Document:

exv4w1

 

Exhibit 4.1

SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE

AGREEMENT

Dated as of December 31, 2004

among

THE VIALINK COMPANY

and

THE PURCHASERS LISTED ON EXHIBIT A

 

 

SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

     This SERIES F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the “Agreement”) is dated as of
December 31, 2004, by and among The viaLink Company, a Delaware corporation (the “Company”), and
each of the Purchasers of shares of Series F Convertible Preferred Stock of the Company whose names
are set forth on Exhibit A hereto (individually, a “Purchaser” and collectively, the “Purchasers”).

     The parties hereto agree as follows:

Article I

Purchase and Sale of Preferred Stock

     Section 1.1. Purchase and Sale of Stock. Upon the following terms and conditions, the
Company shall issue and sell to the Purchasers and each of the Purchasers shall purchase from the
Company, the number of shares of the Company’s Series F Convertible Preferred Stock, par value
$.001 per share (the “Preferred Shares”), at a purchase price of $10,000 per share, set forth with
respect to such Purchaser on Exhibit A hereto. The aggregate purchase price for the Preferred
Shares shall be ___and ___/100 Dollars ($___) [between $3,650,000 and $3,950,000].
The designation, rights, preferences and other terms and provisions of the Series F Convertible
Preferred Stock are set forth in the Certificate of Designation of the Relative Rights and
Preferences of the Series F Convertible Preferred Stock attached hereto as Exhibit B (the
“Certificate of Designation”). The Company and the Purchasers are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended
(the “Securities Act”) or Section 4(2) of the Securities Act.

     Section 1.2. The Conversion Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar contractual rights of
stockholders, such number of shares of Company common stock, par value $.001 per share (the “Common
Stock”) as shall from time to time be sufficient to effect the conversion of all of the Preferred
Shares then outstanding; provided that the number of shares of Common Stock so reserved
shall at no time be less than 100% of its authorized but unissued shares of its Common Stock, to
effect the conversion of the Preferred Shares. Any shares of Common Stock issuable upon conversion
of the Preferred Shares (and such shares when issued) are herein referred to as the “Conversion
Shares”. The Preferred Shares and the Conversion Shares are sometimes collectively referred to as
the “Shares”.

     Section 1.3. Purchase Price and Closing. The Company agrees to issue and sell to the
Purchasers and, in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not
jointly, agree to purchase that number of the Preferred Shares set forth opposite their respective
names on Exhibit A. The aggregate purchase price of the Preferred Shares being acquired by

 

 

each
Purchaser is set forth opposite such Purchaser’s name on Exhibit A (for each such purchaser, the
“Purchase Price” and collectively referred to as the “Purchase Prices”). The closing under this
Agreement (the “Closing”) shall take place no later than December 31, 2004 at the offices
of Hallett & Perrin, P.C., 2001 Bryan Street, Suite 3900, Dallas, Texas 75201 at 1:00 PM (central
time) upon the satisfaction of each of the conditions set forth in Section 4 hereof (the
“Closing Date”).

Article II

Representations and Warranties

     Section 2.1. Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Purchasers, except as set forth in the
Company’s disclosure schedule delivered with this Agreement as follows:

     (a) Organization, Good Standing and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power to own, lease and operate its properties and assets and to conduct
its business as it is now being conducted. The Company does not have any subsidiaries except as
set forth in the Company’s Form 10-KSB for the fiscal year ended December 31, 2003, including the
accompanying financial statements (the “Form 10-KSB”), or in the Company’s Form 10-QSB for the
fiscal quarters ended September 30, 2004, June 30, 2004 or March 31, 2004 (collectively, the “Form
10-QSB”), or on Schedule 2.1(a) hereto. The Company and each such subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so
qualified will not have a Material Adverse Effect (as defined in Section 2.1(e) hereof) on the
Company’s financial condition.

     (b) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration Rights Agreement attached
hereto as Exhibit C (the “Registration Rights Agreement”), the Transfer Agent Instructions (as
defined in Section 3.12), and the Certificate of Designation (collectively, the “Transaction
Documents”) and to issue and sell the Shares in accordance with the terms hereof. The execution,
delivery and performance of the Transaction Documents and the Certificate of Designation by the
Company and the consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is required. This Agreement
has been duly executed and delivered by
the Company. The other Transaction Documents will have been duly executed and delivered by the
Company at the Closing. Each of the Transaction Documents constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies
or by other equitable principles of general application.

 

 

     (c) Capitalization. The authorized capital stock of the Company and the shares
thereof currently issued and outstanding as of September 30, 2004, are set forth on Schedule
2.1(c) hereto. All of the outstanding shares of the Company’s Common Stock and the Company’s
Series D Convertible Preferred Stock, par value $.001 per share, have been duly and validly
authorized. Except as set forth in this Agreement and the Registration Rights Agreement and as set
forth in the Form 10-KSB, Form 10-QSB or on Schedule 2.1(c) hereto, no shares of Common
Stock are entitled to preemptive rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and the Registration Rights Agreement and as set
forth in the Form 10-KSB, Form 10-QSB or on Schedule 2.1(c), there are no contracts,
commitments, understandings, or arrangements by which the Company is or may become bound to issue
additional shares of the capital stock of the Company or options, securities or rights convertible
into shares of capital stock of the Company. Except for customary transfer restrictions contained
in agreements entered into by the Company in order to sell restricted securities or as provided in
the Form 10-KSB, Form 10-QSB or on Schedule 2.1 (c) hereto, the Company is not a party to
any agreement granting registration or anti-dilution rights to any person with respect to any of
its equity or debt securities. The Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock of the Company,
other than (i) those set forth in this Agreement, and (ii) . Except as set forth in the Form
10-KSB, Form 10-QSB or on Schedule 2.1(c) hereto, the offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior to the Closing
complied with all applicable Federal and state securities laws, and no stockholder has a right of
rescission or claim for damages with respect thereto which would have a Material Adverse Effect (as
defined below) on the Company’s financial condition or operating results. The Company has
furnished or made available to the Purchasers true and correct copies of the Company’s Articles of
Incorporation as in effect on the date hereof (the “Articles”), and the Company’s Bylaws as in
effect on the date hereof (the “Bylaws”). For the purposes of this Agreement, “Material Adverse
Effect” means any adverse effect on the business, operations, properties, prospects, or financial
condition of the Company or its subsidiaries and which is material to such entity or other entities
controlling or controlled by such entity.

     (d) Issuance of Shares. The Preferred Shares to be issued at the Closing have been
duly authorized by all necessary corporate action and the Preferred Shares, when paid for or issued
in accordance with the terms hereof, shall be validly issued and outstanding, fully paid and
nonassessable and entitled to the rights and preferences set forth in the Certificate of
Designation. When the Conversion Shares are issued in accordance with the terms of the Preferred
Shares as set forth in the Certificate of Designation, such shares will be duly authorized by all
necessary corporate action and validly issued and outstanding, fully paid and nonassessable, and
the holders shall be entitled to all rights accorded to a holder of Common Stock.

     (e) No Conflicts. Except as disclosed in Schedule 2.1(e) hereto, the
execution, delivery and performance of the Transaction Documents by the Company, the performance by
the Company of its obligations under the Certificate of Designation and the

 

 

consummation by the
Company of the transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company’s Articles or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage,
deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which
the Company is a party or by which it or its properties or assets are bound, (iii) create or impose
a lien, mortgage, security interest, charge or encumbrance of any nature on any property of the
Company under any agreement or any commitment to which the Company is a party or by which the
Company is bound or by which any of its respective properties or assets are bound, or (iv) result
in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment
or decree (including Federal and state securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases other than violations pursuant to clauses
(i) and (iv) above, for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being conducted in
violation of any laws, ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a Material Adverse Effect.
The Company is not required under Federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its obligations under the
Transaction Documents or the Certificate of Designation, or issue and sell the Preferred Shares and
the Conversion Shares in accordance with the terms hereof or thereof (other than any filings which
may be required to be made by the Company with the Commission or state securities administrators
subsequent to the Closing, any registration statement which may be filed pursuant hereto, and the
Certificate of Designation); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers herein.

     (f) Commission Documents, Financial Statements. The Common Stock of the Company is
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and, except as disclosed in the Form 10-KSB, Form 10-QSB or on Schedule
2.1(f) hereto, since September 30, 2004, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the Commission pursuant to
the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a)
or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the “Commission Documents”). The Company has delivered or made
available to each of the Purchasers true and complete copies of the Commission Documents filed with
the Commission since September 30, 2004. The Company has not provided to the Purchasers any
material non-public information or other information which, according to applicable law, rule or
regulation, was required to have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this Agreement. As of their
respective dates, the Form 10-KSB and the Form 10-QSB complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder and

 

 

other federal, state and local laws, rules and regulations applicable to such
documents, and, as of their respective dates, none of the Form 10-KSB and the Form 10-QSB contained
any untrue statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other applicable rules
and regulations with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).

     (g) Subsidiaries. The Form 10-KSB, Form 10-QSB or Schedule 2.1(g) hereto sets
forth each subsidiary of the Company, showing the jurisdiction of its incorporation or organization
and showing the percentage of each person’s ownership of the outstanding stock or other interests
of such subsidiary. For the purposes of this Agreement, “subsidiary” shall mean any corporation or
other entity of which at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors or other persons
performing similar functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. All of the outstanding shares of capital stock of each subsidiary have
been duly authorized and validly issued, and are fully paid and
nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants
or agreements granted or issued by or binding upon any subsidiary for the purchase or acquisition
of any shares of capital stock of any subsidiary or any other securities convertible into,
exchangeable for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the capital stock of any subsidiary or any
convertible securities, rights, warrants or options of the type described in the preceding
sentence. Neither the Company nor any subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock of any subsidiary.

     (h) No Material Adverse Change. Since September 30, 2004, the date through which the
most recent annual report of the Company on Form 10-QSB has been prepared and filed with the
Commission, a copy of which is included in the Commission Documents, the Company has not
experienced or suffered any Material Adverse Effect, except as disclosed on Schedule 2.1(h)
hereto.

     (i) No Undisclosed Liabilities. Except as disclosed in the Form 10-KSB, Form 10-QSB
or on Schedule 2.1(i) hereto, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary
course of the Company’s or its subsidiaries respective businesses since September 30, 2004 and

 

 

which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the
Company or its subsidiaries.

     (j) No Undisclosed Events or Circumstances. No event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.

     (k) Indebtedness. The Form 10-KSB, Form 10-QSB, Commission Documents or Schedule
2.1(k) hereto sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations
in respect of Indebtedness of others, whether or not the same are or should be reflected in the
Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of business;
and (c) the present value of any lease payments in excess of $25,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any subsidiary is in default with
respect to any Indebtedness.

     (l) Title to Assets. Each of the Company and the subsidiaries has good and marketable
title to all of its real and personal property reflected in the Commission Documents, free and
clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except
for those indicated in the Form 10-KSB, Form 10-QSB, Commission Documents or on Schedule
2.1(l) hereto or such that, individually or in the aggregate, do not cause a Material Adverse
Effect on the Company’s financial condition or operating results. All said leases of the Company
and each of its subsidiaries are valid and subsisting and in full force and effect.

     (m) Actions Pending. There is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or any other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any subsidiary which questions the validity of this
Agreement or any of the other Transaction Documents or the transactions contemplated hereby or
thereby or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the
Form 10-KSB, Form 10-QSB or on Schedule 2.1(m) hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending
or, to the knowledge of the Company, threatened, against or involving the Company, any subsidiary
or any of their respective properties or assets. Except as set forth in the Form 10-KSB, Form
10-QSB or Schedule 2.1(m) hereto, there are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or regulatory body against the Company
or any subsidiary or any officers or directors of the Company or subsidiary in their capacities as
such.

     (n) Compliance with Law. The business of the Company and the subsidiaries has been
and is presently being conducted in accordance with all applicable federal, state and

 

 

local
governmental laws, rules, regulations and ordinances, except as set forth in the Form 10-KSB, Form
10-QSB, on Schedule 2.1(n) hereto or such that, individually or in the aggregate, do not
cause a Material Adverse Effect. The Company and each of its subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

     (o) Taxes. Except as set forth in the Form 10-KSB, Form 10-QSB or on Schedule
2.1(o) hereto, the Company and each of the subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid or made provisions
for the payment of all taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of the Company and the
subsidiaries for all current taxes and other charges to which the Company or any subsidiary is
subject and which are not currently due and payable. Except as disclosed on Schedule
2.1(o) hereto, none of the federal income tax returns of the Company or any subsidiary have
been audited by the Internal Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever, whether pending or threatened against the Company or any subsidiary for any period, nor
of any basis for any such assessment, adjustment or contingency.

     (p) Certain Fees. Except as set forth in this Agreement or on Schedule 2.1(p)
hereto, no brokers, finders or financial advisory fees or commissions will be payable by the
Company or any subsidiary or any Purchaser with respect to the transactions contemplated by this
Agreement.

     (q) Disclosure. To the best of the Company’s knowledge, neither this Agreement or the
Schedules hereto nor any other documents, certificates or instruments furnished to the Purchasers
by or on behalf of the Company or any subsidiary in connection with the transactions contemplated
by this Agreement contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light of the circumstances
under which they were made herein or therein, not misleading.

     (r) Operation of Business. The Company and each of the subsidiaries owns or possesses
all patents, trademarks, domain names (whether or not registered) and any patentable improvements
or copyrightable derivative works thereof, websites and intellectual property rights relating
thereto, service marks, trade names, copyrights, licenses and authorizations as set forth in the
Form 10-KSB, Form 10-QSB or on Schedule 2.1(r) hereto, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted without any
conflict with the rights of others.

     (s) Environmental Compliance. The Company and each of its subsidiaries have obtained
all material approvals, authorization, certificates, consents, licenses, orders and permits or
other similar authorizations of all governmental authorities, or from any other person, that are
required under any Environmental Laws. The Form 10-KSB or Form 10-QSB sets forth

 

 

all material
permits, licenses and other authorizations issued under any Environmental Laws to the Company or
its subsidiaries. “Environmental Laws” shall mean all applicable laws relating to the protection
of the environment including, without limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of hazardous substances, chemical substances,
pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous
in nature. The Company has all necessary governmental approvals required under all Environmental
Laws and used in its business or in the business of any of its subsidiaries. The Company and each
of its subsidiaries are also in compliance with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or
imposed under all Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or in any way affecting the Company or
its subsidiaries that violate or may violate any Environmental Law after the Closing Date or that
may give rise to any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii)
based on or related to the manufacture, processing, distribution, use, treatment, storage
(including without limitation underground storage tanks), disposal, transport or handling, or the
emission, discharge, release or threatened release of any hazardous substance. “Environmental
Liabilities” means all liabilities of a person (whether such liabilities are owed by such person to
governmental authorities, third parties or otherwise) whether currently in existence or arising
hereafter which arise under or relate to any Environmental Law.

     (t) Books and Record Internal Accounting Controls. The records and documents of the
Company and its subsidiaries accurately reflect in all material respects the information relating
to the business of the Company and the subsidiaries, the location and collection of their assets,
and the nature of all transactions giving rise to the obligations or accounts receivable of the
Company or any subsidiary. The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient, in the judgment of the Company’s board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions is taken with respect to any
differences.

     (u) Material Agreements. Except as set forth in the Form 10-KSB, Form 10-QSB,
Commission Documents, on Schedule 2.1(u) hereto or on any other schedule hereto, neither
the Company nor any subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to a registration statement on Form S-2 or applicable form (collectively,
“Material Agreements”) if the Company or any subsidiary were registering

 

 

securities under the
Securities Act. The Company and each of its subsidiaries has in all material respects performed
all the obligations required to be performed by them to date under the foregoing agreements, have
received no notice of default and, to the best of the Company’s knowledge are not in default under
any Material Agreement now in effect, the result of which could cause a Material Adverse Effect.
No written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of
the Company or of any subsidiary limits or shall limit the payment of dividends on the Company’s
Preferred Shares, other Preferred Stock, if any, or its Common Stock.

     (v) Transactions with Affiliates. Except as set forth in the Form 10-KSB, Form 10-QSB
or on Schedule 2.1(v) hereto, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing transactions between (a) the
Company, any subsidiary or any of their respective customers or suppliers on the one hand, and (b)
on the other hand, any officer, employee, consultant or director of the Company, or any of its
subsidiaries, or any person owning any capital stock of the Company or any subsidiary or any member
of the immediate family of such officer, employee, consultant, director or stockholder or any
corporation or other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee, consultant, director or
stockholder.

     (w) Securities Act of 1933. Based in material part upon the representations herein of
the Purchasers, the Company has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of the Shares hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy any of the Shares or similar securities to, or solicit offers with
respect thereto from, or enter into any preliminary conversations or negotiations relating thereto
with, any person, or has taken or will take any action so as to bring the issuance and sale of any
of the Shares under the registration provisions of the Securities Act and applicable state
securities laws, and neither the Company nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of
the Shares.

     (x) Governmental Approvals. Except as set forth in the Form 10-KSB or Form 10-QSB,
and except for the filing of any notice prior or subsequent to the Closing Date that may be
required under applicable state and/or Federal securities laws (which if required, shall be filed
on a timely basis), including the filing of a registration statement or statements pursuant to the
Registration Rights Agreement, and the filing of the Certificate of Designation with the Secretary
of State of the State of Delaware, no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the
execution or delivery of the Preferred Shares, or for the performance by the Company of its
obligations under the Transaction Documents or the Certificate of Designation.

     (y) Employees. Neither the Company nor any subsidiary has any collective bargaining
arrangements or agreements covering any of its employees, except as set forth in the

 

 

Form 10-KSB,
Form 10-QSB or on Schedule 2.1(y) hereto. Except as set
forth in the Form 10-KSB, Form
10-QSB or on Schedule 2.1(y) hereto, neither the Company nor any subsidiary has any
employment contract, agreement regarding proprietary information, non-competition agreement,
non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since September 30, 2004, no officer,
consultant or key employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could have a Material Adverse Effect, has terminated or, to the knowledge of
the Company, has any present intention of terminating his or her employment or engagement with the
Company or any subsidiary.

     (z) Absence of Certain Developments. Except as provided in the Form 10-KSB, Form
10-QSB, Commission Documents or in Schedule 2.1(z) hereto, since September 30, 2004,
neither the Company nor any subsidiary has:

          (i) issued any stock, bonds or other corporate securities or any rights, options or warrants
with respect thereto;

          (ii) borrowed any amount or incurred or become subject to any liabilities (absolute or
contingent) except current liabilities incurred in the ordinary course of business which are
comparable in nature and amount to the current liabilities incurred in the ordinary course of
business during the comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company’s or such subsidiary’s business;

          (iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary course of business;

          (iv) declared or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock;

          (v) sold, assigned or transferred any other tangible assets, or canceled any debts or claims,
except in the ordinary course of business;

          (vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights,
trade secrets or other intangible assets or intellectual property rights, or disclosed any
proprietary confidential information to any person except to customers in the ordinary course of
business or to the Purchasers or their representatives;

          (vii) suffered any substantial losses or waived any rights of material value, whether or not
in the ordinary course of business, or suffered the loss of any material amount of prospective
business;

          (viii) made any changes in employee compensation except in the ordinary course of business and
consistent with past practices;

 

 

          (ix) made capital expenditures or commitments therefor that aggregate in excess of $100,000;

          (x) entered into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary course of business;

          (xi) made charitable contributions or pledges in excess of $25,000;

          (xii) suffered any material damage, destruction or casualty loss, whether or not covered by
insurance;

          (xiii) experienced any material problems with labor or management in connection with the terms
and conditions of their employment;

          (xiv) effected any two or more events of the foregoing kind which in the aggregate would be
material to the Company or its subsidiaries; or

          (xv) entered into an agreement, written or otherwise, to take any of the foregoing actions.

     (aa) Use of Proceeds. The proceeds from the sale of the Preferred Shares will be used
by the Company for working capital and general corporate purposes, as well as to cover transaction
costs incurred by the Company in connection with the transactions contemplated by the Merger
Agreement (as defined herein).

     (bb) Public Utility Holding Company Act and Investment Company Act Status. The
Company is not a “holding company” or a “public utility company” as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result of and
immediately upon the Closing will not be, an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940, as amended.

     (cc) ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its subsidiaries which is or would be
materially adverse to the Company and its subsidiaries. The execution and delivery of this
Agreement and the issue and sale of the Preferred Shares will not involve any transaction which is
subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended, provided that,
if any of the Purchasers, or any person or entity that owns a beneficial interest in any of the
Purchasers, is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA)
with respect to which the Company is a “party in interest” (within the meaning of Section 3(14) of
ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(cc), the term “Plan” shall mean an “employee
pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or any subsidiary

 

 

or by
any trade or business, whether or not incorporated, which, together with the Company or any
subsidiary, is under common control, as described in Section 414(b) or (c) of the Code.

     (dd) Dilutive Effect. The Company understands and acknowledges that the number of
Conversion Shares issuable upon conversion of the Preferred Shares will increase in certain
circumstances. The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Shares in accordance with this Agreement and the Certificate of
Designation, is absolute and unconditional regardless of the dilutive effect that such issuance may
have on the ownership interest of other stockholders of the Company.

     Section 2.2. Representations and Warranties of the Purchasers. Each of the Purchasers
hereby makes the following representations and warranties to the Company with respect solely to
itself and not with respect to any other Purchaser:

     (a) Organization and Standing of the Purchasers. If the Purchaser is an entity, such
Purchaser is a corporation or partnership duly incorporated or organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or organization.

     (b) Authorization and Power. The Purchaser has the requisite power and authority to
enter into and perform this Agreement and to purchase the Preferred Shares being sold to it
hereunder. The execution, delivery and performance of this Agreement and the Registration Rights
Agreement by such Purchaser and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate or partnership action (if the
Purchaser is an entity), and no further consent or authorization of such Purchaser or its Board of
Directors, stockholders, or partners, as the case may be, is required. Each of this Agreement and
the Registration Rights Agreement has been duly authorized, executed and delivered by such
Purchaser.

     (c) No Conflicts. The execution, delivery and performance of this Agreement and the
Registration Rights Agreement and the consummation by such Purchaser of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of
such Purchaser’s charter documents or bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or
instrument to which such Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency applicable to such
Purchaser or its properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such Purchaser). Such
Purchaser is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the Registration Rights Agreement
or to purchase the Preferred Shares in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, such Purchaser is assuming and relying upon the
accuracy of the relevant representations and agreements of the Company herein.

 

 

     (d) Acquisition for Investment. Such Purchaser is acquiring the Preferred Shares
solely for its own account for the purpose of investment and not with a view to or for sale in
connection with distribution. Such Purchaser does not have a present intention to sell the
Preferred Shares, nor a present arrangement (whether or not legally binding) or intention to effect
any distribution of the Preferred Shares to or through any person or entity; provided,
however, that by making the representations herein and subject to Section 2.2(f) below,
such Purchaser does not agree to hold the Shares for any minimum or other specific term and
reserves the right to dispose of the Shares at any time in accordance with Federal and state
securities laws applicable to such disposition. Such Purchaser acknowledges that it is able to
bear the financial risks associated with an investment in the Preferred Shares and that it has been
given full access to such records of the Company and the subsidiaries and to the officers of the
Company and the subsidiaries and received such information as it has deemed necessary or
appropriate to conduct its due diligence investigation.

     (e) Accredited Purchasers. Such Purchaser is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act.

     (f) Rule 144. Such Purchaser understands that the Shares must be held indefinitely
unless such Shares are registered under the Securities Act or an exemption from registration is
available. Such Purchaser acknowledges that such Purchaser is familiar with Rule 144 of the rules
and regulations of the Commission, as amended, promulgated pursuant to the Securities Act (“Rule
144”), and that such person has been advised that Rule 144 permits resales only under certain
circumstances. Such Purchaser understands that to the extent that Rule 144 is not available, such
Purchaser will be unable to sell any Shares without either registration under the Securities Act or
the existence of another exemption from such registration requirement.

     (g) Investment Experience. Each Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and risks of the
prospective investment in the Preferred Shares, which are substantial and has in fact evaluated
such merits and risks in making its investment decision to purchase the Preferred Shares. Each
Purchaser, by virtue of its business and financial expertise, has the capacity to protect its own
interest in connection with this transaction, or has consulted with tax, financial, legal or
business advisors as to the appropriateness of an investment in the Preferred Shares. Each
Purchaser has not been organized for the purpose of investing in the Preferred Shares, although
such investment is consistent with its purposes.

     (h) Access to Information. Each Purchaser or its professional advisor has been
granted the opportunity to conduct a full and fair examination of the records, documents and files
of the Company, to ask questions of and receive answers from representatives of the Company, its
officers, directors, employees and agents concerning the terms and conditions of the offering, the
Company and its business and prospects, and to obtain any additional information which the
Purchaser or its professional advisor deems necessary to verify the accuracy of the information
received. Each Purchaser further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the offering, and any
information so requested has been made available to the full and complete satisfaction of such
Purchaser. Each Purchaser hereby confirms that it has

 

 

received and examined all material
information it considers necessary to make an informed decision to invest in the Preferred Shares.

     (i) No Distributor, Dealer or Underwriter. Each Purchaser is not a distributor or
dealer of the Preferred Shares. The Purchaser is not taking the Preferred Shares with the intent
of making a distribution of the Preferred Shares, as such terms are defined in the Securities Act
and the Exchange Act. In any event, if the Purchaser is deemed to be the distributor of the
Preferred Shares offered hereby, the Purchaser will act in accordance with applicable law.

     (j) No Immediate Need for Liquidity. Each Purchaser understands that each of the
Preferred Shares and Conversion Shares is a “restricted security” within the meaning of the
Securities Act, and certificates representing the Preferred Shares and Conversion Shares are
legended with certain restrictions on resale and may not be resold without a valid exemption from
registration under the Securities Act, or until a registration statement is filed with respect
thereto under the Securities Act. There can be no assurance that upon registration of the
Conversion Shares pursuant to the Securities Act, that a market for the Conversion Shares will
exist on an exchange or market or quotation system. Accordingly, each Purchaser is aware that
there are legal and practical limits on such Purchaser’s ability to sell or dispose of the
Conversion Shares, and, therefore that the Purchaser must bear the economic risk of the investment
for an indefinite period of time. Each Purchaser has adequate means of providing for the
Purchaser’s current needs and possible personal contingencies and has need for only limited
liquidity of this investment. The Purchaser’s commitment to illiquid investments is reasonable in
relation to the Purchaser’s net worth. The Purchaser is capable of bearing the high degree of
economic risks and burdens of this investment, including but not limited to the possibility of
complete loss of all its investment capital and the lack of a liquid market, such that it may not
be able to liquidate readily the investment whenever desired or at the then current asking price.

     (k) Private Transaction. At no time was a Purchaser presented with or solicited by
any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or
television advertisement or any other form of general advertising.

     (l) Reliance on Own Advisors. Each Purchaser has relied completely on the advice of,
or has consulted with, its own personal tax, investment, legal or other advisors and has not relied
on the Company or any of its affiliates, officers, directors, attorneys, accountants or any
affiliates of any thereof and each other person, if any, who controls any thereof, within the
meaning of Section 15 of the Securities Act, except to the extent such advisors shall be deemed to
be as such.

     (m) General. Such Purchaser understands that the Shares are being offered and sold in
reliance on a transactional exemption from the registration requirement of Federal and state
securities laws and the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in
order to determine the applicability of such exemptions and the suitability of such Purchaser to
acquire the Shares.

 

 

Article III

Covenants

     The Company covenants with each of the Purchasers as follows, which covenants are for the
benefit of the Purchasers and their permitted assignees (as defined herein).

     Section 3.1. Securities Compliance.

     (a) The Company shall notify the Commission in accordance with their rules and regulations, of
the transactions contemplated by any of the Transaction Documents, including filing a Form D with
respect to the Preferred Shares and Conversion Shares as required under Regulation D, and shall
take all other necessary action and proceedings as may be required and permitted by applicable law,
rule and regulation, for the legal and valid issuance of the Preferred Shares and the Conversion
Shares to the Purchasers or subsequent holders.

     (b) The Company is relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchasers set forth herein in order to
determine the applicability of Federal and state securities laws exemptions and the suitability of
such Purchasers to acquire the Preferred Shares.

     (c) Unless waived by a Purchaser by means of providing sixty-one (61) days notice to the
Company, the Company covenants and agrees that the number of Conversion Shares issuable upon
conversion of the Preferred Shares by a Purchaser shall not exceed the number of such shares that,
when aggregated with all other shares of Common Stock then owned by a Purchaser beneficially or
deemed beneficially owned by a Purchaser, would result in a Purchaser owning more than 4.99% of all
of such Common Stock as would be outstanding on such date of conversion, as determined in
accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder.

     Section 3.2. Registration and Listing. The Company will cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all
respects with its reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this Agreement or the
Registration Rights Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action necessary to
continue the listing or trading of its Common Stock on the over-the-counter electronic bulletin
board.

     Section 3.3. Inspection Rights. The Company shall permit, during normal business
hours and upon reasonable request and reasonable notice, each Purchaser or any employees, agents or
representatives thereof, so long as such Purchaser shall be obligated hereunder to purchase the
Preferred Shares or shall beneficially own any Preferred Shares, or shall own Conversion Shares
which, in the aggregate, represent more than 2% of the total

 

 

combined voting power of all voting
securities then outstanding, for purposes reasonably related to such Purchaser’s interests as a
stockholder to examine and make reasonable copies of and extracts from the records and books of
account of, and visit and inspect the properties, assets, operations and business of the Company
and any subsidiary, and to discuss the affairs, finances and accounts of the Company and any
subsidiary with any of its officers, consultants, directors, and key employees.

     Section 3.4. Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with
which could have a Material Adverse Effect.

     Section 3.5. Keeping of Records and Books of Account. The Company shall keep and
cause each subsidiary to keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all financial transactions of the
Company and its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.

     Section 3.6. Reporting Requirements. If the Company ceases to file its periodic
reports with the Commission, or if the Commission ceases making these periodic reports available
via the Internet without charge, then the Company shall furnish the following to each Purchaser so
long as such Purchaser shall be obligated hereunder to purchase the Preferred Shares or shall
beneficially own any Preferred Shares, or shall own Conversion Shares which, in the aggregate,
represent more than 2% of the total combined voting power of all voting securities then
outstanding:

     (a) Quarterly Reports filed with the Commission on Form 10-QSB as soon as available, and in
any event within forty-five (45) days after the end of each of the first three fiscal quarters of
the Company;

     (b) Annual Reports filed with the Commission on Form 10-KSB as soon as available, and in any
event within ninety (90) days after the end of each fiscal year of the Company; and

     (c) Copies of all notices and information, including without limitation notices and proxy
statements in connection with any meetings, that are provided to holders of shares of
Common Stock, contemporaneously with the delivery of such notices or information to such
holders of Common Stock.

     Section 3.7. Amendments. The Company shall not amend or waive any provision of the
Articles or Bylaws of the Company, or Registration Rights Agreement in any way that would adversely
affect the liquidation preferences, dividends rights, conversion rights, voting rights or
redemption rights of the holders of the Preferred Shares.

     Section 3.8. Other Agreements. The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the right or ability to

 

 

perform of the
Company or any subsidiary under any Transaction Document or the Certificate of Designation.

     Section 3.9. Distributions. So long as any Preferred Shares remain outstanding, the
Company agrees that it shall not (i) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock or (ii) purchase or otherwise acquire for value, directly or indirectly,
any Common Stock or other equity security of the Company; provided, that the foregoing shall not
operate to restrict or prohibit any dividend made solely in shares of Common Stock, stock split or
reverse stock split.

     Section 3.10. Reservation of Shares. So long as any of the Preferred Shares remain
outstanding, the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than 100% of the aggregate number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares.

     Section 3.11. Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Purchaser or its respective nominee(s), for the Conversion Shares in
such amounts as specified from time to time by each Purchaser to the Company upon conversion of the
Preferred Shares in the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent
Instructions”). Prior to registration of the Conversion Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 3.12 will be given by the Company to its transfer agent and that the
Shares shall otherwise be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section
3.12 shall affect in any way each Purchaser’s obligations and agreements set forth in Section 5.1
to comply with all applicable prospectus delivery requirements, if any, upon resale of the Shares.
If a Purchaser provides the Company with an opinion of counsel, in a generally acceptable form, to
the effect that a public sale, assignment or transfer of the Shares may be made without
registration under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Purchaser and without any restrictive legend.
The Company acknowledges that a breach by it of its obligations under this Section 3.12 will cause
irreparable harm to the Purchasers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of
its obligations under this Section 3.12 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 3.12, that the Purchasers shall
be entitled, in addition to all other available remedies, to an order and/or injunction restraining
any breach and requiring immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.

 

 

Article IV

Conditions

     Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Shares.
The obligation hereunder of the Company to issue and sell the Preferred Shares to the Purchasers is
subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion.

     (a) Accuracy of Each Purchaser’s Representations and Warranties. The representations
and warranties of each Purchaser shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.

     (b) Performance by the Purchasers. Each Purchaser shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Closing.

     (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.

     (d) Consummation of Merger. The transactions contemplated by that certain Amended and
Restated Agreement and Plan of Merger dated May 25, 2004 (the “Merger Agreement”) among the
Company, viaLink Acquisition, Inc., a Pennsylvania corporation of
which the Company is the sole shareholder, and Prescient Systems, Inc., a Pennsylvania
corporation, shall have been consummated.

     Section 4.2. Conditions Precedent to the Obligation of the Purchasers to Purchase the
Shares. The obligation hereunder of each Purchaser to acquire and pay for the Preferred Shares
is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for each Purchaser’s sole benefit and may be waived by such
Purchaser at any time in its sole discretion.

     (a) Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a particular date), which shall be true and correct
in all material respects as of such date.

     (b) Performance by the Company. The Company shall have performed, satisfied and
complied in all respects with all covenants, agreements and conditions required by

 

 

this Agreement
to be performed, satisfied or complied with by the Company at or prior to the Closing.

     (c) No Suspension, Etc. From the date hereof to the Closing Date, trading in the
Company’s Common Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall be terminated prior
to the Closing), and, at any time prior to the Closing, trading in securities generally as reported
by Bloomberg Financial Markets (“Bloomberg”) shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported by Bloomberg, or on
the New York Stock Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity or crisis of such magnitude
in its effect on, or any material adverse change in any financial market which, in each case, in
the judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Preferred
Shares.

     (d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.

     (e) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator
or any governmental authority shall have been commenced, and no investigation by any governmental
authority shall have been threatened, against the Company or any subsidiary, or any of the
officers, directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.

     (f) Certificate of Designation of Rights and Preferences. Prior to the Closing, the
Certificate of Designation in the form of Exhibit B attached hereto shall have been filed with the
Secretary of State of Delaware.

     (g) Registration Rights Agreement. At the Closing, the Company shall have executed
and delivered the Registration Rights Agreement to each Purchaser.

     (h) Certificates. The Company shall have executed and delivered to the Purchasers the
certificates (in such denominations as such Purchaser shall request) for the Preferred Shares being
acquired by such Purchaser at the Closing.

     (i) Resolutions. The Board of Directors of the Company shall have adopted resolutions
consistent with Section 2.1(b) above in a form reasonably acceptable to such Purchaser (the
“Resolutions”).

     (j) Reservation of Shares. As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of effecting

 

 

the conversion
of the Preferred Shares, a number of shares of Common Stock equal to at least 100% of the aggregate
number of Conversion Shares issuable upon conversion of the Preferred Shares outstanding on the
Closing Date (after giving effect to the Preferred Shares to be issued on the Closing Date and
assuming all such Preferred Shares were fully convertible or exercisable on such date regardless of
any limitation on the timing or amount of such conversions or exercises).

     (k) Transfer Agent Instructions. The Irrevocable Transfer Agent Instructions, in the
form of Exhibit D attached hereto, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.

     (l) Secretary’s Certificate. The Company shall have delivered to such Purchaser a
secretary’s certificate, dated as of the Closing Date, as to (i) the Resolutions, (ii) the
Articles, (iii) the Bylaws, (iv) the Certificate of Designation, each as in effect at the Closing,
and (v) the authority and incumbency of the officers of the Company executing the Transaction
Documents and any other documents required to be executed or delivered in connection therewith.

     (m) Officer’s Certificate. The Company shall have delivered to the Purchasers a
certificate of an executive officer of the Company, dated as of the Closing Date, confirming the
accuracy of the Company’s representations, warranties and covenants as of the Closing Date and
confirming the compliance by the Company with the conditions precedent set forth in this
Section 4.2 as of the Closing Date.

     (n) Material Adverse Effect. No Material Adverse Effect shall have occurred at or
before the Closing Date.

     (o) Consummation of Merger. The transactions contemplated by the Merger Agreement
shall have been consummated.

Article V

Stock Certificate Legend

     Section 5.1. Legend. Each certificate representing the Preferred Shares, and, if
appropriate, securities issued upon conversion thereof, shall be stamped or otherwise imprinted
with a legend substantially in the following form (in addition to any legend required by applicable
state securities or “blue sky” laws):

THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE VIALINK COMPANY SHALL HAVE RECEIVED
AN OPINION OF ITS

 

 

COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.

     The Company agrees to reissue certificates representing the Shares without the legend set
forth above if at such time, prior to making any transfer of any Shares or Shares, such holder
thereof shall give written notice to the Company describing the manner and terms of such transfer
and removal as the Company may reasonably request. Such proposed transfer will not be effected
until: (a) the Company has notified such holder that either (i) in the opinion of Company counsel,
the registration of such Shares under the Securities Act is not required in connection with such
proposed transfer; or (ii) a registration statement under the Securities Act covering such proposed
disposition has been filed by the Company with the Commission and has become effective under the
Securities Act; and (b) the Company has notified such holder that either: (i) in the opinion of
Company counsel, the registration or qualification under the securities or “blue sky” laws of any
state is not required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or “blue sky” laws has been effected. The Company will use its best
efforts to respond to any such notice from a holder within ten (10) days. In the case of any proposed transfer under this Section 5, the Company
will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws,
but shall in no event be required, in connection therewith, to qualify to do business in any state
where it is not then qualified or to take any action that would subject it to tax or to the general
service of process in any state where it is not then subject. The restrictions on transfer
contained in Section 5.1 shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this Agreement.

Article VI

Indemnification

     Section 6.1. General Indemnity. The Company agrees to indemnify and hold harmless the
Purchasers and any placement agent or sub-placement agent (and their respective directors,
officers, affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the Purchasers as a result of any
inaccuracy in or breach of the representations, warranties or covenants made by the Company herein.
Each Purchaser severally but not jointly agrees to indemnify and hold harmless the Company and its
directors, officers, affiliates, agents, successors and assigns from and against any and all
losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by such Purchaser
herein.

     Section 6.2. Indemnification Procedure. Any party entitled to indemnification under
this Article VI (an “indemnified party”) will give written notice to the indemnifying party of any
matters giving rise to a claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Article VI except to the extent that the

 

 

indemnifying party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which indemnification is
sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it and the indemnifying
party may exist with respect of such action, proceeding or claim, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. In the event that the indemnifying
party advises an indemnified party that it will contest such a claim for indemnification hereunder,
or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing,
such person of its election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it commences such
defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party elects in writing
to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding shall be losses subject
to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim by the indemnifying
party and shall furnish to the indemnifying party all information reasonably available to the
indemnified party which relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend any such action or
claim, then the indemnified party shall be entitled to participate in such defense with counsel of
its choice at its sole cost and expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying party shall not,
without the indemnified party’s prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future obligation on the indemnified
party or which does not include, as an unconditional term thereof, the giving by the claimant or
the plaintiff to the indemnified party of a release from all liability in respect of such claim.
The indemnification required by this Article VI shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees to
refund such moneys if it is ultimately determined by a court of competent jurisdiction that such
party was not entitled to indemnification. The indemnity agreements contained herein shall be in
addition to (a) any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.

Article VII

Miscellaneous

     Section 7.1. Fees and Expenses. Except as otherwise set forth in this Agreement, the
Registration Rights Agreement or the Certificate of Designation, each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses,
incurred by such party incident to the negotiation, preparation, execution,

 

 

delivery and
performance of this Agreement, provided that the Company shall pay, at the Closing, (i) all
actual attorneys’ fees and expenses (exclusive of disbursements and out-of-pocket expenses)
incurred by the Purchasers up to $___in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Registration Rights Agreement and the transactions
contemplated thereunder and (ii) placement agent fees to the placement agent referred to on
Schedule 2.1(p) hereto. In addition, the Company shall pay all reasonable fees and
expenses incurred by the Purchasers in connection with the filing and declaration of effectiveness
by the Commission of the Registration Statement (as defined in the Registration Rights Agreement)
any amendments, modifications or waivers of this Agreement or any of the
other Transaction Documents, or incurred in connection with the enforcement of this Agreement
or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’
fees and expenses. The Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Preferred Shares pursuant hereto.

Section 7.2. Specific Enforcement, Consent to Jurisdiction. 

     (a) The Company and the Purchasers acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement, the Certificate of Designation or the
Registration Rights Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent or cure breaches of the provisions of this Agreement or the Registration
Rights Agreement and to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or equity.

     (b) Each of the Company and the Purchasers (i) hereby irrevocably submits to the jurisdiction
of the United States District Court sitting in the Southern District of New York and the courts of
the State of New York located in New York county for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby and (ii) hereby waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing in
this Section 7.2 shall affect or limit any right to serve process in any other manner permitted by
law.

     Section 7.3. Entire Agreement; Amendment. This Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the Transaction Documents or the Certificate of Designation, neither the
Company nor any of the Purchasers makes any representations, warranty, covenant or undertaking with
respect to such matters and they supersede all prior understandings and agreements with respect to
said subject matter, all of which are merged herein. No provision of this Agreement may be waived
or amended other than by a written instrument signed by the

 

 

Company and the holders of at least
three-fourths (3/4) of the shares of Series F Convertible Preferred Stock then outstanding, and no
provision hereof may be waived other than by an a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought. No such amendment shall be effective
to the extent that it applies to less than all of the holders of the Preferred Shares then
outstanding. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any provision of any of
the Transaction Documents or the Certificate of Designation unless the same consideration is also
offered to all of the parties to the Transaction Documents or holders of Preferred Shares, as the
case may be.

     Section 7.4. Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be effective (a) upon
hand delivery by telex (with correct answer back received), telecopy or facsimile at the address or
number designated below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or (b) on
the second business day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:

	 	 	 
	If to the Company:

	 	The viaLink Company
	

	 	13155 Noel Road
	

	 	Suite 700
	

	 	Dallas, Texas 75240
	

	 	Attention: Chief Executive Officer and Chief
	

	 	Financial Officer
	

	 	Tel. No.: (972) 934-5500
	

	 	Fax No.: (972) 934-5583
	 
	 	 
	If to any Purchaser:

	 	At the address of such Purchaser set forth on Exhibit
A to this Agreement, with copies to Purchaser’s
counsel as set forth on Exhibit A or as specified in
writing by such Purchaser with copies to:
	 
	 	 
	

	 	 

     Any party hereto may from time to time change its address for notices by giving at least ten
(10) days written notice of such changed address to the other party hereto.

     Section 7.5. Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provisions, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.

 

 

     Section 7.6. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this Agreement for any
other purpose and shall not be deemed to limit or affect any of the provisions hereof.

     Section 7.7. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. After the Closing, the assignment
by a party to this Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.

     Section 7.8. No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other person.

     Section 7.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving effect to the choice of
law provisions. This Agreement shall not interpreted or construed with any presumption against the
party causing this Agreement to be drafted.

     Section 7.10. Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1(o) and (s) should survive indefinitely and those contained in
Article II, with the exception of Sections 2.1(o) and (s), shall survive the execution and delivery
hereof and the Closing until the date three (3) years from the Closing Date, and the agreements and
covenants set forth in Articles I, III, V, VIII and IX of this Agreement shall survive the
execution and delivery hereof and the Closing hereunder until the Purchasers in the aggregate
beneficially own (determined in accordance with Rule 13d-3 under the Exchange Act) less than 2% of
the total combined voting power of all voting securities then outstanding, provided, that Sections
3.1, 3.2, 3.4, 3.5, 3.7, 3.8, 3.9, 3.10 and 3.12 shall not expire until the Registration Statement
required by Section 2 of the Registration Rights Agreement is no longer required to be effective
under the terms and conditions of Registration Rights Agreement.

     Section 7.11. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument and shall
become effective when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered to the other
parties within five days of the execution and delivery hereof.

     Section 7.12. Publicity. The Company agrees that it will not disclose, and will not
include in any public announcement, the name of the Purchasers without the consent of the
Purchasers unless and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement.

     Section 7.13. Severability. The provisions of this Agreement, the Certificate of
Designation and the Registration Rights Agreement are severable and, in the event that any
court of competent jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement, the Certificate of Designation or the Registration
Rights

 

 

Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any other provision or
part of a provision of this Agreement, the Certificate of Designation or the Registration Rights
Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such provision, had never been contained herein, so that such provisions would be valid,
legal and enforceable to the maximum extent possible.

     Section 7.14. Further Assurances. From and after the date of this Agreement, upon the
request of any Purchaser or the Company, each of the Company and the Purchasers shall execute and
deliver such instrument, documents and other writings as may be reasonably necessary or desirable
to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, the
Preferred Shares, the Conversion Shares, the Certificate of Designation, and the Registration
Rights Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officer as of the date first above written.

	 	 	 	 	 
	 	THE VIALINK COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PURCHASER

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PURCHASER

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	PURCHASER

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Titleexv4w2

 

Exhibit 4.2

CERTIFICATE OF DESIGNATION OF THE RELATIVE RIGHTS

AND PREFERENCES OF THE

SERIES E CONVERTIBLE PREFERRED STOCK

OF

THE VIALINK COMPANY

     The undersigned, the President of The viaLink Company, a Delaware corporation (the “Company”),
in accordance with the provisions of the Delaware General Corporation Law, does hereby certify
that, pursuant to the authority conferred upon the Board of Directors by the Certificate of
Incorporation of the Company, the following resolution creating a series of Series E Convertible
Preferred Stock, was duly adopted on May 19, 2004:

     RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of
Directors of the Company by provisions of the Certificate of Incorporation of the Company (the
“Certificate of Incorporation”), there hereby is created out of the shares of Preferred Stock, par
value $.001 per share, of the Company authorized in Article IV of the Certificate of Incorporation
(the “Preferred Stock”), a series of Preferred Stock of the Company, to be named “Series E
Convertible Preferred Stock,” consisting of One Thousand Six Hundred Fifty (1,650) shares, which
series shall have the following designations, powers, preferences and relative and other special
rights and the following qualifications, limitations and restrictions:

     1. Designation and Rank. The designation of such series of the Preferred Stock shall
be the Series E Convertible Preferred Stock, par value $.001 per share (the “Series E Preferred
Stock”). The maximum number of shares of Series E Preferred Stock shall be One Thousand Six
Hundred Fifty (1,650) shares. The Series E Preferred Stock shall rank (i) senior to the common
stock, par value $.001 per share (the “Common Stock”), and to all other classes and series of
equity securities of the Company which by its terms does not rank senior to the Series E Preferred
Stock (“Junior Stock”); (ii) senior to shares of the Company’s Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock, and (iii)
junior to any other class or series of equity securities which by its terms shall rank senior to
the Series E Preferred Stock. The Series E Preferred Stock shall be subordinate to and rank junior
to all indebtedness of the Company now or hereafter outstanding.

     2. Dividends.

     (a) Payment of Dividends. Commencing eighteen (18) months following the date of
issuance of the Series E Preferred Stock (the “Issuance Date”), the holders of record of shares of
Series E Preferred Stock shall be entitled to receive, out of any assets at the time legally
available therefor and when and as declared by the Board of Directors, dividends at the rate of
four percent (4%) of the stated Liquidation Preference Amount (as defined in Section 4(a)) per
share per annum commencing on the Issuance Date, increasing to the rate of eight percent (8%) of
the stated Liquidation Preference Amount thirty (30) months following the Issuance Date (the
“Dividend Payment”), and no more, payable semi-annually at the option of the Company in cash

 

 

or in shares of Common Stock, and if paid in shares of Common Stock, in an amount equal to the
quotient of (i) the Dividend Payment divided by (ii) the Conversion Price (as defined in Section
5(d) below). If the Company elects to pay any dividend in shares of Common Stock, the Company will
give the holders of record of shares of the Series E Preferred Stock ten (10) trading days notice
prior to the date of the applicable Dividend Payment and such shares of Common Stock shall be
registered pursuant to an effective registration statement under the Securities Act of 1933, as
amended (the “Securities Act”). In the case of shares of Series E Preferred Stock outstanding for
less than a full year, dividends shall be pro rated based on the portion of each year during which
such shares are outstanding. Dividends on the Series E Preferred Stock shall be cumulative, shall
accrue and be payable semi-annually at the option of the Company in cash or into shares of Common
Stock in accordance with the terms and provisions of this Section 2(a). Dividends on the Series E
Preferred Stock are prior and in preference to any declaration or payment of any distribution (as
defined below) on any outstanding shares of Common Stock or any other equity securities of the
Company ranking junior to the Series E Preferred Stock as to the payment of dividends. Such
dividends shall accrue on each share of Series E Preferred Stock from day to day whether or not
earned or declared so that if such dividends with respect to any previous dividend period at the
rate provided for herein have not been paid on, or declared and set apart for, all shares of Series
E Preferred Stock at the time outstanding, the deficiency shall be fully paid on, or declared and
set apart for, such shares on a pro rata basis with all other equity securities of the Company
ranking on parity with the Series E Preferred Stock as to the payment of dividends before any
distribution shall be paid on, or declared and set apart for Common Stock or any other equity
securities of the Company ranking junior to the Series E Preferred Stock as to the payment of
dividends.

     (b) So long as any shares of Series E Preferred Stock are outstanding, the Company shall not
declare, pay or set apart for payment any dividend or make any distribution on any Junior Stock
(other than dividends or distributions payable in additional shares of Junior Stock), unless at the
time of such dividend or distribution the Company shall have paid all accrued and unpaid dividends
on the outstanding shares of Series E Preferred Stock.

     (c) In the event of a dissolution, liquidation or winding up of the Company pursuant to
Section 4, all accrued and unpaid dividends on the Series E Preferred Stock shall be payable on the
day immediately preceding the date of payment of the preferential amount to the holders of Series E
Preferred Stock. In the event of a voluntary conversion pursuant to Section 5(a), all accrued and
unpaid dividends on the Series E Preferred Stock being converted shall be payable on the day
immediately preceding the Voluntary Conversion Date (as defined in Section 5(b)(i)).

     (d) For purposes hereof, unless the context otherwise requires, “distribution” shall mean the
transfer of cash or property without consideration, whether by way of dividend or otherwise,
payable other than in shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of the Company for cash or property.

     3. Voting Rights.

 

 

     (a) Class Voting Rights. The Series E Preferred Stock shall have the following class
voting rights (in addition to the voting rights set forth in Section 3(b) hereof). So long as at
least five hundred (500) shares of Series E Preferred Stock are issued and outstanding, the Company
shall not, without the affirmative vote or consent of the holders of at least two-thirds (2/3) of
the shares of the Series E Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting, in which the holders of the Series E Preferred Stock vote
separately as a class: (i) amend, alter or repeal the provisions of the Series E Preferred Stock,
whether by merger, consolidation or otherwise, so as to adversely affect any right, preference,
privilege or voting power of the Series E Preferred Stock; provided, however, that
any creation and issuance of another series of Junior Stock or the creation and issuance of the
Series F Convertible Preferred Stock (which shall rank senior to the Series E Preferred Stock)
shall not be deemed to adversely affect such rights, preferences, privileges or voting powers; (ii)
repurchase, redeem or pay dividends on, shares of Common Stock or any other shares of the Company’s
Junior Stock (other than de minimus repurchases from employees of the Company in certain
circumstances) if dividends on the Series E Preferred Stock are due and remain unpaid; (iii) amend
the Certificate of Incorporation or By-Laws of the Company so as to affect materially and adversely
any right, preference, privilege or voting power of the Series E Preferred Stock; provided,
however, that any creation and issuance of another series of Junior Stock or the creation
and issuance of the Series F Convertible Preferred Stock (which shall rank senior to the Series E
Preferred Stock) shall not be deemed to adversely affect such rights, preferences, privileges or
voting powers; (iv) effect any distribution with respect to Junior Stock; (v) authorize, create,
issue or increase the authorized or issued amount of any securities or other financial instrument
ranking senior to the Series E Preferred Stock (except for the issuance of shares of the Series F
Convertible Preferred Stock which shall rank senior to the Series E Preferred Stock), with respect
to the distribution of assets on liquidation, dissolution or winding up of the Company; (vi) sell
all or substantially all of the assets of the Company, or liquidate or dissolve the Company, unless
such action would result in the distribution to the holders of Series E Preferred Stock of at least
the Liquidation Preference Amount (as defined in Section 4 hereof) plus all accrued but unpaid
dividends, if any; or (vii) consummate the Proposed Equity Financing (as defined in Section
5(c)(ii) hereof) if such consummation would result in the investors in the Proposed Equity
Financing owning greater than twenty-five percent (25%) of the shares of Common Stock issued and
outstanding at the time (excluding from such calculation the issuance of any shares of Common Stock
issued or issuable upon conversion of the Series F Preferred Stock prior to the consummation of the
Proposed Equity Financing).

     (b) General Voting Rights. The holder of each share of Series E Preferred Stock shall
be entitled to vote such number of shares of Common Stock into which such share of Series E
Preferred Stock could be converted for purposes of determining the shares of Common Stock entitled
to vote at any regular, annual or special meeting of stockholders of the Company, and shall have
voting rights and powers equal to the voting rights and powers of the Common Stock (except as
otherwise expressly provided herein or as required by law, voting together with the Common Stock as
a single class) and shall be entitled to notice of any stockholders’ meeting in accordance with the
bylaws of the Company. Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares

 

 

into which shares of Series E Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).

     4. Liquidation Preference.

     (a) In the event of the liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, after payment or provision for payment of the debts and other
liabilities of the Company, the holders of shares of the Series E Preferred Stock then outstanding
shall be entitled to receive, out of the assets of the Company whether such assets are capital or
surplus of any nature, an amount equal to $10,000 per share (the “Liquidation Preference Amount”)
of the Series E Preferred Stock plus any accrued but unpaid dividends before any payment shall be
made or any assets distributed to the holders of the Common Stock or any other Junior Stock. If
the assets of the Company are not sufficient to pay in full the Liquidation Preference Amount plus
any accrued but unpaid dividends payable to the holders of outstanding shares of the Series E
Preferred Stock and any series of preferred stock or any other class of stock on a parity, as to
rights on liquidation, dissolution or winding up, with the Series E Preferred Stock, then all of
said assets will be distributed among the holders of the Series E Preferred Stock and the other
classes of stock on a parity with the Series E Preferred Stock, if any, ratably in accordance with
the respective amounts that would be payable on such shares if all amounts payable thereon were
paid in full. The liquidation payment with respect to each outstanding fractional share of Series
E Preferred Stock shall be equal to a ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Series E Preferred Stock. All payments for which this Section
4(a) provides shall be in cash, property (valued at its fair market value as determined by the
Company’s independent, outside accountant) or a combination thereof; provided,
however, that no cash shall be paid to holders of Junior Stock unless each holder of the
outstanding shares of Series E Preferred Stock has been paid in cash the full Liquidation
Preference Amount plus any accrued but unpaid dividends to which such holder is entitled as
provided herein. After payment of the full Liquidation Preference Amount plus any accrued but
unpaid dividends to which each holder is entitled, such holders of shares of Series E Preferred
Stock will not be entitled to any further participation as such in any distribution of the assets
of the Company.

     (b) A consolidation or merger of the Company with or into any other corporation or
corporations, or a sale of all or substantially all of the assets of the Company, or the
effectuation by the Company of a transaction or series of transactions in which more than 50% of
the voting shares of the Company is disposed of or conveyed, shall not be deemed to be a
liquidation, dissolution, or winding up within the meaning of this Section 4. In the event of the
merger or consolidation of the Company with or into another corporation, the Series E Preferred
Stock shall maintain its relative powers, designations and preferences provided for herein and no
merger shall result inconsistent therewith.

     (c) Written notice of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, stating a payment date and the place where the distributable amounts
shall be payable, shall be given by mail, postage prepaid, no less than forty-five (45)

 

 

days prior to the payment date stated therein, to the holders of record of the Series E Preferred
Stock at their respective addresses as the same shall appear on the books of the Company.

     5. Conversion. The holder of Series E Preferred Stock shall have the following
conversion rights (the “Conversion Rights”):

     (a) Right to Convert. At any time on or after the Issuance Date, the holder of any
such shares of Series E Preferred Stock may, at such holder’s option, subject to the limitation set
forth in Section 7 herein, elect to convert (a “Voluntary Conversion”) all or any portion of the
shares of Series E Preferred Stock held by such person into a number of fully paid and
nonassessable shares of Common Stock equal to the quotient of (i) the Liquidation Preference Amount
of the shares of Series E Preferred Stock being converted divided by (ii) the Conversion Price (as
defined in Section 5(d) below) then in effect as of the date of the delivery by such holder of its
notice of election to convert.

     (b) Mechanics of Voluntary Conversion. The Voluntary Conversion of Series E Preferred
Stock shall be conducted in the following manner:

          (i) Holder’s Delivery Requirements. To convert Series E Preferred Stock into full
shares of Common Stock on any date (the “Voluntary Conversion Date”), the holder thereof shall (A)
transmit by facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., New York time
on such date, a copy of a fully executed notice of conversion in the form attached hereto as
Exhibit I (the “Conversion Notice”), to the Company, and (B) surrender to a common carrier
for delivery to the Company as soon as practicable following such Voluntary Conversion Date but in
no event later than three (3) business days after such date the original certificates representing
the shares of Series E Preferred Stock being converted (or an indemnification undertaking with
respect to such shares in the case of their loss, theft or destruction) (the “Preferred Stock
Certificates”) and the originally executed Conversion Notice.

          (ii) Company’s Response. Upon receipt by the Company of a facsimile copy of a
Conversion Notice, the Company shall immediately send, via facsimile, a confirmation of receipt of
such Conversion Notice to such holder. Upon receipt by the Company of a copy of the fully executed
Conversion Notice, the Company or its designated transfer agent (the “Transfer Agent”), as
applicable, shall, within three (3) business days following the date of receipt by the Company of
the fully executed Conversion Notice (so long as the applicable Preferred Stock Certificates and
original Conversion Notice are received by the Company on or before such third business day), issue
and deliver to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion Notice, registered in
the name of the holder or its designee, for the number of shares of Common Stock to which the
holder shall be entitled. If the number of shares of Preferred Stock represented by the Preferred
Stock Certificate(s) submitted for conversion is greater than the number of shares of Series E
Preferred Stock being converted, then the Company shall, as soon as practicable and in no event
later than three (3) business days after receipt of the Preferred Stock Certificate(s) and at the
Company’s expense, issue and deliver to the holder a

 

 

new Preferred Stock Certificate representing the number of shares of Series E Preferred Stock not
converted.

          (iii) Dispute Resolution. In the case of a dispute as to the arithmetic calculation
of the number of shares of Common Stock to be issued upon conversion, the Company shall promptly
issue to the holder the number of shares of Common Stock that is not disputed and shall submit the
arithmetic calculations to the holder via facsimile as soon as possible, but in no event later than
two (2) business days after receipt of such holder’s Conversion Notice. If such holder and the
Company are unable to agree upon the arithmetic calculation of the number of shares of Common Stock
to be issued upon such conversion within one (1) business day of such disputed arithmetic
calculation being submitted to the holder, then the Company shall within one (1) business day
submit via facsimile the disputed arithmetic calculation of the number of shares of Common Stock to
be issued upon such conversion to the Company’s independent, outside accountant. The Company shall
cause the accountant to perform the calculations and notify the Company and the holder of the
results no later than seventy-two (72) hours from the time it receives the disputed calculations.
Such accountant’s calculation shall be binding upon all parties absent manifest error. The
reasonable expenses of such accountant in making such determination shall be paid by the Company,
in the event the holder’s calculation was correct, or by the holder, in the event the Company’s
calculation was correct, or equally by the Company and the holder in the event that neither the
Company’s or the holder’s calculation was correct. The period of time in which the Company is
required to effect conversions under this Certificate of Designation shall be tolled with respect
to the subject conversion pending resolution of any dispute by the Company made in good faith and
in accordance with this Section 5(b)(iii).

          (iv) Record Holder. The person or persons entitled to receive the shares of Common
Stock issuable upon a conversion of the Series E Preferred Stock shall be treated for all purposes
as the record holder or holders of such shares of Common Stock on the Conversion Date.

          (v) Company’s Failure to Timely Convert. If within three (3) business days of the
Company’s receipt of the Conversion Notice and the Preferred Stock Certificates to be converted
(the “Share Delivery Period”) the Company shall fail to issue and deliver to a holder the number of
shares of Common Stock to which such holder is entitled upon such holder’s conversion of the Series
E Preferred Stock or to issue a new Preferred Stock Certificate representing the number of shares
of Series E Preferred Stock to which such holder is entitled pursuant to Section 5(b)(ii) (a
“Conversion Failure”), in addition to all other available remedies which such holder may pursue
hereunder and under the Series E Convertible Preferred Stock Purchase Agreement among the Company
and the purchasers listed therein (the “Purchase Agreement”) (including indemnification pursuant to
Article VI thereof), the Company shall pay additional damages to such holder on each business day
after such third (3rd) business day that such conversion is not timely effected in an
amount equal 0.5% of the product of (A) the sum of the number of shares of Common Stock not issued
to the holder on a timely basis pursuant to Section 5(b)(ii) and to which such holder is entitled
and, in the event the Company has failed to deliver a Preferred Stock Certificate to the holder on
a timely basis pursuant to Section 5(b)(ii),

 

 

the number of shares of Common Stock issuable upon conversion of the shares of Series E Preferred
Stock represented by such Preferred Stock Certificate, as of the last possible date which the
Company could have issued such Preferred Stock Certificate to such holder without violating Section
5(b)(ii) and (B) the Closing Bid Price (as defined in Section 5(d) below) of the Common Stock on
the last possible date which the Company could have issued such Common Stock and such Preferred
Stock Certificate, as the case may be, to such holder without violating Section 5(b)(ii). If the
Company fails to pay the additional damages set forth in this Section 5(b)(v) within five (5)
business days of the date incurred, then such payment shall bear interest at the rate of 2% per
month (pro rated for partial months) until such payments are made.

     (c) Mandatory Conversion.

          (i) Each share of Series E Preferred Stock outstanding on the Mandatory Conversion Date shall,
automatically and without any action on the part of the holder thereof, convert into a number of
fully paid and nonassessable shares of Common Stock equal to the quotient of (i) the Liquidation
Preference Amount of the shares of Series E Preferred Stock outstanding on the Mandatory Conversion
Date divided by (ii) the Conversion Price in effect on the Mandatory Conversion Date.

          (ii) As used herein, a “Mandatory Conversion Date” shall be any date after the date that is
the later of the closing of the Proposed Equity Financing (as defined below) or twelve (12) months
following the Issuance Date, provided, that (A) the Closing Bid Price of the Common Stock
is equal to or exceeds $4.00 for a period of ten (10) consecutive trading days and (B) the Common
Stock issuable upon conversion of the Series E Preferred Stock is registered pursuant to an
effective registration statement under the Securities Act and such registration statement has been
effective, without lapse or suspension of any kind, for a period 60 consecutive calendar days; and
further provided that the Mandatory Conversion Date shall be extended for as long
as the conversion of such share of Preferred Stock would violate Section 7. The Mandatory
Conversion Date and the Voluntary Conversion Date collectively are referred to in this Certificate
of Designation as the “Conversion Date.” For purposes hereof, “Proposed Equity Financing” means
the consummation by the Company of a private placement of at least $3,000,000 of shares of the
Company’s equity securities (or such lesser amount as may be agreed upon by the Company and the
holders of at least two-thirds (2/3) of the shares of the Company’s Series F Preferred Stock
outstanding at such time) after the Company has consummated a merger (the “Merger”) with Prescient
Systems, Inc. in which the Company is the surviving entity.

          (iii) On the Mandatory Conversion Date, the outstanding shares of Series E Preferred Stock
shall be converted automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the Company or its
transfer agent; provided, however, that the Company shall not be obligated to issue
the shares of Common Stock issuable upon conversion of any shares of Series E Preferred Stock
unless certificates evidencing such shares of Series E Preferred Stock are either delivered to the
Company or the holder notifies the Company that such certificates have been lost, stolen, or
destroyed, and executes an agreement satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection therewith. Upon the occurrence of the automatic

 

 

conversion of the Series E Preferred Stock pursuant to this Section 5, the holders of the Series E
Preferred Stock shall surrender the Preferred Stock Certificates representing the Series E
Preferred Stock for which the Mandatory Conversion Date has occurred to the Company and the Company
shall deliver the shares of Common Stock issuable upon such conversion (in the same manner set
forth in Section 5(b)(ii)) to the holder within three (3) business days of the holder’s delivery of
the applicable Preferred Stock Certificates.

     (d) Conversion Price.

          (i) The term “Conversion Price” shall mean $2.00 per share, subject to adjustment under
Section 5(e) hereof. The parties acknowledge that the initial Conversion Price of $2.00 is
intended to give effect to the 1-for-20 reverse stock split to be effected following the Merger
with a record date on or about January 10, 2005 (the “Stock Split”).

          (ii) The term “Closing Bid Price” shall mean, for any security as of any date, the last
closing bid price of such security on any stock exchange or market on which the security is then
listed or admitted for trading or quotation, as applicable, the OTC Bulletin Board for such
security as reported by Bloomberg, or, if no closing bid price is reported for such security by
Bloomberg, the last closing trade price of such security as reported by Bloomberg, or, if no last
closing trade price is reported for such security by Bloomberg, the average of the bid prices of
any market makers for such security as reported in the “pink sheets” by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on such date on any
of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair
market value as mutually determined by the Company and the holders of a majority of the outstanding
shares of Series E Preferred Stock.

     (e) Adjustments of Conversion Price.

          (i) Adjustments for Stock Splits and Combinations. If the Company shall at any time
or from time to time after the Issuance Date, effect a stock split of the outstanding Common Stock,
the Conversion Price shall be proportionately decreased. If the Company shall at any time or from
time to time after the Issuance Date, combine the outstanding shares of Common Stock, the
Conversion Price shall be proportionately increased. Notwithstanding the foregoing, there shall be
no adjustment made to the Conversion Price under this Section 5(e)(i) as a result of the Stock
Split. Any adjustments under this Section 5(e)(i) shall be effective at the close of business on
the date the stock split or combination occurs.

          (ii) Adjustments for Certain Dividends and Distributions. If the Company shall at any
time or from time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in shares of Common Stock, then, and in each event, the Conversion Price shall be decreased
as of the time of such issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, as applicable, the Conversion Price then in
effect by a fraction:

 

 

               (1) the numerator of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of business on such record
date; and

               (2) the denominator of which shall be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in payment of such dividend or
distribution.

          (iii) Adjustment for Other Dividends and Distributions. If the Company shall at any
time or from time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other distribution
payable in other than shares of Common Stock, then, and in each event, an appropriate revision to
the applicable Conversion Price shall be made and provision shall be made (by adjustments of the
Conversion Price or otherwise) so that the holders of Series E Preferred Stock shall receive upon
conversions thereof, in addition to the number of shares of Common Stock receivable thereon, the
number of securities of the Company which they would have received had their Series E Preferred
Stock been converted into Common Stock on the date of such event and had thereafter, during the
period from the date of such event to and including the Conversion Date, retained such securities
(together with any distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 5(e)(iii) with respect to the rights
of the holders of the Series E Preferred Stock.

          (iv) Adjustments for Reclassification, Exchange or Substitution. If the Common Stock
issuable upon conversion of the Series E Preferred Stock at any time or from time to time after the
Issuance Date shall be changed to the same or different number of shares of any class or classes of
stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections 5(e)(i), (ii) and
(iii), or a reorganization, merger, consolidation, or sale of assets provided for in Section
5(e)(v)), then, and in each event, an appropriate revision to the Conversion Price shall be made
and provisions shall be made (by adjustments of the Conversion Price or otherwise) so that the
holder of each share of Series E Preferred Stock shall have the right thereafter to convert such
share of Series E Preferred Stock into the kind and amount of shares of stock and other securities
receivable upon reclassification, exchange, substitution or other change, by holders of the number
of shares of Common Stock into which such share of Series E Preferred Stock might have been
converted immediately prior to such reclassification, exchange, substitution or other change, all
subject to further adjustment as provided herein.

          (v) Adjustments for Reorganization, Merger, Consolidation or Sales of Assets.
If at any time or from time to time after the Issuance Date there shall be a capital reorganization
of the Company (other than by way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 5(e)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 5(e)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially all of the Company’s
properties or assets to any other person (an “Organic Change”), then as a part of such

 

 

Organic Change an appropriate revision to the Conversion Price shall be made and provision shall be
made (by adjustments of the Conversion Price or otherwise) so that the holder of each share of
Series E Preferred Stock shall have the right thereafter to convert such share of Series E
Preferred Stock into the kind and amount of shares of stock and other securities or property of the
Company or any successor corporation resulting from Organic Change. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5(e)(v) with respect
to the rights of the holders of the Series E Preferred Stock after the Organic Change to the end
that the provisions of this Section 5(e)(v) (including any adjustment in the Conversion Price then
in effect and the number of shares of stock or other securities deliverable upon conversion of the
Series E Preferred Stock) shall be applied after that event in as nearly an equivalent manner as
may be practicable.

          (vi) Adjustments for Issuance of Additional Shares of Common Stock. If the Company, at
any time commencing twelve (12) months following the Issuance Date, shall issue any additional
shares of Common Stock (otherwise than as provided in the foregoing subsections (i) through (v) of
this Section 5(e)) (the “Additional Shares of Common Stock”), at a price per share less than the
Conversion Price or without consideration, then the Conversion Price upon each such issuance shall
be adjusted to that price (rounded to the nearest cent) determined by multiplying the Conversion
Price by a fraction:

               (1) the numerator of which shall be equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock
plus (B) the number of shares of Common Stock (rounded to the nearest whole share) which
the aggregate consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the Conversion Price, and

               (2) the denominator of which shall be equal to the number of shares of Common Stock
outstanding immediately after the issuance of such Additional Shares of Common Stock.

The provisions of this subsection (vi) shall not apply under any of the circumstances for which an
adjustment is provided in subsections (i), (ii), (iii), (iv) or (v) of this Section 5(e). No
adjustment of the Conversion Price shall be made under this subsection (e)(vi) upon the issuance of
any Additional Shares of Common Stock which are issued pursuant to any Common Stock Equivalent (as
such term is defined hereinafter) if upon the issuance of such Common Stock Equivalent (x) any
adjustment shall have been made pursuant to subsection (vii) of this Section 5(e) or (y) no
adjustment was required pursuant to subsection (vii) of this Section 5(e). No adjustment of the
Conversion Price shall be made under this subsection (vi) in an amount less than $.01 per share,
but any such lesser adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment, if any, which together with any adjustments so carried forward
shall amount to $.01 per share or more; provided that upon any adjustment of the Conversion
Price as a result of any dividend or distribution payable in Common Stock or Convertible Securities
(as defined below) or the reclassification, subdivision or combination of Common Stock into a
greater or smaller number of shares, the foregoing

 

 

figure of $.01 per share (or such figure as last adjusted) shall be adjusted (to the nearest
one-half cent) in proportion to the adjustment in the Conversion Price.

          (vii) Issuance of Common Stock Equivalents. If the Company, at any time commencing
twelve (12) months following the Issuance Date, shall issue any securities convertible into or
exchangeable for, directly or indirectly, Common Stock (“Convertible Securities”), other than the
Series E Preferred Stock, or any rights or warrants or options to purchase any such Common Stock or
Convertible Securities, shall be issued or sold (collectively, the “Common Stock Equivalents”) and
the price per share for which Additional Shares of Common Stock may be issuable thereafter pursuant
to such Common Stock Equivalent shall be less than the Conversion Price then in effect, then the
Conversion Price upon each such issuance or amendment shall be adjusted as provided in the first
sentence of subsection (vi) of this Section 5(e) on the basis that (1) the maximum number of
Additional Shares of Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are actually then
exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on
which the Company shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent, and (2) the
aggregate consideration for such maximum number of Additional Shares of Common Stock shall be
deemed to be the minimum consideration received or receivable by the Company for the issuance of
such Additional Shares of Common Stock pursuant to such Common Stock Equivalent. No adjustment of
the Conversion Price shall be made under this subsection (vii) upon the issuance of any Convertible
Security which is issued pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any adjustment shall previously have been made to the exercise price of such
warrants then in effect upon the issuance of such warrants or other rights pursuant to this
subsection (vii).

          (viii) Consideration for Stock. In case any shares of Common Stock or Convertible
Securities other than the Series E Preferred Stock, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, shall be issued or sold:

               (1) in connection with any merger or consolidation in which the Company is the surviving
corporation (other than any consolidation or merger in which the previously outstanding shares of
Common Stock of the Company shall be changed to or exchanged for the stock or other securities of
another corporation), the amount of consideration therefore shall be, deemed to be the fair value,
as determined reasonably and in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board may determine to
be attributable to such shares of Common Stock, Convertible Securities, rights or warrants or
options, as the case may be; or

               (2) in the event of any consolidation or merger of the Company in which the Company is not the
surviving corporation or in which the previously outstanding shares of Common Stock of the Company
shall be changed into or exchanged for the stock or other securities of another corporation, or in
the event of any sale of all or substantially all of the assets of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a number of shares of its
Common Stock for stock or securities or other
property of the other corporation computed on the basis of the actual exchange ratio on which the

 

 

transaction was predicated, and for a consideration equal to the fair market value on the date of
such transaction of all such stock or securities or other property of the other corporation. If
any such calculation results in adjustment of the applicable Conversion Price, or the number of
shares of Common Stock issuable upon conversion of the Series E Preferred Stock, the determination
of the applicable Conversion Price or the number of shares of Common Stock issuable upon conversion
of the Series E Preferred Stock immediately prior to such merger, consolidation or sale, shall be
made after giving effect to such adjustment of the number of shares of Common Stock issuable upon
conversion of the Series E Preferred Stock.

          (ix) Record Date. In case the Company shall take record of the holders of its Common
Stock or any other Preferred Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Convertible Securities, then the date of the issue or sale of the shares of Common
Stock shall be deemed to be such record date.

     (f) Certain Issues Excepted. Notwithstanding anything in Section 5(e) hereof to the
contrary, the Company shall not be required to make any adjustment of the Conversion Price or the
number of shares of Common Stock issuable upon conversion of the Series E Preferred Stock upon the
grant after the Issuance Date of, or the exercise after the Issuance Date of, (1) the Company’s
issuance of any Additional Shares of Common Stock (other than for cash) and warrants therefor in
connection with a merger, acquisition or consolidation, (2) the Company’s issuance of Additional
Shares of Common Stock pursuant to a bona fide firm underwritten public offering of the Company’s
securities, (3) the Company’s issuance of Additional Shares of Common Stock or warrants therefor in
connection with bona fide strategic alliances or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (4) the Company’s issuance of Common Stock or
the issuance or grants of options to purchase Common Stock pursuant to the Company’s stock option
plans and employee stock purchase plans as they now exist, (5) the Company’s issuance of warrants
or other securities issued to the placement agent in connection with the transactions contemplated
by the Purchase Agreement, and (6) securities issued pursuant to the conversion or exercise of
convertible or exercisable securities issued or outstanding on or prior to the date hereof.

     (g) No Impairment. The Company shall not, by amendment of 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 to be observed or performed hereunder by the Company,
but will at all times in good faith, assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series E Preferred Stock against impairment.
In the event a holder shall elect to convert any shares of Series E Preferred Stock as provided
herein, the Company cannot refuse conversion based on any claim that such holder or any one
associated or affiliated with such holder has been engaged in any violation of law, unless, an
injunction from a court, on notice, restraining and/or adjoining conversion of all or of said
shares of Series E Preferred Stock shall have been issued and the Company posts a surety bond for
the benefit of such holder in the amount of the difference between the Conversion Price and the
Closing Bid Price on the trading day preceding the date of the attempted conversion multiplied

 

 

by
the number of shares of Series E Preferred Stock sought to be converted, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such holder in the event it obtains judgment.

     (h) Certificates as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock issuable upon conversion
of the Series E Preferred Stock pursuant to this Section 5, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to
each holder of such Series E Preferred Stock a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon written request of the holder of such affected Series E Preferred Stock, at any
time, furnish or cause to be furnished to such holder a like certificate setting forth such
adjustments and readjustments, the Conversion Price in effect at the time, and the number of shares
of Common Stock and the amount, if any, of other securities or property which at the time would be
received upon the conversion of a share of such Series E Preferred Stock. Notwithstanding the
foregoing, the Company shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent of such adjusted amount.

     (i) Issue Taxes. The Company shall pay any and all issue and other taxes, excluding
federal, state or local income taxes, that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series E Preferred Stock pursuant thereto;
provided, however, that the Company shall not be obligated to pay any transfer
taxes resulting from any transfer requested by any holder in connection with any such conversion.

     (j) Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by facsimile or three (3) business days following
being mailed by certified or registered mail, postage prepaid, return-receipt requested, addressed
to the holder of record at its address appearing on the books of the Company. The Company will
give written notice to each holder of Series E Preferred Stock at least twenty (20) days prior to
the date on which the Company closes its books or takes a record (I) with respect to any dividend
or distribution upon the Common Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock or (III) for determining rights to vote with respect to any Organic Change,
dissolution, liquidation or winding-up and in no event shall such notice be provided to such holder
prior to such information being made known to the public. The Company will also give written
notice to each holder of Series E Preferred Stock at least twenty (20) days prior to the date on
which any Organic Change, dissolution, liquidation or winding-up will take place and in no event
shall such notice be provided to such holder prior to such information being made known to the
public.

     (k) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of the Series E Preferred Stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Company shall pay cash equal to the product of such fraction
multiplied by the average of the Closing Bid Prices of the Common Stock for the five (5)

 

 

consecutive trading days immediately preceding the Voluntary Conversion Date or Mandatory
Conversion Date, as applicable.

     (l) Reservation of Common Stock. The Company shall, so long as any shares of Series E
Preferred Stock are outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series E Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series E Preferred Stock then outstanding; provided that the
number of shares of Common Stock so reserved shall at no time be less than 100% of the number of
shares of Common Stock for which the shares of Series E Preferred Stock are at any time
convertible. The initial number of shares of Common Stock reserved for conversions of the Series E
Preferred Stock and each increase in the number of shares so reserved shall be allocated pro rata
among the holders of the Series E Preferred Stock based on the number of shares of Series E
Preferred Stock held by each holder at the time of issuance of the Series E Preferred Stock or
increase in the number of reserved shares, as the case may be. In the event a holder shall sell or
otherwise transfer any of such holder’s shares of Series E Preferred Stock, each transferee shall
be allocated a pro rata portion of the number of reserved shares of Common Stock reserved for such
transferor. Any shares of Common Stock reserved and which remain allocated to any person or entity
which does not hold any shares of Series E Preferred Stock shall be allocated to the remaining
holders of Series E Preferred Stock, pro rata based on the number of shares of Series E Preferred
Stock then held by such holder. The Company shall, from time to time in accordance with the
Delaware General Corporation Law, as amended, increase the authorized number of shares of Common
Stock if at any time the unissued number of authorized shares shall not be sufficient to satisfy
the Company’s obligations under this Section 5(k).

     (m) Regulatory Compliance. If any shares of Common Stock to be reserved for the
purpose of conversion of Series E Preferred Stock require registration or listing with or approval
of any governmental authority, stock exchange or other regulatory body under any federal or state
law or regulation or otherwise before such shares may be validly issued or delivered upon
conversion, the Company shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case may be.

     6. Exchange of Series E Preferred Stock.

          (a) Commencing on the date that is twelve (12) months following the Issuance Date, if the
Company enters into any Subsequent Financing (as defined below) on terms more favorable than the
terms governing the shares of Series E Preferred Stock, then the holders of shares of Series E
Preferred Stock in their sole discretion may exchange their shares of Series E Preferred Stock,
valued at the Liquidation Preference Amount plus any accrued but unpaid dividends, if any, for the
securities issued or to be issued in the Subsequent Financing. The Company covenants and agrees to
promptly notify in writing the holders of shares of Series E Preferred Stock of the terms and
conditions of any such proposed Subsequent Financing.

 

 

          (b) A “Subsequent Financing” shall be defined as any subsequent offer or sale to, or exchange
with (or other type of distribution to), any third party of Common Stock or any securities
convertible, exercisable or exchangeable into Common Stock, including debt securities so
convertible; provided, however, that the following issuances shall not be deemed a
Subsequent Financing: (i) the Company’s issuance of any additional shares of Common Stock (other
than for cash) and warrants therefor in connection with a merger, acquisition or consolidation,
(ii) the Company’s issuance of additional shares of Common Stock pursuant to a bona fide firm
underwritten public offering of the Company’s securities, (iii) the Company’s issuance of
additional shares of Common Stock or warrants therefor in connection with bona fide strategic
alliances or other partnering arrangements so long as such issuances are not for the purpose of
raising capital, (iv) the Company’s issuance of Common Stock or the issuance or grants of options
to purchase Common Stock pursuant to the Company’s stock option plans and employee stock purchase
plans as they now exist, (v) the Company’s issuance of warrants or other securities issued to the
placement agent in connection with the transactions contemplated by this Agreement, and (vi)
securities issued pursuant to the conversion or exercise of convertible or exercisable securities
issued or outstanding on or prior to the date hereof.

     7. Conversion Restriction. Notwithstanding anything to the contrary set forth in
Section 5 of this Certificate of Designation, at no time may a holder of shares of Series E
Preferred Stock convert shares of the Series E Preferred Stock if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares
of Common Stock owned by such holder at such time, would result in such holder beneficially owning
(as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules thereunder) in excess of 9.9% of the then issued and outstanding shares of Common
Stock outstanding at such time; provided, however, that upon a holder of Series E
Preferred Stock providing the Company with sixty-one (61) days written notice (pursuant to Section
4(i) hereof) (the “Waiver Notice”) that such holder would like to waive Section 7 of this
Certificate of Designation with regard to any or all shares of Common Stock issuable upon
conversion of Series E Preferred Stock, this Section 7 shall be of no force or effect with regard
to those shares of Series E Preferred Stock referenced in the Waiver Notice.

     8. Inability to Fully Convert.

     (a) Holder’s Option if Company Cannot Fully Convert. If, upon the Company’s receipt
of a Conversion Notice or on the Mandatory Conversion Date, the Company cannot issue shares of
Common Stock registered for resale under the registration statement for any reason, including,
without limitation, because the Company (x) does not have a sufficient number of shares of Common
Stock authorized and available, (y) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities from issuing all of the Common
Stock which is to be issued to a holder of Series E Preferred Stock pursuant to a Conversion Notice
or (z) fails to have a sufficient number of shares of Common Stock registered for resale under the
registration statement, then the Company shall issue as many shares of Common Stock as it is able
to issue in accordance with such holder’s Conversion Notice and pursuant to Section 5(b)(ii) above
and, with respect to the unconverted Series E Preferred Stock,

 

 

the holder, solely at such holder’s option, can elect, within five (5) business days after receipt
of notice from the Company thereof to:

          (i) if the Company’s inability to fully convert Series E Preferred Stock is pursuant to
Section 8(a)(z) above, require the Company to issue restricted shares of Common Stock in accordance
with such holder’s Conversion Notice and pursuant to Section 5(b)(ii) above; or

          (ii) void its Conversion Notice and retain or have returned, as the case may be, the shares of
Series E Preferred Stock that were to be converted pursuant to such holder’s Conversion Notice
(provided that a holder’s voiding its Conversion Notice shall not affect the Company’s obligations
to make any payments which have accrued prior to the date of such notice).

     (b) Mechanics of Fulfilling Holder’s Election. The Company shall immediately send via
facsimile to a holder of Series E Preferred Stock, upon receipt of a facsimile copy of a Conversion
Notice from such holder which cannot be fully satisfied as described in Section 8(a) above, a
notice of the Company’s inability to fully satisfy such holder’s Conversion Notice (the “Inability
to Fully Convert Notice”). Such Inability to Fully Convert Notice shall indicate (i) the reason
why the Company is unable to fully satisfy such holder’s Conversion Notice and (ii) the number of
Series E Preferred Stock which cannot be converted. Such holder shall notify the Company of its
election pursuant to Section 8(a) above by delivering written notice via facsimile to the Company
(“Notice in Response to Inability to Convert”).

     (c) Pro-rata Conversion. In the event the Company receives a Conversion Notice from
more than one holder of Series E Preferred Stock on the same day and the Company can convert some,
but not all, of the Series E Preferred Stock pursuant to this Section 8, the Company shall convert
from each holder of Series E Preferred Stock electing to have Series E Preferred Stock converted at
such time an amount equal to such holder’s pro-rata amount (based on the number shares of Series E
Preferred Stock held by such holder relative to the number shares of Series E Preferred Stock
outstanding) of all shares of Series E Preferred Stock being converted at such time.

     9. Vote to Change the Terms of or Issue Preferred Stock. The affirmative vote at a
meeting duly called for such purpose or the written consent without a meeting, of the holders of
not less than two-thirds (2/3) of the then outstanding shares of Series E Preferred Stock, shall be
required (a) for any change to this Certificate of Designation or the Company’s Certificate of
Incorporation which would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Series E Preferred Stock or (b) for the issuance of shares of Series
E Preferred Stock other than pursuant to the Purchase Agreement.

     10. Lost or Stolen Certificates. Upon receipt by the Company of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of any Preferred Stock Certificates
representing the shares of Series E Preferred Stock, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the holder to the Company and, in the case of

 

 

mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and date;
provided, however, the Company shall not be obligated to re-issue Preferred Stock
Certificates if the holder contemporaneously requests the Company to convert such shares of Series
E Preferred Stock into Common Stock.

     11. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designation shall be cumulative and
in addition to all other remedies available under this Certificate of Designation, at law or in
equity (including a decree of specific performance and/or other injunctive relief), no remedy
contained herein shall be deemed a waiver of compliance with the provisions giving rise to such
remedy and nothing herein shall limit a holder’s right to pursue actual damages for any failure by
the Company to comply with the terms of this Certificate of Designation. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the performance thereof).
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable
harm to the holders of the Series E Preferred Stock and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such breach or
threatened breach, the holders of the Series E Preferred Stock shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.

     12. Specific Shall Not Limit General; Construction. No specific provision contained
in this Certificate of Designation shall limit or modify any more general provision contained
herein. This Certificate of Designation shall be deemed to be jointly drafted by the Company and
all initial purchasers of the Series E Preferred Stock and shall not be construed against any
person as the drafter hereof.

     13. Failure or Indulgence Not Waiver. No failure or delay on the part of a holder of
Series E Preferred Stock in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or privilege.

     IN WITNESS WHEREOF, the undersigned has executed and subscribed this Certificate and does
affirm the foregoing as true this ___day of ___, 2004.

	 	 	 	 	 
	 	THE VIALINK COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

EXHIBIT I

THE VIALINK COMPANY

CONVERSION NOTICE

Reference is made to the Certificate of Designation of the Relative Rights and Preferences of the
Series E Preferred Stock of The viaLink Company (the “Certificate of Designation”). In accordance
with and pursuant to the Certificate of Designation, the undersigned hereby elects to convert the
number of shares of Series E Preferred Stock, par value $.001 per share (the “Preferred Shares”),
of The viaLink Company, a Delaware corporation (the “Company”), indicated below into shares of
Common Stock, par value $.001 per share (the “Common Stock”), of the Company, by tendering the
stock certificate(s) representing the share(s) of Preferred Shares specified below as of the date
specified below.

	 	 	 	 	 
	Date of Conversion:
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	Number of Preferred Shares to be converted:
	 	 	 	 
	

	 	 	 	 
	 
	 	 	 	 
	Stock certificate no(s). of Preferred Shares to be converted:
	 	 	 	 
	

	 	 	 	 
	 
	 	 	 	 
	The Common Stock have been sold pursuant to the registration statement: YES        NO     

Please confirm the following information:

	 	 	 	 	 
	Conversion Price:
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	Number of shares of Common Stock
	 	 	 	 
	to be issued:
	 	 	 	 
	 
	 	 

Please issue the Common Stock into which the Preferred Shares are being converted and, if
applicable, any check drawn on an account of the Company in the following name and to the following
address:

	 	 	 	 	 
	Issue to:
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	Facsimile Number:
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	Authorization:
	 	 	 	 
	 
	 	 
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Title:	 	 
	

	 	 	 	 
	 
	 	 	 	 
	Dated:

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