0000911420-05-000107.txt : 20120629
0000911420-05-000107.hdr.sgml : 20120629
20050222170010
ACCESSION NUMBER: 0000911420-05-000107
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 10
FILED AS OF DATE: 20050222
DATE AS OF CHANGE: 20050222
GROUP MEMBERS: COMMONWEALTH ASSOCIATES GROUP HOLDINGS, LLC
GROUP MEMBERS: COMVEST II PARTNERS, LLC
GROUP MEMBERS: MICHAEL S. FALK, INDIVIDUALLY
GROUP MEMBERS: ROBERT L. PRIDDY, INDIVIDUALLY
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: COMVEST INVESTMENT PARTNERS II LLC
CENTRAL INDEX KEY: 0001275683
IRS NUMBER: 010784781
FILING VALUES:
FORM TYPE: SC 13D
MAIL ADDRESS:
STREET 1: 830 THIRD AVE
CITY: NEW YORK
STATE: NY
ZIP: 10022
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: CORVU CORP
CENTRAL INDEX KEY: 0001103341
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372]
IRS NUMBER: 411457090
STATE OF INCORPORATION: MN
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-60219
FILM NUMBER: 05631887
BUSINESS ADDRESS:
STREET 1: 3400 W 66TH ST
STREET 2: STE 445
CITY: EDINA
STATE: MN
ZIP: 55435
BUSINESS PHONE: 9529447777
MAIL ADDRESS:
STREET 1: 3400 W. 66TH ST
STREET 2: SUITE 445
CITY: EDINA
STATE: MN
ZIP: 55435
SC 13D
1
d1028060.txt
SCHEDULE 13D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CORVU CORPORATION
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01
(Title of Class of Securities)
221011 10 9
(CUSIP Number)
COMVEST INVESTMENT PARTNERS II LLC
ONE NORTH CLEMATIS STREET, SUITE 300
WEST PALM BEACH, FLORIDA 33401
(561) 868-6074
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
Copy to:
Alan I. Annex, Esq.
Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
FEBRUARY 11, 2005
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box.
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other parties
to whom copies are to be sent.
(Page 1 of 12)
CUSIP No. 221011 10 9 13D Page 2 of 12 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ComVest Investment Partners II LLC (01-0784781)
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
25,400,000
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
25,400,000
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,400,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
OO
________________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 221011 10 9 13D Page 3 of 12 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
ComVest II Partners, LLC (01-6228703)
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
AF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
25,400,000
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
25,400,000
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,400,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
OO
________________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 221011 10 9 13D Page 4 of 12 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Commonwealth Associates Group Holdings, LLC (01-0622406)
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
AF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
25,400,000
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
25,400,000
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,400,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
OO
________________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 221011 10 9 13D Page 5 of 12 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Michael S. Falk
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
AF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
25,400,000
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
25,400,000
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,400,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
IN
________________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 221011 10 9 13D Page 6 of 12 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robert L. Priddy
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
AF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
25,400,000
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
25,400,000
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
25,400,000
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
IN
________________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 221011 10 9 13D Page 7 of 12 Pages
ITEM 1. SECURITY AND ISSUER.
This Statement relates to shares (the "Shares") of the Common Stock,
par value $0.01 per share (the "Common Stock") of CorVu Corporation, a Minnesota
corporation (the "Issuer") acquired by the Reporting Person on February 11,
2005. The principal executive offices of the Issuer are located at 3400 West
66th Street, Edina, Minnesota, 55435.
ITEM 2. IDENTITY AND BACKGROUND.
The name of the Reporting Person is ComVest Investment Partners II LLC,
a Delaware limited liability company ("ComVest"). ComVest is a private
investment company. The managing member of ComVest is ComVest II Partners LLC, a
Delaware limited liability company ("ComVest II Partners"), the managing member
of which is Commonwealth Associates Group Holdings, LLC, a Delaware limited
liability company ("CAGH"). Michael Falk ("Falk") is the Chairman and principal
member of CAGH. Robert Priddy ("Priddy") is a member of ComVest Partners II.
Falk and Priddy are citizens of the United States of America.
The business address for ComVest and the other individuals described in
this Item 2 is One North Clematis Street, Suite 300, West Palm Beach, Florida
33401.
During the last five years, neither ComVest nor any other person
enumerated in this Item 2, has been (i) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On February 11, 2005, Issuer and ComVest signed a Securities Purchase
Agreement (the "Purchase Agreement") and consummated the transactions
contemplated thereby. Pursuant to the terms and conditions set forth in the
Purchase Agreement, ComVest (i) purchased 22,000,000 shares of the Issuer's
common stock for a purchase price of $3,300,000,(ii) purchased 17,000 shares of
a Series C Convertible Preferred Stock ("Series C Preferrred Stock") plus
five-year warrants to purchase up to 3,400,000 shares of the Issuer's common
stock at an exercise price of $0.50 per share for an aggregate purchase price of
$1,700,000, and (iii) provided to CorVu a senior secured loan in the principal
amount of $1,500,000. In addition, the Issuer granted to ComVest warrants to
purchase an additional 2,000,000 shares at $0.50; however, these warrants will
become exercisable only if less than two ComVest designees are members of the
Issuer's board of directors and ComVest owns more than 5,000,000 shares of the
Issuer's common stock. Both warrants will not become exercisable prior to August
11, 2005.
Each share of Series C Preferred Stock has a par value of $100 and will
convert into 200 shares of the Issuer's common stock, subject to customary
antidilution provisions. The Series C Preferred Stock will accrue cumulative
quarterly dividends of $1.50 per share during the first year after issuance,
$2.25 per share during the second year after issuance, and $3.00 per share
during the third year after issuance. If the Issuer fails to pay such dividend
within thirty days after the end of a quarter, ComVest has the right to request
the conversion of the outstanding dividend amount into shares of the Issuer's
common stock at the volume-weighted average closing price of the Common Stock of
the Corporation during the twenty-day period beginning on the day of ComVest's
conversion notice. The Issuer will have the right to redeem Series C Preferred
Stock at any time upon 10 business days prior written notice upon payment of
$100 per share plus accumulated but unpaid dividends; holders of Series C
Preferred Stock may elect to
CUSIP No. 221011 10 9 13D Page 8 of 12 Pages
convert the stock at any time. The Issuer is obligated to use 100% of the
proceeds from any equity or debt financing to redeem the Series C Preferred
Stock. Upon liquidation of the Issuer, each share of Series C Preferred Stock
entitles its holder to receive an amount of $150, prior and in preference to
holders of common stock and any other preferred stock, and to participate, on an
as-converted basis and together with holders of the Issuer's Series B
Convertible Preferred Stock ("Series B Preferred Stock"), in any liquidation
distributions to holders of common stock.
The loan is secured by substantially all of the assets of the Issuer
and its wholly-owned subsidiary, CorVu North America, and ranks senior to any
existing or future indebtedness of the Issuer. The interest rate for the loan is
6% during the first year of the loan, 9% during the second year and 12% for the
third year. The loan becomes immediately due and payable upon the earlier of (i)
36 months from the date of issuance, (ii) a merger or combination of the Issuer
or a sale of all or substantially all of the assets of the Issuer, or (iii) the
acquisition of more than 50% of the voting power or interest in the Issuer by a
single entity or person. The Issuer is obligated to use 50% of any proceeds it
may receive in the future upon the sale of certain equity or debt securities to
retire the loan, provided, that all shares of Series C Preferred Stock have been
redeemed previously. Without ComVest's approval, the Issuer may not maintain a
cash balance of less than $750,000.
All warrants are subject to anti-dilution protection.
The Issuer paid a cash fee of $240,000 to ComVest at the closing.
ITEM 4. PURPOSE OF TRANSACTION.
ComVest purchased the Shares for investment purposes and not with the
view to sell in connection with any distribution thereof. Except in the ordinary
course of business or as set forth below, the Reporting Person has no present
intention or plans or proposals which relate to or could result in any of the
matters referred to in paragraphs (a) through (j) of Item 4 of Schedule 13D.
Prior to the closing of the transactions with ComVest, the Issuer
amended its articles of incorporation by filing the statement of designation of
rights, preferences and limitations of the Series C Preferred Stock. The
Issuer's board of directors had approved such statement of designation and had
designated 17,000 shares out of the Issuer's authorized undesignated stock as
shares of Series C Preferred Stock.
As required by the Issuer's articles of incorporation, the majority of
the holders of the outstanding shares of the Issuer's Series B Preferred Stock
consented to the creation of the Series C Preferred Stock with liquidation
preference, dividend and redemption rights on parity with, or senior to, the
Series B Preferred Stock.
Contingent upon the closing of the transaction, the Issuer's board of
directors increased the number of directors to seven and elected two individuals
designated by ComVest to fill these newly created seats. Accordingly, On
February 11, 2004, the Issuer's board of directors increased the number of
directors to seven and elected Robert L. Priddy and Robert L. Doretti to the
board. Messrs. Priddy and Doretti had been designated by ComVest. ComVest will
also appoint an observer to the Issuer's board of directors. One of the warrants
granted to ComVest will become exercisable only if ComVest has less than two
designees on the Issuer's board of directors at a time when ComVest owns more
than 5,000,000 shares of the Issuer's stock (on an as-converted basis). In
addition, ComVest entered into a Stockholders' Agreement with Justin MacIntosh,
the Issuer's Chief Executive Officer, granting ComVest, among other things, a
right of first refusal with respect to his shares of Common Stock under certain
circumstances.
CUSIP No. 221011 10 9 13D Page 9 of 12 Pages
The information provided in Item 3 is incorporated by reference herein.
Notwithstanding anything to the contrary contained herein, the
Reporting Person reserves the right, depending on all relevant factors, to
change its intention with respect to any and all of the matters referred to
above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Including the shares of Common Stock and the shares of Series C
Preferred Stock (on an as converted basis) that ComVest acquired in the
transactions on February 11, 2005, ComVest now has the beneficial ownership of
25,400,000 shares of Common Stock of the Issuer, representing 48% of the
Issuer's stock. In addition, ComVest has received a Preferred Warrant to
purchase 3,400,000 shares of Common Stock exercisable at $0.50 per share and a
Protective Warrant to purchase 2,000,000 shares of Common Stock exercisable at
$0.50 per share (collectively, the "Warrants"). The Warrants have a delayed
exercise period and, accordingly, the shares of Common Stock underlying the
warrants have not been included in ComVest's beneficial ownership calculation.
Falk and Priddy, by virtue of their status as managing members of
ComVest II Partners (the managing member of ComVest) and as the principal
members of ComVest and ComVest II Partners, may be deemed to have indirect
beneficial ownership of the Shares owned by ComVest. However, Falk and Priddy
disclaim any beneficial ownership of such Shares.
(b) Falk and Priddy, by virtue of their status as managing members of
ComVest II Partners (the managing member of ComVest) and as the principal
members of ComVest and ComVest II Partners, have the power to vote or to direct
the vote and the power to dispose and to direct the disposition of the Shares
owned by ComVest.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Other than as set forth above, neither ComVest nor any other person
named in Item 2 above has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with respect to any
securities of the Issuer, including but not limited to any contracts,
arrangements, understandings or relationships concerning the transfer or voting
of such securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or losses, or the
giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement, as required by Rule 13d- 1 under the Securities
exchange Act of 1934.
2. Securities Purchase Agreement, dated as of February 11, 2005, by and
between CorVu Corporation and ComVest Investment Partners II LLC.
3. Senior Secured Note in the principal amount of $1,500,000.
CUSIP No. 221011 10 9 13D Page 10 of 12 Pages
4. Preferred Warrant to purchase 3,400,000 shares of Common Stock at $0.50
per share.
5. Protective Warrant to purchase 2,000,000 shares of Common Stock at
$0.50 per share.
6. Stockholders' Agreement.
7. Security Agreement.
8. Series C Certificate of Designation.
9. Registration Rights Agreement
CUSIP No. 221011 10 9 13D Page 11 of 12 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 22, 2005 ComVest Investment Partners II LLC
By: ComVest II Partners, LLC,
its managing member
By: /s/ Robert L. Priddy
-----------------------------------
Name: Robert L. Priddy
Title: Managing Member
Dated: February 22, 2005 ComVest II Partners, LLC
By: /s/ Robert S. Priddy
-----------------------------------
Name: Robert L. Priddy
Title: Managing Member
Dated: February 22, 2005 Commonwealth Associates Group Holdings, LLC
By: /s/ Michael S. Falk
-------------------------------------------
Name: Michael S. Falk
Title: Chairman and Managing Member
Dated: February 22, 2005 /s/ Michael S. Falk
-------------------------------------------
Michael S. Falk, individually
Dated: February 22, 2005 /s/ Robert L. Priddy
-------------------------------------------
Robert L. Priddy, individually
CUSIP No. 221011 10 9 13D Page 12 of 12 Pages
EXHIBIT INDEX
1. Joint Filing Agreement, as required by Rule 13d-1 under the Securities
exchange Act of 1934.
2. Securities Purchase Agreement, dated as of February 11, 2005, by and
between CorVu Corporation and ComVest Investment Partners II LLC.
3. Senior Secured Note in the principal amount of $1,500,000.
4. Preferred Warrant to purchase 3,400,000 shares of Common Stock at $0.50
per share.
5. Protective Warrant to purchase 2,000,000 shares of Common Stock at
$0.50 per share.
6. Stockholders' Agreement.
7. Security Agreement.
8. Series C Certificate of Designation.
9. Registration Rights Agreement
EX-1
2
e1028060.txt
AMENDED JOINT FILING AGREEMENT
EXHIBIT 1
JOINT FILING AGREEMENT
The undersigned hereby consent to the joint filing by any of them of a
Statement on Schedule 13D and any amendments thereto, whether heretofore or
hereafter filed, relating to the securities of CorVu Corporation, and hereby
affirm that this Schedule 13D is being filed on behalf of each of the
undersigned.
Dated: February 22, 2005 ComVest Investment Partners II LLC
By: ComVest II Partners, LLC,
its managing member
By: /s/ Robert L. Priddy
-----------------------------------
Name: Robert L. Priddy
Title: Managing Member
Dated: February 22, 2005 ComVest II Partners, LLC
By: /s/ Robert S. Priddy
-----------------------------------
Name: Robert L. Priddy
Title: Managing Member
Dated: February 22, 2005 Commonwealth Associates Group Holdings, LLC
By: /s/ Michael S. Falk
-------------------------------------------
Name: Michael S. Falk
Title: Chairman and Managing Member
Dated: February 22, 2005 /s/ Michael S. Falk
-------------------------------------------
Michael S. Falk, individually
Dated: February 22, 2005 /s/ Robert L. Priddy
-------------------------------------------
Robert L. Priddy, individually
EX-2
3
e1019612.txt
SECURITIES PURCHASE AGREEMENT
EXHIBIT 2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
February 11, 2005, by and among CorVu Corporation, a Minnesota corporation (the
"Company"), ComVest Investment Partners II LLC, a Delaware limited liability
company ("Purchaser") and the Subsidiaries (as defined herein) set forth on the
signature page hereto.
WHEREAS, subject to the terms and conditions set forth in this
Agreement and in accordance with and in reliance upon the exemption from
securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission promulgated
thereunder (the "Securities Act"), including Regulation D ("Regulation D"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
to be made hereunder, the Company desires to issue and sell to Purchaser, and
Purchaser desires to purchase from the Company (i) a senior secured note (the
"Senior Secured Note") in an aggregate principal amount of $1,500,000, (ii)
22,000,000 shares of common stock, $0.01 par value per share ("Common Stock"),
of the Company for an aggregate purchase price of $3,300,000, (iii) 17,000 of
shares of convertible preferred stock, par value $100 per share (the "Series C
Preferred Stock"), (iv) warrants (the "Preferred Warrant") to purchase 3,400,00
shares of Common Stock and (v) warrants (the "Protective Warrant" and, together
with the Preferred Warrant, the "Warrants") to purchase 2,000,00 shares of
Common Stock on the Closing Date;
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and Purchaser agrees as
follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" means any claim, action, suit, arbitration, inquiry,
action or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, such specified Person.
"Agreement" shall have the meaning set forth in the Preamble.
1
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by Law to be
closed in The City of New York.
"Certificate of Designation" means the Certificate of
Designation of Rights and Preferences of Series C Convertible Preferred
Stock of the Company to be filed with the Secretary of State of the
State of Minnesota in connection with the issuance of the Series C
Preferred Stock in the form of Exhibit E attached hereto.
"Claims" means any and all administrative, regulatory or
judicial actions, suits, petitions, appeals, demands, demand letters,
claims, Encumbrances, notices of noncompliance or violation,
investigations, Actions, consent orders or consent agreements.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"Company" shall have the meaning set forth in the Preamble.
"Company Indemnified Party" shall have the meaning set forth
in Section 4.10(b).
"Company Intellectual Property" means Intellectual Property
owned by the Company or any Subsidiary.
"Company IP Agreements" means (a) licenses of Intellectual
Property by the Company or any Subsidiary to any third party, (b)
licenses of Intellectual Property by any third party to the Company or
any Subsidiary, (c) agreements between the Company or any Subsidiary
and any third party relating to the development or use of Intellectual
Property, the development of data, or the modification, framing,
linking, or advertisement with respect to Internet web sites and (d)
consents, settlements, decrees, orders, injunctions, judgments or
rulings to which the Company or any Subsidiary is a party, governing
the use, validity or enforceability of Company Intellectual Property.
"Company Software" means all Software (a) material to the
operation of its business or (b) manufactured, distributed, sold,
licensed or marketed by the Company or any Subsidiary.
"Commission" means the Securities and Exchange Commission.
"Common Stock" shall have the meaning set forth in the
Recitals.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or
2
exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.
"Company Counsel" means Fredrikson & Byron, P.A. with offices
located at 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota
55402.
"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
3
Securities issued or issuable hereunder, (d) issuances in connection
with mergers, acquisitions, joint ventures or other transactions with
an unrelated third party in a bona fide transaction the purpose of
which is not fundraising, (e) issuances at fair market value to the
Company's suppliers, consultants and other providers of services and
goods not to exceed $100,000 to any one Person, and not to exceed an
aggregate of $250,000 in any fiscal year without the prior written
consent of Purchaser, or (f) issuances of options ("Replacement
Options") to MacIntosh at the then fair market value in replacement of
options held by MacIntosh on the Closing date upon their expiration and
issuances of shares of Common Stock upon exercise of any such
Replacement Options, provided, that such Replacement Options have been
issued in accordance with the Company's then existing stock option plan
and approved by a majority of the non-employee members of the Board of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose.
"GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied
consistently throughout the periods involved.
"Governmental Authority" means any federal, national,
supranational, state, provincial, local, or similar government,
governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"GT" means Greenberg Traurig, LLP with offices located at The
Met Life Building, 200 Park Avenue, New York, New York 10166.
"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
4
others referred to in clauses (a) through (g) above guaranteed directly
or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay
or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against
loss, (iii) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss, and (i)
all Indebtedness referred to in clauses (a) through (g) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Encumbrance on property
(including accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness.
"Indemnified Party" shall mean a Company Indemnified Party or
a Purchaser Indemnified Party, as the case may be;
"Indemnifying Party" shall mean Purchaser pursuant to Section
4.10(a) and the Company pursuant to Section 4.10(b), as the case may be
"Intellectual Property" means (i) patents, patent applications
and statutory invention registrations, (ii) trademarks, service marks,
domain names, trade dress, logos, trade names, corporate names and
other identifiers of source or goodwill, including registrations and
applications for registration thereof and including the goodwill of its
business symbolized thereby or associated therewith, (iii) mask works
and copyrights, including copyrights in computer software, and
registrations and applications for registration thereof, and (iv)
confidential and proprietary information, including trade secrets, know
how and invention rights.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule,
code, order, requirement or rule of law (including common law).
"Leased Real Property" means the real property leased by the
Company or any Subsidiary as tenant, together with, to the extent
leased by the Company or any Subsidiary, all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal
property of the Company or any Subsidiary attached or appurtenant
thereto and all easements, licenses, rights and appurtenances relating
to the foregoing.
"Licensed Intellectual Property" means Intellectual Property
licensed to the Company or any Subsidiary pursuant to the Company IP
Agreements.
5
"MacIntosh" means Justin M. MacIntosh.
"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,
6
as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Preferred Shares" means the 17,000 shares of Series C
preferred Stock issued to Purchaser pursuant to this Agreement.
"Preferred Stock" means the "blank check" preferred stock
designated by the Company.
"Preferred Warrant" shall have the meaning set forth in the
Recitals in the form of Exhibit C attached hereto.
"Protective Warrant" shall have the meaning set forth in the
Recitals in the form of Exhibit D attached hereto.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Indemnified Party" shall have the meaning set forth
in Section 4.10(a).
"Real Property" means the Leased Real Property and the Owned
Real Property.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and Purchaser, in the form of Exhibit B attached hereto.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by Purchaser of the Shares and the Warrant
Shares.
"Regulation D" shall have the meaning set forth in the
Recitals.
"Regulations" means the Treasury Regulations (including
Temporary Regulations) promulgated by the United States Department of
Treasury with respect to the Code or other federal tax statutes.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(g).
"Securities" collectively means the Shares, the Preferred
Shares, the Conversion Shares, the Senior Secured Note, the Warrants
and the Warrant Shares.
7
"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
8
required to be filed with any Tax authority for the Company's fiscal
years ended June 30, 2000 and thereafter, including any schedule or
attachment thereto or any amendment thereof.
"Trade Secrets" means trade secrets, know-how and other
confidential or proprietary technical, business and other information,
including manufacturing and production processes and techniques,
research and development information, technology, drawings,
specifications, designs, plans, proposals, technical data, financial,
marketing and business data, pricing and cost information, business and
marketing plans, customer and supplier lists and information, and all
rights in any jurisdiction to limit the use or disclosure thereof.
"Trademarks" means trademarks, service marks, trade dress,
logos, trade names, corporate names, URL addresses, domain names and
symbols, slogans and other indicia of source or origin, including the
goodwill of its business symbolized thereby or associated therewith,
common law rights thereto, registrations and applications for
registration thereof throughout the world, all rights therein provided
by international treaties and conventions, and all other rights
associated therewith.
"Transaction Documents" means this Agreement, the Senior
Secured Note, the Certificate of Designation, the Warrants, the
Stockholders' Agreement, the Security Agreement and the Registration
Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Warrants" means, collectively, the Preferred Warrant and the
Protective Warrant delivered to Purchaser at the Closing in accordance
with Section 2.2 hereof.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 Interpretation and Rules of Construction. In this Agreement, except
to the extent otherwise provided or that the context otherwise requires:
(i) when a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an
Article or Section of, or a Schedule or Exhibit to, this
Agreement unless otherwise indicated;
(ii) references to the "knowledge" of the Company
shall refer to the actual knowledge of any of the Company's
officers or members of its Board or the knowledge that any
such person would reasonably be expected to have assuming
reasonable inquiry;
9
(iii) references to "due inquiry" shall refer to an
inquiry that any of the Company's officers or members of its
Board would reasonably be expected to undertake based upon the
information available to them;
(iv) the headings for this Agreement are for
reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement;
(v) whenever the words "include," "includes" or
"including" are used in this Agreement, they are deemed to be
followed by the words "without limitation";
(vi) the words "hereof," "herein" and "hereunder" and
words of similar import, when used in this Agreement, refer to
this Agreement as a whole and not to any particular provision
of this Agreement;
(vii) all terms defined in this Agreement have the
defined meanings when used in any certificate or other
document made or delivered pursuant hereto, unless otherwise
defined therein;
(viii) the definitions contained in this Agreement
are applicable to the singular as well as the plural forms of
such terms;
(ix) any Law defined or referred to herein or in any
agreement or instrument that is referred to herein means such
Law or statute as from time to time amended, modified or
supplemented, including by succession of comparable successor
Laws;
(x) references to a Person are, in the case of
individuals, also to his or her personal representatives,
heirs and permitted assigns and, in the case of entities, also
to its successors and permitted assigns; and
(xi) the use of "or" is not intended to be exclusive
unless expressly indicated otherwise.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
(a) The consummation of the sale of the Senior Secured Note,
Shares, Preferred Shares and Warrants (the "Closing") shall take place
on or before February 11, 2005 (the "Closing Date") by telecopy
exchange of signature pages with originals to follow by overnight
delivery, or in such other manner or at such place as the parties
hereto may agree.
(b) At the Closing, Purchaser shall deliver to the Company an
aggregate of Six Million Five Hundred Thousand Dollars ($6,500,000),
such amount
10
representing the aggregate purchase price for the Senior Secured Note,
the Shares and the Preferred Shares, by certified check or wire
transfer (the "Purchase Price").
2.2 Closing Conditions; Deliveries.
(a) On the Closing Date, the Company shall deliver or cause to
be delivered to Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a copy of the irrevocable instructions to the
Company's transfer agent instructing the transfer agent to
deliver, on an expedited basis, a certificate evidencing each
of the Shares and Preferred Shares, each registered in the
name of Purchaser;
(iii) a copy of the Preferred Warrant registered in
the name of Purchaser;
(iv) a copy of the Protective Warrant registered in
the name of Purchaser;
(v) the Registration Rights Agreement duly executed
by the Company;
(vi) the Stockholders' Agreement duly executed by
MacIntosh and his Affiliates;
(vii) the certificates referred to in Section
2.2(c)(i) and 2.2(e)(i);
(viii) the Security Agreement duly executed by the
Company and each of its Subsidiaries; and
(ix) a legal opinion of Company Counsel, in the form
reasonably acceptable to GT.
(b) On the Closing Date, Purchaser shall deliver or cause to
be delivered to the Company the following:
(i) this Agreement duly executed by Purchaser;
(ii) the Purchase Price by wire transfer of
immediately available funds to the account as specified in
writing by the Company;
(iii) the certificates referred to in Section
2.2(c)(ii) and 2.2(e)(ii);
(iv) the Stockholders' Agreement duly executed by
Purchaser,
11
(v) the Security Agreement duly executed by
Purchaser; and
(vi) the Registration Rights Agreement duly executed
by Purchaser.
(c) Accuracy of Representations and Warranties.
(i) Each representation and warranty contained in
Section 3.1 shall be true on and as of Closing with the same
effect as though such representation and warranty had been
made on and as of that date and the Company has delivered to
Purchaser a certificate, executed by the Chief Executive
Officer and the Chief Financial Officer of the Company, dated
the Closing Date, certifying to the fulfillment of the
conditions specified in this Section 2.2(c)(i).
(ii) Each representation and warranty contained in
Section 3.2 shall be true on and as of Closing with the same
effect as though such representation and warranty had been
made on and as of that date and Purchaser has delivered to the
Company a certificate, executed by the Chief Executive Officer
or Chief Financial Officer of Purchaser, dated the Closing
Date, certifying to the fulfillment of the conditions
specified in this Section 2.2(c)(ii).
(d) Material Adverse Effect. As of the Closing, there shall
not have occurred any changes that have had or could reasonably have a
Material Adverse Effect on the operations or financial condition of the
Company.
(e) Performance.
(i) The Company shall have performed and complied
with all agreements and conditions contained in this Agreement
required to be performed or complied with by the Company prior
to or at the Closing and the Company has delivered to
Purchaser a certificate, executed by the Chief Executive
Officer and the Chief Financial Officer of the Company, dated
the Closing Date, certifying to the fulfillment of the
conditions specified in this Section 2.2(e)(i).
(ii) Purchaser shall have performed and complied with
all agreements and conditions contained in this Agreement
required to be performed or complied with by Purchaser prior
to or at the Closing and Purchaser has delivered to the
Company a certificate, executed by the Chief Executive Officer
or Chief Financial Officer of Purchaser, dated the Closing
Date, certifying to the fulfillment of the conditions
specified in this Section 2.2(e)(ii).
(f) Due Diligence. As of the Closing, Purchaser shall, in its
sole discretion, have completed its legal and financial due diligence
and the results of such due diligence shall, in its sole discretion, be
acceptable to Purchaser and its
12
legal counsel. The Disclosure Schedule delivered to Purchaser by the
Company in connection with this Agreement shall not contain any
exceptions that are deemed unacceptable by Purchaser in its sole
discretion.
(g) Capitalization on the Closing Date. As of the Closing
Date, there shall be outstanding (excluding shares of Common Stock
issued or to be issued to MacIntosh and members of his family upon
conversion of the Series B Preferred Stock and conversion of securities
representing current Indebtedness issued thereto) (i) not more than 24
million shares of Common Stock and not more than 600,000 shares of
Series B Preferred Stock; (ii) options to purchase up to 4.1 million
shares of Common Stock granted to employees under the Company's stock
option plans; (iii) options to purchase up to 1.4 million shares of
Common Stock granted to employees outside of the Company's stock option
plans with average exercise prices between $0.91 and $1.58 per share;
(iv) warrants to purchase up to 1,400,000 shares of Common Stock at an
exercise price of $0.20; (v) warrants to purchase up to 2,805,275
shares of Common Stock at an average exercise price of $1.71. MacIntosh
and members of his family shall, as of the Closing, convert all of
their shares of Series B Preferred Stock into shares of Common Stock
and all of their securities representing current Indebtedness into
shares of Common Stock upon terms consistent with the purchase of the
Shares by Purchaser and in accordance with the terms set forth in such
instruments.
(h) Indebtedness. As of the Closing, (i) the Company or its
Subsidiaries, as the case may be, shall cause any Indebtedness between
CorVu North America, Inc. and Commerce Bank to be paid off, and (ii)
there shall be no other Indebtedness, other than as set forth in the
SEC Reports and accounts payable, trade payables and capital lease
obligations incurred in the ordinary course of business.
(i) Certificate of Designation. The Certificate of Designation
shall have been accepted for filing with the Secretary of State of the
State of Minnesota.
(j) MacIntosh Employment Agreement. The employment agreement
between the Company and MacIntosh shall have been amended to provide
for an annual salary of $250,000 for all services provided by MacIntosh
to the Company and the Subsidiaries. Such amended agreement shall
further provide that any amounts in excess of $250,000 shall be
deferred until such time as the Company achieves, on a consolidated
basis, two (2) consecutive quarters of revenues in excess of $4,000,000
and positive EBITDA.
(k) Board of Directors. The Board of the Company shall have
been increased by two (2) members and the Designees (as defined below)
shall have been duly elected and qualified.
13
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to Purchaser:
(a) Authority, Organization and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation
and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry
on its business as it has been and is currently conducted. The Company
is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification
necessary or desirable, except to the extent that the failure to be so
licensed or qualified and in good standing would not (x) adversely
affect the ability of the Company to carry out its obligations under,
and to consummate the transactions contemplated by, this Agreement and
the other Transaction Documents or (y) adversely affect the ability of
the Company and the Subsidiaries to conduct its business, and all such
jurisdictions are set forth in Section 3.1(a) of the Disclosure
Schedule. All corporate actions taken by the Company have been duly
authorized, and the Company has not taken any action that in any
respect conflicts with, constitutes a default under or results in a
violation of any provision of its Certificate of Incorporation or
By-laws. True and correct copies of the Certificate of Incorporation
and By-laws of the Company, each as in effect on the date hereof, have
been delivered by the Company to Purchaser.
(b) Subsidiaries.
(i) Section 3.1(b)(i) of the Disclosure Schedule sets
forth a true and complete list of all Subsidiaries, listing
for each Subsidiary its name, type of entity, the jurisdiction
and date of its incorporation or organization, its authorized
capital stock, partnership capital or equivalent, the number
and type of its issued and outstanding shares of capital
stock, partnership interests or similar ownership interests
and the current ownership of such shares, partnership
interests or similar ownership interests.
(ii) Other than the Subsidiaries, there are no other
corporations, partnerships, joint ventures, associations or
other entities in which the Company or any Subsidiary owns, of
record or beneficially, any direct or indirect equity or other
interest or any right (contingent or otherwise) to acquire the
same. Other than the Subsidiaries and except as set forth in
Section 3.1(b)(ii) of the Disclosure Schedule, neither the
Company nor any Subsidiary is a member of (nor is any part of
its business conducted
14
through) any partnership nor is the Company or any Subsidiary
a participant in any joint venture or similar arrangement.
(iii) Each Subsidiary that is a corporation: (A) is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(B) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by
such Subsidiary and to carry on its business as it has been
and is currently conducted by such Subsidiary and (C) is duly
licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased
by it or the operation of its business makes such licensing or
qualification necessary or desirable, except to the extent
that the failure to be so licensed or qualified and in good
standing would not (x) adversely affect the ability of the
Company to carry out its obligations under, and to consummate
the transactions contemplated by, this Agreement and the other
Transaction Documents or (y) adversely affect the ability of
the Company and the Subsidiaries to conduct its business. Each
Subsidiary that is not a corporation: (A) is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, (B) has all necessary power and
authority to own, operate or lease the properties and assets
owned, operated or leased by such Subsidiary and to carry on
its business as it has been and is currently conducted by such
Subsidiary and (C) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its
business makes such licensing or qualification necessary or
desirable, except to the extent that the failure to be so
licensed or qualified and in good standing would not (x)
adversely affect the ability of the Company to carry out its
obligations under, and to consummate the transactions
contemplated by, this Agreement and the other Transaction
Documents or (y) adversely affect the ability of the Company
and the Subsidiaries to conduct its business.
(iv) All corporate actions taken by each Subsidiary
have been duly authorized and no Subsidiary has taken any
action that in any respect conflicts with, constitutes a
default under or results in a violation of any provision of
its Certificate of Incorporation or By-laws (or similar
organizational documents). True and complete copies of the
certificate of incorporation and by-laws (or similar
organizational documents), in each case as in effect on the
date hereof, of each Subsidiary have been delivered by the
Company to Purchaser.
(c) Capitalization.
(i) Immediately prior to the Closing, the authorized
capital stock of the Company consists of 75,000,000 shares of
Common Stock. 1,000,000 shares of Series A Preferred Stock,
600,000 shares of Series B
15
Preferred Stock, 17,000 shares of Series C Preferred Stock and
23,383,000 shares of undesignated stock. As of the date hereof
and immediately prior to the Closing, (i) 23,970,268 shares of
Common Stock are issued and outstanding, all of which are
validly issued, fully paid and nonassessable, (ii) 600,000
shares of Series B Preferred Stock are issued and outstanding,
all of which are validly issued, fully paid and nonassessable,
(iii) 3,928,876 shares of Common Stock are reserved for
issuance upon exercise of employee stock options granted
pursuant to various stock option plans, (iv) 1,302,751 shares
of Common Stock are reserved for issuance upon exercise of
employee stock options granted outside of the Company's stock
option plan, (v) 1,400,001 shares of Common Stock are reserved
for issuance upon exercise of outstanding warrants at an
exercise price of $0.20 per share, and (vi) 2,319,703 shares
of Common Stock are reserved for issuance upon exercise of
outstanding warrants at an average exercise price of $1.12 per
share. None of the issued and outstanding shares of Common
Stock or Series B Preferred Stock was issued in violation of
any preemptive rights. Except as set forth in Section
3.1(c)(i) of the Disclosure Schedule, there are no options,
warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the
Shares or Preferred Shares or obligating either the Company or
the Company to issue or sell any Shares or Preferred Shares,
or any other interest in, the Company. There are no
outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Common
Stock or Preferred Stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or
otherwise) in, any other Person. As of the date hereof and
immediately prior to the Closing, the Common Stock and Series
B Preferred Stock constitute all of the issued and outstanding
capital stock of the Company. Upon consummation of the
transactions contemplated by this Agreement and registration
of the Shares and Preferred Shares in the name of Purchaser in
the stock records of the Company, Purchaser, assuming it shall
have purchased the Shares and Preferred Shares for value in
good faith and without notice of any adverse claim, will own
all the Shares and Preferred Shares free and clear of all
Encumbrances. Upon consummation of the transactions
contemplated by this Agreement, the Shares and the Preferred
Shares will be fully paid and nonassessable. There are no
voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the
voting or transfer of any of the Common Stock or Preferred
Stock.
(ii) To the best knowledge of the Company, after due
inquiry, the shareholder register attached to this Agreement
as Schedule A accurately records, in all material respects:
(A) the name and address of each Person owning shares of
Common Stock or Preferred Stock and (B) the certificate number
of each certificate evidencing shares of capital stock issued
by the Company, the number of shares evidenced by each
16
such certificate, the date of issuance thereof and, in the
case of cancellation, the date of cancellation.
(iii) All the outstanding shares of capital stock of
each Subsidiary that is a corporation are validly issued,
fully paid, nonassessable and, except with respect to wholly
owned Subsidiaries, free of preemptive rights and are owned by
the Company, whether directly or indirectly, free and clear of
all Encumbrances. There are no options, warrants, convertible
securities or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of
any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or any other
interest in, any Subsidiary. There are no voting trusts,
stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other
interests in any Subsidiary.
(iv) The stock register of each Subsidiary accurately
records: (A) the name and address of each Person owning shares
of capital stock of such Subsidiary and (B) the certificate
number of each certificate evidencing shares of capital stock
issued by such Subsidiary, the number of shares evidenced by
each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation.
(v) The Conversion Shares and the Warrant Shares are
duly authorized and reserved for issuance and, upon conversion
of the Preferred Shares and exercise of the warrants in
accordance with the terms thereof, will be validly issued,
fully paid and nonassessable, and free from all Encumbrances
and will not be subject to preemptive rights or similar rights
of stockholders of the Company and will not impose personal
liability upon the holder thereof.
(vi) The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of or
otherwise pursuant to the Preferred Shares and upon the
issuance of the Warrant Shares upon the exercise of or
otherwise pursuant to the Warrants. The Company further
acknowledges that its obligation to issue Conversion Shares
upon conversion of or otherwise pursuant to the Preferred
Shares and Warrant Shares upon the exercise of or otherwise
pursuant to the Warrants in accordance with this Agreement,
the Certificate of Designation and the Warrants is absolute,
subject only to the terms and conditions set forth in this
Agreement, the Certificate of Designation and the Warrants,
regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the
Company.
17
(vii) The terms, designations, powers, preferences
and relative, participating and optional or special rights,
and the qualifications, limitations and restrictions of each
series of Preferred Stock of the Company (other than the
Series C Preferred Stock) are as stated in the Company's
articles of incorporation (including the statement of
designation of the Series B Preferred Stock), filed on or
prior to the date hereof. The terms, designations, powers,
preferences and relative, participating and optional or
special rights, and the qualifications, limitations and
restrictions of the Series C Preferred Stock are as stated in
the Certificate of Designation.
(d) Corporate Books and Records. The minute books of the
Company and the Subsidiaries contain accurate records of all meetings
and accurately reflect all other actions taken by the stockholders,
Boards of Directors and all committees of the Boards of Directors of
the Company and the Subsidiaries. To the extent requested, true and
accurate copies of all such minute books and of the stock register of
the Company and each Subsidiary have been provided by the Company to
Purchaser.
(e) No Conflicts. Assuming that all consents, approvals,
authorizations and other actions set forth in Section 3.1(f) of the
Disclosure Schedule have been obtained and all filings and
notifications listed in Section 3.1(e) of the Disclosure Schedule have
been made and any applicable waiting period has expired or been
terminated, the execution, delivery and performance of this Agreement
and the other Transaction Documents by the Company do not and will not
(i) violate, conflict with or result in the breach of any provision of
the certificate of incorporation or by-laws (or similar organizational
documents) of the Company or any Subsidiary, (ii) conflict with or
violate (or cause an event which could have a Material Adverse Effect
as a result of) any Law or Governmental Order applicable to the
Company, any Subsidiary or any of their respective assets, properties
or businesses, or (iii) except as set forth in Section 3.1(e)(iii) of
the Disclosure Schedule, conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the Securities or any of the
assets or properties of the Company or any Subsidiary pursuant to any
note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement
to which the Company or any Subsidiary is a party or by which any of
the Securities or any of the assets or properties of the Company or any
Subsidiary is bound or affected, except, in the case of clause (c), to
the extent that such conflicts, breaches, defaults or other matters
would not (i) adversely affect the ability of the Company to carry out
its obligations under, and to consummate the transactions contemplated
by, this Agreement and the other Transaction Documents or (ii)
adversely affect the ability of the Company and the Subsidiaries to
conduct its business.
18
(f) Governmental Consents and Approvals. Except as set forth
in Section 3.1(f) of the Disclosure Schedule, the execution, delivery
and performance of this Agreement and each Transaction Document by the
Company do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification
to, any Governmental Authority. The Company knows of no reason why all
the consents, approvals and authorizations necessary for the
consummation of the transactions contemplated by this Agreement will
not be received.
(g) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred
to herein as the "SEC Reports") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act, and
none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as
in effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP, except as may be otherwise specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required
by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for
the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.
(h) Material Changes. Since the date of the latest financial
statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer,
director or
19
Affiliate, except pursuant to existing Company stock option plans. The
Company does not have pending before the Commission any request for
confidential treatment of information.
(i) Litigation. Except as set forth in Section 3.1(i) of the
Disclosure Schedule (which, with respect to each Action set forth
therein, sets forth the parties, nature of the proceeding, date and
method commenced, amount of charges or other relief sought and, if
applicable, paid or granted), there are no Actions by or against the
Company or any Subsidiary (or by or against the Company or any
Affiliate thereof and relating to its business, the Company or any
Subsidiary) or affecting any of the Assets or its business pending
before any Governmental Authority (or, to the best knowledge of the
Company after due inquiry, threatened to be brought by or before any
Governmental Authority). None of the matters set forth in Section
3.1(i) of the Disclosure Schedule has or has had a Material Adverse
Effect or could affect the legality, validity or enforceability of this
Agreement, any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in
Section 3.1(i) of the Disclosure Schedule, none of the Company, the
Subsidiaries or any of their respective assets or properties, including
the Assets, is subject to any Governmental Order (nor, to the best
knowledge of the Company after due inquiry, are there any such
Governmental Orders threatened to be imposed by any Governmental
Authority) which has or has had a Material Adverse Effect or could
affect the legality, validity or enforceability of this Agreement, any
other Transaction Document or the consummation of the transactions
contemplated hereby or thereby.
(j) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(k) Compliance. (i) Except as set forth in Section 3.1(k)(i)
of the Disclosure Schedule and to the best knowledge of the Company,
after due inquiry, the Company and the Subsidiaries have each conducted
and continue to conduct its business in accordance with all Laws and
Governmental Orders applicable to the Company or any Subsidiary or the
Assets, and neither the Company nor any Subsidiary is in violation of
any such Law or Governmental Order.
(ii) Section 3.1(k)(ii) of the Disclosure Schedule
sets forth a brief description of each Governmental Order
applicable to the Company, any Subsidiary or the Assets, and
no such Governmental Order has or has had a Material Adverse
Effect or could affect the legality, validity or
enforceability of this Agreement, any Ancillary Agreement or
the consummation of the transactions contemplated hereby or
thereby.
(iii) To the best knowledge of the Company, after due
inquiry, none of the Company, any Subsidiary or any officer,
director, employee,
20
agent or representative of the Company or any Subsidiary has
furthered or supported any foreign boycott in violation of the
Anti-Boycott laws and regulations of the United States
promulgated pursuant to the Export Administration Act of 1979
(50 U.S.C.A. App. ss. 2407, and regulations promulgated
thereunder).
(l) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has
received any notice of Actions relating to the revocation or
modification of any Material Permit.
(m) Material Contracts. Except as set forth in Section 3.1(m)
of the Disclosure Schedule, neither the Company nor any Subsidiary is a
party to or bound by any "material contracts" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the Commission) with respect to
the Company or any Subsidiary. All contracts described in this Section
3.1(m) are valid and in full force and effect except to the extent they
have previously expired in accordance with their terms or if the
failure to be in full force and effect, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any Subsidiary has violated any
provision of, or committed or failed to perform any act which with or
without notice, lapse of time or both would constitute a default under
the provisions of, any contract described above, except in each case
for those violations and defaults which, individually or in the
aggregate, would not reasonably be expected to result in a Material
Adverse Effect.
(n) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to its business of the Company and the
Subsidiaries, in each case free and clear of all Encumbrances, except
for Encumbrances as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries and
Encumbrances for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance.
(o) Patents and Trademarks. Except as would not, individually
or in the aggregate, have a Material Adverse Effect:
21
(i) Section 3.1(o)(i) of the Disclosure Schedule sets
forth a true and complete list of (A) all patents and patent
applications, registered trademarks and trademark registration
applications, registered copyrights and copyright registration
applications, and domain names included in the Company
Intellectual Property, and (B) all material Company IP
Agreements excluding licenses for the use of Company Software
to customers of the Company or its Subsidiaries in the
ordinary course of business.
(ii) To the best knowledge of the Company, after due
inquiry, the operation of its business as currently conducted
or as contemplated to be conducted, the use of the Company
Intellectual Property and Licensed Intellectual Property in
connection therewith and the Company's and the Subsidiaries'
transmission, use, linking and other practices related to the
operation of their web sites in connection with its business,
the content thereof and the advertisements contained therein,
do not infringe, misappropriate or otherwise violate the
Intellectual Property or other proprietary rights, including
rights of privacy, publicity and endorsement, of any third
party, and no Actions or Claims are pending or threatened
against the Company or any Subsidiary alleging any of the
foregoing.
(iii) To the best knowledge of the Company, after due
inquiry, the Company or a Subsidiary is the exclusive owner of
the entire and unencumbered right, title and interest in and
to the Company Intellectual Property, and the Company or a
Subsidiary has a valid right to use the Company Intellectual
Property and Licensed Intellectual Property as currently
conducted or as contemplated to be conducted.
(iv) Except as disclosed in Section 3.1(o)(iv) of the
Disclosure Schedule, no Company Intellectual Property, or to
the best knowledge of Seller after due inquiry, any Licensed
Intellectual Property, is subject to any outstanding decree,
order, injunction, judgment or ruling restricting the use of
such Intellectual Property or that would impair the validity
or enforceability of such Intellectual Property.
(v) The Company Intellectual Property and the
Licensed Intellectual Property include all of the Intellectual
Property used in the ordinary day-to-day conduct of its
business, and there are no other items of Intellectual
Property that are material to the ordinary day-to-day conduct
of its business. The Company Intellectual Property, or to the
best knowledge of Seller after due inquiry, any Licensed
Intellectual Property, are subsisting, valid and enforceable,
and has not been adjudged invalid or unenforceable in whole or
part.
(vi) No Actions or Claims have been asserted or are
pending or, to the best knowledge of the Company after due
inquiry, threatened against the Company or any Subsidiary (i)
based upon or challenging or
22
seeking to deny or restrict the use by the Company or any
Subsidiary of any of the Company Intellectual Property or
Licensed Intellectual Property, (ii) alleging that any
services provided by, processes used by, or products
manufactured or sold by the Company or any Subsidiary infringe
or misappropriate any Intellectual Property right of any third
party or (iii) alleging that the Licensed Intellectual
Property is being licensed or sublicensed in conflict with the
terms of any license or other agreement.
(vii) To the best knowledge of the Company, no Person
is engaging in any activity that infringes the Company
Intellectual Property or Licensed Intellectual Property.
Except as set forth in Section 3.1(o)(vii) of the Disclosure
Schedule, neither the Company nor any Subsidiary has granted
any license or other right to any third party with respect to
the Company Intellectual Property or Licensed Intellectual
Property except to the customers of its business to whom the
Company or a Subsidiary has licensed such Company Intellectual
Property or Licensed Intellectual Property in the ordinary
course of business. The consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents will not result in the termination or impairment of
any of the Company Intellectual Property.
(viii) To the best knowledge of the Company, after
due inquiry, the Company Software is free of all viruses,
worms, trojan horses and other material known contaminants.
The Company Software does not incorporate any GNU or "open"
source code or object code under which the Company Software is
subject to the GNU general public license or GNU lesser
general public license. To the best knowledge of the Company,
after due inquiry, the Company or a Subsidiary has obtained
all approvals necessary for exporting the Company Software
outside the United States and importing the Company Software
into any country in which the Company Software is now sold or
licensed for use, and all such export and import approvals in
the United States and throughout the world are valid, current,
outstanding and in full force and effect. No rights in the
Company Software have been transferred to any third party
except to the customers of its business to whom the Company or
a Subsidiary has licensed such Company Software in the
ordinary course of business. The Company or a Subsidiary has
the right to use all software development tools, library
functions, compilers, and other third party software that are
material to its business or that are required to operate or
modify the Company Software.
(ix) The Company and the Subsidiaries have taken
reasonable steps in accordance with normal industry practice
to maintain the confidentiality of the trade secrets and other
confidential Intellectual Property used in connection with its
business. To the best knowledge of the Company after due
inquiry, (i) there has been no misappropriation of any
material trade secrets or other material confidential
Intellectual
23
Property used in connection with its business by any Person;
(ii) no employee, independent contractor or agent of the
Company or any Subsidiary has misappropriated any trade
secrets of any other Person in the course of performance as an
employee, independent contractor or agent of its business; and
(iii) no employee, independent contractor or agent of the
Company or any Subsidiary is in default or breach of any term
of any employment agreement, nondisclosure agreement,
assignment of invention agreement or similar agreement or
contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
(x) To the best knowledge of the Company, after due
inquiry, the Company's or any Subsidiary's operation of any
web sites used in connection with its business, and content
thereof and data processed, collected, stored or disseminated
in connection therewith, do not violate any applicable Law,
including European Directive 95/46/EC, and any Person's right
of privacy or publicity. The Company or its Subsidiary (i) has
obtained all necessary permits, approvals, consents,
authorizations or licenses to lawfully operate its web sites
and to use its data and (ii) is operating its web sites and
using its data in accordance with the scope of such permits,
approvals, consents, authorizations or licenses. The Company
and its Subsidiaries have taken reasonable steps in accordance
with normal industry practice to secure their web sites and
data, and any portion thereof, from unauthorized access by any
Person.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in its
businesses in which the Company and the Subsidiaries are engaged. To
the best of Company's knowledge, such insurance contracts and policies
are accurate and complete. Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
(q) Employee Benefits.
(i) Section 3.1(q)(i) of the Disclosure Schedule
lists (A) all employee benefit plans, bonus, stock option,
stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or
other contracts or agreements, to which the Company or any
Subsidiary is a party, with respect to which the Company or
any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary
for the benefit of any current or former employee, officer or
director of the Company or any Subsidiary and
24
(B) any contracts, arrangements or understandings between the
Company or any of its Affiliates and any employee of the
Company or any Subsidiary (collectively, the "Plans").
(ii) Each Plan has been operated in all material
respects in accordance with its terms and the requirements of
all applicable Laws. The Company and its Subsidiaries have
performed all material obligations required to be performed by
it under, is not in any material respect in default under or
in material violation of, and the Company has no knowledge of
any material default or violation by any party to, any Plan.
No action is pending or, to the knowledge of the Company,
threatened with respect to any Plan (other than claims for
benefits in the ordinary course) and, to the knowledge of the
Company, no fact or event exists that could give rise to any
such action.
(r) Taxes.
(i) Except as set forth in Section 3.1(r)(i) of the
Disclosure Schedule, (A) all Tax Returns required to be filed
by or with respect to the Company and each Subsidiary
(including the consolidated federal income Tax Return of the
Company and any state, local or other Tax Return that includes
the Company or any Subsidiary on a consolidated, combined or
unitary basis) have been timely filed; (B) all Taxes required
to be shown on such Tax Returns or otherwise due in respect of
the Company or any Subsidiary have been timely paid; (C) all
such Tax Returns are true, correct and complete in all
material respects; (D) no adjustment relating to such Tax
Returns has been proposed formally or informally by any
Governmental Authority (insofar as either relates to the
activities or income of the Company or any Subsidiary or could
result in liability of the Company or any Subsidiary on the
basis of joint and/or several liability) and, to the best
knowledge of the Company after due inquiry, no basis exists
for any such adjustment; (E) there are no pending or, to the
best knowledge of the Company after due inquiry, threatened
Actions for the assessment or collection of Taxes against the
Company or any Subsidiary or (insofar as either relates to the
activities or income of the Company or any Subsidiary or could
result in liability of the Company or any Subsidiary on the
basis of joint and/or several liability) any Person that was
included in the filing of a Tax Return with the Company on a
consolidated, combined or unitary basis; (F) to the best
knowledge of the Company, after due inquiry, all sales and
license transactions between the Company and the Company or
any Subsidiary, between the Company and any Subsidiary and
between any of the Subsidiaries, have been conducted on an
arm's-length basis; (G) there are no Tax liens on any assets
of the Company or any Subsidiary; (H) neither Seller nor any
Affiliate is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or
deemed payment by the Company or a Subsidiary of any "excess
parachute payments" within the meaning of
25
section 280G of the Code (without regard to Section 280G(b)(4)
of the Code); (I) no acceleration of the vesting schedule for
any property that is substantially unvested within the meaning
of the regulations under Section 83 will occur in connection
with the transactions contemplated by this Agreement; (J) from
and after June 30, 2000, the Company and each Subsidiary have
been and continue to be members of the affiliated group
(within the meaning of Section 1504(a)(1) of the Code) for
which the Company files a consolidated return as the common
parent, and has not been includible in any other consolidated
return for any taxable period for which the statute of
limitations has not expired; (K) none of the Company or the
Subsidiaries has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (L) the Company and Subsidiary
have each properly and timely withheld, collected and
deposited all Taxes that are required to be withheld,
collected and deposited under applicable Law; (M) none of the
Company or Subsidiaries is doing business in or engaged in a
trade or business in any jurisdiction in which it has not
filed all required Tax Returns, and no notice or inquiry has
been received from any jurisdiction in which Tax Returns have
not been filed by the Company or any Subsidiary to the effect
that the filing of Tax Returns may be required; (N) neither
the Company nor any Subsidiary has been at any time a member
of any partnership or joint venture or the holder of a
beneficial interest in any trust for any period for which the
statute of limitations for any Tax has not expired and (O)
neither the Company nor any Subsidiary is subject to any
accumulated earnings tax, personal holding company Tax or
similar Tax.
(ii) Except as set forth with reasonable specificity
in Section 3.1(r)(ii) of the Disclosure Schedule, (A) there
are no outstanding waivers or agreements extending the statute
of limitations for any period with respect to any Tax to which
the Company or any Subsidiary may be subject; (B) there are no
requests for information currently outstanding that could
affect the Taxes of the Company or any Subsidiary; (C) there
are no proposed reassessments of any property owned by the
Company or any Subsidiary or other proposals that could
increase the amount of any Tax to which the Company or any
Subsidiary would be subject; (D) no power of attorney that is
currently in force has been granted with respect to any matter
relating to Taxes that could affect the Company or any
Subsidiary; (E) none of the Company or the Subsidiaries (1)
has or is projected to have an amount includible in its income
for the current taxable year under Section 951 of the Code,
(2) has been a passive foreign investment company within the
meaning of Section 1296 of the Code, (3) has an unrecaptured
overall foreign loss within the meaning of Section 904(f) of
the Code or (4) has participated in or cooperated with an
international boycott within the meaning of section 999 of the
Code and (F) none of the Company or the Subsidiaries has, to
an extent that would cause a tax liability to the Company, any
(1) income reportable for a
26
period ending after the Closing but attributable to a
transaction (e.g., an installment sale) occurring in, or a
change in accounting method made for, a period ending on or
prior to the Closing that resulted in a deferred reporting of
income from such transaction or from such change in accounting
method (other than a deferred intercompany transaction), or
(2) deferred gain or loss arising out of any deferred
intercompany transaction.
(iii) Section 3(r)(iii) of the Disclosure Schedule
(A) lists all income, franchise and similar income-type Tax
Returns (federal, state, local and foreign) filed with respect
to each of the Company and the Subsidiaries for taxable
periods ended on or after June 30, 2000, (B) indicates the
most recent income, franchise or similar Tax Return for each
relevant jurisdiction for which an audit has been completed or
the statute of limitations has lapsed and (C) indicates all
Tax Returns that currently are the subject of audit.
(iv) To the extent reasonably requested by Purchaser,
the Company has delivered to Purchaser correct and complete
copies of all federal, state and foreign income, franchise and
similar Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or
any Subsidiary since June 30, 2000.
(v) To the extent reasonably requested by Purchaser,
the Company has delivered to Purchaser a true and complete
copy of any tax-sharing or allocation agreement or arrangement
involving the Company or any Subsidiary and a true and
complete description of any such unwritten or informal
agreement or arrangement.
(vi) Except as et forth in Section 3.1(r)(vi) of the
Disclosure Schedule, the Company has established reserves and
allowances to satisfy all liabilities for Taxes relating to
the Company and the Subsidiaries for all taxable periods
through the Closing (without regard to the materiality
thereof).
(s) Title to Tangible Personal Property. Section 3.1(s) of the
Disclosure Schedule sets forth a list of all material Tangible Personal
Property as of the date therein specified. Except as set forth in
Section 3.1(s), as of the date hereof, The Company and any Subsidiary
has good and valid title to, or a valid leasehold interest in, all
Tangible Personal Property, which includes such property listed on
Section 3.1(s), other than property that is obsolete or has been
retired or disposed of in the ordinary course of business, free and
clear of any Encumbrances, other than Permitted Encumbrances.
(t) Title to Owned and Leased Real Property.
27
(i) Neither the Company nor any Subsidiary currently,
and in the past, has owned any real property.
(ii) As of the date hereof, except as set forth in
Section 3.1(t)(ii) of the Disclosure Schedule, the Company and
each Subsidiary has a valid leasehold interest in the Leased
Real Property.
(iii) The Leased Real Property has not suffered any
material damage by fire, casualty or otherwise which has not
heretofore been repaired and restored in all material
respects.
(iv) Except as set forth in Section 3.1(t)(iv) of the
Disclosure Schedule, there (i) is no default (or event that,
with or without the giving of notice or the lapse of time or
both, could constitute a default) that exists under the leases
for the Leased Real Property, (ii) are no adverse or other
parties in possession of the Real Property, or of any part
thereof and no third party has been granted any license,
lease, or other right relating to the use or possession of the
Real Property, or any part thereof, except tenants under
written leases; and (iii) are no material unpaid impact fees,
special assessments and permit fees with respect to the Real
Property, if applicable.
(v) Neither the Company nor any Subsidiary has
granted any rights, options, rights of first refusal, or any
other agreements of any kind, which are currently in effect,
to purchase or to otherwise acquire the Real Property or any
part thereof or any interest therein.
(u) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 in any
twelve (12) month period other than (i) for payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee
benefits, including stock option agreements under any stock option plan
of the Company.
(v) Sarbanes-Oxley Act. The Company is in substantial
compliance with the applicable provisions of the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act"), and the rules and regulations
promulgated thereunder, that are effective and intends to comply
substantially with other applicable provisions of
28
the Sarbanes-Oxley Act, and the rules and regulations promulgated
thereunder, upon the effectiveness of such provisions.
(w) Certain Fees. No brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this
Agreement, except as set forth in Section 3.1(x) of the Disclosure
Schedule. Purchaser shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(x) Private Placement. Assuming the accuracy of Purchaser's
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to Purchaser as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of any trading market.
(y) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Shares,
will not be or be an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company
shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(z) Registration Rights. Except as set forth in Section 3.1(z)
of the Disclosure Schedule, no Person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company.
(aa) Application of Takeover Protections. The Company and its
Board have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or
other similar anti-takeover provision under the Company's Certificate
of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to Purchaser
as a result of Purchaser and the Company fulfilling their obligations
or exercising their rights under the Transaction Documents, including
without limitation the Company's issuance of the Securities and
Purchaser's ownership of the Securities.
(bb) Disclosure. The Company understands and confirms that
Purchaser will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure
provided to Purchaser regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with
respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under
29
which they were made, not misleading. The Company acknowledges and
agrees that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby other
than those specifically set forth in Section 3.2 hereof.
(cc) No Integrated Offering. Assuming the accuracy of
Purchaser's representations and warranties set forth in Section 3.2,
neither the Company, nor any of its affiliates, nor any Person acting
on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any
exchange or automated quotation system on which any of the securities
of the Company are listed or designated.
(dd) General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to Purchaser.
(ee) Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any corrupt
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government
officials or employees or to any foreign or domestic political parties
or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law, or
(iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ff) Accountants. The Company's accountants are set forth in
Section 3.1(ff) of the Disclosure Schedule. To the Company's knowledge,
such accountants, who the Company expects will express their opinion
with respect to the financial statements to be included in the
Company's Annual Report on Form 10-K for the year ended June 30, 2004,
are independent accountants as required by the Securities Act.
(gg) Acknowledgment Regarding Purchaser's Purchase of
Securities. The Company acknowledges and agrees that Purchaser is
acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents and the transactions contemplated hereby.
The Company further acknowledges that Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
30
contemplated hereby and any advice given by Purchaser or any of its
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to Purchaser's
purchase of the Securities. The Company further represents to Purchaser
that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
3.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:
(a) Organization; Authority. Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or
similar action on the part of Purchaser. Each Transaction Document to
which it is a party has been duly executed by Purchaser, and, assuming
this Agreement constitutes the valid and binding obligation of the
Company and when delivered by Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of
Purchaser, enforceable against it in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws
relating to or affecting the rights of creditors' generally and by
general equitable principles (regardless of whether such enforceability
is considered in a Action in equity or at law).
(b) Investment Intent. Purchaser understands that the
Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting Purchaser's
right to sell the Securities pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state securities
laws). Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any of the Securities.
(c) Rule 144. Purchaser understands that the Securities must
be held indefinitely unless such Securities are registered under the
Securities Act or an exemption from registration is available.
Purchaser acknowledges that it is familiar with Rule 144, and that
Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. Purchaser understands that to the extent that
Rule 144 is not available, Purchaser will be unable to sell any
Securities
31
without either registration under the Securities Act or the existence
of another exemption from such registration requirement.
(d) Purchaser Status. At the time Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants, it will be either: (i) an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a "qualified institutional
buyer" as defined in Rule 144A(a) under the Securities Act. Purchaser
is not required to be registered as a broker-dealer under Section 15 of
the Exchange Act.
(e) Experience of Purchaser. Purchaser, either alone or
together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment. (k) General. Purchaser
understands that the Securities are being offered and sold in reliance
on a transactional exemption from the registration requirements of
federal and state securities laws and the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in
order to determine the applicability of such exemptions and the
suitability of Purchaser to acquire the Securities. Purchaser
understands that no United States federal or state agency or any
government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
(f) General Solicitation. Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
The Company acknowledges and agrees that Purchaser does not make or has
not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions. The Securities may only be disposed of
in compliance with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to
32
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
and shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights Agreement.
(b) Purchaser agrees to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN SECURITIES
PURCHASE AGREEMENT, A CERTAIN STOCKHOLDERS' AGREEMENT AND A
CERTAIN REGISTRATION RIGHTS AGREEMENT, ALL OF WHICH ARE DATED
FEBRUARY 11, 2005 AND ARE AVAILABLE FOR INSPECTION AT THE
OFFICES OF THE COMPANY.
(c) Certificates evidencing the Shares, Preferred Shares,
Conversion Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering
the resale of such security is effective under the Securities Act, or
(ii) following a sale of such Shares, Preferred Shares, Conversion
Shares or Warrant Shares pursuant to an effective registration
statement (including the Registration Statement), or (iii) following
any sale of such Shares, Preferred Shares, Conversion Shares or Warrant
Shares Shares pursuant to Rule 144, or (iv) if such Shares, Preferred
Shares, Conversion Shares or Warrant Shares are eligible for sale under
Rule 144(k), or (v) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the Staff of the Commission); provided,
however, that in each of instances (iii) through (v) above, (A)
Purchaser shall have provided representations that Purchaser is
permitted to
33
dispose of such Shares, Preferred Shares, Conversion Shares and/or
Warrant Shares without limitation as to amount or manner of sale
pursuant to Rule 144 under the Securities Act and (B) such certificates
evidencing the Shares, Preferred Shares, Conversion Shares and/or
Warrant Shares shall have been surrendered along with a notice
requesting removal of any legend and requesting the issuance of new
certificates free of the legend to replace those surrendered. The
Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required
by the Company's transfer agent to effect the removal of the legend
hereunder. If all or any portion of a Preferred Share or Warrant is
exercised at a time when there is an effective registration statement
to cover the resale of the Conversion Shares or Warrant Shares, such
Conversion Shares or Warrant Shares shall be issued free of all
legends.
4.2 Integration. Except as otherwise contemplated by this Agreement,
the Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to Purchaser or that would be integrated with the offer or
sale of the Securities for purposes of the rules and regulations of any exchange
or quotation service on which any of the securities of the Company are listed or
quoted such that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.
4.3 Description of the Senior Secured Note and Security Agreement.
The following summary of the Senior Secured Note and Security Agreement
is provided for illustrative purposes only. To the extent there are any
inconsistencies between the summary below and the Senior Secured Note and/or
Security Agreement, such agreements shall control.
(a) Maturity. The Company shall pay Purchaser the outstanding
principal amount of the Senior Secured Note, together with all accrued
and unpaid interest thereon, on the earliest to occur (the "Maturity
Date") of (i) thirty-six (36) months following the Closing Date, (ii) a
merger or combination of the Company or the sale, transfer or other
disposition of all or substantially all of the assets of the Company or
(iii) the acquisition by a single entity, person or a "group" within
the meaning of Rule 13d-1 of the Exchange Act, of more than fifty
percent (50%) of the voting power or capital stock of the Company (on a
fully-diluted basis).
(b) Interest. The Senior Secured Note shall bear interest
("Interest") at a rate per annum as follows:
Months 1-12 of the Senior Secured Note 6% per annum
Months 13-24 of the Senior Secured Note 9% per annum
Months 25-36 of the Senior Secured Note 12% per annum
34
Interest shall be payable quarterly in cash. If any Event of Default
(as defined in the Senior Secured Note) has occurred and is continuing,
the Senior Secured Note shall bear interest at a rate of the
then-applicable Interest plus four percent (4%) per annum until such
time as such Event of Default has been cured.
(c) Prepayment. The Senior Secured Note may be prepaid, in
whole or in part, at any time without penalty or premium, upon ten (10)
days' prior written notice to Purchaser. In the event the Company
issues any Exempt Issuance of securities during the term of the Senior
Secured Note, the Company shall use at least fifty percent (50%) of the
proceeds therefrom to prepay the Senior Secured Note; provided,
however, that the Preferred Shares have been redeemed, in whole, in
accordance with its terms.
(d) Security and Ranking. The Senior Secured Note and all
other obligations of the Company under this Agreement and the other
Transaction Documents shall be secured by substantially all of the
assets of the Company, as described in the Security Agreement
(collectively, the "Collateral"), dated as of even date herewith, by
and between Purchaser and the Company. As an inducement to Purchaser to
purchase the Senior Secured Note and the other Securities described
herein and execute and enter into this Agreement, and to secure prompt
payment of the Senior Secured Note and the discharge in full of the
Company's obligations under this Agreement and under the Senior Secured
Note, this Agreement and the other Transaction Documents, the Company
shall grant to Purchaser a first priority perfected lien and security
interest in the Collateral, which security interest shall rank senior
in lien priority to any other existing or future Indebtedness.
4.4 Certain Covenants of the Company.
(a) Affirmative Covenants. The Company covenants that, so long
as any portion of the Senior Secured Note or the Preferred Shares is
outstanding, it shall take the following actions:
(i) Provide to Purchaser all such information about
the Company, as the case may be, that is made available
publicly.
(ii) If an Event of Default occurs, the Company
shall, if so requested by Purchaser, promptly provide the
following information:
(A) Annual Financial Statements. Unless
filed with the Commission through EDGAR and publicly
available through the EDGAR system, copies of the
consolidated balance sheet of the Company and its
Subsidiaries, as of the end of the immediately
preceding fiscal year and the related consolidated
statements of income, stockholders' equity and cash
flows for such fiscal year, prepared in accordance
with generally accepted accounting principles and
certified by a firm of independent public accountants
of recognized national standing or such other
independent public accountants, in either case, as
unanimously selected by the Board;
35
(B) Monthly Financial Statements. Unless
filed with the Commission through EDGAR and publicly
available through the EDGAR system, copies of the
consolidated balance sheet of the Company and its
Subsidiaries, and the related consolidated statements
of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally
accepted accounting principles, such consolidated
balance sheet, consolidated statements of income,
stockholders' equity and cash flows to be as of the
end of each month following the end of the
immediately preceding fiscal year, in each case with
comparative statements for the prior fiscal year;
provided, however, that, to the extent the
information in this Section 4.4(a)(ii)(B) is
requested by Purchaser, Purchaser shall hold and
treat all such information confidential;
(C) Accountant's Letters. Copies of each
accountant's management letter and other written
report submitted to the Company by its independent
public accountants in connection with an annual or
interim audit of the books of the Company or any of
its Subsidiaries;
(D) Notices. Copies of notices of all
Actions that could materially and adversely affect
the Company or any of its Subsidiaries; and
(E) Other Information. Any other information
regarding the business, prospects, financial
condition, operations, property or affairs of the
Company as Purchaser may reasonably request;
(iii) The Company shall maintain and cause each of
its Subsidiaries to maintain their respective corporate
existence unless the Board unanimously approves otherwise;
(iv) The Company shall obtain and maintain and cause
each of its Subsidiaries to maintain as to their respective
properties and businesses, with financially sound and
reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is
customary for companies similarly situated;
(v) The Company shall permit and cause each of its
Subsidiaries to permit Purchaser and such persons as Purchaser
may designate, at Purchaser's expense, to visit and inspect
any of the properties of the Company and its Subsidiaries,
examine their books and take copies and extracts therefrom,
discuss the affairs, finances and accounts of the Company and
its Subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said
accountants to discuss with Purchaser and its designees such
affairs, finances and accounts), and consult with and advise
the management of the Company and its Subsidiaries as to their
affairs, finances and accounts, all at reasonable times and
upon reasonable notice during normal business hours and
provided that Purchaser or its designees have executed a
confidentiality
36
agreement in substance and form reasonably acceptable to the
Company; provided, however, that in no event (other than an
Event of Default) shall the Company be required to provide
Purchaser or its designees with any information about the
Company that is not publicly available;
(vi) The Company shall comply, and cause each
Subsidiary to comply, with all applicable Laws, noncompliance
with which could materially adversely affect its business or
condition, financial or otherwise;
(vii) The Company shall at all times maintain a cash
balance of not less than $750,000 on its consolidated balance
sheet, unless otherwise unanimously approved by the Board;
(viii) The Company shall keep, and cause each
Subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with
generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Company and such
Subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in
connection with its business shall be made; and
(ix) Within no more than five (5) days following an
Event of Default (as defined in the Senior Secured Note), the
Company shall notify Purchaser of such Event of Default, the
circumstances causing such default and the proposed course of
action to be taken by the Company to cure such default.
(b) Negative Covenants. The Company covenants that, so long as
any portion of the Senior Secured Note or the Preferred Shares is
outstanding, it shall not take any of the following actions without the
prior written consent of Purchaser, which may not be withheld
unreasonably:
(i) Redeem or repurchase any shares of Common Stock
Equivalents of the Company, except for (A) repurchases
contemplated by this Agreement, or (B) repurchases or
redemptions from employees, directors or consultants of the
Company in accordance with agreements existing as of the date
hereof for the repurchase or redemption of shares of Common
Stock Equivalents in connection with any termination of
service to the Company or any of its Subsidiaries;
(ii) Except to the extent required to comply with its
obligations hereunder or with applicable Law, the Company
shall not, nor shall it permit any of its Subsidiaries to,
amend its respective articles of organization, by-laws or
regulations, or similar organic documents;
(iii) the Company shall not, nor shall it permit any
of its Subsidiaries to, incur or guarantee any Indebtedness or
enter into any "keep well" or other agreement to maintain any
financial statement condition of another
37
Person or enter into any arrangement having the economic
effect of any of the foregoing, other than (A) short-term
indebtedness and "keep well" or similar assurances for the
benefit of customers, in each case in the ordinary course of
business consistent with past practice or (B) long-term
Indebtedness in connection with the refunding of existing
Indebtedness at a lower cost of funds;
(iv) The Company shall not, nor shall it permit any
of its Subsidiaries to, (A) enter into, adopt or amend or
increase the amount or accelerate the payment or vesting of
any benefit or amount payable under any employee benefit plan,
or otherwise increase the compensation or benefits of any
director, officer or other employee of such party or any of
its subsidiaries, except for normal increases in compensation
and benefits in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the
Company and its Subsidiaries taken as a whole, (B) enter into
or amend any employment, severance or special pay arrangement
with respect to the termination of employment or other similar
contract, agreement or arrangement with any director or
officer; provided that the foregoing shall not preclude the
implementation of incentive pay arrangements in the ordinary
course of business consistent with past practice, or (C)
create any Encumbrance on any of the assets or properties of
the Company or any Subsidiary;
(v) Declare or pay any dividend on any class of
Common Stock Equivalents of the Company or the Guarantor
(except dividends payable solely in Common Stock Equivalents
in connection with a stock split or similar transaction of the
Company);
(vi) Enter into any transactions with Affiliates of
the Company other than in the ordinary course of business;
(vii) Merge or consolidate with any other entity or
have a transaction in which any "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of greater
than fifty percent (50%) of the shares of Common Stock then
outstanding of the Company, on a fully diluted basis,
ordinarily entitled to vote in the election of directors;
(viii) Sell all or substantially all of the assets of
the Company;
(ix) Except as contemplated by this Agreement, permit
any Encumbrances on any assets of the Company (other than the
Permitted Liens);
(x) Liquidate, dissolve or wind-up the operations of
the Company;
38
(xi) Apply for, or consent to, the appointment of a
receiver, trustee or liquidator for the Company or any
Subsidiary or any of their respective properties ; and
(xii) Enter into any agreement to do any of the
foregoing.
4.5 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.6 Board Composition. Purchaser shall have the right to designate two
(2) representatives (the "Designees") for election to the Company's Board, both
of whom shall not have been involved in any of the events set forth in Item
401(f) of Regulation S-K during the preceding ten (10) year and shall be
qualified to serve as directors of a reporting company under the Exchange Act as
determined by a majority of the members of a committee of non-employee directors
established for such purpose and at least one of whom shall satisfy the Nasdaq
National Market requirements for an "independent director." Such "independent"
Designee shall be appointed to the Company's Compensation Committee, and any
future increases in the compensation of the Chief Executive Officer, or
additional grants of options to the Chief Executive Officer (except Replacement
Options), shall only be approved by unanimous consent of the Company's
Compensation Committee. The Company shall use its best efforts to have the
Designees nominated and elected to the Board.
4.7 Additional Covenants of the Company.
(a) For a period equal to the shorter of (i) three (3) years
from the Closing Date and (ii) such time as Purchaser beneficially owns
less than 5,000,000 shares of Common Stock (on an as converted basis),
the Company shall not issue or sell any shares of Common Stock, or any
securities convertible or exchangeable into Common Stock, for an
effective per share price of less than $0.25, without the prior written
consent of Purchaser.
(b) The Company shall not incur Indebtedness, other than in
connection with an asset-based senior line of credit, without the prior
written consent of Purchaser.
4.8 Certain Transactions. Purchaser and its Affiliates agree not to
engage in any "going private" transaction (including, without limitation,
selling all or substantially all of the Company's assets, merging the Company,
or any other transaction with similar economic effects) with the Company,
without the prior written consent of MacIntosh.
39
4.9 Pre-emptive Rights. For so long as Purchaser owns more than
5,000,000 shares of Common Stock (on an as converted basis) and in the event the
Company proposes to issue or sell any shares of Common Stock, or any securities
convertible or exchangeable into Common Stock, Purchaser shall have the right
(but not the obligation) to purchase such number of securities from the Company,
on the same terms and conditions offered by the Company, in order to maintain
its percentage ownership in the Company; it being understood that Purchaser
shall have ten (10) Business Days from its receipt of written notice from the
Company containing sufficient details with respect to such issuance or sale to
exercise its rights hereunder.
4.10 Indemnification.
(a) The Company shall indemnify and hold harmless Purchaser,
its officers, directors, employees, agents and consultants (each, a
"Purchaser Indemnified Party"), from and against any and all costs,
claims, damages, losses, liabilities and expenses (including reasonable
attorneys' fees) (together, the "Losses") which may be suffered or
incurred by such Purchaser Indemnified Party by reason of (i) any
material misrepresentation or breach of warranty by the Company in this
Agreement or the other Transaction Documents or (ii) any material
default of any obligation, agreement or covenant of the Company under
this Agreement or the other Transaction Documents, in each case so long
as such Losses were not caused by the gross negligence or willful
misconduct of such Purchaser Indemnified Party.
(b) Purchaser shall indemnify and hold harmless the Company
and its officers, directors, employees, agents and consultants (each, a
"Company Indemnified Party"), from and against any and all Losses which
may be suffered or incurred by such Company Indemnified Party by reason
of any material misrepresentation or breach of warranty by Purchaser in
this Agreement or the other Transaction Documents, so long as such
Losses were not caused by the gross negligence or willful misconduct of
such Company Indemnified Party.
(c) An Indemnified Party shall give the Indemnifying Party
notice of any matter which an Indemnified Party has determined has
given or could give rise to a right of indemnification under this
Agreement, within thirty (30) days of such determination, stating the
amount of the Loss, if known, and method of computation thereof, and
containing a reference to the provisions of this Agreement in respect
of which such right of indemnification is claimed or arises.
(d) If an Indemnified Party shall receive notice of any
action, audit, claim, demand or assessment (each, a "Third Party
Claim") against it which may give rise to a claim for Loss under this
Section 4.10, within thirty (30) days of the receipt of such notice,
the Indemnified Party shall give the Indemnifying Party notice of such
Third Party Claim; provided, however, that the failure to provide such
notice shall not release the Indemnifying Party from any of its
obligations under this Section 4.10 except to the extent that such
failure results in a detriment to the Indemnifying Party and shall not
relieve the Indemnifying Party from any
40
other liability that it may have to any Indemnified Party other than
under this Section 4.10. The Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense
and through counsel of its choice if it gives notice of its intention
to do so to the Indemnified Party within ten (10) days of the receipt
of such notice from the Indemnified Party. If the Indemnifying Party
elects to undertake any such defense against a Third Party Claim, the
Indemnified Party may participate in such defense at its own expense.
The Indemnified Party shall cooperate with the Indemnifying Party in
such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records,
materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably
required by the Indemnifying Party. If the Indemnifying Party elects to
direct the defense of any such claim or proceeding, the Indemnified
Party shall not pay, or permit to be paid, any part of such Third Party
Claim unless the Indemnifying Party consents in writing to such payment
or unless the Indemnifying Party withdraws from the defense of such
Third Party Claim liability or unless a final judgment from which no
appeal may be taken by or on behalf of the Indemnifying Party is
entered against the Indemnified Party for such Third Party Claim. If
the Indemnified Party assumes the defense of any such claims or
proceeding pursuant to this Section 4.10(d) and proposes to settle such
claims or proceeding prior to a final judgment thereon or to forgo any
appeal with respect thereto, then the Indemnified Party shall give the
Indemnifying Party prompt written notice thereof and the Indemnifying
Party shall have the right to participate in the settlement or assume
or reassume the defense of such claims or proceeding.
4.11 "Key Man" Life Insurance. Within forty-five (45) days from the
Closing Date, the Company shall have obtained "key man" life insurance on the
life of MacIntosh in an amount between $2,500,000 and $5,000,000, subject to
commercially reasonable availability, costs and terms of such insurance as
approved by MacIntosh
4.12 Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement, the Conversion Shares pursuant to any conversion of the Preferred
Shares and the Warrant Shares pursuant to any exercise of the Warrants.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. On the Closing Date, the Company shall pay
Purchaser a closing fee (the "Closing Fee") equal to Two Hundred Forty Thousand
Dollars ($240,000), by check or wire transfer. The Company and Purchaser shall
be responsible for their respective costs and expenses incurred in connection
with this transaction.
41
5.2 Rights Upon Termination. So long as Purchaser has proceeded in good
faith to consummate this Agreement and the transactions contemplated hereby, in
the event the Company elects not to consummate this transaction for any reason
prior to February 11, 2005, the Company shall pay to Purchaser a financial
advisory and structuring fee (the "Advisory Fee") equal to Five Thousand Dollars
($500,000) which shall, at the sole option of Purchaser, be payable in cash or
shares of Common Stock valued at $0.25 per share of Common Stock. Upon the
Company's election to terminate this transaction, Purchaser shall have ten (10)
days in which to make an election to receive either cash or shares of Common
Stock from the Company. Any Advisory Fee that becomes due shall be payable to
Purchaser within five (5) days following Purchaser's receipt of notice from the
Company that the Company has elected not to consummate this transaction. Any
Advisory Fee paid pursuant to this Section 5.2 shall be in addition to any
expenses and costs payable by the Company to Purchaser in accordance with
Section 5.1 hereof. The Company hereby acknowledges that, in the event the
Company is required to pay the Advisory Fee in accordance with this Section 5.2,
the Company shall be deemed to have received advisory services from Purchaser in
consideration of such Advisory Fee. In the event Purchaser does not consummate
the transactions contemplated hereby by February 11, 2005 or otherwise
terminates this Agreement prior to such date despite the Company's good faith
attempts to consummate the transactions contemplated hereby, the terms of this
Section 5.2 shall expire and the Company shall have no further obligation to pay
the Advisory Fee.
5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand, sent
via a reputable nationwide overnight courier service or mailed by first class
certified or registered mail, return receipt requested, postage prepaid:
If to the Company, at 3400 West 66th Street, Suite 445, Edina,
Minnesota 55435, 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 Justin M. MacIntosh, c/o CorVu Australasia Pty. Ltd., Level 8,
821-843 Pacific Highway, Chatswood NSW 2067, Australia, Facsimile: (011-61 2)
9495 5444, and Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000,
Minneapolis, Minnesota 55402, Attn: John H. Stout or Barbara Muller; or
If to ComVest, at 830 Third Avenue, New York, NY 10022,
Attention: Carl Kleidman, or at such other address or addresses as may have been
furnished to the Company in writing by ComVest, with a copy to Greenberg
Traurig, LLP, The MetLife Building, 200 Park Avenue, New York, New York 10166,
Attention: Alan I. Annex, Esq.
42
Notices provided in accordance with this Section 5.4 shall be
deemed delivered upon personal delivery, one business day after being sent via a
reputable nationwide overnight courier service, or three business days after
deposit in the mail.
5.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of Purchaser. Purchaser may assign any or all
of its rights under this Agreement to any Person to whom Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to Purchaser.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.
5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or Action, any claim that
it is not personally subject to the jurisdiction of any such court or that such
Action is improper or inconvenient venue for such Action. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such Action by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient
43
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
The parties hereby waive all rights to a trial by jury. If either party shall
commence an Action to enforce any provisions of the Transaction Documents, then
the prevailing party in such Action shall be reimbursed by the other party for
its attorneys' fees and other costs and expenses reasonably incurred with the
investigation, preparation and prosecution of such Action.
5.9 Survival. Unless this Agreement is terminated under Section 5.2
hereof, all agreements, representations, warranties and covenants contained
herein shall survive the execution and delivery of this Agreement and the
closing of the transactions contemplated hereby until (i) Purchaser owns less
than 5,000,000 shares of Common Stock (on an as converted basis) or (ii) the
pay-off of the Senior Secured Note, whichever occurs later.
5.10 Execution. This Agreement may be executed in two (2) or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.11 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
44
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment
or payments to Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
(Signature Page Follows)
45
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
CORVU CORPORATION
By:
-----------------------------------------
Name:
Title:
SUBSIDIARIES:
CORVU NORTH AMERICA, INC.
By:
-----------------------------------------
Name:
Title:
CORVU SOFTWARE MARKETING, INC.
By:
-----------------------------------------
Name:
Title:
CORVU SOFTWARE, LTD.
By:
-----------------------------------------
Name:
Title:
CORVU LATIN AMERICA, INC.
By:
-----------------------------------------
Name:
Title:
46
CORVU PLC
By:
-----------------------------------------
Name:
Title:
CORVU AUSTRALASIA PTY. LTD.
By:
-----------------------------------------
Name:
Title:
PURCHASER:
COMVEST INVESTMENT PARTNERS II LLC
By:
-----------------------------------------
Name:
Title:
47
EX-3
4
e1023129.txt
SENIOR SECURED PROMISSORY NOTE
EXHIBIT 3
EXECUTION COPY
SENIOR SECURED PROMISSORY NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), NOR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY HAS BEEN ACQUIRED FOR INVESTMENT AND THIS SECURITY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF IT UNDER THE ACT OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE MAKER THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT. THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS NOTE AND THE SECURITIES
PURCHASE AGREEMENT, DATED FEBRUARY 11, 2005 (THE "PURCHASE AGREEMENT"), AND NO
TRANSFER OF THIS SECURITY SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH. THE TRANSFERABILITY OF THIS SECURITY
IS SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND IN THE PURCHASE
AGREEMENT, A COPY OF WHICH WILL BE PROVIDED TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE MAKER.
CORVU CORPORATION
SENIOR SECURED NON-CONVERTIBLE PROMISSORY NOTE
THIS SENIOR SECURED NOTE IS MADE AND DELIVERED PURSUANT TO THE
PURCHASE AGREEMENT AND SUBJECT TO THE TERMS AND
CONDITIONS THEREOF. THIS SENIOR SECURED NOTE IS SECURED BY THE COLLATERAL
DESCRIBED IN A CERTAIN SECURITY AGREEMENT, DATED AS OF EVEN DATE
HEREWITH (THE "SECURITY AGREEMENT").
February 11, 2005
$1,500,000
FOR VALUE RECEIVED, CORVU CORPORATION, a Minnesota corporation
(the "Maker"), promises to pay to the order of COMVEST INVESTMENT PARTNERS II
LLC, a Delaware limited liability company or its registered assigns (the
"Holder") on or before a date which shall be the earlier 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) (the "Maturity Date") the principal amount of One Million
Five Hundred Thousand Dollars ($1,500,000) together with all accrued and unpaid
interest thereon, unless this Note is sooner converted in accordance with the
terms set forth herein. All capitalized terms used but not defined herein shall
have the meaning set forth in the Purchase Agreement.
1. Interest Rate. The unpaid balance of the principal amount of this
Note shall accrue simple interest (the "Interest") at a rate (the "Interest
Rate") per annum as follows:
Months 1-12 of the Senior Secured Note 6% per annum Months
13-24 of the Senior Secured Note 9% per annum Months 25-36 of
the Senior Secured Note 12% per annum
Interest shall begin accruing as of the date hereof through the Maturity Date.
Interest shall accrue on a quarterly basis and on the date of a conversion, if
applicable, and shall be computed on the basis of a 365-day year, for the actual
number of days involved. If any Event of Default 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.
2. Payment of Principal Amount and Interest. Accrued Interest shall be
due and payable on a quarterly basis. Such payments shall be made either by wire
transfer or by delivery to the Holder of a check payable to the Holder.
3. Prepayment.
(a) Optional Prepayment. Notwithstanding the foregoing, at any time
after the Closing Date, the Maker shall have the right to prepay all or any
portion of the then-outstanding principal balance of this Note, together with
accrued but unpaid Interest thereon, without premium or penalty, upon ten (10)
days' prior written notice to Holder.
(b) Mandatory Prepayment. In the event the Maker issues Common Stock
Equivalents other than an Exempt Issuance during the term of this Note, the
Maker shall prepay all or a portion of the then-outstanding principal amount of
this Note, together with all accrued but unpaid Interest thereon, using Fifty
Percent (50%) of the net proceeds received by the Maker from such sale (or any
lesser portion necessary) to repay the then-outstanding principal and interest
amount of the Note; provided, however, that the Preferred Shares have first been
redeemed, in whole, in accordance with its terms.
All prepayments pursuant to this Section 3 shall be applied first to
the interest outstanding hereunder prior to their application to the outstanding
principal amount hereof. Upon full prepayment of this Note, the Holder shall
surrender this Note for cancellation, after which this Note shall be of no
further force or effect.
4. Security Interest. This Note shall be senior in lien priority to all
other Indebtedness (existing or future) of the Maker (other than Permitted Liens
(as defined in the Security Agreement)) and shall be secured by a first priority
perfected lien and security interest in the Collateral (as defined in the
Security Agreement).
5. Events of Default. This Note shall become due and payable upon any
of the following events, herein called "Events of Default":
2
(a) failure of the Maker to pay the principal amount, interest or
any other amounts due under this Note as and when due;
(b) a material breach by the Maker, or the material failure by the
Maker to perform, any representation, warranty, covenant or agreement made by
the Maker in this Note or any other Transaction Document, or any related
instrument, document or agreement (subject to any applicable cure periods);
(c) Maker's application for, or Maker's consent to, the appointment
of a receiver, trustee or liquidator for the Maker or any of its properties;
(d) filing by the Maker of a voluntary petition in bankruptcy or a
petition or an answer seeking reorganization or an arrangement with creditors;
(e) the entry against the Maker of a court order approving a
petition filed against it under the federal bankruptcy laws by a creditor other
than the Holder, which order shall not have been vacated or set aside or
otherwise terminated within sixty (60) days;
(f) with respect to any instrument or agreement for borrowed money
to which the Maker is or becomes a party, (i) an event of default has occurred
and has been declared by any third party to such instrument or agreement, the
amount of the declared default exceeds Fifty Thousand Dollars ($50,000), and
such third party has accelerated any payments due under such instrument or
agreement or (ii) an event of default has occurred and has been declared by any
third party to such instrument or agreement, the amount of the declared default
exceeds Three Hundred Thousand Dollars ($300,000), provided, that the foregoing
shall not constitute a default if the Maker, with advise of its legal counsel,
has made a good faith determination that such amount is not due and that the
Maker has valid and reasonable defenses against non-payment of such amount.
(g) the Maker agrees to pay in full settlement of any litigation,
proceeding or action, or a judgment is entered by a court of competent
jurisdiction with respect to any litigation, proceeding or action involving the
Maker (other than any settlement entered into or judgment entered with respect
to obligations incurred by the Maker in the ordinary course of business and
which were accrued for on the balance sheet of the Maker in the ordinary course
of business), of at least Three Hundred Thousand Dollars ($300,000) in any one
instance or One Million Dollars ($1,000,000) in the aggregate, in each case that
is not covered by any insurance maintained by the Maker.
6. Transferability. Subject to compliance with applicable federal and
state securities laws, this Note shall be transferable solely in accordance with
Section 5.6 of the Purchase Agreement. In no event may the Holder assign this
Note separate from an assignment of its rights under the Security Agreement. Any
such transfer shall be effected by the presentation of this Note to the Maker
for transfer, accompanied by a duly completed and executed Assignment Form in
the form attached hereto as Exhibit A, and an opinion of counsel
3
of the Holder in form reasonably satisfactory to the Maker that the transfer may
be properly made under an exemption from registration under the Securities Act
and applicable state securities laws. Any transfer made in violation of this
Section 6 shall be void.
7. Definitions. As used in this Note, the following term shall have the
following meaning:
"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.
8. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing, and shall be deemed delivered upon
personal delivery or facsimile transmission, one (1) business day after being
sent via a reputable nationwide overnight courier services, or two (2) business
days after deposit in the mail addressed as follows:
If to the Maker:
CORVU CORPORATION
3400 West 66th Street, Suite 445
Edina, Minnesota 55435
Attention: Chief Financial Officer
Facsimile No.: (952) 843 7752
With copies to:
Justin M. MacIntosh
C/o CorVu Australasia Pty. Ltd.
Level 8, 821-843 Pacific Highway,
Chatswood NSW 2067
Australia
Facsimile: (011-61 2) 9495 5444
Fredrikson & Byron, P.A.
200 South Sixth Street, Suite 4000
Minneapolis, Minnesota 55402
Attention: John H. Stout or Barbara Muller
Facsimile No.: (612) 492 7077
If to the Holder:
COMVEST INVESTMENT PARTNERS II LLC
830 Third Avenue
New York, NY 10022
Attention: Carl Kleidman
Facsimile No.: (212) 829-5978
4
With a copy to:
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue, 14th Floor
New York, NY 10166
Attention: Alan I. Annex, Esq.
Facsimile No.: (212) 801-6400
Either party may change by notice the address to which notices to it are to be
addressed.
9. Successors and Assigns. All covenants, agreements and undertakings
in this Note by or on behalf of any of the parties shall bind and inure to the
benefit of the respective successors and assigns of the parties.
10. Governing Law. This Note shall be governed by, construed under and
interpreted and enforced in accordance with laws of the State of New York,
without giving effect to principles of choice of law. Any action or proceeding
arising out of or relating to this Note shall be commenced in a federal or state
court having competent jurisdiction in the State of New York, and for the
purpose of any such action or proceeding, each of the parties and any assignees
thereof submits to the personal jurisdiction of the State of New York. The
parties hereby irrevocably consent to the exclusive personal jurisdiction of any
state or federal court for New York County in the State of New York or the
Southern District of New York. The parties hereby waive any objection to venue
and any objection based on a more convenient forum in any action instituted
under this Note.
11. Remedies. The Maker stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Maker in the
performance of or compliance with any of the terms of this Note are not and will
not be adequate, and that such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
12. Amendments. The terms and provisions of this Note may not be
modified, altered or amended except in accordance with Section 9 of the Security
Agreement.
13. Headings. The descriptive headings of the several paragraphs of
this Note are inserted for purposes of reference only, and shall not affect the
meaning or construction of any of the provisions hereof.
5
IN WITNESS WHEREOF, the Maker has executed this Note and has delivered
it to the Holder, on the day and year first above written.
CORVU CORPORATION
By:
-----------------------------------------
Name:
Title:
6
Exhibit A
ASSIGNMENT
FOR VALUED RECEIVED, the undersigned Holder of the attached Senior
Secured Note (the "Note") issued by CorVu Corporation (the "Maker") hereby
sells, assigns and transfers unto the persons below, all right, title and
interest of the undersigned in and to the obligations evidenced by the Note, and
does hereby irrevocably constitute and appoint _______________________
attorney-in-fact to transfer the Note on the books of the Maker with full power
of substitution in the premises.
Dated:
------------------------------
Signature:
--------------------------
Fill in for new Registration of Note:
------------------------------------
Name of Noteholder
Address of Noteholder:
-------------------------------
-------------------------------
-------------------------------
7
EX-4
5
e1020170.txt
PREFERRED WARRANT
EXHIBIT 4
EXECUTION COPY
PREFERRED WARRANT
NEITHER THIS WARRANT NOR ANY SECURITY INTO WHICH IT IS CONVERTIBLE HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT HAS BEEN ACQUIRED FOR
INVESTMENT AND NEITHER THIS WARRANT NOR ANY SECURITY INTO WHICH IT IS
CONVERTIBLE MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH SALE OR TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT. NEITHER THIS WARRANT NOR ANY SECURITY INTO WHICH IT IS
CONVERTIBLE MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS
WARRANT AND THE SECURITIES PURCHASE AGREEMENT, DATED AS OF EVEN DATE HEREWITH,
AND NO TRANSFER OF THIS WARRANT OR ANY SECURITY INTO WHICH IT IS CONVERTIBLE
SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN
COMPLIED WITH. THE TRANSFERABILITY OF THIS WARRANT AND ANY SECURITY INTO WHICH
IT IS CONVERTIBLE IS SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND
IN THE PURCHASE AGREEMENT.
WARRANT
TO PURCHASE COMMON STOCK OF
CORVU CORPORATION
THIS WARRANT IS MADE AND DELIVERED PURSUANT TO A CERTAIN
SECURITIES PURCHASE AGREEMENT, DATED AS OF EVEN DATE
HEREWITH, AND SUBJECT TO THE TERMS AND CONDITIONS
THEREOF.
Certificate No. ____ Date of Issuance: February 11, 2005
Expiration Date: August 11, 2010
This Preferred Warrant is issued to COMVEST INVESTMENT PARTNERS II LLC
(the "Holder") by CORVU CORPORATION, a Minnesota corporation (the "Company") ,
pursuant to the terms of that certain Securities Purchase Agreement (the
"Purchase Agreement") of even date herewith, in connection with the Company's
issuance to the Holder of this Warrant, the Protective Warrant, the Senior
Secured Note, the Shares and the Preferred Shares for an aggregate purchase
price of Six Million Five Hundred Thousand Dollars ($6,500,000), in reliance
upon an exemption from registration pursuant to Section 4(2) of the Securities
Act;
THIS CERTIFIES THAT, for value received, the receipt and sufficiency of
which is hereby acknowledged:
Subject to the conditions set forth herein and in the Purchase
Agreement, the Holder, with an address at 830 Third Avenue, New York, NY 10022,
is entitled, upon surrender of this Warrant at the principal office of the
Company, to subscribe for and purchase from the Company, for a period of five
(5) years commencing six months after the date hereof and ending at 5:00 p.m.
Eastern Standard Time on August 11, 2010 (the "Exercise Period"), up to
3,400,000 shares of Common Stock at the Per Share Exercise Price. All
capitalized terms used but not defined herein shall have the meaning set forth
in the Purchase Agreement.
This Warrant is subject to the following provisions, terms and
conditions:
1. Definitions.
1.1 "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.
1.2 "Common Stock" shall mean the shares of common stock, par value
$.01, of the Company.
1.3 "Commission" shall mean the U.S. Securities and Exchange
Commission or any other governmental authority at the time administering the
Securities Act.
1.4 "Company" shall have the meaning specified in the introduction
to this Warrant, and shall include any corporation or business entity resulting
from the merger, consolidation or conversion of the Company .
1.5 "Current Price per Share" shall mean the average of the closing
sales prices, if available, or the average of the bid and asked prices for the
Warrant Shares, Common Stock or Marketable Securities, as the case may be (or
their successors) on the principal market therefor for the five (5) full Trading
Days preceding the day which is two (2) Business Days prior to the day of
exercise, or if no such price is available, then a price that is mutually agreed
upon by the Holder and the Company. If the Holder and the Company cannot agree
upon a mutually acceptable price, then such price shall be determined by a
written appraisal of a recognized firm of investment bankers who shall be
selected by the Company and shall be reasonably acceptable to the holders of a
majority of the Warrants. The determination of such independent appraiser shall
be conclusive and binding on the Holder and the Company.
1.6 "Fair Market Price per Share" shall mean the fair value, as
determined by a majority of the full Board of Directors of the Company in good
faith, which determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, of any potential
dilutive issuance described in Section 4(c)
1.7 "Marketable Securities" shall mean securities of a corporation
subject to the informational and reporting requirements of the Securities
Exchange Act of 1934, as amended, that are listed and actively traded on a
nationally-recognized stock exchange or inter-dealer quotation system in the
United States.
2
1.8 "Per Share Exercise Price" shall be $.50, as may be adjusted in
accordance with Section 4 hereof.
1.9 "Registration Statement" shall be (i) any registration statement
that the Company shall file with the Commission in accordance with Section 2(a)
of the Registration Rights Agreement, covering all or part of the Shares and
Warrant Shares, or (ii) the registration statement that the Company may file (or
has filed) with the Commission in accordance with Section 2(b) of the
Registration Rights Agreement, covering all or a part of the Shares and the
Warrant Shares so long as such registration statement is declared effective
prior to the time the registration statement contemplated by Section 2(a) of the
Registration Rights Agreement is declared effective; provided, however, that if
any registration statement filed under Section 2(b) of the Registration Rights
Agreement covers only a portion of the Shares and the Warrant Shares, then
"Registration Statement" shall mean both registration statements described in
subparagraphs (i) and (ii) above.
1.10 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities Act shall include
a reference to the comparable section, if any, of any such similar or successor
federal statute.
1.11 "this Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part.
1.12 "Trading Days" shall mean any days during the course of which
the Company's Common Stock is listed and traded with the OTC Electronic Bulletin
Board or such similar organization if the OTC Electronic Bulletin Board is no
longer reporting such information.
2. Payment upon Exercise; Issuance of Certificates; No Fractional
Shares.
(a) This Warrant may be exercised during the Exercise Period, in whole
or in part, by the surrender of this Warrant with the election at the end hereof
(the "Election") duly executed to the Company, during normal business hours on
any Business Day, at the address and in the manner set forth in Section 11
hereof, or at such other place as is designated in writing by the Company. Such
executed Election must be accompanied by payment in an amount equal to the
applicable Per Share Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised. Such payment may be made by check
payable to the order of the Company. The Company agrees that the Warrant Shares
so purchased shall be and are deemed to be issued to the Holder or its designee
(subject to the transfer restrictions applicable to this Warrant) as the record
owner of such Warrant Shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment shall have been made as
aforesaid.
(b) Certificates for the Warrant Shares so purchased, representing the
aggregate number of securities specified in the Election, shall be delivered to
the Holder or its designee within a reasonable time, not exceeding ten (10)
Business Days after this Warrant shall
3
have been duly exercised. The stock certificate or certificates so delivered
shall be in such denominations as may be requested by the Holder and shall be
registered in the name of the Holder or such other name as shall be designated
by the Holder (subject to the transfer restrictions applicable to this Warrant).
The Company shall pay all expenses and charges payable in connection with the
preparation, execution and delivery of stock certificates pursuant to this
Section 2, except that, in case such stock certificates shall be registered in a
name or names other than the Holder or the Holder's designee, funds sufficient
to pay all stock transfer taxes which shall be payable in connection with the
execution and delivery of such stock certificates shall be paid by the Holder to
the Company at the time of delivery of such stock certificates by the Company.
(c) This Warrant shall be exercisable only for a whole number of
Warrant Shares. No fractions of such securities, or scrip for any such fraction
of securities, shall be issued upon the exercise of this Warrant. The Company
shall pay a cash adjustment in respect of such fractional interest in an amount
equal to the Current Price per Share of one share of Warrant Shares at the time
of such exercise multiplied by such fraction computed to the nearest whole cent.
3. Cashless Exercise. At any time during the Exercise Period, the
Company agrees that:
(a) The Holder may exercise this Warrant by surrendering it to the
Company and receiving, in exchange therefor, the number of shares of Common
Stock then purchasable upon exercise of that portion of the Warrant to be
exercised less the number of shares of Common Stock equal to the quotient of the
aggregate Per Share Exercise Price of all such shares underlying that portion of
the Warrant to be exercised divided by the Current Price per Share.
(b) Concurrent with the occurrence of any event described in Section
4(a) for cash, the Holder may exercise this Warrant by surrendering it to the
Company in exchange for the amount of cash per share the Holder would be
entitled to receive after the happening of such event if this Warrant had been
exercised immediately prior to the close of business on such record date or
effective date, as applicable, less the applicable Per Share Exercise Price.
(c) Concurrent with the occurrence of any event described in Section
4(a) for Marketable Securities, the Holder may exercise this Warrant by
surrendering it to the Company in exchange for the applicable amount of such
Marketable Securities the Holder would be entitled to receive after the
happening of such event if this Warrant had been exercised immediately prior to
the close of business on such record date or effective date, as applicable, less
the number of such Marketable Securities equal to the quotient of the aggregate
Per Share Exercise Price of all shares underlying this Warrant divided by the
Current Price per Share of such Marketable Securities.
4. Adjustments.
(a) Merger, Sale of Assets, etc. In the event the Company, at any time
prior to the Holder's exercise of this Warrant, (i) reorganizes (other than a
combination, reclassification, exchange or subdivision); (ii) merges or
consolidates the Company with or into another
4
corporation in which the Company is not the surviving entity, or merges with
another corporation in which the Company is the surviving entity but the shares
of the Company's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (iii) sells or transfers the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as part of such reorganization, merger, consolidation, sale or transfer,
provision shall be made so that the Holder shall thereafter be entitled to
receive upon exercise of this Warrant the number of securities or property of
the successor corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the securities deliverable upon
exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been
exercised immediately prior to such reorganization, merger, consolidation, sale
or transfer.
(b) Declaration of Dividends, Stock Splits, etc. In the event the
Company declares a dividend or distribution of its common stock, or effects a
stock split or reverse stock split with respect to its common stock, or issues
any shares of its common stock by reclassification of shares of its common
stock, the exercise rights of the Holder in effect on the date of such event
shall be adjusted proportionately so that the Holder thereafter shall be
entitled to receive upon exercise pursuant to the terms and conditions hereof
the aggregate number of shares of common stock that the Holder would own or be
entitled to receive after the happening of any of the events mentioned in this
Section 4(b) if this Warrant had been exercised immediately prior to the close
of business on the date of such happening.
(c) Issuance of Additional Shares of Common Stock.
(i) Except as provided in Section 4(c)(ii), in the event the Company
shall issue or sell any additional shares of Common Stock for a consideration
per additional share of Common Stock less than the Fair Market Price per Share
(the "Discounted per Share Price"), then the Per Share Exercise Price shall be
reduced to the Discounted per Share Price. For purposes of this subsection (i),
the date as of which the Fair Market Price per Share of Common Stock shall be
the earlier of the date upon which the Company shall (a) enter into a firm
contract for the issuance of such shares or (b) issue such shares. The number of
shares of Common Stock issuable upon exercise of this Warrant shall remain
unchanged after any adjustment of the Per Share Exercise Price as provided in
this Section 4(c).
(ii) The provisions of Section 4(c) shall not apply to (x) any
issuance of additional shares of Common Stock for which an adjustment is
provided under Section 4(a) or 4(b), (y) the issuance of Warrant Shares, or (z)
any Exempt Issuances as defined in the Purchase Agreement.
(iii) If at any time the Company shall in any manner (other than in
connection with a merger in which the Company is the surviving corporation)
issue or sell, any warrants (other than the Warrants) or other rights to
subscribe for or purchase any additional shares of Common Stock or any
convertible securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of
5
such convertible securities shall be determined to be at a Discounted per Share
Price, then the Per Share Exercise Price shall be adjusted as provided in
Section 4(c)(i) on the basis that (i) the maximum number of additional shares of
Common Stock issuable pursuant to all such warrants or other rights or necessary
to effect the conversion or exchange of all such convertible securities shall be
deemed to have been issued and outstanding, (ii) the price per share for such
additional shares of Common Stock shall be deemed to be the lowest price per
share at which such additional shares of Common Stock are issuable, and (iii)
the Company shall have received all of the consideration, if any, payable for
such warrants or other rights as of the date of the actual issuance thereof. No
further adjustments of the Per Share Exercise Price shall be made upon the
actual issue of such Common Stock or of such convertible securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such convertible securities.
(iv) If at any time the Company shall in any manner (other than in
connection with a merger in which the Company is the surviving corporation)
issue or sell, any convertible securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange shall be
determined to be at a Discounted per Share Price, then the Per Share Exercise
Price shall be adjusted as provided in Section 4(c)(i) on the basis that (i) the
maximum number of additional shares of Common Stock issuable upon the conversion
or exchange of all such convertible securities shall be deemed to have been
issued and outstanding, (ii) the price per share of such additional shares of
Common Stock shall be deemed to be the lowest price in any range of prices at
which such additional shares of Common Stock are available to holders of such
convertible securities, and (iii) the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such convertible securities. No further adjustments of the Per Share Exercise
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such convertible securities.
(v) If, at any time after any adjustment of the Per Share Exercise
Price shall have been made pursuant to Section 4(c)(iii) or 4(c)(iv) as the
result of any issuance of warrants, rights or convertible securities, and either
(1) such warrants or rights, or the rights of
conversion or exchange in such other convertible securities, shall
expire, and all or a portion of such warrants or rights, or the right
of conversion or exchange with respect to all or a portion of such
other convertible securities, as the case may be, shall not have been
exercised, or
(2) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights, or such
other convertible securities, shall be increased or decreased by virtue
of provisions therein contained,
then such previous adjustments shall be rescinded and annulled and the
additional shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
rights or options or other convertible securities on the then outstanding
Warrants, but not on any then outstanding Warrant Shares, on the basis of
6
(3) treating the number of additional shares of
common stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such warrants or
rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and
(4) treating any such warrants or rights or any such
other convertible securities which then remain outstanding as having
been granted or issued immediately after the time of such increase or
decrease of the consideration per share for which shares of Common
Stock or other property are issuable under such warrants or rights or
other convertible securities.
(vi) To the extent that any additional shares of Common Stock or any
convertible securities or any warrants or other rights to subscribe for or
purchase any additional shares of Common Stock or any convertible securities
shall be issued for cash consideration, the consideration received by the
Company therefor shall be the amount of the cash received by the Company
therefor, or, if such additional shares of Common Stock or convertible
securities are offered by the Company for subscription, the subscription price,
or, if such additional shares of Common Stock or convertible securities are sold
to underwriters or dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not subtracting any
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board of Directors of
the Company. In case any additional shares of Common Stock or any convertible
securities or any warrants or other rights to subscribe for or purchase such
additional shares of Common Stock or convertible securities shall be issued in
connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, convertible securities, warrants or other rights, as the case may
be. The consideration for any additional shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Company for issuing such warrants or
other rights plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for any additional
shares of Common Stock issuable pursuant to the terms of any convertible
securities shall be the consideration, if any, received by the Company for
issuing warrants or other rights to subscribe for or purchase such convertible
securities, plus the consideration paid or payable to the Company in respect of
the subscription for or purchase of such convertible securities, plus the
additional consideration, if any, payable to the Company upon the exercise of
the right of conversion or exchange in such convertible securities. In case of
the issuance at any time of any additional shares of Common Stock or convertible
securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received for such
additional shares
7
of Common Stock or convertible securities a consideration equal to the amount of
such dividend so paid or satisfied.
(d) Written Notice. The Company shall give written notice to the
Holder within ten (10) days following the consummation of any transaction within
the scope of this Section 4 and provide in such written notice a brief
description of the terms and conditions of such transaction.
(e) Minimal Adjustments. No adjustment in a Per Share Exercise Price
need be made if such adjustment would result in a change in such Per Share
Exercise Price of less than five cents ($0.05). Any adjustment of less than five
cents ($0.05) which is not made shall be carried forward and shall be made at
the time of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of five cents ($0.05) or more in a Per Share
Exercise Price.
5. Issue Tax. The issuance of certificates for the Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder for
any issuance tax in respect thereof, provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
Holder .
6. Transferability and Assignment. Except as set forth in Section 6
hereof and subject to compliance with applicable federal and state securities
laws, and to the extent applicable, the parties may not assign their rights and
obligations under this Warrant except in accordance with Section 5.6 of the
Purchase Agreement. In the event the Holder proposes to effect an assignment,
the Holder must present this Warrant to the Company for transfer, accompanied by
a duly completed and executed Form of Assignment (as provided at the end
hereof), the transferee must agree to be bound by the terms of this Warrant as
if such transferee were an original holder of this Warrant, and the Holder must
deliver to the Company an opinion of counsel of the Holder in form reasonably
satisfactory to the Company that the transfer may be properly made under an
exemption from registration under the Securities Act and applicable state
securities laws. Upon any registration of transfer, the Company shall execute
and deliver a new Warrant certificate to the person entitled thereto. In the
event the Warrant is transferred, the subsequent holder shall have no greater
rights than those afforded the Holder hereunder. Any transfer made in violation
of this Section 8 shall be void.
7. Reservation of Warrant Shares. The Company shall, at all times
when this Warrant shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the exercise of this
Warrant, such number of its duly authorized shares of capital stock as shall
from time to time be sufficient to effect the exercise of this Warrant.
Alternatively, the Company shall take all action necessary to cause it to be
authorized to issue all necessary shares issuable upon exercise of this Warrant.
All shares of capital stock which may be issued in connection with the exercise
of this Warrant will, upon issuance by the Company, be validly issued, fully
paid and non-assessable.
8
8. Mutilated or Missing Warrant Certificate. In case the certificate
evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the
Company shall, at the request of the Holder, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate, or in lieu
of and in substitution for the certificate lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing the equivalent rights and
interests, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction of such Warrant. Applicants for such substitute
Warrant certificate shall also comply with such other reasonable requirements
and pay such other reasonable charges as the Company may prescribe. The Holder
shall pay all taxes and all other expenses and charges payable in connection
with the preparation, execution and delivery of Warrants pursuant to this
Section 8.
9. No Rights as a Shareholder. Nothing contained herein shall be
construed as conferring upon the Holder or its transferees any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
10. Legend. The Warrant Shares issued upon exercise of this Warrant
shall be subject to a stop transfer order and the certificate or certificates
evidencing such Warrant Shares shall bear the following legend:
"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."
11. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, addressed to CorVu Corporation,
3400 West 66th Street, Suite 445, Edina, Minnesota 55435, Attention: Chief
9
Financial Officer, Telecopy No. (952) 944-7447; with copies to: Justin M.
MacIntosh,c/o CorVu Australasia Pty. Ltd., Level 8, 821-843 Pacific Highway,
Chatswood NSW 2067, Australia, Telecopy No. (011-61 2) 9495 5444, and Fredrikson
& Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota 55402,
Attn: John H. Stout or Barbara Muller, Telecopy No. (612) 492 7077, (ii) if to
the Holder, at the address set forth above, or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 11. Notice to the estate of any party shall be
sufficient if addressed to the party as provided in this Section 11. Any notice
or other communication given by certified mail shall be deemed given at the time
of certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 11 shall be deemed given at the time of receipt
thereof.
12. Governing Law. This Warrant shall be construed in accordance
with the laws of the State of New York, without regard to principles governing
conflicts of law. Any action or proceeding arising out of or relating to this
Warrant shall be commenced in a federal or state court having competent
jurisdiction in the State of New York, and for the purpose of any such action or
proceeding, each of the Company and the Holder and any assignee of the Holder
submits to the personal jurisdiction of the State of New York The parties hereby
irrevocably consent to the exclusive jurisdiction of any state or federal court
for New York County in the State of New York or the Southern District of New
York. The parties hereby waive any objection to venue and any objection based on
a more convenient forum in any action instituted under this Warrant.
13. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
14. Amendments; Waivers. The terms and provisions of this Warrant
may be amended, modified, waived or altered only in writing signed by the
Company and the Holder, and any such amendment effected pursuant to this Section
14 shall be binding upon the successors and assigns of the parties.
15. Headings. The descriptive headings of the several sections of
this Warrant are inserted for purposes of reference only, and shall not affect
the meaning or construction of any of the provisions hereof.
[Signature Page to Warrant]
10
Dated: February 11, 2005
CORVU CORPORATION
By:
--------------------------------------------
Name:
Title:
ACKNOWLEDGED AND ACCEPTED:
COMVEST INVESTMENT PARTNERS II LLC
By:
---------------------------------
Name:
Title:
11
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ___________________ hereby sells, assigns, and
transfers unto _____________________________ Warrants to purchase _____________
shares of _______________ of CorVu Corporation (the "Company"), together with
all right, title, and interest therein, and does hereby irrevocably constitute
and appoint _____________________________ attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:
------------------------------
Signature:
----------------------------------
NOTICE
The signature on the foregoing Assignment must correspond to the
name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
12
To: CorVu Corporation
3400 West 66th Street, Suite 445
Edina, Minnesota 55435
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase
______ Warrant Shares covered by the within Warrant certificate and tenders
payment herewith in the amount of $_____________ in accordance with the terms
thereof, and requests that certificates for such securities be issued in the
name of, and delivered to:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print Name, Address and Social Security or Tax Identification Number)
The undersigned also hereby represents that the representations and
warranties provided by the undersigned in Section 3.2 of the Purchase Agreement
are true and correct in all material respects as if made on and as of the date
hereof.
Signature:
----------------------------
13
EX-5
6
e1020753.txt
PROTECTIVE WARRANT
EXHIBIT 5
EXECUTION COPY
PROTECTIVE WARRANT
NEITHER THIS WARRANT NOR ANY SECURITY INTO WHICH IT IS CONVERTIBLE HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER
ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT HAS BEEN ACQUIRED FOR
INVESTMENT AND NEITHER THIS WARRANT NOR ANY SECURITY INTO WHICH IT IS
CONVERTIBLE MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH SALE OR TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT. NEITHER THIS WARRANT NOR ANY SECURITY INTO WHICH IT IS
CONVERTIBLE MAY BE TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS
WARRANT AND THE SECURITIES PURCHASE AGREEMENT, DATED AS OF EVEN DATE HEREWITH,
AND NO TRANSFER OF THIS WARRANT OR ANY SECURITY INTO WHICH IT IS CONVERTIBLE
SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN
COMPLIED WITH. THE TRANSFERABILITY OF THIS WARRANT AND ANY SECURITY INTO WHICH
IT IS CONVERTIBLE IS SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND
IN THE PURCHASE AGREEMENT.
WARRANT
TO PURCHASE COMMON STOCK OF
CORVU CORPORATION
THIS WARRANT IS MADE AND DELIVERED PURSUANT TO A CERTAIN SECURITIES
PURCHASE AGREEMENT, DATED AS OF EVEN DATE HEREWITH, AND SUBJECT TO
THE TERMS AND CONDITIONS THEREOF.
Certificate No. ___ Date of Issuance: February 11, 2005
Expiration Date: August 11, 2010
This Protective Warrant is issued to COMVEST INVESTMENT PARTNERS II LLC
(the "Holder") by CORVU CORPORATION, a Minnesota corporation (the "Company") ,
pursuant to the terms of that certain Securities Purchase Agreement (the
"Purchase Agreement") of even date herewith, in connection with the Company's
issuance to the Holder of this Warrant, the Preferred Warrant, the Senior
Secured Note, the Shares and the Preferred Shares for an aggregate purchase
price of Six Million Five Hundred Thousand Dollars ($6,500,000), in reliance
upon an exemption from registration pursuant to Section 4(2) of the Securities
Act;
THIS CERTIFIES THAT, for value received, the receipt and sufficiency of
which is hereby acknowledged:
Subject to the conditions set forth herein and in the Purchase
Agreement, the Holder, with an address at 830 Third Avenue, New York, NY 10022,
is entitled, upon surrender of this Warrant at the principal office of the
Company, to subscribe for and purchase from the Company, for a period of five
(5) years, commencing six months after the date hereof and ending at 5:00 p.m.
Eastern Standard Time on August 11, 2010 (the "Exercise Period"), up to
2,000,000 shares of Common Stock at the Per Share Exercise Price; provided,
however, that the Holder may only exercise this Warrant during the Exercise
Period if on the date of such exercise (i) the Holder and its Affiliates
collectively beneficially own greater than 5,000,000 shares of Common Stock and
(ii) fewer than two (2) Designees (as defined in the Purchase Agreement) are
members of the Board of Directors of the Company despite the Designees having
voted for their own nomination and despite the Holder having voted its shares of
Common Stock in favor of such election of the Designees. All capitalized terms
used but not defined herein shall have the meaning set forth in the Purchase
Agreement.
This Warrant is subject to the following provisions, terms and
conditions:
1. Definitions.
1.1 "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.
1.2 "Common Stock" shall mean the shares of common stock, par value
$.01, of the Company.
1.3 "Commission" shall mean the U.S. Securities and Exchange
Commission or any other governmental authority at the time administering the
Securities Act.
1.4 "Company" shall have the meaning specified in the introduction
to this Warrant, and shall include any corporation or business entity resulting
from the merger, consolidation or conversion of the Company .
1.5 "Current Price per Share" shall mean the average of the closing
sales prices, if available, or the average of the bid and asked prices for the
Warrant Shares, Common Stock or Marketable Securities, as the case may be (or
their successors) on the principal market therefor for the five (5) full Trading
Days preceding the day which is two (2) Business Days prior to the day of
exercise, or if no such price is available, then a price that is mutually agreed
upon by the Holder and the Company. If the Holder and the Company cannot agree
upon a mutually acceptable price, then such price shall be determined by a
written appraisal of a recognized firm of investment bankers who shall be
selected by the Company and shall be reasonably acceptable to the holders of a
majority of the Warrants. The determination of such independent appraiser shall
be conclusive and binding on the Holder and the Company.
1.6 "Fair Market Price per Share" shall mean the fair value, as
determined by a majority of the full Board of Directors of the Company in good
faith, which determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, of any potential
dilutive issuance described in Section 4(c)
2
1.7 "Marketable Securities" shall mean securities of a corporation
subject to the informational and reporting requirements of the Securities
Exchange Act of 1934, as amended, that are listed and actively traded on a
nationally-recognized stock exchange or inter-dealer quotation system in the
United States.
1.8 "Per Share Exercise Price" shall be $.50, as may be adjusted in
accordance with Section 4 hereof.
1.9 "Registration Statement" shall be (i) any registration statement
that the Company shall file with the Commission in accordance with Section 2(a)
of the Registration Rights Agreement, covering all or part of the Shares and
Warrant Shares, or (ii) the registration statement that the Company may file (or
has filed) with the Commission in accordance with Section 2(b) of the
Registration Rights Agreement, covering all or a part of the Shares and the
Warrant Shares so long as such registration statement is declared effective
prior to the time the registration statement contemplated by Section 2(a) of the
Registration Rights Agreement is declared effective; provided, however, that if
any registration statement filed under Section 2(b) of the Registration Rights
Agreement covers only a portion of the Shares and the Warrant Shares, then
"Registration Statement" shall mean both registration statements described in
subparagraphs (i) and (ii) above.
1.10 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar or successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time. Reference to a particular section of the Securities Act shall include
a reference to the comparable section, if any, of any such similar or successor
federal statute.
1.11 "this Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part.
1.12 "Trading Days" shall mean any days during the course of which
the Company's Common Stock is listed and traded with the OTC Electronic Bulletin
Board or such similar organization if the OTC Electronic Bulletin Board is no
longer reporting such information.
2. Payment upon Exercise; Issuance of Certificates; No Fractional
Shares.
(a) This Warrant may be exercised during the Exercise Period, in whole
or in part, by the surrender of this Warrant with the election at the end hereof
(the "Election") duly executed to the Company, during normal business hours on
any Business Day, at the address and in the manner set forth in Section 11
hereof, or at such other place as is designated in writing by the Company. Such
executed Election must be accompanied by payment in an amount equal to the
applicable Per Share Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised. Such payment may be made by check
payable to the order of the Company. The Company agrees that the Warrant Shares
so purchased shall be and are deemed to be issued to the Holder or its designee
(subject to the transfer restrictions applicable to this
3
Warrant) as the record owner of such Warrant Shares as of the close of business
on the date on which this Warrant shall have been surrendered and payment shall
have been made as aforesaid.
(b) Certificates for the Warrant Shares so purchased, representing the
aggregate number of securities specified in the Election, shall be delivered to
the Holder or its designee within a reasonable time, not exceeding ten (10)
Business Days after this Warrant shall have been duly exercised. The stock
certificate or certificates so delivered shall be in such denominations as may
be requested by the Holder and shall be registered in the name of the Holder or
such other name as shall be designated by the Holder (subject to the transfer
restrictions applicable to this Warrant). The Company shall pay all expenses and
charges payable in connection with the preparation, execution and delivery of
stock certificates pursuant to this Section 2, except that, in case such stock
certificates shall be registered in a name or names other than the Holder or the
Holder's designee, funds sufficient to pay all stock transfer taxes which shall
be payable in connection with the execution and delivery of such stock
certificates shall be paid by the Holder to the Company at the time of delivery
of such stock certificates by the Company.
(c) This Warrant shall be exercisable only for a whole number of
Warrant Shares. No fractions of such securities, or scrip for any such fraction
of securities, shall be issued upon the exercise of this Warrant. The Company
shall pay a cash adjustment in respect of such fractional interest in an amount
equal to the Current Price per Share of one share of Warrant Shares at the time
of such exercise multiplied by such fraction computed to the nearest whole cent.
3. Cashless Exercise. At any time during the Exercise Period, the
Company agrees that:
(a) The Holder may exercise this Warrant by surrendering it to the
Company and receiving, in exchange therefor, the number of shares of Common
Stock then purchasable upon exercise of that portion of the Warrant to be
exercised less the number of shares of Common Stock equal to the quotient of the
aggregate Per Share Exercise Price of all such shares underlying that portion of
the Warrant to be exercised divided by the Current Price per Share.
(b) Concurrent with the occurrence of any event described in Section
4(a) for cash, the Holder may exercise this Warrant by surrendering it to the
Company in exchange for the amount of cash per share the Holder would be
entitled to receive after the happening of such event if this Warrant had been
exercised immediately prior to the close of business on such record date or
effective date, as applicable, less the applicable Per Share Exercise Price.
(c) Concurrent with the occurrence of any event described in Section
4(a) for Marketable Securities, the Holder may exercise this Warrant by
surrendering it to the Company in exchange for the applicable amount of such
Marketable Securities the Holder would be entitled to receive after the
happening of such event if this Warrant had been exercised immediately prior to
the close of business on such record date or effective date, as applicable, less
the number of such Marketable Securities equal to the quotient of the aggregate
Per Share Exercise Price of all shares underlying this Warrant divided by the
Current Price per Share of such Marketable Securities.
4
4. Adjustments.
(a) Merger, Sale of Assets, etc. In the event the Company, at any time
prior to the Holder's exercise of this Warrant, (i) reorganizes (other than a
combination, reclassification, exchange or subdivision); (ii) merges or
consolidates the Company with or into another corporation in which the Company
is not the surviving entity, or merges with another corporation in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; or (iii) sells or transfers the Company's properties and assets as,
or substantially as, an entirety to any other person, then, as part of such
reorganization, merger, consolidation, sale or transfer, provision shall be made
so that the Holder shall thereafter be entitled to receive upon exercise of this
Warrant the number of securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or transfer that
a holder of the securities deliverable upon exercise of this Warrant would have
been entitled to receive in such reorganization, consolidation, merger, sale or
transfer if this Warrant had been exercised immediately prior to such
reorganization, merger, consolidation, sale or transfer.
(b) Declaration of Dividends, Stock Splits, etc. In the event the
Company declares a dividend or distribution of its common stock, or effects a
stock split or reverse stock split with respect to its common stock, or issues
any shares of its common stock by reclassification of shares of its common
stock, the exercise rights of the Holder in effect on the date of such event
shall be adjusted proportionately so that the Holder thereafter shall be
entitled to receive upon exercise pursuant to the terms and conditions hereof
the aggregate number of shares of common stock that the Holder would own or be
entitled to receive after the happening of any of the events mentioned in this
Section 4(b) if this Warrant had been exercised immediately prior to the close
of business on the date of such happening.
(c) Issuance of Additional Shares of Common Stock.
(i) Except as provided in Section 4(c)(ii), in the event the Company
shall issue or sell any additional shares of Common Stock, for a consideration
per additional share of Common Stock less than the Fair Market Price per Share
(the "Discounted per Share Price"), then the Per Share Exercise Price shall be
reduced to the Discounted per Share Price. For purposes of this subsection (i),
the date as of which the Fair Market Price per Share of Common Stock shall be
the earlier of the date upon which the Company shall (a) enter into a firm
contract for the issuance of such shares or (b) issue such shares. The number of
shares of Common Stock issuable upon exercise of this Warant shall remain
unchanged after any adjustment of the Per Share Exercise Price as provided in
this Section 4(c).
(ii) The provisions of Section 4(c) shall not apply to (x) any issuance
of additional shares of Common Stock for which an adjustment is provided under
Section 4(a) or 4(b), (y) the issuance of Warrant Shares, or (z) for any Exempt
Issuances as defined in the Purchase Agreement.
5
(iii) If at any time the Company shall in any manner (other than in
connection with a merger in which the Company is the surviving corporation)
issue or sell, any warrants (other than the Warrants) or other rights to
subscribe for or purchase any additional shares of Common Stock or any
convertible securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such convertible securities shall be determined to be
at a Discounted per Share Price, then the Per Share Exercise Price shall be
adjusted as provided in Section 4(c)(i) on the basis that (i) the maximum number
of additional shares of Common Stock issuable pursuant to all such warrants or
other rights or necessary to effect the conversion or exchange of all such
convertible securities shall be deemed to have been issued and outstanding, (ii)
the price per share for such additional shares of Common Stock shall be deemed
to be the lowest price per share at which such additional shares of Common Stock
are issuable, and (iii) the Company shall have received all of the
consideration, if any, payable for such warrants or other rights as of the date
of the actual issuance thereof. No further adjustments of the Per Share Exercise
Price shall be made upon the actual issue of such Common Stock or of such
convertible securities upon exercise of such warrants or other rights or upon
the actual issue of such Common Stock upon such conversion or exchange of such
convertible securities.
(iv) If at any time the Company shall in any manner (other than in
connection with a merger in which the Company is the surviving corporation)
issue or sell, any convertible securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange shall be
determined to be at a Discounted per Share Price, then the Per Share Exercise
Price shall be adjusted as provided in Section 4(c)(i) on the basis that (i) the
maximum number of additional shares of Common Stock issuable upon the conversion
or exchange of all such convertible securities shall be deemed to have been
issued and outstanding, (ii) the price per share of such additional shares of
Common Stock shall be deemed to be the lowest price in any range of prices at
which such additional shares of Common Stock are available to holders of such
convertible securities, and (iii) the Company shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such convertible securities. No further adjustments of the Per Share Exercise
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such convertible securities.
(v) If, at any time after any adjustment of the Per Share Exercise
Price shall have been made pursuant to Section 4(c)(iii) or 4(c)(iv) as the
result of any issuance of warrants, rights or convertible securities, and either
(1) such warrants or rights, or the rights of
conversion or exchange in such other convertible securities, shall
expire, and all or a portion of such warrants or rights, or the right
of conversion or exchange with respect to all or a portion of such
other convertible securities, as the case may be, shall not have been
exercised, or
(2) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or rights, or such
other convertible securities, shall be increased or decreased by virtue
of provisions therein contained,
6
then such previous adjustments shall be rescinded and annulled and the
additional shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
rights or options or other convertible securities on the then outstanding
Warrants, but not on any then outstanding Warrant Shares, on the basis of
(3) treating the number of additional shares of
common stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such warrants or
rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and
(4) treating any such warrants or rights or any such
other convertible securities which then remain outstanding as having
been grated or issued immediately after the time of such increase or
decrease of the consideration per share for which shares of Common
Stock or other property are issuable under such warrants or rights or
other convertible securities.
(vi) To the extent that any additional shares of Common Stock or any
convertible securities or any warrants or other rights to subscribe for or
purchase any additional shares of Common Stock or any convertible securities
shall be issued for cash consideration, the consideration received by the
Company therefor shall be the amount of the cash received by the Company
therefor, or, if such additional shares of Common Stock or convertible
securities are offered by the Company for subscription, the subscription price,
or, if such additional shares of Common Stock or convertible securities are sold
to underwriters or dealers for public offering without a subscription offering,
the public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not subtracting any
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board of Directors of
the Company. In case any additional shares of Common Stock or any convertible
securities or any warrants or other rights to subscribe for or purchase such
additional shares of Common Stock or convertible securities shall be issued in
connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, convertible securities, warrants or other rights, as the case may
be. The consideration for any additional shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Company for issuing such warrants or
other rights plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for any additional
shares of Common Stock issuable pursuant to the terms of any convertible
securities shall be the consideration, if any, received by the
7
Company for issuing warrants or other rights to subscribe for or purchase such
convertible securities, plus the consideration paid or payable to the Company in
respect of the subscription for or purchase of such convertible securities, plus
the additional consideration, if any, payable to the Company upon the exercise
of the right of conversion or exchange in such convertible securities. In case
of the issuance at any time of any additional shares of Common Stock or
convertible securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or convertible securities a
consideration equal to the amount of such dividend so paid or satisfied.
(d) Written Notice. The Company shall give written notice to the Holder
within ten (10) days following the consummation of any transaction within the
scope of this Section 4 and provide in such written notice a brief description
of the terms and conditions of such transaction.
(e) Minimal Adjustments. No adjustment in a Per Share Exercise Price
need be made if such adjustment would result in a change in such Per Share
Exercise Price of less than five cents ($0.05). Any adjustment of less than five
cents ($0.05) which is not made shall be carried forward and shall be made at
the time of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of five cents ($0.05) or more in a Per Share
Exercise Price.
5. Issue Tax. The issuance of certificates for the Warrant Shares upon
the exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the Holder
..
6. Transferability and Assignment. Except as set forth in Section 6
hereof and subject to compliance with applicable federal and state securities
laws, and to the extent applicable, the parties may not assign their rights and
obligations under this Warrant except in accordance with Section 5.6 of the
Purchase Agreement. In the event the Holder proposes to effect an assignment,
the Holder must present this Warrant to the Company for transfer, accompanied by
a duly completed and executed Form of Assignment (as provided at the end
hereof), the transferee must agree to be bound by the terms of this Warrant as
if such transferee were an original holder of this Warrant, and the Holder must
deliver to the Company an opinion of counsel of the Holder in form reasonably
satisfactory to the Company that the transfer may be properly made under an
exemption from registration under the Securities Act and applicable state
securities laws. Upon any registration of transfer, the Company shall execute
and deliver a new Warrant certificate to the person entitled thereto. In the
event the Warrant is transferred, the subsequent holder shall have no greater
rights than those afforded the Holder hereunder. Any transfer made in violation
of this Section 8 shall be void.
7. Reservation of Warrant Shares. The Company shall, at all times when
this Warrant shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the exercise of this
Warrant, such number of its duly
8
authorized shares of capital stock as shall from time to time be sufficient to
effect the exercise of this Warrant. Alternatively, the Company shall take all
action necessary to cause it to be authorized to issue all necessary shares
issuable upon exercise of this Warrant. All shares of capital stock which may be
issued in connection with the exercise of this Warrant will, upon issuance by
the Company, be validly issued, fully paid and non-assessable.
8. Mutilated or Missing Warrant Certificate. In case the certificate
evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the
Company shall, at the request of the Holder, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate, or in lieu
of and in substitution for the certificate lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing the equivalent rights and
interests, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction of such Warrant. Applicants for such substitute
Warrant certificate shall also comply with such other reasonable requirements
and pay such other reasonable charges as the Company may prescribe. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution and
delivery of Warrants pursuant to this Section 8.
9. No Rights as a Shareholder. Nothing contained herein shall be
construed as conferring upon the Holder or its transferees any rights as a
shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter.
10. Legend. The Warrant Shares issued upon exercise of this Warrant
shall be subject to a stop transfer order and the certificate or certificates
evidencing such Warrant Shares shall bear the following legend:
"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."
9
11. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, addressed to CorVu Corporation,
3400 West 66th Street, Suite 445, Edina, Minnesota 55435, Attention: Chief
Financial Officer, Telecopy No. (952) 944-7447; with copies to: Justin M.
MacIntosh, c/o CorVu Australasia Pty. Ltd., Level 8, 821-843 Pacific Highway,
Chatswood NSW 2067, Australia, Telecopy No. (011-61 2) 9495 5444, and Fredrikson
& Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota 55402,
Attn: John H. Stout or Barbara Muller, Telecopy No. (612) 492 7077, (ii) if to
the Holder, at the address set forth above, or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 11. Notice to the estate of any party shall be
sufficient if addressed to the party as provided in this Section 11. Any notice
or other communication given by certified mail shall be deemed given at the time
of certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 11 shall be deemed given at the time of receipt
thereof.
12. Governing Law. This Warrant shall be construed in accordance with
the laws of the State of New York, without regard to principles governing
conflicts of law. Any action or proceeding arising out of or relating to this
Warrant shall be commenced in a federal or state court having competent
jurisdiction in the State of New York, and for the purpose of any such action or
proceeding, each of the Company and the Holder and any assignee of the Holder
submits to the personal jurisdiction of the State of New York The parties hereby
irrevocably consent to the exclusive jurisdiction of any state or federal court
for New York County in the State of New York or the Southern District of New
York. The parties hereby waive any objection to venue and any objection based on
a more convenient forum in any action instituted under this Warrant.
13. Remedies. The Company stipulates that the remedies at law of the
Holder in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
14. Amendments; Waivers. The terms and provisions of this Warrant may
be amended, modified, waived or altered only in writing signed by the Company
and the Holder, and any such amendment effected pursuant to this Section 14
shall be binding upon the successors and assigns of the parties.
15. Headings. The descriptive headings of the several sections of this
Warrant are inserted for purposes of reference only, and shall not affect the
meaning or construction of any of the provisions hereof.
[Signature Page to Warrant]
10
Dated: February 11, 2005
CORVU CORPORATION
By:
--------------------------------------------
Name:
Title:
ACKNOWLEDGED AND ACCEPTED:
COMVEST INVESTMENT PARTNERS II LLC
By:
---------------------------------
Name:
Title:
11
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ___________________ hereby sells, assigns, and
transfers unto _____________________________ Warrants to purchase _____________
shares of _______________ of CorVu Corporation (the "Company"), together with
all right, title, and interest therein, and does hereby irrevocably constitute
and appoint _____________________________ attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:
Signature:
-----------------------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
12
To: CorVu Corporation
3400 West 66th Street, Suite 445
Edina, Minnesota 55435
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase ______
Warrant Shares covered by the within Warrant certificate and tenders payment
herewith in the amount of $_____________ in accordance with the terms thereof,
and requests that certificates for such securities be issued in the name of, and
delivered to:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print Name, Address and Social Security or Tax Identification Number)
The undersigned also hereby represents that the representations and
warranties provided by the undersigned in Section 3.2 of the Purchase Agreement
are true and correct in all material respects as if made on and as of the date
hereof.
Signature:
----------------------------
13
EX-7
7
e1020820.txt
STOCKHOLDERS' AGREEMENT
EXHIBIT 7
EXECUTION COPY
================================================================================
STOCKHOLDERS' AGREEMENT
AMONG
THE STOCKHOLDERS NAMED HEREIN
AND
COMVEST INVESTMENT PARTNERS II LLC
DATED AS OF FEBRUARY 11, 2005
================================================================================
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms...........................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMVEST
SECTION 2.01. Due Organization and Authority..................................4
SECTION 2.02. No Conflict.....................................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
SECTION 3.01. Organization and Authority......................................4
SECTION 3.02. No Conflict.....................................................4
ARTICLE IV
TRANSFER OF SHARES
SECTION 4.01. Legends.........................................................5
SECTION 4.02. Certain Restrictions on Sale and Encumbrance....................5
SECTION 4.03. Improper Sale or Encumbrance....................................5
SECTION 4.04. Tag-Along Rights................................................6
SECTION 4.05. Transferees to Execute Agreement................................7
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Notices.........................................................7
SECTION 5.02. Public Announcements............................................8
SECTION 5.03. Cumulative Remedies; Specific Performance.......................8
SECTION 5.04. Binding Effect; Successors in Interest..........................8
SECTION 5.05. Severability....................................................8
SECTION 5.06. Counterparts....................................................9
SECTION 5.07. Entire Agreement................................................9
SECTION 5.08. Governing Law; Submission to Jurisdiction.......................9
SECTION 5.09. Expenses........................................................9
SECTION 5.10. Amendments and Waivers; Assignment..............................9
SECTION 5.11. Headings.......................................................10
SECTION 5.12. Waiver of Jury Trial...........................................10
i
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT, dated as of February 11, 2005,
is entered into among ComVest Investment Partners II LLC ("ComVest") and each
Person (other than ComVest) who becomes a signatory hereto (such signatories,
individually, a "Stockholder" and, collectively, the "Stockholders").
Capitalized terms used herein but not otherwise defined shall have the meanings
ascribed to them in the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, ComVest and CorVu Corporation (the "Company") are
parties to a Securities Purchase Agreement, dated as of February 11, 2005 (the
"Purchase Agreement"), pursuant to which ComVest purchased from the Company for
an aggregate purchase price of Six Million Five Hundred Thousand Dollars
($6,500,000), in reliance upon an exemption from registration pursuant to
Section 4(2) of the Securities Act, (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 a purchase price of $3,300,000, (iii) 17,000 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;
WHEREAS, the parties hereto desire to provide certain rights
and obligations of the Stockholders and ComVest with respect to the Stock to be
held by the Stockholders as hereinafter provided; and
NOW, THEREFORE, in consideration of the promises and the
mutual representations, covenants and agreements contained herein, and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
DEFINITIONS
SECTION 1.01 Certain Defined Terms. (a) As used in this
Agreement, the following terms shall have the following meanings:
"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" means this Stockholders' Agreement, dated as of
February 11, 2005 and all amendments made hereto in accordance with the
provisions hereof.
"Beneficial Owner," "Beneficially Own" or "Beneficially Owned"
has the meaning given such term in Rule 13d-3 under the Exchange Act,
provided that Beneficial Ownership under Rule 13d-3(1)(i) shall be
determined based on whether a Person has a
14
right to acquire Beneficial Ownership irrespective of whether such
right is exercisable within 60 days of the time of determination.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banking institutions in the State of New
York are authorized or required by law or executive order to close.
"Cash Equivalents" means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States government or
issued by any agency thereof and backed by the full faith and credit of
the United States, in each case maturing within one year from the date
of acquisition thereof, (b) marketable direct obligations issued by any
state of the United States or any political subdivision of any such
state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and, at the time of acquisition,
having the highest rating obtainable from any of Standard & Poor's
Ratings Services, Moody's Investors Service, Inc. or Duff & Phelps
Credit Rating Co. or (c) commercial paper maturing not more than one
year from the date of issuance thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.
"Control" (including the terms "Controlled by" and "under
common Control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or otherwise,
including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Encumbrance" means any security interest, pledge, mortgage,
lien, charge, adverse claim of ownership or use, or other encumbrance
of any kind.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder.
"Losses" means any claims, suits, judgments, losses, damages,
fines, costs or expenses (including reasonable legal fees and
expenses).
"Marketable Securities" means securities that are (a) (i)
securities of or other interests in any Person that are traded on a
United States national securities exchange or reported on by the
National Association of Securities Dealers Automated Quotation System
or (ii) debt securities on market terms of an issuer that has debt or
equity securities that are so traded or so reported on and in which
Marketable Securities a nationally recognized securities firm has
agreed to make a market, and (b) not subject to restrictions on
transfer as a result of any applicable contractual provisions or the
provisions of the Securities Act or, if subject to such restrictions
under the Securities Act, are also subject to registration rights
reasonably acceptable to the Person receiving such Marketable
Securities as consideration in a transaction pursuant to Article IV
hereof.
"Permitted Transferee" means, with respect to a specified
Stockholder, (i) a transferee by gift of Stock who is a member of the
family of such Person, or any trust for
2
the benefit of any such family member and (ii) a transferee of Stock
who is a family member and receives such Stock by will or the laws of
descent and distribution. For purposes of this definition, the word
"family" shall include any spouse, lineal ancestor or descendant,
brother or sister.
"Person" means any individual, partnership, firm, corporation,
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.
"Price Determination Date" means in connection with any Sale
of Common Stock pursuant to Section 4.04 hereof, the date on which the
Prospective Seller receives a Notice of Acceptance indicating ComVest's
interest in participating such Sale.
"Sale" means, in respect of any Stock, property or other
asset, any sale, assignment, transfer, distribution or other
disposition thereof or of a participation therein, or other conveyance
of legal or beneficial interest therein, or any short position in a
security or any other action or position otherwise reducing risk
related to ownership through hedging or other derivative instruments,
whether voluntarily or by operation of law or any agreement or
commitment to do any of the foregoing.
"Securities Act" means the United States Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
"Third Party" means with respect to ComVest, any Person (other
than ComVest or an Affiliate of ComVest), and with respect to any
Stockholder, any other Person (other than a Permitted Transferee of
such Stockholder, ComVest or any Affiliate of ComVest).
(b) The following terms have the meanings set forth in the
section set forth opposite such term:
TERM SECTION
Common Stock Recitals
Company Recitals
Notice of Acceptance 4.04(c)
Offer 4.04(a)
Offer Notice 4.04(a)
Offer Period 4.04(c)
Offer Price 4.04(a)
Offered Shares 4.04(a)
ComVest Preamble
Prospective Seller 4.04(a)
Prospective Transferee 4.07
Purchase Offer 4.06(a)
Purchase Offer Notice 4.06(b)
Stockholder(s) Preamble
3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMVEST
ComVest represents and warrants to the Stockholders as
follows:
SECTION 2.01. Due Organization and Authority. ComVest is a
limited liability company duly organized, validly existing, in good standing and
in active status under the laws of the State of Delaware. ComVest has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement and to consummate the transactions
contemplated by this Agreement; and the execution, delivery and performance by
ComVest of this Agreement have been duly authorized by all necessary action on
the part of ComVest. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of ComVest, enforceable
against it in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, fraudulent conveyance, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
SECTION 2.02. No Conflict. The execution, delivery and
performance of this Agreement by ComVest do not and will not (a) violate,
conflict with or result in the breach of any provision of its certificate of
incorporation or by-laws or any other document, agreement or instrument to which
ComVest is subject or by which ComVest is bound, or (b) conflict with or violate
any law, governmental order or governmental regulation applicable to it or any
of its assets, properties or businesses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder severally, but not jointly, represents and
warrants to ComVest and each other Stockholder as follows:
SECTION 3.01. Organization and Authority. Such Stockholder has
the absolute and unrestricted right, power and authority to enter into and to
perform his obligations under this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered and constitutes the legal, valid and binding obligation of such
Stockholder, enforceable against him in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, fraudulent conveyance,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
SECTION 3.02. No Conflict. The execution, delivery and
performance of this Agreement by such Stockholder do not and will not conflict
with or violate any law, governmental regulation or governmental order
applicable to such Stockholder or any of his assets, properties or businesses or
any other document, agreement or instrument to which such Stockholder is subject
or by which such Stockholder is bound.
4
ARTICLE IV
TRANSFER OF SHARES
SECTION 4.01. Legends. The Company shall affix to each
certificate evidencing Common Stock issued to Stockholders a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A
STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 11, 2005, AS IT
MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OF TRANSFER OF THESE SHARES WILL BE MADE ON THE
BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL
HAVE BEEN COMPLIED WITH."
SECTION 4.02. Certain Restrictions on Sale and Encumbrance. 1.
Until such time as all of the Shares, Conversion Shares and Warrant Shares are
fully registered and freely tradable as provided in the Registration Rights
Agreement, no Stockholder shall, directly or indirectly (through the transfer of
any securities of the Company of any Person that holds, or Controls any Person
that holds, such securities of the Company or otherwise) make or solicit any
Sale of, or create, incur or assume any Encumbrance with respect to, any
securities of the Company Beneficially Owned by such Stockholder, other than any
Sale to a Permitted Transferee who shall agree in writing to be bound by the
provisions of this Agreement, or any Sale in accordance with this Article IV.
(b) No Sale of Common Stock to a Permitted Transferee shall be
effective if a purpose or effect of such transfer shall have been to circumvent
the provisions of this Section 4.02. Each Stockholder shall remain responsible
for the performance of this Agreement by each Permitted Transferee of such
Stockholder to which Common Stock is transferred. If any Permitted Transferee to
which any securities of the Company is transferred pursuant to Section 4.02(a)
ceases to be a Permitted Transferee of the Stockholder from which or whom it
acquired such securities of the Company pursuant to such provision, such Person
shall reconvey such securities of the Company to such transferring Stockholder
immediately before such Person ceases to be a Permitted Transferee of such
transferring Stockholder so long as such Person knows of its upcoming change of
status immediately prior thereto. If such change of status is not known until
after its occurrence, the former Permitted Transferee shall make such transfer
to such transferring Stockholder as soon as practicable after the former
Permitted Transferee receives notice thereof. For all purposes of this
Agreement, a Permitted Transferee shall be obligated under this Agreement as if
he, she or it were the transferring Stockholder.
SECTION 4.03. Improper Sale or Encumbrance. Any attempt not in
compliance with this Agreement to make any Sale of, or create, incur or assume
any Encumbrance with respect to, any securities of the Company shall be null and
void and of no force and effect, the purported transferee shall have no rights
or privileges in or with respect to the Company, and the Company shall not give
any effect in the Company's stock records to such attempted Sale or Encumbrance.
Furthermore, the Stockholder and the other parties engaging or attempting to
engage in such Sale shall indemnify and hold harmless the Company and each of
the
5
Stockholders from all Losses that such indemnified Persons may incur (including,
without limitation, incremental tax liability and lawyers' fees and expenses) in
enforcing the provisions of this Agreement.
SECTION 4.04. Tag-Along Rights. 1. If any Stockholder receives
from or otherwise negotiates with a Third Party a bona fide offer (an "Offer")
to purchase for cash, Cash Equivalents or Marketable Securities any Common Stock
Beneficially Owned or held by such Stockholder, and such Stockholder intends to
sell such Common Stock to such Third Party, such Stockholder (the "Prospective
Seller") shall provide ComVest with written notice of such Offer (an "Offer
Notice"). The Offer Notice shall identify the Third Party making the Offer, the
number and type of shares of Common Stock covered by the Offer (the "Offered
Shares"), the price per share of Common Stock at which a Sale is proposed to be
made (the "Offer Price"), the form of consideration proposed to be paid and all
other material terms and conditions of the Offer.
(b) If the Offer Price includes
(i) any Marketable Securities, the value of such securities
shall be determined by calculating a volume-weighted average of the
closing prices of such securities over the ten trading-day period
ending on the Price Determination Date on the market with the largest
trading volume in such securities; or
(ii) any Cash Equivalents, the value of such Cash Equivalents
shall be determined by reference to the closing price thereof on the
market with the largest trading volume in such securities on the Price
Determination Date.
(c) ComVest shall have the right, but not the obligation, to
include the shares of Common Stock owned by ComVest and its Affiliates, on a pro
rata basis in any such Sale, on the same terms and conditions as set forth in
the Offer Notice, pursuant to the procedure set forth hereunder, provided that
such terms and conditions, including the price per Share, are identical to those
set forth in the Offer. The Offer Notice shall state that ComVest and its
Affiliates may participate in the Sale by delivering, within 10 Business Days of
having received the Offer Notice (the "Offer Period"), a notice to the
Prospective Seller stating that it intends to exercise its rights pursuant to
this Section 4.04 and to sell its and its Affiliates' pro rata shares of Common
Stock (the "Tag Along Shares") for the consideration, and on the terms and
conditions, set forth in the Offer (the "Notice of Acceptance"). The Notice of
Acceptance shall contain a specific provision entitling the Prospective Seller
to conclude the Sale on behalf of ComVest and its Affiliates; provided, however,
that such proxy will not entitle the Prospective Seller to conclude any
agreement on behalf of ComVest and its Affiliates which differs from the
consideration, terms and conditions described in the Offer Notice. If no Notice
of Acceptance is received by the Prospective Seller within the Offer Period, or
if the Notice of Acceptance does not fulfill all of the foregoing requirements,
ComVest shall have waived its rights hereunder. If the Notice of Acceptance is
received by the Prospective Seller within the Offer Period, then the Prospective
Seller shall, for a period not to exceed 15 Business Days, seek to obtain from
the third party an offer, for the consideration and on the same terms and
conditions described in the Offer Notice, of its and its Affiliates' pro rata
shares of Common Stock as well as all of the pro rata shares of Common Stock
offered for sale by ComVest and its Affiliates (collectively, the "Total
Shares").
6
In case the prospective third party refuses to purchase all of the Total Shares,
then the Prospective Seller shall not be entitled to consummate a Sale of any
shares of Common Stock to such third party.
(d) Anything in this Section 4.04 to the contrary
notwithstanding, the provisions of this Section 4.04 shall not be applicable to
any Sale to a Permitted Transferee.
SECTION 4.05. Transferees to Execute Agreement. Each
Stockholder agrees that it will not, as long as such Stockholder or ComVest
Beneficially Own any shares of Common Stock, directly or indirectly, make any
Sale of, or create, incur or assume any Encumbrance with respect to, any shares
of Common Stock Beneficially Owned by such Stockholder unless prior to the
consummation of any such Sale or the creation, incurrence or assumption of such
Encumbrance, the Person to whom such Sale is proposed to be made or the Person
in whose favor such Encumbrance is proposed to be created, incurred or assumed
(a "Prospective Transferee") (i) executes and delivers this Agreement to ComVest
and each Stockholder, and (ii) unless such Prospective Transferee is a
recognized institutional investor, delivers to ComVest an opinion of counsel,
satisfactory in form and substance to ComVest, to the effect that the execution
of this Agreement by such Prospective Transferee makes this Agreement a legal,
valid and binding obligation of such Prospective Transferee enforceable against
such Prospective Transferee in accordance with its terms. Upon the execution and
delivery by such Prospective Transferee of this Agreement and, if required, the
delivery of the opinion of counsel referred to in clause (ii) of the preceding
sentence, such Prospective Transferee shall be deemed a "Stockholder" for
purposes of this Agreement and shall have the rights and be subject to the
obligations of a Stockholder under this Agreement, in each case with respect to
the Stock owned by such Prospective Transferee or in respect of which such
Encumbrance shall have been created, incurred or assumed.
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Notices.
Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
7
if to ComVest or the Surviving Corporation:
ComVest Investment Partners II LLC
830 Third Avenue
New York, New York 10022
Attn: Carl G. Kleidman
Phone: (212) 829-5800
Facsimile No: (212) 829-5978
with copy to (which copy shall not constitute notice):
Greenberg Traurig, LLP
200 Park Avenue
New York, NewYork 10166
Attn: Alan Annex, Esq.
Phone: (212) 801-9200
Facsimile No.: (212) 801-6400
if to a Stockholder: At the address specified on the signature pages.
SECTION 5.02. Public Announcements. Except as required by law,
no party to this Agreement shall make, or cause to be made, any press release or
public announcement in respect of this Agreement or otherwise communicate with
any news media without the prior written consent of the other parties, and the
parties shall cooperate as to the timing and contents of any such press release
or public announcement.
SECTION 5.03. Cumulative Remedies; Specific Performance. The
rights and remedies of the parties hereto shall be cumulative (and not
alternative). The parties to this Agreement agree that, in the event of any
breach or threatened breach by any party to this Agreement of any covenant,
obligation or other provision set forth in this Agreement for the benefit of any
other party to this Agreement, such other party shall be entitled (in addition
to any other remedy that may be available to it) to seek (a) a decree or order
of specific performance or mandamus to enforce the observance and performance of
such covenant, obligation or other provision, and (b) an injunction restraining
such breach or threatened breach.
SECTION 5.04. Binding Effect; Successors in Interest. (a) This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns (if any). No
Stockholder shall, directly or indirectly, assign any rights or obligations
hereunder to any Person except as expressly provided herein.
SECTION 5.05. Severability. In the event that any provision of
this Agreement, or the application of any such provision to any Person or set of
circumstances, shall be
8
determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Agreement, and the application of such provision to Persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent permitted by
law.
SECTION 5.06. Counterparts. This Agreement may be executed in
several counterparts and by facsimile, each of which shall constitute an
original and all of which, when taken together, shall constitute one agreement.
SECTION 5.07. Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto relating to the subject matter hereof
and thereof and supersedes all prior agreements and understandings among or
between any of the parties relating to the subject matter hereof and thereof.
SECTION 5.08 Governing Law; Submission to Jurisdiction. 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, that such suit, action or 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
suit, action or 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 or Action to
enforce any provisions of the Transaction Documents, then the prevailing party
in such action or Action shall be reimbursed by the other party for its
attorneys' fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or Action.
SECTION 5.09. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
SECTION 5.10. Amendments and Waivers; Assignment. 1. Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
all parties hereto or, in the case of a waiver, by the party or parties against
whom the waiver is to be effective.
9
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder (other than a failure or delay beyond a period of
time specified herein) shall operate as a waiver thereof and no single or
partial exercise thereof shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 5.11. Headings. The headings and subheadings in this
Agreement are included for convenience and identification only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof.
SECTION 5.12. Waiver of Jury Trial. Each of the parties hereto
hereby waives to the fullest extent permitted by applicable law any right it may
have to a trial by jury with respect to any litigation directly or indirectly
arising out of, under or in connection with this Agreement. Each of the parties
hereto (a) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other party would not,
in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other party hereto have been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 5.12.
10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or caused this Agreement to be duly executed by their respective duly
authorized signatories, as of the date first above written.
COMVEST INVESTMENT PARTNERS II LLC
By:
-----------------------------------------
Name:
Title:
STOCKHOLDERS:
Address:
--------------------------------------------
(Justin M. MacIntosh)
c/o CorVu Australasia Pty. Ltd.
Level 8, 821-843 Pacific Highway
Chatswood NSW 2067
Australia
11
EX-8
8
e1025753.txt
SECURITY AGREEMENT
EXHIBIT 8
EXECUTION COPY
SECURITY AGREEMENT
DATE: February 11, 2005
DEBTOR: CorVu Corporation EIN: 41-1457090
(Collectively) 3400 West 66th Street Organization I.D. #4I-202
Suite 445
Edina, MN 55435
CorVu North America, Inc. EIN: 41-1819469
3400 West 66th Street Organization I.D. #8V-868
Suite 445
Edina, MN 55435
SECURED PARTY: ComVest Investment Partners II LLC
830 Third Avenue
New York, NY 10022
1. Security Interest and Collateral. To secure the payment of
outstanding principal and interest on that certain Promissory Note of even date
herewith in the original principal amount of $1,500,000 by Debtor to Secured
Party (the "Note") and the performance of every liability and obligation of
every type and description that Debtor may now or at any time hereafter owe to
Secured Party under the Note, whether such debt, liability or obligation now
exists or is hereafter created or incurred, and whether it is absolute or
contingent, liquidated or unliquidated, or sole, joint, several or joint and
several (all such debts, liabilities and obligations and any amendments,
extensions, renewals or replacements thereof collectively referred to herein as
the "Obligations"), Debtor hereby grants Secured Party a first priority security
interest (the "Security Interest") in all of Debtor's property (the
"Collateral"), including without limitation the following:
A. Inventory. All inventory of Debtor, whether now owned or
hereafter acquired and wherever located and other tangible
personal property held for sale or lease or furnished or to be
furnished under contracts of service or consumed in Debtor's
business, and all goods of Debtor, whether now owned or
hereafter acquired and wherever located, including without
limitation all computer programs embedded in goods, and all
other Inventory and Goods of the Debtor, as such terms may be
defined in the Uniform Commercial Code as may be in effect in
the State of Minnesota from time to time (the "UCC");
B. Equipment. All equipment of Debtor, whether now owned or
hereafter acquired and wherever located, including but not
limited to all present and future equipment, machinery, tools,
motor vehicles, trade fixtures, furniture, furnishings,
1
office and recordkeeping equipment and all goods for use in
Debtor's business and all other Equipment of the Debtor, as
such term may be defined in the UCC, together with all parts,
equipment and attachments relating to any of the foregoing;
C. Accounts, Contract Rights and Other Rights to Payment: Each
and every right of Debtor to the payment of money, whether
such right to payment now exists or hereafter arises, whether
such right to payment arises out of a sale, lease, license,
assignment or other disposition of goods or other property by
Debtor, out of a rendering of services by Debtor, out of a
loan by Debtor, out of the overpayment of taxes or other
liabilities of Debtor, or otherwise arises under any contract
or agreement, whether such right to payment is or is not
already earned by performance, and howsoever such right to
payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which
Debtor may at any time have by law or agreement against any
account debtor or other obligor obligated to make any such
payment or against any of the property of such account debtor
or other obligor; all including but not limited to all present
and future debt instruments, chattel paper, accounts, license
fees, contract rights, loans and obligations receivable and
tax refunds and all other Accounts of the Debtor, as such term
may be defined in the UCC;
D. Instruments: All instruments, chattel paper, letters of credit
or other documents of Debtor, whether now owned or hereafter
acquired, including but not limited to promissory notes,
drafts, bills of exchange and trade acceptances; all rights
and interests of Debtor, whether now existing or hereafter
created or arising, under leases (where Debtor is the lessor),
licenses or other contracts, in each case where assignment for
security purposes is not expressly prohibited by the terms of
such instruments and all other Instruments of the Debtor, as
such term may be defined in the UCC;
E. Deposit Accounts and Investment Property: All right, title and
interest of Debtor in all deposit and investment accounts
maintained with any bank, savings and loan association,
broker, brokerage, or any other financial institution,
together with all monies and other property deposited or held
therein, including, without limitation, any checking account,
savings account, escrow account, savings certificate and
margin account, and all securities, whether certificated or
uncertificated, security entitlements, securities accounts,
commodity contracts, and commodity accounts and all other
Deposit Accounts and Investment Property of the Debtor, as
such terms may be defined in the UCC;
F. General Intangibles: All general intangibles of Debtor,
whether now owned or hereafter acquired, including, but not
limited to, applications for patents, patents, copyrights,
trademarks, trade secrets, good will, tradenames, customer
lists, permits and franchises, software, all licenses of any
of the foregoing and the right to use Debtor's name, and any
and all membership interests, governance rights, and financial
rights in each and every limited liability company, and all
payment
2
intangibles and all other General Intangibles of the Debtor,
as such term may be defined in the UCC;
G. Chattel Paper: All Chattel Paper of the Debtor, whether
tangible or electronic, as such term may be defined in the
UCC; and
H. Supporting Obligations, Embedded Software, etc.: All of
Debtor's rights, whether now existing or hereafter acquired,
in promissory notes, documents, embedded software, letter of
credit rights and supporting obligations (and security
interests and liens securing them) as such terms may be
defined in the UCC.
together with all substitutions and replacements for and products of any of the
foregoing property and proceeds of any and all of the foregoing property
together with (i) all accessories, attachments, parts, equipment, accessions and
repairs and embedded software now or hereafter attached or affixed to or used in
connection with any such goods, (ii) all warehouse receipts, bills of lading and
other documents of title now or hereafter covering such goods, and (iii) all
books and records of Debtor related to the Collateral.
2. Representations, Warranties and Agreements. Debtor jointly and
severally represents, warrants and agrees that:
2.1. Debtor is a corporation duly organized, validly existing
and in good standing under the laws of the state of Minnesota, and the
state of Minnesota has been Debtor's state of organization since the
date of Debtor's organization. Debtor has full power and authority to
execute this Agreement, to perform Debtor's obligations hereunder and
to subject the Collateral to the Security Interest. Debtor's taxpayer
identification number is the number shown at the beginning of this
Agreement. Debtor's organizational identification number is the number
shown at the beginning of this Agreement.
2.2. Debtor's chief place of business is, and has been for the
five years preceding the date of this Agreement, located at the address
shown at the beginning of this Agreement. Debtor's records concerning
its accounts and contract rights are kept at such address. The
Collateral is located at the address shown at the beginning of this
Agreement, and there are no other locations where any of the Collateral
may be kept except as set forth on Schedule 2.2 hereto. All Collateral
has been located at the address shown at the beginning of this
Agreement or at the locations set forth on Schedule 2.2, for the five
years prior to execution of this Agreement. Debtor will give at least
30 days' advance written notice to Secured Party of any change in
Debtor's jurisdiction of organization or chief place of business and
any change in or addition of any Collateral location. Debtor will take
all such actions as Secured Party may reasonably request to permit
Secured Party to establish and perfect the Security Interest in all
jurisdictions Secured Party deems necessary, including but not limited
to the execution, delivery or endorsement of any and all instruments,
documents, assignments, security agreements and other agreements and
writings that Secured Party may at any time reasonably request in order
to secure, protect, perfect or enforce the Security Interest and
Secured Party's
3
rights under this Agreement.
2.3. Debtor has (or will have at the time Debtor acquires
rights in Collateral hereafter arising) absolute title to each item of
Collateral free and clear of all security interests, liens and
encumbrances. Debtor will keep all Collateral free and clear of all
security interests, liens and encumbrances except the Security
Interest, and will defend the Collateral against all claims or demands
of all persons other than Secured Party. Debtor will promptly pay or
properly and timely contest all taxes and other governmental charges
levied or assessed upon or against any Collateral or upon or against
the creation, perfection or continuance of the Security Interest.
2.4. Until the Obligations are satisfied in full, Debtor will
not, without Secured Party's prior written consent, sell any of the
Collateral or enter into any agreement that is inconsistent with
Debtor's obligations or Secured Party's rights under this Agreement,
except that Debtor may sell or discard the Collateral in the ordinary
course of business so long as such agreements are not inconsistent with
Secured Party's rights or Debtor's obligations under this Agreement.
Debtor further agrees that it will not take any action, or permit any
action to be taken by others under its control, or fail to take any
action, that would affect the validity of the Collateral or enforcement
of Secured Party's rights in the Collateral. In addition, Debtor agrees
not to enter into any instruments, chattel paper, letters of credit or
other documents, including but not limited to promissory notes, drafts,
bills of exchange and trade acceptances, which expressly prohibit
assignment for security purposes.
2.5. This Agreement has been duly and validly authorized by
all necessary action by Debtor.
2.6. Debtor will keep all tangible Collateral in good repair,
working order and condition, normal depreciation excepted, and will,
from time to time, replace any worn, broken or defective parts thereof.
2.7. Debtor will at all reasonable times permit Secured Party
or its representatives to examine or inspect any Collateral, wherever
located, and to examine, inspect and copy Debtor's books and records
pertaining to the Collateral and its business and financial condition.
2.8. If Secured Party at any time so requests after the
occurrence of an Event of Default, Debtor will promptly transfer to
Secured Party any instrument, document, chattel paper, or investment
properties constituting the Collateral, duly endorsed or assigned by
Debtor.
2.9. Debtor will keep accurate and complete records pertaining
to the Collateral and pertaining to Debtor's business and financial
condition and submit to Secured Party such periodic reports concerning
the Collateral and Debtor's business and financial condition as Secured
Party may from time to time reasonably request.
4
2.10. Debtor will at all times keep all tangible Collateral
insured against risks of fire (including so-called extended coverage),
theft, and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the
extent of its interest.
2.11. Debtor will pay when due or reimburse Secured Party on
demand for all costs of collection of any of the Obligations and all
other out-of-pocket expenses (including all reasonable attorneys' fees)
incurred by Secured Party in connection with the creation, perfection,
satisfaction, protection, defense or enforcement of the Security
Interest or the creation, continuance, protection, defense or
enforcement of this Agreement or any or all of the Obligations,
including expenses incurred in any litigation or bankruptcy or
insolvency proceedings.
2.12. The Obligations have been incurred and the Collateral
will be used primarily for business purposes.
2.13. All rights to payment and all instruments, documents,
chattel papers and other agreements constituting or evidencing
Collateral are (or will be when arising or issued) the valid, genuine
and legally enforceable obligation, subject to no defense, set-off or
counterclaim (other than those arising in the ordinary course of
business) of each account debtor or other obligor named therein or in
Debtor's records pertaining thereto as being obligated to pay such
obligation. Debtor will not agree to any modification, amendment or
cancellation of any such obligation without Secured Party's prior
written consent except discounts provided by Debtor in the ordinary
course of business, and will not subordinate any such right to payment
to claims of other creditors of such account debtor or other obligor.
2.14. Debtor will promptly notify Secured Party of any
material loss of or damage to any Collateral or of any adverse change
in the prospect of payment of any material sums due on or under any
instrument, chattel paper, account or contract right constituting
Collateral.
2.15. Debtor will from time to time execute such financing
statements or control agreements as Secured Party may reasonably deem
necessary in order to perfect the Security Interest and, if any
Collateral is covered by a certificate of title, execute such documents
as may be required to have the Security Interest properly noted on a
certificate of title. In addition, Debtor authorizes Secured Party to
file any financing statement the Secured Party deems necessary,
describing any liens held by Secured Party. Such financing statements
may describe the Collateral in the same manner as described herein or
may contain an indication or description of the Collateral that
describes such property in any other manner as the Secured Party may
determine, in its reasonable discretion, is necessary to ensure the
perfection of the Security Interest, including, without limitation,
describing such property as "all assets" or "all personal property."
2.16 Debtor will not use or keep any Collateral, or permit it
to be used or kept, for any unlawful purpose or in violation of any
federal, state or local law, statute or
5
ordinance.
2.17. If Debtor at any time fails to perform or observe any
agreement contained in this Section 2, and if such failure shall
continue for a period of 30 calendar days after Secured Party gives
Debtor written notice thereof, Secured Party may (but need not) perform
or observe such agreement on behalf and in the name, place and stead of
Debtor (or, at Secured Party's option, in Secured Party's own name) and
may (but need not) take any and all other actions that Secured Party
may reasonably deem necessary to cure or correct such failure. Debtor
shall pay Secured Party on demand the amount of all monies expended and
all costs and expenses (including reasonable attorneys' fees) incurred
by Secured Party in connection with or as a result of Secured Party's
performing or observing such agreements or taking such actions,
together with interest thereon from the date expended or incurred by
Secured Party at the highest rate then applicable to any of the
Obligations. To facilitate the performance or observance by Secured
Party of such agreements of Debtor (in the event Debtor does not cure
any such failure during the above-described 30-day period), Debtor
hereby irrevocably appoints (which appointment is coupled with an
interest) Secured Party, or its delegate, as the attorney-in-fact of
Debtor with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments, documents, financing
statements, and other agreements and writings required to be obtained,
executed, delivered or endorsed by Debtor under this Section 2.
3. Account Verification and Collection Rights of Secured Party. Secured
Party shall have the right to verify any accounts in the name of Debtor or in
Secured Party's own name; and Debtor, whenever requested pursuant to the terms
of this Section, shall furnish Secured Party with duplicate statements of the
accounts, which statements may be mailed or delivered by Secured Party for that
purpose. Secured Party may at any time after the occurrence of an Event of
Default notify any account debtor, or any other person obligated to pay any
amount due, that such chattel paper, account, or other right to payment has been
assigned or transferred to Secured Party for security and shall be paid directly
to Secured Party. If Secured Party so requests at any time after the occurrence
of an Event of Default, Debtor will so notify such account debtors and other
obligors in writing and will indicate on all invoices to such account debtors or
other obligors that the amount due is payable directly to Secured Party. At any
time after Secured Party or Debtor gives such notice to an account debtor or
other obligor, Secured Party may (but need not), in Secured Party's own name or
in Debtor's name, demand, sue for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such chattel
paper, account, or other right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor.
4. Events of Default. The occurrence of any of the following shall, at
the sole option of the Secured Party, be an Event of Default:
A. Any "Event of Default" (as defined in such agreement) by
Debtor under the Note or any other agreement evidencing the
Obligations, which default is not cured within any grace period granted
with respect to such default or, if no specific grace period
6
is granted with respect to such default, where such default is not
cured within five (5) business days after written notice thereof from
the Secured Party;
B. Debtor's failure to comply with any representation,
warranty or covenant hereunder if not cured within thirty (30) days
after written notice;
C. Transfer or disposition of any of the Collateral, except as
permitted by this Agreement; or
D. Attachment, execution or levy on any of the Collateral.
5. Remedies upon Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter, Secured Party may exercise any one or more
of the following rights and remedies:
5.1. declare all Obligations to be immediately due and
payable, which shall then be immediately due and payable, without
presentment or other notice or demand;
5.2. exercise and enforce any or all rights and remedies
available upon default to a secured party under the Uniform Commercial
Code, including but not limited to the right to take possession of any
Collateral, proceeding without judicial process if permitted by law or
by judicial process, and the right to use, sell, lease or otherwise
dispose of any or all of the Collateral, and in connection therewith,
Secured Party may require Debtor to make the Collateral available to
Secured Party at a place to be designated by Secured Party that is
reasonably convenient to both parties, and if notice to Debtor of any
intended disposition of Collateral or any other intended action is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in Section
8.2) at least 10 business days prior to the date of intended
disposition or other action; or
5.3. exercise or enforce any or all other rights or remedies
available to Secured Party by law or agreement against the Collateral,
including specifically the right to use the Collateral, against Debtor
or against any other person or property.
All rights and remedies of Secured Party shall be cumulative and may be
exercised singularly or concurrently, at Secured Party's option, and the
exercise or enforcement of any one such right or remedy shall neither be a
condition to nor bar the exercise or enforcement of any other.
6. Other Personal Property. Unless at the time Secured Party takes
possession of any tangible Collateral, or within seven days thereafter, Debtor
gives written notice to Secured Party of the existence of any goods, papers or
other property of Debtor, not affixed to or constituting a part of such
Collateral, but which are located or found upon or within such Collateral,
Secured Party shall not be responsible or liable to Debtor for any action taken
or omitted by or on behalf of Secured Party with respect to such property
without actual knowledge of the existence of any such property or without actual
knowledge that it was located or to be found upon or within such Collateral.
7
7. Assignment of Insurance. Debtor hereby assigns to Secured Party, as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party. Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in Secured Party's own name or in
Debtor's name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.
8. Miscellaneous.
8.1. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released,
only explicitly in a writing signed by Secured Party. A waiver signed
by Secured Party shall be effective only in the specific instance and
for the specific purpose given. Mere delay or failure to act shall not
preclude the exercise or enforcement of any of Secured Party's rights
or remedies.
8.2. All notices to be given to Debtor shall be deemed
sufficiently given if delivered or mailed by registered or certified
mail, postage prepaid, to Debtor at its address set forth above or at
such other address as Debtor may subsequently provide to Secured Party.
8.3. Secured Party's duty of care with respect to Collateral
in its possession (as imposed by law) shall be deemed fulfilled if
Secured Party exercises reasonable care in physically safekeeping such
Collateral or, in the case of Collateral in the custody or possession
of a bailee or other third person, exercises reasonable care in the
selection of the bailee or other third person, and Secured Party need
not otherwise preserve, protect, insure or care for any Collateral.
Secured Party shall not be obligated to preserve any rights Debtor may
have against prior parties, to realize on the Collateral at all or in
any particular manner or order, or to apply any cash proceeds of
Collateral in any particular order of application.
8.4. This Agreement shall be binding upon and inure to the
benefit of Debtor and Secured Party and their respective successors and
assigns and shall take effect when signed by Debtor and delivered to
Secured Party, and Debtor waives notice of Secured Party's acceptance
hereof.
8.5. A carbon, photographic or other reproduction of this
Agreement or of any financing statement signed by Debtor shall have the
same force and effects as the original for all purposes of a financing
statement.
8.6. This Agreement shall be governed by the internal laws of
the State of Minnesota. If any provision or application of this
Agreement is held unlawful or unenforceable in any respect, such
illegality or unenforceability shall not affect other
8
provisions or applications which can be given effect and this Agreement
shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. Any
dispute arising out of or relating to this Agreement, including the
formation, interpretation or alleged breach hereof, shall be brought in
the state or federal courts located in Hennepin County, Minnesota, and
the parties hereto consent to the personal jurisdiction and venue of
such courts.
8.7. All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Obligations.
(signature page on following page)
9
ACCORDINGLY, this Agreement has been duly executed by the parties as of
the date first set forth above.
CORVU CORPORATION
By:
-----------------------------------------
Its:
-------------------------------------
CORVU NORTH AMERICA, INC.
By:
-----------------------------------------
Its:
-------------------------------------
COMVEST INVESTMENT PARTNERS II LLC
By:
-----------------------------------------
Its:
-------------------------------------
10
SCHEDULE 2.2
Other Locations
555 North Point Center East
Fourth Floor
Alpharetta, GA 30022
5606 MacArthur Boulevard
11th Floor
Irving, TX 75038
1
EX-9
9
e1025187.txt
STATEMENT OF DESIGNATION
EXHIBIT 9
CORVU CORPORATION
STATEMENT OF DESIGNATION
OF
RIGHTS, PREFERENCES AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
The undersigned, David C. Carlson, the Chief Financial Officer of CorVu
Corporation, a Minnesota corporation (the "Corporation"), hereby certifies that
the following resolutions establishing Series C Convertible Preferred Stock of
the Corporation pursuant to Minnesota Statutes Section 302A.401 were duly
adopted by the directors of the Corporation by written action dated as of
February __, 2005 pursuant to Minnesota Statutes Section 302A.239:
"NOW, THEREFORE, RESOLVED, that the Board approves the
designation of 17,000 shares of its undesignated stock as Series C
Convertible Preferred Stock ("Series C Preferred Stock"), with a par
value of $100.00 per share, that are convertible into 3,400,000 shares
of Common Stock at a conversion price of $0.50.
FURTHER RESOLVED, that 3,400,000 shares of Common Stock be
reserved for issuance upon conversion of the Series C Preferred Stock.
FURTHER RESOLVED, that the Board adopt the Certificate of
Designation of Rights and Preferences of Series C Preferred Stock of
CorVu Corporation, attached hereto as Exhibit A, and incorporated by
reference herein."
IN WITNESS WHEREOF, the undersigned has signed this statement on February ,
2005.
_____________________________________________
David C. Carlson, Chief Financial Officer
EXHIBIT A
CERTIFICATE OF DESIGNATION
OF
RIGHTS AND PREFERENCES
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
CORVU CORPORATION
1. Designation. The series of Preferred Stock is hereby designated Series C
Convertible Preferred Stock (the "SERIES C PREFERRED STOCK").
2. Authorized Shares. The number of authorized shares constituting the
Series C Preferred Stock shall be 17,000 shares of such series, with a par value
of $100.00 per share.
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "LIQUIDATION"), the holders of
the Series C Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock or Series B Convertible Preferred
Stock, par value $.01 per share (the "SERIES B PREFERRED STOCK"), or any other
Preferred Stock by reason of their ownership thereof, an amount equal to $150.00
per share of Series C Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) (the "SERIES C LIQUIDATION
VALUE"). If, upon the occurrence of such a Liquidation, the assets and funds
thus distributed among the holders of the Series C Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series C Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(b) After payment to the holders of the Series C Preferred Stock of the
amounts set forth in Section 3(a) above, the holders of the Series B Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the remaining assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, an amount
equal to $1.00 per share of Series B Preferred Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) (the "SERIES B
LIQUIDATION VALUE"). If, upon the occurrence of such a Liquidation, the assets
and funds thus distributed among the holders of the Series B Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire remaining assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(c) After payment to the holders of the Series C Preferred Stock of the
amounts set forth in Section 3(a) above and to the holders of the Series B
Preferred Stock of the amounts set
forth in Section 3(b) above, the holders of the Series A Convertible
Preferred Stock (the "SERIES A PREFERRED STOCK") shall be entitled to receive,
prior and in preference to any distribution of any of the remaining assets or
surplus funds of the Corporation to the holders of the Common Stock by reason of
their ownership thereof, an amount equal to $10.00 per share of Series A
Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares) (the "SERIES A LIQUIDATION VALUE"). If, upon the
occurrence of such a Liquidation, the assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire remaining assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(d) After payment to the holders of the Series C Preferred Stock of the
amounts set forth in Section 3(a) above and to the holders of the Series B
Preferred Stock of the amounts set forth in Section 3(b) above and to the holder
of Series A Preferred Stock of the amounts set forth in Section 3(c) above, the
entire remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock, the Series C Preferred Stock and the Series B Preferrd Stock in
proportion to the shares of Common Stock then held by them and the shares of
Common Stock that they then have the right to acquire upon conversion of the
shares of Series C Preferred Stock or Series B Preferred Stock, respectively,
then held by them.
(e) For purposes of this Section 3, (i) an acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by another entity (other
than a mere reincorporation transaction) and in which the shareholders of the
Corporation immediately prior to such transaction do not own a majority of the
outstanding voting securities of the surviving or acquiring entity immediately
following such transaction; (ii) a sale of all or substantially all of the
assets of the Corporation; or (iii) the acquisition of at least fifty percent of
the shares of the Corporation providing voting power or an interest in the
Corporation by a single person or a group as defined in Rule 13d-1(b)(1)(J)
(each, a "CHANGE OF CONTROL"), shall be treated as a Liquidation and shall
entitle the holders of Series C Preferred Stock to receive at the closing of
such transaction in cash, securities or other property (valued as provided in
Section 3(e) below) amounts as specified in Section 3(a) above. The Corporation
will provide each holder of shares of Series C Preferred Stock with at least
thirty (30) days' advance written notice of the closing of a Change of Control.
(f) Whenever a distribution provided for in this Section 3 shall be
payable in securities or property other than cash, the amount of such
distribution shall be determined based upon the fair market value of such
securities or other property as unanimously determined in good faith by the
Board of Directors.
4. Voting Rights. Each holder of shares of the Series C Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series C Preferred Stock could be converted and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series C Preferred Stock held by each holder could
be converted) shall be rounded downwards to the nearest whole number. Each
holder of Common Stock shall be entitled to one (1) vote for each share of
Common Stock held.
5. Dividends.
(a) Payment of Dividend. The holders of the shares of Series C
Preferred Stock shall receive, on a quarterly basis, dividends at a rate of 6%
per annum per share during the first year of issuance, 9% per annum per share
during the second year of issuance and 12% per annum per share thereafter,
payable as of the first business day of a calendar year quarter (the "Valuation
Date") for the previous calendar year quarter; the dividend payment shall be
reduced accordingly if the preceding dividend period was less than one entire
calendar year quarter. The dividends shall be payable in cash out of legally
available funds. Such dividends shall be payable before any dividends shall be
paid upon, or set apart for, the Series B Preferred Stock, the Common Stock or
any other Preferred Stock and shall be cumulative, so that if in any quarterly
dividend period, dividends shall not have been paid upon or set apart for the
Series C Preferred Stock, the deficiency (but without interest) shall be fully
paid or set apart for payment before any dividends shall be paid upon or set
apart for the Series B Preferred Stock, Common Stock or any other Preferred
Stock.
(b) Failure to Pay Dividend Amounts. In the event the Corporation fails
to pay any holder of Series C Preferred Stock a dividend pursuant to Section
5(a) above within fifteen (15) days from the end of the applicable quarterly
period, each holder of Series C Preferred Stock shall have the right to notify
the Corporation that such holder will require the Corporation to convert the
outstanding dividend amount into shares of Common Stock (the "CONVERSION
NOTICE"). If the Corporation fails to pay to such holder the outstanding
dividend amount within fifteen (15) days after the date of the Conversion
Notice, then the Corporation shall issue immediately to such holder, in lieu of
the outstanding dividend amount, the number of shares of Common Stock of the
Corporation equal to the quotient of the outstanding dividend amount divided by
the volume-weighted average closing price of the Common Stock of the Corporation
during the twenty-day period beginning on the day of the Conversion Notice.
6. Conversion. The holders of Series C Preferred Stock shall have the
following conversion rights (the "Conversion Rights"):
(a) Right to Convert. Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $100.00 by the Conversion Price (as
defined below) applicable to such share in effect on the date the certificate is
surrendered for conversion. The option of a holder of Series C Preferred Stock
to convert such holder's shares of Series C Preferred Stock into shares of
Common Stock shall terminate immediately prior to the closing of a Change of
Control referred to in Section 3(d) above; provided, that notice of such Change
of Control has been provided to such holder as
provided herein. The price at which shares of Common Stock shall be deliverable
upon conversion of shares of the Series C Preferred Stock (the "CONVERSION
PRICE") shall initially be $0.50 per share of Common Stock. Such initial
Conversion Price shall be adjusted as hereinafter provided.
(b) Mechanics of Conversion. Before any holder of Series C Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for such stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same and shall state therein the name or names in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series C Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of surrender of the
shares of Series C Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date. If the conversion is in connection with an
underwritten offering of securities pursuant to the Securities Act or a Change
of Control, the conversion may, at the option of any holder tendering shares of
Series C Preferred Stock for conversion, be conditioned upon the closing of such
offering or Change of Control, in which event the person(s) entitled to receive
the Common Stock upon conversion of the Series C Preferred Stock shall not be
deemed to have converted such Series C Preferred Stock until immediately prior
to such closing.
(c) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
at any time or from time to time after the February 11, 2005 (the "Issue Date")
shall declare or pay, without consideration, any dividend on the Common Stock
payable in Common Stock or in any right to acquire Common Stock for no
consideration, or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for any series of Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(d) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series C Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for in Section 6(c) above
or a merger or other reorganization referred to in Section 6(b) above), the
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or
reclassification, be proportionately adjusted so that the Series C Preferred
Stock shall be convertible into, in lieu of the number of shares of Common Stock
which the holders would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the holders
upon conversion of the Series C Preferred Stock immediately before that change.
(e) Adjustments to Conversion Price.
(i) If, at any time or from time to time after the Issue Date, the
Corporation issues or sells, or is deemed by the express provisions of this
subsection 6(e)(i) to have issued or sold, Additional Shares of Common
Stock (as defined in subsection 6(e)(iv) below), other than as a dividend
or other distribution on any class of capital stock, and other than a
subdivision or combination of shares of Common Stock as provided in
subsection 6(c) or (d) above, for an Effective Price (as defined in
subsection 6(e)(iv) below) which shall be less than the per share purchase
price of any shares of Series C Preferred Stock previously sold on an
adjusted basis, the Conversion Price and the Common Stock issued upon
conversion shall, as applicable, be adjusted so that the Conversion Price
and the Common Stock issued upon conversion shall be adjusted to reflect
the lowest per-share sale price of any Additional Shares of Common Stock.
(ii) For the purpose of making any adjustment required under this
Section 6(e), the consideration received by the Corporation for any issue
or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the Corporation after
deduction of any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such
issue or sale but without deduction of any expenses payable by the
Corporation, (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by
the Board of Directors, and (C) if Additional Shares of Common Stock or
Common Stock Equivalents (as defined in subsection 6(e)(iii) below) are
issued or sold together with other stock or securities or other assets of
the Corporation for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock or Common Stock Equivalents.
(iii) For the purpose of the adjustment required under this
Section 6(e), if the Corporation issues or sells any securities of the
Corporation 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 (collectively, "Common Stock
Equivalents") for the purchase of Additional Shares of Common Stock or
Common Stock Equivalents, and if the Effective Price of such Additional
Shares of Common Stock shall be less than the per share purchase price of
the Series C Preferred Stock previously sold on an adjusted basis, in each
case the Corporation shall be deemed to have issued at the time of the
issuance of such Common Stock Equivalents the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to
have received as consideration for the issuance
of such shares an amount equal to the total amount of the consideration, if
any, received by the Corporation for the issuance of such Common Stock
Equivalents, plus the minimum amounts of consideration, if any, payable to
the Corporation (other than by cancellation of liabilities or obligations
evidenced by such Common Stock Equivalents) upon the conversion thereof;
provided that if in the case of Common Stock Equivalents the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed
to have received the minimum amounts of consideration without reference to
such clauses; provided further that if the minimum amount of consideration
payable to the Corporation upon the exercise or conversion of Common Stock
Equivalents is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the
Effective Price shall be recalculated using the figure to which such
minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the
exercise or conversion of such Common Stock Equivalents is subsequently
increased, the Effective Price shall be again recalculated using the
increased minimum amount of consideration payable to the Corporation upon
the exercise or conversion of such Common Stock Equivalents. No further
adjustment of the Conversion Price, as adjusted upon the issuance of such
Common Stock Equivalents, shall be made as a result of the actual issuance
of Additional Shares of Common Stock on the exercise of any such conversion
of any such Common Stock Equivalents. If any such conversion privilege
represented by any such Common Stock Equivalents shall expire without
having been exercised, the Conversion Price as adjusted upon the issuance
of such Common Stock Equivalents shall be readjusted to the Conversion
Price which would have been in effect had an adjustment been made on the
basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights of conversion of such Common Stock Equivalents, and
such Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus
the consideration received for issuing or selling the Common Stock
Equivalents actually converted, plus the consideration, if any, actually
received by the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Common Stock Equivalents) on the conversion
of such Common Stock Equivalents, provided that such readjustment shall not
apply to prior conversions of Series C Preferred Stock.
(iv) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation or deemed to be issued pursuant to
this Section 6(e), whether or not subsequently reacquired or retired by the
Corporation; provided, that Additional Shares of Common Stock shall not
include or be deemed to include any of the following issuances (the "Exempt
Issuances") of securities: (a) shares of Common Stock or options to
employees, officers or directors of the Corporation pursuant to any stock
or option plan duly adopted by a majority of the non-employee members of
the Board of Directors 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 Common Stock Equivalents, options or
warrants issued and outstanding on December 20, 2004, provided that such
securities have not been amended since the Issue Date, (c) 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, (d) issuances at fair market value to the Corporation'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 unanimous prior written consent of
the holders of the Series C Preferred Stock, or (e) issuances of options to
Justin MacIntosh at the then fair market value in replacement of options
held by him on the Issue 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
Corporation's then existing stock option plan and approved by a majority of
the non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for such
purpose.
(v) The "Effective Price" of Additional Shares of Common Stock
shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been
issued or sold by the Corporation under this Section 6(e), into the
aggregate consideration received, or deemed to have been received by the
Corporation for such issue under this Section 6(e), for such Additional
Shares of Common Stock.
(f) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or Certificate of Designations or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 6 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.
(g) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series C
Preferred Stock a certificate executed by the Corporation's President or Chief
Financial Officer setting forth (i) such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based; (ii)
the Conversion Price for such series of Preferred Stock at the time in effect;
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series C
Preferred Stock.
(h) Notices of Record Date. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or
convey all or substantially all of its assets, or to liquidate, dissolve or
wind up; then, in connection with each such event, the Corporation shall send
to the holders of Series C Preferred Stock:
(i) at least thirty (30) days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or
subscription rights (which notice shall specify the date on which the
holders of Common Stock shall be entitled thereto and shall describe the
amount and nature of such dividend, distribution or subscription rights) or
for determining rights to vote, if any, in respect of the matters referred
to in (iii) and (iv) above; and
(ii) in the case of the matters referred to in (iii) and (iv)
above, at least thirty (30) days' prior written notice of the date when the
closing of the same shall take place (which notice shall specify the date
on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon the
occurrence of such event and shall describe the amount and nature of such
securities or other property).
(i) Issue Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series C Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to this Certificate of
Designations or the Corporation's Articles of Incorporation.
(k) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series C Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series C Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
(l) Notices. Any notice required by the provisions of this Section 6 to
be given to the holders of shares of Series C Preferred Stock shall be deemed
given if deposited in the
United States mail, with appropriate postage prepaid, or if sent by facsimile
or delivered personally by hand or nationally recognized courier and addressed
to each holder of record at such holder's address or facsimile number appearing
in the records of the Corporation.
7. Redemption.
(a) Right to Redeem. The Corporation may, to the extent that funds are
legally available therefor, redeem the Series C Preferred Stock any time, in its
sole discretion, upon ten (10) days' prior written notice to the holders of
Series C Preferred Stock, at a price of $100 per share. In addition, the value
of earned and unpaid dividends will be added to the redemption price.
(b) Obligation to Redeem. The Corporation shall be obligated to use one
hundred percent (100%) of any proceeds that the Corporation receives for the
issuance of shares of Common Stock or Preferred Stock or of any debt security to
redeem shares of Series C Preferred Stock at a price of $100 per share, plus the
value of earned and unpaid dividends; provided, that the Corporation shall not
be obligated to use any proceeds received in connection with any Exempt
Issuances. In addition, upon any event of default under that certain Secured
Promissory Note issued to ComVest Investment Partners II LLC, the Corporation
shall be obligated to redeem all of the then-outstanding shares of Series C
Preferred Stock at a price of $100 per share, plus the value of earned and
unpaid dividends.
(c) Pro-rata Redemption. In the event of a redemption of less than all
of the outstanding shares of Series C Preferred Stock, redemptions as among the
holders of such shares of Series C Preferred Stock shall be on a pro rata basis.
(d) Mechanics of Redemption. The Corporation shall give notice by mail
of redemptions to the holders of record of the shares of Series C Preferred
Stock at least ten (10) business days prior to the date of redemption. The
notice shall (i) specify the date of redemption and the number of shares to be
redeemed from each shareholder and (ii) be addressed to each holder at the
holder's post office address as shown on the records of the Corporation. On or
after the date fixed for redemption, each holder of shares of Series C Preferred
Stock called for redemption shall surrender the certificate or certificates
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment. If less than all of the
certificates are redeemed, the Corporation shall issue a new certificate for the
unredeemed shares.
(e) Failure to Pay Redemption Amounts. If the Corporation fails to pay
the applicable redemption amount pursuant to Section 7(b) above within five (5)
business days of written notice that such amount is due and payable, then, in
addition to all other available remedies, each holder of Series C Preferred
Stock shall have the right at any time, so long as the mandatory redemption
event continues, to require the Corporation, upon written notice, to immediately
issue, in lieu of the mandatory redemption amount payable in accordance with
Section 7(b), such number of shares of Common Stock of the Corporation equal to
such applicable redemption amount divided by lesser of (i) Conversion Price then
in effect and (ii) the closing price of the Common Stock of the Corporation on
the date of such notice from such holder of Series C Preferred Stock.
8. Restrictions and Limitations. So long as shares of Series C
Preferred Stock remain outstanding, the Corporation shall not, without the vote
or written consent by the holders of a majority of the then-outstanding shares
of the Series C Preferred Stock, voting as a single class:
(a) Effect any sale, lease, assignment, transfer, or other conveyance
of all or substantially all of the assets of the Corporation or any of its
subsidiaries, or any consolidation or merger involving the Corporation or any of
its subsidiaries (other than one in which the holders of capital stock of the
Corporation immediately prior to such merger or consolidation continues to hold
in excess of 50% by voting power of the surviving or acquiring corporation);
(b) Alter or change the rights, preferences, privileges or powers of,
or the restrictions provided for the benefit of, the Series C Preferred Stock;
(c) Increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Series C Preferred Stock;
(d) Authorize or issue, or obligate itself to issue, or otherwise
create (including by reclassification) any other equity security (including any
security convertible into or exercisable for any equity security) on a parity
with or senior to the Series C Preferred Stock as to liquidation preferences,
voting rights, dividend rights or redemption rights; and
(e) Amend its Articles of Incorporation or Bylaws if such amendment
would alter or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of, the Series C Preferred.
9. No Reissuance of Series C Preferred Stock. No share or shares of
Series C Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be cancelled and restored to the shares that the Corporation shall be authorized
to issue.
EX-10
10
e1020106.txt
REGISTRATION RIGHTS AGREEMENT
EXHIBIT 10
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated February
11, 2005, is entered into by and between CORVU CORPORATION, a Minnesota
corporation (the "Company") and COMVEST INVESTMENT PARTNERS II LLC, a Delaware
limited liability company ("ComVest"), as a material inducement for ComVest to
purchase (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 3,400,000 shares of Common Stock and (v)
warrants (the "Protective Warrant" and, together with the Preferred Warrant, the
"Warrants") to purchase 2,000,000 shares of Common Stock in accordance with the
terms of that certain Securities Purchase Agreement, dated on or about the date
hereof (the "Purchase Agreement"). All capitalized terms used but not defined
herein shall have the meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, the Company and ComVest hereby agree as follows:
1. Definitions. In addition to those terms defined elsewhere in this
Agreement, the following terms shall have the following meanings wherever used
in this Agreement:
"Act" shall mean the Securities Act of 1933, as amended, and
any successor statute from time to time.
"Costs and Expenses" shall mean all of the costs and expenses
relating to any subject Registration Statement, including but not limited to
registration, filing and qualification fees, reasonable blue sky expenses, costs
of listing any shares of Common Stock on any national securities exchange
automated quotation system, printing expenses, fees and disbursements of counsel
and accountants to the Company, and reasonable fees and disbursements of counsel
to ComVest (such fees and disbursements not to exceed $15,000 per Registration);
provided, however, that underwriting discounts and commissions attributable
solely to the securities registered for the benefit of ComVest, fees and
disbursements of any additional counsel to ComVest, and all other expenses
attributable solely to ComVest shall be borne by ComVest.
"Excluded Registration Statement" shall mean a registration
statement relating solely to the registration of the sale of securities (i)
other than for cash, (ii) to participants in a Company stock plan or employee
benefit plan, agreement or arrangement, and (iii) in a transaction covered by
Rule 145 under the Act or the resale of securities issued in such a transaction.
"Existing Registration Rights Agreements" shall mean
collectively (i) the registration rights granted to the selling shareholders set
forth in the Company's Form SB-2/A filed on March 19, 2004, (ii) the
Registration Rights Agreement dated May 15, 2003 with
Strategic Growth International, Inc. and (iii) the registration rights
agreements entered into with the shareholders of the Company's Series B
Convertible Preferred Stock.
"Registrable Securities" shall mean all Warrant Registrable
Securities, the Conversion Shares and the Shares, held from time to time by
ComVest; provided, however, that such Registrable Securities shall cease to be
Registrable Securities at such time as all such Registrable Securities (i) are
sold pursuant to any registration statement filed by the Company with the SEC,
pursuant to Rule 144 promulgated under the Act or pursuant to any other
exemption from registration under the Act or (ii) may be sold, subject to any
applicable volume limitations, in open market transactions pursuant to any
applicable exemption from the registration requirements of the Act, including
without limitation Rule 144(k) promulgated thereunder (or any successor
thereto).
"Registration" shall mean any registration or proposed
registration of Registrable Securities pursuant to a Registration Statement in
respect to the sale of any Registrable Securities.
"Registration Period" shall mean the period (i) beginning upon
the earlier of declaration of effectiveness of the Registration Statements
provided for in Section 2 hereof or declaration of effectiveness of any
Registration Statement provided for in Section 3 hereof that includes
Registrable Securities and (ii) ending on the earlier of the date that all
Registrable Securities have ceased to be Registrable Securities and the second
anniversary of the date of this Agreement.
"Registration Statement" shall mean any registration statement
filed or to be filed by the Company with the SEC.
"SEC" shall mean the United States Securities and Exchange
Commission, or any successor agency or agencies performing the functions
thereof.
"Warrant Registrable Securities" shall mean the shares of
Common Stock issuable upon exercise of the Warrants or any shares issued in
exchange for or replacement thereof, from time to time.
2. Demand Registration. At any time after the date hereof, ComVest may
make one (1) written request to the Company for registration with the SEC under
and in accordance with the provisions of the Securities Act of the Registrable
Securities (the "Demand Registration"). The Demand Registration shall become
effective as soon as practicable, but in no event later than four (4) months
following receipt by the Company of written notice of such demand (the
"Effective Date"). Unless expressly agreed to by ComVest, no securities of the
Company or of any other Person other than Registrable Securities shall be
included in a Demand Registration except pursuant to the exercise of any
piggyback registration rights granted on or prior to the date hereof. Except as
otherwise provided herein, a registration will not count as a Demand
Registration until it has become effective and ComVest is legally permitted to
sell all of its Registrable Securities that are requested to be so included
unless ComVest fails to take such actions as are required on its part to cause
the registration to become effective, in which case such registration shall
count as a Demand Registration.
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3. Piggyback Rights. (a) In addition to the foregoing and subject to
the provisions of this Agreement, in the event that the Company shall at any
time after the date hereof (and prior to the date of the Registration Statement
provided for in Section 2 hereof is declared effective by the SEC) propose to
file a Registration Statement (other than an Excluded Registration Statement),
then the Company shall give to ComVest written notice (the "Registration
Notice") of the proposed filing of such Registration Statement not less than
twenty (20) days prior to such filing, and shall, subject to the limitations
provided in this Section 3, include in such Registration Statement all or a
portion of the Registrable Securities owned by ComVest, as and to the extent
that ComVest may request same to be so included by means of written notice given
to the Company within twenty (20) days after the Company's giving of the
Registration Notice. ComVest shall be permitted to withdraw all or any part of
its Registrable Securities from a Registration Statement by written notice to
the Company given at any time prior to the effective date of the Registration
Statement. In the event of the inclusion of all or a portion of the Registrable
Securities pursuant to this Section 3, the Company shall bear all of the Costs
and Expenses of such registration; provided, however, that ComVest shall pay,
pro rata based upon the number of its Registrable Securities included therein,
the underwriters' discounts, commissions and compensation attributable solely to
the inclusion of such Registrable Securities in the overall public offering.
(b) Notwithstanding anything to the contrary contained herein, the
Company's obligation to include any Registrable Securities in a Registration
Statement filed under this Section 3 shall be subject to the following further
conditions:
(i) The distribution for the account of ComVest shall be
underwritten by the same underwriters (if any) who are underwriting the
distribution of the securities for the account of the Company and/or
any other persons whose securities are covered by such Registration
Statement, if any, and ComVest shall enter into an agreement with such
underwriters containing customary indemnification and other provisions;
(ii) If, in connection with an underwritten public offering
pursuant to a Registration Statement, the purchase agreement to be
entered into with the managing underwriters contains or requires
restrictions upon the sale of securities of the Company by any of the
Company, its officers, directors or other principal stockholders, other
than the securities which are to be included in the proposed
distribution, then such restrictions shall likewise be binding upon
ComVest, and if requested by the Company ComVest shall enter into a
written agreement to that effect; and
(iii) If, in connection with an underwritten public offering
pursuant to a Registration Statement, the managing underwriter(s)
thereof shall advise the Company in writing that the securities to be
included in such Registration will not include all of the Registrable
Securities requested to be so included (but which shall not refer to
any securities held by or to be newly issued by the Company), then the
Company will promptly furnish ComVest with a copy of such written
statement and may require, by written notice to ComVest accompanying
such written statement, that the distribution of all or a specified
portion of such Registrable Securities be excluded from such
distribution; and, in case of an exclusion of only a portion of the
Registrable Securities proposed to be included, the Registrable
Securities to be included shall (i) first be
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allocated to the Company, (ii) then to the holders of registration
rights under the Existing Registration Rights Agreements in accordance
with the terms and conditions of such agreements, and (iii) then, to
ComVest in proportion to its Registrable Securities so requested to be
registered pursuant to such Registration Statement by ComVest (or in
such other proportions as ComVest may agree), prior to inclusion of any
other securities.
(c) ComVest shall furnish in writing to the Company all information
concerning it and its holdings of securities of the Company and its affiliates
as shall be required in connection with the preparation, filing, amendment and
supplementation of any Registration Statement covering any of ComVest's
Registrable Securities.
4. Blackout Periods. The Company may suspend ComVest's sale or transfer
of Registrable Securities under a Registration Statement if the Company shall
furnish to ComVest a certificate (the "Grace Period Notice") signed by the Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board of Directors of the Company it would be seriously detrimental to the
Company or its stockholders for such sales or transfers not to be suspended (a
"Grace Period"); provided, however, that the Company shall not so suspend
ComVest unless it similarly suspends the sale or transfer of securities by any
other holder of securities of the Company whose securities are covered by the
same or another Registration Statement (expressly including holders of
securities under the Existing Registration Rights Agreements). In such event,
the Company's obligations under this Agreement to seek to have a Registration
Statement declared effective or kept effective shall be suspended for a Grace
Period not to exceed thirty (30) consecutive days during any ninety (90)-day
period; provided, however, that the Company may not exercise this right for more
than seventy-five (75) days in any one annual period (an "Allowable Grace
Period"); provided, further, however, that the Company may not exercise this
right unless it also suspends the effectiveness of any other Registration
Statement (expressly including the Existing Registration Statement or any other
Registration Statement of the Company with respect to the securities of the
Company covered by the Existing Registration Rights Agreements) for the same
amount of time. Subject to the similar suspension of all other holders of
securities of the Company whose securities are covered by the same or another
Registration Statement, ComVest agrees that, upon receipt of any notice from the
Company of a Grace Period Notice, ComVest (and its directors, officers, members
and Affiliates) shall immediately discontinue disposition of its Registrable
Securities pursuant to any Registration Statement(s) covering such Registrable
Securities until ComVest's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 4(e) hereof or receipt of notice from the
Company that no such supplement or amendment is required. During any Grace
Period during which the Registrable Securities are suspended from trading, then
no other Registration Statements shall be declared effective. Similarly, during
any Grace Period during which the effectiveness of any Registration Statement
covering the Registrable Securities is suspended, then trading under any other
Registration Statement shall be similarly suspended.
5. Registration Procedures. In the case of each Registration effected
by the Company in which Registrable Securities are to be sold for the account of
ComVest, the Company will use its good faith reasonable efforts to:
(a) furnish to counsel selected by ComVest copies of all Registration
Statements or prospectuses or any amendments or supplements thereto proposed to
be filed with the SEC,
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which documents will be subject to review by such counsel before filing solely
with regard to any information contained therein which pertains to ComVest;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective during the
Registration Period (or, with respect to Registration Statement filed in
accordance with Section 3 hereof, for such shorter or longer period covered
thereby) and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during such
period;
(c) furnish to ComVest electronic copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as ComVest may reasonably require in order to facilitate the
disposition of the Registrable Securities held by ComVest;
(d) register or qualify such Registrable Securities under such other
securities or blue sky laws of such states as may be reasonably required and do
any and all other acts and things which may be reasonably necessary or advisable
to enable ComVest to consummate the disposition of the Registrable Securities in
such jurisdictions (provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction);
(e) notify ComVest, at any time when a prospectus relating to a
Registration Statement is required to be delivered under the Act, of the
happening of any event as a result of which the prospectus included in a
Registration Statement contains an untrue statement of a material fact or omits
to state any fact necessary to make the statements therein not materially
misleading, and prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchaser(s) of Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not materially
misleading; and
(f) effective not later than the effectiveness of the subject
Registration Statement, cause all subject Registrable Securities to be listed
for trading on each national securities exchange or automated quotation system
on which the Common Stock is then listed.
6. Indemnification by the Company.
(a) In the event that the Company has failed to use its reasonable best
efforts and has otherwise failed to act in good faith to effect the registration
of the Registrable Securities in accordance with Section 2 hereof and the SEC
has failed to declare effective any such Registration Statement by the Effective
Date, then the Company shall pay ComVest a cash payment in the aggregate amount
of One Thousand Dollars ($1,000) for each day after the Effective Date during
which such Registration Statement has not been declared effective by the SEC.
Such payment shall be due on the earlier of (i) three (3) days following the
date on which such Registration Statement is declared effective or (ii) the last
day of any calendar month during which such delay is or continues to be
incurred. In the event the Company otherwise materially
5
breaches or materially fails to perform, as applicable, any representation,
warranty or covenant contained in this Agreement, the Company shall indemnify
ComVest from and against any expenses, claims, losses, costs, charges or
liabilities of any kind, including amounts paid in settlement and reasonable
attorneys' fees (collectively, the "Losses"), which may be incurred by ComVest
as a result of any such failure or breach, with such indemnification to be made
within thirty (30) days of receipt of written request therefor.
(b) The Company shall indemnify and hold harmless ComVest, each of its
directors, legal counsel and accountants for ComVest, and any underwriter (as
defined in the Act) for any Losses to which ComVest or any other such
indemnified person becomes subject, under the Act or any rule or regulation
thereunder, insofar as such Losses (i) are caused by any untrue statement or
alleged untrue statement of any material fact contained in any preliminary
prospectus (if used prior to the Effective Date of the Registration Statement),
or contained, on the Effective Date thereof, in any Registration Statement of
which Registrable Securities were the subject, the prospectus contained therein,
any amendment or supplement thereto, or (ii) arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) arise out of any violation by the Company of the Act or any rule or
regulation thereunder applicable to the Company and relating to actions or
omissions otherwise required of the Company in connection with such Registration
Statement. The Company shall reimburse ComVest and any such other indemnified
person for any legal or other expenses reasonably incurred by ComVest or such
other indemnified person in connection with investigating, defending or settling
any such Loss; provided, however, that the Company shall not be liable to any
such Persons in any such case to the extent that any such Loss arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
furnished to the Company in writing by such person expressly for inclusion in
any of the foregoing documents. This indemnity shall not apply to amounts paid
in settlement of any such Loss if such settlement is effected without the
consent of the Company.
7. Indemnification by ComVest. ComVest shall indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
a Registration Statement, legal counsel and accountants for the Company, each
person (if any) who controls the Company within the meaning of the Act and any
underwriter (as defined in the Act) for the Company, against any Losses to which
the Company or any other such indemnified person may become subject under the
Act or any rule or regulation thereunder or otherwise to the extent that such
Losses (or related actions) (i) are caused solely by any untrue statement or
alleged untrue statement of any material fact contained in any preliminary
prospectus (if used prior to the effective date of the Registration Statement),
or contained, on the Effective Date thereof, in any Registration Statement of
which such ComVest's Registrable Securities were the subject, the prospectus
contained therein, any amendment or supplement thereto, or (ii) arise out of or
are based solely upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with information furnished
to the Company by ComVest, in writing, expressly for inclusion in any of the
foregoing documents; provided, however, that the aggregate liability of ComVest
shall not be greater than the net proceeds received by ComVest upon the sale of
the Registrable Securities giving rise to such
6
indemnification obligation. This indemnity shall not apply to amounts paid in
settlement of any such Loss or related Action if such settlement is effected
without the consent of ComVest.
8. Additional Provisions.
(a) ComVest and each other person indemnified pursuant to Section 6
above shall, in the event that it receives notice of the commencement of any
Action against it which is based upon an alleged act or omission which, if
proven, would result in the Company's having to indemnify it pursuant to Section
6 above, promptly notify the Company, in writing, of the commencement of such
Action and permit the Company, if the Company so notifies ComVest or other
indemnified person within thirty (30) days after receipt by the Company of
notice of the commencement of the Action, to assume the defense of such Action
with counsel reasonably satisfactory to ComVest; provided, however, that ComVest
or other indemnified person shall be entitled to retain its own counsel at its
own expense. The omission to notify the Company promptly of the commencement of
any such Action shall not relieve the Company of any liability to indemnify
ComVest or such other indemnified person, as the case may be, under Section 6
above, from and after the Company's receipt of such notice, except to the extent
that the Company shall suffer any Losses by reason of such failure to give
notice, and shall not relieve the Company of any other liabilities which it may
have under this or any other agreement.
(b) The Company and each other person indemnified pursuant to Section 7
above shall, in the event that it receives notice of the commencement of any
Action against it which is based upon an alleged act or omission which, if
proven, would result in any Holder having to indemnify it pursuant to Section 7
above, promptly notify ComVest or other indemnified person, in writing, of the
commencement of such Action and permit ComVest, if ComVest so notifies the
Company within thirty (30) days after receipt by ComVest of notice of the
commencement of the Action, to assume the defense of such Action with counsel
reasonably satisfactory to the Company; provided, however, that the Company or
other indemnified person shall be entitled to retain its own counsel at the
Company's expense. The omission to notify any Holder promptly of the
commencement of any such Action shall not relieve ComVest of liability to
indemnify the Company or such other indemnified person, as the case may be,
under Section 6 above, from and after ComVest's receipt of such notice, except
to the extent that the subject Holder shall suffer any Losses by reason of such
failure to give notice, and shall not relieve ComVest of any other liabilities
which it may have under this or any other agreement.
(c) No indemnifying party, in the defense of any such Action, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such Action. Each indemnified
party shall furnish such information regarding itself or the Action in question
as an indemnifying party may reasonably request in writing and as shall be
reasonably required in connection with defense of such Action resulting
therefrom.
(d) If a court of competent jurisdiction determines that the foregoing
indemnity provided under Sections 6 and 7 above is unavailable, or is
insufficient to hold harmless an indemnified party, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such Losses (A) in such proportion as is appropriate to reflect the
7
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other, or (B) if the allocation provided by clause (A)
above is not permitted by applicable law, or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such proportion as
is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other, but
also the relative fault of the indemnifying party and the indemnified party, as
well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
9. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be given in accordance with
Section 5.4 of the Purchase Agreement.
10. Waiver and Amendment. No waiver, amendment or modification of this
Agreement or of any provision hereof shall be valid unless evidenced by a
writing duly executed by the Company and ComVest. No waiver of any default
hereunder shall be deemed a waiver of any other, prior or subsequent default
hereunder.
11. Governing Law. This Agreement shall be governed by, construed under
and interpreted and enforced in accordance with the laws of the State of New
York, without giving effect to principles of choice of law. Any Action arising
out of or relating to this Agreement shall be commenced in a federal or state
court having competent jurisdiction in the State of New York, and for the
purpose of any such Action, each of the parties and any assignees thereof
submits to the personal jurisdiction of the State of New York. The parties
hereby irrevocably consent to the exclusive personal jurisdiction of any state
or federal court for New York County in the State of New York or the Southern
District of New York. The parties hereby waive any objection to venue and any
objection based on a more convenient form in any Action instituted under this
Agreement.
12. Captions. The captions and Section headings used in this Agreement
are for convenience only, and shall not affect the construction or
interpretation of this Agreement or any of the provisions hereof.
13. Entire Agreement. This Agreement constitutes the sole and entire
agreement and understanding between the parties hereto as to the subject matter
hereof, and supersedes all prior discussions, agreements and understandings of
every kind and nature between them as to such subject matter.
14. No Third Party Beneficiaries. Except as expressly provided herein,
this Agreement is not intended to confer upon any person any rights or remedies
hereunder.
15. Successors and Assigns. The Company may not sell, assign, transfer
or otherwise convey any of its rights or delegate any of its duties under this
Agreement, except to a corporation which has succeeded to substantially all of
the business and assets of the Company and has assumed in writing its
obligations under this Agreement, and this Agreement shall be binding on the
Company and such successor. This Agreement shall be binding upon and inure to
8
the benefit of and be enforceable by ComVest and its successors and assigns.
Without limiting the generality of the foregoing, any transferee of Registrable
Securities shall have the rights set forth in this Agreement, and such rights
shall be enforceable against the Company by such transferees as third-party
beneficiaries.
16. 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.
17. Term. This Agreement shall terminate upon the expiration of the
Registration Period; provided, however, that the parties' rights and obligations
under Sections 6 and 7 shall survive any termination of this Agreement.
9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
11th day of February 2005.
CORVU CORPORATION
By:
-----------------------------------------
Name:
Title:
COMVEST INVESTMENT PARTNERS II
LLC
By:
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Name:
Title:
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