EXHIBIT 10.4
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:
DEFINITIONS
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.
"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.
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"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 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 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.
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"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
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.
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"Licensed Intellectual Property" means Intellectual Property
licensed to the Company or any Subsidiary pursuant to the Company IP
Agreements.
"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, 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.
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"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.
"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 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.
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"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.
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.
Interpretation and Rules of Construction. In this Agreement, except
to the extent otherwise provided or that the context otherwise requires:
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;
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;
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;
the headings for this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this
Agreement;
whenever the words "include," "includes" or "including" are
used in this Agreement, they are deemed to be followed by the words
"without limitation";
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;
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;
the definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms;
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;
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
the use of "or" is not intended to be exclusive unless
expressly indicated otherwise.
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PURCHASE AND SALE
CLOSING.
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.
At the Closing, Purchaser shall deliver to the Company an aggregate
of Six Million Five Hundred Thousand Dollars ($6,500,000), such amount
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").
CLOSING CONDITIONS; DELIVERIES.
On the Closing Date, the Company shall deliver or cause to be
delivered to Purchaser the following:
this Agreement duly executed by the Company;
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;
a copy of the Preferred Warrant registered in the name of
Purchaser;
a copy of the Protective Warrant registered in the name of
Purchaser;
the Registration Rights Agreement duly executed by the
Company;
the Stockholders' Agreement duly executed by MacIntosh and his
Affiliates;
the certificates referred to in Section 2.2(c)(i) and
2.2(e)(i);
the Security Agreement duly executed by the Company and each
of its Subsidiaries; and
a legal opinion of Company Counsel, in the form reasonably
acceptable to GT.
On the Closing Date, Purchaser shall deliver or cause to be
delivered to the Company the following:
this Agreement duly executed by Purchaser;
the Purchase Price by wire transfer of immediately available
funds to the account as specified in writing by the Company;
the certificates referred to in Section 2.2(c)(ii) and
2.2(e)(ii);
the Stockholders' Agreement duly executed by Purchaser,
the Security Agreement duly executed by Purchaser; and
the Registration Rights Agreement duly executed by Purchaser.
Accuracy of Representations and Warranties.
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).
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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).
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.
Performance.
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).
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).
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 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.
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.
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.
Certificate of Designation. The Certificate of Designation shall
have been accepted for filing with the Secretary of State of the State of
Minnesota.
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.
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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REPRESENTATIONS AND WARRANTIES
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:
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.
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 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.
47
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 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 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.
48
(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.
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.
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.
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.
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.
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 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.
49
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.
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.
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, 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).
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.
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.
50
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.
Patents and Trademarks. Except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(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 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.
51
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 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.
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.
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 (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. 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;
52
(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 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 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.
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(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).
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.
Title to Owned and Leased Real Property.
(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.
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.
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 the Xxxxxxxx-Xxxxx Act, and the rules and
regulations promulgated thereunder, upon the effectiveness of such
provisions.
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.
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.
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.
54
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.
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.
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
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.
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.
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.
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.
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.
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 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.
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:
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.
55
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).
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.
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 without either registration under
the Securities Act or the existence of another exemption from such
registration requirement.
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.
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.
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.
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.
OTHER AGREEMENTS OF THE PARTIES
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 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.
56
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.
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 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.
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.
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:
57
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
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.
58
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;
(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 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;
59
(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 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;
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(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.
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.
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. 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.
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.
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.
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 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.
61
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.
"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
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.
MISCELLANEOUS
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.
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.
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.
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: (000-00 0) 0000 0000,
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.
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.
62
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.
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.
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.
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 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.
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.
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.
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.
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.
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.
63
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.
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)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
CORVU CORPORATION
By: /s/ Xxxxxx X. XxxXxxxxx
-----------------------------------------
Name: Xxxxxx X. XxxXxxxxx
Title: Chief Executive Officer
SUBSIDIARIES:
CORVU NORTH AMERICA, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer
CORVU SOFTWARE MARKETING, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer
CORVU SOFTWARE, LTD.
By: /s/ Xxxxxx X. XxxXxxxxx
-----------------------------------------
Name: Xxxxxx X. XxxXxxxxx
Title: Managing Director
CORVU LATIN AMERICA, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer
CORVU PLC
By: /s/ Xxxxxx X. XxxXxxxxx
-----------------------------------------
Name: Xxxxxx X. XxxXxxxxx
Title: Managing Director
CORVU AUSTRALASIA PTY. LTD.
By: /s/ Xxxxxx X. XxxXxxxxx
-----------------------------------------
Name: Xxxxxx X. XxxXxxxxx
Title: Managing Director
65
PURCHASER:
COMVEST INVESTMENT PARTNERS II LLC
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Partner
66
