EXHIBIT 2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
February 11, 2005, by and among CorVu Corporation, a Minnesota corporation (the
"Company"), ComVest Investment Partners II LLC, a Delaware limited liability
company ("Purchaser") and the Subsidiaries (as defined herein) set forth on the
signature page hereto.
WHEREAS, subject to the terms and conditions set forth in this
Agreement and in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission promulgated
thereunder (the "Securities Act"), including Regulation D ("Regulation D"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder, the Company desires to issue and sell to Purchaser, and
Purchaser desires to purchase from the Company (i) a senior secured note (the
"Senior Secured Note") in an aggregate principal amount of $1,500,000, (ii)
22,000,000 shares of common stock, $0.01 par value per share ("Common Stock"),
of the Company for an aggregate purchase price of $3,300,000, (iii) 17,000 of
shares of convertible preferred stock, par value $100 per share (the "Series C
Preferred Stock"), (iv) warrants (the "Preferred Warrant") to purchase 3,400,00
shares of Common Stock and (v) warrants (the "Protective Warrant" and, together
with the Preferred Warrant, the "Warrants") to purchase 2,000,00 shares of
Common Stock on the Closing Date;
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Purchaser agrees as
follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" means any claim, action, suit, arbitration, inquiry,
action or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such specified Person.
"Agreement" shall have the meaning set forth in the Preamble.
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"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by Law to be
closed in The City of New York.
"Certificate of Designation" means the Certificate of
Designation of Rights and Preferences of Series C Convertible Preferred
Stock of the Company to be filed with the Secretary of State of the
State of Minnesota in connection with the issuance of the Series C
Preferred Stock in the form of Exhibit E attached hereto.
"Claims" means any and all administrative, regulatory or
judicial actions, suits, petitions, appeals, demands, demand letters,
claims, Encumbrances, notices of noncompliance or violation,
investigations, Actions, consent orders or consent agreements.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"Company" shall have the meaning set forth in the Preamble.
"Company Indemnified Party" shall have the meaning set forth
in Section 4.10(b).
"Company Intellectual Property" means Intellectual Property
owned by the Company or any Subsidiary.
"Company IP Agreements" means (a) licenses of Intellectual
Property by the Company or any Subsidiary to any third party, (b)
licenses of Intellectual Property by any third party to the Company or
any Subsidiary, (c) agreements between the Company or any Subsidiary
and any third party relating to the development or use of Intellectual
Property, the development of data, or the modification, framing,
linking, or advertisement with respect to Internet web sites and (d)
consents, settlements, decrees, orders, injunctions, judgments or
rulings to which the Company or any Subsidiary is a party, governing
the use, validity or enforceability of Company Intellectual Property.
"Company Software" means all Software (a) material to the
operation of its business or (b) manufactured, distributed, sold,
licensed or marketed by the Company or any Subsidiary.
"Commission" means the Securities and Exchange Commission.
"Common Stock" shall have the meaning set forth in the
Recitals.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or
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exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.
"Company Counsel" means Xxxxxxxxxx & Xxxxx, P.A. with offices
located at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx
00000.
"control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or
among two or more Persons, means the possession, directly or indirectly
or as trustee, personal representative or executor, of the power to
direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee,
personal representative or executor, by contract, credit arrangement or
otherwise.
"Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Series C Preferred Stock.
"Copyrights" means mask works, rights of publicity and
privacy, and copyrights in works of authorship of any type, including
Software, registrations and applications for registration thereof
throughout the world, all rights therein provided by international
treaties and conventions, all moral and common law rights thereto, and
all other rights associated therewith.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto, dated as of the date hereof, delivered by the Company to
Purchaser in connection with this Agreement.
"Encumbrance" means any security interest, pledge,
hypothecation, mortgage, Encumbrance (including environmental and tax
Encumbrances), violation, charge, lease, license, encumbrance, servient
easement, adverse claim, reversion, reverter, preferential arrangement,
restrictive covenant, condition or restriction of any kind, including
any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Exempt Issuance" means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors (the "Board") of the
Company or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the
exercise of or conversion of any convertible securities, options or
warrants issued and outstanding on December 20, 2004, provided that
such securities have not been amended since the date of this Agreement,
(c) the
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Securities issued or issuable hereunder, (d) issuances in connection
with mergers, acquisitions, joint ventures or other transactions with
an unrelated third party in a bona fide transaction the purpose of
which is not fundraising, (e) issuances at fair market value to the
Company's suppliers, consultants and other providers of services and
goods not to exceed $100,000 to any one Person, and not to exceed an
aggregate of $250,000 in any fiscal year without the prior written
consent of Purchaser, or (f) issuances of options ("Replacement
Options") to MacIntosh at the then fair market value in replacement of
options held by MacIntosh on the Closing date upon their expiration and
issuances of shares of Common Stock upon exercise of any such
Replacement Options, provided, that such Replacement Options have been
issued in accordance with the Company's then existing stock option plan
and approved by a majority of the non-employee members of the Board of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose.
"GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied
consistently throughout the periods involved.
"Governmental Authority" means any federal, national,
supranational, state, provincial, local, or similar government,
governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"GT" means Xxxxxxxxx Traurig, LLP with offices located at The
Met Life Building, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed
money, (b) all obligations of such Person for the deferred purchase
price of property or services, (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d)
all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the Company or lender
under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such
Person as lessee under leases that have been or should be, in
accordance with GAAP, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any
capital stock of such Person or any warrants, rights or options to
acquire such capital stock, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (h) all Indebtedness of
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others referred to in clauses (a) through (g) above guaranteed directly
or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay
or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against
loss, (iii) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (i)
all Indebtedness referred to in clauses (a) through (g) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Encumbrance on property
(including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness.
"Indemnified Party" shall mean a Company Indemnified Party or
a Purchaser Indemnified Party, as the case may be;
"Indemnifying Party" shall mean Purchaser pursuant to Section
4.10(a) and the Company pursuant to Section 4.10(b), as the case may be
"Intellectual Property" means (i) patents, patent applications
and statutory invention registrations, (ii) trademarks, service marks,
domain names, trade dress, logos, trade names, corporate names and
other identifiers of source or goodwill, including registrations and
applications for registration thereof and including the goodwill of its
business symbolized thereby or associated therewith, (iii) mask works
and copyrights, including copyrights in computer software, and
registrations and applications for registration thereof, and (iv)
confidential and proprietary information, including trade secrets, know
how and invention rights.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule,
code, order, requirement or rule of law (including common law).
"Leased Real Property" means the real property leased by the
Company or any Subsidiary as tenant, together with, to the extent
leased by the Company or any Subsidiary, all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal
property of the Company or any Subsidiary attached or appurtenant
thereto and all easements, licenses, rights and appurtenances relating
to the foregoing.
"Licensed Intellectual Property" means Intellectual Property
licensed to the Company or any Subsidiary pursuant to the Company IP
Agreements.
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"MacIntosh" means Xxxxxx X. XxxXxxxxx.
"Material Adverse Effect" means any circumstance, change in or
effect on its business, the Company or any Subsidiary that,
individually or in the aggregate with all other circumstances, changes
in or effects on its business, the Company or any Subsidiary: (a) is or
is reasonably likely to be materially adverse to its business,
operations, assets or liabilities (including contingent liabilities),
employee relationships, customer or supplier relationships, prospects,
results of operations or the condition (financial or otherwise) of its
business, the Company or any Subsidiary or (b) is reasonably likely to
materially adversely effect the ability of Purchaser to operate or
conduct its business in the manner in which it is currently or
contemplated to be operated or conducted by the Company or any
Subsidiary.
"Owned Real Property" means the real property in which the
Company or any Subsidiary has fee title (or equivalent) interest,
together with all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or any
Subsidiary attached or appurtenant thereto and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Patents" means United States, foreign and international
patents, patent applications and statutory invention registrations,
including reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations thereof, and all rights therein provided
by international treaties and conventions.
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure Action
shall have been commenced and as to which neither the Company nor any
Subsidiary is otherwise subject to civil or criminal liability due to
its existence: (a) Encumbrances for Taxes not yet due and payable, for
which adequate reserves have been maintained in accordance with GAAP;
(b) Encumbrances imposed by Law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Encumbrances and other similar
Encumbrances arising in the ordinary course of business securing
obligations that (i) are not overdue for a period of more than 30 days
and (ii) are not in excess of $5,000 in the case of a single property
or $50,000 in the aggregate at any time; (c) pledges or deposits to
secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; and (d) minor
survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in
connection with any Indebtedness, (ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually
or in the aggregate, materially adversely affect the value of or the
use of such property for its current and anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
limited liability company, association, trust, unincorporated
organization or other entity,
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as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Preferred Shares" means the 17,000 shares of Series C
preferred Stock issued to Purchaser pursuant to this Agreement.
"Preferred Stock" means the "blank check" preferred stock
designated by the Company.
"Preferred Warrant" shall have the meaning set forth in the
Recitals in the form of Exhibit C attached hereto.
"Protective Warrant" shall have the meaning set forth in the
Recitals in the form of Exhibit D attached hereto.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Indemnified Party" shall have the meaning set forth
in Section 4.10(a).
"Real Property" means the Leased Real Property and the Owned
Real Property.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and Purchaser, in the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by Purchaser of the Shares and the Warrant
Shares.
"Regulation D" shall have the meaning set forth in the
Recitals.
"Regulations" means the Treasury Regulations (including
Temporary Regulations) promulgated by the United States Department of
Treasury with respect to the Code or other federal tax statutes.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(g).
"Securities" collectively means the Shares, the Preferred
Shares, the Conversion Shares, the Senior Secured Note, the Warrants
and the Warrant Shares.
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"Security Agreement" means the Security Agreement between the
Company and Purchaser in the form of Exhibit G attached hereto.
"Securities Act" shall have the meaning set forth in the
Recitals.
"Senior Secured Note" shall have the meaning set forth in the
Recitals in the form of Exhibit A attached hereto.
"Series A Preferred Stock" means the Series A Convertible
Preferred Stock, par value $10.00 per share, of the Company.
"Series B Preferred Stock" means the Series B Convertible
Preferred Stock, par value $.01 per share, of the Company.
"Series C Preferred Stock" shall have the meaning set forth in
the Recitals.
"Shares" means the 22,000,000 shares of Common Stock issued to
Purchaser pursuant to this Agreement.
"Software" means computer software, programs and databases in
any form, including Internet web sites, web content and links, source
code, object code, operating systems and specifications, data,
databases, database management code, utilities, graphical user
interfaces, menus, images, icons, forms, methods of processing,
software engines, platforms and data formats, all versions, updates,
corrections, enhancements and modifications thereof, and all related
documentation, developer notes, comments and annotations.
"Stockholders' Agreement" means the agreement among Purchaser,
MacIntosh and his Affiliates relating to the Common Stock beneficially
owned by MacIntosh and his Affiliates in the form of Exhibit F attached
hereto.
"Subsidiaries" means any and all corporations, partnerships,
limited liability companies, joint ventures, associations and other
entities controlled by the Company directly or indirectly through one
or more intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any government or
taxing authority, including taxes or other charges on or with respect
to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net
worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs' duties, tariffs, and
similar charges.
"Tax Returns" means any return, declaration, report, election,
claim for refund or information return or other statement or form
relating to, filed or
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required to be filed with any Tax authority for the Company's fiscal
years ended June 30, 2000 and thereafter, including any schedule or
attachment thereto or any amendment thereof.
"Trade Secrets" means trade secrets, know-how and other
confidential or proprietary technical, business and other information,
including manufacturing and production processes and techniques,
research and development information, technology, drawings,
specifications, designs, plans, proposals, technical data, financial,
marketing and business data, pricing and cost information, business and
marketing plans, customer and supplier lists and information, and all
rights in any jurisdiction to limit the use or disclosure thereof.
"Trademarks" means trademarks, service marks, trade dress,
logos, trade names, corporate names, URL addresses, domain names and
symbols, slogans and other indicia of source or origin, including the
goodwill of its business symbolized thereby or associated therewith,
common law rights thereto, registrations and applications for
registration thereof throughout the world, all rights therein provided
by international treaties and conventions, and all other rights
associated therewith.
"Transaction Documents" means this Agreement, the Senior
Secured Note, the Certificate of Designation, the Warrants, the
Stockholders' Agreement, the Security Agreement and the Registration
Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Warrants" means, collectively, the Preferred Warrant and the
Protective Warrant delivered to Purchaser at the Closing in accordance
with Section 2.2 hereof.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 Interpretation and Rules of Construction. In this Agreement, except
to the extent otherwise provided or that the context otherwise requires:
(i) when a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an
Article or Section of, or a Schedule or Exhibit to, this
Agreement unless otherwise indicated;
(ii) references to the "knowledge" of the Company
shall refer to the actual knowledge of any of the Company's
officers or members of its Board or the knowledge that any
such person would reasonably be expected to have assuming
reasonable inquiry;
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(iii) references to "due inquiry" shall refer to an
inquiry that any of the Company's officers or members of its
Board would reasonably be expected to undertake based upon the
information available to them;
(iv) the headings for this Agreement are for
reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement;
(v) whenever the words "include," "includes" or
"including" are used in this Agreement, they are deemed to be
followed by the words "without limitation";
(vi) the words "hereof," "herein" and "hereunder" and
words of similar import, when used in this Agreement, refer to
this Agreement as a whole and not to any particular provision
of this Agreement;
(vii) all terms defined in this Agreement have the
defined meanings when used in any certificate or other
document made or delivered pursuant hereto, unless otherwise
defined therein;
(viii) the definitions contained in this Agreement
are applicable to the singular as well as the plural forms of
such terms;
(ix) any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such
Law or statute as from time to time amended, modified or
supplemented, including by succession of comparable successor
Laws;
(x) references to a Person are, in the case of
individuals, also to his or her personal representatives,
heirs and permitted assigns and, in the case of entities, also
to its successors and permitted assigns; and
(xi) the use of "or" is not intended to be exclusive
unless expressly indicated otherwise.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) The consummation of the sale of the Senior Secured Note,
Shares, Preferred Shares and Warrants (the "Closing") shall take place
on or before February 11, 2005 (the "Closing Date") by telecopy
exchange of signature pages with originals to follow by overnight
delivery, or in such other manner or at such place as the parties
hereto may agree.
(b) At the Closing, Purchaser shall deliver to the Company an
aggregate of Six Million Five Hundred Thousand Dollars ($6,500,000),
such amount
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representing the aggregate purchase price for the Senior Secured Note,
the Shares and the Preferred Shares, by certified check or wire
transfer (the "Purchase Price").
2.2 Closing Conditions; Deliveries.
(a) On the Closing Date, the Company shall deliver or cause to
be delivered to Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a copy of the irrevocable instructions to the
Company's transfer agent instructing the transfer agent to
deliver, on an expedited basis, a certificate evidencing each
of the Shares and Preferred Shares, each registered in the
name of Purchaser;
(iii) a copy of the Preferred Warrant registered in
the name of Purchaser;
(iv) a copy of the Protective Warrant registered in
the name of Purchaser;
(v) the Registration Rights Agreement duly executed
by the Company;
(vi) the Stockholders' Agreement duly executed by
MacIntosh and his Affiliates;
(vii) the certificates referred to in Section
2.2(c)(i) and 2.2(e)(i);
(viii) the Security Agreement duly executed by the
Company and each of its Subsidiaries; and
(ix) a legal opinion of Company Counsel, in the form
reasonably acceptable to GT.
(b) On the Closing Date, Purchaser shall deliver or cause to
be delivered to the Company the following:
(i) this Agreement duly executed by Purchaser;
(ii) the Purchase Price by wire transfer of
immediately available funds to the account as specified in
writing by the Company;
(iii) the certificates referred to in Section
2.2(c)(ii) and 2.2(e)(ii);
(iv) the Stockholders' Agreement duly executed by
Purchaser,
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(v) the Security Agreement duly executed by
Purchaser; and
(vi) the Registration Rights Agreement duly executed
by Purchaser.
(c) Accuracy of Representations and Warranties.
(i) Each representation and warranty contained in
Section 3.1 shall be true on and as of Closing with the same
effect as though such representation and warranty had been
made on and as of that date and the Company has delivered to
Purchaser a certificate, executed by the Chief Executive
Officer and the Chief Financial Officer of the Company, dated
the Closing Date, certifying to the fulfillment of the
conditions specified in this Section 2.2(c)(i).
(ii) Each representation and warranty contained in
Section 3.2 shall be true on and as of Closing with the same
effect as though such representation and warranty had been
made on and as of that date and Purchaser has delivered to the
Company a certificate, executed by the Chief Executive Officer
or Chief Financial Officer of Purchaser, dated the Closing
Date, certifying to the fulfillment of the conditions
specified in this Section 2.2(c)(ii).
(d) Material Adverse Effect. As of the Closing, there shall
not have occurred any changes that have had or could reasonably have a
Material Adverse Effect on the operations or financial condition of the
Company.
(e) Performance.
(i) The Company shall have performed and complied
with all agreements and conditions contained in this Agreement
required to be performed or complied with by the Company prior
to or at the Closing and the Company has delivered to
Purchaser a certificate, executed by the Chief Executive
Officer and the Chief Financial Officer of the Company, dated
the Closing Date, certifying to the fulfillment of the
conditions specified in this Section 2.2(e)(i).
(ii) Purchaser shall have performed and complied with
all agreements and conditions contained in this Agreement
required to be performed or complied with by Purchaser prior
to or at the Closing and Purchaser has delivered to the
Company a certificate, executed by the Chief Executive Officer
or Chief Financial Officer of Purchaser, dated the Closing
Date, certifying to the fulfillment of the conditions
specified in this Section 2.2(e)(ii).
(f) Due Diligence. As of the Closing, Purchaser shall, in its
sole discretion, have completed its legal and financial due diligence
and the results of such due diligence shall, in its sole discretion, be
acceptable to Purchaser and its
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legal counsel. The Disclosure Schedule delivered to Purchaser by the
Company in connection with this Agreement shall not contain any
exceptions that are deemed unacceptable by Purchaser in its sole
discretion.
(g) Capitalization on the Closing Date. As of the Closing
Date, there shall be outstanding (excluding shares of Common Stock
issued or to be issued to MacIntosh and members of his family upon
conversion of the Series B Preferred Stock and conversion of securities
representing current Indebtedness issued thereto) (i) not more than 24
million shares of Common Stock and not more than 600,000 shares of
Series B Preferred Stock; (ii) options to purchase up to 4.1 million
shares of Common Stock granted to employees under the Company's stock
option plans; (iii) options to purchase up to 1.4 million shares of
Common Stock granted to employees outside of the Company's stock option
plans with average exercise prices between $0.91 and $1.58 per share;
(iv) warrants to purchase up to 1,400,000 shares of Common Stock at an
exercise price of $0.20; (v) warrants to purchase up to 2,805,275
shares of Common Stock at an average exercise price of $1.71. MacIntosh
and members of his family shall, as of the Closing, convert all of
their shares of Series B Preferred Stock into shares of Common Stock
and all of their securities representing current Indebtedness into
shares of Common Stock upon terms consistent with the purchase of the
Shares by Purchaser and in accordance with the terms set forth in such
instruments.
(h) Indebtedness. As of the Closing, (i) the Company or its
Subsidiaries, as the case may be, shall cause any Indebtedness between
CorVu North America, Inc. and Commerce Bank to be paid off, and (ii)
there shall be no other Indebtedness, other than as set forth in the
SEC Reports and accounts payable, trade payables and capital lease
obligations incurred in the ordinary course of business.
(i) Certificate of Designation. The Certificate of Designation
shall have been accepted for filing with the Secretary of State of the
State of Minnesota.
(j) MacIntosh Employment Agreement. The employment agreement
between the Company and MacIntosh shall have been amended to provide
for an annual salary of $250,000 for all services provided by MacIntosh
to the Company and the Subsidiaries. Such amended agreement shall
further provide that any amounts in excess of $250,000 shall be
deferred until such time as the Company achieves, on a consolidated
basis, two (2) consecutive quarters of revenues in excess of $4,000,000
and positive EBITDA.
(k) Board of Directors. The Board of the Company shall have
been increased by two (2) members and the Designees (as defined below)
shall have been duly elected and qualified.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to Purchaser:
(a) Authority, Organization and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation
and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry
on its business as it has been and is currently conducted. The Company
is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification
necessary or desirable, except to the extent that the failure to be so
licensed or qualified and in good standing would not (x) adversely
affect the ability of the Company to carry out its obligations under,
and to consummate the transactions contemplated by, this Agreement and
the other Transaction Documents or (y) adversely affect the ability of
the Company and the Subsidiaries to conduct its business, and all such
jurisdictions are set forth in Section 3.1(a) of the Disclosure
Schedule. All corporate actions taken by the Company have been duly
authorized, and the Company has not taken any action that in any
respect conflicts with, constitutes a default under or results in a
violation of any provision of its Certificate of Incorporation or
By-laws. True and correct copies of the Certificate of Incorporation
and By-laws of the Company, each as in effect on the date hereof, have
been delivered by the Company to Purchaser.
(b) Subsidiaries.
(i) Section 3.1(b)(i) of the Disclosure Schedule sets
forth a true and complete list of all Subsidiaries, listing
for each Subsidiary its name, type of entity, the jurisdiction
and date of its incorporation or organization, its authorized
capital stock, partnership capital or equivalent, the number
and type of its issued and outstanding shares of capital
stock, partnership interests or similar ownership interests
and the current ownership of such shares, partnership
interests or similar ownership interests.
(ii) Other than the Subsidiaries, there are no other
corporations, partnerships, joint ventures, associations or
other entities in which the Company or any Subsidiary owns, of
record or beneficially, any direct or indirect equity or other
interest or any right (contingent or otherwise) to acquire the
same. Other than the Subsidiaries and except as set forth in
Section 3.1(b)(ii) of the Disclosure Schedule, neither the
Company nor any Subsidiary is a member of (nor is any part of
its business conducted
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through) any partnership nor is the Company or any Subsidiary
a participant in any joint venture or similar arrangement.
(iii) Each Subsidiary that is a corporation: (A) is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(B) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by
such Subsidiary and to carry on its business as it has been
and is currently conducted by such Subsidiary and (C) is duly
licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or
qualification necessary or desirable, except to the extent
that the failure to be so licensed or qualified and in good
standing would not (x) adversely affect the ability of the
Company to carry out its obligations under, and to consummate
the transactions contemplated by, this Agreement and the other
Transaction Documents or (y) adversely affect the ability of
the Company and the Subsidiaries to conduct its business. Each
Subsidiary that is not a corporation: (A) is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, (B) has all necessary power and
authority to own, operate or lease the properties and assets
owned, operated or leased by such Subsidiary and to carry on
its business as it has been and is currently conducted by such
Subsidiary and (C) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its
business makes such licensing or qualification necessary or
desirable, except to the extent that the failure to be so
licensed or qualified and in good standing would not (x)
adversely affect the ability of the Company to carry out its
obligations under, and to consummate the transactions
contemplated by, this Agreement and the other Transaction
Documents or (y) adversely affect the ability of the Company
and the Subsidiaries to conduct its business.
(iv) All corporate actions taken by each Subsidiary
have been duly authorized and no Subsidiary has taken any
action that in any respect conflicts with, constitutes a
default under or results in a violation of any provision of
its Certificate of Incorporation or By-laws (or similar
organizational documents). True and complete copies of the
certificate of incorporation and by-laws (or similar
organizational documents), in each case as in effect on the
date hereof, of each Subsidiary have been delivered by the
Company to Purchaser.
(c) Capitalization.
(i) Immediately prior to the Closing, the authorized
capital stock of the Company consists of 75,000,000 shares of
Common Stock. 1,000,000 shares of Series A Preferred Stock,
600,000 shares of Series B
15
Preferred Stock, 17,000 shares of Series C Preferred Stock and
23,383,000 shares of undesignated stock. As of the date hereof
and immediately prior to the Closing, (i) 23,970,268 shares of
Common Stock are issued and outstanding, all of which are
validly issued, fully paid and nonassessable, (ii) 600,000
shares of Series B Preferred Stock are issued and outstanding,
all of which are validly issued, fully paid and nonassessable,
(iii) 3,928,876 shares of Common Stock are reserved for
issuance upon exercise of employee stock options granted
pursuant to various stock option plans, (iv) 1,302,751 shares
of Common Stock are reserved for issuance upon exercise of
employee stock options granted outside of the Company's stock
option plan, (v) 1,400,001 shares of Common Stock are reserved
for issuance upon exercise of outstanding warrants at an
exercise price of $0.20 per share, and (vi) 2,319,703 shares
of Common Stock are reserved for issuance upon exercise of
outstanding warrants at an average exercise price of $1.12 per
share. None of the issued and outstanding shares of Common
Stock or Series B Preferred Stock was issued in violation of
any preemptive rights. Except as set forth in Section
3.1(c)(i) of the Disclosure Schedule, there are no options,
warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the
Shares or Preferred Shares or obligating either the Company or
the Company to issue or sell any Shares or Preferred Shares,
or any other interest in, the Company. There are no
outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Common
Stock or Preferred Stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or
otherwise) in, any other Person. As of the date hereof and
immediately prior to the Closing, the Common Stock and Series
B Preferred Stock constitute all of the issued and outstanding
capital stock of the Company. Upon consummation of the
transactions contemplated by this Agreement and registration
of the Shares and Preferred Shares in the name of Purchaser in
the stock records of the Company, Purchaser, assuming it shall
have purchased the Shares and Preferred Shares for value in
good faith and without notice of any adverse claim, will own
all the Shares and Preferred Shares free and clear of all
Encumbrances. Upon consummation of the transactions
contemplated by this Agreement, the Shares and the Preferred
Shares will be fully paid and nonassessable. There are no
voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the
voting or transfer of any of the Common Stock or Preferred
Stock.
(ii) To the best knowledge of the Company, after due
inquiry, the shareholder register attached to this Agreement
as Schedule A accurately records, in all material respects:
(A) the name and address of each Person owning shares of
Common Stock or Preferred Stock and (B) the certificate number
of each certificate evidencing shares of capital stock issued
by the Company, the number of shares evidenced by each
16
such certificate, the date of issuance thereof and, in the
case of cancellation, the date of cancellation.
(iii) All the outstanding shares of capital stock of
each Subsidiary that is a corporation are validly issued,
fully paid, nonassessable and, except with respect to wholly
owned Subsidiaries, free of preemptive rights and are owned by
the Company, whether directly or indirectly, free and clear of
all Encumbrances. There are no options, warrants, convertible
securities or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of
any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or any other
interest in, any Subsidiary. There are no voting trusts,
stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other
interests in any Subsidiary.
(iv) The stock register of each Subsidiary accurately
records: (A) the name and address of each Person owning shares
of capital stock of such Subsidiary and (B) the certificate
number of each certificate evidencing shares of capital stock
issued by such Subsidiary, the number of shares evidenced by
each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation.
(v) The Conversion Shares and the Warrant Shares are
duly authorized and reserved for issuance and, upon conversion
of the Preferred Shares and exercise of the warrants in
accordance with the terms thereof, will be validly issued,
fully paid and nonassessable, and free from all Encumbrances
and will not be subject to preemptive rights or similar rights
of stockholders of the Company and will not impose personal
liability upon the holder thereof.
(vi) The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of or
otherwise pursuant to the Preferred Shares and upon the
issuance of the Warrant Shares upon the exercise of or
otherwise pursuant to the Warrants. The Company further
acknowledges that its obligation to issue Conversion Shares
upon conversion of or otherwise pursuant to the Preferred
Shares and Warrant Shares upon the exercise of or otherwise
pursuant to the Warrants in accordance with this Agreement,
the Certificate of Designation and the Warrants is absolute,
subject only to the terms and conditions set forth in this
Agreement, the Certificate of Designation and the Warrants,
regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the
Company.
17
(vii) The terms, designations, powers, preferences
and relative, participating and optional or special rights,
and the qualifications, limitations and restrictions of each
series of Preferred Stock of the Company (other than the
Series C Preferred Stock) are as stated in the Company's
articles of incorporation (including the statement of
designation of the Series B Preferred Stock), filed on or
prior to the date hereof. The terms, designations, powers,
preferences and relative, participating and optional or
special rights, and the qualifications, limitations and
restrictions of the Series C Preferred Stock are as stated in
the Certificate of Designation.
(d) Corporate Books and Records. The minute books of the
Company and the Subsidiaries contain accurate records of all meetings
and accurately reflect all other actions taken by the stockholders,
Boards of Directors and all committees of the Boards of Directors of
the Company and the Subsidiaries. To the extent requested, true and
accurate copies of all such minute books and of the stock register of
the Company and each Subsidiary have been provided by the Company to
Purchaser.
(e) No Conflicts. Assuming that all consents, approvals,
authorizations and other actions set forth in Section 3.1(f) of the
Disclosure Schedule have been obtained and all filings and
notifications listed in Section 3.1(e) of the Disclosure Schedule have
been made and any applicable waiting period has expired or been
terminated, the execution, delivery and performance of this Agreement
and the other Transaction Documents by the Company do not and will not
(i) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or by-laws (or similar organizational
documents) of the Company or any Subsidiary, (ii) conflict with or
violate (or cause an event which could have a Material Adverse Effect
as a result of) any Law or Governmental Order applicable to the
Company, any Subsidiary or any of their respective assets, properties
or businesses, or (iii) except as set forth in Section 3.1(e)(iii) of
the Disclosure Schedule, conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the Securities or any of the
assets or properties of the Company or any Subsidiary pursuant to any
note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement
to which the Company or any Subsidiary is a party or by which any of
the Securities or any of the assets or properties of the Company or any
Subsidiary is bound or affected, except, in the case of clause (c), to
the extent that such conflicts, breaches, defaults or other matters
would not (i) adversely affect the ability of the Company to carry out
its obligations under, and to consummate the transactions contemplated
by, this Agreement and the other Transaction Documents or (ii)
adversely affect the ability of the Company and the Subsidiaries to
conduct its business.
18
(f) Governmental Consents and Approvals. Except as set forth
in Section 3.1(f) of the Disclosure Schedule, the execution, delivery
and performance of this Agreement and each Transaction Document by the
Company do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification
to, any Governmental Authority. The Company knows of no reason why all
the consents, approvals and authorizations necessary for the
consummation of the transactions contemplated by this Agreement will
not be received.
(g) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred
to herein as the "SEC Reports") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, and
none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as
in effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required
by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for
the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.
(h) Material Changes. Since the date of the latest financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer,
director or
19
Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for
confidential treatment of information.
(i) Litigation. Except as set forth in Section 3.1(i) of the
Disclosure Schedule (which, with respect to each Action set forth
therein, sets forth the parties, nature of the proceeding, date and
method commenced, amount of charges or other relief sought and, if
applicable, paid or granted), there are no Actions by or against the
Company or any Subsidiary (or by or against the Company or any
Affiliate thereof and relating to its business, the Company or any
Subsidiary) or affecting any of the Assets or its business pending
before any Governmental Authority (or, to the best knowledge of the
Company after due inquiry, threatened to be brought by or before any
Governmental Authority). None of the matters set forth in Section
3.1(i) of the Disclosure Schedule has or has had a Material Adverse
Effect or could affect the legality, validity or enforceability of this
Agreement, any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in
Section 3.1(i) of the Disclosure Schedule, none of the Company, the
Subsidiaries or any of their respective assets or properties, including
the Assets, is subject to any Governmental Order (nor, to the best
knowledge of the Company after due inquiry, are there any such
Governmental Orders threatened to be imposed by any Governmental
Authority) which has or has had a Material Adverse Effect or could
affect the legality, validity or enforceability of this Agreement, any
other Transaction Document or the consummation of the transactions
contemplated hereby or thereby.
(j) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(k) Compliance. (i) Except as set forth in Section 3.1(k)(i)
of the Disclosure Schedule and to the best knowledge of the Company,
after due inquiry, the Company and the Subsidiaries have each conducted
and continue to conduct its business in accordance with all Laws and
Governmental Orders applicable to the Company or any Subsidiary or the
Assets, and neither the Company nor any Subsidiary is in violation of
any such Law or Governmental Order.
(ii) Section 3.1(k)(ii) of the Disclosure Schedule
sets forth a brief description of each Governmental Order
applicable to the Company, any Subsidiary or the Assets, and
no such Governmental Order has or has had a Material Adverse
Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or
the consummation of the transactions contemplated hereby or
thereby.
(iii) To the best knowledge of the Company, after due
inquiry, none of the Company, any Subsidiary or any officer,
director, employee,
20
agent or representative of the Company or any Subsidiary has
furthered or supported any foreign boycott in violation of the
Anti-Boycott laws and regulations of the United States
promulgated pursuant to the Export Administration Act of 1979
(50 U.S.C.A. App. ss. 2407, and regulations promulgated
thereunder).
(l) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has
received any notice of Actions relating to the revocation or
modification of any Material Permit.
(m) Material Contracts. Except as set forth in Section 3.1(m)
of the Disclosure Schedule, neither the Company nor any Subsidiary is a
party to or bound by any "material contracts" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the Commission) with respect to
the Company or any Subsidiary. All contracts described in this Section
3.1(m) are valid and in full force and effect except to the extent they
have previously expired in accordance with their terms or if the
failure to be in full force and effect, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Subsidiary has violated any
provision of, or committed or failed to perform any act which with or
without notice, lapse of time or both would constitute a default under
the provisions of, any contract described above, except in each case
for those violations and defaults which, individually or in the
aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
(n) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to its business of the Company and the
Subsidiaries, in each case free and clear of all Encumbrances, except
for Encumbrances as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries and
Encumbrances for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. Except as would not, individually
or in the aggregate, have a Material Adverse Effect:
21
(i) Section 3.1(o)(i) of the Disclosure Schedule sets
forth a true and complete list of (A) all patents and patent
applications, registered trademarks and trademark registration
applications, registered copyrights and copyright registration
applications, and domain names included in the Company
Intellectual Property, and (B) all material Company IP
Agreements excluding licenses for the use of Company Software
to customers of the Company or its Subsidiaries in the
ordinary course of business.
(ii) To the best knowledge of the Company, after due
inquiry, the operation of its business as currently conducted
or as contemplated to be conducted, the use of the Company
Intellectual Property and Licensed Intellectual Property in
connection therewith and the Company's and the Subsidiaries'
transmission, use, linking and other practices related to the
operation of their web sites in connection with its business,
the content thereof and the advertisements contained therein,
do not infringe, misappropriate or otherwise violate the
Intellectual Property or other proprietary rights, including
rights of privacy, publicity and endorsement, of any third
party, and no Actions or Claims are pending or threatened
against the Company or any Subsidiary alleging any of the
foregoing.
(iii) To the best knowledge of the Company, after due
inquiry, the Company or a Subsidiary is the exclusive owner of
the entire and unencumbered right, title and interest in and
to the Company Intellectual Property, and the Company or a
Subsidiary has a valid right to use the Company Intellectual
Property and Licensed Intellectual Property as currently
conducted or as contemplated to be conducted.
(iv) Except as disclosed in Section 3.1(o)(iv) of the
Disclosure Schedule, no Company Intellectual Property, or to
the best knowledge of Seller after due inquiry, any Licensed
Intellectual Property, is subject to any outstanding decree,
order, injunction, judgment or ruling restricting the use of
such Intellectual Property or that would impair the validity
or enforceability of such Intellectual Property.
(v) The Company Intellectual Property and the
Licensed Intellectual Property include all of the Intellectual
Property used in the ordinary day-to-day conduct of its
business, and there are no other items of Intellectual
Property that are material to the ordinary day-to-day conduct
of its business. The Company Intellectual Property, or to the
best knowledge of Seller after due inquiry, any Licensed
Intellectual Property, are subsisting, valid and enforceable,
and has not been adjudged invalid or unenforceable in whole or
part.
(vi) No Actions or Claims have been asserted or are
pending or, to the best knowledge of the Company after due
inquiry, threatened against the Company or any Subsidiary (i)
based upon or challenging or
22
seeking to deny or restrict the use by the Company or any
Subsidiary of any of the Company Intellectual Property or
Licensed Intellectual Property, (ii) alleging that any
services provided by, processes used by, or products
manufactured or sold by the Company or any Subsidiary infringe
or misappropriate any Intellectual Property right of any third
party or (iii) alleging that the Licensed Intellectual
Property is being licensed or sublicensed in conflict with the
terms of any license or other agreement.
(vii) To the best knowledge of the Company, no Person
is engaging in any activity that infringes the Company
Intellectual Property or Licensed Intellectual Property.
Except as set forth in Section 3.1(o)(vii) of the Disclosure
Schedule, neither the Company nor any Subsidiary has granted
any license or other right to any third party with respect to
the Company Intellectual Property or Licensed Intellectual
Property except to the customers of its business to whom the
Company or a Subsidiary has licensed such Company Intellectual
Property or Licensed Intellectual Property in the ordinary
course of business. The consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents will not result in the termination or impairment of
any of the Company Intellectual Property.
(viii) To the best knowledge of the Company, after
due inquiry, the Company Software is free of all viruses,
worms, trojan horses and other material known contaminants.
The Company Software does not incorporate any GNU or "open"
source code or object code under which the Company Software is
subject to the GNU general public license or GNU lesser
general public license. To the best knowledge of the Company,
after due inquiry, the Company or a Subsidiary has obtained
all approvals necessary for exporting the Company Software
outside the United States and importing the Company Software
into any country in which the Company Software is now sold or
licensed for use, and all such export and import approvals in
the United States and throughout the world are valid, current,
outstanding and in full force and effect. No rights in the
Company Software have been transferred to any third party
except to the customers of its business to whom the Company or
a Subsidiary has licensed such Company Software in the
ordinary course of business. The Company or a Subsidiary has
the right to use all software development tools, library
functions, compilers, and other third party software that are
material to its business or that are required to operate or
modify the Company Software.
(ix) The Company and the Subsidiaries have taken
reasonable steps in accordance with normal industry practice
to maintain the confidentiality of the trade secrets and other
confidential Intellectual Property used in connection with its
business. To the best knowledge of the Company after due
inquiry, (i) there has been no misappropriation of any
material trade secrets or other material confidential
Intellectual
23
Property used in connection with its business by any Person;
(ii) no employee, independent contractor or agent of the
Company or any Subsidiary has misappropriated any trade
secrets of any other Person in the course of performance as an
employee, independent contractor or agent of its business; and
(iii) no employee, independent contractor or agent of the
Company or any Subsidiary is in default or breach of any term
of any employment agreement, nondisclosure agreement,
assignment of invention agreement or similar agreement or
contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
(x) To the best knowledge of the Company, after due
inquiry, the Company's or any Subsidiary's operation of any
web sites used in connection with its business, and content
thereof and data processed, collected, stored or disseminated
in connection therewith, do not violate any applicable Law,
including European Directive 95/46/EC, and any Person's right
of privacy or publicity. The Company or its Subsidiary (i) has
obtained all necessary permits, approvals, consents,
authorizations or licenses to lawfully operate its web sites
and to use its data and (ii) is operating its web sites and
using its data in accordance with the scope of such permits,
approvals, consents, authorizations or licenses. The Company
and its Subsidiaries have taken reasonable steps in accordance
with normal industry practice to secure their web sites and
data, and any portion thereof, from unauthorized access by any
Person.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in its
businesses in which the Company and the Subsidiaries are engaged. To
the best of Company's knowledge, such insurance contracts and policies
are accurate and complete. Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
(q) Employee Benefits.
(i) Section 3.1(q)(i) of the Disclosure Schedule
lists (A) all employee benefit plans, bonus, stock option,
stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or
other contracts or agreements, to which the Company or any
Subsidiary is a party, with respect to which the Company or
any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary
for the benefit of any current or former employee, officer or
director of the Company or any Subsidiary and
24
(B) any contracts, arrangements or understandings between the
Company or any of its Affiliates and any employee of the
Company or any Subsidiary (collectively, the "Plans").
(ii) Each Plan has been operated in all material
respects in accordance with its terms and the requirements of
all applicable Laws. The Company and its Subsidiaries have
performed all material obligations required to be performed by
it under, is not in any material respect in default under or
in material violation of, and the Company has no knowledge of
any material default or violation by any party to, any Plan.
No action is pending or, to the knowledge of the Company,
threatened with respect to any Plan (other than claims for
benefits in the ordinary course) and, to the knowledge of the
Company, no fact or event exists that could give rise to any
such action.
(r) Taxes.
(i) Except as set forth in Section 3.1(r)(i) of the
Disclosure Schedule, (A) all Tax Returns required to be filed
by or with respect to the Company and each Subsidiary
(including the consolidated federal income Tax Return of the
Company and any state, local or other Tax Return that includes
the Company or any Subsidiary on a consolidated, combined or
unitary basis) have been timely filed; (B) all Taxes required
to be shown on such Tax Returns or otherwise due in respect of
the Company or any Subsidiary have been timely paid; (C) all
such Tax Returns are true, correct and complete in all
material respects; (D) no adjustment relating to such Tax
Returns has been proposed formally or informally by any
Governmental Authority (insofar as either relates to the
activities or income of the Company or any Subsidiary or could
result in liability of the Company or any Subsidiary on the
basis of joint and/or several liability) and, to the best
knowledge of the Company after due inquiry, no basis exists
for any such adjustment; (E) there are no pending or, to the
best knowledge of the Company after due inquiry, threatened
Actions for the assessment or collection of Taxes against the
Company or any Subsidiary or (insofar as either relates to the
activities or income of the Company or any Subsidiary or could
result in liability of the Company or any Subsidiary on the
basis of joint and/or several liability) any Person that was
included in the filing of a Tax Return with the Company on a
consolidated, combined or unitary basis; (F) to the best
knowledge of the Company, after due inquiry, all sales and
license transactions between the Company and the Company or
any Subsidiary, between the Company and any Subsidiary and
between any of the Subsidiaries, have been conducted on an
arm's-length basis; (G) there are no Tax liens on any assets
of the Company or any Subsidiary; (H) neither Seller nor any
Affiliate is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or
deemed payment by the Company or a Subsidiary of any "excess
parachute payments" within the meaning of
25
section 280G of the Code (without regard to Section 280G(b)(4)
of the Code); (I) no acceleration of the vesting schedule for
any property that is substantially unvested within the meaning
of the regulations under Section 83 will occur in connection
with the transactions contemplated by this Agreement; (J) from
and after June 30, 2000, the Company and each Subsidiary have
been and continue to be members of the affiliated group
(within the meaning of Section 1504(a)(1) of the Code) for
which the Company files a consolidated return as the common
parent, and has not been includible in any other consolidated
return for any taxable period for which the statute of
limitations has not expired; (K) none of the Company or the
Subsidiaries has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (L) the Company and Subsidiary
have each properly and timely withheld, collected and
deposited all Taxes that are required to be withheld,
collected and deposited under applicable Law; (M) none of the
Company or Subsidiaries is doing business in or engaged in a
trade or business in any jurisdiction in which it has not
filed all required Tax Returns, and no notice or inquiry has
been received from any jurisdiction in which Tax Returns have
not been filed by the Company or any Subsidiary to the effect
that the filing of Tax Returns may be required; (N) neither
the Company nor any Subsidiary has been at any time a member
of any partnership or joint venture or the holder of a
beneficial interest in any trust for any period for which the
statute of limitations for any Tax has not expired and (O)
neither the Company nor any Subsidiary is subject to any
accumulated earnings tax, personal holding company Tax or
similar Tax.
(ii) Except as set forth with reasonable specificity
in Section 3.1(r)(ii) of the Disclosure Schedule, (A) there
are no outstanding waivers or agreements extending the statute
of limitations for any period with respect to any Tax to which
the Company or any Subsidiary may be subject; (B) there are no
requests for information currently outstanding that could
affect the Taxes of the Company or any Subsidiary; (C) there
are no proposed reassessments of any property owned by the
Company or any Subsidiary or other proposals that could
increase the amount of any Tax to which the Company or any
Subsidiary would be subject; (D) no power of attorney that is
currently in force has been granted with respect to any matter
relating to Taxes that could affect the Company or any
Subsidiary; (E) none of the Company or the Subsidiaries (1)
has or is projected to have an amount includible in its income
for the current taxable year under Section 951 of the Code,
(2) has been a passive foreign investment company within the
meaning of Section 1296 of the Code, (3) has an unrecaptured
overall foreign loss within the meaning of Section 904(f) of
the Code or (4) has participated in or cooperated with an
international boycott within the meaning of section 999 of the
Code and (F) none of the Company or the Subsidiaries has, to
an extent that would cause a tax liability to the Company, any
(1) income reportable for a
26
period ending after the Closing but attributable to a
transaction (e.g., an installment sale) occurring in, or a
change in accounting method made for, a period ending on or
prior to the Closing that resulted in a deferred reporting of
income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction), or
(2) deferred gain or loss arising out of any deferred
intercompany transaction.
(iii) Section 3(r)(iii) of the Disclosure Schedule
(A) lists all income, franchise and similar income-type Tax
Returns (federal, state, local and foreign) filed with respect
to each of the Company and the Subsidiaries for taxable
periods ended on or after June 30, 2000, (B) indicates the
most recent income, franchise or similar Tax Return for each
relevant jurisdiction for which an audit has been completed or
the statute of limitations has lapsed and (C) indicates all
Tax Returns that currently are the subject of audit.
(iv) To the extent reasonably requested by Purchaser,
the Company has delivered to Purchaser correct and complete
copies of all federal, state and foreign income, franchise and
similar Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or
any Subsidiary since June 30, 2000.
(v) To the extent reasonably requested by Purchaser,
the Company has delivered to Purchaser a true and complete
copy of any tax-sharing or allocation agreement or arrangement
involving the Company or any Subsidiary and a true and
complete description of any such unwritten or informal
agreement or arrangement.
(vi) Except as et forth in Section 3.1(r)(vi) of the
Disclosure Schedule, the Company has established reserves and
allowances to satisfy all liabilities for Taxes relating to
the Company and the Subsidiaries for all taxable periods
through the Closing (without regard to the materiality
thereof).
(s) Title to Tangible Personal Property. Section 3.1(s) of the
Disclosure Schedule sets forth a list of all material Tangible Personal
Property as of the date therein specified. Except as set forth in
Section 3.1(s), as of the date hereof, The Company and any Subsidiary
has good and valid title to, or a valid leasehold interest in, all
Tangible Personal Property, which includes such property listed on
Section 3.1(s), other than property that is obsolete or has been
retired or disposed of in the ordinary course of business, free and
clear of any Encumbrances, other than Permitted Encumbrances.
(t) Title to Owned and Leased Real Property.
27
(i) Neither the Company nor any Subsidiary currently,
and in the past, has owned any real property.
(ii) As of the date hereof, except as set forth in
Section 3.1(t)(ii) of the Disclosure Schedule, the Company and
each Subsidiary has a valid leasehold interest in the Leased
Real Property.
(iii) The Leased Real Property has not suffered any
material damage by fire, casualty or otherwise which has not
heretofore been repaired and restored in all material
respects.
(iv) Except as set forth in Section 3.1(t)(iv) of the
Disclosure Schedule, there (i) is no default (or event that,
with or without the giving of notice or the lapse of time or
both, could constitute a default) that exists under the leases
for the Leased Real Property, (ii) are no adverse or other
parties in possession of the Real Property, or of any part
thereof and no third party has been granted any license,
lease, or other right relating to the use or possession of the
Real Property, or any part thereof, except tenants under
written leases; and (iii) are no material unpaid impact fees,
special assessments and permit fees with respect to the Real
Property, if applicable.
(v) Neither the Company nor any Subsidiary has
granted any rights, options, rights of first refusal, or any
other agreements of any kind, which are currently in effect,
to purchase or to otherwise acquire the Real Property or any
part thereof or any interest therein.
(u) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 in any
twelve (12) month period other than (i) for payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee
benefits, including stock option agreements under any stock option plan
of the Company.
(v) Xxxxxxxx-Xxxxx Act. The Company is in substantial
compliance with the applicable provisions of the Xxxxxxxx-Xxxxx Act of
2002 (the "Xxxxxxxx-Xxxxx Act"), and the rules and regulations
promulgated thereunder, that are effective and intends to comply
substantially with other applicable provisions of
28
the Xxxxxxxx-Xxxxx Act, and the rules and regulations promulgated
thereunder, upon the effectiveness of such provisions.
(w) Certain Fees. No brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this
Agreement, except as set forth in Section 3.1(x) of the Disclosure
Schedule. Purchaser shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(x) Private Placement. Assuming the accuracy of Purchaser's
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to Purchaser as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of any trading market.
(y) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Shares,
will not be or be an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company
shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(z) Registration Rights. Except as set forth in Section 3.1(z)
of the Disclosure Schedule, no Person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company.
(aa) Application of Takeover Protections. The Company and its
Board have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or
other similar anti-takeover provision under the Company's Certificate
of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to Purchaser
as a result of Purchaser and the Company fulfilling their obligations
or exercising their rights under the Transaction Documents, including
without limitation the Company's issuance of the Securities and
Purchaser's ownership of the Securities.
(bb) Disclosure. The Company understands and confirms that
Purchaser will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure
provided to Purchaser regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with
respect to such representations and warranties and do 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 light of the
circumstances under
29
which they were made, not misleading. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 3.2 hereof.
(cc) No Integrated Offering. Assuming the accuracy of
Purchaser's representations and warranties set forth in Section 3.2,
neither the Company, nor any of its affiliates, nor any Person acting
on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any
exchange or automated quotation system on which any of the securities
of the Company are listed or designated.
(dd) General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to Purchaser.
(ee) Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law, or
(iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ff) Accountants. The Company's accountants are set forth in
Section 3.1(ff) of the Disclosure Schedule. To the Company's knowledge,
such accountants, who the Company expects will express their opinion
with respect to the financial statements to be included in the
Company's Annual Report on Form 10-K for the year ended June 30, 2004,
are independent accountants as required by the Securities Act.
(gg) Acknowledgment Regarding Purchaser's Purchase of
Securities. The Company acknowledges and agrees that Purchaser is
acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby.
The Company further acknowledges that Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
30
contemplated hereby and any advice given by Purchaser or any of its
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to Purchaser's
purchase of the Securities. The Company further represents to Purchaser
that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
3.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:
(a) Organization; Authority. Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or
similar action on the part of Purchaser. Each Transaction Document to
which it is a party has been duly executed by Purchaser, and, assuming
this Agreement constitutes the valid and binding obligation of the
Company and when delivered by Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of
Purchaser, enforceable against it in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws
relating to or affecting the rights of creditors' generally and by
general equitable principles (regardless of whether such enforceability
is considered in a Action in equity or at law).
(b) Investment Intent. Purchaser understands that the
Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting Purchaser's
right to sell the Securities pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state securities
laws). Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any of the Securities.
(c) Rule 144. Purchaser understands that the Securities must
be held indefinitely unless such Securities are registered under the
Securities Act or an exemption from registration is available.
Purchaser acknowledges that it is familiar with Rule 144, and that
Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Purchaser understands that to the extent that
Rule 144 is not available, Purchaser will be unable to sell any
Securities
31
without either registration under the Securities Act or the existence
of another exemption from such registration requirement.
(d) Purchaser Status. At the time Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants, it will be either: (i) an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a "qualified institutional
buyer" as defined in Rule 144A(a) under the Securities Act. Purchaser
is not required to be registered as a broker-dealer under Section 15 of
the Exchange Act.
(e) Experience of Purchaser. Purchaser, either alone or
together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment. (k) General. Purchaser
understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirements of
federal and state securities laws and the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in
order to determine the applicability of such exemptions and the
suitability of Purchaser to acquire the Securities. Purchaser
understands that no United States federal or state agency or any
government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
(f) General Solicitation. Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
The Company acknowledges and agrees that Purchaser does not make or has
not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions. The Securities may only be disposed of
in compliance with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to
32
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
and shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.
(b) Purchaser agrees to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN SECURITIES
PURCHASE AGREEMENT, A CERTAIN STOCKHOLDERS' AGREEMENT AND A
CERTAIN REGISTRATION RIGHTS AGREEMENT, ALL OF WHICH ARE DATED
FEBRUARY 11, 2005 AND ARE AVAILABLE FOR INSPECTION AT THE
OFFICES OF THE COMPANY.
(c) Certificates evidencing the Shares, Preferred Shares,
Conversion Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering
the resale of such security is effective under the Securities Act, or
(ii) following a sale of such Shares, Preferred Shares, Conversion
Shares or Warrant Shares pursuant to an effective registration
statement (including the Registration Statement), or (iii) following
any sale of such Shares, Preferred Shares, Conversion Shares or Warrant
Shares Shares pursuant to Rule 144, or (iv) if such Shares, Preferred
Shares, Conversion Shares or Warrant Shares are eligible for sale under
Rule 144(k), or (v) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the Staff of the Commission); provided,
however, that in each of instances (iii) through (v) above, (A)
Purchaser shall have provided representations that Purchaser is
permitted to
33
dispose of such Shares, Preferred Shares, Conversion Shares and/or
Warrant Shares without limitation as to amount or manner of sale
pursuant to Rule 144 under the Securities Act and (B) such certificates
evidencing the Shares, Preferred Shares, Conversion Shares and/or
Warrant Shares shall have been surrendered along with a notice
requesting removal of any legend and requesting the issuance of new
certificates free of the legend to replace those surrendered. The
Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required
by the Company's transfer agent to effect the removal of the legend
hereunder. If all or any portion of a Preferred Share or Warrant is
exercised at a time when there is an effective registration statement
to cover the resale of the Conversion Shares or Warrant Shares, such
Conversion Shares or Warrant Shares shall be issued free of all
legends.
4.2 Integration. Except as otherwise contemplated by this Agreement,
the Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to Purchaser or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of any exchange
or quotation service on which any of the securities of the Company are listed or
quoted such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.
4.3 Description of the Senior Secured Note and Security Agreement.
The following summary of the Senior Secured Note and Security Agreement
is provided for illustrative purposes only. To the extent there are any
inconsistencies between the summary below and the Senior Secured Note and/or
Security Agreement, such agreements shall control.
(a) Maturity. The Company shall pay Purchaser the outstanding
principal amount of the Senior Secured Note, together with all accrued
and unpaid interest thereon, on the earliest to occur (the "Maturity
Date") of (i) thirty-six (36) months following the Closing Date, (ii) a
merger or combination of the Company or the sale, transfer or other
disposition of all or substantially all of the assets of the Company or
(iii) the acquisition by a single entity, person or a "group" within
the meaning of Rule 13d-1 of the Exchange Act, of more than fifty
percent (50%) of the voting power or capital stock of the Company (on a
fully-diluted basis).
(b) Interest. The Senior Secured Note shall bear interest
("Interest") at a rate per annum as follows:
Months 1-12 of the Senior Secured Note 6% per annum
Months 13-24 of the Senior Secured Note 9% per annum
Months 25-36 of the Senior Secured Note 12% per annum
34
Interest shall be payable quarterly in cash. If any Event of Default
(as defined in the Senior Secured Note) has occurred and is continuing,
the Senior Secured Note shall bear interest at a rate of the
then-applicable Interest plus four percent (4%) per annum until such
time as such Event of Default has been cured.
(c) Prepayment. The Senior Secured Note may be prepaid, in
whole or in part, at any time without penalty or premium, upon ten (10)
days' prior written notice to Purchaser. In the event the Company
issues any Exempt Issuance of securities during the term of the Senior
Secured Note, the Company shall use at least fifty percent (50%) of the
proceeds therefrom to prepay the Senior Secured Note; provided,
however, that the Preferred Shares have been redeemed, in whole, in
accordance with its terms.
(d) Security and Ranking. The Senior Secured Note and all
other obligations of the Company under this Agreement and the other
Transaction Documents shall be secured by substantially all of the
assets of the Company, as described in the Security Agreement
(collectively, the "Collateral"), dated as of even date herewith, by
and between Purchaser and the Company. As an inducement to Purchaser to
purchase the Senior Secured Note and the other Securities described
herein and execute and enter into this Agreement, and to secure prompt
payment of the Senior Secured Note and the discharge in full of the
Company's obligations under this Agreement and under the Senior Secured
Note, this Agreement and the other Transaction Documents, the Company
shall grant to Purchaser a first priority perfected lien and security
interest in the Collateral, which security interest shall rank senior
in lien priority to any other existing or future Indebtedness.
4.4 Certain Covenants of the Company.
(a) Affirmative Covenants. The Company covenants that, so long
as any portion of the Senior Secured Note or the Preferred Shares is
outstanding, it shall take the following actions:
(i) Provide to Purchaser all such information about
the Company, as the case may be, that is made available
publicly.
(ii) If an Event of Default occurs, the Company
shall, if so requested by Purchaser, promptly provide the
following information:
(A) Annual Financial Statements. Unless
filed with the Commission through XXXXX and publicly
available through the XXXXX system, copies of the
consolidated balance sheet of the Company and its
Subsidiaries, as of the end of the immediately
preceding fiscal year and the related consolidated
statements of income, stockholders' equity and cash
flows for such fiscal year, prepared in accordance
with generally accepted accounting principles and
certified by a firm of independent public accountants
of recognized national standing or such other
independent public accountants, in either case, as
unanimously selected by the Board;
35
(B) Monthly Financial Statements. Unless
filed with the Commission through XXXXX and publicly
available through the XXXXX system, copies of the
consolidated balance sheet of the Company and its
Subsidiaries, and the related consolidated statements
of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally
accepted accounting principles, such consolidated
balance sheet, consolidated statements of income,
stockholders' equity and cash flows to be as of the
end of each month following the end of the
immediately preceding fiscal year, in each case with
comparative statements for the prior fiscal year;
provided, however, that, to the extent the
information in this Section 4.4(a)(ii)(B) is
requested by Purchaser, Purchaser shall hold and
treat all such information confidential;
(C) Accountant's Letters. Copies of each
accountant's management letter and other written
report submitted to the Company by its independent
public accountants in connection with an annual or
interim audit of the books of the Company or any of
its Subsidiaries;
(D) Notices. Copies of notices of all
Actions that could materially and adversely affect
the Company or any of its Subsidiaries; and
(E) Other Information. Any other information
regarding the business, prospects, financial
condition, operations, property or affairs of the
Company as Purchaser may reasonably request;
(iii) The Company shall maintain and cause each of
its Subsidiaries to maintain their respective corporate
existence unless the Board unanimously approves otherwise;
(iv) The Company shall obtain and maintain and cause
each of its Subsidiaries to maintain as to their respective
properties and businesses, with financially sound and
reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is
customary for companies similarly situated;
(v) The Company shall permit and cause each of its
Subsidiaries to permit Purchaser and such persons as Purchaser
may designate, at Purchaser's expense, to visit and inspect
any of the properties of the Company and its Subsidiaries,
examine their books and take copies and extracts therefrom,
discuss the affairs, finances and accounts of the Company and
its Subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said
accountants to discuss with Purchaser and its designees such
affairs, finances and accounts), and consult with and advise
the management of the Company and its Subsidiaries as to their
affairs, finances and accounts, all at reasonable times and
upon reasonable notice during normal business hours and
provided that Purchaser or its designees have executed a
confidentiality
36
agreement in substance and form reasonably acceptable to the
Company; provided, however, that in no event (other than an
Event of Default) shall the Company be required to provide
Purchaser or its designees with any information about the
Company that is not publicly available;
(vi) The Company shall comply, and cause each
Subsidiary to comply, with all applicable Laws, noncompliance
with which could materially adversely affect its business or
condition, financial or otherwise;
(vii) The Company shall at all times maintain a cash
balance of not less than $750,000 on its consolidated balance
sheet, unless otherwise unanimously approved by the Board;
(viii) The Company shall keep, and cause each
Subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with
generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Company and such
Subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in
connection with its business shall be made; and
(ix) Within no more than five (5) days following an
Event of Default (as defined in the Senior Secured Note), the
Company shall notify Purchaser of such Event of Default, the
circumstances causing such default and the proposed course of
action to be taken by the Company to cure such default.
(b) Negative Covenants. The Company covenants that, so long as
any portion of the Senior Secured Note or the Preferred Shares is
outstanding, it shall not take any of the following actions without the
prior written consent of Purchaser, which may not be withheld
unreasonably:
(i) Redeem or repurchase any shares of Common Stock
Equivalents of the Company, except for (A) repurchases
contemplated by this Agreement, or (B) repurchases or
redemptions from employees, directors or consultants of the
Company in accordance with agreements existing as of the date
hereof for the repurchase or redemption of shares of Common
Stock Equivalents in connection with any termination of
service to the Company or any of its Subsidiaries;
(ii) Except to the extent required to comply with its
obligations hereunder or with applicable Law, the Company
shall not, nor shall it permit any of its Subsidiaries to,
amend its respective articles of organization, by-laws or
regulations, or similar organic documents;
(iii) the Company shall not, nor shall it permit any
of its Subsidiaries to, incur or guarantee any Indebtedness or
enter into any "keep well" or other agreement to maintain any
financial statement condition of another
37
Person or enter into any arrangement having the economic
effect of any of the foregoing, other than (A) short-term
indebtedness and "keep well" or similar assurances for the
benefit of customers, in each case in the ordinary course of
business consistent with past practice or (B) long-term
Indebtedness in connection with the refunding of existing
Indebtedness at a lower cost of funds;
(iv) The Company shall not, nor shall it permit any
of its Subsidiaries to, (A) enter into, adopt or amend or
increase the amount or accelerate the payment or vesting of
any benefit or amount payable under any employee benefit plan,
or otherwise increase the compensation or benefits of any
director, officer or other employee of such party or any of
its subsidiaries, except for normal increases in compensation
and benefits in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the
Company and its Subsidiaries taken as a whole, (B) enter into
or amend any employment, severance or special pay arrangement
with respect to the termination of employment or other similar
contract, agreement or arrangement with any director or
officer; provided that the foregoing shall not preclude the
implementation of incentive pay arrangements in the ordinary
course of business consistent with past practice, or (C)
create any Encumbrance on any of the assets or properties of
the Company or any Subsidiary;
(v) Declare or pay any dividend on any class of
Common Stock Equivalents of the Company or the Guarantor
(except dividends payable solely in Common Stock Equivalents
in connection with a stock split or similar transaction of the
Company);
(vi) Enter into any transactions with Affiliates of
the Company other than in the ordinary course of business;
(vii) Merge or consolidate with any other entity or
have a transaction in which any "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of greater
than fifty percent (50%) of the shares of Common Stock then
outstanding of the Company, on a fully diluted basis,
ordinarily entitled to vote in the election of directors;
(viii) Sell all or substantially all of the assets of
the Company;
(ix) Except as contemplated by this Agreement, permit
any Encumbrances on any assets of the Company (other than the
Permitted Liens);
(x) Liquidate, dissolve or wind-up the operations of
the Company;
38
(xi) Apply for, or consent to, the appointment of a
receiver, trustee or liquidator for the Company or any
Subsidiary or any of their respective properties ; and
(xii) Enter into any agreement to do any of the
foregoing.
4.5 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.6 Board Composition. Purchaser shall have the right to designate two
(2) representatives (the "Designees") for election to the Company's Board, both
of whom shall not have been involved in any of the events set forth in Item
401(f) of Regulation S-K during the preceding ten (10) year and shall be
qualified to serve as directors of a reporting company under the Exchange Act as
determined by a majority of the members of a committee of non-employee directors
established for such purpose and at least one of whom shall satisfy the Nasdaq
National Market requirements for an "independent director." Such "independent"
Designee shall be appointed to the Company's Compensation Committee, and any
future increases in the compensation of the Chief Executive Officer, or
additional grants of options to the Chief Executive Officer (except Replacement
Options), shall only be approved by unanimous consent of the Company's
Compensation Committee. The Company shall use its best efforts to have the
Designees nominated and elected to the Board.
4.7 Additional Covenants of the Company.
(a) For a period equal to the shorter of (i) three (3) years
from the Closing Date and (ii) such time as Purchaser beneficially owns
less than 5,000,000 shares of Common Stock (on an as converted basis),
the Company shall not issue or sell any shares of Common Stock, or any
securities convertible or exchangeable into Common Stock, for an
effective per share price of less than $0.25, without the prior written
consent of Purchaser.
(b) The Company shall not incur Indebtedness, other than in
connection with an asset-based senior line of credit, without the prior
written consent of Purchaser.
4.8 Certain Transactions. Purchaser and its Affiliates agree not to
engage in any "going private" transaction (including, without limitation,
selling all or substantially all of the Company's assets, merging the Company,
or any other transaction with similar economic effects) with the Company,
without the prior written consent of MacIntosh.
39
4.9 Pre-emptive Rights. For so long as Purchaser owns more than
5,000,000 shares of Common Stock (on an as converted basis) and in the event the
Company proposes to issue or sell any shares of Common Stock, or any securities
convertible or exchangeable into Common Stock, Purchaser shall have the right
(but not the obligation) to purchase such number of securities from the Company,
on the same terms and conditions offered by the Company, in order to maintain
its percentage ownership in the Company; it being understood that Purchaser
shall have ten (10) Business Days from its receipt of written notice from the
Company containing sufficient details with respect to such issuance or sale to
exercise its rights hereunder.
4.10 Indemnification.
(a) The Company shall indemnify and hold harmless Purchaser,
its officers, directors, employees, agents and consultants (each, a
"Purchaser Indemnified Party"), from and against any and all costs,
claims, damages, losses, liabilities and expenses (including reasonable
attorneys' fees) (together, the "Losses") which may be suffered or
incurred by such Purchaser Indemnified Party by reason of (i) any
material misrepresentation or breach of warranty by the Company in this
Agreement or the other Transaction Documents or (ii) any material
default of any obligation, agreement or covenant of the Company under
this Agreement or the other Transaction Documents, in each case so long
as such Losses were not caused by the gross negligence or willful
misconduct of such Purchaser Indemnified Party.
(b) Purchaser shall indemnify and hold harmless the Company
and its officers, directors, employees, agents and consultants (each, a
"Company Indemnified Party"), from and against any and all Losses which
may be suffered or incurred by such Company Indemnified Party by reason
of any material misrepresentation or breach of warranty by Purchaser in
this Agreement or the other Transaction Documents, so long as such
Losses were not caused by the gross negligence or willful misconduct of
such Company Indemnified Party.
(c) An Indemnified Party shall give the Indemnifying Party
notice of any matter which an Indemnified Party has determined has
given or could give rise to a right of indemnification under this
Agreement, within thirty (30) days of such determination, stating the
amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this Agreement in respect
of which such right of indemnification is claimed or arises.
(d) If an Indemnified Party shall receive notice of any
action, audit, claim, demand or assessment (each, a "Third Party
Claim") against it which may give rise to a claim for Loss under this
Section 4.10, within thirty (30) days of the receipt of such notice,
the Indemnified Party shall give the Indemnifying Party notice of such
Third Party Claim; provided, however, that the failure to provide such
notice shall not release the Indemnifying Party from any of its
obligations under this Section 4.10 except to the extent that such
failure results in a detriment to the Indemnifying Party and shall not
relieve the Indemnifying Party from any
40
other liability that it may have to any Indemnified Party other than
under this Section 4.10. The Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense
and through counsel of its choice if it gives notice of its intention
to do so to the Indemnified Party within ten (10) days of the receipt
of such notice from the Indemnified Party. If the Indemnifying Party
elects to undertake any such defense against a Third Party Claim, the
Indemnified Party may participate in such defense at its own expense.
The Indemnified Party shall cooperate with the Indemnifying Party in
such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records,
materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably
required by the Indemnifying Party. If the Indemnifying Party elects to
direct the defense of any such claim or proceeding, the Indemnified
Party shall not pay, or permit to be paid, any part of such Third Party
Claim unless the Indemnifying Party consents in writing to such payment
or unless the Indemnifying Party withdraws from the defense of such
Third Party Claim liability or unless a final judgment from which no
appeal may be taken by or on behalf of the Indemnifying Party is
entered against the Indemnified Party for such Third Party Claim. If
the Indemnified Party assumes the defense of any such claims or
proceeding pursuant to this Section 4.10(d) and proposes to settle such
claims or proceeding prior to a final judgment thereon or to forgo any
appeal with respect thereto, then the Indemnified Party shall give the
Indemnifying Party prompt written notice thereof and the Indemnifying
Party shall have the right to participate in the settlement or assume
or reassume the defense of such claims or proceeding.
4.11 "Key Man" Life Insurance. Within forty-five (45) days from the
Closing Date, the Company shall have obtained "key man" life insurance on the
life of MacIntosh in an amount between $2,500,000 and $5,000,000, subject to
commercially reasonable availability, costs and terms of such insurance as
approved by MacIntosh
4.12 Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement, the Conversion Shares pursuant to any conversion of the Preferred
Shares and the Warrant Shares pursuant to any exercise of the Warrants.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. On the Closing Date, the Company shall pay
Purchaser a closing fee (the "Closing Fee") equal to Two Hundred Forty Thousand
Dollars ($240,000), by check or wire transfer. The Company and Purchaser shall
be responsible for their respective costs and expenses incurred in connection
with this transaction.
41
5.2 Rights Upon Termination. So long as Purchaser has proceeded in good
faith to consummate this Agreement and the transactions contemplated hereby, in
the event the Company elects not to consummate this transaction for any reason
prior to February 11, 2005, the Company shall pay to Purchaser a financial
advisory and structuring fee (the "Advisory Fee") equal to Five Thousand Dollars
($500,000) which shall, at the sole option of Purchaser, be payable in cash or
shares of Common Stock valued at $0.25 per share of Common Stock. Upon the
Company's election to terminate this transaction, Purchaser shall have ten (10)
days in which to make an election to receive either cash or shares of Common
Stock from the Company. Any Advisory Fee that becomes due shall be payable to
Purchaser within five (5) days following Purchaser's receipt of notice from the
Company that the Company has elected not to consummate this transaction. Any
Advisory Fee paid pursuant to this Section 5.2 shall be in addition to any
expenses and costs payable by the Company to Purchaser in accordance with
Section 5.1 hereof. The Company hereby acknowledges that, in the event the
Company is required to pay the Advisory Fee in accordance with this Section 5.2,
the Company shall be deemed to have received advisory services from Purchaser in
consideration of such Advisory Fee. In the event Purchaser does not consummate
the transactions contemplated hereby by February 11, 2005 or otherwise
terminates this Agreement prior to such date despite the Company's good faith
attempts to consummate the transactions contemplated hereby, the terms of this
Section 5.2 shall expire and the Company shall have no further obligation to pay
the Advisory Fee.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand, sent
via a reputable nationwide overnight courier service or mailed by first class
certified or registered mail, return receipt requested, postage prepaid:
If to the Company, at 0000 Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxxx 00000, Attention: Chief Financial Officer, or at such other address or
addresses as may have been furnished in writing by the Company to Purchaser,
with copies to Xxxxxx X. XxxXxxxxx, c/o CorVu Australasia Pty. Ltd., Xxxxx 0,
000-000 Xxxxxxx Xxxxxxx, Xxxxxxxxx XXX 0000, Xxxxxxxxx, Facsimile: (011-61 2)
9495 5444, and Xxxxxxxxxx & Xxxxx, P.A., 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxxxx, Xxxxxxxxx 00000, Attn: Xxxx X. Xxxxx or Xxxxxxx Xxxxxx; or
If to ComVest, at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000,
Attention: Xxxx Xxxxxxxx, or at such other address or addresses as may have been
furnished to the Company in writing by ComVest, with a copy to Xxxxxxxxx
Xxxxxxx, LLP, The MetLife Building, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxx X. Annex, Esq.
42
Notices provided in accordance with this Section 5.4 shall be
deemed delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or three business days after
deposit in the mail.
5.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Purchaser. Purchaser may assign any or all
of its rights under this Agreement to any Person to whom Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to Purchaser.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or Action, any claim that
it is not personally subject to the jurisdiction of any such court or that such
Action is improper or inconvenient venue for such Action. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such Action by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient
43
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereby waive all rights to a trial by jury. If either party shall
commence an Action to enforce any provisions of the Transaction Documents, then
the prevailing party in such Action shall be reimbursed by the other party for
its attorneys' fees and other costs and expenses reasonably incurred with the
investigation, preparation and prosecution of such Action.
5.9 Survival. Unless this Agreement is terminated under Section 5.2
hereof, all agreements, representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
closing of the transactions contemplated hereby until (i) Purchaser owns less
than 5,000,000 shares of Common Stock (on an as converted basis) or (ii) the
pay-off of the Senior Secured Note, whichever occurs later.
5.10 Execution. This Agreement may be executed in two (2) or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
44
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment
or payments to Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
(Signature Page Follows)
45
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
CORVU CORPORATION
By:
-----------------------------------------
Name:
Title:
SUBSIDIARIES:
CORVU NORTH AMERICA, INC.
By:
-----------------------------------------
Name:
Title:
CORVU SOFTWARE MARKETING, INC.
By:
-----------------------------------------
Name:
Title:
CORVU SOFTWARE, LTD.
By:
-----------------------------------------
Name:
Title:
CORVU LATIN AMERICA, INC.
By:
-----------------------------------------
Name:
Title:
46
CORVU PLC
By:
-----------------------------------------
Name:
Title:
CORVU AUSTRALASIA PTY. LTD.
By:
-----------------------------------------
Name:
Title:
PURCHASER:
COMVEST INVESTMENT PARTNERS II LLC
By:
-----------------------------------------
Name:
Title:
47
