e-automate Corporation
SECURITIES PURCHASE AGREEMENT
Dated as of June 19, 2000
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TABLE OF CONTENTS
Page
Article I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions; Interpretation . . . . . . . . . . . . . . . 1
Article II - ISSUANCE AND SALE OF THE SECURITIES . . . . . . . . . . 6
2.1 Authorization of the Securities . . . . . . . . . . . . . 6
2.2 Issuance and Sale of the Securities . . . . . . . . . . . 6
2.3 Additional Issuances and Sales of the Securities. . . . . 6
Article III - CLOSING; CLOSING DELIVERIES. . . . . . . . . . . . . . 7
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Payment for and Delivery of the Securities. . . . . . . . 7
Article IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . 7
4.1 Existence; Qualification; Subsidiaries. . . . . . . . . . 7
4.2 Authorization and Enforceability; Issuance of the
Securities, the Conversion Shares and the Warrant
Shares. . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . 9
4.4 Private Sale. . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Financial Statements; Disclosure. . . . . . . . . . . . . 9
4.6 Absence of Certain Changes. . . . . . . . . . . . . . . .10
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . .12
4.8 Licenses, Compliance with Law, Other Agreements, Etc. . .12
4.9 Third-Party Approvals . . . . . . . . . . . . . . . . . .12
4.10 No Undisclosed Liabilities . . . . . . . . . . . . . . .12
4.11 Tangible Assets. . . . . . . . . . . . . . . . . . . . .12
4.12 Inventory. . . . . . . . . . . . . . . . . . . . . . . .12
4.13 Owned Real Property. . . . . . . . . . . . . . . . . . .12
4.14 Real Property Leases . . . . . . . . . . . . . . . . . .13
4.15 Agreements . . . . . . . . . . . . . . . . . . . . . . .13
4.16 Intellectual Property. . . . . . . . . . . . . . . . . .13
4.17 Employees. . . . . . . . . . . . . . . . . . . . . . . .14
4.18 Transactions With Affiliates . . . . . . . . . . . . . .14
4.19 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .14
4.20 Other Investors. . . . . . . . . . . . . . . . . . . . .15
4.21 Investment Company . . . . . . . . . . . . . . . . . . .15
4.22 Certain Fees . . . . . . . . . . . . . . . . . . . . . .15
4.23 Solicitation Materials . . . . . . . . . . . . . . . . .15
4.24 Registration Rights; Rights of Participation . . . . . .15
4.25 Seniority. . . . . . . . . . . . . . . . . . . . . . . .15
4.26 Reservation of Common Stock. . . . . . . . . . . . . . .16
4.27 Covenant as to Common Stock. . . . . . . . . . . . . . .16
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4.28 Payment of Series 2000-A Preferred Stock . . . . . . . .16
4.29 Stay, Extension and Usury Laws . . . . . . . . . . . . .16
4.30 Continued Existence. . . . . . . . . . . . . . . . . . .16
4.31 Further Assurances . . . . . . . . . . . . . . . . . . .16
4.32 Restricted Payments. . . . . . . . . . . . . . . . . . .16
4.33 Successors . . . . . . . . . . . . . . . . . . . . . . .17
Article V - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. . . . .17
5.1 Authorization and Enforceability. . . . . . . . . . . . .17
5.2 Purchaser's Ability to Perform. . . . . . . . . . . . . .17
Article VI - COMPLIANCE WITH SECURITIES LAWS . . . . . . . . . . . .17
6.1 Investment Intent of the Purchaser. . . . . . . . . . . .17
6.2 Status of Securities. . . . . . . . . . . . . . . . . . .17
6.3 Accredited Investor Status. . . . . . . . . . . . . . . .17
6.4 Access to Information . . . . . . . . . . . . . . . . . .17
6.5 Transfer of Securities, Conversion Shares and Warrant
Shares. . . . . . . . . . . . . . . . . . . . . . . .18
6.6 Right of First Refusal. . . . . . . . . . . . . . . . . .18
Article VII - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . .19
7.1 Conditions Precedent. . . . . . . . . . . . . . . . . . .19
7.2 Closing Deliveries to the Company . . . . . . . . . . . .21
Article VIII - COVENANTS OF THE COMPANY. . . . . . . . . . . . . . .21
8.1 Restricted Actions. . . . . . . . . . . . . . . . . . . .21
8.2 Required Actions. . . . . . . . . . . . . . . . . . . . .22
8.3 Reservation of Common Stock . . . . . . . . . . . . . . .23
8.4 Payments Free of Withholding. . . . . . . . . . . . . . .24
Article IX - REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . .24
9.1 Registration Rights . . . . . . . . . . . . . . . . . . .24
9.2 Piggyback Registration Rights . . . . . . . . . . . . . .25
Article X - SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . .25
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . .25
Article XI - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . .25
11.1 Indemnification. . . . . . . . . . . . . . . . . . . . .25
Article XII - ARBITRATION. . . . . . . . . . . . . . . . . . . . . .26
12.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . .26
Article XIII - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . .26
13.1 Governing Law. . . . . . . . . . . . . . . . . . . . . .26
13.2 Consent to Jurisdiction; Service of Process And Venue. .26
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13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . .26
13.4 Headings . . . . . . . . . . . . . . . . . . . . . . . .26
13.5 Amendment and Waiver . . . . . . . . . . . . . . . . . .26
13.6 Severability . . . . . . . . . . . . . . . . . . . . . .27
13.7 Successors and Assigns . . . . . . . . . . . . . . . . .27
13.8 No Third Party Beneficiaries . . . . . . . . . . . . . .27
13.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . .27
13.10 Purchaser Fees and Expenses . . . . . . . . . . . . . .28
13.11 Remedies Cumulative . . . . . . . . . . . . . . . . . .29
13.12 Timeliness. . . . . . . . . . . . . . . . . . . . . . .29
13.13 Counterparts. . . . . . . . . . . . . . . . . . . . . .29
SCHEDULES
Schedule 4.1 Subsidiaries
Schedule 4.2 Existing Indebtedness
Schedule 4.3 Capitalization
Schedule 4.6(c) Places of Business
Schedule 4.13 Owned Real Property
Schedule 4.16 Intellectual Property
Schedule 4.18 Transactions with Affiliates
Schedule 4.19 Taxes
Schedule 4.20 Other Investors
EXHIBITS
Exhibit A Certificate of Designation of Series 2000-A
Preferred Stock
Exhibit B Form of Warrant
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
June 19, 2000, by and between e-automate Corporation (the
"Company"), a Delaware corporation with an address at 73 North 490
West, American Fork, Utah 84003; and ASPEN CAPITAL RESOURCES, LLC or
its assigns (the "Purchaser"), a Utah limited liability company with
an address at 8989 South Schofield Circle, Sandy, Utah 84093.
The Company desires to issue to the Purchaser and the
Purchaser desires to purchase from the Company, upon the terms and
subject to the conditions set forth herein, (i) the Series 2000-A
Preferred Stock (as defined herein) of the Company and (ii) the
Warrants (as defined herein) of the Company.
In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement,
the parties hereto agree as follows:
Article I - DEFINITIONS
1.1 Definitions; Interpretation. For purposes of this
Agreement, the following terms have the indicated meanings:
"Affiliate" of a Person means any officer, director or
employee of the Company and any other Person that directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person. For
purposes of this definition, "control" of a Person means the power,
directly or indirectly, either (i) to vote 10% or more of the
Capital Stock having ordinary voting power for the election of
directors of such Person or (ii) to direct or cause the direction of
the management and policies of such Person whether by contract or
otherwise.
"Capital Stock" of any Person shall mean any and all shares,
interests (including membership and economic interests in a limited
liability company), rights to purchase, warrants, options,
participations or other equivalents of or interests in (however
designated) equity of such Person, but excluding any debt securities
convertible into such equity prior to such conversion.
"Capitalized Lease" means any lease which is required under
GAAP to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means obligations for the
payment of rent for any Capitalized Lease; for purposes hereof, the
amount of any such obligation shall be the capitalized amount
thereof determined in accordance with GAAP.
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"Certificate of Designation" mean the Certificate of
Designation of Series 2000-A Preferred Stock of the Company, set
forth as Exhibit A hereto, as the same may be amended from time to
time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means, collectively, the Company's Common
Stock, $.001 par value per share, and any Capital Stock of any class
of the Company hereafter authorized which is not limited to a fixed
sum or percentage of par or stated value in respect to the rights of
the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding
up of the Company.
"Confidential Information" means any proprietary information
concerning the Company's business other than information that (i)
was already known to the Person having a duty to keep confidential
such information on a nonconfidential basis prior to the time of
disclosure, (ii) is or becomes generally available to the public
through no act or omission of such Person or (iii) becomes available
to such Person on a nonconfidential basis from a source other than
any party hereto (or any agent or representative thereof) if such
source was not under a prohibition against disclosing the
information or otherwise bound by a confidentiality agreement with
respect thereto.
"Conversion Shares" means shares of Common Stock issued or
issuable upon conversion of the Preferred Shares, whether or not a
Preferred Share is presently convertible; provided, that if there is
a change such that the securities issuable upon conversion of the
Preferred Shares are issued by an entity other than the Company or
there is a change in the securities so issuable, then the term
"Conversion Shares" shall mean shares of the security issuable upon
conversion of the Preferred Shares if such securities are issuable
in shares, or shall mean the equivalent units in which such security
is issuable if such security is not issuable in shares.
"Current Balance Sheet" means the unaudited balance sheet of
the Company as at March 31, 2000.
"Dividend Shares" means shares of Preferred Stock issued
pursuant to Section 2 of the Certificate of Designation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means the closing bid price of a share of
Common Stock quoted on the NASDAQ Stock Market System or reported on
the NASD's OTC Bulletin Board. However, until a share of Common
Stock is first quoted on the NASDAQ Stock Market System or reported
on the NASD's OTC Bulletin Board after the date of this Agreement,
"Fair Market Value" means $3.00 per share.
"Financial Statements" means (i) the unaudited consolidated
balance sheets of the Company as at March 31, 2000, and the related
unaudited consolidated statements of operations, consolidated
statements of cash flows and consolidated statements of
stockholders' equity (deficit) for the quarterly periods then ended,
and (ii) the audited consolidated balance sheets of the Company as
at March 31, 1999 and 1998, and the related audited consolidated
statements of operations, consolidated statements of cash flows and
consolidated statements of stockholders' equity (deficit) for the
fiscal year periods then ended.
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"GAAP" means United States generally accepted accounting
principles as in effect from time to time, consistently applied.
"Governmental Agency" means any federal, state, local,
foreign or other governmental agency, instrumentality, commission,
authority, board or body and the National Association of Securities
Dealers.
"Hedging Agreement" means any interest rate swap, collar,
cap, floor or forward rate agreement or other agreement regarding
the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the Company, and any
confirming letter executed pursuant to such agreement, all as
amended, supplemented, restated or otherwise modified from time to
time.
"includes" and "including" mean includes and including,
without limitation.
"Indebtedness" means, without duplication, as to any Person
(i) indebtedness for borrowed money; (ii) indebtedness for the
deferred purchase price of property or services (other than current
trade payables incurred in the ordinary course of business and
payable in accordance with customary practices); (iii) indebtedness
evidenced by bonds, notes, debentures or other similar instruments
(other than performance, surety and appeal or other similar bonds
arising in the ordinary course of business); (iv) obligations and
liabilities secured by a Lien upon property owned by such Person,
whether or not owing by such Person and even though such Person has
not assumed or become liable for the payment thereof; (v)
obligations and liabilities directly or indirectly guaranteed by
such Person; (vi) obligations or liabilities created or arising
under any conditional sales contract or other title retention
agreement with respect to property used and/or acquired by such
Person, even though the rights and remedies of the lessor, seller
and/or lender thereunder are limited to repossession of such
property; (vii) Capitalized Lease Obligations; (viii) all
liabilities in respect of letters of credit, acceptances and similar
obligations created for the account of such Person; and (ix) net
liabilities of such Person under Hedging Agreements and foreign
currency exchange agreements, as calculated on a basis satisfactory
to the Purchaser and in accordance with accepted practice.
"Initial Closing" and "Additional Closing" have the meanings
set forth in Section 3.1.
"Initial Closing Date" and "Additional Closing Dates" have
the meanings set forth in Section 3.1.
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"Intellectual Property" means all domestic and foreign
patents, patent applications, disclosures, industrial designs,
discoveries and inventions; trademarks, service marks, trade dress,
trade names, d/b/a's, Internet domain names and corporate names and
all goodwill associated therewith; published and unpublished works
of authorship, copyrights; registrations, applications and renewals
for any of the foregoing; trade secrets, Confidential Information,
know-how, technical and computer data, databases, proprietary
information, documentation and software, financial, business and
marketing plans, customer and supplier lists and all other
intellectual property and proprietary rights; and all copies and
tangible embodiments of the foregoing.
"IRS" means the Internal Revenue Service.
"knowledge" or "know" when used with respect to the Company
means the knowledge of the senior management (vice president or
senior) of the Company, or any other management personnel that has
had significant involvement in the business and affairs of the Company.
"Liability" means any liability or obligation (whether
absolute or contingent, liquidated or unliquidated or due or to
become due).
"Lien" means any mortgage, deed of trust, pledge, lien,
security interest, charge, encumbrance, security arrangement,
restriction, covenant, encroachment or other title imperfection of
any nature whatsoever, including but not limited to any conditional
sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security.
"Material Adverse Change" means any material adverse change
in the business, condition (financial or otherwise), prospects or
results of operations of the Company and its Subsidiaries taken as a
whole.
"Material Adverse Effect" means any material adverse effect
on (i) the business, condition (financial or otherwise), prospects
or results of operations of the Company and its Subsidiaries taken
as a whole, or (ii) any of the transactions contemplated hereby or
by the Related Documents.
"ordinary course of business" means the ordinary course of
business of the Company consistent with past practice (including
with respect to quantity, quality and frequency).
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other entity.
"Preferred Shares" has the meaning set forth in Section 2.1.
"Preferred Stock" means the Series 2000-A Preferred Stock,
$.001 par value per share, of the Company.
"Related Documents" means all documents and instruments to be
executed or adopted by the Company in connection herewith, including
without limitation each of the Preferred Shares, each of the
Warrants and all other documents and instruments to be executed or
adopted by the Company pursuant thereto.
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"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning given that term in Section 2.1.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation, partnership, association
or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without
regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by the Company or (ii) if a
partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by the Company.
For purposes hereof, the Company shall be deemed to have a majority
ownership interest in a partnership, association or other business
entity if the Company, directly or indirectly, is allocated a
majority of partnership, association or other business entity gains
or losses, or is or controls the managing director or general
partner of such partnership, association or other business entity.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section59A), customs duties, Capital
Stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
"Tax Returns" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
"Warrants" means the Warrants of the Company exercisable for
shares of Common Stock, to be issued by the Company on the Closing
Date and each Additional Closing Date, substantially in the form of
Exhibit B hereto.
"Warrant Shares" means shares of the Common Stock obtained or
obtainable upon exercise of the Warrants, whether or not a Warrant
is presently exercisable; provided, that if there is a change such
that the securities issuable upon exercise of the Warrants are
issued by an entity other than the Company or there is a change in
the class of securities so issuable, then the term "Warrant Shares"
shall mean shares of the security issuable upon exercise of the
Warrants if such security is issuable in shares, or shall mean the
equivalent units in which such security is issuable if such security
is not issuable in shares.
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Article II - ISSUANCE AND SALE OF THE SECURITIES
2.1 Authorization of the Securities. The Company has
authorized the issuance and sale to the Purchaser, on the terms and
subject to the conditions of this Agreement, of (a) its Preferred
Stock in an aggregate amount of up to 5,000 shares and containing
the terms and conditions and in the form of the Certificate of
Designation set forth in Exhibit "A" attached hereto (the "Preferred
Shares"), and (b) its Warrants containing the terms and conditions
and in the form of the Warrant set forth in Exhibit "B" attached
hereto (the "Warrants and, together with the Preferred Shares, the
"Securities"). The Preferred Shares are convertible into and the
Warrants are exercisable for shares of the Company's Common Stock.
2.2 Issuance and Sale of the Securities. At the Initial
Closing, on the terms and subject to the conditions of this
Agreement, the Company shall issue to the Purchaser and the
Purchaser shall purchase from the Company (a) 500 Preferred Shares
for aggregate consideration of $500,000.00, and (b) Warrants
initially exercisable for the purchase of 100,000 Warrant Shares.
2.3 Additional Issuances and Sales of the Securities.
On or before each date which is 30 days or a multiple thereof
after the Initial Closing Date, until the date which is 270 days
after the Initial Closing Date, on the terms and subject to the
conditions of this Agreement, the Company shall issue to the
Purchaser and the Purchaser shall purchase from the Company (a) 500
Preferred Shares for aggregate consideration of $500,000.00, and (b)
Warrants initially exercisable for the purchase of 100,000 Warrant
Shares.
Notwithstanding the foregoing, the Purchaser shall have no
obligation to purchase any Securities in connection with any
additional issuance and sale of the Securities pursuant to this
Section 2.3, provided that the Purchaser may in its sole discretion
purchase such Securities, (a) if the Company is in default or has
breached any of its obligations under this Agreement or any of the
Related Documents, (b) if an Event of Noncompliance has occurred
under the Certificate of Designation, or (c) if, after the first
date upon which the Company's Common Stock is quoted in the NASDAQ
Stock Market System or reported on the NASD's OTC Bulletin Board,
the average of the closing bid prices for the Company's Common Stock
for ten (10) consecutive trading days, as quoted in the NASDAQ Stock
Market System or reported on the NASD's OTC Bulletin Board, is less
than or equal to $3.25 per share.
Notwithstanding the foregoing, the Purchaser shall have no
obligation to purchase any Securities in connection with any
additional issuance and sale of the Securities pursuant to this
Section 2.3 if, and to the extent, such purchase would result in the
Purchaser becoming directly or indirectly the beneficial owner of
more than 9.9% of the Common Stock of the Company.
Article III - CLOSING; CLOSING DELIVERIES
3.1 Closing. The closing of the transactions contemplated by
Section 2.2 of this Agreement (the "Initial Closing") shall take
place at 3:00 p.m. on June 19, 2000, at the offices of Evans &
Swensen, P.C., 136 South Main Street, Suite 318, Salt Lake City,
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Utah 84101 or at such other date, time and/or place as shall be
agreed upon by the parties hereto. The date upon which the Initial
Closing occurs is referred to herein as the "Initial Closing Date."
The closings of the transactions contemplated by Section 2.3 of this
Agreement (the "Additional Closings") shall take place on the dates
indicated therein and at such times and/or places as shall be agreed
upon by the parties hereto. The dates upon which the Additional
Closings occur are referred to herein as the "Additional Closing
Dates."
3.2 Payment for and Delivery of the Securities. At the
Initial Closing, the Company shall issue and deliver to the
Purchaser, (a) a stock certificate for 500 Preferred Shares, against
payment by the Purchaser, by check or wire transfer of immediately
available funds to the account designated by the Company, of
$450,000.00 (net of 10% placement fee payable to Aspen Capital
Resources, LLC pursuant to Section 12.10), and (b) duly issued
Warrants initially exercisable for the purchase of 100,000 Warrant
Shares. At each Additional Closing, the Company shall issue and
deliver to the Purchaser, (a) stock certificates for the number of
Preferred Shares specified pursuant to Section 2.3, against payment
by the Purchaser, by check or wire transfer of immediately-available
funds to the account designated by the Company, of the price of the
Preferred Shares (net of a 10% placement fee payable to Aspen
Capital Resources, LLC pursuant to Section 12.10), and (b) duly
issued Warrants exercisable for the purchase of 100,000 Warrant Shares.
Article IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as
follows:
4.1 Existence; Qualification; Subsidiaries. Each of the
Company and its Subsidiaries is a corporation, partnership or
limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of the state of
its incorporation or formation and has full corporate or partnership
power and authority, as the case may be, to conduct its business and
own and operate its properties as now conducted, owned and operated.
The copies of the Certificate of Incorporation, as amended, and
By-Laws of the Company and all amendments thereto previously
delivered to the Purchaser are true, correct and complete copies of
such documents. The Company and each Subsidiary is licensed or
qualified as a foreign corporation, partnership or limited liability
company and is in good standing in all jurisdictions where such
person is required to be so licensed or qualified, except where the
failure to be so licensed, qualified or in good standing would not
have a Material Adverse Effect. Except as set forth on SCHEDULE 4.1,
the Company has no Subsidiaries and owns no Capital Stock or other
securities of, and has not made any other investment in, any other
entity. All of the issued shares of Capital Stock, partnership
interests or membership interests, as the case may be, of each
Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities
or adverse claims.
4.2 Authorization and Enforceability; Issuance of the
Securities, the Conversion Shares and the Warrant Shares.
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(a) The Company has full power and authority and has taken
all required corporate and other action necessary to permit it to
execute and deliver this Agreement and the Related Documents and to
carry out the terms hereof and thereof and to issue and deliver the
Securities, the Conversion Shares and the Warrant Shares, and none
of such actions will violate any provision of the Certificate of
Incorporation of the Company, the By-Laws of the Company or of any
applicable law, regulation, order, judgment or decree or rule of any
stock exchange where the Company's Common Stock is listed or market
in which the Company's Common Stock is quoted, or result in the
breach of or constitute a default (or an event which, with notice or
lapse of time or both would constitute a default) under any material
agreement (including the Company's current secured debt instruments
set forth on SCHEDULE 4.2 (the "Existing Indebtedness")), instrument
or understanding to which the Company is a party or by which it is
bound or by which it will become bound as a result of the
transactions contemplated by this Agreement. This Agreement, each of
the Related Documents and all other agreements and instruments
contemplated hereby to which the Company is a party, have been duly
executed and delivered by the Company and each constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that
enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
application related to the enforcement of creditor's rights
generally and (ii) general principles of equity.
(b) The execution, delivery and performance of this
Agreement, each of the Related Documents and all other agreements
and instruments contemplated hereby to which the Company is a party
have been duly authorized by the Company. The Conversion Shares and
the Warrant Shares, will be fully paid and nonassessable. The
Conversion Shares and the Warrant Shares have been duly reserved for
issuance upon conversion of the Preferred Shares and exercise of the
Warrants, as the case may be, and, when so issued, will be duly
authorized, validly issued and outstanding, fully paid and
nonassessable shares of Common Stock. Neither the issuance and
delivery of any Conversion Shares upon conversion of any Preferred
Shares nor the issuance and delivery of any Warrant Shares upon
exercise of the Warrants is subject to any preemptive right of any
stockholder of the Company or to any right of first refusal or other
similar right in favor of any Person.
4.3 Capitalization. The authorized Capital Stock of the
Company consists of (a) 20,000,000 shares of Common Stock, par value
$.001 per share, of which, as of the date of this Agreement,
5,398,001 shares were issued and outstanding, 236,228 shares have
been subscribed and paid for and are to be issued, 2,840,000 shares
are reserved for issuance upon the exercise of certain stock options
and warrants, and up to 166,667 shares may be sold on or before June
30, 2000 pursuant to the Company's current private placement, and
(b) 1,000,000 shares of preferred stock, par value $.001 per share,
of which, as of the date of this Agreement, no shares are issued and
outstanding and 125,796 shares of Series 2000-B Preferred Stock will
be issued immediately after the date of this Agreement. All of the
outstanding Capital Stock has been validly issued and is fully paid
and nonassessable and has been issued in compliance with all
applicable securities laws (including the provisions of the
Securities Act and the rules and regulations promulgated
thereunder). Except as set forth in Schedule 4.3, there are no
<PAGE>
-8-
options, convertible securities, warrants, calls, pledges, transfer
restrictions (except restrictions imposed by federal and state
securities laws), voting restrictions, liens, rights of first offer,
rights of first refusal, antidilution provisions or commitments of
any character relating to any issued or unissued shares of Capital
Stock of the Company other than as contemplated in the Related
Documents. Except as contemplated by this Agreement and the Related
Documents or as set forth in Schedule 4.3 and Schedule 4.25, there
are no preferential rights applicable to the issuance and sale of
the Securities, the Conversion Shares and the Warrant Shares.
4.4 Private Sale. Assuming the accuracy of the
representations and warranties made by recipients of the Company's
Capital Stock in connection with the acquisition of such Capital
Stock, the Company has not violated any applicable federal or state
securities laws in connection with the offer, sale and issuance of
any of its Capital Stock. Subject to the accuracy of the Purchaser's
representations contained herein, neither the offer, sale and
issuance of the Securities hereunder nor the issuance and delivery
of any Conversion Shares upon conversion of any Preferred Shares or
any Warrant Shares upon exercise of any Warrants requires
registration under the Securities Act or any state securities laws.
4.5 Financial Statements; Disclosure.
(a) As of the date of this Agreement, the Financial
Statements (together with the notes thereto, as applicable), (i) are
true, correct and complete in all material respects, (ii) are in
accordance with the books and records of the Company and (iii)
fairly present the financial condition and results of operations of
the Company as of the dates and for the periods indicated in
accordance with GAAP, except that the unaudited balance sheets and
related financial statements do not contain an auditors' opinion and
do not contain footnotes and are subject to normal, recurring
year-end audit adjustments which are not material.
(b) This Agreement together with the schedules, attachments,
exhibits, written statements and certificates supplied to the
Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements contained herein or therein, in
light of the circumstances in which they were made, not misleading.
There is no fact which has not been disclosed to the Purchaser of
which the Company has knowledge, and which has had or could
reasonably be anticipated to have a Material Adverse Effect.
(c) As of its filing date, each document filed with the SEC
by the Company, as amended or supplemented prior to the date of this
Agreement or any Additional Closing Date, if applicable, pursuant to
the Securities Act and/or the Exchange Act, true and correct copies
of which have been given to the Purchaser, (i) complied in all
material respects with the applicable requirements of the Securities
Act and/or Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.
Each final registration statement filed with the SEC by the Company
pursuant to the Securities Act, as of the date such statement became
effective (i) complied in all material respects with the applicable
requirements of the Securities Act and (ii) did not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any prospectus, in
light of the circumstances under which they were made).
<PAGE>
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4.6 Absence of Certain Changes.
(a) Since the date of the Current Balance Sheet, neither the
Company nor any Subsidiary has:
(i) incurred any Liabilities other than current
Liabilities incurred, or obligations under contracts entered
into, in the ordinary course of business and for individual
amounts not greater than $50,000;
(ii) paid, discharged or satisfied any claim, Lien or
Liability, other than any claim, Lien or Liability (A)
reflected or reserved against on the Current Balance Sheet
and paid, discharged or satisfied in the ordinary course of
business since the date of the Current Balance Sheet or (B)
incurred and paid, discharged or satisfied since the date of
the Current Balance Sheet, in each case in the ordinary
course of business;
(iii) sold, leased, assigned or otherwise transferred
any of its assets, tangible or intangible (other than sales
of inventory in the ordinary course of business and use of
supplies in the ordinary course of business);
(iv) permitted any of its assets, tangible or
intangible, to become subject to any Lien;
(v) written off as uncollectible any accounts
receivable other than (A) in the ordinary course of business
or (B) for amounts not greater than $50,000 in the aggregate;
(vi) terminated or amended or suffered the
termination or amendment of, or other than in the ordinary
course of business, failed to perform in all material
respects all of its obligations or suffered or permitted any
material default to exist under, any material agreement,
license or permit;
(vii) suffered any damage, destruction or loss of
tangible property (whether or not covered by insurance) which
in the aggregate exceeds $100,000;
(viii) made any loan (other than intercompany
advances) to any other Person (other than advances to
employees in the ordinary course of business which do not
exceed $10,000 individually or $50,000 in the aggregate);
(ix) canceled, waived or released any debt, claim or
right in an amount or having a value exceeding $100,000;
<PAGE>
-10-
(x) paid any amount to or entered into any agreement,
arrangement or transaction with, or any series of agreements,
arrangements or transactions with, any Affiliate (including
its officers, directors and employees) having a value of in
excess of $50,000 in the aggregate (other than as
Company-wide employee benefits or termination benefits paid
in the ordinary course of business);
(xi) declared, set aside, or paid any dividend or
distribution with respect to its Capital Stock or redeemed,
purchased or otherwise acquired any of its Capital Stock;
(xii) other than in the ordinary course of business
or under existing contractual terms or obligations, granted
any increase in the compensation of any officer or employee
or made any other change in employment terms of any officer
or employee;
(xiii) made any change in any method of accounting or
accounting practice;
(xiv) suffered or caused any other occurrence, event
or transaction outside the ordinary course of business or
which could have a Material Adverse Effect; or
(xv) agreed, in writing or otherwise, to any of the
foregoing.
(b) Since the date of the Current Balance Sheet, there has
been no Material Adverse Change.
(c) Schedule 4.6(C) hereto sets forth a complete and
accurate list as of the date hereof of (i) each place of business of
the Company and each of its Subsidiaries and (ii) the chief
executive office of the Company and each of its Subsidiaries.
4.7 Litigation. No claim, suit, proceeding or investigation
is proceeding, pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any
officer or director thereof or the Company's or the Subsidiaries'
business which if decided adversely to any such person could have a
Material Adverse Effect.
4.8 Licenses, Compliance with Law, Other Agreements, Etc.
Each of the Company and its Subsidiaries has all material
franchises, permits, licenses and other rights to allow it to
conduct its business and is not in violation, in any material
respects of any order or decree of any court, or of any law, order
or regulation of any Governmental Agency, or of the provisions of
any contract or agreement to which it is a party or by which it is
bound, and neither this Agreement nor the Related Documents nor the
transactions contemplated hereby or thereby will result in any such
violation. Each of the Company's and its Subsidiary's business has
been conducted in compliance with all federal, state and local laws,
ordinances, rules and regulations, in all material respects. To the
knowledge of the Company, conditions or events of non-compliance
with respect to the Company's licensees that would have a Material
Adverse Effect on the Company or its contractual relationships with
its licensees.
<PAGE>
-11-
4.9 Third-Party Approvals. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this
Agreement, the Company is not required to obtain any order, consent,
approval or authorization of, or to make any declaration or filing
with, any Governmental Agency or other third party (including under
any state securities or "blue sky" laws) in connection with the
execution and delivery of this Agreement or the Related Documents,
or the consummation of the transactions contemplated hereby or
thereby to occur on the Initial Closing Date or any Additional
Closing Date.
4.10 No Undisclosed Liabilities. Neither the Company nor any
of its Subsidiaries has any material Liabilities except (i) as and
to the extent of the amounts reflected or reserved against on the
Current Balance Sheet and (ii) liabilities and obligations incurred
in the ordinary course of business since the date thereof that in
the aggregate could not result in a Material Adverse Effect.
4.11 Tangible Assets. Each of the Company and its
Subsidiaries has good and marketable title to, or valid leasehold
interests in, all material tangible assets used or reasonably
necessary in connection with the conduct of its business.
4.12 Inventory. All inventory of each of the Company and its
Subsidiaries, whether reflected on the Current Balance Sheet or
otherwise, consists of a quality and quantity usable or salable in
the ordinary course of business, subject to defect or obsolescence
consistent with the Company's historical experience.
4.13 Owned Real Property. Set forth on Schedule 4.13 is a
true and correct description of all real property owned by the
Company and its Subsidiaries. The Company and each of its
Subsidiaries has good and marketable title in fee simple, free and
clear of all Liens, to all of the real property owned by the Company
and each of its Subsidiaries.
4.14 Real Property Leases. There exists no event of default
(nor any event which with notice or lapse of time would constitute
an event of default) with respect to the Company, any Subsidiary
and, to the Company's knowledge, with respect to any other party
thereto under any agreement pursuant to which the Company is the
lessee or lessor of any real property, except for such defaults and
defects in enforceability as could not in the aggregate be expected
to have a Material Adverse Effect, and all such agreements are in
full force and effect and enforceable against the lessor or lessee
in accordance with their terms except for such defaults and defects
in enforceability as could not in the aggregate be expected to have
a Material Adverse Effect.
4.15 Agreements. Neither the Company nor any Subsidiary is in
default, nor to the knowledge of the Company is there any basis for
a valid claim of default, and to the Company's knowledge no event
has occurred which, with notice or lapse of time, would constitute a
default, under any agreement, arrangement or understanding to which
the Company or any Subsidiary is a party, and to the knowledge of
the Company, no Person other than the Company is in default under
any such agreement, in each case other than defaults which in the
aggregate could not be expected to have a Material Adverse Effect.
Additionally, neither the Company nor any Subsidiary is party to any
agreement the performance of which in accordance with its terms
(including any termination provision thereof) could be expected to
have a Material Adverse Effect.
<PAGE>
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4.16 Intellectual Property. Schedule 4.16 sets forth a
complete list of (i) all patented, registered, applied for or
otherwise material Intellectual Property owned, filed or used by the
Company; and (ii) all trade names and material unregistered
trademarks and other designations used by the Company in connection
with its business. The Company owns and possesses all right, title
and interest in and to, or has a valid and enforceable license to
use, all Intellectual Property used by the Company in its business
as currently conducted and as currently proposed to be conducted. No
claim by any third party contesting the validity, enforceability,
use or ownership of Intellectual Property owned, held or used by the
Company has been made or, to the knowledge of the Company, is
threatened. To the knowledge of the Company, neither it nor its
indemnitees has violated or misappropriated the Intellectual
Property of any third party and no third party has violated or
misappropriated Intellectual Property owned, held or used by the
Company. No claim by any third party has been asserted, or to the
knowledge of the Company threatened, that the Company or its
indemnitees is violating or misappropriating Intellectual Property.
To the knowledge of the Company, all Intellectual Property owned or
held by the Company is valid, subsisting and enforceable, and all
such Intellectual Property is free of all Liens, and, except as set
forth on Schedule 4.16, is fully assignable by the Company to any
Person, without payment, consent of any Person or other condition
or restriction. The Company has taken all reasonable measures to
protect the secrecy, confidentiality and value of all Confidential
Information, proprietary information and trade secrets owned, held
or used by the Company (including, without limitation, entering into
appropriate confidentiality agreements with all officers, directors,
employees, and other Persons with access to such information and
trade secrets). To the knowledge of the Company, such information
and trade secrets have not been disclosed to any Persons other than
Company employees or Company contractors who had a need to know and
use such information and trade secrets in the ordinary course of
employment or contract performance and who executed appropriate
confidentiality agreements.
4.17 Employees. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strike,
material grievance, material claim of unfair labor practice or other
collective bargaining dispute. To the knowledge of the Company there
is no organizational effort being made or threatened by or on behalf
of any labor union with respect to its employees. To the knowledge
of the Company, it has not committed any unfair labor practice or
violated any federal, state or local law or regulation regulating
employers or the terms and conditions of its employees' employment,
including laws regulating employee wages and hours, employment
discrimination, employee civil rights, equal employment opportunity
and employment of foreign nationals, except for such violations as
could not be expected to have a Material Adverse Effect.
4.18 Transactions With Affiliates. Except as set forth on
Schedule 4.18, neither the Company nor any Subsidiary is party to
any agreement, arrangement or transaction or series of agreements,
arrangements or transactions with any Affiliate which agreements,
arrangements, transactions and series of transactions in the
aggregate have a value over $50,000 (other than as Company-wide
employee benefits paid in the ordinary course of business).
<PAGE>
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4.19 Taxes.
(a) Except as disclosed on Schedule 4.19, each of the
Company and its Subsidiaries has filed all Tax Returns that it was
required to file, and has paid all Taxes due with respect to the
periods covered by such Tax Returns.
(b)None of the Company and its Subsidiaries (i) has been a
member of an affiliated group filing a consolidated federal Tax
Return (other than a group the common parent of which was the
Company) or (ii) has any Liability for the Taxes of any Person
(other than any of the Company and its Subsidiaries) under Treas.
Reg. Section1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
(c) Each of the Company and its Subsidiaries has withheld
and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(d) Except as set forth on Schedule 4.19, there is no
dispute or claim concerning any Tax Liability of any of the Company
and its Subsidiaries either (i) claimed or raised by any authority
in writing or (ii) as to which any of the directors and officers
(and employees responsible for Tax matters) of the Company and its
Subsidiaries has knowledge based upon personal contact with any
agent of such authority.
4.20 Other Investors. Set forth on Schedule 4.20 is a list of
all stockholders (including option and convertible security holders)
of the Company who as of the date hereof, based on SEC filings of
such stockholders, after giving effect to the terms hereof, own more
than 5% of the fully diluted common equity of the Company and sets
forth such percentage ownership.
4.21 Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate of, an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
4.22 Certain Fees. Other than fees and expenses due and
payable to the Purchaser pursuant to Section 12.4 or otherwise
disclosed in writing to the Purchaser by the Company, no fees or
commissions will be payable by the Company to any broker, financial
advisor, finder, investment banker, or bank with respect to the
transactions contemplated by this Agreement. The Purchaser shall not
have any obligation with respect to any fees or with respect to any
claims made by or on behalf of any Persons for fees of a type
contemplated in this section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall
indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents and partners, and their respective Affiliates from
and against all claims, losses, damages, costs (including attorney's
fees) and expenses suffered in respect to any such claimed or
existing fees.
<PAGE>
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4.23 Solicitation Materials. The Company has not (i)
distributed any offering materials to the Purchaser in connection
with the offering and sale of the Securities other than its public
filings with the SEC, or (ii) solicited any offer to buy or sell the
Securities by means of any form of general solicitation or general
advertising within the meaning of Regulation D under the Securities
Act. None of the information provided to the Purchaser by or on
behalf of the Company contain any untrue statement of material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
4.24 Registration Rights; Rights of Participation. (a) the
Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities
of the Company registered with the SEC or any other Governmental
Agency which has not expired or been satisfied in full and (b) no
Person, including, but not limited to, current or former
stockholders of the Company, underwriters, brokers or agents, has
any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by this Agreement or any other related
document which has not been waived. None of the rights granted to
the Purchaser hereunder and under the Related Documents conflicts
with or would cause a default under any of the agreements or
arrangements listed on SCHEDULE 4.24 hereto.
4.25 Seniority. No Capital Stock of the Company whether or
not currently outstanding is senior to the Preferred Stock in right
of payment, whether with respect to dividends or redemption or upon
liquidation, dissolution or otherwise.
4.26 Reservation of Common Stock. The Company shall at all
times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock or out of the Common
Stock held in treasury, the full number of shares of Common Stock as
shall from time to time be issuable upon the conversion of all
issued and outstanding Series 2000-A Preferred Stock and upon the
exercise of all outstanding Warrants.
4.27 Covenant as to Common Stock. The Company covenants that
all shares of Common Stock which may be issued upon conversion of
Series 2000-A Preferred Stock, including interest, additional shares
of Common Stock and penalties, will upon issue be fully paid and
nonassessable and the Company will pay all taxes, liens and charges
that may be payable in respect of the issue or delivery of shares of
Common Stock on conversion of Series 2000-A Preferred Stock pursuant
hereto.
4.28 Payment of Series 2000-A Preferred Stock. The Company
shall pay the principal of, and interest on, the Series 2000-A
Preferred Stock on the dates and in manner provided herein and in
the Series 2000-A Preferred Stock.
4.29 Stay, Extension and Usury Laws. The Company covenants
(to the extent that it may lawfully do so) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of Series 2000-A Preferred
Stock; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay
or impede the execution of any right herein granted to the Purchaser.
<PAGE>
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4.30 Continued Existence. The Company will do or cause to be
done all things necessary to preserve and keep in full force and
effect its existence as a corporation and will refrain from taking
any action that would cause its existence as a corporation to cease,
including without limitation any action that would result in the
liquidation, winding up or dissolution of the Company.
4.31 Further Assurances. From time to time the Company will
make, execute and deliver to the Purchaser, or cause to be made,
executed and delivered to the Purchaser, any and all such further
and other instruments and assurances as may be reasonably necessary
or proper to carry out the intention of, or to facilitate the
performance of, the terms of Series 2000-A Preferred Stock or to
secure the rights and remedies hereunder of the Purchaser.
4.32 Restricted Payments. The Company shall not declare and
pay any dividends on its capital stock or redeem, acquire or
otherwise retire for value any securities issued by it (other than
the Series 2000-A Preferred Stock) unless, at the time of the taking
of such action, no breach or default under this Agreement or the
Related Documents or event which with notice or lapse of time or
both would become an default under this Agreement or the Related
Documents has occurred and is continuing.
4.33 Successors. The Company shall not, whether in a single
transaction or through a series of related transactions, consolidate
or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of its assets to, any Person unless such
Person agrees in writing to assume all obligations of the Company
under the Series 2000-A Preferred Stock.
Article V - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as
follows:
5.1 Authorization and Enforceability. The Purchaser has full
power and authority and has taken all action necessary to permit it
to execute and deliver this Agreement and the other documents and
instruments to be executed by it pursuant hereto and to carry out
the terms hereof and thereof. This Agreement and each such other
document and instrument, when duly executed and delivered by the
Purchaser, will constitute a valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its
terms, except to the extent limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
application related to the enforcement of creditors' rights
generally and (ii) general principles of equity.
5.2 Purchaser's Ability to Perform. As of the Initial
Closing, the Purchaser has the financial resources to perform fully
its total obligations under this Agreement.
<PAGE>
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Article VI - COMPLIANCE WITH SECURITIES LAWS
6.1 Investment Intent of the Purchaser. The Purchaser
represents and warrants to the Company that it is acquiring the
Securities for its own account, with no present intention of selling
or otherwise distributing the same in violation of the Securities
Act.
6.2 Status of Securities. The Purchaser has been informed by
the Company that the Securities have not been registered under the
Securities Act or under any state securities laws and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering.
6.3 Accredited Investor Status. The Purchaser represents and
warrants to the Company that it is an "Accredited Investor" as
defined in Regulation D under the Securities Act.
6.4 Access to Information. The Purchaser has had access to
management of the Company and has been able to ask questions of
management related to the Company and has reviewed the Company's
filings pursuant to the Exchange Act. Notwithstanding any due
diligence investigations conducted by or on behalf of the Purchaser,
it is understood and agreed by each of the parties hereto that the
Purchaser is entitled to rely, and is relying, on the
representations and warranties made by the Company herein and in the
Related Documents.
6.5 Transfer of Securities, Conversion Shares and Warrant
Shares.
(a) Securities, Conversion Shares and Warrant Shares may be
transferred (i) pursuant to public offerings registered under the
Securities Act, (ii) pursuant to Rule 144 of the SEC (or any similar
rule then in force), (iii) to an Affiliate or member of the family
of the transferor (provided that the subsequent transfer of the
Securities, Conversion Shares or Warrant Shares is restricted), or
(iv) subject to the conditions set forth in Section 6.5(b), any
other legally available means of transfer.
(b) In connection with any transfer of any Securities,
Conversion Shares or Warrant Shares (other than a transfer described
in Section 6.5(a)(i), (ii) or (iii)), the holder of such shares
shall deliver written notice to the Company describing in reasonable
detail the proposed transfer, together with an opinion of counsel
(which, to the Company's reasonable satisfaction, is knowledgeable
in securities law matters), to the effect that such transfer may be
effected without registration of such shares under the Securities Act.
(c) Until transferred pursuant to clauses (a)(i) or (ii)
above or pursuant to clause (a)(i) above with an opinion of counsel
pursuant to paragraph (b) above that such legend is not required,
each Preferred Share, Warrant, Conversion Shares and Warrant Shares
shall be imprinted with a legend substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS [PREFERRED SHARE/WARRANT]
WERE ORIGINALLY ISSUED ON ________, 2000 AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW. THE TRANSFER OF THE
SECURITIES REPRESENTED BY THIS [PREFERRED SHARE/WARRANT] IS
SUBJECT TO THE CONDITIONS SET FORTH IN THE SECURITIES
PURCHASE AGREEMENT, DATED AS OF JUNE 19, 2000, BETWEEN THE
<PAGE>
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ISSUER (THE "COMPANY") AND THE PURCHASER NAMED THEREIN. THE
COMPANY RESERVES THE RIGHT TO REFUSE ANY TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE COMPANY.
6.6 Right of First Refusal. If, during the 18 months
following the Initial Closing Date, the Company proposes to issue,
offer or sell any of its securities, whether debt or equity, the
Company, at least 10 days prior to the date of any such sale, shall
deliver a written notice to the Purchaser, including the terms of
the sale and the Purchaser shall have the right, during such 10 day
period, to elect to acquire such securities upon the same terms and
subject to the same conditions as are contained in the notice. If
the Purchaser does not exercise this right, the Company may sell
such securities upon the terms and subject to the same conditions as
are contained in the notice during the 40 days following the date of
the notice. If the proposed sale is not completed during such 40 day
period, the Company shall treat any subsequent sale as a new sale
subject to the requirement to give notice to the Purchaser.
Article VII - CONDITIONS PRECEDENT
7.1 Conditions Precedent. The obligation of the Purchaser to
purchase any Securities hereunder is subject to the satisfaction of
each of the following conditions precedent:
(a) The issuance and sale of the Securities shall not
contravene any law, rule or regulation applicable to, or result in
any liability or obligation for, the Purchaser or the Company or any
of its Subsidiaries;
(b) The following conditions have been satisfied as of the
Initial Closing Date and each Additional Closing Date,
(i) The representations and warranties of the Company
contained herein and in any Related Document and in any
writing delivered pursuant hereto or thereto shall be true
and correct when made and materially true and correct as of
the time of the Initial Closing and each Additional Closing;
(ii) No action, suit, investigation or proceeding
shall be pending or threatened before any court or
Governmental Agency to restrain, prohibit, collect damages as
a result of or otherwise challenge this Agreement or any
Related Document or any transaction contemplated hereby or
thereby;
(iii) All acts or covenants required hereunder to be
performed by the Company prior to the Initial Closing and
each Additional Closing shall have been fully performed by
it; and
<PAGE>
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(iv) No Material Adverse Change shall have occurred
between the date of the Current Balance Sheet and the Initial
Closing Date or Additional Closing Date and no event or
occurrence shall have occurred that could have a Material
Adverse Effect.
(c) The following documents and items shall be delivered to
the Purchaser at or prior to the Initial Closing and each Additional
Closing:
(i) A fully executed counterpart of this Agreement
(at the Initial Closing only), fully executed certificates
for the Preferred Shares (in such denominations as the
Purchaser shall request) and the Warrants being delivered by
the Company at the Initial Closing and at each Additional
Closing.
(ii) Certificates of a duly authorized officer of the
Company dated as of each Additional Closing Date:
(A) Stating that the following conditions
have been satisfied as of each Additional Closing Date:
(1) The representations and warranties
of the Company contained herein and in any
writing delivered pursuant hereto were true
and correct when made and are materially true
and correct as of the time of each Additional
Closing;
(2) No action, suit, investigation
or proceeding is pending or threatened before
any court or Governmental Agency to restrain,
prohibit, collect damages as a result of or
otherwise challenge this Agreement or any
Related Document or any transaction
contemplated hereby or thereby;
(3) All acts or covenants required
hereunder to be performed by the Company prior
to each Additional Closing have been fully
performed by it; and
(4) No Material Adverse Change shall
have occurred between the date of the Current
Balance Sheet and each Additional Closing Date
and there shall have been no event or
occurrence that could result in a Material
Adverse Effect; and
(B) Setting forth the resolutions of the
Board of Directors authorizing the execution and
delivery of this Agreement and the Related Documents
and the consummation of the transactions
contemplated hereby and thereby, and certifying that
such resolutions were duly adopted and have not been
rescinded or amended;
<PAGE>
-19-
(iii) The Company shall have paid fees payable
pursuant to Section 12.10 hereof;
(iv) A copy of a certificate of the appropriate
official(s) of the state of organization and each state of
foreign qualification of the Company and each of its
Subsidiaries certifying as of the date of the certificate to
the existence in good standing of, and the payment of taxes
by, such Person in such states;
(v) A true and complete copy of the Certificate of
Incorporation, as amended, of the Company, certified as of a
date not more than six months prior to the Initial Closing
Date by an appropriate official of the state of organization
of each such Person, a true and complete copy of the Bylaws
of the Company, certified as of the Initial Closing Date by
the Secretary of the Company, and a certificate as of each
Additional Closing Date by the Secretary of the Company that
there has been no change to the Certificate of Incorporation
or Bylaws of the Company since the Initial Closing Date; and
(vi) Such other documents relating to the
transactions contemplated hereby as the Purchaser may
reasonably request.
7.2 Closing Deliveries to the Company. The Purchaser will
deliver to the Company the aggregate purchase price for the
Securities to be acquired by the Purchaser, net of a 10% placement
fee payable to Aspen Capital Resources, LLC.
Article VIII - COVENANTS OF THE COMPANY
8.1 Restricted Actions. Without the prior written consent of
the Purchaser, and for so long as any of the Preferred Shares remain
outstanding, the Company shall not, and shall not permit any
Subsidiary to:
(a) become subject to any agreement or instrument which by
its terms would (under any circumstances) restrict or impair the
Company's right to comply with or fulfill its obligations under the
terms of this Agreement or any of the Related Documents;
(b) materially alter or change the business of the Company;
(c) issue any stock option or warrant at less than the Fair
Market Value at the time of grant;
(d) create, incur or suffer to exist any Indebtedness, other
than Indebtedness existing on the date hereof, and any extension of
maturity, refinancing or modification of the terms there of
provided, however, that such extension, refinancing or modification
(A) is pursuant to terms that are not materially less favorable to
the purchaser than the terms of the Indebtedness being extended,
refinanced or modified and (B) after giving effect to the extension,
refinancing or modification, such Indebtedness is not greater than
the amount of Indebtedness outstanding immediately prior to such
extension, refinancing or modification.
<PAGE>
-20-
(e) alter the rights, preferences and privileges of the
Securities, the Conversion Shares or the Warrant Shares; and
(f) grant any rights of registration under the Securities
Act relating to any of its shares of Capital Stock or other
securities to any Person other than pursuant to this Agreement,
unless (i) the rights so granted to another Person do not limit,
restrict or impair the rights of the Purchaser under this Agreement
and under the Related Documents and (ii) such rights so granted to
another Person do not grant priority in registration rights to such
other Person over rights granted to Purchaser under this Agreement
and under the Related Documents.
8.2 Required Actions. For so long as any of the Preferred
Shares remain outstanding, the Company shall, and shall cause each
Subsidiary to:
(a) cause all properties owned by the Company or any of its
Subsidiaries or used or held for use in the conduct of its business
or the business of any of its Subsidiaries to be maintained and kept
in good condition, repair and working order (reasonable wear and
tear excepted) and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the
Board of Directors may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted
at all times; provided, however, that the foregoing shall not
prevent the Company from discontinuing the maintenance or operation
of any of such properties if such discontinuance is, in the judgment
of the management of the Company, desirable in the conduct of its
business or the business of any of its Subsidiaries and is not
disadvantageous in any material respect to the holders of the
Securities;
(b) preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises
of the Company and each of its Subsidiaries; provided, however, that
the Company shall not be required to preserve any such right,
license or franchise if the Board of Directors shall determine that
the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries as a whole and that
the loss thereof is not disadvantageous in any material respect to
the holders of Securities;
(c) maintain the books, accounts and records of the Company
and its Subsidiaries in accordance with past custom and practice as
used in the preparation of the Financial Statements except to the
extent permitted or required by GAAP;
(d) keep all of its and its Subsidiaries' properties which
are of an insurable nature insured with insurers, believed by the
Company in good faith to be financially sound and responsible,
against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated
and owning like properties (which may include self-insurance, if
reasonable and in comparable form to that maintained by companies
similarly situated);
<PAGE>
-21-
(e) comply with all material legal requirements and material
contractual obligations applicable to the operations and business of
the Company and its Subsidiaries and pay all applicable Taxes as
they become due and payable;
(f) permit representatives of any holder of the Securities
and its agents (including their counsel, accountants and
consultants), subject to the execution of a reasonable
confidentiality agreement, to have reasonable access upon reasonable
notice during business hours to the Company's books, records,
facilities, key personnel, officers, directors, customers,
independent accountants and legal counsel so long as such access
does not violate any applicable Federal or state law or cause the
loss of the attorney-client privilege;
(g) at all times (i) file all reports (including annual
reports, quarterly reports and the information, documentation and
other reports) required to be filed by the Company under the
Exchange Act and Sections 13 and 15 of the rules and regulations
adopted by the SEC thereunder, and the Company shall use its best
efforts to file each of such reports on a timely basis, and take
such further action as any holder or holders of the Securities, the
Conversion Shares or the Warrant Shares may reasonably request
(including providing copies of such reports to the holders of the
Securities, the Conversion Shares or the Warrant Shares), all to the
extent required to enable such holders to sell Securities pursuant
to Rule 144 adopted by the SEC under the Securities Act (as such
rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the SEC and to enable the Company to
register securities with the SEC on Form S-3 or any similar
short-form registration statement and upon the filing of each such
report deliver a copy thereof to each holder of the Securities, the
Conversion Shares or the Warrant Shares, (ii) if the Company is no
longer subject to the requirements of the Exchange Act, provide
reports to the holders of the Securities, the Conversion Shares or
the Warrant Shares in substantially the same form and at the same
times as would be required if the Company were subject to the
Exchange Act, and (iii) provide to each initial holder of the
Securities, the Conversion Shares or the Warrant Shares and each
other holder who has entered into a confidentiality agreement with
the Company, pursuant to mutually agreeable terms, any material
information distributed to the Board of Directors;
(h) commencing not later than 120 days after the Initial
Closing Date, maintain at all times a valid listing for the Common
Stock on a national securities exchange, the NASDAQ Stock Market
System or reporting on the NASD's OTC Bulletin Board;
(i) maintain all material Intellectual Property Rights
necessary to the conduct of its business and own or have a valid
license to use all right, title and interest in and to, such
material Intellectual Property Rights;
(j) deliver Conversion Shares in accordance with the terms
and conditions, and time periods, set forth in the Certificate of
Designation; and
(k) take such actions and execute, acknowledge and deliver,
and cause each of the Subsidiaries to take such actions and execute,
acknowledge and deliver, at its sole cost and expense such
<PAGE>
-22-
agreements, instruments or other documents as the Purchaser may
reasonably require from time to time in order to (i) carry out more
effectively the purposes of this Agreement and the Related
Documents, (ii) maintain the validity and effectiveness of any of
the Related Documents, and (iii) to better assure, convey, grant,
assign, transfer and confirm unto the Purchaser the rights now or
hereafter intended to be granted to the Purchaser under this
Agreement or any Related Document.
8.3 Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purposes of issuance upon
conversion of the Preferred Shares and the exercise of the Warrants,
such number of shares of Common Stock as are issuable upon the
conversion or exercise of all Preferred Shares and all Warrants. All
shares of Common Stock which are so issuable shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from
all Taxes, liens and charges. The Company, at its sole cost and
expense, shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares
of Common Stock may be listed (except for official notice of
issuance which shall be immediately transmitted by the Company upon
issuance).
8.4 Payments Free of Withholding. All payments by the Company
hereunder or under the Preferred Shares or the Warrants shall be
made free and clear of, and without any deduction for, any Tax
imposed by any taxing jurisdiction, domestic or foreign.
Article IX - REGISTRATION RIGHTS
9.1 Registration Rights. The Company, at its sole cost and
expense, covenants to immediately register or qualify or cause to be
registered or qualified by one or more registrations or
qualifications under applicable federal and state securities laws
the sale and resale by the Purchaser of (i) all of the Conversion
Shares, (ii) all of the Warrant Shares, and (iii) all of the
additional shares of Common Stock issued or issuable to the
Purchaser pursuant to this Agreement, if any, (the "Registrable
Securities") and to maintain such registrations or qualifications
effective for all periods during which any Preferred Share may be
converted or any Warrants may be exercised. The Company covenants to
use its best efforts to cause such registrations or qualifications
to become effective as soon after filing as possible and to remain
effective for all periods during which any portion of any Preferred
Share may be converted or any Warrants may be exercised. The Company
covenants to prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registrations or
qualifications and the prospectus used in connection therewith as
may be necessary to keep such registrations or qualifications
effective and to comply with the provisions of the Securities Act of
1933, as amended, with respect to the disposition of all securities
covered by such registration or qualification in accordance with the
intended methods of disposition by the sellers thereof set forth in
such registration or qualification.
If such registrations or qualifications, registering all of
the Registrable Securities, have not become effective on or before
the date which is 120 days after the date of this Agreement or on
any date thereafter cease to remain effective as provided herein,
<PAGE>
-23-
the Company hereby covenants and agrees to issue or cause to be
issued to the Purchaser on such date and on every date which is 30
days or a multiple thereof after such date, until such registrations
or qualifications shall become effective with respect to all of the
Registrable Securities, as additional consideration for the
Preferred Share and not as a penalty, additional shares of Common
Stock equal in number to 7% of (i) the total number of shares of
Common Stock issued or issuable upon conversion of all issued and
outstanding Preferred Shares or portions thereof which are
convertible by the Purchaser and (ii) the additional shares of
Common Stock issued or issuable to the Purchaser pursuant to this
Agreement, if any, and to cause the sale and resale of all such
additional shares to be included in the registrations or
qualifications described herein.
9.2 Piggyback Registration Rights. The Company covenants that
if at any time when any Preferred Share may be converted or any
Warrant may be exercised the Company should file a non-underwritten
registration statement or offering statement on behalf of the
Company pursuant to applicable federal and state securities laws for
a public offering of securities, the Company will provide written
notification to the Purchaser at least 30 days but not more than 60
days prior to the filing date of such registration statement or
offering statement and will register or qualify or cause to be
registered or qualified, subject to the rights pursuant to which the
registration or qualification is filed, at the option of the
Purchaser and at the sole cost and expense of the Company, the sale
and resale by the Purchaser of (i) all of the Conversion Shares,
(ii) all of the Warrant Shares, and (iii) all of the additional
shares of Common Stock issuable to the Purchaser pursuant to this
Agreement, if any, and the Company will maintain such registration
statement effective for all periods during which any Preferred
Shares may be converted or any Warrants may be exercised.
Article X - SURVIVAL
10.1 Survival. The representations, warranties, covenants and
agreements of the parties hereto contained herein, or in any writing
delivered pursuant hereto, shall survive the Initial Closing and
each Additional Closing of the transactions contemplated hereby and
by the Related Documents notwithstanding any due diligence
investigation conducted by or on behalf of Purchaser and until such
time as all of the obligations of the parties hereto have been
satisfied.
Article XI - INDEMNIFICATION
11.1 Indemnification. In consideration of the Purchaser's
execution and delivery of this Agreement and acquiring the
Securities hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall defend, protect,
indemnify and hold harmless the Purchaser and each other holder of
the Securities and each of their respective officers, directors,
employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties,
<PAGE>
-24-
fees, liabilities, damages, and expenses (including, without
limitation, costs of suit and attorneys' fees and expenses) in
connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought)
(the "Indemnified Liabilities"), incurred by the Indemnitees or any
of them as a result of, or arising out of, or relating to (a) the
material breach or inaccuracy of any representation or warranty
contained in this Agreement or any Related Document or any other
instrument, agreement or document delivered to the Purchaser in
accordance herewith or therewith, (b) the execution, delivery,
performance or enforcement of this Agreement, any Related Document
and any other instrument, document or agreement executed pursuant
hereto or thereto by any of the Indemnitees, or (c) resulting from
any material breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company herein or in any Related
Document. The Company shall reimburse the Indemnitees for the
Indemnified Liabilities as such Indemnified Liabilities are
incurred. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make
the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable
law.
Article XII - ARBITRATION
12.1 Arbitration. Any unresolved dispute or controversy
arising under or in connection with this Agreement or the Related
Documents shall be settled exclusively by arbitration, conducted in
accordance with the rules of the American Arbitration Association
then in effect. A decision by the arbitrator or by a majority of the
arbitration panel shall be final and binding. Judgement may be
entered on the arbitrators' award in any court having jurisdiction.
Any arbitration proceeding shall be held in Salt Lake City, Utah.
Notwithstanding the foregoing, the Purchaser shall be entitled to
seek injunctive or other equitable relief from any court of
competent jurisdiction, without the need to resort to arbitration.
Article XIII - GENERAL PROVISIONS
13.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the
State of Utah without giving effect to the laws of conflict or
choice of laws of the State of Utah of any other jurisdiction that
would result in the application of any laws other than those of the
State of Utah.
13.2 Consent to Jurisdiction; Service of Process And Venue.
Any legal action or proceeding with respect to this Agreement or any
related document may be brought in the courts of the State of Utah
in the County of Salt Lake or in the United States District Court
for the District of Utah, and, by execution and delivery of this
Agreement, the parties hereby irrevocably accept in respect of their
property, generally and unconditionally, the jurisdiction of the
aforesaid courts.
13.3 Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto constitute the
entire agreement among the parties with respect to the subject
matter hereof and supersede all prior oral or written arrangements
or understandings.
13.4 Headings. The headings of the various sections of this
Agreement have been inserted for reference only and shall not be
deemed to be a part of this Agreement.
<PAGE>
-25-
13.5 Amendment and Waiver. No amendment of any provision of
this Agreement shall be effective, unless the same shall be in
writing and signed by the Company and the Purchaser. Any failure of
the Company to comply with any provision hereof may only be waived
in writing by the Purchaser, and any failure of the Purchaser of the
Securities, the Conversion Shares or the Warrant Shares to comply
with any provision hereof may only be waived in writing by the
Company. No such waiver shall operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Agreement or
default by any other party shall constitute a waiver of such party's
right to enforce any provision hereof or to take any such action.
13.6 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
13.7 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective
successors and assigns, including each subsequent holder of
Securities, Conversion Shares or Warrant Shares. Except as otherwise
specifically provided herein, this Agreement shall not be assignable
by the Company without the prior written consent of the Purchaser.
13.8 No Third Party Beneficiaries. Except as specifically set
forth or referred to herein, nothing herein is intended or shall be
construed to confer upon any person or entity other than the parties
hereto and their successors or assigns, any rights or remedies under
or by reason of this Agreement.
13.9 Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be
(i) delivered in person, (ii) transmitted by telecopy, (iii) sent by
registered or certified mail, postage prepaid with return receipt
requested, or (iv) sent by reputable overnight courier service, fees
prepaid, to the recipient at the address or telecopy number set
forth below, or such other address or telecopy number as may
hereafter be designated in writing by such recipient. Notices shall
be deemed given upon personal delivery, upon receipt of return
receipt in the case of delivery by mail, upon acknowledgment by the
receiving telecopier or one day following deposit with an overnight
courier service.
(a) If to the Company:
e-automate Corporation
73 North 490 West
American Fork, Utah 84003
Telecopy: (801) 492-1704
Attention: James K. Phillips
<PAGE>
-26-
(b) If to the Purchaser:
Aspen Capital Resources, LLC
8989 South Schofield Circle
Sandy, Utah 84093
Telecopy: (801) 501-9882
Attention: Joe K. Johnson
13.10 Purchaser Fees and Expenses.
(a) The Company shall pay a placement fee to Aspen Capital
Resources, LLC equal to 10% of the aggregate principal amount of
Preferred Shares issued pursuant to this Agreement, payable upon
issuance of each Preferred Share.
(b) The Company shall reimburse or pay, on demand, to or on
behalf of the Purchaser (i) the reasonable fees and expenses of
counsel(s) to the Purchaser incurred in connection with the
documentation, negotiation and consummation of the transactions
contemplated by this Agreement and the Related Documents and (ii)
reasonable due diligence expenses incurred by the Purchaser, limited
to $5,000.00 in connection with the Initial Closing and an aggregate
of $15,000.00 in connection with all Closings. The Company shall
reimburse or pay, on demand, to or on behalf of the Purchaser the
reasonable fees and expenses of counsel(s) to the Purchaser incurred
in connection with any Additional Closing and any future amendment
or waiver to this Agreement or any of the Related Documents. The
Company shall reimburse or pay, on demand, to or on behalf of the
Purchaser the costs and expenses, including reasonable fees and
expenses of counsel(s) to the Purchaser, incurred by the Purchaser
in connection with the enforcement, whether with or without suit, of
this Agreement and any of the Related Documents.
(c) The Company also agrees to pay or cause to be paid, on
demand, and to save the Purchaser harmless against liability for the
payment of all reasonable out-of-pocket expenses incurred by the
Company from time to time arising from or relating to: (i) the
preservation and protection of any of the Company's rights under
this Agreement or the Related Documents, (ii) the defense of any
claim or action asserted or brought against the Purchaser by any
Person that arises from or relates to this Agreement, any Related
Document, the Purchaser's claims against the Company, or any and all
matters in connection therewith, (iii) the commencement or defense
of, or intervention in, any court proceeding arising from or related
to this Agreement or any Related Document, (iv) the filing of any
petition, complaint, answer, motion or other pleading by the
Purchaser in connection with this Agreement or any Related Document,
(v) any attempt to collect from the Company, or (vi) the receipt of
any advice with respect to any of the foregoing. Without limitation
of the foregoing or any other provision of any Related Document: (A)
the Company agrees to pay all stamp, document, transfer, recording
or filing taxes or fees and similar impositions now or hereafter
determined by the Purchaser to be payable in connection with this
Agreement or any Related Document, and the Company agrees to save
the Purchaser harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting
<PAGE>
-27-
from any omission to pay or delay in paying any such taxes, fees or
impositions, and (B) if the Company fails to perform any covenant or
agreement contained herein or in any Related Document, the Purchaser
may itself perform or cause performance of such covenant or
agreement, and the expenses of the Purchaser incurred in connection
therewith shall be reimbursed on demand by the Company.
13.11 Remedies Cumulative. Except as otherwise provided
herein, the remedies provided herein shall be cumulative and shall
not preclude the assertion by any party hereto of any other rights
or the seeking of any other remedies against any other party hereto.
13.12 Timeliness. The parties agree that time is of the
essence for the performance of each and every covenant and the
satisfaction of each and every condition contained in the Preferred
Share.
13.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Agreement as of the date first
above written.
The Company: e-automate Corporation
By: /s/ Lon D. Price
-----------------------------
Lon Price, President
and Chief Executive Officer
By: /s/ Kim Green
------------------------------
Kim Green, Director of Finance
and Corporate Secretary
The Purchaser: ASPEN CAPITAL RESOURCES, LLC
By: /s/ Joe K. Johnson
--------------------------------
Joe K. Johnson, Manager
<PAGE>
-28-
e-automate Corporation
Certificate of Designation
Series 2000-A Convertible Preferred Stock
e-automate Corporation (the "Corporation"), a Delaware
corporation, hereby certifies that pursuant to authority conferred
upon the Board of Directors of the Corporation by its Certificate of
Incorporation, as amended, and in accordance with the provisions of
Section 151 of the General Corporation Law of Delaware ("DGCL"), the
Board of Directors of the Corporation, at a meeting duly called and
held pursuant to Section 141 of the DGCL, duly adopted the following
resolution providing for the designation and the powers,
preferences, and the qualifications, limitations or restrictions
thereof, of the Series 2000-A Convertible Preferred Stock (the
"Series 2000-A Preferred Stock"), which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of
its Certificate of Incorporation, as amended, and pursuant to the
General Corporation Law of Delaware, a series of Preferred Stock of
the Corporation is hereby created, such series of Preferred Stock to
be designated the Series 2000-A Preferred Stock, to consist of 5,500
shares, $0.001 par value per share, with a stated value of $1,000
per share (the "Stated Value"). The Series 2000-A Preferred Stock is
being issued pursuant to the terms and conditions of that certain
Securities Purchase Agreement dated as of June 19, 2000, as amended
from time to time (the "Purchase Agreement"), which is incorporated
herein by this reference. Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the
Purchase Agreement. The powers, preferences and rights, and the
qualifications, limitations or restrictions of the Series 2000-A
Preferred Stock shall be as follows:
1. Voting Rights. Except as otherwise required by
applicable law, each share of Series 2000-A Preferred Stock issued
and outstanding shall have the number of votes equal to the whole
number of shares of common stock into which the share of Series
2000-A Preferred Stock is convertible (with any fractional share
determined on an aggregate conversion basis being rounded to the
nearest whole share).
2. Dividends. The holder of Series 2000-A Preferred Stock
shall be entitled to receive (out of legally available funds)
cumulative dividends equal to 8% per annum and payable quarterly
within 5 days after the last business day of each calendar quarter
(the "Dividend Payment Date"). From and after the occurrence of an
Event of Noncompliance, the holder of Series 2000-A Preferred Stock
shall be entitled to receive (out of legally available funds)
cumulative dividends equal to 21% per annum (the "Default Rate") and
payable on each Dividend Payment Date. The holder of Series 2000-A
Preferred Stock at its option may elect to receive payment of
dividends in cash or in Common Stock at the Conversion Price, as
defined below. Dividends on the Series 2000-A Preferred Stock shall
rank senior to dividends payable on all other series or classes of
stock of the Corporation. Unless all accrued dividends and interest
thereon, if any, have been paid in full, no dividend on any other
stock shall be declared or paid or made, as the case may be, or any
moneys paid to any sinking or purchase fund on any other stock for
the redemption or repurchase thereof. Dividends for less than a full
calendar quarter shall be prorated and based on the actual number of
days elapsed divided by 360 days.
<PAGE>
-1-
3. Redemption.
A. Mandatory Redemption. The Corporation shall have the
obligation, at the option of the Holder of Series 2000-A Preferred
Stock, to redeem all of the outstanding shares of Series 2000-A
Preferred Stock by paying a sum per share equal to 125% of the
Stated Value per share, plus accrued and unpaid dividends and
penalties thereon through the date of redemption (collectively, the
"Redemption Price") (i) if an Event of Noncompliance (as defined
herein) occurs, or (ii) if, after the first date upon which the
Company's Common Stock is quoted in the NASDAQ Stock Market System
or reported on the NASD's OTC Bulletin Board, the average of the
closing bid prices for the Company's Common Stock for twenty-two
(22) consecutive trading days, as quoted in the NASDAQ Stock Market
System or reported on the NASD's OTC Bulletin Board, is less than or
equal to $3.25 per share.
B. Notice of Redemption. A Holder of a share of Series 2000-A
Preferred Stock may submit written notice of a redemption, pursuant
to paragraph B above, to the Corporation not less than ten (10) days
prior to the date specified in the notice on which such redemption
is to be made (the "Redemption Date").
C. Redemption Payments. For each share of Series 2000-A
Preferred Stock which is to be redeemed hereunder, the Corporation
shall be obligated on the applicable Redemption Date to pay to the
Holder thereof (upon surrender by such Holder at the Corporation's
principal office of the share certificate) the Redemption Price in
cash or in immediately available funds. If the Corporation does not
make the payment when due, dividends will accrue on all outstanding
Series 2000-A Preferred Stock from and after the Redemption Date at
the Default Rate until paid in full and the Conversion Price
calculated pursuant to Section 4 in connection with any subsequent
conversion of a share of Series 2000-A Preferred Stock will be
reduced by $1.00 per share, without regard to any minimum Conversion
Price.
D. Dividends After Redemption Date. If the Redemption Price to
be paid hereunder is paid in full to the Holder of Series 2000-A
Preferred Stock on the Redemption Date, the redeemed share of Series
2000-A Preferred Stock shall not be entitled to any dividends
accruing after such date and on such date, all rights of the holder
of such shares shall cease, and such shares shall no longer be
deemed to be issued and outstanding.
4. Conversion. Holders of Series 2000-A Preferred Stock
shall have the right, but not the obligation to convert the Stated
Value and any accrued and unpaid dividends thereon into fully paid
and nonassessable shares (calculated as to each conversion to the
nearest number of whole shares) of the common stock, $.001 par
value, of the Corporation (the "Common Stock") at the Conversion
Price, as defined herein, subject to adjustment as provided herein.
"Conversion Price" means 80% of the average of the three lowest
closing bid prices for the Common Stock quoted on the NASDAQ Stock
Market System or reported on the NASD's OTC Bulletin Board during
the 15 trading days preceding the conversion date, subject to a
maximum Conversion Price of $5.75 per share and a minimum Conversion
Price of $3.25 per share.
<PAGE>
-2-
Such conversion right may be exercised on or after June 19,
2000 with respect to all or any portion of the Series 2000-A
Preferred Stock. Upon the occurrence of an Event of Noncompliance,
all of the Series 2000-A Preferred Stock shall be immediately
convertible notwithstanding any timing restrictions imposed herein
and the Conversion Price shall not be subject to any limitations on
the minimum imposed herein.
In the case of any Series 2000-A Preferred Stock which is
surrendered for conversion, accrued and unpaid dividends will be
payable on such Series 2000-A Preferred Stock with respect to the
period ending on the conversion date. The Holder at its option may
elect to receive payment of dividends in cash or in Common Stock at
the Conversion Price.
On or after December 19, 2001, the Company may require the
Holder to convert all of the outstanding Series 2000-A Preferred
Stock held by the Holder into shares of Common Stock as provided in
this Designation by delivering to the Holder 30-days prior written
notice of the exercise of this right.
A. Exercise of Conversion Privilege. To exercise the
conversion privilege, the Holder of the Series 2000-A Preferred
Stock shall surrender to the Corporation such Series 2000-A
Preferred Stock, duly endorsed or assigned to the Corporation or in
blank, accompanied by written Notice of Conversion to the
Corporation in the form provided in the Series 2000-A Preferred
Stock that the Holder elects to convert such Series 2000-A Preferred
Stock or, if less than the entire principal amount thereof is to be
converted, the specified portion.
Series 2000-A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day of
surrender of such Series 2000-A Preferred Stock for conversion in
accordance with the foregoing provisions, and at such time the
rights of the Holders of such Series 2000-A Preferred Stock as
Holders shall cease, and the person or persons entitled to receive
the Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock as and
after such time.
Within two (2) business days after the conversion date, the
Corporation, without cost to the Holder, shall issue and shall
deliver to the Holder of the converted Series 2000-A Preferred Stock
or the person specified by such Holder a certificate or certificates
for the number of full shares of Common Stock issuable upon
conversion registered in the name of such Holder or such other
person as shall have been specified by such Holder and all accrued
and unpaid dividends on the converted Series 2000-A Preferred Stock
or portion thereof upon which the Holder does not elect to receive
payment in Common Stock.
Upon conversion of Series 2000-A Preferred Stock, the
Corporation shall take all such actions as are necessary in order to
insure that the Common Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable.
The Corporation shall not close its books against the transfer
of Common Stock issued or issuable upon conversion of Series 2000-A
Preferred Stock in any manner which interferes with the timely
conversion of Series 2000-A Preferred Stock. The Corporation shall
assist and cooperate with any Holder of Series 2000-A Preferred
Stock required to make any governmental filings or obtain any
governmental approval prior to or in connection with the conversion
of Series 2000-A Preferred Stock (including, without limitation,
making any filings required to be made by the Corporation).
The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely
for the purpose of issuance upon the conversion of Series 2000-A
Preferred Stock, such number of shares of Common Stock issuable upon
the conversion of all outstanding Series 2000-A Preferred Stock. All
shares of Common Stock which are so issuable shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance).
The conversion rights of any Series 2000-A Preferred Stock
subject to redemption hereunder shall terminate on the Redemption
Date for such Series 2000-A Preferred Stock unless the Corporation
has failed to pay to the Holder thereof the Redemption Price of such
Series 2000-A Preferred Stock or portion thereof (plus all accrued
and unpaid dividends and penalties thereon and any premium payable
with respect thereto).
B. Adjustment of Exercise Price and Number of Shares
upon Issuance of Common Stock. If and whenever, on or after the date
of the Purchase Agreement, the Corporation issues or sells (or in
accordance with Section 4.C is deemed to have issued or sold)
(specifically excluding those shares of Common Stock issued and sold
upon the exercise of options and warrants granted prior to the date
of the Purchase Agreement), other than (i) as described in Section
4.D or (ii) pursuant to the Purchase Rights covered by Section 4.I,
any shares of Common Stock for a consideration per share less than
the Fair Market Value (as defined below) per share of the Common
Stock determined as of the earlier of (x) the announcement of such
issuance or sale, or (y) the date of such issuance or sale, then
immediately upon such issuance or sale the Conversion Price shall be
reduced to equal the amount determined by multiplying the Conversion
Price in effect immediately prior to such issuance or sale by a
fraction, the numerator of which will be the sum of (1) the number
of shares of Common Stock deemed outstanding (including Shares
deemed outstanding pursuant to Section 4.C.(i)) immediately prior to
such issuance or sale multiplied by the Fair Market Value per share
of the Common Stock determined as of the date of such issuance or
sale, plus (2) the consideration, if any, received by the
Corporation upon such issuance or sale, and the denominator of which
will be the product derived by multiplying such Fair Market Value
per share of the Common Stock by the number of shares of Common
Stock deemed outstanding (including Shares deemed outstanding
pursuant to Section 4.C.(i)) immediately after such issuance or
sale. Upon each such adjustment of the Conversion Price hereunder,
the number of Conversion Shares issuable upon exercise of Series
2000-A Preferred Stock shall be adjusted to equal the number of
shares determined by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of Conversion
Shares issuable upon exercise of Series 2000-A Preferred Stock
immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment. For
the purposes of this Section 4, the calculation of the number of
shares of Common Stock deemed outstanding shall exclude the
Conversion Shares. "Fair Market Value" means the closing bid
price of a share of Common Stock quoted on the NASDAQ Stock Market
System or reported on the NASD's OTC Bulletin Board. However, until
a share of Common Stock is first quoted on the NASDAQ Stock Market
System or reported on the NASD's OTC Bulletin Board after the date
of this Agreement, "Fair Market Value" means $3.00 per share.
<PAGE>
-4-
C. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Section 3.B, the
following shall be applicable:
(i) Issuance of Rights or Options or Convertible
Securities. If the Corporation in any manner grants any rights or
options, whether or not immediately exercisable, to subscribe for or
to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (including without
limitation convertible common stock) (such rights or options being
herein called "Options" and such convertible or exchangeable stock
or securities being herein called "Convertible Securities") or if
the Corporation in any manner issues or sells any Convertible
Securities, whether or not immediately convertible or exchangeable,
and the Fair Market Value per share for which Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities is less than the Fair Market Value per
share of the Common Stock in effect on the earlier of (x) the
announcement of such grant or issuance or sale and (y) the date of
such grant or issuance or sale, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options of
upon conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the
Corporation for such Fair Market Value per share. For purposes of
this paragraph, the Fair Market Value per share for which Common
Stock is issuable upon exercise of such Options or upon conversion
or exchange of such Convertible Securities" is determined by
dividing (A) the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options, plus
the minimum aggregate amount of additional consideration payable to
the Corporation upon the exercise of all such Options, plus in the
case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by
(B) the total maximum number of shares of Common Stock issuable upon
exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Conversion Price shall be made
upon the actual issuance of such Common Stock or of such Convertible
Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(ii) Change in Option Price or Conversion Rate. If either
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock shall change at any time to an amount which is less
than the Fair Market Value, then the Conversion Price in effect at
the time of such change shall be adjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold
and the number of Conversion Shares shall be correspondingly
readjusted.
<PAGE>
-5-
D. Subdivision or Combination of Shares. If the Corporation at
any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) the outstanding shares of Common
Stock into a greater number of shares of Common Stock, or pays a
dividend or makes a distribution to holders of outstanding shares of
Common Stock in the form of shares of Common Stock, or combines (by
reverse stock split or otherwise) the outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price of the
Series 2000-A Preferred Stock in effect immediately prior to such
event and the number of shares of Common Stock issuable upon
conversion of the Series 2000-A Preferred Stock shall be
proportionately adjusted so that the holder of the Series 2000-A
Preferred Stock thereafter surrendered for conversion shall be
entitled to receive after the occurrence of any of the events
described the proportionate number of shares of Common Stock to
which the holder would have been entitled had such Series 2000-A
Preferred Stock been exercised immediately prior to the occurrence
of such event, such adjustment to become effective immediately after
the opening of business on the day following the date upon which
such subdivision or combination or reclassification, as the case may
be, becomes effective.
E. Liquidation of the Corporation. In the event of the
liquidation, dissolution, or winding up of the Corporation, a notice
thereof shall be sent to the Holder at least 15 days before the
record date specified for determining holders of the shares of
Common Stock entitled to receive any distribution upon such
liquidation, dissolution, or winding up.
F. Consolidation of Corporation. In the case of any
consolidation or merger of the Corporation with or into another
corporation (other than a consolidation or merger in which the
Corporation is the surviving corporation and which does not result
in any reclassification or change of outstanding shares of the class
issuable upon conversion of the Series 2000-A Preferred Stock), or
in case of any sale or transfer to another corporation of the
property of the Corporation as an entirety or substantially as an
entirety, the Holder of each Series 2000-A Preferred Stock then
outstanding shall have the right to exercise such Series 2000-A
Preferred Stock for the purchase of the kind and amount of shares of
Common Stock and other securities and property receivable upon such
consolidation, merger, sale, or transfer by a holder of the number
of shares of Common Stock which would have been issuable if the
conversion of the Series 2000-A Preferred Stock had occurred
immediately prior to such consolidation, merger, sale, or transfer.
G. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 4 but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other
rights with equity features), then the Corporation's Board of
Directors shall exercise their reasonable judgment consistent with
the fundamental intent of such provisions in making an appropriate
adjustment in the Conversion Price and the number of shares of
Common Stock issuable upon conversion of the Series 2000-A Preferred
Stock so as to protect the rights of the Holder of the Series 2000-A
Preferred Stock.
<PAGE>
-6-
H. Notices.
(i) Immediately upon any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to the
Holder, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Corporation shall give written notice to the
Holder at least 30 days prior to the date on which the Corporation
closes its books or takes a record (A) with respect to any dividend
or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock, or (C) for
determining rights to vote with respect to any recapitalization,
reorganization, reclassification, consolidation, merger, sale of all
or substantially all of the Corporation's assets, dissolution or
liquidation.
(iii) The Corporation shall also give written notice to
the Holder at least 30 days prior to the date on which any
recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's
assets, dissolution or liquidation shall take place.
I. Purchase Rights. If at any time the Corporation grants,
issues or sells any options, convertible securities or rights to
purchase stock, warrants, securities or other property pro rata to
the record holders of the Common Stock (the "Purchase Rights"), then
the Corporation shall grant, issue or sell (as the case may be) to
the Holder the aggregate Purchase Rights which such Holder would
have acquired if such Holder had held the maximum number of shares
of Common Stock issuable upon conversion of all the Series 2000-A
Preferred Stock immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights or, if
no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
5. Events of Noncompliance.
A. Definition. An Event of Noncompliance shall have Occurred if:
(i) the Corporation fails to pay on any Dividend Payment
Date the full amount of dividends then accrued on the Preferred
Stock, whether or not such payments are legally permissible or are
prohibited by any agreement to which the Corporation is subject;
(ii) the Corporation fails to make any redemption payment
(whether following the giving of notice pursuant to paragraph 2C or
otherwise) with respect to the Preferred Stock which it is required
to make hereunder, whether or not such payment is legally
permissible or is prohibited by any agreement to which the
Corporation is subject;
(iii) the Corporation breaches or otherwise fails to
perform or observe any material provision contained herein, in the
Purchase Agreement or in the Related Documents (as defined in the
Purchase Agreement) and (other than with respect to Section 8.1 or
8.2(l) of the Purchase Agreement, the breach of or failure to
perform which shall result in an immediate Event of Noncompliance)
such failure is not cured within fifteen (15) days after the
occurrence thereof;
<PAGE>
-7-
(iv) any representation or warranty contained in the
Purchase Agreement or required to be furnished to any holder of
Preferred Stock pursuant to the Purchase Agreement, or any
information contained in writing required to be furnished by the
Corporation or any Subsidiary to any holder of Preferred Stock, is
false or misleading in any material respect on the date made or
furnished;
(v) the Corporation or any Subsidiary makes an assignment
for the benefit of creditors or admits in writing its inability to
pay its debts generally as they become due; or an order, judgment or
decree is entered adjudicating the Corporation or any Subsidiary
bankrupt or insolvent; or any order for relief with respect to the
Corporation or any Subsidiary is entered under the Federal
Bankruptcy Code; or the Corporation or any Subsidiary petitions or
applies to any tribunal for the appointment of a custodian, trustee,
receiver or liquidator of the Corporation or any Subsidiary or of
any substantial part of the assets of the Corporation or any
Subsidiary, or commences any proceeding (other than a proceeding for
the voluntary liquidation and dissolution of any Subsidiary)
relating to the Corporation or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction; or the
Corporation or any Subsidiary takes any action to authorize any of
the foregoing; or any such petition or application is filed, or any
such proceeding is commenced, against the Corporation or any
Subsidiary and either (a) the Corporation or any such Subsidiary by
any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or proceeding
is not dismissed within 60 days;
(vi) any material provision of the Purchase Agreement or
any Related Document shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be
contested by any party thereto, or a proceeding shall be commenced
by the Corporation or any Governmental Authority or other regulatory
body having jurisdiction over the Corporation, seeking to establish
the invalidity or enforceability thereof, or the Corporation shall
deny in writing that it has any liability or obligation purported to
be created under the Purchase Agreement or any Related Document;
(vii) (A) any registration statement required to be filed
and declared effective by the Corporation pursuant to the Purchase
Agreement shall not become effective as provided in the Purchase
Agreement or shall cease to be effective, (B) the Securities and
Exchange Commission shall issue any stop order suspending the
effectiveness under the Securities Act of any registration statement
required to be filed and declared effective by the Corporation
pursuant to the Purchase Agreement or any state securities
commission suspends the qualification of the Registrable Securities
covered thereby for offering or sale in any jurisdiction, (C) any
proceeding for purposes of either (A) or (B) above is initiated, or
(D) after October 17, 2000 the Common Stock is suspended from
trading on or the price for the Common Stock is not quoted or
reported on the NASDAQ Stock Market System or the NASD's OTC
Bulletin Board;
<PAGE>
-8-
(viii) the Company at any time shall not have reserved and
available authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon conversion of the Preferred Stock, in
the number which would be issuable upon the conversion of all of the
issued and outstanding Preferred Stock;
(ix) the occurrence of a Material Adverse Change (as
defined in the Purchase Agreement);
(x) the Company has not acquired all of the rights, title
and interest in and to the Meyers data mining tool on or before July
19, 2000.
B. Right to Cure. Any breach, default in performance
of any provision or Event of Noncompliance of the Purchase Agreement
or any of the Related Documents which directly affects the
Purchaser's ability to acquire the Preferred Shares and Warrants,
convert the Preferred Shares, Exercise the Warrants or sell pursuant
to a valid registration shall be interpreted in accordance with the
terms of the Purchase Agreement or any Related Document. Any breach,
default in performance of any provision of the Purchase Agreement or
any of the Related Documents or Event of Noncompliance which does
not directly affect the Purchaser's ability to acquire the Preferred
Shares and Warrants, convert the Preferred Shares, Exercise the
Warrants or sell pursuant to a valid registration shall be subject
to written notice delivered to the Company and may be cured by the
Company during the five (5) days after receipt of written notice of
such breach, default or Event of Noncompliance.
6. Liquidation and Sale Preferences. In the event of
liquidation, dissolution or winding up, whether voluntary or
involuntary, (an "Event of Liquidation") of the Corporation, the
holders of Series 2000-A Preferred Stock, prior and in preference to
the holders of the common stock, shall be entitled to receive (i)
the Stated Value per share of Series 2000-A Preferred (adjusted to
reflect stock dividends, stock splits or recapitalizations, if any),
plus (ii) accrued but unpaid dividends (the "Liquidation
Preference"). The Liquidation Preference shall rank senior to all
other series or classes of stock of the Corporation. After payment
of the Liquidation Preference and any other preferential payments on
other series or classes of stock except the common stock, the
holders of Series 2000-A Preferred Stock shall have no other rights
to the remaining assets of the Corporation. If upon the occurrence
of such event, the assets and funds thus distributed among the
holders of the Series 2000-A Preferred Stock shall be insufficient
to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed
ratably among the holders of the Series 2000-A Preferred Stock in
proportion to the amount of such stock owned by each such holder.
The Corporation shall mail to each holder of Series 2000-A Preferred
Stock, at least twenty (20) days prior to an Event of Liquidation, a
notice setting forth the date on which such Event of Liquidation is
expected to become effective and the type and amount of anticipated
proceeds per share of common stock to be distributed with respect
thereto and shall afford each such holder the opportunity to convert
such shares of Series 2000-A Preferred Stock pursuant to Section
(iii) (conditional upon the consummation of such Event of
Liquidation) prior to the consummation thereof.
<PAGE>
-9-
A consolidation or merger of the Corporation with or into any
other corporation or corporations, or a sale, conveyance, or
disposition of all or substantially all of the assets of the
Corporation, or the effectuation of any acquisition of the
Corporation by any other entity by means of a transaction or series
of related transactions in which more than fifty percent (50%) of
the voting power of the Corporation is disposed of (the "Sale"),
shall be deemed to be an Event of Liquidation; provided, however,
that if holders of Series 2000-A Preferred Stock are to receive more
than the preferential amounts due them under the immediately
preceding paragraph in the Sale, the Sale shall not be an Event of
Liquidation and all holders of Series 2000-A Preferred Stock shall
participate ratably with the holders of common stock and the holders
of any other series of preferred stock with similar rights in
proportion to the amount of shares of common stock owned by each
such holder on an as-converted basis and shall not be entitled to
receive any preferential amounts.
7. Protective Provisions. So long as shares of Series
2000-A Preferred Stock are outstanding, the Corporation shall not
without first obtaining the approval (by vote or written consent),
as provided by law, of the holders of two-thirds of the outstanding
shares of Series 2000-A Preferred Stock: (a) to alter or change the
rights, preferences or privileges of the shares of Series 2000-A
Preferred Stock so as to affect adversely the shares of such stock;
(b) to increase the authorized number of shares of Series 2000-A
Preferred Stock; (c) to create any new class or series of shares of
capital stock with rights or preferences prior to or on a parity
with, or increase the number of shares of, Series 2000-A Preferred
Stock; or (d) to sell or convey or otherwise dispose of all or
substantially all of the property or business of the Corporation. No
repurchases or redemptions of any other series or class of stock of
the Corporation while in default of any provision of the Series
2000-A Preferred Stock.
8. Amendments and Waivers. Series 2000-A Preferred Stock
may be amended only with the written consent of the Holder, and any
existing Event of Noncompliance may be waived only with the written
consent of the Holder.
RESOLVED, that the Board of Directors has determined that the
rights and preferences of the Series 2000-A Preferred Stock are
under the circumstances presently prevailing, fair and equitable to
all the existing stockholders.
IN WITNESS WHEREOF, the Corporation has caused its duly
authorized officers to execute this certificate this __ day of June,
2000.
e-automate Corporation
By: ________________________________
Lon Price, President and Chief
Executive Officer
By:_________________________________
Kim Green, Director of Finance
and Corporate Secretary
<PAGE>
-10-
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On June __, 2000, personally appeared before me Lon Price,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
____________________________________
NOTARY PUBLIC
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On June __, 2000, personally appeared before me Kim Green,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
____________________________________
NOTARY PUBLIC
<PAGE>
-11-
NOTICE OF CONVERSION
To: e-automate Corporation
The undersigned registered owner of this share of Series 2000-A
Preferred Stock hereby exercises the option to convert this share of
Series 2000-A Preferred Stock, or the portion hereof designated
below, and the accrued dividends thereon designated below into
shares of Common Stock in accordance with the terms of the Series
2000-A Preferred Stock, and directs that the shares issuable and
deliverable upon this conversion be issued and delivered to the
registered owner hereof, unless a different name has been provided
below.
Dated: __________________ ____________________________________
____________________________________
Signature(s)
Complete the following for registration of shares of Common Stock if
they are to be delivered other than to and in the name of the
registered owner:
____________________________________
Name
____________________________________
____________________________________
Address
____________________________________
Soc. Sec. or Tax I.D. No.
<PAGE>
-12-
THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE WERE
ORIGINALLY ISSUED ON JUNE 19, 2000 AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAW. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
WARRANT CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT, DATED AS OF JUNE 19, 2000, BETWEEN
THE ISSUER (THE "COMPANY") AND THE PURCHASER NAMED THEREIN. THE
COMPANY RESERVES THE RIGHT TO REFUSE ANY TRANSFER OF SUCH SECURITIES
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT
CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE COMPANY.
__________________________________________
e-automate Corporation
(a Delaware corporation)
Warrant Certificate
for the Purchase of Common Stock
Dated: June 19, 2000 Number of Series 2000-A Warrants: 100,000
This certifies that, for value received, the sufficiency of
which is hereby acknowledged, ASPEN CAPITAL RESOURCES, LLC or its
assigns (the "Holder"), a Utah limited liability company with an
address at 8989 South Schofield Circle, Sandy, Utah 84093, is the
owner of the number of Series 2000-A Warrants (the "Warrants") set
forth above, each of which represents the right to purchase one
fully paid and nonassessable share of the common stock, $.001 par
value, (the "Shares") of e-automate Corporation (the "Company"), a
Delaware corporation with an address at 73 North 490 West, American
Fork, Utah 84003, at the initial exercise price (the "Initial
Exercise Price") of $5.00 per share, provided that if the fair
market value of the Shares is less than $5.00 per Share at any time
during the first six months for which the Shares are quoted on the
NASDAQ Stock Market System or reported on the NASD's OTC Bulletin
Board the initial exercise price shall be $4.00 per share. The
Initial Exercise Price and number of Shares (and the amount and kind
of other securities) for which this Warrant is exercisable shall be
subject to adjustment as provided herein.
This Warrant Certificate relates to Warrants of the Company
issued pursuant to a Securities Purchase Agreement, dated as of June
19, 2000 (as amended and modified from time to time, the "Purchase
Agreement"), between the Company and the Holder, and the Warrants
are those Warrants referred to in the Purchase Agreement. The
Purchase Agreement contains terms governing the rights of the Holder
of this Warrant Certificate, and all provisions of the Purchase
Agreement are hereby incorporated herein in full by reference.
1. Duration. Warrants may be exercised at any time and from
time to time on or after the date which is 337 days after the date
of the Securities Purchase Agreement (the "Exercise Commencement"),
but not after the date which is four years after the Exercise
Commencement (the "Exercise Deadline"). Notwithstanding the
foregoing, all of the Warrants shall be immediately exercisable (i)
upon the occurrence of an Event of Default as defined in the
Certificate of Designation, or (ii) if there is a change in control
of the Company.
<PAGE>
-1-
2. Exercise.
A. All or any number of the Warrants may be exercised by
surrendering the Warrant Certificate(s) representing the Warrants to
be exercised to the Company, together with (i) an Election to
Exercise (in the form attached hereto and incorporated herein by
reference) completed and signed by the person exercising the
Warrants, (ii) if the person exercising the Warrants is not the
registered Holder, an Assignment (in the form attached hereto and
incorporated herein by reference) evidencing assignment of the
Warrants to the person exercising them, and (iii) payment in full of
the aggregate Exercise Price of the Warrants to be exercised, either
by (x) a check payable to the Company, (y) the surrender to the
Company of securities of the Company having a value equal to the
aggregate Exercise Price of the Warrants to be exercised (which
value in the case of debt securities shall be the principal amount
thereof and accrued and unpaid interest thereon and in the case of
Shares shall be the Fair Market Value thereof), or (z) the delivery
of a notice to the Company that the Company is authorized to reduce
the number of Shares issuable upon exercise of the Warrants by the
number of Shares having an aggregate Fair Market Value (as defined
herein) equal to the aggregate Exercise Price of the Warrants to be
exercised. "Fair Market Value" means the closing bid price of a
share of Common Stock quoted on the NASDAQ Stock Market System or
reported on the NASD's OTC Bulletin Board on the trading day next
preceding the Exercise Date (as defined herein). However, until a
share of Common Stock is first quoted on the NASDAQ Stock Market
System or reported on the NASD's OTC Bulletin Board after the date
of this Agreement, "Fair Market Value" means $3.00 per share. A
Warrant shall be deemed exercised when all of the foregoing have
been delivered to the Company (the "Exercise Date").
B. Upon the exercise of less than all of the Warrants
evidenced by this Warrant Certificate, there shall be issued to the
Holder a new Warrant Certificate in respect of the Warrants not
exercised. No fractional Shares will be issued upon the exercise of
Warrants. As to any final fraction of a share which the Holder of
one or more Warrant Certificates, the rights under which are
exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay the cash value.
Within two (2) business days after the Exercise Date, the Company,
without cost to the Holder, shall issue and shall deliver to the
Holder of the exercised Warrants or the person specified by such
Holder a certificate or certificates for the number of full Shares
issuable upon exercise registered in the name of such Holder or such
other person as shall have been specified by such Holder.
C. The Shares issuable upon the exercise of Warrants shall
be deemed to have been issued to the Holder on the Exercise Date,
and the Holder shall be deemed for all purposes to have become the
owner of such Shares on the Exercise Date.
D. The Company covenants that all Shares which may be issued
upon exercise of Warrants will, upon payment of the Exercise Price
therefor, be fully paid and nonassessable and the Company will pay
all taxes, liens and charges and any other costs incurred by the
Company in connection with the exercise of the Warrants and the
issuance and delivery of Shares pursuant thereto.
<PAGE>
-2-
E. The Company shall not close its books against the
transfer of Warrants or of any Shares issued or issuable upon the
exercise of Warrants in any manner which interferes with the timely
exercise of Warrants.
F. The Company shall assist and cooperate with any
reasonable request by the Holder which is required to make any
governmental filings or obtain any governmental approvals prior to
or in connection with any exercise of Warrants.
G. The Company shall at all times reserve and keep available
out of its authorized but unissued Shares solely for the purpose of
issuance upon the exercise of Warrants, the maximum number of Shares
issuable upon the exercise of all Warrants. All Shares which are so
issuable shall, when issued and upon the payment of the applicable
Exercise Price, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The
Company shall take all such actions as may be necessary to ensure
that all such Shares may be so issued without violation by the
Company of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Shares
or other securities constituting Shares may be listed (except for
official notice of issuance which shall be immediately delivered by
the Company upon each such issuance). The Company will use its best
efforts to cause the Shares issuable upon exercise, immediately upon
such exercise, to be listed on any domestic securities exchange upon
which Shares are listed at the time of such exercise.
H. The Company shall not, and shall not permit its
subsidiaries to, directly or indirectly, by any action (including,
without limitation, reincorporation in a jurisdiction other than
Utah, amending its Certificate of Incorporation or through any
issuance or sale of securities or any other voluntary action) avoid
or seek to avoid the observance or performance of any of the terms
of this Warrant Certificate or impair or diminish its value (except
for any action which ratably affects all Shares), but shall at all
times in good faith assist in the carrying out of all such terms of
this Warrant Certificate. Without limiting the generality of the
foregoing, the Company shall (a) obtain all such authorizations,
exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to
perform its obligations under this Warrant Certificate and (b) not
undertake any reverse stock split, combination, reorganization or
other reclassification of its capital stock which would have the
effect of making Warrants exercisable for less than one Share for
each Holder.
3. Adjustment of Exercise Price and Number of Shares. In
order to prevent dilution of the rights granted under this Warrant
Certificate, the Initial Exercise Price shall be subject to
adjustment from time to time as provided in this Section 3 (the
"Exercise Price"), and the number of Shares issuable upon exercise
of Warrants shall be subject to adjustment from time to time, each
as provided in this Section 3.
<PAGE>
-3-
A. Adjustment of Exercise Price and Number of Shares upon
Issuance of Shares. If and whenever, on or after the first date upon
which a Warrant is granted by the Company to a Holder, the Company
issues or sells (or in accordance with Section 3B is deemed to have
issued or sold) (specifically excluding those shares of Common Stock
issued and sold upon the exercise of options and warrants granted
prior to the date of the Purchase Agreement and options granted
after the date of the Purchase Agreement relating to shares of
Common Stock heretofore allocated pursuant to the Company's employee
stock option plan if issued and sold for a consideration per share
greater than or equal to the Fair Market Value on the date of
grant), other than (i) as described in Section 3C or (ii) pursuant
to the Purchase Rights covered by Section 4, any Shares for a
consideration per share less than the Fair Market Value per Share
determined as of the earlier of (x) the announcement of such
issuance or sale, or (y) the date of such issuance or sale, then
immediately upon such issuance or sale the Exercise Price shall be
reduced to equal the amount determined by multiplying the Exercise
Price in effect immediately prior to such issuance or sale by a
fraction, the numerator of which will be the sum of (1) the number
of Shares deemed outstanding (including Shares deemed outstanding
pursuant to Section 3.B.(i)) immediately prior to such issuance or
sale multiplied by the Fair Market Value per Share determined as of
the date of such issuance or sale, plus (2) the consideration, if
any, received by the Company upon such issuance or sale, and the
denominator of which will be the product derived by multiplying such
Fair Market Value per Share by the number of Shares deemed
outstanding (including Shares deemed outstanding pursuant to Section
3.B.(i)) immediately after such issuance or sale. Upon each such
adjustment of the Exercise Price hereunder, the number of Shares
acquirable upon exercise of this Warrant shall be adjusted to equal
the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Shares
acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.
B. Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under Section 3A, the
following shall be applicable:
(i) Issuance of Rights or Options or Convertible Securities.
If the Company in any manner grants any rights or options, whether
or not immediately exercisable, to subscribe for or to purchase
Shares or any stock or other securities convertible into or
exchangeable for Shares (including without limitation convertible
common stock) (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being
herein called "Convertible Securities") or if the Company in any
manner issues or sells any Convertible Securities, whether or not
immediately convertible or exchangeable, and the price per share for
which Shares are issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than
the Fair Market Value per Share in effect on the earlier of (x) the
announcement of such grant or issuance or sale and (y) the date of
such grant or issuance or sale, then the total maximum number of
Shares issuable upon the exercise of such Options or upon conversion
or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options of upon
conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of this paragraph,
the "price per share for which Shares are issuable upon exercise of
<PAGE>
-4-
such Options or upon conversion or exchange of such Convertible
Securities" is determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of
all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or
sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of Shares issuable upon
exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Exercise Price shall be made
upon the actual issuance of such Shares or of such Convertible
Securities upon the exercise of such Options or upon the actual
issuance of such Shares upon conversion or exchange of such
Convertible Securities.
(ii) Change in Option Price or Conversion Rate. If either
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or
exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for
Shares shall change at any time to an amount which is less than the
Fair Market Value, then the Exercise Price in effect at the time of
such change shall be adjusted to the Exercise Price which would have
been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold and the
number of Shares issuable upon exercise of the Warrants shall be
correspondingly readjusted.
C. Subdivision or Combination of Shares. If the Company at
any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) the outstanding Shares into a
greater number of Shares, or pays a dividend or makes a distribution
to holders of outstanding Shares in the form of Shares, or combines
(by reverse stock split or otherwise) the outstanding Shares into a
smaller number of shares, the Exercise Price of the Warrants in
effect immediately prior to such event and the number of Shares
obtainable upon exercise of Warrants shall be proportionately
adjusted so that the Holder of the Warrants thereafter surrendered
for exercise shall be entitled to receive after the occurrence of
any of the events described the proportionate number of Shares to
which the Holder would have been entitled had such Warrant been
exercised immediately prior to the occurrence of such event, such
adjustment to become effective immediately after the opening of
business on the day following the date upon which such subdivision
or combination or reclassification, as the case may be, becomes
effective.
D. Liquidation of the Company. In the event of the
liquidation, dissolution, or winding up of the Company, a notice
thereof shall be sent to the Holder at least 15 days before the
record date specified for determining holders of the Shares entitled
to receive any distribution upon such liquidation, dissolution, or
winding up.
E. Consolidation of Company. In the case of any
consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in
any reclassification or change of outstanding shares of the class
issuable upon exercise of the Warrants), or in case of any sale or
transfer to another corporation of the property of the Company as an
<PAGE>
-5-
entirety or substantially as an entirety, the Holder of each Warrant
then outstanding shall have the right to exercise such Warrant for
the purchase of the kind and amount of Shares and other securities
and property receivable upon such consolidation, merger, sale, or
transfer by a holder of the number of Shares which would have been
issuable if the conversion of the Warrants had occurred immediately
prior to such consolidation, merger, sale, or transfer.
F. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3 but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other
rights with equity features), then the Company's Board of Directors
shall exercise their reasonable judgment consistent with the
fundamental intent of such provisions in making an appropriate
adjustment in the Exercise Price and the number of Shares issuable
upon exercise of Warrants so as to protect the rights of the Holder
of Warrants.
G. Notices.
(i) Immediately upon any adjustment of the Exercise Price,
the Company shall give written notice thereof to the Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Holder at
least 30 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or
distribution upon the Shares, (B) with respect to any pro rata
subscription offer to holders of Shares, or (C) for determining
rights to vote with respect to any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or
substantially all of the Company's assets, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Holder at least 30 days prior to the date on which any
recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets,
dissolution or liquidation shall take place.
4. Purchase Rights. If at any time the Company grants, issues
or sells any options, convertible securities or rights to purchase
stock, warrants, securities or other property pro rata to the record
holders of the Shares (the "Purchase Rights"), then the Company
shall grant, issue or sell (as the case may be) to the Holder the
aggregate Purchase Rights which such Holder would have acquired if
such Holder had held the maximum number of Shares issuable upon
complete exercise of all Warrants immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights or, if no such record is taken, the date as of which
the record holders of the Shares are to be determined for the grant,
issue or sale of such Purchase Rights.
5. Exchange. Prior to the Exercise Deadline the Holder shall
be entitled to exchange this Warrant Certificate with or without
other Warrant Certificates for another Warrant Certificate or
Warrant Certificates for the same aggregate number of Warrants,
without charge to the Holder, upon surrender of this Warrant
Certificate at the office of the Company; provided that such
certificates may be redistributed to other Holders only in
compliance with applicable federal and state securities laws. The
date the Company initially issues this Warrant Certificate shall be
deemed to be the date of issuance hereof regardless of the number of
times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant Certificate shall be
issued.
<PAGE>
-6-
6. Transfer. Prior to the Exercise Deadline the Holder shall
be entitled to transfer this Warrant Certificate and all rights
hereunder, in whole or in part, without charge to the Holder, upon
surrender of this Warrant Certificate, together with an Assignment
(in the form attached hereto and incorporated herein by reference)
duly executed, at the office of the Company; provided that such
transfer is in compliance with applicable federal and state
securities laws and the Holder provides documentation of such
compliance to the reasonable satisfaction of the Company. Upon any
such transfer, a new Warrant Certificate or Warrant Certificates
representing the same aggregate number of Warrants will be issued in
accordance with instructions in the assignment.
7. Replacement Certificates. Upon receipt of evidence
reasonably satisfactory to the Company (an affidavit of the Holder
shall be satisfactory) of the ownership and the loss, theft,
destruction or mutilation of any certificate evidencing Warrants,
and in the case of any such loss, theft or destruction, upon receipt
of indemnity reasonably satisfactory to the Company (provided that
if the Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the
Company shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the same
rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
8. General Provisions:
A. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Utah without
regard to principles of conflicts of law. The parties hereby consent
to the jurisdiction of any court of competent jurisdiction in the
state of Utah, and consent to venue in Salt Lake County, Utah.
B. Notices. Any notice or demand required by this Warrant
Certificate to be given or made shall be sufficiently given or made
if in writing and (i) delivered in person, (ii) transmitted by
telecopy, (iii) sent by registered or certified mail, postage
prepaid with return receipt requested, or (iv) sent by reputable
overnight courier service, fees prepaid, to the parties at their
addresses as they appear in this Warrant Certificate. Notices shall
be deemed given upon personal delivery, upon receipt of return
receipt in the case of delivery by mail, upon acknowledgment by the
receiving telecopier or one day following deposit with an overnight
courier service.
C. Enforcement. The Company shall reimburse or pay, on
demand, to or on behalf of the Purchaser the costs and expenses,
including reasonable fees and expenses of counsel(s) to the
Purchaser, incurred by the Purchaser in connection with the
enforcement, whether with or without suit, of this Agreement and any
of the Related Documents.
D. Amendments and Waivers. This Warrant Certificate may be
amended or modified only with the written consent of the Holder. No
change or modification of this Warrant Certificate shall be valid
unless with the written consent of the Holder. Any default may be
waived only with the written consent of the Holder.
<PAGE>
-7-
E. Descriptive Headings. The descriptive headings of the
several Sections and paragraphs of this Warrant Certificate are
inserted for convenience only and do not constitute a part of this
Warrant Certificate.
F. Timeliness. The parties agree that time is of the essence
for the performance of each and every covenant and the satisfaction
of each and every condition contained in this Warrant Certificate.
G. Execution. A facsimile copy of this Warrant Certificate
shall be deemed an original, all with the same full force and effect
as though it were an original.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be executed by its duly authorized officers or agents
as of the day and year first above written.
e-automate Corporation
By:________________________________
Lon Price, President
and Chief Executive
Officer
By:_________________________________
Kim Green, Director of Finance
and Corporate Secretary
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On June __, 2000, personally appeared before me Lon Price,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
____________________________________
NOTARY PUBLIC
<PAGE>
-8-
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On June __, 2000, personally appeared before me Kim Green,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
____________________________________
NOTARY PUBLIC
<PAGE>
-9-
ELECTION TO EXERCISE
The undersigned hereby elects to exercise __________ of the
Warrants represented by the Warrant Certificate attached and to
purchase the Shares issuable upon the exercise of such Warrants, and
requests that certificates for such Shares be issued and delivered
to the undersigned as follows:
______________________________________________________________________________
name
______________________________________________________________________________
address, including zip code
______________________________________________________________________________
social security or other tax identifying number
If the number of Warrants hereby exercised is less than all
of the Warrants represented by this Warrant Certificate, the
undersigned directs that a new Warrant Certificate representing the
number of full Warrants not exercised be issued and delivered to the
undersigned.
In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned
hereby tenders payment of $ _______ by certified check or money
order payable in United States currency to the order of the Company.
Dated: __________________ Signature________________________________
Name_____________________________________
Address__________________________________
Address
<PAGE>
-10-
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns and transfers all of the rights of the undersigned
under the attached Warrant Certificate with respect to the number of
the Warrants covered thereby set forth below, unto:
Name of Assignee Address No. of Warrants
______________________________________________________________________________
______________________________________________________________________________
Dated: ________________________ Signature _______________________________
________________________________
Witness
<PAGE>
-11-
CERTIFICATE OF DESIGNATION
e-automate Corporation
Series B Convertible Preferred Stock
e-automate Corporation (the "Corporation"), a Delaware
corporation, hereby certifies that pursuant to authority conferred
upon the Board of Directors of the Corporation by its Certificate of
Incorporation, as amended, and in accordance with the provisions of
Section 151 of the General Corporation Law of Delaware ("DGCL"), the
Board of Directors of the Corporation, at a meeting duly called and
held pursuant to Section 141 of the DGCL, duly adopted the following
resolution providing for the designation and the powers,
preferences, and the qualifications, limitations or restrictions
thereof, of the Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions
of its Certificate of Incorporation, as amended, and pursuant to the
General Corporation Law of Delaware, a series of Preferred Stock of
the Corporation is hereby created, such series of Preferred Stock to
be designated the Series B Convertible Preferred Stock, to consist
of 1,000 shares, $0.001 par value per share, with a stated value of
$1,000 per share (the "Stated Value"). The Series B Preferred Stock
is being issued pursuant to the terms and conditions of that certain
Securities Purchase Agreement dated as of June 21, 2000, as amended
from time to time (the "Purchase Agreement"), which is incorporated
herein by this reference. Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the
Purchase Agreement. The powers, preferences and rights, and the
qualifications, limitations or restrictions of the Series B
Preferred Stock shall be as follows:
1. VOTING RIGHTS. Except as otherwise required by applicable
law, each share of Series B Preferred Stock issued and outstanding
shall have the number of votes equal to the whole number of shares
of common stock into which the share of Series B Preferred Stock is
convertible (with any fractional share determined on an aggregate
conversion basis being rounded to the nearest whole share).
2. DIVIDENDS. Upon approval of the Board of Directors, the
holder of Series B Preferred Stock shall be entitled to receive (out
of legally available funds) cumulative dividends equal to 8% per
annum and payable quarterly within 5 days after the last business
day of each calendar quarter (the "Dividend Payment Date"). From and
after the occurrence of an Event of Noncompliance, the holder of
Series B Preferred Stock shall be entitled to receive (out of
legally available funds) cumulative dividends equal to 21% per annum
(the "Default Rate") and payable on each Dividend Payment Date. The
holder of Series B Preferred Stock at its option may elect to
receive payment of dividends in cash or in Common Stock at the
Conversion Price, as defined below. Dividends on Series B Preferred
Stock shall be junior in preference and subordinate to Series 2000-A
Preferred Stock of the Corporation. Unless all accrued dividends and
interest thereon, if any, have been paid in full, no dividend on any
other stock shall be declared or paid or made, as the case may be,
or any moneys paid to any sinking or purchase fund on any other stock
for the redemption or repurchase thereof. Dividends for less than a
full calendar quarter shall be prorated and based on the actual number
of days elapsed divided by 360 days.
<PAGE>
3. REDEMPTION.
A. MANDATORY REDEMPTION. The Corporation shall have the
obligation, at the option of the Holder of Series B Preferred Stock,
to redeem all of the outstanding shares of Series B Preferred Stock
by paying a sum per share equal to 125% of the Stated Value per
share, plus accrued and unpaid dividends and penalties thereon
through the date of redemption (collectively, the "Redemption
Price") (i) if an Event of Noncompliance (as defined herein) occurs,
or (ii) if, after the first date upon which the Company's Common
Stock is quoted in the NASDAQ Stock Market System or reported on the
NASD's OTC Bulletin Board, the average of the closing bid prices for
the Company's Common Stock for twenty-two (22) consecutive trading
days, as quoted in the NASDAQ Stock Market System or reported on the
NASD's OTC Bulletin Board, is less than or equal to $3.25 per share.
B. NOTICE OF REDEMPTION. The Corporation shall deliver
written notice of each redemption, pursuant to paragraph A above, of
a share of Series B Preferred Stock to the Holder thereof not less
than thirty (30) days prior to the date specified in the notice on
which such redemption is to be made (the "Redemption Date"). A
Holder of a share of Series B Preferred Stock may submit written
notice of a redemption, pursuant to paragraph B above, to the
Corporation not less than ten (10) days prior to the date specified
in the notice on which such redemption is to be made (the
"Redemption Date").
C. REDEMPTION PAYMENTS. For each share of Series B
Preferred Stock which is to be redeemed hereunder, the Corporation
shall be obligated on the applicable Redemption Date to pay to the
Holder thereof (upon surrender by such Holder at the Corporation's
principal office of the share certificate) the Redemption Price in
cash or in immediately available funds. If the Corporation does not
make the payment when due, dividends will accrue on all outstanding
Series B Preferred Stock from and after the Redemption Date at the
Default Rate until paid in full and the Conversion Price calculated
pursuant to Section 4 in connection with any subsequent conversion
of a share of Series B Preferred Stock will be reduced by $1.00 per
share, without regard to any minimum Conversion Price.
D. DIVIDENDS AFTER REDEMPTION DATA. If the Redemption
Price to be paid hereunder is paid in full to the Holder of Series B
Preferred Stock on the Redemption Date, the redeemed share of Series
B Preferred Stock shall not be entitled to any dividends accruing
after such date and on such date, all rights of the holder of such
shares shall cease, and such shares shall no longer be deemed to be
issued and outstanding.
4. CONVERSION. Holders of Series B Preferred Stock shall have
the right, but not the obligation to convert the Stated Value and
any accrued and unpaid dividends thereon into fully paid and
nonassessable shares (calculated as to each conversion to the
nearest number of whole shares) of the common stock, $.001 par
value, of the Corporation (the "Common Stock") at the Conversion
Price, as defined herein, subject to adjustment as provided herein.
"Conversion Price" means 80% of the average of the three lowest
closing bid prices for the Common Stock quoted on the NASDAQ Stock
Market System or reported on the NASD's OTC Bulletin Board during
the 15 trading days preceding the conversion date, subject to a
maximum Conversion Price of $5.75 per share and a minimum Conversion
Price of $3.25 per share.
<PAGE>
-2-
Such conversion right may be exercised on or after June 19,
2000, with respect to all or any portion of the Series B Preferred
Stock. Upon the occurrence of an Event of Noncompliance, all of the
Series B Preferred Stock shall be immediately convertible
notwithstanding any timing restrictions imposed herein and the
Conversion Price shall not be subject to any limitations on the
minimum imposed herein.
In the case of any Series B Preferred Stock which is
surrendered for conversion, accrued and unpaid dividends will be
payable on such Series B Preferred Stock with respect to the period
ending on the conversion date. The Holder at its option may elect to
receive payment of dividends in cash or in Common Stock at the
Conversion Price.
On or after December 21, 2001, the Company may require the
Holder to convert all of the outstanding Series B Preferred Stock
held by the Holder into shares of Common Stock as provided in this
Designation by delivering to the Holder 30-days prior written notice
of the exercise of this right.
A. EXERCISE OF CONVERSION PRIVILEGE. To exercise the
conversion privilege, the Holder of the Series B Preferred Stock
shall surrender to the Corporation such Series B Preferred Stock,
duly endorsed or assigned to the Corporation or in blank,
accompanied by written Notice of Conversion to the Corporation in
the form provided in the Series B Preferred Stock that the Holder
elects to convert such Series B Preferred Stock or, if less than the
entire principal amount thereof is to be converted, the specified
portion.
Series B Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day of
surrender of such Series B Preferred Stock for conversion in
accordance with the foregoing provisions, and at such time the
rights of the Holders of such Series B Preferred Stock as Holders
shall cease, and the person or persons entitled to receive the
Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Stock as and
after such time.
Within two (2) business days after the conversion date, the
Corporation, without cost to the Holder, shall issue and shall
deliver to the Holder of the converted Series B Preferred Stock or
the person specified by such Holder a certificate or certificates
for the number of full shares of Common Stock issuable upon
conversion registered in the name of such Holder or such other
person as shall have been specified by such Holder and all accrued
and unpaid dividends on the converted Series B Preferred Stock or
portion thereof upon which the Holder does not elect to receive
payment in Common Stock.
Upon conversion of Series B Preferred Stock, the Corporation
shall take all such actions as are necessary in order to insure that
the Common Stock issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable.
The Corporation shall not close its books against the
transfer of Common Stock issued or issuable upon conversion of
Series B Preferred Stock in any manner which interferes with the
timely conversion of Series B Preferred Stock. The Corporation shall
assist and cooperate with any Holder of Series B Preferred Stock
required to make any governmental filings or obtain any governmental
approval prior to or in connection with the conversion of Series B
Preferred Stock (including, without limitation, making any filings
required to be made by the Corporation).
<PAGE>
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The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely
for the purpose of issuance upon the conversion of Series B
Preferred Stock, such number of shares of Common Stock issuable upon
the conversion of all outstanding Series B Preferred Stock. All
shares of Common Stock which are so issuable shall, when issued, be
duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed
(except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance).
The conversion rights of any Series B Preferred Stock subject
to redemption hereunder shall terminate on the Redemption Date for
such Series B Preferred Stock unless the Corporation has failed to
pay to the Holder thereof the Redemption Price of such Series B
Preferred Stock or portion thereof (plus all accrued and unpaid
dividends and penalties thereon and any premium payable with respect
thereto).
B. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES
UPON ISSUANCE OF COMMON STOCK. If and whenever, on or after the date
of the Purchase Agreement, the Corporation issues or sells (or in
accordance with Section 4.C is deemed to have issued or sold)
(specifically excluding those shares of Common Stock issued and sold
upon the exercise of options and warrants granted prior to the date
of the Purchase Agreement), other than (i) as described in Section
4.D or (ii) pursuant to the Purchase Rights covered by Section 4.I,
any shares of Common Stock for a consideration per share less than
the Fair Market Value (as defined below) per share of the Common
Stock determined as of the earlier of (x) the announcement of such
issuance or sale, or (y) the date of such issuance or sale, then
immediately upon such issuance or sale the Conversion Price shall be
reduced to equal the amount determined by multiplying the Conversion
Price in effect immediately prior to such issuance or sale by a
fraction, the numerator of which will be the sum of (1) the number
of shares of Common Stock deemed outstanding (including Shares
deemed outstanding pursuant to Section 4.C.(i)) immediately prior to
such issuance or sale multiplied by the Fair Market Value per share
of the Common Stock determined as of the date of such issuance or
sale, plus (2) the consideration, if any, received by the
Corporation upon such issuance or sale, and the denominator of which
will be the product derived by multiplying such Fair Market Value
per share of the Common Stock by the number of shares of Common
Stock deemed outstanding (including Shares deemed outstanding
pursuant to Section 4.C.(i)) immediately after such issuance or
sale. Upon each such adjustment of the Conversion Price hereunder,
the number of Conversion Shares issuable upon exercise of Series B
Preferred Stock shall be adjusted to equal the number of shares
determined by multiplying the Conversion Price in effect immediately
prior to such adjustment by the number of Conversion Shares issuable
upon exercise of Series B Preferred Stock immediately prior to such
adjustment and dividing the product thereof by the Conversion Price
resulting from such adjustment. For the purposes of this Section 4,
the calculation of the number of shares of Common Stock deemed
outstanding shall exclude the Conversion Shares. "Fair Market
Value" means the closing bid price of a share of Common Stock quoted
on the NASDAQ Stock Market System or reported on the NASD's OTC
Bulletin Board. However, until a share of Common Stock is first
quoted on the NASDAQ Stock Market System or reported on the NASD's
OTC Bulletin Board after the date of this Agreement, "Fair Market
Value" means $3.00 per share.
<PAGE>
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C. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under Section 3.B, the
following shall be applicable:
(i) Issuance of Rights or Options or Convertible Securities.
If the Corporation in any manner grants any rights or options, whether or
not immediately exercisable, to subscribe for or to purchase Common Stock or
any stock or other securities convertible into or exchangeable for
Common Stock (including without limitation convertible common stock)
(such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
"Convertible Securities") or if the Corporation in any manner issues
or sells any Convertible Securities, whether or not immediately
convertible or exchangeable, and the Fair Market Value per share for
which Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities is less
than the Fair Market Value per share of the Common Stock in effect
on the earlier of (x) the announcement of such grant or issuance or
sale and (y) the date of such grant or issuance or sale, then the
total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such Options of upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have
been issued and sold by the Corporation for such Fair Market Value
per share. For purposes of this paragraph, the Fair Market Value per
share for which Common Stock is issuable upon exercise of such
Options or upon conversion or exchange of such Convertible
Securities" is determined by dividing (A) the total amount, if any,
received or receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the
exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon
the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon exercise of such Options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No further adjustment of
the Conversion Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Change in Option Price or Conversion Rate. If either
the purchase price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock shall change at any time to an amount
which is less than the Fair Market Value, then the Conversion Price
in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of Conversion Shares shall be
correspondingly readjusted.
D. SUBDIVISION OR COMBINATION OF SHARES. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization,
or otherwise) the outstanding shares of
<PAGE>
-5-
Common Stock into a greater number of shares of Common Stock, or
pays a dividend or makes a distribution to holders of outstanding
shares of Common Stock in the form of shares of Common Stock, or
combines (by reverse stock split or otherwise) the outstanding
shares of Common Stock into a smaller number of shares, the
Conversion Price of the Series B Preferred Stock in effect
immediately prior to such event and the number of shares of Common
Stock issuable upon conversion of the Series B Preferred Stock shall
be proportionately adjusted so that the holder of the Series B
Preferred Stock thereafter surrendered for conversion shall be
entitled to receive after the occurrence of any of the events
described the proportionate number of shares of Common Stock to
which the holder would have been entitled had such Series B
Preferred Stock been exercised immediately prior to the occurrence
of such event, such adjustment to become effective immediately after
the opening of business on the day following the date upon which
such subdivision or combination or reclassification, as the case may
be, becomes effective.
E. LIQUIDATION OF THE CORPORATION. In the event of the liquidation,
dissolution, or winding up of the Corporation, a notice thereof shall be
sent to the Holder at least 15 days before the record date specified for
determining holders of the shares of Common Stock entitled to receive any
distribution upon such liquidation, dissolution, or winding up.
F. CONSOLIDATION OF CORPORATION. In the case of any consolidation
or merger of the Corporation with or into another corporation (other than a
consolidation or merger in which the Corporation is the surviving corporation
and which does not result in any reclassification or change of outstanding
shares of the class issuable upon conversion of the Series B Preferred
Stock), or in case of any sale or transfer to another corporation of the
property of the Corporation as an entirety or substantially as an
entirety, the Holder of each Series B Preferred Stock then
outstanding shall have the right to exercise such Series B Preferred
Stock for the purchase of the kind and amount of shares of Common
Stock and other securities and property receivable upon such
consolidation, merger, sale, or transfer by a holder of the number
of shares of Common Stock which would have been issuable if the
conversion of the Series B Preferred Stock had occurred immediately
prior to such consolidation, merger, sale, or transfer.
G. CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 4 but not expressly provided for by such
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Corporation's Board of Directors shall exercise
their reasonable judgment consistent with the fundamental intent of
such provisions in making an appropriate adjustment in the Conversion
Price and the number of shares of Common Stock issuable upon conversion
of the Series B Preferred Stock so as to protect the rights of the Holder
of the Series B Preferred Stock.
H. NOTICES.
(i) Immediately upon any adjustment of the Conversion Price,
the Corporation shall give written notice thereof to the Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Corporation shall give written notice to the
Holder at least 30 days prior to the date on which the Corporation closes
its books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock, or (C) for determining rights to vote with
respect to any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Corporation's
assets, dissolution or liquidation.
<PAGE>
-6-
(iii) The Corporation shall also give written notice to
the Holder at least 30 days prior to the date on which any recapitalization,
reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Corporation's assets, dissolution or liquidation
shall take place.
I. PURCHASE RIGHTS. If at any time the Corporation grants, issues
or sells any options, convertible securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of the
Common Stock (the "Purchase Rights"), then the Corporation shall grant, issue
or sell (as the case may be) to the Holder the aggregate Purchase
Rights which such Holder would have acquired if such Holder had held
the maximum number of shares of Common Stock issuable upon
conversion of all the Series B Preferred Stock immediately before
the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights or, if no such record is taken, the date as
of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
5. EVENTS OF NONCOMPLIANCE.
A. DEFINITION. An Event of Noncompliance shall have occurred if:
(i) the Corporation fails to pay on any Dividend Payment Date
the full amount of dividends then accrued on the Preferred Stock, whether
or not such payments are legally permissible or are prohibited by any
agreement to which the Corporation is subject;
(ii) the Corporation fails to make any redemption payment
(whether following the giving of notice pursuant to paragraph 2C or otherwise)
with respect to the Preferred Stock which it is required to make hereunder,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to perform or
observe any material provision contained herein, in the Purchase Agreement
or in the Related Documents (as defined in the Purchase Agreement) and
(other than with respect to Section 8.1 or 8.2(l) of the Purchase
Agreement, the breach of or failure to perform which shall result in
an immediate Event of Noncompliance) such failure is not cured
within fifteen (15) days after the occurrence thereof;
(iv) any representation or warranty contained in the Purchase Agreement
or required to be furnished to any holder of Preferred Stock pursuant to the
Purchase Agreement, or any information contained in writing required to be
furnished by the Corporation or any Subsidiary to any holder of
Preferred Stock, is false or misleading in any material respect on
the date made or furnished;
(v) the Corporation or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or
<PAGE>
-7-
any order for relief with respect to the Corporation or any Subsidiary
is entered under the Federal Bankruptcy Code; or the Corporation or
any Subsidiary petitions or applies to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of the
Corporation or any Subsidiary or of any substantial part of the
assets of the Corporation or any Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation
and dissolution of any Subsidiary) relating to the Corporation or
any Subsidiary under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or the Corporation or any Subsidiary takes any
action to authorize any of the foregoing; or any such petition or
application is filed, or any such proceeding is commenced, against
the Corporation or any Subsidiary and either (a) the Corporation or
any such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days;
(vi) any material provision of the Purchase Agreement or
any Related Document shall at any time for any reason be declared
to be null and void, or the validity or enforceability thereof shall
be contested by any party thereto, or a proceeding shall be commenced
by the Corporation or any Governmental Authority or other regulatory
body having jurisdiction over the Corporation, seeking to establish the
invalidity or enforceability thereof, or the Corporation shall deny
in writing that it has any liability or obligation purported to be
created under the Purchase Agreement or any Related Document;
(vii) (A) any registration statement required to be filed
and declared effective by the Corporation pursuant to the Purchase Agreement
shall not become effective as provided in the Purchase Agreement or shall
cease to be effective, (B) the Securities and Exchange Commission shall
issue any stop order suspending the effectiveness under the Securities Act
of any registration statement required to be filed and declared
effective by the Corporation pursuant to the Purchase Agreement or
any state securities commission suspends the qualification of the
Registrable Securities covered thereby for offering or sale in any
jurisdiction, (C) any proceeding for purposes of either (A) or (B)
above is initiated, or (D) after October 16, 2000 the Common Stock
is suspended from trading on or the price for the Common Stock is
not quoted or reported on the NASDAQ Stock Market System or the
NASD's OTC Bulletin Board;
(viii) the Company at any time shall not have reserved and
available authorized but unissued shares of Common Stock, solely for the
purpose of issuance upon conversion of the Preferred Stock, in the number
which would be issuable upon the conversion of all of the issued and
outstanding Preferred Stock; or
(ix) the occurrence of a Material Adverse Change (as defined
in the Purchase Agreement).
B. RIGHT TO CURE. Any breach, default in performance of any provision
or Event of Noncompliance of the Purchase Agreement or any of the Related
Documents which directly affects the Purchaser's ability to acquire the
Preferred Shares and Warrants, convert the Preferred Shares, Exercise the
Warrants or sell pursuant to a valid registration shall be interpreted in
accordance with the terms of the Purchase Agreement or any Related
Document. Any breach, default in performance of any provision of the
Purchase Agreement or any of the Related Documents or Event of
<PAGE>
-8-
Noncompliance which does not directly affect the Purchaser's ability
to acquire the Preferred Shares and Warrants, convert the Preferred
Shares, Exercise the Warrants or sell pursuant to a valid
registration shall be subject to written notice delivered to the
Company and may be cured by the Company during the five (5) days
after receipt of written notice of such breach, default or Event of
Noncompliance.
6. LIQUIDATION AND SALE PREFERENCES. In the event of
liquidation, dissolution or winding up, whether voluntary or
involuntary, (an "Event of Liquidation") of the Corporation, the
holders of Series B Preferred Stock, prior and in preference to the
holders of the common stock, shall be entitled to receive (i) the
Stated Value per share of Series B Preferred (adjusted to reflect
stock dividends, stock splits or recapitalizations, if any), plus
(ii) accrued but unpaid dividends (the "Liquidation Preference").
The Liquidation Preference shall rank junior to Series 2000-A
Preferred Stock but shall retain priority as to all other series or
classes of stock of the Corporation. After payment of the
Liquidation Preference and any other preferential payments on other
series or classes of stock except the common stock, the holders of
Series B Preferred Stock shall have no other rights to the remaining
assets of the Corporation. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series B
Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire
assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the
Series B Preferred Stock in proportion to the amount of such stock
owned by each such holder. The Corporation shall mail to each holder
of Series B Preferred Stock, at least twenty (20) days prior to an
Event of Liquidation, a notice setting forth the date on which such
Event of Liquidation is expected to become effective and the type
and amount of anticipated proceeds per share of common stock to be
distributed with respect thereto and shall afford each such holder
the opportunity to convert such shares of Series B Preferred Stock
pursuant to Section (iii) (conditional upon the consummation of such
Event of Liquidation) prior to the consummation thereof.
A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale, conveyance,
or disposition of all or substantially all of the assets of the
Corporation, or the effectuation of any acquisition of the
Corporation by any other entity by means of a transaction or series
of related transactions in which more than fifty percent (50%) of
the voting power of the Corporation is disposed of (the "Sale"),
shall be deemed to be an Event of Liquidation; provided, however,
that if holders of Series B Preferred Stock are to receive more than
the preferential amounts due them under the immediately preceding
paragraph in the Sale, the Sale shall not be an Event of Liquidation
and all holders of Series B Preferred Stock shall participate
ratably with the holders of common stock and the holders of any
other series of preferred stock with similar rights in proportion to
the amount of shares of common stock owned by each such holder on an
as-converted basis and shall not be entitled to receive any
preferential amounts.
7. PROTECTIVE PROVISIONS. So long as shares of Series
B Preferred Stock are outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent), as
provided by law, of the holders of two-thirds of the outstanding
shares of Series B Preferred Stock: (a) to alter or change the
rights, preferences or privileges of the shares of Series B
Preferred Stock so as to affect adversely the shares of such stock;
(b) to increase the authorized number of shares of Series B
Preferred Stock; (c) to create any new class or series of shares of
capital stock with rights or preferences prior to or on a parity
with, or increase the number of shares of, Series B Preferred Stock;
or (d) to sell or convey or otherwise dispose of all or
substantially all of the property or business of the Corporation. No
repurchases or redemptions of any other series or class of stock of
the Corporation while in default of any provision of the Series B
Preferred Stock.
<PAGE>
-9-
8. AMENDMENTS AND WAIVERS. Series B Preferred Stock may be
amended only with the written consent of the Holder, and any
existing Event of Noncompliance may be waived only with the written
consent of the Holder.
RESOLVED, that the Board of Directors has determined
that the rights and preferences of the Series B Preferred Stock are
under the circumstances presently prevailing, fair and equitable to
all the existing stockholders.
IN WITNESS WHEREOF, the Corporation has caused its
duly authorized officers to execute this certificate this day
of June, 2000.
e-automate Corporation
By: /s/ Lon D. Price
-------------------------------------
Lon D. Price
Its: President and Chief Executive
Officer
By:/s/ Kim A. Green
--------------------------------------
Kim A. Green
Its: Director of Finance
STATE OF UTAH )
: ss.
COUNTY OF ____________)
On June , 2000, personally appeared before me Lon D.
Price, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________
NOTARY PUBLIC
<PAGE>
-10-
STATE OF UTAH )
: ss.
COUNTY OF ____________)
On June , 2000, personally appeared before me Kim A.
Green, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
_______________________________
NOTARY PUBLIC
<PAGE>
-11-
NOTICE OF CONVERSION
To: e-automate Corporation
The undersigned registered owner of this share of
Series B Preferred Stock hereby exercises the option to convert this
share of Series B Preferred Stock, or the portion hereof designated
below, and the accrued dividends thereon designated below into
shares of Common Stock in accordance with the terms of the Series B
Preferred Stock, and directs that the shares issuable and
deliverable upon this conversion be issued and delivered to the
registered owner hereof, unless a different name has been provided
below.
Dated:
--------------------------- ----------------------------------
----------------------------------
Signature(s)
Complete the following for registration of shares of Common Stock if
they are to be delivered other than to and in the name of the
registered owner:
____________________________________
Name
____________________________________
____________________________________
Address
____________________________________
Soc. Sec. or Tax I.D. No.
<PAGE>
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