaries'
material contracts that would be required to be filed with the SEC pursuant to
item 601(b)(10) of Regulation S-K of the Securities Act, (ii) all agreements,
leases or other instruments to which Company or any of its Subsidiaries is a
party or by which Company, its Subsidiaries or its properties are bound, which
involve payments by or to Company or its Subsidiaries of more than $5,000,000,
(iii) all of Company's and its Subsidiaries' loan agreements, bank lines of
credit agreements, indentures, mortgages, deeds of trust, pledge and security
agreements, factoring agreements, conditional sales contracts, letters of
credit, guarantees or other debt instruments involving commitments of more than
$5,000,000, (iv) all non-competition and similar agreements to which Company is
a party which restrict Company's ability to engage in certain
-4-
<PAGE>
businesses, (v) all contracts for the employment of any executive officer of
Company or its Subsidiaries, and (vi) all collective bargaining, union and
similar labor contracts of Company or its Subsidiaries.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which Company, any of its Subsidiaries or
any ERISA Affiliate is making, is obligated to make, has made or been obligated
to make, contributions on behalf of participants who are or were employed by any
of them.
"Obligations" shall mean all amounts owing by Company to Purchaser and
any of its assignees pursuant hereto, including, without limitation, all fees,
expenses, attorneys' fees and any other sum chargeable to Company under any of
the Transaction Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Pension Plan" shall have the meaning set forth in Section 4.18(a)
hereof.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, any instrumentality, division, agency, body or department thereof).
"Plan" shall have the meaning set forth in Section 4.18(a) hereof.
"Prohibited Transaction" shall mean any prohibited transaction as
defined in Section 4975 of the IRC or Section 406 of ERISA for which neither an
individual nor a class exemption has been issued by the United States Department
of Labor.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement by and between Company and Purchaser, substantially in the form
attached hereto as Exhibit A, as such agreement may be amended, supplemented or
---------
otherwise modified from time to time in accordance with the terms thereof.
"Reportable Event" shall mean a reportable event described in Section
4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer
Plan.
"SEC" shall mean the U.S. Securities and Exchange Commission, or any
successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations promulgated thereunder.
"Spill" shall have the meaning set forth in Section 4.10 hereof.
-5-
<PAGE>
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
"Tender Date" shall have the meaning set forth in Section 8.2(a)
hereof.
"Tender Notice" shall have the meaning set forth in Section 8.2(a)
hereof.
"Transaction Documents" shall mean this Agreement, the Warrant and the
Registration Rights Agreement.
"Transfer Notice" shall have the meaning set forth in Section 8.1(a)
hereof.
"Transfer Price" shall have the meaning set forth in Section 8.1(a)
hereof.
"Voting Stock" means the Common Stock, Preferred Stock and any other
securities issued by the Company having the ordinary power to vote in the
election of directors of the Company (other than securities having such power
only upon the happening of a contingency).
"Warrant" shall mean the Warrant exercisable for shares of Common
Stock in the form attached as Exhibit B hereto.
---------
"Warrant Shares" shall mean those shares of Common Stock issued upon
exercise of the Warrant.
"Welfare Plan" shall mean any welfare plan, as defined in Section 3(1)
of ERISA, which is maintained or contributed to by Company, any of its
Subsidiaries or any ERISA Affiliate.
"Withdrawal Liability" means, at any time, the aggregate amount of the
liabilities, if any, pursuant to Section 4201 of ERISA, and any increase in
contributions pursuant to Section 4243 of ERISA with respect to all
Multiemployer Plans.
"Year 2000 Compliant" shall have the meaning set forth in Section 4.24
hereof.
-6-
<PAGE>
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way be construed to
limit the foregoing. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter. The
words "includes" or "including" and other words of similar import shall mean
"including, without limitation," unless the context expressly otherwise
requires.
2. ISSUANCE, SALE AND PURCHASE OF SECURITIES.
-----------------------------------------
2.1 Issuance and Sale.
-----------------
Subject to the terms and conditions and in reliance upon the
representations and warranties set forth in this Agreement, Company agrees to
issue and sell to Purchaser and Purchaser agrees to purchase from Company on the
Closing Date, the number of shares of Common Stock set forth on Schedule 2.1 and
------------
the Warrant for the aggregate consideration of $4,113,235.86 (the "Purchase
Price"), such Purchase Price being the sum of the Current Market Price of the
Common Stock set forth on Schedule 2.1 as of January 3, 2000, plus a number
------------
equal to twenty percent (20%) of such sum.
2.2 Closing.
-------
The closing of the transfer and delivery of the Common Stock and
Warrant, and the receipt of the Purchase Price by the Company (the "Closing"),
will take place on the date hereof (the "Closing Date") at 10:00 a.m. at the
offices of Buchanan Ingersoll Professional Corporation, One Oxford Centre, 301
Grant Street, 20th Floor, Pittsburgh, PA 15219-1410 or at such other time or
place, or on such other date not later than January 31, 2000, as the parties may
mutually agree upon.
On the Closing Date, Company shall transfer and deliver to Purchaser
the Common Stock and Warrant against delivery by Purchaser of the Purchase Price
therefor by wire transfer of funds to the account of Company.
The certificate or certificates for the Common Stock and Warrant shall
be subject to a legend restricting transfer under the Securities Act and
referring to restrictions on transfer and rights of first refusal herein, such
legend to be substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
-7-
<PAGE>
AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY AS TO THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER, INCLUDING
ANY SALE, PLEDGE OR OTHER HYPOTHECATION,
AND RIGHTS OF FIRST REFUSAL IN THE EVENT THAT
THE SHARES ARE BEING SOLD AS PART OF A BLOCK OF
SHARES OR A SERIES OF SALES OF SHARES INVOLVING
MORE THAN 10% OF THE COMPANY'S OUTSTANDING COMMON
STOCK IN ANY 3 MONTH PERIOD, AS SET FORTH IN AN
AGREEMENT BETWEEN THE COMPANY AND MASTECH
CORPORATION, A COPY OF WHICH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY AT THE COMPANY'S PRINCIPAL
EXECUTIVE OFFICES.
2.3 Indemnity.
---------
Company shall indemnify and hold Purchaser and each of its officers,
directors and Affiliates harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys' fees and disbursements, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by Purchaser or
such other indemnified person as the result of Purchaser having entered into
this Agreement or any of the other Transaction Documents relating to or arising
out of any untrue representation, breach of warranty or failure to perform any
covenants or agreement by Company contained herein or in any Transaction
Document, including arising out of any Environmental Law applicable to Company
or its Subsidiaries or otherwise relating to or arising out of the transactions
contemplated hereby; provided, however, that Company shall not be liable for
-------- -------
such indemnification to such indemnified Person to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or expense results from
such indemnified Person's gross negligence or willful misconduct.
3. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
------------------------------------------
Purchaser makes the following representations and warranties to Company,
each and all of which shall survive the execution and delivery of this Agreement
and the Closing hereunder:
3.1 Investment Intention.
--------------------
Purchaser is purchasing the Common Stock and Warrant for its own
account, for investment purposes and not with a view to the distribution
thereof. Purchaser will not, directly
-8-
<PAGE>
or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of the Common Stock, Warrant or Warrant Shares (or solicit any offers to
buy, purchase, or otherwise acquire any of the Common Stock, Warrant or Warrant
Shares), except in compliance with the Securities Act.
3.2 Accredited Investor.
-------------------
Purchaser is an "accredited investor" (as that term is defined in Rule
501 of Regulation D under the Securities Act) and by reason of its business and
financial experience, it has such knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the merits and
risks of the prospective investment, is able to bear the economic risk of such
investment and is able to afford a complete loss of such investment.
3.3 Corporate Existence.
-------------------
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania.
3.4 Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The execution, delivery and performance by Purchaser of this Agreement
and the other Transaction Documents to be executed by it: (i) are within
Purchaser's corporate power; (ii) have been duly authorized by all necessary
corporate action; (iii) are not in contravention of any provision of Purchaser's
certificate of incorporation or by-laws; and (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
binding on Purchaser. This Agreement and the other Transaction Documents to
which Purchaser is a party have each been duly executed and delivered by
Purchaser and constitute the legal, valid and binding obligations of Purchaser,
enforceable against it in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
4. COMPANY'S REPRESENTATIONS AND WARRANTIES.
----------------------------------------
Except as set forth in the Schedule of Exceptions delivered herewith (the
"Schedule"), Company makes the following representations and warranties to
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and the Closing hereunder:
4.1 Authorized and Outstanding Shares of Capital Stock.
--------------------------------------------------
As of December 31, 1999, the authorized capital stock of Company
consisted of: (i) 36,000,000 shares of Common Stock, $.01 par value per share,
of which 5,684,110 shares were issued and outstanding, (ii) 3,000,000 shares of
Series E Convertible Preferred stock, $0.01 par value per share, 214,396 of
which are issued and outstanding; (iii) 1,200,000 shares of Series D Convertible
Preferred Stock, $0.01 par value per share, 1,073,370 of which are issued and
-9-
<PAGE>
outstanding; (iv) 1,000,000 shares of Series C Convertible Preferred Stock,
$0.01 par value per share, 623,339 shares of which are issued and outstanding;
and (v) 4,800,000 shares of undesignated Preferred Stock, $0.01 par value per
share, none of which are issued and outstanding. All of such issued and
outstanding shares are validly issued, fully paid and non-assessable. There is
no existing option, warrant, call, commitment or other agreement to which
Company is a party requiring, and there are no convertible securities of Company
outstanding which upon conversion would require, the issuance of any additional
shares of Stock of Company or other securities convertible into shares of equity
securities of Company, and (ii) there are no agreements to which Company is a
party with respect to the voting or transfer of the Stock of Company. There are
no stockholders' preemptive rights or rights of first refusal or other similar
rights with respect to the issuance of Stock by Company. True and correct copies
of the certificate of incorporation and by-laws of Company have been delivered
to Purchaser.
4.2 Authorization and Issuance of Common Stock, Warrant and Warrant
---------------------------------------------------------------
Shares.
- ------
The issuance of the Common Stock and Warrant have been duly authorized
by all necessary corporate action on the part of Company and, upon delivery to
Purchaser of the Common Stock against payment in accordance with the terms
hereof, the Common Stock will have been validly issued, fully paid and non-
assessable, and free and clear of all pledges, liens, encumbrances and
preemptive rights. The issuance of shares of Common Stock upon exercise of the
Warrant has been duly authorized by all necessary corporate action on the part
of Company and, when issued upon exercise of the Warrant against payment in
accordance with the terms thereof, such Common Stock will have been validly
issued and fully paid and non-assessable. Company has duly reserved 450,000
shares of Common Stock for issuance pursuant to the terms of the Warrant.
4.3 Securities Laws.
---------------
Assuming the accuracy of the investment representations contained in
Sections 3.1 and 3.2, the offer, issuance, sale and delivery of the Common
Stock, Warrant and Warrant Shares, as provided in this Agreement, are exempt
from the registration requirements of the Securities Act and all applicable
state securities laws, and are otherwise in compliance with such laws. Neither
Company nor any Person acting on its behalf has taken or will take any action
(including any offering of any securities of Company under circumstances which
would require the integration of such offering with the offering of the Common
Stock, Warrant and Warrant Shares under the Securities Act and the rules and
regulations of the SEC thereunder) which might subject the offering, issuance or
sale of the Common Stock, Warrant and Warrant Shares, to the registration
requirements of Section 5 of the Securities Act.
4.4 Corporate Existence; Compliance with Law.
----------------------------------------
Company and each of its Subsidiaries, if any, (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware in the case of Company and as set forth on Schedule 4.5 in the
------------
case of its Subsidiaries; (ii) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification (except
for jurisdictions in which such failure to so qualify or to be in good standing
would not have a
-10-
<PAGE>
Material Adverse Effect); (iii) has the requisite corporate power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease, and to conduct
its business as now being conducted; (iv) has, or has applied for, all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct, except where the failure to obtain such approval or
authorization would not result in a Material Adverse Effect; (v) is in
compliance with its certificate or articles of incorporation and by-laws; and
(vi) is in compliance with all applicable provisions of law, except for such
non-compliance which would not have a Material Adverse Effect.
4.5 Subsidiaries.
------------
There currently exist no Subsidiaries of Company other than as set
forth on Schedule 4.5 hereto, which sets forth such Subsidiaries, together with
------------
their respective jurisdictions of organization. All of the outstanding capital
Stock of each such Subsidiary is owned by Company. There are no options,
warrants, rights to purchase or similar rights covering capital Stock for any
such Subsidiary.
4.6 Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The execution, delivery and performance by Company of this Agreement,
the other Transaction Documents to which it is a party and all instruments and
documents to be delivered by Company, the issuance and sale of the Common Stock,
Warrant and Warrant Shares and the consummation of the other transactions
contemplated by any of the foregoing: (i) are within Company's corporate power
and authority; (ii) have been duly authorized by all necessary or proper
corporate action; (iii) are not in contravention of any provision of Company's
certificate of incorporation or by-laws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
to which the Company or its business is subject to; (v) will not conflict with
or result in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which Company or any of its Subsidiaries
is a party or by which Company, any of its Subsidiaries or any of their property
is bound; (vi) will not result in the creation or imposition of any Lien upon
any of the property of Company or any of its Subsidiaries; and (vii) do not
require the consent or approval of, or any filing with, any Governmental
Authority or any other Person (except (A) for those filings required by the
Registration Rights Agreement and (B) to the extent previously obtained or
made). At or prior to the Closing Date, each of this Agreement and the other
Transaction Documents shall have been duly executed and delivered by Company and
each shall then constitute a legal, valid and binding obligation of Company,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
-11-
<PAGE>
4.7 Financial Statements.
--------------------
(a) The audited consolidated balance sheet of Company as at
December 31, 1998, and the related consolidated statements of income and cash
flows for the year then ended, with the opinion thereon of Ernst & Young LLP,
and the unaudited consolidated balance sheet of Company as at September 30, 1999
(the "Balance Sheet") and the related unaudited consolidated statements of
income, and cash flows for the nine months then ended, copies of which have
previously been delivered to Purchaser, have been, except as noted therein,
prepared in conformity with GAAP consistently applied throughout the periods
involved and present fairly in all material respects the consolidated financial
position of Company as at the dates thereof, and the consolidated results of its
operations and cash flows for the periods then ended, subject, in the case of
the interim financial statements, to normal year-end audit adjustments and any
other adjustments described therein.
(b) Except as set forth on Schedule 4.7, neither Company nor any of
------------
its Subsidiaries has any material obligations, contingent or otherwise,
including liabilities for Charges, long-term leases or unusual forward or
long-term commitments which are not reflected in the Balance Sheet, other than
those incurred since December 31, 1998, in the ordinary course of business.
(c) Except as set forth on Schedule 4.7, no dividends or other
------------
distributions have been declared, paid or made upon any shares of capital Stock
of Company, nor have any shares of capital Stock of Company been redeemed,
retired, purchased or otherwise acquired for value by Company since December 31,
1998.
4.8 Ownership of Property.
---------------------
Neither the Company nor any of its Subsidiaries owns any real
property. Each of Company and its Subsidiaries has valid and marketable
leasehold interests in each of its leases, good and marketable title to, or
valid leasehold interests in, all of its other properties and assets. Each of
such leases is valid and enforceable in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity)) and is in
full force and effect except to the extent that such lack of validity or
enforceability would not have a Material Adverse Effect. None of Company, any of
its Subsidiaries nor, to its knowledge, any other party to any such lease is in
default of its obligations thereunder or has delivered or received any notice of
default under any such lease, nor has any event occurred which, with the giving
of notice, the passage of time or both, would constitute a default under any
such lease except to the extent that such default would not reasonably be
expected to have a Material Adverse Effect. Neither Company nor any of its
Subsidiaries is obligated under or a party to, any option, right of first
refusal, or any other contractual right to purchase, acquire, sell, assign or
dispose of any material real property owned or leased by Company or such
Subsidiary.
-12-
<PAGE>
4.9 Material Contracts.
------------------
Schedule 4.9 contains a true, correct and complete list and
------------
description of all Material Contracts (other than those Material Contracts which
have been filed as an exhibit to the Company SEC Documents). Each Material
Contract is a valid and binding agreement of Company or its Subsidiaries (as the
case may be) enforceable against Company or such Subsidiary in accordance with
its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity)), and neither Company nor any of its Subsidiaries has any knowledge
that any Material Contract is not a valid and binding agreement against the
other parties thereto. Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to the Material Contract to have been
performed by Company or such Subsidiary on its part. Except as set forth in
Schedule 4.9, neither Company nor any of its Subsidiaries is in default or
- ------------
breach, nor to Company's or such Subsidiary's knowledge is any third party in
default or breach, under or with respect to any Material Contract.
4.10 Environmental Protection.
------------------------
(a) Except as set forth on Schedule 4.10, to Company's and its
-------------
Subsidiaries' knowledge, all real property owned, leased or otherwise operated
by Company and its Subsidiaries (each, a "Facility") is free of contamination
from any substance, waste or material (i) currently identified to be toxic or
hazardous pursuant to, or which may result in liability under, any Environmental
Law or (ii) within the definition of a substance which is toxic or hazardous
under any Environmental Law, including any asbestos, pcb, radioactive substance,
methane, volatile hydrocarbons, industrial solvents, oil or petroleum or
chemical liquids or solids, liquid or gaseous products, or any other material or
substance which has in the past or could at any time in the future cause or
constitute a health, safety, or environmental hazard to any Person or property
or result in any Environmental Liabilities and Costs ("Hazardous Substance") of
more than $100,000 or which, in either case, could have a Material Adverse
Effect. Except as set forth on Schedule 4.10, neither Company nor any of its
-------------
Subsidiaries has caused or suffered to occur any release, spill, migration,
leakage, discharge, spillage, uncontrolled loss, seepage, or filtration of
Hazard Substances at or from the Facility (a "Spill") which could result in
Environmental Liabilities and Costs in excess of $100,000.
(b) Company and each Subsidiary has generated, treated, stored and
disposed of any Hazardous Substances in full compliance with applicable
Environmental Laws, except for such non-compliances which would not reasonably
be expected to have a Material Adverse Effect.
(c) Company and each Subsidiary has obtained, or has applied for, and
is in full compliance with and in good standing under all permits required under
Environmental Laws (except for such failures which would not reasonably be
expected to have a Material Adverse Effect) and neither Company nor any of its
Subsidiaries has any knowledge of any proceedings to substantially modify or to
revoke any such permit.
-13-
<PAGE>
(d) Except as set forth on Schedule 4.10, there are no
-------------
investigations, proceedings or litigation pending or, to Company's or its
Subsidiaries' knowledge, threatened affecting or against Company, any of its
Subsidiaries or the Facilities relating to Environmental Laws or Hazardous
Substances.
(e) Except for communications in connection with the matters listed
on Schedule 4.10, neither Company nor any of its Subsidiaries has received any
-------------
communication or notice (including requests for information) indicating the
potential of Environmental Liabilities and Costs against Company or its
Subsidiaries.
4.11 Labor Matters.
-------------
(a) There are no strikes or other labor disputes against Company or
any of its Subsidiaries pending or, to Company's or its Subsidiaries' knowledge,
threatened. To the Company's knowledge, hours worked by and payment made to
employees of Company and its Subsidiaries have not been in violation of the Fair
Labor Standards Act or any other applicable law dealing with such matters. All
payments due from Company and each of its Subsidiaries on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of Company or such Subsidiary. There is no organizing activity involving
Company or any of its Subsidiaries pending or, to Company's or its Subsidiaries'
knowledge, threatened by any labor union or group of employees. There are no
representation proceedings pending or, to Company's or its Subsidiaries'
knowledge, threatened with the National Labor Relations Board, and no labor
organization or group of employees of Company or its Subsidiaries has made a
pending demand for recognition. There are no complaints or charges against
Company or any of its Subsidiaries pending or, to Company's or its Subsidiaries'
knowledge, threatened to be filed with any federal, state, local or foreign
court, governmental agency or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment by
Company or any of its Subsidiaries of any individual.
(b) Neither Company nor any of its Subsidiaries is, or during the
five years preceding the date hereof was, a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of Company or its Subsidiaries.
4.12 Other Ventures.
--------------
Except as set forth on Schedule 4.12 or as disclosed in the Company's
-------------
SEC Documents, neither Company nor any of its Subsidiaries is engaged in any
joint venture or partnership with any other Person.
4.13 Taxes.
-----
Except as set forth on Schedule 4.13, all federal, state, local and
-------------
foreign tax returns, reports and statements required to be filed by Company and
its Subsidiaries have been timely filed with the appropriate Governmental
Authority and all such returns, reports and statements are true, correct and
complete in all material respects. All Charges and other impositions due and
payable for the periods covered by such returns, reports and statements have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added
-14-
<PAGE>
thereto for nonpayment thereof, or any such fine, penalty, interest, late charge
or loss has been paid. Proper and accurate amounts have been withheld by Company
and its Subsidiaries from its employees for all periods in full and complete
compliance with the tax, social security and unemployment withholding provisions
of applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective governmental agencies. Neither Company nor
any of its Subsidiaries has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges. No
tax audits or other administrative or judicial proceedings are pending or
threatened with regard to any Charges for which Company or any Subsidiary may be
liable and no assessment of Charges is proposed against the Company or any
Subsidiary. Neither Company nor any of its Subsidiaries has filed a consent
pursuant to IRC Section 341(f) or agreed to have IRC Section 341(f)(2) apply to
any dispositions of subsection (f) assets (as such term is defined in IRC
Section 341(f)(4)). None of the property owned by Company or any of its
Subsidiaries is property which such company is required to treat as being owned
by any other Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, and in effect immediately prior to
the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of IRC Section 168(h). Neither Company nor any of its
Subsidiaries has agreed or has been requested to make any adjustment under IRC
Section 481(a) by reason of a change in accounting method or otherwise. Neither
Company nor any of its Subsidiaries has any obligation under any written tax
sharing agreement.
4.14 No Litigation.
-------------
Except as disclosed on Schedule 4.14, no action, claim or proceeding
-------------
is now pending or, to the knowledge of Company or its Subsidiaries, threatened
against Company or any of its Subsidiaries, at law, in equity or otherwise,
before any court, board, commission, agency or instrumentality of any federal,
state, or local government or of any agency or subdivision thereof, or before
any arbitrator or panel of arbitrators which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.15 Brokers.
-------
Except as set forth on Schedule 4.15, no broker or finder acting on
-------------
behalf of Company or any of its Subsidiaries brought about the consummation of
the transactions contemplated pursuant to this Agreement and neither Company nor
any of its Subsidiaries has any obligation to any Person in respect of any
finder's or brokerage fees (or any similar obligation) in connection with the
transactions contemplated by this Agreement. Company is solely responsible for
the payment of all such finder's or brokerage fees.
4.16 Patents, Trademarks, Copyrights and Licenses.
--------------------------------------------
Company and each of its Subsidiaries owns all licenses, patents,
patent applications, copyrights, service marks, trademarks and registrations and
applications for registration thereof, and trade names necessary to continue to
conduct its business as heretofore conducted by it and now being conducted by
it. To Company's knowledge, Company and each of its Subsidiaries conducts its
businesses without infringement or claim of infringement of any
-15-
<PAGE>
license, patent, copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others except where the same would not
reasonably be expected to have a Material Adverse Effect. To Company's
knowledge, there is no infringement by others of any license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual property
right of Company or any of its Subsidiaries, except where the same would not
reasonably be expected to have a Material Adverse Effect.
4.17 No Material Adverse Effect.
--------------------------
Except as disclosed in the Company SEC Documents, no event has
occurred since September 30, 1999, which has had or could be reasonably expected
to have a Material Adverse Effect, other than events or circumstances which
relate exclusively to (i) changes in trends in the online courseware industry
and (ii) general economic conditions in the United States as a whole.
4.18 ERISA.
-----
(a) Schedule 4.18 sets forth: (i) all "employee benefit plans", as
-------------
defined in Section 3(3) of ERISA, and describes any other material employee
benefit arrangements (the "Plans") maintained by Company and any of its
Subsidiaries or to which Company or any its Subsidiaries contributed or is
obligated to contribute thereunder, and (ii) all "employee pension plans", as
defined in Section 3(2) of ERISA (the "Pension Plans"), maintained by Company,
any of its Subsidiaries or any of its ERISA Affiliates to which Company, any of
its Subsidiaries or any of its ERISA Affiliates contributed or is obligated to
contribute thereunder.
(b) Purchaser will not have (i) any obligation to make any
contribution to any Multiemployer Plan or (ii) any withdrawal liability from any
such Multiemployer Plan under Section 4201 of ERISA which it would not have had
if it had not purchased the Note from Company at the Closing in accordance with
the terms of this Agreement.
(c) The Pension Plans intended to be qualified under Section 401 of
the IRC are so qualified and the trusts maintained pursuant thereto are exempt
from federal income taxation under Section 501 of the IRC, and nothing has
occurred with respect to the operation of the Pension Plans which could cause
the loss of such qualification or exemption or the imposition of any liability,
penalty, or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the terms of the
Plans (without regard to any waivers granted under Section 412 of the IRC) to
any funds or trusts established thereunder or in connection therewith have been
made by the due date thereof (including any valid extension) and no accumulated
funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as defined
in Section 4001(a)(18) of ERISA in any of the respective Pension Plans. Each of
the respective Pension Plans are fully funded in accordance with the actuarial
assumptions used by the PBGC to determine the level of funding required in the
event of the termination of the Pension Plan and all benefit liabilities do not
exceed the assets of such Pension Plans.
-16-
<PAGE>
(f) There has been no "reportable event" as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to the Pension
Plans which would require the giving of notice, or any event requiring
disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notices regarding the Plans with
the Secretary of Labor and the Secretary of the Treasury or the furnishing of
such documents to the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following documents,
with respect to each of the Plans, have been made available or delivered to
Purchaser by Company: (A) any plans and related trust documents, and amendments
thereto, (B) the most recent Forms 5500 (including any schedules thereto) and
the most recent actuarial valuation report, if any, (C) the last IRS
determination letter, and (D) summary plan descriptions.
(i) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Plans, the assets of any of the trusts under
such Plans or the Plan sponsor or the Plan administrator, or against any
fiduciary of the Plans with respect to the operation of such Plans (other than
routine benefit claims), nor does Company or any of its Subsidiaries have
knowledge of facts which could form the basis for any such claim or lawsuit.
(j) All amendments and actions required to bring the Plans into
conformity in all material respects with all of the applicable provisions of
ERISA and other applicable laws have been made or taken except to the extent
that such amendments or actions are not required by law to be made or taken
until a date after the Closing Date.
(k) The Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and
neither Company nor any of its Subsidiaries or "party in interest" or
"disqualified person" with respect to the Plans has engaged in a "prohibited
transaction" within the meaning of Section 4975 of the IRC or Section 406 of
ERISA.
(l) None of Company, any of its Subsidiaries or any ERISA Affiliate
has terminated any Pension Plan, or incurred any outstanding liability under
Section 4062 of ERISA to the PBGC, or to a trustee appointed under Section 4042
of ERISA.
(m) None of Company, any of its Subsidiaries or any ERISA Affiliate
maintains retired life and retired health insurance plans which are Welfare
Plans and which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
at the expense of the participant or the participant's beneficiary. Company, all
of its Subsidiaries and all ERISA Affiliates which maintain a Welfare Plan have
complied with the notice and continuation requirements of COBRA and the
regulations thereunder.
(n) None of Company, any of its Subsidiaries or any ERISA Affiliate
has contributed or been obligated to contribute to a Multiemployer Plan as of
the Closing.
-17-
<PAGE>
(o) None of Company, any of its Subsidiaries or any ERISA Affiliate
has withdrawn in a complete or partial withdrawal from any Multiemployer Plan
prior to the Closing Date, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan.
(p) None of Company, any of its Subsidiaries, any ERISA Affiliate or
any organization to which Company is a successor or parent corporation, within
the meaning of Section 4069(b) of ERISA, has engaged in any transaction, within
the meaning of Section 4069 of ERISA.
4.19 SEC Documents.
-------------
Company has made available to Purchaser a true and complete copy of
each report, schedule, registration statement and definitive proxy statement
filed by Company with the SEC since January 1, 1999 and prior to the date of
this Agreement (the "Company SEC Documents"), which are all the documents (other
than preliminary material) that Company was required to file with the SEC since
such date. As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents, and on their respective
filing dates none of the Company SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.20 Ordinary Course of Business.
---------------------------
Except as set forth on Schedule 4.7 or in response to the events
------------
described therein, since January 1, 1998, Company and each of its Subsidiaries
has conducted its operations only in the ordinary course of business consistent
with past practice.
4.21 Insurance.
---------
There are in full force and effect for the benefit of Company and its
Subsidiaries insurance policies and bonds providing adequate coverage from
reputable and financially sound insurers in amounts sufficient to insure the
assets and risks of Company and its Subsidiaries in accordance with prudent
business practice in the industry of Company and Subsidiaries. No notice has
been given or claim made and to the knowledge of Company, no grounds exist, to
cancel or void any such policies or bonds or to reduce the coverage provided
thereby.
4.22 Minute Books.
------------
The minute books of Company for the period commencing January 1, 1998
through December 31, 1999, as previously made available to Purchaser, accurately
reflect, in all material respects, all formal corporate action of the
stockholders and Board of Directors of Company during such period.
-18-
<PAGE>
4.23 Year 2000 Compliance.
--------------------
Each system comprised of software, hardware, databases or embedded
control systems (microprocessor controlled or controlled by any robotic or other
device) (collectively, a "System") that constitutes any material part of, or is
used in connection with the use, operation or enjoyment of, any material
tangible or intangible asset or real property of Company or any of its
Subsidiaries has not been materially adversely affected by the advent of the
year 2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century ("Year
2000 Compliant") in a manner that could reasonably be expected to have a
Material Adverse Effect. Company has no reason to believe that it or any of its
Subsidiaries may incur material expenses arising from or relating to the failure
of any of their Systems as a result of the advent of the year 2000, the advent
of the twenty-first century or the transition from the twentieth century through
the year 2000 and into the twenty-first century. Each material system of Company
and its Subsidiaries is able to accurately process date data, including, but not
limited to, calculating, comparing and sequencing from, into and between the
twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations.
4.24 Full Disclosure.
---------------
No information contained in this Agreement or any other Transaction
Document contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which made.
4.25 Certain Agreements.
------------------
Except as set forth in Schedule 4.26, neither the Company nor any
-------------
Subsidiary is a party to any oral or written employment agreement or plan,
including any employment agreement, severance agreement, stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which shall be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the other Transaction Documents or the value
of any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or the Transaction Documents. No
holder of any option to purchase shares of Company Common Stock, or shares of
Company Common Stock granted in connection with the performance of services for
the Company or any Subsidiary, is or will be entitled to receive cash from the
Company or any subsidiary in lieu of or in exchange for such option or shares as
a result of the transactions contemplated by this Agreement or the other
Transaction Documents.
4.26 Anti-Takeover Provisions Inapplicable.
-------------------------------------
The execution and consummation of the transactions contemplated by the
Transaction Documents will not trigger any anti-takeover, poison pill or similar
provisions contained within the certificate or articles of incorporation or
bylaws of Company or any of its Subsidiaries, nor any applicable provision under
the Delaware General Corporate Law relating to transactions with interested
stockholders or a sale or merger of the Company.
-19-
<PAGE>
5. COVENANTS OF THE COMPANY.
------------------------
5.1 Affirmative Covenants.
---------------------
Company covenants and agrees that from and after the date hereof
(except as otherwise provided herein, or unless the Purchaser has given its
prior written consent) so long as Purchaser (and/or any Affiliate) shall hold in
the aggregate more than 5% of the outstanding Common Stock:
(a) Preservation of Existence, Etc. Company and each of its
-------------------------------
Subsidiaries shall maintain its corporate existence and its license or
qualification and its good standing in the state of its incorporation and in
each other jurisdiction in which its ownership or lease of property or the
nature of its businesses makes such license or qualification necessary (except
for such other jurisdictions in which such failure to be so licensed or
qualified individually and in the aggregate would not result in a Material
Adverse Effect).
(b) Accounting System; Reporting Requirements. Company on a
-----------------------------------------
consolidated basis will maintain a system of accounting established and
administered in accordance with GAAP. Further, Company will:
(i) promptly deliver to Purchaser, but in no event later than
twenty (20) days after the mailing or filing thereof, copies of (A) all reports,
notices and proxy statements sent by Company to its shareholders, and (B) all
regular and periodic reports and definitive proxy materials (including
Forms 10-K, 10-Q and 8-K) filed by Company with any securities exchange or the
Federal Securities and Exchange Commission; and
(ii) promptly deliver to Purchaser, but in no event later than
twenty (20) days after Company receives the same, copies of any management
letters addressed to Company by its independent certified public accountant.
(c) Maintenance of Insurance. Company shall insure, and shall cause
------------------------
its Subsidiaries to insure, their respective properties and assets against loss
or damage in such amounts as similar properties and assets are insured by
prudent companies in similar circumstances carrying on similar businesses, and
with reputable and financially sound insurers, including self-insurance to the
extent customary, except where the failure to have such coverage would not,
individually or in the aggregate, have a Materially Adverse Effect.
(d) Maintenance of Properties and Leases. Company and its
------------------------------------
Subsidiaries shall maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties useful
or necessary to their respective businesses, and from time to time, Company will
make or cause to be made all appropriate repairs, renewals or replacements
thereof.
(e) Maintenance of Permits and Franchises. Company and its
-------------------------------------
Subsidiaries shall maintain in full force and effect all franchises, permits and
other authorizations necessary for the ownership and operation of their
respective properties and business if the failure so to maintain the same,
individually or in the aggregate, would constitute a Material Adverse Effect.
-20-
<PAGE>
(f) Keeping of Records and Books of Account. Company and its
---------------------------------------
Subsidiaries, shall maintain and keep proper books of record and account which
enable Company to issue financial statements in accordance with GAAP and as
otherwise required by applicable laws of any Governmental Authority having
jurisdiction over Company and its Subsidiaries, and in which full, true and
correct entries shall be made in all material respects of all their respective
dealings and business and financial affairs.
(g) Plans. Company shall, and shall cause each ERISA Affiliate to,
-----
comply with ERISA, the IRC and other applicable Laws applicable to Plans except
where such failure, alone or in conjunction with any other failure, would not
result in a Material Adverse Effect. Without limiting the generality of the
foregoing, Company shall cause all of its Plans and all Plans maintained by any
ERISA Affiliate to be funded in accordance with the minimum funding requirements
of ERISA and shall make, and cause each ERISA Affiliate to make, in a timely
manner, all contributions due to Plans and Multiemployer Plans.
(h) Compliance with Laws. Company and its Subsidiaries shall comply
--------------------
with all applicable laws (including Environmental laws) in all material
respects, and shall obtain and comply in all material respects with and maintain
any and all licenses, approvals, registrations or permits required by
Environmental Laws, provided that they shall not be deemed to be a violation of
this section if any failure to comply with any law would not result in fines,
penalties, other similar liabilities or injunctive relief which in the aggregate
would reasonably be expected to have a Material Adverse Effect. Company and its
Subsidiaries shall conduct and complete in all respects all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all respects with all
lawful orders and directives of all Governmental Authorities respecting
Environmental Laws, except to the extent that the same are being contested in
good faith by appropriate and lawful proceedings diligently conducted and for
which such reserves or other appropriate provisions, if any, required by GAAP
shall have been made, and except to the extent that the same would not
reasonably be expected to have a Material Adverse Effect.
(i) Use of Proceeds. Company will use the proceeds of the Purchase
---------------
Price for the Common Stock and Warrant (and the exercise price for the Warrant
Shares) for Working Capital and general corporate purposes, which shall always
be for lawful purposes only and such uses shall not contravene any applicable
law or any other provision hereof.
(j) Maintenance of Exchange Listing. The Company shall undertake
-------------------------------
best efforts to maintain its listing on the NASDAQ SmallCap Market System.
Promptly after the issuance of the shares of Common Stock and Warrant Shares,
Company shall secure the designation, listing and quotation of such Common Stock
on the NASDAQ SmallCap Market System, and shall undertake best efforts to
maintain such designation, listing and quotation.
(k) Board of Directors. The Board of Directors (or the Nominating
------------------
Committee thereof) of the Company shall nominate a representative selected by
Purchaser (or an Affiliate) for election by the shareholders of the Company to
the Board of Directors; provided, however, that such representative has such
experience and knowledge to be acceptable to the Board of Directors (or the
Nominating Committee thereof). It is expressly agreed that any executive
-21-
<PAGE>
officer of Mastech Corporation shall be presumed to have such knowledge and
experience to serve on the Board of Directors of the Company.
5.2 Negative Covenants.
------------------
Company covenants and agrees that from and after the date hereof
(except as otherwise provided herein, or unless the Purchaser has given its
prior written consent) so long as the Purchaser (and/or an Affiliate) shall hold
at least 5% of the outstanding Common Stock:
(a) Affiliate Transactions. Except as set forth on Schedule 5.2(a),
---------------------- ---------------
neither Company nor any Subsidiary of Company shall enter into or carry out any
material transaction (including purchasing property or services or selling
property or services) with an Affiliate which is not a Subsidiary unless such
transaction is not otherwise prohibited by this Agreement, is entered into upon
fair and reasonable arm's length terms and conditions in accordance with all
applicable law.
(b) Change in Organizational Documents. Company shall not, and shall
----------------------------------
not permit any of its Subsidiaries to, amend in any material respect its
certificate or articles of incorporation without providing at least ten (10)
calendar days' prior written notice to Purchaser and, in the event such change
would cause the Common Stock to have rights which are different from the rights
of other publicly traded common stock of Company, without obtaining the prior
written consent of Purchaser.
(c) Sales of Securities to Competitors. Until the earlier to occur
----------------------------------
of (i) Purchaser (and/or any Affiliate thereof) owns in the aggregate less than
15% of the outstanding Common Stock of the Company or (ii) the seventh
anniversary of the Closing Date, the Company shall not, and shall not permit any
of its Subsidiaries to, knowingly issue or sell any securities of the Company or
any of its Subsidiaries to a Person who is a direct "Competitor" (as defined
below) of Mastech Corporation or any of its Subsidiaries (except in connection
with an underwritten public offering; provided, however, such Competitor shall
not acquire more than 5% of the outstanding securities of the Company). For
purposes of this Agreement, a Competitor shall have the meaning ascribed to it
in that certain letter agreement by and between the Company and Purchaser dated
as of the date of this Agreement.
6. CONDITIONS TO CLOSING.
---------------------
6.1 Conditions to the Purchaser's Obligation to Purchase.
----------------------------------------------------
The obligation of the Purchaser to purchase the Common Stock hereunder
is subject to the fulfillment by the Company to the Purchaser's satisfaction, on
the Closing Date, of each of the following conditions, any of which may be
waived in whole or in part by the Purchaser in writing:
(a) Favorable opinions of Wyrick Robbins Yates & Ponton LLP, counsel
to Company, substantially in the form attached hereto as Exhibit C, shall be
---------
delivered to the Purchaser.
-22-
<PAGE>
(b) Resolutions of the board of directors of Company, certified by
the Secretary or Assistant Secretary of Company, as of the Closing Date, duly
adopted and in full force and effect on such date, authorizing (i) the
consummation of each of the transactions contemplated by this Agreement and (ii)
specific officers to execute and deliver this Agreement and each other
Transaction Document to which it is a party, shall be delivered to the
Purchaser.
(c) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, with telephonic updates where available, showing that
Company is organized and in good standing in the State of Delaware, shall be
delivered to the Purchaser.
(d) A copy of the certificate of incorporation and all amendments
thereto of Company, certified as of a recent date by the Secretary of State of
the State of Delaware, and copies of Company's by-laws, certified by the
Secretary or Assistant Secretary of Company as true and correct as of the
Closing Date, shall be delivered to the Purchaser.
(e) The Registration Rights Agreement shall be duly executed by the
parties thereto.
(f) The Company shall issue and deliver the Warrant to the Purchaser.
(g) Certificates of the Secretary or an Assistant Secretary of
Company, dated the Closing Date, as to the incumbency and signatures of the
officers of Company executing this Agreement, each other Transaction Document to
which it is a party and any other certificate or other document to be delivered
pursuant hereto or thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary, shall be delivered to the Purchaser.
(h) A Certificate of the President, Senior Vice President or CEO of
Company, dated the Closing Date, stating that all of the representations and
warranties of Company contained herein or in the other Transaction Documents are
true and correct on and as of the Closing Date and that no breach of any
covenant contained in Article V has occurred or would result from the Closing
hereunder shall be delivered to the Purchaser.
(i) The Company shall make a wire transfer of all reasonable fees and
expenses of Mastech Corporation's outside counsel, Buchanan Ingersoll
Professional Corporation.
6.2 Conditions to Company's Obligation to Sell.
------------------------------------------
The obligation of the Company to issue and sell hereunder is subject
to the fulfillment by the Purchaser to the Company's satisfaction, on the
Closing Date, of each of the following conditions, any of which may be waived in
whole or in part by the Company in writing:
(a) The Registration Rights Agreement shall be duly executed by the
parties thereto; and
(b) A Certificate of the President or CEO of Purchaser, dated the
Closing Date, stating that all representations and warranties of Purchaser
contained herein or in the other
-23-
<PAGE>
Transaction Documents are true and correct on and as of the Closing Date and
that no breach of any covenant contained in Article VII has occurred or would
result from the Closing hereunder shall be delivered to the Company.
7. COVENANTS OF THE PURCHASER.
--------------------------
Purchaser covenants and agrees that from and after the date hereof
(except as otherwise provided herein, or unless the Company has given its prior
written consent) so long as Purchaser (and/or any Affiliate) shall hold in the
aggregate 5% or more of the outstanding Common Stock:
7.1 Limitation on Ownership of Voting Stock.
---------------------------------------
The Purchaser shall not (and shall not permit any Affiliate to
directly or indirectly) acquire beneficial ownership of any Voting Stock, any
securities convertible into or exchangeable for Voting Stock, or any other
rights to acquire Voting Stock (except, in any case, by way of the Warrant, a
negotiated transaction between the Purchaser and the Company, or stock dividends
or other distributions or offerings made available to holders of any Voting
Stock generally) or authorize or make a tender, exchange or other offer, without
the written consent of the Company, if the effect of such acquisition would be
to increase the Voting Power of all Voting Stock then owned by the Purchaser or
which it has a right to acquire to more than an additional 5% of the outstanding
Common Stock of the Company within any 12-month period.
7.2 Voting Trust, etc.
-----------------
The Purchaser shall not deposit any shares of Voting Stock in a voting
trust or, except as otherwise provided herein, subject any Voting Stock to any
arrangement or agreement with respect to the voting of such Voting Stock unless
such voting trust, arrangement or agreement involves solely Mastech Corporation
and/or any of its Affiliates.
7.3 Solicitation of Proxies.
-----------------------
Without the Company's prior written consent, the Purchaser shall not
solicit proxies with respect to any Voting Stock, and shall not become a
"participant" in any "election contest" (as such terms are used in Rule 14a-11
of Regulation 14A under the Exchange Act relating to the election of directors
of the Company).
7.4 Acquisition Proposal.
--------------------
The Purchaser (and its Affiliates) agrees not to individually or
together with any third Person initiate an Acquisition Proposal.
7.5 Confidential Information.
------------------------
The Company from time to time may disclose to the Purchaser pursuant
to this Agreement certain confidential technical and nontechnical business
information ("Confidential Information"). Notwithstanding any other provision
of this Agreement, including provisions
-24-
<PAGE>
regarding the termination of this Agreement or particular terms of this
Agreement, the Purchaser shall not disclose such Confidential Information to
third parties until the earliest of (i) the date upon which such information
ceases to be Confidential Information through no fault of the Purchaser, (ii)
the date such information is required to be disclosed by law or a court of
competent jurisdiction, or (iii) the fifth anniversary of the date of disclosure
by the Company to the Purchaser. In the event that the Purchaser or any of its
representatives is requested or required to disclose any of the Confidential
Information referred to above, the Purchaser will provide the Company with
prompt notice of such request or requirement so that the Company (if it so
desires) may seek a protective order. The Purchaser further acknowledges and
understands that any information so obtained which may be considered "inside"
non-public information will not be utilized by the Purchaser in connection with
purchases and/or sales of the Company's securities except in compliance with
applicable state and federal securities laws. Confidential Information shall not
include information that (A) was previously known to the receiving party prior
to disclosure thereof by the other party, (B) is independently developed without
the use of such Confidential Information, (C) at the time of disclosure to the
receiving party is, or thereafter becomes, generally available to the public
other than as a result of a disclosure by the receiving party or its
representatives in violation of this Section 7.5, or (D) becomes available to
the receiving party on a non-confidential basis from a third party provided that
such third party is not bound by an obligation of confidentiality to the
Company.
7.6 Limitation on Covenants of Purchaser.
------------------------------------
Notwithstanding anything to the contrary contained within this Article
7 or this Agreement, Sections 7.1, 7.2, 7.3 and 7.4 shall be of no further force
and effect in the event of the earlier of:
(a) an Acquisition Proposal (but only for so long as the Acquisition
Proposal is being pursued and is ultimately consummated; if the Acquisition
Proposal is terminated or abandoned for any reason, Sections 7.1, 7.2, 7.3 and
7.4 shall be reinstated in full force and effect; provided that the Company: (i)
reimburses the Purchaser and any of its Affiliates for the actual costs incurred
by such party with respect to any actions taken by such party in making a
competing Acquisition Proposal; and (ii) if requested by Purchaser, purchases
from the Purchaser or any of its Affiliates any shares of Common Stock purchased
by such Person in excess of the limit imposed by Section 7.1 that were purchased
while the initial Acquisition Proposal was pending. The per share purchase
price for shares purchased pursuant to 7.6(a)(ii) shall be equal to the per
share purchase price paid by the Purchaser or its Affiliates for such shares of
Company Common Stock);
(b) a breach of Section 5.2(c); or
(c) the seventh anniversary of the Closing Date.
8. COMPANY RIGHT OF FIRST REFUSAL.
------------------------------
From the date hereof and for a three-year period thereafter:
-25-
<PAGE>
8.1 Right of First Refusal.
----------------------
Prior to making any private sale or transfer of more than 10% of the
outstanding Common Stock of the Company in any three-month period to a party who
is not an Affiliate of Mastech Corporation, the Purchaser shall give the Company
the opportunity to purchase such Common Stock in the following manner:
(a) The Purchaser shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the approximate number of the
proposed purchasers or transferees, the amount of Common Stock proposed to be
sold or transferred, the proposed price per share therefor (the "Transfer
Price") and the other material terms upon which such disposition is proposed to
be made.
(b) The Company shall have the right, exercisable by written notice
given by the Company to the Purchaser within three (3) Business Days after
receipt of such Transfer Notice, to purchase all but not part of the Common
Stock specified in such Transfer Notice for cash per share equal to the Transfer
Price.
(c) If the Company exercises its right of first refusal hereunder,
the closing of the purchase of the Common Stock with respect to which such right
has been exercised shall take place within thirty (30) calendar days after the
Company receives notice, which period of time shall be extended if necessary in
order to comply with applicable securities laws and regulations. Upon exercise
of its right of first refusal, the Company and the Purchaser shall be legally
obligated to consummate the purchase contemplated thereby and shall use their
best efforts to secure any approvals required in connection therewith.
(d) If the Company does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Purchaser shall be
free, during the period of ninety (90) calendar days following the expiration of
such time for exercise, to sell the Common Stock specified in such Transfer
Notice. The Purchaser's transferee shall acquire such Common Stock free from
any of the provisions of this Agreement; however, such Common Stock shall be
subject to any restrictions imposed under applicable securities laws.
8.2 Tender Offer Sale.
-----------------
Prior to making any sale or exchange of Common Stock in response to a
tender or exchange offer, the Purchaser shall give the Company the opportunity
to purchase all, but not less than all, of the Purchaser's Common Stock in the
following manner:
(a) The Purchaser shall give notice (the "Tender Notice") to the
Company in writing of such intention no later than ten (10) calendar days prior
to the latest time by which Common Stock must be tendered in order to be
accepted pursuant to such offer or to qualify for any proration applicable to
such offer (the "Tender Date"). For purposes hereof, a tender offer to purchase
Common Stock shall be deemed to be an offer at the price specified therein,
without regard to any provisions thereof with respect to proration or conditions
to the offeror's obligation to purchase (assuming such conditions are not
impossible of performance when the offer is made, without giving effect to the
Company's right of first refusal).
-26-
<PAGE>
(b) If the Tender Notice is given, the Company shall have the right,
exercisable by giving notice to the Purchaser at least two (2) Business Days
prior to the Tender Date, to purchase all, but not less than all, of the Common
Stock owned by the Purchaser for cash. If the Company exercises such right by
giving such notice, the closing of the purchase of such Voting Stock shall take
place not later than one Business Day prior to the Tender Date; provided,
---------
however, that if the purchase price specified in the tender offer includes any
- -------
property other than cash, the value of any property included in the purchase
price shall be jointly determined by a nationally recognized investment banking
firm selected by each party or, in the event such firms are unable to agree, a
third nationally recognized investment banking firm to be selected by such two
firms. For this purpose:
(i) If the Company does not exercise such right by giving such
notice or fails to complete the purchase, then the Purchaser shall be free to
accept the tender offer with respect to which the Tender Notice was given, to
which Section 8.1 shall have no application, force or effect.
(ii) If the Company does not purchase the shares, the Company
will provide such assurance as the tender offeror shall reasonably request to
provide the tender offeror with certificates for the Purchaser's shares without
legends referring to this Agreement.
8.3 Assignment of Rights.
--------------------
In the event that the Company elects to exercise a right of first
refusal under this Section 8, the Company may specify, prior to closing such
purchase and upon not less than three Business Days prior notice to the
Purchaser, another person as its designee to purchase the Common Stock to which
such notice relates.
8.4 Acquisition Proposal.
--------------------
Notwithstanding anything to the contrary contained in this Article 8
of this Agreement, Section 8.1 shall be suspended during the occurrence of an
Acquisition Proposal and shall have no further force or effect following
consummation of the transaction giving rise to the Acquisition Proposal.
9. MISCELLANEOUS.
-------------
9.1 Complete Agreement; Modification of Agreement.
---------------------------------------------
(a) The Transaction Documents constitute the complete agreement
between the parties with respect to the subject matter hereof and may not be
modified, altered or amended except as provided therein.
(b) No amendment or waiver of any provision of this Agreement or any
other Transaction Document, nor consent to any departure by Company therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Purchaser, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
-27-
<PAGE>
9.2 Fees and Expenses.
-----------------
Company shall pay all reasonable out-of-pocket expenses of Purchaser
in connection with the preparation of the Transaction Documents and the
transactions contemplated thereby, including all reasonable legal expenses. If,
at any time or times Purchaser shall employ counsel or other advisors for advice
or other representation or shall incur reasonable legal or other costs and
expenses in connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Transaction Documents;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Purchaser, Company, any Subsidiary of Company or
any other Person) relating to any of the Transaction Documents or any other
agreements to be executed or delivered in connection herewith (except for such
actions in which the Company is the prevailing party); or
(iii) any attempt to enforce any rights of Purchaser against
Company, any Subsidiary of Company or any other Person, that may be obligated to
Purchaser by virtue of any of the Transaction Documents;
then, and in any such event, the reasonable attorneys' and other parties' fees
arising from such services, including those of any appellate proceedings, and
all expenses, costs, charges and other fees incurred by such counsel and others
in any way or respect arising in connection with or relating to any of the
events or actions described in this Section shall be payable, on demand, by
Company to Purchaser and shall be additional Obligations under this Agreement
and the other Transaction Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: paralegal fees,
costs and expenses; accountants' and investment bankers' fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone charges; air express
charges; telegram charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal services.
9.3 No Waiver by Purchaser.
----------------------
Purchaser's failure, at any time or times, to require strict
performance by Company of any provision of this Agreement and any of the other
Transaction Documents shall not waive, affect or diminish any right of Purchaser
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Purchaser shall not suspend, waive or affect any other
breach by Company under this Agreement and any of the other Transaction
Documents whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of Company contained in this Agreement or any of
the other Transaction Documents and no breach by Company under this Agreement
and no breach by Company under any of the other Transaction Documents shall be
deemed to have been suspended or waived by Purchaser, unless such suspension or
waiver is by an instrument in writing signed by an officer of Purchaser and
directed to Company specifying such suspension or waiver.
-28-
<PAGE>
9.4 Remedies.
--------
Purchaser's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which Purchaser may
have under any other agreement, including the other Transaction Documents, by
operation of law or otherwise.
9.5 Waiver of Jury Trial.
--------------------
The parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under the Transaction Documents.
9.6 Severability.
------------
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
9.7 Binding Effect; Benefits.
------------------------
This Agreement and the other Transaction Documents shall be binding
upon, and inure to the benefit of, the successors of Company and Purchaser and
the assigns, transferees and endorsees of Purchaser, including all provisions
with respect to Change of Control of Company.
9.8 Conflict of Terms.
-----------------
Except as otherwise provided in this Agreement or any of the other
Transaction Documents by specific reference to the applicable provisions of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any of the other Transaction Documents, the
provision contained in this Agreement shall govern and control.
9.9 Governing Law.
-------------
This Agreement and the Obligations arising hereunder shall be governed
by, and construed and enforced in accordance with, the laws of the Commonwealth
of Pennsylvania applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, and any
applicable laws of the United States of America. Purchaser and Company agree to
submit to personal jurisdiction and to waive any objection as to venue in the
federal or Pennsylvania State courts located in the County of Allegheny,
Commonwealth of Pennsylvania. Service of process on Purchaser or Company in any
action arising out of or relating to any of the Transaction Documents shall be
effective if mailed to such party at the address listed in Section 9.10 hereof.
Nothing herein shall preclude Purchaser or Company from bringing suit or taking
other legal action in any other jurisdiction.
-29-
<PAGE>
9.10 Notices.
-------
Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by
another, or whenever any of the parties desires to give or serve upon another
any such communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt acknowledged or by
registered or certified mail, return receipt requested, postage prepaid, or by
telecopy and confirmed by telecopy answerback addressed as follows:
If to Company:
VCampus Corporation
8251 Greensboro Drive, Suite 500
McLean, VA 22101
Attn: Nat Kannan, CEO
Telecopy Number: (703) 893-1905
with a copy to:
Wyrick Robbins Yates & Ponton LLP
Suite 300
4101 Lake Boone Trail
Raleigh, NC 27607
Attn: Larry E. Robbins
If to Purchaser:
Mastech Corporation
1004 McKee Road
Oakdale, Pennsylvania 15071
Attn: Ajmal Noorani
Telecopy Number: (412) 787-9225
with a copy to:
Buchanan Ingersoll
One Oxford Centre
301 Grant Street, 20/th/ Floor
Pittsburgh, Pennsylvania 15219
Attn: Carl Cohen, Esq. and James Barnes, Esq.
Telecopy Number: (412) 562-1041
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally
-30-
<PAGE>
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback, or three (3) Business Days after the same shall have been deposited
with the United States mail. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to the Persons designated above to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
9.11 Survival.
--------
The representations, warranties and covenants of Company in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
9.12 Section and Other Headings.
--------------------------
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
9.13 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
9.14 Publicity.
---------
Neither Purchaser nor Company shall issue any press release or make
any public disclosure regarding the transactions contemplated hereby unless such
press release or public disclosure is approved by the other party in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the SEC or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may be
advised by counsel is legally necessary or advisable, and may make such
disclosure as it is advised by its counsel is required by law, subject to
advance consultation with Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-31-
<PAGE>
IN WITNESS WHEREOF, Company and Purchaser have executed this Stock
Purchase Agreement as of the day and year first above written.
VCAMPUS CORPORATION
By: /s/ Narasimhan P. Kannan
--------------------------------
Name: Narasimhan P. Kannan
Title: Chief Executive Officer
Purchaser:
---------
MASTECH CORPORATION
By: /s/ Ajmal Noorani
--------------------------------
Name: Ajmal Noorani
Title: Vice President, E Business Solutions
Division
-32-
<PAGE>
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of January 11, 2000, by and between
VCampus Corporation, a Delaware corporation ("Company"), and Mastech
Corporation, a Pennsylvania corporation, through its Mastech eVentures business
unit ("Purchaser").
W I T N E S S E T H:
-------------------
WHEREAS, Company and Purchaser have entered into that certain Stock
Purchase Agreement, dated as of January 10, 2000 (the "Purchase Agreement"),
pursuant to which Company has agreed to issue and sell to Purchaser, and
Purchaser has agreed to purchase from Company, through its Mastech eVentures
business unit, shares of Common Stock of the Company and a Warrant exercisable
for Common Stock of the Company; and
WHEREAS, in order to induce Purchaser to enter into the Purchase Agreement
and to purchase, through its Mastech eVentures business unit, the shares of
Common Stock of the Company and the Warrant exercisable for Common Stock of the
Company, Company has agreed to provide registration rights with respect thereto;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms used herein shall
-----------
have the meaning ascribed to them in the Purchase Agreement, and the following
shall have the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Agreement" shall mean this Registration Rights Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Warrant Shares" shall mean shares of Common Stock issued upon exercise of
the Warrant.
"Holder" shall mean (i) the Purchaser, and (ii) any other Person holding
Registrable Securities to whom the registration rights conferred by this
Agreement have been transferred in compliance with this Agreement.
"Incidental Registration" shall have the meaning ascribed to it in Section
3.
"Majority Holders" shall mean the Holders of a majority of the Registrable
Securities.
<PAGE>
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"Registrable Securities" shall mean the shares of Common Stock issued
pursuant to the Purchase Agreement, the Warrant Shares, shares of Common Stock
hereafter acquired by Purchaser, and shares of Common Stock which Purchaser
hereafter obtains the right to acquire pursuant to any dividend, distribution,
stock split or similar transaction or rights to the extent that all of the
holders of the Common Stock received shares of Common Stock; provided, however,
that the shares of Common Stock or Warrant Shares shall only be treated as
Registrable Securities if and for so long as they have not been sold to or
through a broker or underwriter in a public distribution, or only until the date
on which all of the Registrable Securities can be disposed of in any three month
period pursuant to Rule 144 (or any similar or analogous rule under the
Securities Act of 1933).
"Registration Statement" shall mean a registration statement filed by the
Company with the U.S. Securities and Exchange Commission for a public offering
and sale of securities of the Company (other than a Registration Statement on
Form S-4 or S-8 or any successor form for securities to be offered in a
transaction of the type referred to in Rule 145 under the Securities Act or to
employees of Company pursuant to any employee benefit plan, respectively).
2. Required Registration. Subject to the terms of this Section 2 and
---------------------
Section 5, after receipt of a written request from the holders of Registrable
Securities requesting that Company effect a registration under the Securities
Act covering at least 30% of the Registrable Securities then outstanding, and
specifying the intended method or method of disposition thereof, Company shall
promptly notify all Holders in writing of the receipt of such request and each
such Holder, in lieu of exercising its rights under Section 3 may elect (by
written notice sent to Company within ten (10) Business Days from the date of
such Holder's receipt of the aforementioned Company's notice) to have
Registrable Securities included in such registration thereof pursuant this
Section 2. Thereupon Company shall, as expeditiously as possible, use its best
efforts to effect the registration under the Securities Act of all shares of
Registrable Securities which Company has been so requested to register by such
Holders for sale, all to the extent required to permit the disposition (in
accordance with the intended method or methods thereof, as aforesaid) of the
Registrable Securities so registered; provided, however, that Company shall not
be required to effect more than one (1) registration per year of Registrable
Securities pursuant to this Section 2 and a total of five (5) registrations of
Registrable Securities pursuant to this Section 2 during the term of this
Agreement (excluding a Registration Statement on Form S-3 (or other comparable
or successor short form) registering the offer and sale of Registrable
Securities in one distribution or from time to time in the manner contemplated
by Rule 415 of the Securities Act (a "Shelf Registration Statement")). During
the two-year period following the date of this Agreement, the Company will be
permitted to satisfy its obligations under this Section 2 by filing a Shelf
Registration Statement. Following the second anniversary of the date of this
Agreement or in the event that the Company does not qualify to use Form S-3 for
the
2
<PAGE>
offer and sale of Registrable Securities during the two year period following
the date of this Agreement, the Holders may require the Company to register
Registrable Securities on any applicable form including Form S-1 (or its
successor form). The Company shall not be required to file a Registration
Statement at a time when a Shelf Registration Statement covering Registrable
Securities is then in effect.
3. Incidental Registration. If Company at any time proposes to file on
-----------------------
its behalf a registration statement under the Securities Act on any form (other
than a Registration Statement on Form S-4 or S-8 or any successor form for
securities to be offered in a transaction of the type referred to in Rule 145
under the Securities Act or to employees of Company pursuant to any employee
benefit plan, respectively) for the general registration of securities (an
"Incidental Registration Statement"), it will give written notice to all Holders
at least 15 days before the initial filing with the SEC of such Incidental
Registration Statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by Company. The notice
shall offer to include in such filing the aggregate number of shares of
Registrable Securities as such Holders may request.
Each Holder desiring to have Registrable Securities registered under this
Section 3 shall advise Company in writing within 10 Business Days after the date
of receipt of such offer from Company, setting forth the amount of such
Registrable Securities for which registration is requested. Company shall
thereupon include in such filing the number of shares of Registrable Securities
for which registration is so requested, subject to the next sentence, and shall
use its best efforts to effect registration under the Securities Act of such
shares. In connection with any registration subject to this Section 3, which is
to be effected in a firm commitment underwriting, Company will not be required
to include Registrable Securities in such underwriting unless the Holder of such
Registrable Securities accepts the terms and conditions of the underwriting
agreement which is agreed upon between Company and the managing underwriter
selected by Company, so long as such underwriting agreement conforms to industry
standards and practices and the obligations and liabilities imposed on the
Holders under such agreement are customary for the stockholders selling
securities in an underwritten offering. If the managing underwriter of a
proposed public offering shall advise Company in writing that, in its opinion,
the distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by Company would
materially and adversely affect the distribution of such securities by Company,
then all selling security holders with incidental registration rights shall
reduce the amount of securities each intended to distribute through such
offering on a pro rata basis. Except as otherwise provided in Section 5, all
expenses of such registration shall be borne by Company. The Company shall have
the right to terminate or withdraw any Registration Statement initiated under
this Section 3 prior to the effectiveness of such Registration Statement whether
or not the Holders have elected to include Registrable Securities in such
Registration Statement.
3
<PAGE>
4. Registration Procedures. If the Company is required by the provisions
-----------------------
of Section 2 or 3 to use its best efforts to effect the registration of any of
its securities under the Securities Act, Company will, as expeditiously as
possible:
(a) prepare and file with the SEC a Registration Statement with
respect to such securities and use its best efforts to cause such Registration
Statement to become and remain effective for a period of time required for the
disposition of such securities by the holders thereof, but not to exceed 120
days (or, with respect to any underwritten offering, such shorter period as the
underwriters need to complete the distribution of the registered offering or,
with respect to a shelf Registration Statement on a form under the Securities
Act relating to the offer and sale of Registrable Securities from time to time
in accordance with Rule 415, such longer period as may be required to dispose of
the Registrable Securities covered by such Registration Statement);
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such Registration Statement until, in
the case of an Incidental Registration Statement filed pursuant to Section 3,
the earlier of such time as all of such securities have been disposed of in a
public offering or the expiration of 120 days, or in the case of a Registration
Statement filed pursuant to Section 2, such time as is set forth in Section
4(a);
(c) furnish, to such selling security holders such number of copies of
a summary prospectus or other prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents, as such selling security holders may reasonably request;
(d) use its best efforts to register or qualify the securities covered
by such Registration Statement under such other securities or blue sky laws of
such jurisdictions within the United States and Puerto Rico as each holder of
such securities shall request (provided, however, that Company shall not be
-------- -------
obligated to qualify as a foreign corporation to do business under the laws of
any jurisdiction in which it is not then qualified or to file any general
consent to service or process), and do such other reasonable acts and things as
may be required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration Statement;
(e) furnish, at the request of any Holder requesting registration of
Registrable Securities, on the date that such shares of Registrable Securities
are delivered to the underwriters for sale pursuant to such registration or, if
such Registrable Securities are not being sold through underwriters, on the date
that the Registration Statement with respect to such shares of Registrable
Securities becomes effective, (1) an opinion, dated such date, of the
independent counsel representing Company for the purposes of such registration,
addressed to the underwriters, if any, and if such Registrable Securities are
4
<PAGE>
not being sold through underwriters, then to the Holders making such request, in
customary form and covering matters of the type customarily covered in such
legal opinions; and (2) a comfort letter dated such date, from the independent
certified public accountants of Company, addressed to the underwriters, if any,
and if such Registrable Securities are not being sold through underwriters, then
to the Holder making such request and, if such accountants refuse to deliver
such letter to such Holder, then to Company, in a customary form and covering
matters of the type customarily covered by such comfort letters and as the
underwriters or such Holder shall reasonably request. Such opinion of counsel
shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the Holders of a
majority of the Registrable Securities being registered may reasonably request.
Such letter from the independent certified public accountants shall additionally
cover such other financial matters (including information as to the period
ending not more than five Business Days prior to the date of such letter) with
respect to the registration in respect of which such letter is being given as
the Holders of a majority of the Registrable Securities being so registered may
reasonably request;
(f) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, but not later than 18 months after the effective
date of the Registration Statement, an earnings statement covering the period of
at least 12 months beginning with the first full month after the effective date
of such Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(h) give written notice to Holders:
(i) when such Registration Statement or any amendment thereto
has been filed with the SEC and when such Registration Statement or any
posteffecive amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to
such Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the SEC of any stop order suspending
the effectiveness of such Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Common
5
<PAGE>
Stock for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires Company to make
changes in such Registration Statement or the prospectus in order to make
the statements therein not misleading (which notice shall be accompanied by
an instruction to suspend the use of the prospectus until the requisite
changes have been made);
(i) use its best efforts to prevent the issuance or obtain the
withdrawal of any order suspending the effectiveness of such Registration
Statement at the earliest possible time;
(j) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those, if any, incorporated by reference);
(k) cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing the Registrable Securities to be sold
free of any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales of
the Registrable Securities;
(l) upon the occurrence of any event contemplated by Section 4(h)(v)
above, promptly prepare a post-effective amendment to such Registration
Statement or a supplement to the related prospectus or file any other required
document so that, as thereafter delivered to Holders, the prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the Holders
in accordance with Section 4(h)(v) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the Holders
shall suspend use of such prospectus, and the period of effectiveness of such
Registration Statement provided for above shall each be extended by the number
of days from and including the date of the giving of such notice to Holders
shall have received such amended or supplemented prospectus pursuant to this
Section 4(l);
(m) (i) make reasonably available for inspection by the Holders, any
underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by the Holders or
any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the Company's
officers, directors and employees to supply all relevant information reasonably
requested by the Holders or any such underwriter, attorney, accountant or agent
in connection with the registration; provided that the foregoing inspection and
--------
information gathering shall be coordinated on behalf of the
6
<PAGE>
Purchaser by Purchaser and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in Section 4; and
(n) in connection with any underwritten offering, make appropriate
officers of Company reasonably available to the selling security holders for
meetings with prospective purchasers of the Registrable Securities and prepare
and present to potential investors customary "road show" material in a manner
consistent with other new issuances of securities similar to the Registrable
Securities, in connection with any proposed sale of the Registrable Securities
in an aggregate offering of at least $10 million.
It shall be a condition precedent to the obligation of Company to take any
action pursuant to this Agreement in respect of the securities which are to be
registered at the request of any Holder that such Holder shall furnish to
Company such information regarding the securities held by such Holder and the
intended method of disposition thereof as Company shall reasonably request and
as shall be required in connection with the action taken by Company.
5. Expenses. All expenses incurred in complying with this Agreement,
--------
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for Company, the reasonable fees and expenses of one
counsel for the selling security holders (selected by those holding a majority
of the shares being registered), expenses of any special audits incident to or
required by any such registration and expenses of complying with the securities
or blue sky laws of any jurisdiction pursuant to Section 4(d), shall be paid by
Company, except that:
(a) All such expenses (including costs associated with including
shares of Company Common Stock held by other parties, other than employees or
directors of the Company, who have registration rights of the type described in
Section 3 hereof) in connection with a Registration Statement filed prior to the
first anniversary of the date of this Agreement pursuant to Section 2 shall be
paid by the selling Holders; provided that the Holders shall not be required to
pay aggregate expenses in excess of $50,000; and
(b) all such expenses in connection with any amendment or supplement
to a Registration Statement or prospectus required to be filed pursuant to
Section 3 which is filed more than 180 days after the effective date of such
Registration Statement because any Holder has not effected the disposition of
the securities requested to be registered shall be paid by such Holder; and
(c) Company shall not be liable for any fees, discounts or commissions
to any underwriter or any fees or disbursements of counsel for any underwriter
in respect of the securities sold by such Holder.
7
<PAGE>
6. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, Company shall indemnify and
hold harmless the holder of such Registrable Securities, such holder's directors
and officers, and each other person (including each underwriter) who
participated in the offering of such Registrable Securities and each other
person, if any, who controls such holder or such participating person within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or participating person or controlling person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or (ii) any alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse such holder or such director, officer or participating
person or controlling person for any legal or any other expenses reasonably
incurred by such holder or such director, officer or participating person or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Company shall not be
-------- -------
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any actual or alleged untrue statement
or actual or alleged omission made in such Registration Statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished to Company by such holder
specifically for use therein or (in the case of any underwritten offering) so
furnished for such purposes by any underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such holder or such director, officer or participating person or controlling
person, and shall survive the transfer of such securities by such holder.
(b) Each Holder, by acceptance hereof, agrees to indemnify and hold
harmless Company, its directors and officers and each other person, if any, who
controls Company within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which Company or any such
director or officer or any such person may become subject under the Securities
Act or any other statute or at common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon information in writing provided to Company by such Holder specifically for
use in the following documents and contained, on the effective date thereof, in
any Registration Statement under which securities were registered under the
Securities Act at the request of such holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto.
Notwithstanding the provisions of this paragraph (b) or paragraph (c) below, no
Holder shall be required to indemnify any person pursuant to this Section 6 or
to contribute pursuant to paragraph (c)
8
<PAGE>
below in an amount in excess of the amount of the aggregate net proceeds
received by such Holder in connection with any such registration under the
Securities Act.
(c) If the indemnification provided for in this Section 6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
7. Certain Limitations on Registration Rights. Notwithstanding the other
------------------------------------------
provisions of this Agreement:
(a) Company shall have the right to delay the filing or effectiveness
of, or by written notice require the Holders to cease sales of Registrable
Securities pursuant to, a Registration Statement required pursuant to Section 2
hereof during one or more periods aggregating not more than 60 days in any
twelve-month period (such period or periods, the "Suspension Period") in the
event that (i) Company would, in accordance with the advice of its counsel, be
required to disclose in the prospectus information not otherwise then required
by law to be publicly disclosed, (ii) in the judgment of Company's Board of
Directors, there is a reasonable likelihood that such disclosure, or any other
action to be taken in connection with the prospectus, would materially and
adversely affect any existing or prospective material business situation,
transaction or negotiation or otherwise materially and adversely affect Company,
or (iii) the Registration Statement can no longer be used under the Securities
Act; provided that the
9
<PAGE>
period of effectiveness of the Registration Statement pursuant to Section 2
shall be extended by the length of any such Suspension Period;
(b) Notwithstanding Section 7(b) hereof, Company agrees that it shall
not impose a Suspension Period during the 30-day period following the date on
which the Registration Statement is first declared effective by the SEC (the
"30-day Period") as a result of any activity initiated by Company, or in
response to any proposal, unless Company's Board of Directors determines in good
faith that it is required to impose a Suspension Period by law during such
30-day Period. To the extent Company imposes a Suspension Period during such
30-day Period as a result of such determination by Company's Board of Directors,
Company shall not, for such additional number of consecutive days following the
termination of such Suspension Period, impose an additional Suspension Period,
so as to provide the Holders with a total of 30 days without a Suspension
Period; and
(c) If Company suspends the Registration Statement or requires the
Holders to cease sales of the Common Stock pursuant to paragraph (a) above,
Company shall, as promptly as practicable following the termination of the
circumstances which entitled Company to do so, take such action as may be
necessary to reinstate the effectiveness of the Registration Statement and/or
give written notice to all Holders authorizing them to resume sales pursuant to
the Registration Statement. If, as a result thereof, the prospectus included in
the Registration Statement has been amended to comply with the requirements of
the Securities Act, Company shall enclose such revised prospectus with a notice
to Holders given pursuant to this paragraph (c), and the Shareholders shall make
no offers or sales of shares pursuant to such Registration Statement other than
by means of such revised prospectus.
8. Selection of Managing Underwriters. The managing underwriter or
----------------------------------
underwriters for any offering of Registrable Securities to be registered
pursuant to Section 2 in an underwritten public offering shall be of recognized
national standing selected by the holders of a majority of the shares being so
registered, and shall be reasonably acceptable to Company.
9. Restrictions on Sale After Public Offering. Except for transfers made
------------------------------------------
in transactions exempt from the registration requirements under the Securities
Act (other than Rule 144 thereunder), Company and each Holder hereby agree not
to offer, sell, contract to sell or otherwise dispose of any of their
Registrable Securities within 120 days after the date of any final prospectus
relating to the public offering of Common Stock, if underwritten, whether by
Company or by any Holders, except pursuant to such prospectus or with the
written consent of the managing underwriter or underwriters for such offering.
10. Miscellaneous.
-------------
(a) No Inconsistent Agreements. From and after the date of this
--------------------------
Agreement, the Company shall not, without the prior written consent of the
Majority
10
<PAGE>
Holders, enter into any agreement with any holder or prospective holder of any
securities of the Company which would grant such holder or prospective holder of
any securities of the Company the right to require the Company to initiate any
registration of any securities of the Company (i) that is inconsistent with or
superior to the rights of the Holders of Registrable Shares provided in this
Agreement or (ii) that would require the exclusion of Registrable Shares held by
the Holders from such a registration beyond any such exclusion contemplated by
this Agreement. This Paragraph 10(a) shall not limit the right of the Company to
enter into any agreements with any holder or prospective holder of any
securities of the Company giving such holder or prospective holder the right to
require the Company, upon any registration of any of its securities, to include,
among the securities which the Company is then registering, securities owned by
such holder if such rights are subordinate to the rights of a Holder of
Registrable Shares.
(b) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate. In any action or proceeding brought to enforce any provision
of this Agreement or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
(c) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departure from the provisions hereof may not be given
without the written consent of the Majority Holders and the Company.
(d) Notice Generally. Any notice, demand, request, consent,
----------------
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid, or
by telecopy and confirmed by telecopy answerback, addressed as follows:
(i) If to any Holder, at its last known address appearing on the
books of Company maintained for such purpose.
11
<PAGE>
(ii) If to Company, at
VCampus Corporation
Suite 500
8251 Greensboro Drive
McLean, Virginia 22102
Attention: Nat Kannan, CEO
Telecopy Number: (703) 893-1905
with a copy to
Wyrick Robbins Yates & Ponton LLP
Suite 300
4101 Lake Boone Trail
Raleigh, NC 27607
Attn: Larry E. Robbins
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or three Business Days after the same shall have been deposited in
the United States mail.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto
including any person to whom Registrable Securities are transferred.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law; Jurisdiction. This Agreement shall be governed by,
---------------------------
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to the conflict of laws provisions thereof.
Each of the parties hereby submits to personal jurisdiction and waives any
objection as to venue in the County of Allegheny, Commonwealth of Pennsylvania .
Service of process on the parties in any action arising out of or relating to
this Agreement shall be effective if mailed to the parties in accordance with
Section 10(d) hereof. The parties hereto waive all right to trial by jury in
any action or proceeding to enforce or defend any rights hereunder.
(h) Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law,
12
<PAGE>
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(i) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and Warrant, represents the complete agreement and understanding of
the parties hereto in respect of the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
VCAMPUS CORPORATION
By: /s/ Narasimhan P. Kannan
---------------------------------
Name: Narasimhan P. Kannan
Title: Chief Executive Officer
MASTECH CORPORATION
By: /s/ Ajmal Noorani
---------------------------------
Name: Ajmal Noorani
Title: Vice President, E Business Solutions
Division
14
<PAGE>
SCHEDULE I
----------
1. The Company has entered into agreements granting registration rights to all
of the parties under its currently effective Registration Statement on Form
S-1.
2. The Company granted incidental registration rights to each of BH Capital
Investments, L.P. and Excalibur Limited Partnership with respect to a total
of 55,000 shares of Common Stock issuable upon exercise of warrants.
15
<PAGE>
EXHIBIT 99.3
WARRANT
-------
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE AND THIS WARRANT AND SUCH SECURITIES
MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT THEREFOR OR AN
APPLICABLE EXEMPTION FROM REGISTRATION THEREFROM UNDER SAID ACT AND
SUCH LAWS.
VCampus Corporation
Warrant for the Purchase of Shares
of Common Stock
FOR VALUE RECEIVED and subject to the terms and conditions contained
herein, VCampus Corporation, a Delaware corporation (the "Company"), hereby
certifies that for value received Mastech Corporation, a Pennsylvania
corporation, through its business unit Mastech eVentures, or its permitted
assigns, is entitled to purchase from the Company at any time or from time to
time during the Exercise Period (as defined below) any or all of the Warrant
Shares (as defined below) for the Exercise Price (as defined below). The
Exercise Price shall not be subject to adjustment, except as set forth in
paragraph 3 hereof.
1. Definitions.
-----------
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Business Day" means any day that is not a Saturday, a Sunday or a
legal holiday in Pittsburgh, Pennsylvania.
"Capital Stock" means any and all shares, interests,
participations, or other equivalents (however designated) of capital stock, or
any and all equivalent ownership interests.
"Common Stock" means the common stock of the Company, $.01 par
value per share, and any Capital Stock into which such common stock may be
changed on or after the Issue Date and any class or series of Capital Stock of
the Company (regardless of how denominated), that has the right (subject to any
prior rights of any other class or series of stock) to participate in any
distribution of the assets or earnings of the Company without effective or
practical limit as to per share amount and shall also include shares of common
stock of any successor or acquiring corporation referred to in paragraph 3 (c)
received by or distributed to the holders of such Capital Stock in the
circumstances contemplated by paragraph 3(c).
<PAGE>
"Current Market Price," as of any date with respect to any
security, means the daily market price of such security for the previous
Business Day. The daily market price for each such Business Day shall be (i) the
last sale price on such day on the principal stock exchange or NASDAQ SmallCap
Market System ("NASDAQ/SCS") on which such Common Stock is then listed or
admitted to trading, (ii) if no sale takes place on such day on any exchange or
NASDAQ/SCS, the average of the last reported closing bid and asked prices on
such day as officially quoted on any such exchange or NASDAQ/SCS, (iii) if the
Common Stock is not then listed or admitted to trading on any stock exchange or
on the NASDAQ-SCS, the average of the last reported closing bid and asked prices
on such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automatic Quotation System or the National
Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged
in the business of reporting such prices, as furnished by any similar firm then
engaged in such business, or (v) if there is no such firm, as furnished by any
member of the National Association of Securities Dealers ("NASD") selected
mutually by the Purchaser and Company or, if they cannot agree upon such
selection, as selected by two such members of the NASD, one of which shall be
selected by the Purchaser and one of which shall be selected by the Company.
"Exercise Date" means the date on which the Holder exercises this
Warrant, in whole or in part.
"Exercise Period" means the period commencing on the Issue Date
and ending at 5:00 p.m., Eastern standard time, on the Termination Date.
"Exercise Price" means the Current Market Price for each Warrant
Share plus 20% of such Current Market Price; provided further, however, and
notwithstanding the foregoing: (i) the Exercise Price shall never exceed $6.125
per Warrant Share; and (ii) the Exercise Price shall never be less than $4.344
per Share ($4.344 determined based upon an approximately 44% premium to the
average closing price of the Common Stock for the 15 trading days ended January
3, 2000).
"Holder" means Mastech Corporation or any permitted transferee of
this Warrant.
"Issue Date" means the date upon which this Warrant is originally
issued.
"Merger Triggering Event" has the meaning assigned to that term
in paragraph 3(c).
"Person" means any individual, sole proprietorship, partnership,
corporation, limited liability company, joint venture, trust, association,
institution, public benefit corporation, governmental agency or other entity and
the heirs, executors, administrators, legal representatives, successors and
assigns of such Person, as the context may require.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of January 11, 2000, between the Company and Mastech
Corporation
-2-
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and the regulations promulgated thereunder.
"Stock Purchase Agreement" means the Stock Purchase Agreement,
dated as of January 11, 2000, between the Company and Mastech Corporation.
"Termination Date" means the first anniversary of the Issue Date;
provided, however, that if, on such date, the Company is then required, pursuant
- --------
to an effective request therefor by the Holder, to effect, or is in the process
of effecting, a registration under the Securities Act for an underwritten public
offering in which Warrant Shares are, pursuant to the Registration Rights
Agreement, entitled to be included, or if the Company is in default of any
obligations created by this Warrant, the Stock Purchase Agreement or by the
Registration Rights Agreement, the Termination Date shall be deemed to be, and
the right to exercise this Warrant and purchase Warrant Shares shall expire at
5:00 p.m., Eastern standard time, on, the 30th day following the date on which
such registration shall have become effective (but in no event later than 180
days beyond the date this Warrant otherwise would have expired) or on the 30th
day following the date all of such defaults have been cured, as the case may be;
and provided, further, that if an approval or waiver is required to be obtained
from a governmental authority (or a filing with a governmental authority and/or
expiration of a period of time following such filing) in order for an exercise
of this Warrant, in whole or in part, or the issuance of any or all of the
Warrant Shares upon such exercise, to comply with applicable law (including,
without limitation, the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976,
as amended) and the Holder delivers to the Company on or prior to the last date
with respect to which this Warrant can be exercised with respect to such Warrant
Shares a written notification of the Holder's intent to exercise this Warrant
and evidence reasonably satisfactory to the Company that the Holder has made all
filings required to be made by the Holder to obtain such approval or waiver or
to satisfy any other filing requirements, and a request that the Company make
all filings required to be made by the Company to obtain such approval or waiver
or to satisfy any other filing requirements, and the Holder thereafter
diligently continues to attempt to obtain such approval or waiver and/or
expiration of waiting period, then the Termination Date shall be deemed to be,
and the last date on which this Warrant can be exercised with respect to such
Warrant Shares shall be extended through, the date five Business Days after the
date on which a final ruling is made with respect to the filing(s) requesting
such approval or waiver or the expiration of such waiting period, as the case
may be. The Company agrees to provide reasonable assistance to, and cooperate
with, the Holder in making such filings required to be made by the Holder, and
the Company shall make all filings required to be made by the Company, for
obtaining such approvals or waivers or to satisfy any other filing requirements,
as are necessary for the exercise of this Warrant by the Holder not to
constitute a violation of any other law or regulation.
"Transaction Consideration" has the meaning assigned in paragraph
3(c).
"Warrant Consideration Amount" has the meaning specified in
Section 2(b) hereof.
-3-
<PAGE>
"Warrant Shares" means any of the shares of Common Stock issuable upon
exercise of this Warrant. The number of Warrant Shares shall initially be
450,000 shares of Common Stock, subject to adjustment on or after the Issue Date
pursuant only to the provisions of paragraph 3 of this Warrant.
2. Exercise of Warrant.
-------------------
(a) This Warrant may be exercised during the Exercise Period in
accordance with the vesting schedule set forth on Schedule A attached
----------
hereto, by the Holder by the surrender of this Warrant (with the
subscription duly executed) at the address set forth in paragraph 11(a)
hereof, together with proper payment of the Exercise Price.
Notwithstanding the foregoing, this Warrant shall become fully vested and
immediately exercisable in the event of: (i) a Merger Triggering Event; or
(ii) upon the breach of any covenant or obligation in this Warrant, the
Stock Purchase Agreement or the Registration Rights Agreement if such
breach is not cured within 30 days of notice of such breach delivered to
the Company. Payment for the Warrant Shares to be purchased shall be made
by wire transfer or certified or official bank check payable to the order
of the Company. If this Warrant is exercised in part, this Warrant must be
exercised for a whole number of shares of Common Stock, and the Holder is
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised. Upon such surrender
of this Warrant, the Company will issue a certificate or certificates in
the name of the Holder for the number of shares of Common Stock to which
the Holder shall be entitled. The Company shall not be required to issue a
fractional share of Common Stock upon any exercise of this Warrant, but the
Company shall pay an amount in cash equal to the Current Market Price for
one Warrant Share on the date the Warrant is exercised, multiplied by the
fraction of a Warrant Share that would be issuable on the exercise of this
Warrant.
(b) In the event any Holder elects upon exercise to surrender
this Warrant for payment of the applicable Exercise Price for the shares
being purchased, this Warrant shall be surrendered and canceled. To the
extent any Holder elects to pay all or part of the Exercise Price by
surrendering this Warrant to the Company, the number of purchasable shares
under this Warrant required to be surrendered as payment for the Exercise
Price (the "Warrant Consideration Amount") shall be equal to that number
----------------------------
obtained by dividing (i) that amount of the aggregate Exercise Price that
any Holder elects by written notice to the Company to pay by the
application of this Warrant (such notice setting forth, in addition, the
required reduction in the number of shares purchasable by this Warrant as
calculated and shown in sufficient detail in accordance with the
immediately succeeding clause), by (ii) the Exercise Price per share on the
date of exercise.
(c) In the event of any exercise of the rights represented by
this Warrant, (i) certificates for the shares of Warrant Shares so
purchased shall be dated the date of such exercise and delivered to the
Holder hereof within a reasonable time, not exceeding five Business Days
after such exercise, and the Holder hereof shall be deemed for all
-4-
<PAGE>
purposes to be the Holder of the shares of Warrant Shares so purchased as
of the date of such exercise, and (ii) unless this Warrant has expired, a
new Warrant representing the number of shares equal to (A) the number of
shares purchasable under this Warrant less (B) the sum of (1) the number of
shares of Warrant Shares purchased upon exercise and (2) the Warrant
Consideration Amount, if any, shall be issued to the Holder hereof within
such time.
3. Certain Adjustments. The Exercise Price and the kind and number of
-------------------
shares of Common Stock issuable upon exercise of this Warrant shall be subject
to adjustment as set forth below in this paragraph 3. The Company shall give the
registered Holder notice of any event described below which requires an
adjustment pursuant to this paragraph 3 in accordance with the provisions of
paragraph 4.
(a) Stock Dividends, Subdivisions and Combinations. If at any time
----------------------------------------------
the Company shall:
(i) fix a record date for the purpose of determining the
holders of its Common Stock entitled to receive a dividend payable in,
or other distribution of, additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock; or
(iv) issue any shares of its capital stock or other securities
by reclassification of the Common Stock (other than pursuant to
paragraph 3(c) below); then the Exercise Price shall be
proportionately decreased in the case of such a dividend or
distribution of additional shares of Common Stock or such a
subdivision, or proportionately increased in the case of such a
combination, or the kind of capital stock or other securities of the
Company which may be purchased shall be adjusted in the case of such a
reclassification of the Common Stock, each on the record date for such
dividend or distribution or effective date of such subdivision,
combination or reclassification, as the case may be, such that the
Holder shall be entitled to receive, upon exercise of this Warrant,
the aggregate number and kind of shares of Common Stock which, if this
Warrant had been fully exercised immediately prior to such date, it
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, distribution, subdivision, combination or
reclassification.
(b) Certain Other Dividends and Distributions. If at any time the
-----------------------------------------
Company shall fix a record date for the purpose of determining the holders
of its Common Stock entitled to receive any dividend or other distribution
(including any such distribution made in connection with a consolidation or
merger, but excluding any distribution referred to in subparagraph (a)
above) of:
-5-
<PAGE>
(i) any evidences of indebtedness, any shares of its capital
stock (including Convertible Securities but excluding Common Stock) or
any other securities or property of any nature whatsoever (including
cash but excluding normal cash dividends or cash distributions
permitted under applicable law so long as in each case such cash is
payable solely out of earnings or earned surplus of the Company); or
(ii) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its capital stock
(including Convertible Securities) or any other of its securities or
its property of any nature whatsoever;
then the Exercise Price shall be adjusted to equal the Exercise Price
in effect prior to such distribution or dividend multiplied by a
fraction, (A) the numerator of which shall be (1) the Current Market
Price per share of the Common Stock on such record date minus (2) the
amount allocable to one share of Common Stock of the fair value of any
and all such evidences of indebtedness, shares of stock, other
securities or property or warrants or other subscription or purchase
rights so distributable (as determined in good faith by the Board of
Directors of the Company and, unless waived by the Holder, supported
by an opinion from an investment banking firm of nationally recognized
standing approved by the Holder, which approval shall not be
unreasonably withheld), and (B) the denominator of which shall be such
Current Market Price per share of Common Stock on such record date.
Such adjustments shall be made whenever such a record date is fixed.
A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par
value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of
its Common Stock of such shares of such other class of stock within
the meaning of this subparagraph (b) and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of
the outstanding shares of Common Stock within the meaning of
subparagraph (a). The Company shall give to the Holder of this
Warrant not less than twenty (20) days' prior notice of any record
date referred to in this subparagraph (b) in accordance with the
provisions of paragraph 4.
(c) Adjustments for Consolidation, Merger, Sale of Assets,
------------------------------------------------------
Reorganization, etc.
--------------------
(i) In case the Company after the date hereof (A) shall
consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation of such consolidation or merger,
or (B) shall permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or surviving
Person but, in connection with such consolidation or
-6-
<PAGE>
merger, the Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other property,
or (C) shall transfer all or substantially all of its properties or
assets to any other Person or (D) shall effect a capital
reorganization or reclassification of the Common Stock (other than a
capital reorganization or reclassification for which adjustment in the
Exercise Price is provided in subparagraph 3(a) or subparagraph 3(b)),
then, and in the case of each such transaction, proper provision shall
be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled
(x) upon the exercise hereof at any time after the consummation of
such transaction, to the extent this Warrant is not exercised prior to
such transaction, or is redeemed in connection with such transaction,
to receive at the Exercise Price in effect at the time immediately
prior to the consummation of such transaction in lieu of the Common
Stock issuable upon such exercise of this Warrant prior to such
transaction the stock and other securities, cash and property to which
such Holder would have been entitled upon the consummation of such
transaction if such Holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible
to the adjustments provided for in this paragraph 3 or (y) to sell
this Warrant (or, at such Holder's election, a portion thereof) to the
Person continuing after or surviving such event specified in clauses
(A) through (D) above, or to the Company (if the Company is the
continuing or surviving Person) at a sales price equal to the amount
of cash, property and/or the number of shares of Common Stock or other
securities to which a holder of the number of shares of Common Stock
which would otherwise have been delivered upon the exercise of this
Warrant or the portion hereof redeemed would have been entitled upon
the effective date or closing of any such event specified in clauses
(A) through (D) above (the "Event Consideration"), less the amount or
-------------------
portion of such Event Consideration having a fair value equal to the
aggregate Exercise Price applicable to this Warrant or the portion
hereof so sold.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Company will not effect any of the transactions
described in clauses (A) through (D) of the above subparagraph (i)
unless, prior to the consummation thereof, the surviving Person (if
other than the Company) in any merger or consolidation described in
such clauses, each Person which is to acquire the Company's assets in
any transaction described in clause (c) above, and each Person (other
than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as
provided herein, shall assume, by written instrument delivered to, and
reasonably satisfactory to, the Holder of this Warrant, (A) the
obligations of the Company under this Warrant (and if the Company
shall survive the consummation of such transaction, such assumption
shall be in addition to, and, if requested by the Holder, shall not
release the Company from, any continuing obligations of the Company
under this Warrant) and (B) the obligation to deliver to such Holder
such shares of stock, securities, cash or, property as, in accordance
with the foregoing provisions of this paragraph (c), such
-7-
<PAGE>
Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such
Person, which counsel shall be reasonably satisfactory to such Holder,
stating that this Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without limitation, all of the
provisions of this paragraph 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to
deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
(iii) In case any of the transactions described in clauses (A)
through (D) of subparagraph (i) shall be proposed to be effected (any
such transaction a "Merger Triggering Event"), the Holder of this
-----------------------
Warrant may, and the Company agrees that as a condition to the
consummation of any such Merger Triggering Event, the Company shall
secure the right of such Holder to, sell this Warrant (or, at such
Holder's election, a portion thereof) to the Person continuing after
or surviving such Merger Triggering Event, or the Company (if the
Company is the continuing or surviving Person), simultaneously with,
the effective date or closing of such Merger Triggering Event, at a
sale price equal to the amount of cash, property and/or the number of
shares of Common Stock or other securities to which a holder of the
number of shares of Common Stock which would otherwise have been
deliverable upon the exercise of this Warrant or the portion hereof
redeemed would have been entitled upon the effective date or closing
of such Merger Triggering Event (the "Transaction Consideration"),
-------------------------
less the amount or portion of such Transaction Consideration having a
fair value equal to the aggregate Exercise Price applicable to this
Warrant or the portion hereof so sold. In the event that the Holder
of this Warrant exercises its rights under this subparagraph (iii) to
sell this Warrant (or a portion thereof) simultaneously with the
effective date or closing of any such Merger Triggering Event, the
Company shall not effect any such Merger Triggering Event unless upon
or prior to the consummation thereof such amounts of cash, property,
Common Stock, or other securities are delivered to the Holder of this
Warrant. Not less than twenty (20) days' prior notice of any Merger
Triggering Event shall be given to the Holder of this Warrant in
accordance with paragraph 4.
(d) Adjustment of Number of Warrant Shares. Upon each adjustment of
--------------------------------------
the Exercise Price, as the case may be, pursuant to subparagraph (a) or (b)
of this paragraph 3, this Warrant shall be deemed to evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock covered
by this Warrant immediately prior to such adjustment by the Exercise Price
in effect prior to such adjustment and dividing the product so obtained by
the Exercise Price in effect after such adjustment. If the Company shall
be in default under any provision of this Warrant so that shares issued at
the Exercise Price adjusted in accordance with the terms of this Warrant
would not be validly issued, the adjustment of number of shares provided
for in the foregoing sentence shall nonetheless be made, and the Holder of
this Warrant shall be entitled to purchase such greater number of shares at
the lowest price at which such shares may then be validly issued under
-8-
<PAGE>
applicable law. Such exercise shall not constitute a waiver of any claim
arising against the Company by reason of its default under this Warrant.
(e) When Adjustments to Be Made. No adjustment in the Exercise Price
---------------------------
shall be required by this paragraph 3 if such adjustment either by itself
or with other adjustments not previously made would require an increase or
decrease of less than 1% in such price. Any adjustment representing a
change of less than such minimum amount which is postponed shall be carried
forward and made as soon as such adjustment, together with other
adjustments required by this paragraph 3 and not previously made, would
result in a minimum adjustment. Notwithstanding the foregoing, any
adjustment carried forward shall be made no later than ten Business Days
prior to the Termination Date. All calculations under this subparagraph
(e) shall be made to the nearest cent. For the purpose of any adjustment,
any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(f) Fractional Interests. In computing adjustments under this
--------------------
paragraph 3, fractional interests in Common Stock shall be taken into
account to the nearest whole share.
(g) When Adjustments Not Required. If the Company shall fix a record
-----------------------------
date for the purpose of determining the holders of its Common Stock
entitled to receive a dividend or distribution and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its plan
to pay or deliver such dividend or distribution, then thereafter no
adjustment shall be required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall be rescinded and
annulled.
(h) Certain Limitations. Subject to the provisions of paragraph 6,
-------------------
there shall be no adjustment of the Exercise Price hereunder to the extent
that such adjustment would cause the Exercise Price to be less than the par
value per share of the Common Stock, which par value shall not at any time
while this Warrant is outstanding exceed $.01.
(i) Other Action Affecting Common Stock. In case after the date
-----------------------------------
hereof the Company shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subparagraphs (a) through
(h) of this paragraph 3, inclusive, and the failure to make any adjustment
would not fairly protect the purchase rights represented by this Warrant in
accordance with the essential intent and principle of this paragraph 3,
then the Exercise Price and/or the number of Warrant Shares shall be
adjusted in such manner and at such time as the Board of Directors of the
Company may in good faith determine to be equitable in the circumstances.
4. Notices.
-------
(a) Notices of Adjustments. Whenever the Exercise Price or the number
----------------------
of Warrant Shares shall be adjusted pursuant to paragraph 3, the Company shall
forthwith deliver to the Holder a certificate prepared by the Company, setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was
-9-
<PAGE>
calculated (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights), specifying the number of Warrant
Shares then issuable hereunder, the Exercise Price after giving effect to
such adjustment and (to the extent applicable) describing the number and
kind of any other shares of stock for which the Warrant is exercisable. In
the event that the Holder shall disagree with any such adjustment or with
the terms of any new agreement to be entered into pursuant to paragraph
3(c), it shall notify the Company thereof and any disagreement shall be
resolved by an investment banking firm of nationally recognized standing
mutually agreeable to the Company and the Holder, or if the Company and the
Holder are unable to agree upon an investment banking firm, an investment
banking firm selected by an investment banking firm chosen by the Company
and an investment banking firm chosen by the Holder.
(b) Notices of Corporate Action. In the event of any of the
---------------------------
following:
(i) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, which dividend, distribution or other right affects
the rights of the Holder, or
(ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other party or any transfer of all or substantially all the assets of
the Company to any other party, or
(iii) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
The Company will mail to the Holder a notice specifying (A) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distribution or right and the amount and character of any such dividend,
distribution or right and (B) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least twenty (20) days prior to the date herein specified, in the case
of any date referred to in the foregoing subdivision (A), and at least twenty
(20) days prior to the date therein specified, in the case of the date referred
to in the foregoing subdivision (B).
5. Reservation of Warrant Shares. The Company agrees that, upon
-----------------------------
commencement of the Exercise Period and at all times prior to the Termination
Date, the Company will at all
-10-
<PAGE>
times have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the shares of the Common
Stock and other securities and properties as from time to time shall be
receivable upon the exercise of this Warrant, free and clear of all restrictions
on sale or transfer and free and clear of all preemptive rights. The Company
shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of the Holders hereof against
impairment. Without limiting the generality of the foregoing, the Company will
(a) not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
6. Fully Paid Stock; Taxes. The shares of Common Stock represented
-----------------------
by each and every certificate for Warrant Shares delivered on the exercise of
this Warrant and the payment of the Exercise Price set forth herein shall, at
the time of such delivery, be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights, and the Company will take
all such actions as may be necessary to assure that the par value or stated
value, if any, per share of the Common Stock is at all times equal to or less
than the then Exercise Price. If the Exercise Price is at any time less than
the par value of the Warrant Shares or if the Warrant at any time is exercisable
by its delivery alone and without payment of any additional consideration, the
Company also covenants and agrees to cause to be taken such action (whether by
decreasing the par value of the Warrant Shares, the conversion of the Warrant
Shares from par value to no par value, or otherwise) as will permit the exercise
of this Warrant without any additional payment by the Holder hereof (other than
payment of the Exercise Price, if any, and applicable transfer taxes, if any)
and the issuance of the Warrant Shares, which Warrant Shares, upon such
issuance, will be fully paid and non-assessable. The Company further covenants
and agrees that it will pay, when due and payable, any and all federal and state
stamp, original issue or similar taxes which may be payable in respect of the
issuance of any Warrant Shares or certificate therefor and that the Warrant
Shares will be otherwise free from all taxes, liens and charges with respect to
issuance.
7. Transferability. Upon execution and delivery of an assignment
---------------
instrument substantially in the form attached hereto, an assignee shall be a
party to this Agreement and shall have the rights and obligations of the Holder,
to the extent of such assignment, and the Holder shall be released from its
obligations hereunder to a corresponding extent. Upon the consummation of any
assignment permitted pursuant to this paragraph, the Holder and the Company
shall make appropriate arrangements, so that, if required, new Warrants shall be
issued
-11-
<PAGE>
to the Holder and the assignee. The Holder shall give the Company prior written
notice of the date that any such assignment shall become effective, which date
shall be no less than ten days after the date such notice is given.
8. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to
----------------------
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity or bond reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of the like
date, tenor and denomination.
9. Holder Not Shareholder. This Warrant does not confer upon the
----------------------
Holder any right to vote or to consent to or receive notice as a shareholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a shareholder, prior to the exercise hereof.
10. Surrender. The Holder may at any time surrender all or a portion
---------
of this Warrant for cancellation by transmitting same to the Company at its
address set forth herein accompanied by a written notice setting forth the
Holder's intention to surrender this Warrant (or such portion) for cancellation
and upon such transmittal by the Holder, this Warrant (or such portion) shall
become null and void and of no further force and effect.
11. Notices. Any notice, demand, request, consent, approval,
-------
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(a) in the case of the Company, to:
VCampus Corporation
8251 Greensboro Drive, Suite 500
McLean, Virginia 22101
Attention: Nat Kannan
with a copy to:
Wyrick Robbins Yates & Ponton LLP
Suite 300
4101 Lake Boone Trail
Raleigh, North Carolina 27607
Attention: Larry E. Robbins
(b) in the case of the Holder, to:
Mastech Corporation
1004 McKee Road
-12-
<PAGE>
Oakdale, Pennsylvania 15071
Attention: Ajmal Noorani
with a copy to:
Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, Pennsylvania 15219-1410
Attention: Carl A. Cohen, Esq. and James J. Barnes, Esq.
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, delivery or other communication hereunder shall be deemed to
have been duly given or served on the date on which personally delivered, with
receipt acknowledged, or three Business Days after the same shall have been
deposited in the United States mail. Failure or delay in delivering copies of
any notice, demand, request, approval, declaration, delivery or other
communication to the person designated above to receive a copy shall in no way
adversely affect the effectiveness of such notice, demand, request, approval,
declaration, delivery or other communication.
12. Miscellaneous.
-------------
(a) Remedies. The Company agrees that monetary damages would not
--------
be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive the
defense in any action for specific performance that a remedy at law
would be adequate. Accordingly, it is agreed that the Holder shall be
entitled to an injunction, restraining order or other equitable relief
to prevent breaches of this Agreement and to enforce specifically the
terms and provisions hereof in any court of competent jurisdiction in
the United States or any state thereof. Such remedies shall be
cumulative and nonexclusive and shall be in addition to any other
rights and remedies the parties may have under this Agreement.
(b) No Inconsistent Agreements. The Company will not on or after the
--------------------------
date of this Warrant enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holder
in this Warrant, otherwise conflicts with the provisions hereof or
would be violated by the performance of the Company's obligations
hereunder. The Company represents and warrants that, except as set
forth on Schedule B, the rights granted to the Holder hereunder do not
----------
in any way conflict with and are not inconsistent with the rights
granted to the holders of the Company's securities under any such
agreements.
-13-
<PAGE>
(c) Successors and Assigns. Subject to the provisions of
----------------------
paragraph 7 hereof, this Warrant shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties.
(d) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
(e) Amendments and Waivers. The provisions of this Warrant,
----------------------
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the consent of both the
Company and the Holder.
(f) Headings. The headings of this Warrant have been inserted as
--------
a matter of convenience and shall not affect the construction hereof.
(g) Applicable Law. This Warrant shall be governed by and
--------------
construed in accordance with the laws of the Commonwealth of
Pennsylvania. Each party hereto agrees to submit to the nonexclusive
jurisdiction of the courts in the City of Pittsburgh in the
Commonwealth of Pennsylvania in any action or proceeding arising out
of or relating to this Agreement.
(h) Registration Provisions. Except as provided in the
-----------------------
Registration Rights Agreement, the Company is not required under the
terms hereof to register any securities issued pursuant hereto, and
the subsequent transfer of any shares issued pursuant hereto may
require registration under the Securities Act as well as under
applicable state laws. In the event the shares issued upon the
exercise of this Warrant are not registered, the Holder acknowledges
that any stock certificate evidencing shares acquired on exercise of
this Warrant shall contain a legend restricting transferability
substantially as follows:
THIS SECURITY HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR
SOLD UNLESS REGISTERED AND/OR QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION
IS APPLICABLE. THEREFORE, NO SALE OR TRANSFER OF THIS
SECURITY SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED
TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION, UNLESS (A) SUCH
TRANSACTION SHALL HAVE BEEN REGISTERED UNDER THE ACT AND
QUALIFIED OR APPROVED UNDER APPROPRIATE STATE SECURITIES LAWS,
OR (B) THE ISSUER SHALL HAVE FIRST RECEIVED AN OPINION OF
COUNSEL
-14-
<PAGE>
REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION,
QUALIFICATION OR APPROVAL IS NOT REQUIRED.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its name by its Chief Executive Officer thereunto duly authorized.
Dated: January 11, 2000
VCAMPUS CORPORATION
By: /s/ Narasimhan P. Kannan
------------------------------------
Name: Narasimhan P. Kannan
Title: Chief Executive Officer
-16-
<PAGE>
SUBSCRIPTION
The undersigned, __________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase _______ shares of
the Common Stock of VCampus Corporation, covered by said Warrant, and makes
payment therefor in full at the price per share provided by said Warrant.
Dated:
_________________________________________
(Signature)
_________________________________________
(Address)
ASSIGNMENT
FOR VALUE RECEIVED, __________________, hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint _______________________, attorney,
to transfer said Warrant on the books of VCampus Corporation.
Dated:
_________________________________________
(Signature)
_________________________________________
(Address)
<PAGE>
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, ____________________ hereby assigns and transfers unto
_______________________ the right to purchase [ ] shares of the Common Stock
of VCampus Corporation by the foregoing Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint _______________________,
attorney, to transfer said Warrant on the books of VCampus Corporation.
Dated:____________________
_________________________________________
(Signature)
_________________________________________
(Address)
<PAGE>
SCHEDULE A
The Warrant shall vest in accordance with the following schedule:
(a) 150,000 shares of Common Stock shall vest upon the two (2) month
anniversary date of this Warrant;
(b) 150,000 shares of Common Stock shall vest upon the four (4) month
anniversary date of this Warrant;
(c) 150,000 shares of Common Stock shall vest upon the six (6) month
anniversary date of this Warrant.
