SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
CORVU CORPORATION
(Name of small business issuer in its charter)
MINNESOTA 41-1457090
(State of incorporation or organization) (I.R.S. Employer Identification No.)
3400 West 66th Street, Suite 445, Edina, MN 55435
(Address of principal executive offices)
Issuer's telephone number, including area code: (612) 944-7777
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
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This Report contains statements, which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
the Securities Exchange Act of 1934. These statements appear in a number of
places in this Report and include all statements regarding the intent, belief or
current expectations of the Company, its directors or its officers with respect
to, among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy and operating strategy; and (iv) the declaration and payment of
dividends. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein.
To simplify the language in this registration statement, references to
"We", "Us", "Our", "CorVu", the "Company" or the "Surviving Company" refer to
CorVu Corporation and its wholly-owned subsidiaries.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
Business Development
We are a holding company that develops and sells business performance
management software products and related professional services through our
subsidiaries: CorVu North America, Inc. (incorporated in Minnesota, responsible
for North and South America); CorVu Plc. (incorporated in Great Britain,
responsible for Europe), and CorVu Australasia Pty. Ltd. (incorporated in
Australia, responsible for the Australian-Pacific region). Recently, CorVu Plc
incorporated a subsidiary, CorVu Benelux B.V., under the laws of the
Netherlands, and is in the process of forming another subsidiary, CorVu
Deutschland GmbH, under the laws of Germany.
We are the company surviving the merger between CorVu Corporation and
Minnesota American, Inc.
Minnesota American, Inc. was incorporated in Minnesota as J.B.
Goodhouse on September 29, 1983. On April 28, 1988, it changed its name to
Lockermate Corporation, on October 20, 1992 to Minnesota American, Inc. The
principal assets of Minnesota American, Inc. consisted of the capital stock of
its subsidiaries, LockerMate Corporation and Favorite Memories, Inc. The shares
of Minnesota American, Inc. were quoted on the Over-the-Counter Bulletin Board
(OTCBB) of the National Association of Securities Dealers (NASD) under the
symbol "MNAC".
CorVu Corporation was incorporated in Minnesota as "CorVu
International" on September 15, 1995 and changed its name to "CorVu Corporation"
on August 29, 1996. The shares of CorVu Corporation were privately held.
Throughout 1999, both Minnesota American, Inc. and CorVu Corporation
engaged in preliminary discussions with various third parties concerning
possible strategic transactions and / or investments. The negotiations between
both companies started in the fall of 1999. On November 17, 1999, the companies
entered into a formal "Agreement and Plan of Reorganization". The following
transactions were carried out to complete the merger:
1. On January 13, 2000, the shareholders of CorVu Corporation approved the
merger of CorVu Corporation with Minnesota American, Inc.
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2. Minnesota American, Inc. ceased operating its subsidiary Favorite
Memories, Inc., as a going concern effective November 30, 1999.
3. Minnesota American, Inc. obtained shareholder approval for the sale of
its LockerMate subsidiary, and closed the sale of that subsidiary, on
January 14, 2000, thus concluding its pre-merger business activities;
4. On January 14, 2000, Minnesota American, Inc. obtained shareholder
approval for its merger with CorVu Corporation and the amendment of its
Articles of Incorporation to change its name to "CorVu Corporation";
5. The companies consummated the merger on January 14, 2000 by filing
Articles of Merger with the Minnesota Secretary of State.
The merger did not affect the issued and outstanding shares of common
and preferred stock of Minnesota American, Inc. As a result of the merger, CorVu
Corporation shareholders received 1.125 shares of common stock of our Company
for each share of common stock they held. These shares, which we call "Merger
Shares", were not registered under the Securities Act of 1933 and are subject to
a Registration Rights Agreement. After the merger, shareholders of CorVu
Corporation hold about 74% of the issued and outstanding stock of our Company.
Our Company will continue the business of CorVu Corporation. The common stock of
our Company is currently quoted on the OTCBB under the symbol "CRVU". However,
since January 4, 1999, quotations on the OTCBB have been limited to the
securities of companies that report their current financial information to the
SEC, banking, or insurance regulators. Our securities will no longer be eligible
for quotation on the OTCBB as of market open on February 10, 2000 unless we have
become a reporting company under the Securities Exchange Act of 1934 on or
before that date.
Business of Issuer
(i) Our Principal Products and Services
CorVu is a provider of Enterprise Business Performance Management and
Balanced Scorecard software products.
Business performance management is a process by which an organization
seeks to define its strategy, measure and analyze its performance, and
ultimately manage improvements to enhance performance. In recent years several
methodologies have arisen for managing organizational performance. One of these
methodologies is known as "Balanced Scorecard".
The Balanced Scorecard is a performance management methodology first
introduced by Dr. Robert Kaplan and Dr. David Norton in their 1992 Harvard
Business Review article, "The Balanced Scorecard - Measures that Drive
Performance." The Balanced Scorecard recognizes four dimensions as integral for
developing an enterprise view of performance: financial, customer, internal and
innovation. The Balanced Scorecard is a business performance management system
designed to enable an organization to translate its mission statement and
strategy into specific goals and measurements. The Balanced Scorecard can
communicate these goals and measurements throughout the entire organization, to
provide guidelines for an employee's contribution to the performance of the
organization.
We generate revenues in three areas: (1) sale and licensing of our
software products; (2) consulting and training services (we refer to these
services as "professional services"); and (3) maintenance agreements entered
into in connection with the sale and licensing of our products.
Our Products
Our software products are designed to enable our customers to better
measure and analyze their information in order to achieve strategic objectives
and improve business performance through two basic products, CorBusiness and
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CorManage. We recently announced version 4.1 of both products and we are
expecting to ship these new versions to customers in February 2000. The
following product descriptions are those of the 4.1 version of the products.
Customers who have licensed previous versions of these products and who have
active maintenance agreements will receive these 4.1 versions at no additional
charge.
CorBusiness is designed to address the needs of the data warehousing and
business intelligence market.
Data warehouses are databases designed specifically for accessing and
analyzing information. They may be described as a "copy" of an organization's
transaction database. Such databases have grown in popularity over the last few
years as organizations are finding it more critical to understand and utilize
their information resources. The term Business Intelligence (BI) generally
refers to the process of accessing and analyzing such information in order to
develop a more comprehensive understanding of one's organization and thus, to
make more informed decisions. CorBusiness includes end-user query/reporting
(i.e., information access and reporting), On-Line Analytical Processing ("OLAP")
analysis (i.e., the multidimensional analysis of information, viewing data from
many different perspectives and cross examinations) and executive dashboards
(i.e., collections of many key performance indicators presented on a single
screen through a simple graphical representation). The application modules are
as follows:
Graphical Analysis - designed to empower users with easy ad-hoc access
to data. Once retrieved, users can access various levels of their data
to explore and analyze information more easily and more
comprehensively. Such ad-hoc analysis is designed to enable users to
uncover and understand trends that may be hidden in the data.
Informative visual reports created with the help of the graphical
analysis module may include
- an unlimited amount of headers and footers;
- aggregates, i.e., sums, averages, counts, etc.;
- conditional color-coding, i.e., red numbers indicate poor
performance, green numbers indicate good performance; and
- the ability to view summary information first and double-click
on specific data to reveal information on various levels of
details.
Users can arrange the available information in a variety of graphical
presentations, e.g. in the form of a "pie chart" or as a column chart.
Graphs may also be "rotated" for 3-dimensional viewing, giving users a
more complete visual understanding of the information.
Report Writer - designed to provide the more sophisticated user with
the ability to produce
- composite reports including both data and graphics;
- calculations such as sums, averages, and counts on several
levels;
- graphic images, and other multimedia objects, such as video or
audio clips.
The module is intended to allow quick and easy formatting of data, even
for financial reporting layouts. Users who generate a report with the
help of this Report Writer can tightly integrate the report with an
existing application.
Executive Alerts - designed to enable executives to quickly and
graphically monitor those performance measures that they consider to be
important for their business. Simple visual presentation is meant to
provide more immediate information regarding the health of an
enterprise. As with other CorVu modules, users may access various
levels of data by simply clicking on the graph to view specific
sub-groups and constituents of the graph. This capability may be
important for decision makers who need the appropriate level of detail
to answer specific business questions.
CorManage is designed to satisfy various demands of the Business Performance
Management market - such as the ability to link specific performance measures to
specific strategic objectives; and the ability to identify the impact one
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strategic objective may have on another within the organization. CorManage
combines the CorBusiness application described above - with an offering based on
the Balanced Scorecard methodology - including forecasting, strategic modeling
and what-if analysis. In addition to the CorBusiness application, CorManage
includes:
Forecasting - Unlike query and reporting tools, which tell users what
has happened in the past, this business tool intends to assist users in
more accurately predicting future events.
Our Forecasting module is designed to examine the past and to apply
selected statistical methods, strategies and parameters to predict
future trends and events. Once created, users can modify forecasts as
desired and use them in other programs.
Impact Analysis - This module is designed to provide "what-if" analysis
for simulated business modeling. "What-if" business models are
simulations based on hypotheses posed by the users. Users then analyze
these simulations to help predict future trends and events. They also
assist users in testing business plans and measuring the business
impact prior to implementation. Model simulations are comparable to
historical data or other models using CorVu's graphical formats and
analytical features that integrate Enterprise Business Performance
Management concepts with traditional Business Intelligence functions.
Balanced Scorecard - This module is designed to combine strategic
measurement and management systems and provide current performance
results and analysis. Our Balanced Scorecard products are intended to
give users the ability to translate strategic and organizational
objectives into individual performance measures, as well as show
individual employees ways to contribute to the overall performance of
the organization. CorVu's Balanced Scorecard products enable executives
to link performance results with processes that may drive those same
results, and to learn how to leverage the value of all other
information technology applications.
Our CorVu WebServer is designed to give access to each of these applications via
the worldwide web. From a Windows browser users can access the various CorVu
products to track overall performance with the Balanced Scorecard, access
Executive Alerts, produce queries and reports, perform OnLine Analytical
Processing (OLAP) analysis, interrogate business forecasts and "what-if"
scenarios.
CorVu's client products are available for Windows 95/98, WindowsNT and Linux.
CorVu's server products are available on WindowsNT, UNIX, and Linux. All pricing
is based upon the number of users licensed under the agreement with the
respective customer.
CorVu software products contain the following essential components:
CorVu Knowledge Library - is designed to present the end-user with
database information in common terms rather than in technical computer
jargon.
CorVu Server - with support for UNIX and Windows-NT, the CorVu Server
is designed to allow CorVu users to process and analyze larger volumes
of data, since it utilizes the power of large, server-based computers
to process data, rather than the users' desktop computers.
CorVu Gateway - is designed to provide each end-user with access to all
data included in the customers' systems.
CorVu Intelligent Scheduler - designed to enable users to effectively
manage when their queries and reports will run. This allows users to
have repetitive reports - such as monthly financial statements - run
automatically at predetermined intervals.
Professional Services
In an effort to assist our clients in implementing Enterprise Business
Performance Management software, we have developed the RapidROI Program which
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consists of consulting, installation, implementation, and training services. The
program is designed to facilitate the implementation and use of our products in
the organizations of our customers and thus, to establish long-term
relationships with our customers. In the RapidROI program, CorVu consultants
work with customers through a step-by-step process, confirming customer
satisfaction at each stage prior to moving on. This process typically entails
the following steps:
Initial Interview - CorVu consultants conduct interviews with client
personnel to be able to define the client's expectations and needs.
Design - CorVu consultants work with client personnel to design an
implementation agenda which the client approves as appropriate for its
needs.
Implementation - Installation and setup of the CorVu products ordered.
Training - While much training occurs at each individual stage, most
customers consider the assistance of consultants especially helpful
when they start to use CorVu's software products. Administrative
training occurs primarily during the implementation stage.
Performance Tuning - Depending on the individual customer, the
adaptation of the specific CorVu product may prove necessary.
While each of these stages may be required in varying degrees, our company
attempts to provide customized services to our customers to make the
implementation of our products a success.
Maintenance Agreements
We also provide support services to customers with "Software Maintenance
Agreements". Such customers are entitled to:
o New Versions of CorVu Software
o Help Desk Support Services
o Online Support Services
A Software Maintenance Agreement is meant to give customers access to our help
desk staff when the customers experience a software problem or have any
questions regarding the use of our products. Customers with Software Maintenance
Agreement may reach our help desk staff via telephone, e-mail or through our
home page on the World Wide Web (www.corvu.com). The services provided through
the World Wide Web are designed to make it easier for customers to answer
questions and solve problems without the need for direct assistance from our
support personnel.
(ii) Market for our Products and Services
Our management believes that the market for our products and services includes
small, medium and large corporations across all industry segments. Regardless of
size, all organizations are concerned with improving their performance. Various
analyst organizations agree that performance management concepts, such as the
balanced scorecard methodology, may be a way to achieve such performance
improvement.
Our currently available information suggests that 40% of our customers are
active in the manufacturing and distribution sectors. Over the last 12 to 24
months we have been able to increase our sales to organizations in other
sectors, such as financial services, insurance, healthcare, pharmaceuticals,
telecommunications, and government and other segments of the public sector.
(iii) Distribution of our Products and Services
CorVu products and services are sold through our subsidiaries' sales offices and
through "Value Added Resellers", distributors and marketing alliances.
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Our Sales Offices - Our subsidiaries have sales offices in the U.S. in
Boston, New York, Washington, D.C., Atlanta, Cincinnati, Chicago,
Minneapolis, Dallas, Los Angeles and San Francisco. In Europe, our
sales offices are located in London, Sheffield, Rotterdam, Munich and
Stockholm. Sales offices for the Asian-Pacific region have been
established in Sydney, Melbourne, Perth and Auckland. Direct sales
activities are concentrated on Fortune 2000 accounts.
Value Added Resellers (VARs) - Our VARs are software companies with
industry applications that sell our software products in conjunction
with their own products. Some VARs will private-label CorVu products.
Current VARs offer CorVu products into a variety of industries,
including manufacturing, distribution, warehouse logistics, healthcare,
insurance, mining, power/utilities, and human resources. Under the
typical agreement between a VAR and one of our subsidiaries, the VAR
receives the non-exclusive license to sell the software products
specified in the agreement and to grant sublicenses for the use of such
software to users of the VAR's applications. The license fees paid by a
VAR are a percentage of our standard license fee for the use of our
software and may be increased at our discretion upon 30 days prior
written notice. Any of the parties may terminate the agreement without
giving any reason by giving written notice 90 days prior to the
termination date. A typical VAR agreement would have a three year term.
Distributors - CorVu distributors are companies that sell technology
into geographic regions where CorVu has no physical presence. Currently
we have distributors located in Brazil, the Czech Republic, Indonesia,
Mexico, Norway, the Philippines, Saudi Arabia, Singapore, South Africa,
South Korea, Sri Lanka, and Thailand. Our subsidiaries typically grant
to their distributors the non-exclusive license to sell the software
products specified in the distributor agreement and to grant
sublicenses for the use of such software. The fees a distributor has to
pay are a percentage of our standard license fee for the use of our
software and may be increased at our discretion upon 30 days prior
written notice. The agreement may be entered into for a five year term,
termination usually requires cause such as nonperformance.
Alliance Partners - Our "Alliance Partners" are companies that provide
both technology and management consulting and implementation services
but, typically do not actually sell software. These companies often
provide great influence into large corporate sales. Smaller regional
alliances with such firms also provide influence into smaller and
mid-size companies in the partner's locale. Such Alliance Partners
maintain no financial relationship with CorVu in that they do not
receive fees in exchange for their recommendations. They recommend
CorVu solutions as a service to their clients.
Historically, approximately 42% of our annual revenues have been received
through distributors, VARs, and Alliance Partners.
(iv) Competition
We are unaware of competitors whose products perform all of the
functions performed by our products. However, there are competitors whose
products perform certain of the functions performed by our products, but do not
integrate all the functions performed by our products into one product. These
competitors can be categorized as follows:
Business Intelligence (BI) - Business Intelligence is the term
generally applied to the process of accessing and analyzing information. Our
product "CorBusiness" is designed to address these needs. Some of the
competitors we encounter in this market are Cognos, Business Objects and Brio.
However, our management believes that these competing products focus only on
specific business intelligence features, such as end user query and reporting,
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or sophisticated programmer reporting, or multidimensional information analysis.
In contrast, CorVu products are designed to offer a suite of integrated
applications covering all of the business intelligence features mentioned above.
Balanced Scorecard - Our management is aware of only a few companies
offering software based on the Balanced Scorecard methodology. We consider
Hyperion, Gentia, and Panorama Business Views to be our most important
competitors in this area. However, we are not aware that they also offer
products that integrate with either relational databases or business
intelligence applications. A few vendors of applications that are designed to
automate an entire organization have recently announced initiatives to offer
balanced scorecard applications. However, we are not aware that they intend to
sell their products outside of their existing client base. To our knowledge,
these products are designed to work only with performance data contained within
the application already installed by the ERP Vendor. Our management therefore
does not consider these vendors' products to be competitive with our products in
the market we are focusing on. On the contrary, we believe that their entry into
this market may actually benefit our Company by validating the market for
balanced scorecard software products. Their announcements may attract attention
to these products and actually raise the awareness of CorVu in the market.
Our management believes that our products are competitive due to features such
as ease of deployment, low overhead and administration, ease of use, integrated
application suite, and appeal to broad user requirements.
(v) Our Customers
Over 2100 customers worldwide have licensed CorVu products. These
include companies like Citibank, American Express, Ford Motor Company, St. Jude
Medical, British Customs and Excise, Australia Dept of Veterans Affairs and US
Census 2000. The most any single customer or partner has contributed to CorVu is
about 6%. Several of our customers order additional software and services over
time. In the past, such additional orders typically have been orders for new
projects, departments, divisions, etc. within a given customer.
(vi) Our Employees
As of January 15, 2000, we employed 114 people in our Company and our
subsidiaries around the world. Fifty-seven of these employees worked in Sales
and Marketing, 30 provided professional services such as training and general
product assistance, 12 worked in product development and 15 provided general
administrative services.
RISK FACTORS
Our operations and our securities are subject to a number of risks,
including but not limited to those described below. If any of the following
risks actually occur, the business, financial condition or operating results of
our Company and the trading price or value of our securities could be materially
adversely affected.
AFTER FEBRUARY 9, 2000, OUR SECURITIES WILL NO LONGER BE QUOTED ON THE
OVER-THE-COUNTER BULLETIN BOARD UNLESS THIS REGISTRATION STATEMENT HAS BEEN
DECLARED EFFECTIVE ON OR BEFORE THAT DATE.
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On January 4, 1999, the Securities and Exchange Commission (SEC)
approved amendments to the applicable NASD Rules to limit quotations on the
Over-The-Counter Bulletin Board (OTCBB) to the securities of companies that
report their current financial information to the SEC, banking, or insurance
regulators. This new Eligibility Rule provides that, in order for a security to
continue being quoted on the OTCBB, the issuer must be required to make periodic
filings with the SEC, or with banking or insurance regulators, and be current
with those filings. The NASD will affix a modifier "E" on the security symbol of
any securities issuer that does not meet the requirements of the Eligibility
Rule. Once an issuer which is required to make filings with the SEC is deemed
not to be in compliance with the Eligibility Rule, the issuer's security may
continue to be quoted on the OTCBB for a 30 day grace period from the date that
the "E" modifier was appended on the security symbol.
The NASD affixed the modifier "E" to the security symbol of Minnesota
American, Inc. on January 10, 2000. Unless this registration statement has been
declared effective on or before February 9, 2000, our securities will no longer
be quoted on the OTCBB as of market open on February 10, 2000. However, subject
to various conditions, broker-dealers will be permitted to publish or submit
quotations in other quotation mediums, including the National Quotation Bureau's
Pink Sheets.
WE HAVE EXPERIENCED HISTORICAL LOSSES AND ARE IN NEED OF ADDITIONAL FINANCING TO
SUPPORT OPERATIONS
In fiscal year 1998 (ended June 30, 1998), CorVu Corporation incurred
net operating losses in the amount of approximately $1.29 million and in fiscal
year 1999 in the amount of approximately $3.06 million. Under a loan agreement
with a third party lender, a principal amount of about $1.4 million became due
on December 15, 1999 and we did not have funds available to pay the note off.
The outstanding principal and interest was subsequently not paid on December 16,
1999. Subsequently, we have repaid $600,000 and continue in discussions with the
lender regarding repayment of the balance. The audit report dated December 3,
1999, except as to notes 4, 11, and 13, which are as of December 16, 1999, on
our 1999 and 1998 consolidated financial statements, contains an explanatory
paragraph that states that the company has suffered recurring losses from
operations and has a net capital deficiency, which raise substantial doubt about
its ability to continue as a going concern.
The increase of CorVu's operating expenses through the fast expansion
of CorVu's sales and support organizations significantly contributed to our
losses. Other factors included increased expenses for product development and
marketing including advertising. We expect to continue to significantly increase
our operating expenses to further expand our marketing operations. We also
expect to continue to increase our capital expenditures to further develop and
maintain our proprietary software. We will require additional funds to finance
our future growth. We cannot assure you that we will successfully negotiate or
obtain additional financing, or that we will obtain financing on terms favorable
or acceptable to us. Through the end of January 2000, we obtained additional
funds through several sales of equity. In addition, we are negotiating a loan
agreement that would include the possibility to convert amounts outstanding into
shares of common stock of our Company. Our ability to obtain additional capital
depends on market conditions, the national economy and other factors outside our
control. Investors should be aware that raising the required amounts of capital
will result in substantial dilution to current shareholders. However, if we do
not obtain adequate financing or such financing is not available on acceptable
terms, our ability to finance our expansion, develop or enhance services or
products or respond to competitive pressures will be limited significantly. Our
failure to secure necessary financing could have a material adverse effect on
our business, prospects, financial condition and results of operations.
THE COMPETITIVE SITUATION IN THE MARKET FOR BUSINESS INTELLIGENCE TECHNOLOGY AND
BUSINESS PERFORMANCE MANAGEMENT SYSTEMS MAY CHANGE THROUGH THE REORGANIZATION OF
OUR COMPETITORS.
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Companies with far higher revenues, greater market presence and substantially
greater resources than our Company are interested and active in the market for
Business Intelligence Technology and Business Performance Management Systems. To
the extent these companies develop products that integrate the functions
performed by our products into one product, we would face competitors that would
pose a significant competitive threat in the market place.
WE DEPEND ON OUR ABILITY TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS
We believe that our trademarks and other proprietary rights are important to our
success and competitive position. We rely on a combination of trademark,
copyright and trade secret laws to protect our proprietary rights. One of our
products is protected under a trademark registered in Australia. We have applied
for trademark registrations in the United States and in some Latin American
countries for some of our products. We cannot assure you that we will secure
significant protection for our proprietary rights or that claims will not be
made against us in connection with our proprietary rights. The actions we take
to establish and protect our trademarks and other proprietary rights may be
inadequate to prevent imitation of our services or products or to prevent others
from claiming violations of their trademarks and proprietary rights by us. In
addition, others may develop similar technology independently or assert rights
in our trademarks and other proprietary rights. The laws of other countries may
afford us little or no effective protection of our additional property.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD IMPAIR OUR
BUSINESS
Other parties may assert infringement or unfair competition claims against us.
We cannot predict whether third parties will assert claims of infringement
against us, or whether any past or future assertions or prosecutions will harm
our business. If we are forced to defend against any such claims, whether they
are with or without merit or are determined in our favor, then we may face
costly litigation, diversion of technical and management personnel, or product
shipment delays. As a result of such a dispute, we may have to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of product
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, it could
impair our business.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OPERATIONS
Our performance depends substantially on the continued services and performance
of our senior management and other key personnel particularly Justin MacIntosh,
our Chief Executive Officer. We have employment agreements with our executive
officers. Our performance also depends on our ability to retain and motivate our
key employees. We have relatively few senior personnel, and thus the loss of any
single individual could interrupt our operations significantly. The loss of the
services of any of our executive officers or other key employees could have a
material adverse effect on our business, prospects, financial condition and
results of operations. Our future success also depends on our ability to
identify, attract, hire, train, retain and motivate other highly skilled
technical, managerial and marketing personnel. Competition for such personnel is
intense, and we cannot assure you that we will succeed in attracting and
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retaining such personnel. Our failure to attract and retain the necessary
technical, managerial and marketing personnel could have a material adverse
effect on our business, prospects, financial condition and results of
operations.
WE ARE LARGELY CONTROLLED BY MANAGEMENT
Our officers and directors currently own or control a substantial majority of
our outstanding common stock. If they act in concert, they will be able to
exercise voting control over our Company for the foreseeable future and will be
able to elect the entire Board of Directors, set dividend policy and determine
our management affairs. This management control could preclude, or make it more
difficult to effect, a sale or reorganization of our Company that is not on
terms acceptable to our management.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
CorVu is an international provider of Integrated Business Intelligence and
Business Performance Management software. Our Company designs, develops, markets
and supports its management software products and its services through sales
offices of our subsidiaries as well as through distributors, Value Added
Resellers, and Alliance Partners. Sales and support offices belonging to our
subsidiaries are located throughout the United States, Australia and Europe. See
for details ITEM 1 (b), Business of the Issuer.
On January 14, 2000, the former CorVu Corporation merged with and into Minnesota
American, Inc. In connection with the merger, Minnesota American, Inc., the
company surviving the merger, changed its name to "CorVu Corporation". Minnesota
American, Inc. had operated its business through two subsidiaries. Prior to the
merger, Minnesota American, Inc. ceased to operate one of the subsidiaries and
sold the other subsidiary, thus discontinuing all of its business activities.
The Surviving Company continues to operate the business operated by the former
CorVu Corporation before the merger. Accordingly, the discussion and analysis
provided below focuses on the financial position and results of operations of
the former CorVu Corporation.
Fiscal Year Ended June 30, 1999 versus June 30, 1998
REVENUES:
CorVu derives its revenues from three sources: (i) the sale and licensing of its
software products; (ii) consulting and training services; and (iii) maintenance
agreements in connection with the sale and licensing of software products. CorVu
recognizes revenue in accordance with Statement of Position No. 97-2, Software
Revenue Recognition. Software license revenue is recognized when all of the
following criteria have been met: there is an executed license agreement,
software has been shipped to the customer, no significant vendor obligations
remains, the license fee is fixed and payable within twelve months and
collection is deemed probable. Maintenance revenues are recognized ratably over
the term of the maintenance contract, typically 12 to 36 months. Consulting and
other revenues are recognized when services are performed.
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CorVu's revenues which were comprised of (i) software and license fees, and (ii)
maintenance, consulting, and other revenues, increased by $3,720,796, from
$6,867,662 in fiscal 1998 to $10,588,458 in fiscal 1999, an increase of 54%.
Software and license fee revenue increased by $2,178,991 (46%), from $4,688,895
in fiscal year 1998, to $6,867,886 in fiscal year 1999; maintenance, consulting,
and other revenues increased by$1,541,805 (71%), from $2,178,767 in fiscal 1998
to $3,720,572 in fiscal 1999. CorVu's management attributes these increases to
two factors: (1) The number of employees in CorVu's sales and marketing
organization was increased from 24 employees in fiscal 1998 to 48 employees in
fiscal 1999, and the number of professionals providing consulting, training and
maintenance services, increased from 14 professionals in fiscal 1998 to 24
professionals in fiscal 1999. (2) In the middle of calendar year 1999, CorVu
Corporation completed its development from being a seller of isolated software
modules and tools to becoming a seller of comprehensive software offerings for
an entire organization. This change in CorVu's marketing and sales strategy
resulted in an increase in the average dollar value of each sale.
OPERATING EXPENSES:
Operating expenses increased by $5,492,845 (67%), from $8,157,119 in fiscal 1998
to $13,649,964 in fiscal 1999. CorVu reports operating costs and expenses on a
departmental basis for the following departments: (i) maintenance, consulting,
and other services; (ii) product development; (iii) sales and marketing; and
(iv) general and administrative department. All costs and expenses incurred by
personnel of the respective department are included under the department's
expenses.
Cost of maintenance, consulting and other expenses increased $825,404 (67%),
from $1,238,733 in fiscal 1998 to $2,064,137 in fiscal 1999, due to the
expansion of CorVu's professional service organization, from 14 professionals in
fiscal 1998 to 24 professionals in fiscal 1999. The increase in product
development costs by $113,641 (22%), from $515,100 in fiscal 1998 to $628,741 in
fiscal 1999, was also caused by the employment of additional personnel (7
professionals in fiscal 1998 as opposed to 11 professionals in fiscal 1999).
CorVu's management believes this investment to be necessary to ensure CorVu's
competitiveness through the continuing development of new and the updating of
old software products.
Sales and marketing expenses increased $1,641,470 (38%), from $4,289,869 in
fiscal 1998 to $5,931,339 in fiscal 1999. The primary factor for the increase
was the doubling of personnel in that area from 24 people in fiscal 1998 to 48
people in fiscal 1999. Other factors were increased expenditures for marketing
including advertising, production of marketing material, and participation in
trade show activity to increase the exposure of CorVu's products in the
marketplace and to increase its market share. General and administrative
expenses increased $2,912,330 (138%), from $2,113,417 in fiscal 1998 to
$5,025,747 in fiscal 1999. CorVu recorded non-cash expenses of $716,500 for (i)
stock options CorVu had granted to employees below the fair value, based on the
intrinsic value method, and (ii) options and warrants issued to third parties
valued using the Black-Scholes pricing model. The remainder of the increase of
$2,195,830 was caused by increased overhead expenditures such as salaries, wages
and benefits for administrative personnel, office rent, equipment rent for
computers and communication equipment, professional service fees such as audit
and tax fees and corporate travel expenses.
INTEREST EXPENSE, NET:
Interest expense, net increased by $97,116 (51%), from $191,094 in fiscal 1998
to $288,210 in fiscal 1999, due to a $479,986 increase in borrowings under the
note payable under an agreement with Integral Business Finance Pty Limited dated
February 26, 1998. In addition, advances from certain directors increased by
$680,000 during fiscal 1999.
NET LOSSES:
CorVu incurred net losses of $3,349,716 and $1,480,551 for the fiscal years
ended June 30, 1999 and 1998, respectively.
<PAGE>
Liquidity and Capital Resources
Total cash and cash equivalents decreased by $255,954 during fiscal 1999, from
$287,289 as of June 30, 1998 to $31,335 as of June 30, 1999. Net cash used in
operating activities was $1,391,656 for fiscal 1999. This was caused by the net
loss during the year as discussed above. Net cash used in investing activities
was $107,701 for fiscal 1999 reflecting the acquisition of office furniture and
computer and office software and equipment as part of CorVu's worldwide
expansion. Net cash provided by financing activities was $1,275,291 for fiscal
1999. Proceeds from the sale of common stock accounted for $216,471 of this
activity. In addition, borrowings under the note payable increased by $479,986
and borrowings under director advances increased by $680,000 during fiscal 1999.
Working capital needs were funded using the following sources:
Note payable- In February 1998, CorVu's subsidiaries entered into a loan
agreement with Integral Business Finance Pty Limited which was secured by its
assets and the assets of the other subsidiaries. Borrowings under the loan
increased during fiscal 1999 by $479,986 to a total of $1,407,000. The rate of
interest was based on an index defined in the loan agreement plus 3% with
interest due monthly. The interest rate on June 30, 1999 was 8.05%. In addition,
there was a line fee of 1.25%, payable quarterly in advance. The loan was due on
December 15, 1999. After the merger, the Surviving Company paid $600,000 to the
lender.
Director advances- During fiscal 1999, CorVu Corporation received a total of
$680,000 of additional advances from certain directors. On June 30, 1999, a
director converted a total of $790,000 of outstanding advances into common stock
at a price of $2.00 per share. Subsequent to June 30, 1999, the Company repaid
$330,000 of advances to certain directors. Immediately prior to the merger,
outstanding director advances totaled $316,938.
Fiscal Quarters Ended September 30, 1999 versus September 30, 1998
REVENUES:
Total revenue for the first quarter fiscal 1999, ended September 30, 1999,
increased by $346,652, from $2,613,748 in the first quarter fiscal 1998 to
$2,960,400 in the first quarter fiscal year 1999, an increase of 13%. Software
and license fee revenues decreased $189,564 (10%), from $1,930,284 in 1998 to
$1,740,720 in 1999. CorVu's management believes several factors to be
responsible for this decrease: (1) As described above, CorVu changed its sales
and marketing strategy, in order to become a seller of comprehensive business
software offerings for entire organizations. The sale of such comprehensive
software products requires on the part of the sales force skills that are
different from the skills the sales personnel had needed previously for the sale
of separate tools and modules. CorVu experienced a higher turnover in its sales
force than anticipated. The hiring of new sales personnel who were not fully
trained and therefore, did not contribute significantly to corporate revenues,
became necessary. (2) The described change in the sales and marketing strategy
not only resulted in a higher volume for each sale but also in a significant
extension of the sales cycle. (3) Many potential customers were in the final
phase of their Y2K compliance work and therefore froze additional spending and
implementation of new systems. Maintenance, consulting and other revenues
increased by $536,216 (78%), from $683,464 in fiscal 1998 to $1,219,680 in
fiscal 1999, due to the employment of additional service professionals to meet
the demands of the increased customer base for both consulting and training
services. In addition, annual maintenance fees continued to increase in line
with CorVu's increased customer base.
OPERATING EXPENSES:
Operating expenses increased by $1,388,505 (52%), from $2,679,991 in fiscal 1998
to $4,068,496 in fiscal 1999. Cost of maintenance, consulting and other expenses
increased $211,070 (56%), from $379,219 in fiscal 1998 to $590,289 in fiscal
1999, and product development costs increased $116,124 (100%), from $114,989 in
fiscal 1998 to $231,113 in fiscal 1999. These increases were primarily caused by
the employment of additional professionals in both the consulting and training
<PAGE>
services, as well as in the research and development area. Sales and marketing
expenses increased $348,480 (25%), from $1,369,449 in fiscal 1998 to $1,717,929
in fiscal 1999, due to the higher number of employees working in that sector and
other factors such as higher expenditures for marketing including advertising,
production of marketing materials, and participation in trade show activities.
General and administrative expenses increased $712,831 (87%), from $816,334 in
fiscal 1998 to $1,529,165 in fiscal 1999. CorVu recorded non-cash expenses of
$300,000 for stock options granted to a director below fair value, based on the
intrinsic value method. The remainder of the increase of $362,831 was caused by
increased overhead expenditures such as salaries, wages and benefits for
administrative personnel, office rent, equipment rent for computers and
communication equipment and corporate travel expenses.
INTEREST EXPENSE, NET:
Interest expense, net increased by $1,757 (3%), from $53,355 in fiscal 1998 to
$55,112.
NET LOSSES:
CorVu Corporation incurred net losses of $1,163,208 and $119,598 for the fiscal
quarters ended September 30, 1999 and 1998, respectively.
Liquidity and Capital Resources
Total cash and cash equivalents decreased by $19,279 during quarter ended
September 30, 1999 from $31,335 as of June 30, 1999 to $12,056 as of September
30, 1999. Net cash used in operating activities was $316,692 for the quarter
ended September 30, 1999. This was caused by the net loss during the period as
discussed above. Net cash used in investing activities was $10,973 for fiscal
1999 reflecting the acquisition of office furniture and computer and office
software and equipment as part of CorVu's expansion. Net cash provided by
financing activities was $233,363 for the quarter ended September 30, 1999.
Proceeds from the sale of common stock accounted for $25,000 of this activity.
In addition, the Company collected a stock subscription receivable in the amount
of $250,000.
On November 15, 1999, CorVu entered into two loan agreements with third parties
totaling $500,000. The outstanding principal was due on March 14, 2000. Interest
was charged at a rate of 10% per annum. In addition, the agreements called for
the issuance of warrants to purchase up to 450,000 shares of common stock at an
exercise price of $.01 per share. CorVu will record a non-cash expense of
approximately $670,000 to reflect the fair value of the warrants issued using
the Black-Scholes pricing model over the period the related loan was
outstanding. After the merger of CorVu with and into Minnesota American, Inc.,
the outstanding principal and interest was converted at a price of $2 per share,
into a total of 285.702 shares of common stock of our Company.
In December 1999 and January 2000, prior to the merger, CorVu raised a total of
$1,870,000 from the sale of common stock (priced at $2.00 per share) under
several transactions. See for details Part II, Item 4 below (Recent Sales of
Unregistered Securities). In addition, under one such transaction, CorVu issued
a warrant for the purchase of up to 75,000 shares of common stock at an exercise
price of $2.00 per share. After the merger, CorVu sold to two accredited
investors 500,000 shares of common stock plus 300,000 common stock warrants
exercisable at prices from $2 to $8 per share, for a total purchase price of
$1,000,000. In addition, CorVu is negotiating with another accredited investor
for a convertible short-term loan in the principal amount of $750,000 plus
100,000 common stock warrants exercisable at the bid price of the closing day.
In addition, CorVu's management intends to undertake one or several of the
following activities: (1) continue to increase CorVu's revenues from software
licenses and other revenue sources; (2) increase the level of the current
indebtedness; (3) solicit additional equity investment in the Company; (4)
<PAGE>
reduce operating costs, as deemed necessary, in the event the sales of product
licenses and / or additional equity or debt financing do not generate adequate
proceeds. CorVu's management believes that these activities, combined with the
recent financing transactions, will generate sufficient cash flows to sustain
CorVu's operations through the end of fiscal 2000.
ITEM 3: DESCRIPTION OF PROPERTY
Our corporate headquarters are located at 3400 West 66th Street, Edina,
Minnesota. On June 1, 1998, we entered into a sublease agreement that will
expire on August 31, 2002, to rent approximately 6,271 rentable square feet.
Pursuant to the sublease agreement, we make monthly base rent payments of
approximately $5,497.58. In addition to the rent payments, we reimburse the
sublandlord all amounts that may become due under the lease between the landlord
and our sublandlord, for any operating costs allocable to our premises based
upon the rentable square foot office area allocable to our premises. Total
monthly rent payments amount to approximately $10,700. The premises include a
reception area, conference and training rooms, as well as executive and
administrative offices.
The major regional centers of our subsidiaries are located in Sydney (Australia)
and London (Great Britain). Total monthly rent payments for the Sydney office
amount to about $10,700, for the London office to approximately $7,200, and for
the Rotterdam location to about $6,000. These amounts are subject to variations
due to the applicable exchange rates. The lease agreements vary concerning terms
and conditions, and are subject to the applicable local law.
ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as of January 15, 2000 concerning the
beneficial ownership of our Company's common stock by (i) each director of the
company, (ii) the named executive officers in the summary compensation table,
(iii) the persons known by the company to own more than 5% of the company's
outstanding common stock, and (iv) all directors and executive officers as a
group. Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares of common stock owned by
them.
Name or Number of Shares Percent of Common
Identity of Group Beneficially Owned Stock Outstanding(1)
- ------------------ ------------------ -----------------
Edward S. Adams (2)(3) 574,603 3.11%
David C. Carlson (2)(4) 191,250 1.04%
Ismail Kurdi (2)(5) 1,175,625 6.33%
Justin M. MacIntosh (2)(6) 8,829,701 47.16%
James L. Mandel (2)(7) 224,061 1.22%
Pierce A. McNally (2)(8) 405,985 2.22%
Alan M. Missroon (2)(9) 157,500 *(10)%
Troy Rollo (11)(12) 1,023,950 5.59%
Directors and executive officers
as a group 11,558,725 58.97%
(1) The percentages are calculated on the basis of 18,271,577 shares of
common stock of the Surviving Company. In addition, for each person or
group, any securities that the person or group has the right to acquire
within 60 days pursuant to options, warrants, conversion privileges or
other rights, have been added to the total amount of outstanding shares
of the Surviving Company.
(2) Address: 3400 W. 66th Street, Suite 445, Edina, MN 55435.
<PAGE>
(3) Mr. Adams' beneficial ownership consists of (i) 345,806 shares of
common stock issued to Jon Adams Financial Co., L.L.P ("JAF") under its
letter agreement with CorVu, dated May 12,1999, which are converted
pursuant to the merger agreement into 389,031 shares of common stock of
our Company and (ii) a warrant issued to JAF under the same letter
agreement to purchase an additional amount of 185,572 shares of common
stock of the surviving corporation at $5.3125 per share.
(4) Mr. Carlson's beneficial ownership consists out of 191,250 shares of
common stock issuable under currently exercisable stock options.
(5) Mr. Kurdi's beneficial ownership includes 309,375 shares of common
stock issuable under currently exercisable warrants.
(6) Mr. MacIntosh's beneficial ownership includes 7,541,733 shares of
common stock held by Barleigh Wells Limited, 115,537 shares of common
stock held by Blamac Holdings Limited, 450,000 shares of common stock
issuable under currently exercisable stock options, and 81,420 shares
of common stock held by Mr. MacIntosh's spouse as to which Mr.
MacIntosh disclaims his beneficial ownership.
(7) Mr. Mandel's beneficial ownership includes 35,000 shares of common
stock issuable under currently exercisable stock options, and 40,350
shares of common stock held by Mr. Mandel's spouse as to which Mr.
Mandel disclaims beneficial ownership.
(8) Mr. McNally's beneficial ownership includes 299,938 shares of common
stock held by McNally Family Investment Partnership, d/b/a Aldrich
Investment Partnership, of which Mr. McNally and his spouse are the
general partners, and 2,000 shares of common stock issuable under
currently exercisable stock options.
(9) Mr. Missroon's beneficial ownership consists of 157,500 shares of
common stock issuable under currently exercisable stock options.
(10) Below 1%.
(11) Address: C/-Crispin & Jeffery, Level 2, 57 Grosvenor Street, Neutral
Bay NSW 2089, AUSTRALIA.
(12) Mr. Rollo's beneficial ownership includes 982,325 shares of common
stock held by Rollosoft Pty. Limited, an entity of which Mr. Rollo is
the sole director and shareholder, and 41,625 shares of common stock
issuable under currently exercisable stock options.
ITEM 5: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age and position of each person who
serves as a director and/or officer of our Company as of January 15, 2000
(alphabetical order).
Name Age Position
----------------- --- --------------------------------
Ed Adams 36 Director
David Carlson 43 Chief Financial Officer; Director
Ismail Kurdi 31 Director
Justin MacIntosh 49 Chairman, President, Chief Executive Officer;
Director
James L. Mandel 43 Director
Pierce A. McNally 50 Director
Alan Missroon 36 Vice President Marketing; Director
John Stout 59 Secretary
Edward S. Adams (Director). Mr. Adams holds various positions at the University
of Minnesota Law School: he is Associate Dean for Academic Affairs, Julius E.
Davis Chair and Professor of Law and Director of the Center for Business Law and
Enterpreneurship at the University of Minnesota Law School. He is president and
chief executive officer of Equity Securities Investments, Inc. and a principal
of Jon Adams Financial Co., L.L.P., the company that has provided financial and
business advice to our Company. He is also serving as director on the board of
Virtualfund, Inc., a Minnesota corporation.
<PAGE>
David C. Carlson (Chief Financial Officer; Director). Before joining CorVu
Corporation in July 1996, Mr. Carlson gained extensive experience in the area of
accounting and audits. He served for five years in the audit division of Arthur
Andersen & Co. Subsequently, he held the position of Controller and later, Vice
President of Finance at Canterbury Downs, a horse racing facility. Later, he
joined the Minnesota Timberwolves, a professional sports franchise, as
Controller, a position he subsequently held at a local health and fitness chain.
Mr. Carlson is responsible for all areas of financial management of our Company.
He became a member of the board of directors of CorVu Corporation in December
1996.
Ismail Kurdi (Director). Mr. Kurdi has a Bachelor of Science from Boston
University and was with Oxy USA, a subsidiary of Occidental Petroleum, before
relocating back to London England, where he is a real estate developer and
investor. He serves on the board of directors for several property companies.
Mr. Kurdi was elected to the board of directors of CorVu Corporation in December
1996.
Justin M. MacIntosh (Chairman, President, Chief Executive Officer; Director).
After a career in the equity and real estate markets of Australia, Mr. MacIntosh
founded MACS Software Company, a provider of business application software, in
1977. He served as Chairman and CEO of MACS until he founded the former parent
company of CorVu in Australia in 1990. Since the incorporation of CorVu
Corporation in Minnesota in 1995, Mr. MacIntosh has served as Chairman,
President and Chief Executive Director, and as a director of the company.
James Mandel (Director). Mr. Mandel has been a director of Minnesota American
since 1987. He has been the Chief Executive Officer and a director of Vicom
Inc., a full service telecommunications company which is reporting to the SEC
under the Securities Exchange Act of 1934 and is headquartered in Minneapolis,
since September 1998. From January 1997 to September 1998, he was Chairman of
Call 4 Wireless LLC and from January 1992 to February 1997, he served as a Vice
President of Grand Casinos, Inc.
Pierce McNally (Director). Mr. McNally has served as Minnesota American's
Chairman of the Board, Chief Executive Officer and Secretary since October 1994.
He practiced corporate law at Oppenheimer, Wolff & Donnelly LLP from 1979 to
1985. He currently serves as Chairman, Secretary and Director of LockerMate
Corporation of Minnetonka, Minnesota. Since 1982, Mr. McNally has held various
corporate positions, including Chairman, Secretary and Director, in
communications and information technology companies in Minneapolis.
Additionally, he has served and continues to serve on the boards of several U.S.
corporations (including Vicom Inc., Personal Genie, Inc. and Raining River
Resources, Inc.) for the last seven years.
Alan Missroon (Vice President Marketing; Director). Mr. Missroon gained his
knowledge of the business intelligence market while working at Burroughs
Corporation (Unisys) and during his eight years at IQ Software Corporation in
which he became familiar with a variety of positions in sales, sales management,
product design, and marketing. Mr. Missroon is responsible for worldwide
operations, product positioning, market awareness, interfacing with trade press
and analysts and other general marketing duties. He joined CorVu Corporation in
January 1997 and was elected as one of the directors of CorVu Corporation in
February 1997.
John H. Stout (Secretary). Mr. Stout is an officer and shareholder of Fredrikson
& Byron, P.A., practicing principally in the areas of corporate and partnership
organization, governance and finance. He has been the legal counsel of CorVu
Corporation for several years. Mr. Stout is co-chair of Fredrikson's
International Business Group and a member of its Business Technology,
Securities, and Merger & Acquisitions practice groups.
<PAGE>
ITEM 6: EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash compensation paid or to be paid
by CorVu, as well as certain other compensation, paid or accrued, during each of
CorVu's last three fiscal years to the Chief Executive Officer and to the other
executive officers whose total annual salary and bonus paid or accrued during
fiscal year 1999 exceeded $100,000.
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Awards Payouts
------------------------- -----------
Restricted LTIP All Other
Name and Principal Fiscal Annual Stock Payouts Compensation
Position Year Compensation Awards Options ($) ($)
Salary($) Bonus($) Other ($) (1)
- ------------------------- ------ -------------------------------- ------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Justin M. MacIntosh (2) 1999 412,000 -- -- -- -- -- --
Chairman and Chief 1998 300,800 -- -- -- 56,250 -- --
Executive Officer 1997 291,000 -- -- -- -- -- --
David C. Carlson 1999 100,000 -- -- -- 45,000 -- --
Chief Financial Officer 1998 84,240 10,530 -- -- 45,000 -- --
1997 78,000 7,800 -- -- 67,500 -- --
Alan M. Missroon 1999 124,500 -- -- -- 11,250 -- --
Vice President Marketing 1998 114,500 25,020 -- -- - -- --
1997 55,000 18,000 -- -- 135,000 -- --
</TABLE>
(1) Numbers adjusted by conversion ratio of 1.125 to reflect post-merger
situation.
(2) Includes salary from CorVu Australasia Pty. Ltd.
Option Grants During 1999 Fiscal Year
The following table provides information regarding stock options
granted during fiscal 1999 to the named executive officers in the Summary
Compensation Table. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Percent of Total
Number of Shares Options Granted to Exercise or
Underlying Options Employees Base Price Per
Name Granted (1) in Fiscal Year Share (1) Expiration Date
<S> <C> <C> <C> <C>
Justin M. MacIntosh --- --- --- ---
David C. Carlson 45,000 3.51% $1.34 05/27/06
Alan M. Missroon 11,250 0.88% $1.78 03/13/06
</TABLE>
(1) Number of shares and exercise price per share adjusted to reflect post-
merger situation.
<PAGE>
Option Exercises During 1999 Fiscal Year and Fiscal Year-End Option Values
The following table provides information as to options exercised by the
named executive officers in the Summary Compensation Table during fiscal 1999
and the number and value of options at June 30, 1999. The Company has no
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares June 30, 1999 June 30, 1999
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable(1) Unexercisable(2)
<S> <C> <C> <C> <C>
Justin M. MacIntosh -- -- 56,250 exercisable $148,640
0 unexercisable $0
David C. Carlson -- -- 135,000 exercisable $497,139
22,500 unexercisable $99,506
Alan M. Missroon -- -- 112,500 exercisable $321,468
33,750 unexercisable $93,909
</TABLE>
(1) Numbers adjusted by conversion ratio of 1.125 to reflect post-merger
situation.
(2) Value is calculated on the basis of the difference between the option
exercise price and $5.3125, the average of the closing bid and ask
price on January 14, 2000, the day of the merger.
Employment Agreements
Effective July 1, 1999, the CorVu entered into a three-year employment
agreement with Justin M. MacIntosh. Pursuant to the agreement, Mr. MacIntosh
will serve as our Chairman, President and Chief Executive Officer. During the
term of the agreement, Mr. MacIntosh will be paid annual base salaries of
$330,000 for the first employment year, $380,000 for the second and $420,000 for
the third employment year. He was also granted options to purchase a total of
675,000 shares of our Company's common stock at $1.34 per share, with 225,000 of
these options vesting at the beginning of each employment year. (The number of
the options and the exercise price of the options have been changed to reflect
the post-merger situation.) Mr. MacIntosh will participate in any retirement,
welfare and other benefit program our Company provides for its executive
officers. Mr. MacIntosh will receive payments in the amount of at least 9
monthly installments of the base salary in effect at the time of termination if
we terminate his employment without cause. Mr. MacIntosh is subject to certain
confidentiality and non-compete provisions under the agreement.
Effective July 15, 1996, CorVu entered into a one-year employment
agreement with David Carlson that was amended as of July 20, 1998. Pursuant to
the agreement Mr. Carlson will serve as our Chief Financial Officer. The term of
the agreement is automatically renewed for successive one-year periods unless
the agreement has been terminated earlier. Mr. Carlson currently receives an
<PAGE>
annual base salary in the amount of $108,000 and additional 25% quarterly bonus
payments, based on attaining quarterly business plan profits and his personal
performance. Mr. Carlson will participate in any retirement, welfare and other
benefit program our Company provides for its executive officers. Both parties to
the agreement can terminate the agreement without cause upon 60 days prior
written notice. Mr. Carlson is subject to certain confidentiality provisions
under the agreement.
Effective January 2, 1997, CorVu entered into a one-year employment
agreement with Alan M. Missroon. Pursuant to the agreement Mr. Missroon will
serve as our Vice President of Marketing. The agreement is automatically renewed
for successive one year terms unless terminated earlier. Mr. Missroon receives
an annual base salary of $150,000 and additional bonuses, based on our profits.
In addition, Mr. Missroon was granted options to purchase a total of 112,500
shares of stock of our company at $2.54; all of which were exercisable at
January 15, 2000. (The number of the options and their exercise price have been
changed to reflect the post-merger situation.) Mr. Missroon will participate in
any retirement, welfare and other benefit program our Company provides for its
executive officers. If we terminate his employment without cause, Mr. Missroon
will receive his base salary for a period of three months after the date of
termination, with an additional one month of base pay added for each year of
employment up to a maximum of six months. Mr. Missroon is subject to certain
confidentiality and non-compete provisions under the agreement.
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Directors of CorVu Corporation
Edward Adams, a director of CorVu, is a principal of Jon Adams Financial Co.,
L.L.P., and president and chief executive officer of Equity Securities
Investments, Inc., a registered broker-dealer. Jon Adams Financial Co., L.L.P.
received for its services in connection with the merger of CorVu and Minnesota
American, Inc., $47,500 plus 389,031 shares of common stock and warrants to
purchase additional 185,572 shares of CorVu common stock. Equity Securities
Investments, Inc. received a commission of 7.5% plus a non-accountable expense
allowance of 1% on most of the security sales and financing transactions of
CorVu since November 1999.
On May 28, 1999, David Carlson, the Chief Financial Officer and a director of
CorVu, and his wife Cynthia loaned CorVu $300,000. The due date of the note was
extended from July 21, 1999 to September 20, 1999. Interest payable was based
upon a bank index rate plus 2%. CorVu paid the promissory note in full on
December 13, 1999.
One of the directors of CorVu, Ismail Kurdi, advanced to CorVu money at an
interest rate of 5% per annum on numerous occasions in fiscal 1997, fiscal 1998
and fiscal 1999. Mr. Kurdi advanced $150,000 on June 26, 1997, $200,000 on
October 28, 1997, and $250,000 on December 26, 1997. CorVu paid amounts of
$80,000 each back to Mr. Kurdi on January 27, 1998 and February 27, 1998. Mr.
Kurdi loaned $150,000 to CorVu on November 27, 1998, so that as of December 31,
1998, CorVu owed Mr. Kurdi the principal amount of $590,000 and interest
totaling $29,489. Mr. Kurdi advanced $200,000 to CorVu on February 26, 1999 and
$30,000 on April 14, 1999. As of June 30, 1999, outstanding loans from Mr. Kurdi
to CorVu totaled $820,000. Mr. Kurdi and CorVu agreed to convert the amount of
$790,000 into CorVu common stock, at a per share price of $2, effective June 30,
1999. On October 13, 1999, Mr. Kurdi advanced $150,000 to CorVu. On December 13,
1999, the Company paid $30,000 to Mr. Kurdi. As of December 31, 1999, the
principal amount of $150,000 was outstanding, as well as interest in the amount
of $49,975. On January 31, 2000, we paid the principal of $150,000 back to Mr.
Kurdi.
<PAGE>
Justin M. MacIntosh, the Chairman, President, Chief Executive Officer of CorVu
and one of our Directors, and Australian companies controlled by him (Core Music
Group and Blamac Holdings Limited) advanced money to, and received money
advances from our Australian subsidiary on a regular basis. As of the end of
fiscal year 1999, our Australian subsidiary owed $112,296 to Justin MacIntosh
and $176,992 to Blamac Holdings Limited. At the same point of time, Core Music
Group owed to our Australian subsidiary $218,415. We intend to settle these
amounts in the near future.
Pierce A. McNally, a director of CorVu, is a 20% shareholder of LAC, Inc. which
bought LockerMate, Inc. from Minnesota American, Inc. prior to the merger of
Minnesota American, Inc. with CorVu. The sale of LockerMate, Inc. was one of the
conditions for the closing of the merger.
ITEM 8: DESCRIPTION OF SECURITIES
Common and Preferred Stock
After the merger, our Company is authorized to issue an aggregate number of
100,000,000 shares which shall consist of 75,000,000 shares of common stock,
1,000,000 shares of Series A Convertible Preferred Stock, and 24,000,000
undesignated shares. Our Board of directors is authorized to establish from the
undesignated shares one or more classes or series of shares, to designate each
such class or series (including but not limited to the designation of additional
Series A Convertible Preferred Shares), and to fix the relative rights and
preferences of each such class or series. As of January 15, 2000, 18,271,577
shares of common stock and 4,200 shares of Series A Convertible Preferred Stock
were outstanding.
Common stock:
Our common stock has a par value of $.01 per share.
Common shareholders are entitled to one vote for each share held of record on
each matter submitted to a vote of the common shareholders.
Subject to the preferential dividend rights of the Series A Convertible
Preferred Stock, the common stock shareholders are entitled to receive dividends
as and when declared by our board of directors. However, dividends on our common
stock are not contemplated in the foreseeable future. Common shareholders are
entitled to one vote for each share held of record on each matter submitted to a
vote of the common shareholders.
Our Articles provide that our shareholders will not have cumulative voting
rights in the electing of directors. Under cumulative voting, a shareholder
could cast that number of votes equal to such shareholder's shares multiplied by
the number of directors to be elected in favor of one candidate or among several
candidates. Cumulative voting makes it possible for less than a majority of the
shareholders to elect one or more members of the board of directors. Under
non-cumulative voting, a majority of the voting power of the shareholders
entitled to vote can elect the entire board of directors. Our Articles provide
that our shareholders will not have any preemptive rights to subscribe for or
purchase additional shares of our capital stock. This means that our
shareholders will not be entitled to acquire a certain fraction of the unissued
securities or rights to purchase our securities before we may offer them to
other persons. Preemptive rights enable a shareholder to maintain the
shareholder's proportional voting power and proportional rights to receive other
distributions by the company.
Series A Convertible Preferred Stock:
The holders of Series A Convertible Preferred Stock are entitled to receive a
dividend of 6.5% per annum, payable semi-annually on July 1 and January 1. The
dividend is cumulative which means that if in any semi-annual dividend period,
dividends at the rate of 6.5% per annum have not been paid upon or set apart for
the Series A 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 common stock.
<PAGE>
The Company may, to the extent that funds are legally available therefor, redeem
each share of Series A Stock at $11.70 plus earned and unpaid dividends. Each
share of Series A Stock is convertible into common stock at the rate of eight
shares of common stock for each share of Series A Stock. Each share of Series A
Stock is entitled to eight votes. In the event of an involuntary or voluntary
liquidation, the holders of shares of Series A stock shall be entitled to
receive out of the assets of our Company an amount equal to $10 per share.
PART II
ITEM 1: MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The common stock of Minnesota American, Inc. was traded in the over-the-counter
market with prices quoted on the OTC Bulletin Board under the symbol "MNAC."
After the merger, we changed the symbol to "CRVU." CorVu's common stock was not
publicly traded prior to the merger. Quotations in the following table are based
on information provided by IDD Information Services, Tradeline(r) on Lexis(R).
The quotations represent inter-dealer prices, without retail markup, markdown or
commission, and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------
Fiscal Quarter Ended High Bid Low Bid
- ------------------------------------------------------------------------
<S> <C> <C>
September 30, 1997 $0.125 $0.03125
December 31, 1997 0.28125 0.125
March 31, 1998 0.171875 0.125
June 30, 1998 0.1875 0.03125
September 30, 1998 $0.125 $0.046875
December 31, 1998 0.421875 0.09375
March 31, 1999 1.00 0.25
June 30, 1999 1.0625 0.28125
September 30, 1999 $2.75 $0.28125
</TABLE>
As of January 15, 2000, approximately 149 shareholders held the common stock of
our Company. In addition, three shareholders held a total of 4,200 shares of
Series A Convertible Preferred Stock.
Prior to their merger, neither CorVu Corporation nor Minnesota American, Inc.
paid dividends to holders of their common stock. However, the shareholders of
Series A Convertible Preferred Stock are entitled to receive a cumulative
dividend of 6.5% per year, payable semi-annually.
ITEM 2: LEGAL PROCEEDINGS
None.
<PAGE>
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, CorVu has engaged in the securities transactions
listed below. CorVu relied for all such sales on exemptions from registration
provided under Section 4(2), Regulation D and/or Regulation S of the Securities
Act for transactions not involving a public offering and related state
securities laws. Unless otherwise stated, all securities were issued directly by
CorVu, no underwriters were involved and no discount, commission or other
transaction-related remuneration was paid. The purchasers of securities acquired
them for their own account and not with a view to any distribution thereof to
the public. The certificates evidencing the securities bear legends stating that
the shares are not to be offered, sold or transferred other than pursuant to an
effective registration statement under the Securities Act, or an exemption from
such registration requirements.
1. In February 1997, CorVu issued and sold 150,000 shares of common stock
to Ashkirk International Limited, a non-U.S. entity, at $2.85 per
share.
2. In April 1997, CorVu issued and sold 135,000 shares of common stock to
Ashkirk International Limited and Blamac Holdings Limited, non-U.S.
entities, at $2.85 per share.
3. In September 1997, CorVu issued and sold 100,000 shares of common stock
to Wink Holdings Limited, a non-U.S. entity, at $2 per share.
4. In September 1997, CorVu issued and sold 102,700 shares of common stock
to Trulock Company Limited, a non-U.S. entity, at $3 per share.
5. In October 1997, CorVu issued and sold 3,000 shares of common stock to
an employee of its Australian subsidiary, at $2.85 per share.
6. In July 1998, CorVu issued warrants to purchase 30,000 shares of common
stock, at $3 per share, to the McCurdy Group.
7. In August 1998, CorVu issued warrants to purchase 100,000 shares of
common stock, at $1.17 per share, to First Albany Corporation.
8. In November 1998, CorVu issued warrants to purchase 30,000 shares of
common stock, at $3 per share, to Technology Strategies & Alliances.
9. In February 1999, CorVu issued and sold 1,550 shares of common stock to
an employee of its Australian subsidiary, at $2 per share.
10. In April 1999, CorVu issued and sold 150,000 shares of common stock, at
$2 per share, and a warrant for the purchase of 150,000 shares of
common stock, at $.01 per share, to a director, who is an accredited
investor and who is not a U.S. citizen.
11. In June 1999, CorVu issued and sold 520,000 shares of common stock, at
$2 per share, and a warrant for the purchase of 125,000 shares of
common stock, exercise price of $.01 per share, to a director, who is
an accredited investor and who is not a U.S. citizen.
12. In June 1999, CorVu issued warrants to purchase 80,000 shares of common
stock, at $3 per share, to several of its foreign distributors.
13. In September 1999, CorVu issued and sold 12,500 shares of common stock,
at $2 per share, to two individuals, each an accredited investor.
14. In November 1999, CorVu issued warrants to purchase 12,000 shares of
common stock, at $2 per share, to an accredited investor for services
rendered.
15. In November 1999, CorVu issued warrants to purchase 450,000 shares of
common stock, at $.01 per share, to two business entities, both of
which are accredited investors, in connection with a loan agreement.
16. In December 1999 and January 2000, CorVu issued and sold 935,000 shares
of common stock, at $2 per share, to two accredited U.S. investors and
seventeen non-U.S. individuals and business entities. In addition,
under one such transaction CorVu issued a warrant for the purchase of
up to 75,000 shares of common stock at an exercise price of $2 per
share.
<PAGE>
17. In connection with the merger with Minnesota American, Inc., CorVu
issued to its business advisor Jon Adams Financial Co., L.L.P., 345,806
shares of common stock as partial payment for services rendered.
18. Immediately following the merger, our Company, as the Surviving Company
of the merger, issued a warrant to purchase 185,572 shares of common
stock, at $5.3125 per share, to Jon Adams Financial Co., L.L.P. for
services rendered.
19. In January 2000, our Company instructed our transfer agent to issue
285,702 shares of common stock at $2 per shares to two business
entities, both of which are accredited investors, in conversion of the
outstanding principal and interest under a loan agreement.
20. In January 2000, our Company issued and sold 500,000 shares of common
stock and warrants to purchase 300,000 shares of common stock, at
exercise prices ranging from $2 to $8 per share, to two accredited
investors for a total purchase price of $1,000,000.
21. As of January 31, 2000, options to purchase approximately 3,826,250
shares of CorVu common stock and warrants to purchase 1,674,072 shares
of CorVu common stock were outstanding. (The number of options might
change slightly due to the conversion of pre-merger CorVu options at a
rate of 1.125; under the merger agreement, the number of option shares
will be rounded down to the nearest whole number.)
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Minnesota corporate law, a corporation shall, unless prohibited or limited
by its Articles of Incorporation or Bylaws, indemnify its directors, officers,
employees and agents against judgments, penalties, fines, settlements, expenses
and disbursements incurred by such person who was, or is threatened to be, made
a party to a proceeding by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation if generally, with
respect to the acts or omissions of the person complained of in the proceeding,
the person: (i) has not been indemnified by another organization with respect to
the same acts or omissions; (ii) acted in good faith, (iii) received no improper
personal benefit; (iv) in the case of a criminal proceeding, had no reasonable
cause to believe the conduct was unlawful; and (v) reasonably believed the
conduct was in the best interests of the corporation or, in certain
circumstances, reasonably believed that the conduct was not opposed to the best
interests of the corporation. Our Articles of Incorporation and bylaws do not
limit our obligation to indemnify such persons.
Minnesota corporate law also provides that a corporation may purchase and
maintain insurance on behalf of any indemnified party against any liability
asserted against such person, whether or not the corporation would have been
required to indemnify the person against liability under the provisions of
Minnesota corporate law. Under the Agreement and Plan of Reorganization, entered
into by Minnesota American, Inc. and CorVu Corporation on November 17, 1999, our
Company - as the Surviving Company - is obliged to indemnify and hold harmless
current and former officers and directors of both companies for six years after
the merger, in respect of acts or omissions occurring prior to the merger,
provided that such indemnification shall be subject to any limitation imposed
from time to time under applicable law. Moreover, for six years after the
merger, we must use our best efforts to provide officers' and directors'
liability insurance in respect of acts or omissions occurring prior to and
including the merger, covering each current and former officer or director of
Minnesota American, Inc. and CorVu. The Company is in the process of procuring
Director and Officer insurance.
<PAGE>
PART F/S
The following information is provided:
CorVu Corporation
o Consolidated Financial Statements June 30, 1998 and June 30, 1999
o (Unaudited) Consolidated Financial Interim Statements for quarters
September 1999 and September 1998
o Pro forma balance sheet. Since Minnesota American, Inc. sold and
disposed of, respectively, both of its operating subsidiaries,
operations after the consummation of the merger consist of CorVu.
Regarding pro forma statements of income, we therefore refer to the
statements of income of CorVu, included above.
Minnesota American, Inc.
o Consolidated Financial Statements September 30, 1998 and September 30,
1999
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 1999 and 1998
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
CorVu Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheets of CorVu
Corporation and subsidiaries (the Company) as of June 30, 1999 and 1998, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CorVu Corporation
and subsidiaries as of June 30, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 4. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ KPMG LLP
December 3, 1999, except as to notes 4, 11 and 13
which are as of December 16, 1999
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1999 and 1998
<TABLE>
<CAPTION>
Assets 1999 1998
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 31,335 287,289
Stock subscription receivable 250,000 -
Trade accounts receivable, net of allowance for doubtful
accounts of $100,000 and $50,000, respectively 3,763,628 2,456,273
Prepaid expenses 117,369 97,844
Other assets 58,794 149,189
----------- ------------
Total current assets 4,221,126 2,990,595
Furniture, fixtures, and equipment 325,595 243,195
Less accumulated depreciation (172,654) (146,221)
----------- ------------
152,941 96,974
----------- ------------
$ 4,374,067 3,087,569
=========== ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 1,904,989 1,000,091
Accrued compensation 1,507,916 737,424
Deferred revenue 1,435,792 973,363
Accrued interest 370,287 216,538
Other accrued expenses 192,811 58,068
Convertible note payable-parent 2,000,000 -
Due to affiliates - 101,166
Note payable 1,407,000 927,014
Director advances 444,826 554,826
----------- ------------
Total current liabilities 9,263,621 4,568,490
----------- ------------
Convertible note payable-parent - 2,000,000
----------- ------------
Total liabilities 9,263,621 6,568,490
Stockholders' deficit:
Undesignated capital stock, 25,000,000 shares in 1999 and 1998, none issued. - -
Common stock, $0.01 par value; 25,000,000 shares authorized;
10,162,250 and 9,490,700 shares issued and outstanding in
1999 and 1998, respectively 101,622 94,907
Additional paid-in capital 2,852,949 811,693
Accumulated deficit (7,980,480) (4,630,764)
Deferred compensation (75,000) -
Accumulated other comprehensive income 211,355 243,243
----------- ------------
Total stockholders' deficit (4,889,554) (3,480,921)
----------- ------------
Commitments (Notes 9, 10, 12, and 13)
Total liabilities and stockholders' deficit $ 4,374,067 3,087,569
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
Revenues:
Software and license fees $ 6,867,886 4,688,895
Maintenance, consulting, and other 3,720,572 2,178,767
-------------- -------------
Total revenues 10,588,458 6,867,662
-------------- -------------
Operating costs and expenses:
Cost of maintenance, consulting, and other 2,064,137 1,238,733
Product development 628,741 515,100
Sales and marketing 5,931,339 4,289,869
General and administrative 5,025,747 2,113,417
-------------- -------------
Total operating expenses 13,649,964 8,157,119
-------------- -------------
Operating loss (3,061,506) (1,289,457)
Interest expense, net (288,210) (191,094)
-------------- -------------
Net loss $ (3,349,716) (1,480,551)
============== =============
Loss per common share-basic and diluted $ (0.35) (0.16)
Weighted average shares-basic and diluted 9,518,964 9,450,260
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficit
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common stock paid-in Accumulated Deferred comprehensive stockholders
Shares Amount capital deficit compensation income/(loss) deficit
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 9,285,000 $ 92,850 520,200 (3,150,213) -- 40,959 (2,496,204)
Comprehensive loss:
Net loss -- -- -- (1,480,551) -- -- (1,480,551)
Foreign currency translation
adjustment -- -- -- -- -- 202,284 202,284
----------
Comprehensive loss -- -- -- -- -- -- (1,278,267)
Issuance of common stock 205,700 2,057 291,493 -- -- -- 293,550
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1998 9,490,700 94,907 811,693 (4,630,764) -- 243,243 (3,480,921)
Comprehensive loss:
Net loss -- -- -- (3,349,716) -- -- (3,349,716)
Foreign currency translation
adjustment -- -- -- -- -- (31,888) (31,888)
----------
Comprehensive loss -- -- -- -- -- -- (3,381,604)
Warrants and stock options granted -- 716,500 -- -- -- 716,500
Deferred compensation -- -- 75,000 -- (75,000) -- --
Issuance of common stock 671,550 6,715 1,249,756 -- -- -- 1,256,471
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1999 10,162,250 $ 101,622 2,852,949 (7,980,480) (75,000) 211,355 (4,889,554)
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,349,716) (1,480,551)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 51,734 188,955
Warrants and stock options granted 716,500 -
Changes in operating assets and liabilities:
Accounts receivable (1,307,355) (1,370,516)
Prepaid expenses (19,525) (60,417)
Other current assets 90,395 (127,759)
Accounts payable 734,228 191,242
Accrued compensation 365,656 378,271
Deferred revenue 462,429 569,779
Accrued interest 153,749 143,700
Other accrued expenses 710,249 9,856
----------- -----------
Net cash used in operating activities (1,391,656) (1,557,440)
----------- -----------
Cash flows from investing activities:
Capital expenditures (107,701) (91,894)
----------- -----------
Net cash used in investing activities (107,701) (91,894)
----------- -----------
Cash flows from financing activities:
Net proceeds from sale of common stock 216,471 293,550
Borrowings on note payable 479,986 927,014
Repayment of amounts due to affiliates (101,166) -
Borrowings of amounts due to affiliates - 101,166
Borrowings on notes payable-directors 680,000 562,278
Repayment on notes payable-directors - (160,000)
Payments on capital lease - (81,419)
----------- -----------
Net cash provided by financing activities 1,275,291 1,642,589
Effect of exchange rate changes on cash (31,888) 202,284
----------- -----------
Net increase (decrease) in cash and cash equivalents (255,954) 195,539
Cash and cash equivalents at beginning of year 287,289 91,750
----------- -----------
Cash and cash equivalents at end of year $ 31,335 287,289
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(1) Description of Business and Consolidated Financial Statement Presentation
(a) Organization
CorVu Corporation (the Company or CorVu) is an international
provider of Integrated Business Intelligence and Business
Performance Management Solutions. The Company designs,
develops, markets, and supports its proprietary management
software solutions.
The Company's products and services are sold through both
direct and indirect channels. Sales and support offices are
located throughout the United States, Australia, and Europe.
CorVu is a Minnesota corporation. Prior to August 16, 1999,
CorVu was majority owned by CorVu Pty Limited (Parent), an
Australian Company, which is controlled by the Chief Executive
Officer of the Company. On August 16, 1999, the Parent
distributed all shares of CorVu common stock held to the
Parent's shareholders.
(b) Basis of Consolidated Financial Statement Presentation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries.
Intercompany accounts and transactions have been eliminated in
consolidation.
(2) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133
established standards for accounting and reporting of derivative
financial instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The accounting for changes in fair value of
a derivative depends on the intended use of the derivative and the
resulting designation. Management is currently in the process of
assessing the impact of SFAS No. 133 to the Company.
In December 1998, the AICPA issued Statement of Position (SOP) No.
98-9, Modification of SOP 97-2, Software Revenue Recognition, with
Respect to Certain Transactions. SOP No. 98-9 requires recognition of
revenue using the "residual method" in a multiple-element software
arrangement when fair value does not exist for one or more of the
delivered elements in the arrangement. Under the "residual method," the
total fair value of the undelivered elements is deferred and recognized
in accordance with SOP No. 97-2. The Company will be required to
implement SOP No. 98-9 for the year beginning July 1, 1999. SOP No.
98-9 also extends the deferral of the application of SOP No. 97-2 to
certain other multiple element software arrangements until the date SOP
98-9 becomes effective. The Company does not expect a material change
to its accounting for revenues as a result of the provisions of SOP
98-9.
<PAGE>
(3) Summary of Significant Accounting Policies
(a) Revenue Recognition
The Company recognizes revenue in accordance with Statement of
Position No. 97-2, Software Revenue Recognition. Software
license revenue is recognized when all of the following
criteria have been met: there is an executed license
agreement, software has been shipped to the customer, no
significant vendor obligations remain, the license fee is
fixed and payable within twelve months and collection is
deemed probable. Maintenance revenues are recognized ratably
over the term of the maintenance contract, typically 12 to 36
months. Consulting and other revenues are recognized when
services are performed.
Deferred revenue represents payment received or amounts in
advance of services to be performed.
(b) Software Development Costs
Software development costs are expensed as incurred until
technological feasibility is established. Software development
costs incurred subsequent to establishing technological
feasibility are capitalized and amortized over their estimated
useful lives. During 1999 and 1998, no software development
costs were capitalized.
(c) Comprehensive Income
Comprehensive income represents the change in stockholders'
deficit resulting from other than stockholder investments and
distributions. Accumulated other comprehensive income (loss)
in the consolidated statements of stockholders' deficit is
solely comprised of the accumulated foreign currency
translation adjustment.
(d) Foreign Currency Translation
The functional currency of the Company's subsidiaries is the
local currency. Accordingly, the Company translates all assets
and liabilities into U.S. dollars at current rates. Revenues,
costs, and expenses are translated at weighted average rates
during each reporting period. Gains and losses resulting from
the translation of the consolidated financial statements are
excluded from results of operations and are reflected as a
translation adjustment and a separate component of
stockholders' deficit.
Gains and losses resulting from foreign currency transactions
are recognized in the consolidated statement of operations in
the period they occur.
(e) Net Loss per Share
Basic loss per share is computed by dividing net loss
available to common stockholders by the weighted-average
number of shares outstanding during the period. Diluted EPS
recognizes the potential dilutive effects of stock options and
warrants determined by the treasury stock method and the
effects of convertible debt.
<PAGE>
(f) Stock-based Compensation
The Company uses the intrinsic value-based method prescribed
by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations in accounting for employee stock options.
Under the intrinsic value method, compensation expense is
recorded only to the extent that the market price of the
common stock exceeds the exercise price of the stock option on
the date of grant.
(g) Income Taxes
The Company accounts for income taxes using the asset and
liability method. Under the asset and liability method,
deferred tax assets and liabilities are recognized at the
enacted rates for the future tax consequences attributable to
differences between the financial statement carrying amounts
of existing tax assets and liabilities and their respective
tax basis. The effect on deferred tax assets and liabilities
of a change in tax rate is recognized in income in the period
that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to
the amounts expected to be realized.
(h) Fair Value of Financial Instruments
The carrying value of the Company's financial assets and
liabilities, because of their short-term nature, approximates
fair value. The carrying value of notes payable and long-term
debt approximates fair value because the current rates
approximate market rates available on similar instruments.
(i) Cash and Cash Equivalents
Cash equivalents consist of highly liquid money market
accounts carried at cost plus accrued interest, which
approximates market value. All cash equivalents have remaining
maturities of 90 days or less.
(j) Stock Subscription Receivable
Stock subscription receivables that are paid in full by the
subscriber prior to the date the financial statements are
issued are reflected as a current asset.
(k) Property and Equipment, Net
Property and equipment consists of property, equipment,
furniture and computers and are stated at cost less
accumulated depreciation. Depreciation is calculated using the
straight-line method over the estimated useful lives of the
respective assets which generally range from three to seven
years.
(l) Advertising Costs
Advertising costs are expensed as incurred. Advertising costs
totaled approximately $156,000 and $130,000 for the years
ended June 30, 1999 and 1998, respectively.
<PAGE>
(m) Business and Credit Concentrations
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade
accounts receivable. The Company sells principally to
resellers and end users in the United States, Australia, and
Europe. The Company performs ongoing credit evaluations of its
customers and has not experienced significant credit losses in
the past.
(n) Impairment of Long-lived Assets and Assets to be Disposed Of
Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of
an asset to future net undiscounted cash flows expected to be
generated by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount
or fair value less costs to sell.
(o) Use of Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of those assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. A change in the facts
and circumstances surrounding these estimates could result in
a change to the estimates and impact future operating results.
(4) Liquidity
The accompanying consolidated financial statements are prepared
assuming the Company will continue as a going concern. During the year
ended June 30, 1999, the Company incurred an operating loss of
$3,061,506 and used $1,391,656 of cash in operating activities. As of
June 30, 1999, the Company had an accumulated deficit of $7,980,480,
total stockholders' deficit of $4,889,554, and negative working capital
of $5,042,495. In addition, due to inadequate funds, the Company has
not paid the outstanding principal and interest on the note payable
discussed in Note 9, that was due on December 16, 1999.
Going forward the Company must raise additional cash either through
raising additional capital or through profits from operations. During
the years ended June 30, 1999 and June 30, 1998, the Company raised
capital of $216,471 and $293,550, respectively.
Management anticipates that the impact of certain subsequent
activities, discussed in Note 11, as well as the actions listed below,
will generate sufficient cash flows to fund the Company's future
operations.
<PAGE>
1. Continue to increase the Company's revenues from software licenses
and other revenue sources.
2. Increase the level of the current Indebtedness.
3. Solicit additional equity investment in the Company.
4. Reduce operating costs, as deemed necessary, in the event the sales
of product licenses and/or additional equity or debt financing do
not generate adequate proceeds.
(5) Loss Per Common Share
For the Year Ended 1999
-------------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
----------- ----------- --------
Basic Loss Per Share: $(3,349,716) 9,518,964 $ (0.35)
Effect of Dilutive Securities:
None -- -- --
----------- ----------- --------
Loss Per Share -
Assuming dilution $(3,349,716) 9,518,964 $ (0.35)
=========== =========== ========
For the Year Ended 1998
-------------------------------------------
Basic Loss Per Share: $(1,480,551) 9,450,260 $ (0.16)
Effect of Dilutive Securities:
None -- -- --
----------- ----------- --------
Loss Per Share -
Assuming dilution $(1,480,551) 9,450,260 $ (0.16)
=========== =========== ========
(6) Stock Options and Warrants
The Company's 1996 Stock Option Plan (the Plan) provides for the
issuance of up to an aggregate of 3,500,000 shares of common stock to
employees, directors, and consultants. The Plan provides for the
issuance of incentive and nonqualified stock options.
Under the Plan, the exercise price for incentive stock options is at
least 100% of the fair market value on the date of the grant. The
exercise price for incentive stock options is at least 110% of the fair
market value on the date of the grant for persons with greater than 10%
of the voting power of all classes of stock. Options generally expire
in seven years; however, incentive stock options may expire in five
years if the optionee owns stock representing more than 10% of the
voting power of all classes of stock. Vesting periods are determined by
a stock option committee appointed by the board of directors and
generally provide for shares to vest ratably over three years.
<PAGE>
During fiscal year 1999, in connection with the grant to employees of
options outside the Plan to purchase 345,000 shares of common stock,
the Company recorded deferred compensation of $75,000, representing the
difference between the deemed value of the common stock for accounting
purposes and the option exercise price of such options on the date of
grant. The Company recognized an expense of $327,500 for the fiscal
year ended June 30, 1999 for these stock option grants based upon the
intrinsic value method in accordance with APB Opinion No. 25, and will
recognize the remainder of the deferred compensation cost over the
respective three year vesting periods of the options granted.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Accordingly, compensation
expense has been recognized using the intrinsic value method prescribed
in APB No. 25 and related interpretations. Had compensation cost for
the Company's stock option grants in fiscal years 1999 and 1998 been
based on the fair value method prescribed by SFAS No. 123, the
Company's net loss would have been increased by $618,979 and $195,282,
respectively in 1999 and in 1998; net loss per share would have been
increased by $.08 and $.02 in 1999 and 1998, respectively.
Under SFAS No. 123, the weighted average estimated fair value of stock
options granted at exercise price equal to market price of grant date
during 1999 and 1998 was $1.15 and $1.08 per share, respectively. The
weighted-average estimated fair value of stock options granted at
prices below fair value during fiscal 1999 was $1.86.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions: dividend yield of 0%; expected volatility
of 0%; risk-free interest rate of 7.0% and 6.5% in 1999 and 1998; and
expected lives of approximately seven years.
Plan activity is summarized as follows:
Weighted-
average exercise
Options price per share
---------- ----------------
Outstanding at June 30, 1997 1,001,800 $ 1.98
Granted 771,800 3.00
Exercised -- --
Forfeited (410,000) 2.01
---------- -----
Outstanding at June 30, 1998 1,363,600 2.50
Granted 793,000 3.00
Exercised -- --
Forfeited (461,800) 2.78
---------- -----
Outstanding at June 30, 1999 1,694,800 $ 2.62
========== =====
<PAGE>
Options activity outside the Plan is summarized as follows:
Weighted-
average exercise
Options price per share
------- ----------------
Outstanding at June 30, 1998 -- $ --
Granted 345,000 1.83
Exercised -- --
Forfeited -- --
------- -----
Outstanding at June 30, 1999 345,000 $ 1.83
======= =====
<PAGE>
The following tables summarize information about stock options
outstanding as of June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
-------------------------------------------------- ---------------------------------
Weighted-
Number average Number
outstanding remaining exercisable
Exercise June 30, contractual Exercise June 30, Exercise
prices 1999 life price 1999 price
------------- ---------------- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
$ 1.00 299,000 4.3 $ 1.00 199,334 $ 1.00
1.50 115,000 7.0 1.50 65,000 1.50
2.00 230,000 6.8 2.00 230,000 2.00
2.85 272,000 4.6 2.85 191,334 2.85
3.00 1,123,800 6.1 3.00 242,770 3.00
------------- ---------------- ----------------- ------------ ---------------- ------------
$ 1.00 - 3.00 2,039,800 5.8 $ 2.47 928,438 $ 2.18
=============================== ================= ============ ================ ============
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------------- ---------------------------------
Weighted-
Number average Number
outstanding remaining exercisable
Exercise June 30, contractual Exercise June 30, Exercise
prices 1998 life price 1998 price
------------- ---------------- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
$ 1.00 314,000 4.3 $ 1.00 104,666 $ 1.00
2.85 351,800 4.6 2.85 127,266 2.85
3.00 697,800 5.6 3.00 137,833 3.00
------------- ---------------- ----------------- ------------ ---------------- ------------
$ 1.00 - 3.00 1,363,600 5 $ 2.5 369,765 $ 2.38
=============================== ================= ============ ================ ============
</TABLE>
Warrants and options issued to third parties
During fiscal year 1999, the Company issued 240,000 warrants and
options to purchase common stock at $1.17 - $3.00 per share to vendors,
value-added resellers, and consultants. The options and warrants are
exercisable from the date of grant through June 2006. The fair value of
the options and warrants at the date of grant was estimated to be
approximately $389,000 using Black-Scholes pricing model which was
expensed in the 1999 consolidated statement of operations.
<PAGE>
The following assumptions were used to calculate the expense using the
Black-Scholes pricing model: dividend yield of 0%; expected volatility
of 0%; risk-free interest rate of 6.50%; and expected lives ranging
from four to seven years.
In connection with the sale of stock in fiscal 1999, the Company issued
warrants to purchase 275,000 shares of common stock at $.01 per share.
The warrants are exercisable for a period of seven years.
(7) Equity Transactions
(a) Stock Subscriptions
On June 30, 1999, the Company entered into a stock
subscription agreement with a director of the Company for the
sale of 125,000 shares of common stock at $2.00 per share. On
July 1, 1999, the Company received $250,000 in satisfaction of
this subscription agreement.
(b) Conversion of Advances
During fiscal 1999, a director of the Company converted
advances to the Company of $790,000 to 395,000 shares of
common stock at $2.00 per share.
(8) Income Taxes
The Company has incurred net operating losses since inception. The
Company has not reflected any benefit of such net operating loss
carryforwards in the accompanying consolidated financial statements.
The income tax expense benefit differed from the amount computed by
applying the U.S. federal income tax rate of 34% to income before
income taxes as a result of the following:
1999 1998
--------- -----------
Computed "expected" tax benefit 34 % 34 %
State income tax, net of federal benefit 5 % 2 %
Change in valuation allowance (39)% (36)%
--------- -----------
- % - %
========= ===========
<PAGE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets as of June 30 is presented below:
1999 1998
------- -------
Deferred tax assets:
Foreign net operating loss carryforward $ 1,070 920
U.S. net operating loss carryforward 1,345 670
Stock compensation 330 --
Miscellaneous reserves and accruals 215 70
Other (20) (20)
------- -------
Total gross deferred tax assets 2,940 1,640
Valuation allowance (2,940) (1,640)
------- -------
Net deferred tax assets $ -- --
======= =======
In assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible.
Based on the level of historical taxable income and projections of
future taxable income over the periods in which the deferred tax assets
are deductible, management does not believe that it is more likely than
not the Company will realize the benefits of these deductible
differences. Accordingly, the Company has provided a valuation
allowance against the gross deferred tax assets as of June 30, 1999 and
1998.
As of June 30, 1999, the Company has reported U.S. net operating loss
carryforwards of approximately $3,360,000. The federal net operating
loss carryforwards expire in the years 2010 through 2019.
Federal tax laws impose significant restrictions on the utilization of
net operating loss carryforwards in the event of a change in ownership
of the Company which constitutes an "ownership change," as defined by
the Internal Revenue Code, Section 382. The Company's net operating
loss carryforward may be subject to the above limitations.
(9) Note Payable
In February 1998, the Company entered into a loan agreement in the
amount of $927,014 with a third party lender. During 1999, the Company
borrowed an additional $479,986. The note is secured by the assets of
the Company. The interest rate on the outstanding principal balance is
based on an index defined in the loan agreement plus 3%, with interest
due monthly. On June 30, 1999 and 1998 the interest rates were 8.05%
and 8.30%, respectively. The outstanding principle balance becomes due
on December 15, 1999. The outstanding principal and interest was
subsequently not paid on December 16, 1999, and the Company is in
negotiations with the lender to extend the terms of the note.
<PAGE>
(10) Commitments
Operating Leases
The Company leases certain facilities and equipment under noncancelable
operating leases that expire at various dates through 2004. Future
minimum lease commitments under these operating leases are as follows:
Year ending June 30:
2000 $ 668,000
2001 439,000
2002 324,000
2003 107,000
2004 92,000
----------
$1,630,000
==========
Rent expense under operating leases for the year ended June 30, 1999
and 1998 was $792,000 and $429,000, respectively.
(11) Related Parties
(a) Director Advances
The Company has received interest-bearing and non-interest
bearing advances from certain directors of the Company.
Interest rates on interest-bearing advances vary from 5.0 to
9-3/4% as of June 30, 1999. These amounts are classified as
current liabilities as the Company anticipates paying the
amounts back during the year ending June 30, 2000. Amounts
outstanding at June 30, 1999 and 1998 are $444,826 and
$554,826, respectively. The Company had repaid $330,000 of the
advances to certain directors at December 16, 1999.
(b) Convertible Note Payable-Parent Corporation
On July 1, 1996, the Company purchased the intellectual
property to CorVu software from its Parent. A promissory note
in the amount of $2,000,000 was issued by the Company to its
Parent as consideration for the purchase of the license. This
intellectual property provides the Company with unlimited use
of the technology and the ability to modify and enhance the
purchased technology. The promissory note bears interest at
6.3% interest per annum. On July 1, 1998, the terms of the
note were modified to include a conversion feature with which
the holder at its option on or after June 30, 1999 may convert
all of the outstanding principal and accrued interest into
common stock of the Company at a conversion price of $2.00. On
August 16, 1999, approximately $1,500,000 of the outstanding
balance and accrued interest was forgiven by the Company's
Parent. The remaining balance of $834,286 was converted to
417,143 shares of common stock in full settlement of the note
and accrued interest.
<PAGE>
(12) Industry Segment and Operations By Geographic Areas:
The Company operates predominantly in one industry segment, being the
design, development and marketing of its proprietary management
software solutions. The geographic distributions of the Company's
revenue and long-lived assets are summarized in the following table:
Year Ended June 30,
----------------------------------
1999 1998
---------------- ---------------
Total Revenues:
United States $ 4,536,000 3,409,000
Australia 3,658,000 2,025,000
United Kingdom 2,394,000 1,434,000
---------------- ---------------
$ 10,588,000 6,868,000
================ ===============
Long-Lived Assets:
United States $ 48,000 40,000
Australia 12,000 16,000
United Kingdom 93,000 41,000
---------------- ---------------
$ 153,000 97,000
================ ===============
(13) Subsequent Events
(a) Agreement and Plan of Reorganization
On November 17, 1999, the Company entered into an Agreement
and Plan of Reorganization (the Agreement) with Minnesota
American, Inc. (MNAC) whereby the Company would merge with and
into MNAC. The merger is subject to shareholder approval and
certain other conditions, including the sale/disposal of
MNAC's current operating subsidiaries and MNAC having at least
$750,000 of cash and $1,000,000 of net worth.
The merger, if approved and completed, will result in
shareholders of the Company and MNAC owning approximately 74
percent and 26 percent, respectively of the outstanding shares
of the combined entity. MNAC is a public company with its
shares traded over the NASD Electronic Bulletin Board. The
combined entity would change its name to CorVu and continue
CorVu's business operations as a public company. The Agreement
includes a termination fee of $250,000 to be paid under
specified circumstances. The Company is obligated to issue
approximately 339,000 common shares and pay approximately
$50,000 to its investment bankers at closing in exchange for
services. In addition, the Company will grant a warrant to
purchase approximately 113,000 common shares at fair value on
the closing date which have a five year life.
<PAGE>
(b) Convertible Bridge Loan
On November 15, 1999, the Company entered into a loan
agreement with a third party in the amount of $500,000. The
outstanding principal is due on February 15, 2000. Interest to
be charged on the outstanding principal is 10% per annum. The
loan will be converted into common stock at a price of $2.00
per share upon the execution of the merger transaction with
MNAC. In addition, the holder of the loan received warrants to
purchase up to 450,000 shares of common stock at an exercise
price of $.01 per share. If the outstanding principal and
interest is not paid on the due date, the number of shares the
holder of the loan has the option to purchase under the
warrants will increase by 25,000 shares, with incremental
increases of 25,000 for each subsequent 60-day period
thereafter until the conditions of the loan agreement are
satisfied.
(c) Equity Sales
At December 16, 1999, the Company had raised a total of $1.4
million from the sale of common stock (priced at $2.00 per
share) under several transactions subsequent to June 30, 1999.
(d) Employment Agreement
On July 1, 1999, the Company entered into a three-year
employment agreement with its chief executive officer. This
agreement included options to purchase 600,000 shares of
common stock at $1.50 per share. The fair value of the stock
on the date of grant was $3.00 per share. The options vest
over a period of three years and expire in June 2006. There is
$900,000 of deferred compensation resulting from this grant
that will be recognized over the vesting term.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1999 (Unaudited) and June 30, 1999
<TABLE>
<CAPTION>
September 30, June 30,
Assets 1999 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,056 $ 31,335
Stock subscription receivable 250,000
Trade accounts receivable, net of allowance for doubtful
accounts of $150,000 and $100,000, respectively 3,773,395 3,763,628
Prepaid expenses and other 171,435 176,163
---------- ----------
Total current assets 3,956,886 4,221,126
Property and equipment, net 154,884 152,941
---------- ----------
$ 4,111,770 $ 4,374,067
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,943,981 $ 1,904,989
Accrued compensation 1,727,779 1,507,916
Deferred revenue 1,455,244 1,435,792
Accrued interest 48,154 370,287
Other accrued expenses 439,073 192,811
Convertible note payable-parent -- 2,000,000
Note payable 1,365,000 1,407,000
Director advances 445,191 444,826
---------- ----------
Total current liabilities 7,424,422 9,263,621
---------- ----------
Stockholders' deficit:
Undesignated, 25,000,000 shares in 1999 -- --
Common stock, $0.01 par value; 25,000,000 shares authorized;
10,591,900 and 10,162,200 shares issued and outstanding 105,919 101,622
Additional paid-in capital 6,113,741 2,852,949
Accumulated deficit (9,143,690) (7,980,480)
Deferred compensation (675,000) (75,000)
Foreign currency translation adjustment 286,378 211,355
---------- ----------
Total stockholders' deficit (3,312,652) (4,889,554)
---------- ----------
Total liabilities and stockholders' deficit $ 4,111,770 $ 4,374,067
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
Three Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
Revenues:
<S> <C> <C>
Software $ 1,740,720 $ 1,930,284
Maintenance, consulting, and other 1,219,680 683,464
-------------- -------------
Total revenues 2,960,400 2,613,748
-------------- -------------
Operating costs and expenses:
Cost of maintenance, consulting, and other 590,289 379,219
Product development 231,113 114,989
Sales and marketing 1,717,929 1,369,449
General and administrative 1,529,165 816,334
-------------- -------------
Total operating expenses 4,068,496 2,679,991
-------------- -------------
Operating loss (1,108,096) (66,243)
Other expense, net (55,112) (53,355)
-------------- -------------
Net loss $ (1,163,208) $ (119,598)
============== =============
Loss per common share-basic $ (0.11) $ (0.01)
Weighted average shares-basic 10,163,880 9,490,700
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,163,208) (119,598)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 9,030 8,212
Warrants and stock options granted 300,000 --
Changes in operating assets and liabilities:
Accounts receivable (9,767) (501,564)
Other current assets 4,728 (10,668)
Accounts payable 38,992 (261,329)
Accrued compensation 219,863 96,885
Deferred revenue 19,452 62,681
Accrued interest 17,956 73,518
Other accrued expenses 246,262 109,743
----------- -----------
Net cash used in operating activities (316,692) (542,120)
----------- -----------
Cash flows from investing activities:
Capital expenditures (10,973) (51,996)
----------- -----------
Net cash used in investing activities (10,973) (51,996)
----------- -----------
Cash flows from financing activities:
Net proceeds from sale of common stock 25,000 --
Collection of subscription receivable 250,000 --
Borrowings on note payable -- 191,995
Repayment on notes payable-director -- (50,920)
Other (41,637) --
----------- -----------
Net cash provided by financing activities 233,363 141,075
Effect of exchange rate changes on cash 75,023 252,793
----------- -----------
Net decrease in cash and cash equivalents (19,279) (200,248)
Cash and cash equivalents at beginning of period 31,335 287,289
----------- -----------
Cash and cash equivalents at end of period $ 12,056 87,041
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CorVu Corporation and Subsidiaries
Footnotes to Consolidated Financial Statements
For the Quarters Ended September 30, 1999 and 1998 (Unaudited)
(1) Unaudited Financial Statements
The accompanying unaudited consolidated financial statements of CorVu
Corporation have been prepared by the Company in accordance with
generally accepted accounting principles for interim financial
information, pursuant to the rules and regulations of the Securities
and Exchange Commission. Pursuant to such rules and regulations,
certain financial information and footnote disclosures normally
included in the financial statements have been condensed or omitted.
The results for the periods indicated are unaudited, but reflect all
adjustments (consisting only of normal recurring adjustments) which
management considers necessary for a fair presentation of operating
results.
(2) Liquidity
The accompanying interim consolidated financial statements are prepared
assuming the Company will continue as a going concern. During the year
ended June 30, 1999, the Company incurred an operating loss of
$3,061,506 and used $1,391,656 of cash in operating activities.
Subsequently, for the quarter ended September 30, 1999, the Company
incurred an operating loss of $1,108,096 and used $316,692 of cash in
operating activities. As of September 30, 1999, the Company had an
accumulated deficit of $9,143,690, total stockholders' deficit of
$3,312,652, and negative working capital of $3,467,536. Going forward
the Company must raise additional cash either through raising
additional capital or through profits from operations. During the years
ended June 30, 1999 and June 30, 1998, the Company raised capital of
$216,471 and $293,550, respectively. Subsequent to June 30, 1999, the
Company has raised an additional $2.9 million equity financing.
Management anticipates that the impact of certain subsequent
activities, as well as the actions listed below, will generate
sufficient cash flows to fund the Company's future operations.
1. Continue to increase the Company's revenues from software licenses
and other revenue sources.
2. Increase the level of the current indebtedness.
3. Solicit additional equity investment in the Company.
4. Reduce operating costs, as deemed necessary, in the event the sales
of product licenses and/or additional equity or debt financing do
not generate adequate proceeds.
<PAGE>
(3) Note Payable
In February 1998, the Company entered into a loan agreement in the
amount of $927,014 with a third party lender. During 1999, the Company
borrowed an additional $479,986. The note is secured by the assets of
the Company. The interest rate on the outstanding principal balance is
based on an index defined in the loan agreement plus 3%, with interest
due monthly. On June 30, 1999 and 1998 the interest rates were 8.05%
and 8.30%, respectively. The outstanding principle balance became due
on December 15, 1999. Subsequently, we have repaid $600,000 and
continue in discussions with the lender regarding repayment of the
balance.
(4) Convertible Bridge Loan
On November 15, 1999, CorVu entered into two loan agreements with third
parties totaling $500,000. The outstanding principal was due on March
14, 2000. Interest was charged at a rate of 10% per annum. In addition,
the agreements called for the issuance of warrants to purchase up to
450,000 shares of common stock at an exercise price of $.01 per share.
After the merger of CorVu with and into Minnesota American, Inc., the
outstanding principal and interest was converted into a total of
285.702 shares of common stock of our Company, at a price of $2 per
share. CorVu will record a non-cash expense of approximately $670,000
to reflect the fair value of the warrants issued using the
Black-Scholes pricing model over the period the bridge loan was
outstanding.
(5) Equity Financing
Subsequent to September 30, 1999 and through January 31, 2000, CorVu
raised a total of $2.87 million from the sale of common stock (priced
at $2 per share). In connection with some of the transactions, the
Company also issued warrants to purchase up to 375,000 shares at
exercise prices ranging from $2 to $8 per share.
(6) Agreement and Plan of Reorganization
On January 14, 2000, the Company completed a reverse merger transaction
with Minnesota American, Inc. (MNAC). The merger resulted in
shareholders of the Company and MNAC owning approximately 74 percent
and 26 percent, respectively of the outstanding shares of the combined
entity. The shares of MNAC were quoted on the Over-the-Counter Bulletin
Board (OTCBB) of the National Association of Securities Dealers (NASD).
The combined entity changed its name to CorVu Corporation and continues
CorVu's business operations. The Company issued 345,806 common shares
and paid $47,500 to its business advisor at closing in exchange for
services. In addition, the Company granted its business advisor a
five-year warrant to purchase up to 185,572 common shares at $5.3125
per share.
Total number of shares authorized after the merger is 100,000,000 which
consists of 75,000,000 shares of common stock, 1,000,000 shares of
Series A Convertible Preferred Stock, and 24,000,000 undesignated
shares. As of January 15, 2000, there were 18,271,577 shares of CorVu
common stock outstanding. Adjusted by the conversion ratio of 1.125
used in the merger, common shares outstanding as of September 30, 1999
and June 30, 1999 are 11,915,887 and 11,432,475, respectively.
As of January 31, 2000, options and warrants outstanding are as follows
(adjusted for the conversion ratio of the merger):
Number Range of
Of Shares Exercise Price
Stock options outstanding 3,826,250 $0.13 to $2.67
Stock options exercisable 1,792,818 $0.13 to $2.67
Warrants outstanding 1,674,072 $0.01 to $8.00
Warrants exercisable 1,674,072 $0.01 to $8.00
<PAGE>
CorVu Corporation
PRO FORMA BALANCE SHEET
The following unaudited pro forma combined balance sheets of Minnesota American,
Inc. and CorVu Corporation and Subsidiaries give effect to the merger of CorVu
and Minnesota American, Inc. As a result of the merger, CorVu shareholders hold
approximately 74% of the shares of the Surviving Corporation.
These pro forma combined balance sheets are based upon the historical financial
statements of the respective entities as of the periods specified, giving effect
to the merger transaction as a reverse purchase acquisition, whereby CorVu
acquired Minnesota American, Inc.. As such CorVu's assets have been recorded at
their historical cost with no "step up" in basis. The pro forma financial
statements reflect that prior to the merger, the subsidiaries of Minnesota
American, Inc. (Favorite Memories, Inc. and LockerMate Corporation) have been
discontinued as a going concern and sold, respectively. As a result, the merged
assets of Minnesota American, Inc. were cash and therefore, the historical cost
of such assets was equal to their fair market value. The pro forma adjustments
reflect that immediately following the merger, 18,271,577 shares of common stock
of the Surviving Company were outstanding.
Since Minnesota American, Inc. sold and disposed of, respectively, both of its
operating subsidiaries, operations after the consummation of the merger consist
of CorVu. Regarding pro forma statements of income, we therefore refer to the
statements of income of CorVu, included above.
<TABLE>
<CAPTION>
Pro Forma
Discontinued Pro Forma Other Pro CorVu Corp. Pro Forma
MNAC Historical Operations Equity Sale Forma Historical Pro Forma Combined
9/30/99 Favorite Mem(A) LockerMate(B) Adjustments 9/30/1999 Adjustments CorVu MNAC
ASSETS:
Current Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Cash $ 253,288 (8,890)(1) (250,340) (161,058)(4) 12,056 $ 962,056
1,200,000 (2)
(83,000)(3)
Accts. Receivable 133,366 (2,997)(1) (130,369) 3,823,395 3,823,395
Inventory 442,455 (51,459) (390,996) 0 -
Deferred Income Tax Asset 194,600 (194,600) 0 -
Prepaid Expenses 20,015 (364) (19,651) 171,435 171,435
Total Current Assets 1,043,724 (63,710) 131,044 (161,058) 4,006,886 4,956,886
Other Assets 29,214 (13,927) (15,287) 0 -
Investments 50,000 (50,000)(5) -
Property & Equipment Net 252,081 (2,049) (250,032) 154,884 154,884
---------------------- --------- --------- ---------
Total Assets 1,375,019 (79,686) (134,275) 4,161,770 5,111,770
====================== ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable-Bank $50,000 (50,000)(4) 0 -
Accounts Payable 278,281 ($8,409)(1) (257,894) 1,943,981 $47,500 (7) 2,003,459
Accrued Compensation 1,727,779 1,727,779
Deferred Revenue 1,455,244 1,455,244
Accrued Interest 48,154 48,154
Accrued Expenses/Customer Deposits 29,279 ($3,478)(1) (21,339) 439,073 443,535
Director Advances 445,191 445,191
Total Current Liabilities 357,560 (11,887) (279,233) (50,000) 6,059,422 6,123,362
Long Term Liabilities
Deferred Income Tax Liability 44,100 (44,100) 0 0
Note Payable 1,365,000 1,365,000
Total Liabilities 401,660 (11,887) (323,333) (50,000) 7,424,422 7,488,362
Stockholders Equity
Series A Convertible Preferred Stock;
par value $10; issued and outstanding
1999 56,726 shares 488,942 0 488,942
Common Stock, Par Value $.01 issued
and outstanding 3,809,610 shares 38,095 0 ($38,095) 0
Common Stock, Par Value $.01 issued
and outstanding 10,591,900 105,919 ($105,919) 0
Common Stock, Par Value $.01 issued
and outstanding 15,725,498 (6) $157,255 157,255
Additional Paid in Capital 1,291,909 6,113,741 ($898,627) 7,544,441
$1,037,418(7)
Accumulated Deficit (845,587) ($67,799) 272,058 (9,093,690) $885,386 (10,178,608)
($1,084,918)(7)
(83,000)(3) (161,058)(4,5)
Deferred Compensation (675,000) (675,000)
Foreign Currency Translation Adjustment 286,378 286,378
Total Shareholders Equity 973,359 (67,799) 189,058 (161,058) (3,262,652) (2,376,592)
---------------------- --------- --------- ---------
Total Liabilities & Equity 1,375,019 (79,686) (134,275) 4,161,770 0 5,111,770
====================== ========= ========= =========
</TABLE>
(A) Reflects the adjustments to the balances of Favorite Memories, Inc., a
wholly owned subsidiary of Minnesota American, Inc. ("MNAC"), for
discontinued operations pursuant to the terms of the merger agreement.
(B) Reflects the adjustments to the balances of LockerMate Corporation, a
wholly owned subsidiary of MNAC, for the equity sale of LockerMate and
the associated sales transactions (See Footnote 2 and 3) pursuant to
the terms of the merger agreement.
(1) Assumes payment of all accounts payable and accrued liabilities and
collection of all accounts receivable.
(2) Cash proceeds from LockerMate sale per the Stock Purchase Agreement
dated December 17, 1999 which is included elsewhere in the proxy.
(3) Estimated selling expenses to include 4% Finders Fee ($48,000) on sale
of LockerMate; estimated legal & accounting expenses of $25,000 and
estimated miscellaneous expenses of $10,000.
(4) Assumes payment of $50,000 Note Payable and merger expenses estimated
at approximately $111,058 of legal, accounting fees and miscellaneous
expenses.
(5) To adjust for the exclusion of the investment in flowersngifts.com
which is not to be included as part of the combined company.
(6) Subsequent to September 30, 1999 and through January 14, 2000, CorVu
has issued an additional 935,000 shares at $2.00 per share and 345,806
shares to Jon Adams Financial by CorVu for services rendered (See Note
7). Immediately following the merger, the total amount of issued and
outstanding shares of common stock was 18,271,577.
(7) Reflects the issuance of 345,806 shares of common stock valued at $3
per share to Jon Adams Financial immediately preceding the merger plus
5% of the gross proceeds resulting from the merger ($47,500).
<PAGE>
MINNESOTA AMERICAN, INC.
CONSOLIDATED FINANCIAL REPORT
SEPTEMBER 30, 1999 AND 1998
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Minnesota American, Inc.
Minnetonka, Minnesota
We have audited the accompanying consolidated balance sheets of
Minnesota American, Inc. and subsidiaries as of September 30, 1999 and 1998, and
the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Minnesota American, Inc. and subsidiaries at September 30, 1999 and 1998, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
VIRCHOW, KRAUSE & COMPANY, LLP
Bloomington, Minnesota
November 17, 1999
<PAGE>
MINNESOTA AMERICAN, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS (Note 2) 1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 253,288 $ 371,382
Trade accounts receivable, less allowance for doubtful
accounts 1999 $20,123; 1998 $15,000 and allowance
for sales returns 1999 $590,598; 1998 $370,447 (Note 7) 133,366 80,732
Inventories 442,455 278,052
Deferred income tax assets (Note 5) 194,600 149,900
Prepaid expenses and other 20,016 29,599
----------- -----------
Total current assets 1,043,725 909,665
OTHER ASSETS 29,214 15,365
INVESTMENTS 50,000 --
EQUIPMENT (Notes 6 and 8):
Furniture and equipment 108,113 97,063
Dies and molds 532,277 596,835
----------- -----------
640,390 693,898
Less accumulated depreciation 388,310 433,828
----------- -----------
252,080 260,070
----------- -----------
$ 1,375,019 $ 1,185,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturity of capital lease obligation $ -- $ 2,859
Note payable, bank (Note 2) 50,000 --
Accounts payable 278,280 207,819
Accrued liabilities 24,817 23,892
Customer deposits 4,462 4,462
----------- -----------
Total current liabilities 357,559 239,032
DEFERRED INCOME TAX LIABILITY (Note 5) 44,100 36,900
COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENT
(Notes 3, 8 and 12)
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, par value $10 per share, authorized
1,000,000 shares; issued and outstanding
1999 56,726; 1998 69,826 shares (Note 3) 488,943 601,857
Common stock, par value $.01 per share; authorized 10,000,000
shares; issued and outstanding 1999 3,809,610;
1998 3,532,810 shares (Notes 3 and 4) 38,096 35,328
Additional paid-in capital 1,291,908 1,146,712
Accumulated deficit (845,587) (874,729)
----------- -----------
973,360 909,168
----------- -----------
$ 1,375,019 $ 1,185,100
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINNESOTA AMERICAN, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net sales (Note 7) $ 2,628,837 $ 2,888,564
Cost of goods sold 1,371,392 1,586,299
----------- -----------
Gross profit 1,257,445 1,302,265
Selling, general and administrative expenses 1,196,082 1,006,165
Impairment loss (Note 6) -- 60,000
----------- -----------
Operating income 61,363 236,100
Other income (expense):
Interest income 3,616 1,327
Interest expense (20,466) (30,207)
Gain on disposal of assets 8,942 --
----------- -----------
Other expense (12,785) --
----------- -----------
(20,693) (28,880)
----------- -----------
Income before income taxes and extraordinary item 40,670 207,220
Federal and state income tax benefits (Note 5) 33,858 94,530
----------- -----------
Income before extraordinary item 74,528 301,750
Extraordinary item (Note 10) -- 86,816
----------- -----------
Net income $ 74,528 $ 388,566
=========== ===========
Basic earnings per share (Note 11):
Income before extraordinary item $ .01 $ .07
=========== ===========
Net income $ .01 $ .10
=========== ===========
Diluted earnings per share (Note 11):
Income before extraordinary item $ .01 $ .07
=========== ===========
Net income $ .01 $ .10
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINNESOTA AMERICAN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Series A Convertible Additional
Preferred Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
---------- ---------- --------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 69,826 $ 601,857 3,532,810 $ 35,328 $1,146,712 $(1,217,908) $ 565,989
Cash dividend paid on
preferred stock - - - - - (45,387) (45,387)
Net income - - - - - 388,566 388,566
---------- ---------- --------- --------- ----------- ----------- ----------
Balance, September 30, 1998 69,826 601,857 3,532,810 35,328 1,146,712 (874,729) 909,168
Cash dividend paid on
preferred stock - - - - - (45,386) (45,386)
Exercise of stock options - - 172,000 1,720 33,330 - 35,050
Preferred stock conversions (13,100) (112,914) 104,800 1,048 111,866 - -
Net income - - - - - 74,528 74,528
---------- ---------- --------- --------- ----------- ----------- ----------
Balance, September 30, 1999 56,726 $ 488,943 3,809,610 $ 38,096 $1,291,908 $ (845,587) $ 973,360
========== ========== ========= ========= ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINNESOTA AMERICAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 74,528 $ 388,566
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 66,997 56,513
Provision for allowance for doubtful accounts and returns 225,274 65,447
Loss on impairment of assets -- 60,000
Gain on disposal of equipment (8,942) --
Deferred income taxes (37,500) (67,500)
Settlement of liabilities -- (115,755)
(Increase) decrease in assets:
Trade accounts receivable (277,908) 413,546
Inventories (164,403) (40,390)
Prepaid expenses and other 9,583 (18,057)
Other assets (13,849) 7,233
Increase (decrease) in liabilities:
Accounts payable 70,461 56,169
Accrued liabilities 925 (42,350)
--------- ---------
Net cash provided by (used in) operating activities (54,834) 763,422
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (65,065) (69,007)
Proceeds from sale of equipment 15,000 --
Purchase of investment securities (50,000) --
--------- ---------
Net cash used in investing activities (100,065) (69,007)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on revolving promissory note -- (161,871)
Payments on note payable, bank -- (150,000)
Borrowings on note payable, bank 50,000 --
Principal payments on capital lease (2,859) (5,459)
Dividends paid (45,386) (45,387)
Exercise of stock options 35,050 --
Payments on notes payable, stockholders -- (1,000)
Payments on note payable, other -- (1,600)
--------- ---------
Net cash provided by (used in) financing activities 36,805 (365,317)
Increase (decrease) in cash and cash equivalents (118,094) 329,098
Cash and cash equivalents:
Beginning 371,382 42,284
--------- ---------
Ending $ 253,288 $ 371,382
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MINNESOTA AMERICAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended September 30, 1999 and 1998
Note 1. Nature of Business and Significant Accounting Policies:
Nature of business:
The Company currently has two wholly-owned subsidiaries,
LockerMate Corporation ("LockerMate") and Favorite Memories, Inc.
LockerMate designs and markets specialty consumer locker shelving
and accessory organizer products. Promotion of products is
accomplished through trade shows, cooperative advertising, direct
mail and cross-marketing. Products are sold through manufacturers
representatives servicing most of the United States. LockerMate's
products are primarily sold by large discount retailers, discount
drug retailers, schools, specialty retailers, catalog companies
and grocery chains. LockerMate uses turn-key out-sourcing for
production, warehousing and shipping under an agreement expiring
on December 31, 1999, with automatic renewal on a calendar year
basis. Historically, most of the Company's sales occur between May
and August.
Favorite Memories, which was in the development stage, markets
photograph and memorabilia albums. Products are primarily sold by
large discount retailers throughout the United States. Subsequent
to year-end, the Company resolved to cease operations of the
subsidiary although no formal plan of disposal has been
determined. The Company and the prior owner of the trademark are
in discussions regarding the conveyance of certain assets of
Favorite Memories to the prior owner.
In February 1995, certain assets of Access Mobility Systems, Inc.
(a former subsidiary) including patents, customer lists and
product names were sold and operations ceased. The sale of the
subsidiary provides for receipts of royalty fees over a five-year
period up to a maximum of $400,000. No royalties were received
during the years ended September 30, 1999 and 1998. Remaining
assets are in the process of being collected/liquidated and
payables are being paid on a pro rata basis as funds are received
or settled for cash amounts when possible.
Principles of consolidation:
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany accounts and
transactions have been eliminated.
A summary of the Company's significant accounting policies
follows:
Cash and cash equivalents:
Cash includes checking deposits, savings accounts, money market
funds and interest-bearing investments with original maturities of
three months or less at the time of purchase. Cash on deposit in
excess of FDIC and similar insurance coverages are subject to the
usual banking risks of funds in excess of those limits.
Investments:
Investments market value in private company stocks are not readily
determinable and are therefore carried at estimated fair market
value as determined by management. The Company has recorded no
unrealized gains (losses) since fair market value estimates cost.
<PAGE>
Note 1. Nature of Business and Significant Accounting Policies (Continued):
Inventories:
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Included in inventories are the deferred cost
of estimated sales returns which were approximately $163,000 and
$87,000 at September 30, 1999 and 1998, respectively.
Equipment:
Equipment is stated at cost. Betterments and renewals that extend
the life of an asset are capitalized and depreciated. Depreciation
for financial reporting purposes for furniture and equipment is
provided principally on the straight-line method based upon an
estimated five year useful life. Dies and molds used in inventory
production are depreciated using the units of production method.
Depreciation and amortization expense on equipment was $66,997 and
$56,513 during the years ended September 30, 1999 and 1998,
respectively.
Income taxes:
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statement carrying amounts of assets and liabilities and
their respective tax bases.
Stock based compensation:
The Company accounts for its stock compensation plans in
accordance with Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." The disclosures
required by SFAS No. 123, "Accounting for Stock-Based
Compensation," are included in Notes 3 and 4.
Per share information:
Beginning with the year ended September 30, 1998, the Company was
required to adopt Financial Accounting Standards Board No. 128,
"Earnings Per share" and retroactively adjust previously reported
EPS amounts, if necessary, to the revised calculations. The new
standard requires the presentation of basic earnings per share and
diluted earnings per share, instead of primary and fully diluted
earnings per share as previously required.
Recognition of revenue:
The Company records sales when products are shipped. Some product
sales are made with the right of return on unsold units. Estimated
reserves for future returns are established by management based on
customer sales and historical experience. Deferred costs, which
include the estimated value of projected product returns, are
included in inventories.
Advertising:
The Company expenses advertising costs as incurred. The Company
participates in a cooperative advertising program with its
customers. These costs are estimated by the Company at the time of
the sale of product to its customer. Total advertising expense for
the periods ended September 30, 1999 and 1998 was approximately
$123,000 and $86,000, respectively.
<PAGE>
Note 1. Nature of Business and Significant Accounting Policies (Continued):
Credit risk:
The Company grants credit to customers, most of which are
retailers and schools located throughout the United States. The
Company reviews customers' credit history before extending credit
and establishes an allowance for doubtful accounts based on
factors surrounding the credit risk of specific customers,
historical trends and other information. At September 30, 1999 and
1998, the Company had significant amounts recorded as receivables
from its major customers (see Note 7).
Estimates and assumptions:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Significant estimates in
these financial statements include the lives used for depreciation
of equipment, molds and dies, calculation of reserves for returns,
inventory valuations, valuation of deferred tax assets and
collectability of receivables. Actual results could differ from
those estimates.
Note 2. Notes Payable - Bank:
In March 1999, the Company and a stockholder jointly obtained a
bank note in the amount of $50,000. The note payable matures
September 2000 and interest is payable monthly at the base rate
(8.25% at September 30, 1999) plus .05%.
In March 1999, the Company obtained bank financing for LockerMate
Corporation in the form of a $1,300,000 revolving line of credit
and for Favorite Memories, Inc. in the form of a $400,000
revolving line of credit, both of which expire in March 2000 and
are due upon demand. No balance is outstanding at September 30,
1999. Interest accrues at the bank's base rate (8.25% at September
30, 1999) plus 2%. The line of credit is secured by substantially
all assets and is personally guaranteed. Line of credit financing
for an amount up to $1,300,000 with similar terms for LockerMate
Corporation expired in March 1999.
Note 3. Stockholders' Equity:
Stock warrants:
As of September 30, 1999, there were warrants outstanding to
purchase 365,000 shares of the Company's common stock at prices
ranging from $.30 to $.875 per share, expiring at various dates
from March 2001 to February 2004. No warrants were outstanding as
of September 30, 1998. During the years ended September 30, 1999
and 1998, no shares were issued through the exercise of warrants.
<PAGE>
Note 3. Stockholders' Equity (Continued):
Stock options:
Directors, officers and employees have unexpired options to
purchase common stock of the Company. At September 30, 1999, stock
options to purchase 377,000 shares of common stock at prices
ranging from $.13 to $.92 per share were outstanding. Activity for
the plan is as follows:
Options Price
Outstanding Per Share
Balance, September 30, 1997 367,500 $ .13 - .625
Granted 64,000 $ .20
Cancelled (32,500) $ .50
--------
Balance, September 30, 1998 399,000 $ .13 - .625
Granted 204,000 $ .30 - .92
Exercised (172,000) $ .13 - .50
Cancelled (54,000) $ .13 - .625
--------
Balance, September 30, 1999 377,000
========
Exercisable, September 30, 1999 232,000 $.13 - .92
========
The options will expire at various dates from November 1999 to
February 2008.
Series A Convertible Preferred Stock:
In April 1993, the Company issued 69,826 shares of $10 par value
Series A Convertible Preferred Stock in a private placement. The
Series A Convertible Preferred Stock bears a 6.5% cumulative
dividend rate payable on January 1 and July 1 of each year. Each
share of Series A Convertible Preferred Stock is convertible into
eight shares of common stock. The holder of each share of Series A
Convertible Preferred Stock is entitled to eight votes, subject to
adjustment. Upon an involuntary or voluntary liquidation or
dissolution of the Company at any time, the holders of the Series
A Convertible Preferred Stock are entitled to receive a
liquidation preference of $10 per share. The preferred stock may
be called for redemption in whole or in part by the Company for a
redemption price of $11.70.
During the period ending September 30, 1999, 13,100 shares of $10
par value Series A Convertible Preferred Stock were converted.
Note 4. Stock Based Compensation:
In 1993, the Company established a stock incentive plan for the
benefit of its employees. The Company also has granted options to
its directors that are not part of the incentive plan. The Company
applies APB Opinion 25 and related interpretations in accounting
for its plans. No compensation cost has been recognized in these
financial statements as the exercise prices were higher than the
market prices at the grant dates. The Company estimates there
would have been only a negligible effect on net income and
earnings per share had the options values been determined based on
the fair value method prescribed by SFAS No. 123.
Note 5. Income Taxes:
The provision for income taxes for the years ended September 30,
1999 and 1998 consists of the following:
1999 1998
--------- ---------
Current tax expense (benefit) $ 3,642 $ 500
Deferred tax expense (benefit) (37,500) (95,030)
---------- ---------
$ (33,858) $ (94,530)
========= =========
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax
income for the years ended September 30, 1999 and 1998 due to the
following:
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
Computed "expected" federal tax expense $ 13,000 $ 64,000
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal tax benefit 2,700 13,600
Nondeductible expenses 900 800
Change in valuation allowance and benefit of
net operating loss carryforwards, net (50,458) (172,930)
--------- ----------
$(33,858) $ (94,530)
======== =========
</TABLE>
Components of deferred tax assets and liabilities as of September
30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of financial
reporting depreciation $ 44,100 $ 36,900
Deferred tax assets:
Accounting reserves 111,900 96,400
Net operating loss carryforward 91,500 124,500
Other 13,000 11,500
-------- --------
216,400 232,400
Valuation allowance (21,800) (82,500)
-------- --------
Net deferred tax assets 194,600 149,900
-------- --------
Net deferred tax assets (liabilities) $150,500 $113,000
======== ========
</TABLE>
At September 30, 1999, net operating loss carryforwards of
approximately $199,000 and $223,000 are available for future
reductions of federal and state taxable income, respectively.
These carryforwards are subject to various limitations and expire
at various dates through the year ended September 30, 2019. The
Company has assessed its past earnings history and trends and
expiration dates of the carryforwards and periodically revises its
valuation allowance with regards to deferred tax assets. The
Company will continue to review this valuation allowance and make
adjustments as appropriate. In addition, federal tax rules impose
limitations on the utilization of loss carryforwards following
certain changes in ownership. If such changes were to occur, the
limitation could reduce the amount of benefits that would be
available to offset future taxable income each year, starting with
the year of ownership change.
<PAGE>
Note 6. Loss on Impairment:
During 1998, the Company recorded impairment losses related to
molds not currently being utilized in operations. The losses were
recorded in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." This statement requires losses to be recognized when
the sum of the expected future cash flows is less than the
carrying value of the asset. The expected future cash flows was
based on the estimated sales prices of the molds as determined by
the Company's management.
Note 7. Significant Customers:
Three customers accounted for 65% of net sales for the year ended
September 30, 1999, with approximately $597,000 in accounts
receivable at September 30, 1999.
Three customers accounted for 70% of net sales for the year ended
September 30, 1998, with approximately $348,000 in accounts
receivable at September 30, 1998.
Note 8. Commitments and Contingencies:
The Company leases office space under an agreement classified as
an operating lease. Under the terms of this lease, the Company is
required to pay a base rent plus a pro rata share of operating
costs each month. The monthly base rent is $2,358 beginning July
1997 and continues until the lease's termination in December 2001.
Total rent expense under this agreement for the years ended
September 30, 1999 and 1998 was $37,672 and $35,159, respectively.
The Company also rents warehouse space under an operating lease
arrangement. This agreement requires monthly payments of $1,750
during the non-shipping season. The agreement expires January 2000
and renews automatically for successive one year periods. Rent
expense for warehouse space was $12,321 and $13,077 during the
years ended September 30, 1999 and 1998, respectively.
In April 1994, the Company recorded a $20,446 five year 16.19%
capital lease for the purchase of computer equipment, of which
$2,859 was outstanding at September 30, 1998 and was paid off
during the period ending September 30, 1999.
The Company has an employment agreement with one of its
executives. The Company is required to compensate the individual
in accordance with the terms of the agreement. The agreement
expires on January 2000 and renews automatically for successive
one-year periods unless either party gives the other party 30 days
written notice prior to the expiration of the agreement of their
intent not to renew the agreement.
The Company has a financial consulting agreement with independent
consultants that in consideration of certain performed services
the Company issued 300,000 stock purchase warrants at an exercise
price of $.30 per share. The warrants have a term of five years
and contain a cashless exercise provision. In addition, if the
LockerMate and Favorite Memories subsidiaries are sold to a third
party, the Company is required to pay the consultants a cash fee
equal to 4% of the sale price.
<PAGE>
Note 9. Supplemental Disclosure of Cash Flow Information:
1999 1998
------- -------
Cash paid during the year for:
Interest $20,466 $34,344
Income taxes 3,642 1,859
Note 10. Extraordinary Item:
During the period ending September 30, 1998, the Company was in
the process of settling liabilities incurred by its dissolved
subsidiary, Access Mobility Systems, Inc. The Company recorded any
income as a result of these settlements at the time of the
settlement and payment. The extraordinary item of $86,816
represents a gain of $115,755, net of the related income tax
effect of $28,939 for the period ended September 30, 1998.
Note 11. Earnings Per Share:
Basic earnings per share are computed by dividing earnings
available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per
share reflect per share amounts that would have resulted if
dilutive potential common stock had been converted to common
stock. The following reconciles amounts reported in the financial
statements:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------- ---------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Income before
extraordinary item $ 74,528 $ 301,750
Less preferred stock
dividends 45,386 45,387
----------- -----------
Income available to
common stockholders -
basic earnings per share 29,142 3,603,828 $ .01 256,363 3,532,810 $ .07
======= =======
Effect of dilutive securities:
Options and warrants - 406,528 - -
Preferred stock
conversion 45,386 453,808 45,387 558,608
----------- ----------- ----------- -----------
Income available to
common stockholders -
diluted earnings per
share $ 74,528 4,464,164 $ .01 $ 301,750 4,091,418 $ .07
=========== =========== ======= =========== =========== =======
</TABLE>
Options and warrants in 1998 were not considered in the above
calculations because their exercise price was higher than the
average market price of common stock during the periods.
<PAGE>
Note 12. Subsequent Event:
On November 17, 1999, the Company entered into a plan of
reorganization and agreement with another company to merge such
entity into Minnesota American, Inc. Each share of common stock
issued and outstanding in the merging entity shall be converted to
1.125 shares of common stock of Minnesota American, Inc. Each
share of common and preferred stock issued and outstanding in
Minnesota American, Inc. will remain unchanged by the merger. Each
option and warrant to purchase shares of the merging entity will
also be assumed by Minnesota American, Inc. at the conversion
rate. The agreement calls for Minnesota American, Inc. to sell,
transfer or otherwise dispose of all or substantially all of the
assets or capital stock of its wholly-owned subsidiaries,
LockerMate Corporation and Favorite Memories, Inc. After such sale
transactions take place, Minnesota American, Inc. is required to
meet various minimum consideration and net worth requirements to
consummate the merger.
<PAGE>
PART III: EXHIBITS
Exhibit
Number Description
2. Agreement and Plan of Reorganization between CorVu Corporation and
Minnsesota American, Inc., dated as of November 17, 1999.
Exhibits, Schedules and Attachments:
Exhibit A: Plan of Merger*
Exhibit B: Amended and Restated Articles of Incorporation of Minnesota
American, Inc.**
Exhibit C: Restated Bylaws of CorVu Corporation***
Exhibit D: Registration Rights Agreement
CorVu Corporation Disclosure Schedule and Attachments
Minnesota American, Inc. Disclosure Schedule and Attachments
3.1 Amended and Restated Articles of Incorporation of Minnesota American,
Inc., as amended to date.
3.2 Amended and Restated Bylaws of CorVu Corporation, as amended to date.
4. Rights of Shareholders of Series A Convertible Preferred Stock: see
Article 3 of the Amended and Restated Aricles of Incorporation of
Minnesota American, Inc. (Exhibit 3.1).
10.1 Subscription Agreement and Letter of Investment Intent, dated April 27,
1999, from Ismail Kurdi, accepted by CorVu Corporation, to Purchase
150,000 Shares of Common Stock and Warrants to Purchase 150,000 Shares
of Common Stock of CorVu Corporation, including Warrant to Ismail Kurdi
to Purchase 150,000 Shares of Common Stock of CorVu Corporation.
10.2 Subscription Agreement and Letter of Investment Intent, dated June 30,
1999, from Ismail Kurdi, accepted by CorVu Corporation, to Purchase
125,000 Shares of Common Stock and Warrants to Purchase 125,000 Shares
of Common Stock of CorVu Corporation, including Warrant to Ismail Kurdi
to Purchase 125,000 Shares of Common Stock of CorVu Corporation.
10.3 Subscription Agreement and Letter of Investment Intent, dated June 30,
1999, from Ismail Kurdi to Subscribe for 395,000 Shares of Common Stock
of CorVu Corporation in full satisfaction and payment of cash advances.
<PAGE>
10.4**** Employment Agreement between CorVu Corporation and Justin MacIntosh,
dated July 1, 1999.
10.5**** Employment Agreement between CorVu and David C. Carlson, dated July 15,
1996, amended July 20, 1998.
10.6**** Employment Agreement between CorVu and Alan M. Missroon, dated January
2, 1997.
10.7 Sublease Agreement between Arcadia Financial Ltd. and CorVu North
America for premises at 3400 West 66th Street, Edina, Minnesota; and
Consent to Subletting of Premises, given by Landlord United Properties
Investment Company.
10.8 Commercial Lease between Viestall Pty. and CorVu Australasia Pty. Ltd.,
dated April 15, 1999, for the premises at Level 4, 1 James Place,
North Sydney.
10.9 Underlease between Michael John Haynes, Raymond John Evans, Terrance
Guy Hawker and CorVu PLC and CorVu Corporation for premises at Craven
House, 40 Uxbridge Road, London W5.
10.10 Loan Agreement between CorVu Australasia Pty Ltd, CorVu North America,
Inc., CorVu PlC and Integral Business Finance Pty Limited.
10.11 Specific and Floating Charge / Deed of Charge between CorVu Australasia
Pty Ltd. and Integral Business Finance Pty Limited.
10.12 Letter Agreement between CorVu Corporation and Jon Adams Financial Co.,
L.L.P., dated 12 May, 1999.
10.13 Bridge Loan Agreement dated as of November 15, 1999 between CorVu
Corporation and Gildea Management Company - The Network Funds,
including Subordinated Unsecured Convertible Promissory Note for
$250,000, and Warrant for up to 250,000 Shares of Common Stock of CorVu
Corporation, both as of November 15, 1999.
10.14 Bridge Loan Agreement dated as of November 15, 1999 between CorVu
Corporation and Calton, Inc., including Subordinated Unsecured
Convertible Promissory Note for $250,000, and Warrant for up to 250,000
Shares of Common Stock of CorVu Corporation, both as of November 15,
1999.
10.15**** CorVu Corporation 1996 Stock Option Plan, as amended through November
30, 1999 and approved by the shareholders at their meeting on January
13, 2000
22. List of the Subsidiaries of the Registrant
* Item has been omitted, but will be provided to the Commission upon request.
** See 3.1.
*** See 3.2.
**** Management contract or compensatory arrangement.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 2, 2000
By /s/ David C. Carlson
(Name and Title)
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
CORVU CORPORATION
AND
MINNESOTA AMERICAN, INC.
November 17, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. THE MERGER; CONVERSION OF SHARES....................................1
1.1 The Merger...................................................1
1.2 Effective Time...............................................1
1.3 Conversion of Shares.........................................2
1.4 CorVu Dissenters'Rights......................................2
1.5 MNAC Dissenters'Rights.......................................3
1.6 Exchange of CorVu Common Stock...............................3
1.7 Stock Options and Warrants...................................5
1.8 Capitalization Changes.......................................6
1.9 Articles of Incorporation of the Surviving Corporation.......6
1.10 Bylaws of the Surviving Corporation..........................7
1.11 Directors and Officers of the Surviving Corporation..........7
ARTICLE 2. CLOSING.............................................................7
2.1 Time and Place...............................................7
2.2 Filings at the Closing.......................................7
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MNAC..............................7
3.1 Organization.................................................8
3.2 Authorization................................................8
3.3 Capitalization...............................................9
3.4 Financial Statements.........................................9
3.5 Absence of Undisclosed Liabilities...........................9
3.6 Consents and Approvals......................................10
3.7 Compliance with Laws........................................10
3.8 Litigation..................................................11
3.9 Absence of Material Adverse Changes.........................11
3.10 Officers, Directors and Employees...........................11
3.11 Taxes.......................................................11
3.12 Contracts...................................................12
3.13 Intellectual Property Rights................................13
3.14 Year 2000 Compliance........................................13
3.15 Benefit Plans...............................................14
3.16 Minute Books................................................15
3.17 No Finders..................................................15
3.18 Proxy Statement.............................................15
3.19 State Takeover Laws.........................................15
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CORVU............................16
4.1 Organization................................................16
4.2 Authorization...............................................16
4.3 Capitalization..............................................17
4.4 Financial Statements........................................17
4.5 Absence of Undisclosed Liabilities..........................18
4.6 Consents and Approvals......................................18
4.7 Compliance with Laws........................................19
4.8 Litigation..................................................19
4.9 Absence of Material Adverse Changes.........................19
4.10 Officers, Directors and Employees...........................19
4.11 Taxes.......................................................20
4.12 Contracts...................................................20
4.13 Intellectual Property Rights................................21
4.14 Year 2000 Compliance........................................21
4.15 Benefit Plans...............................................21
4.16 Minute Books................................................23
4.17 No Finders..................................................23
ARTICLE 5. COVENANTS..........................................................23
5.1 Conduct of Business of MNAC.................................23
5.2 Conduct of Business of CorVu................................24
5.3 No Solicitation.............................................24
5.4 Access and Information......................................26
5.5 Approval of MNAC and CorVu Shareholders.....................27
5.6 Consents....................................................28
5.7 Further Actions.............................................28
5.8 Regulatory Approvals........................................29
5.9 Certain Notifications.......................................29
5.10 Securities Laws.............................................29
5.11 Disposition of MNAC Subsidiaries............................29
5.12 Resignations and Elections of Directors.....................29
5.13 Registration Rights Agreement..............................29
5.14 Plan of Reorganization......................................30
5.15 Directors and Officer Liability.............................30
ARTICLE 6. CLOSING CONDITIONS.................................................30
6.1 Conditions to Obligations of CorVu and MNAC.................30
6.2 Conditions to Obligations of CorVu..........................31
6.3 Conditions to Obligations of MNAC...........................32
ARTICLE 7. TERMINATION AND ABANDONMENT........................................33
7.1 Termination.................................................33
7.2 Effect of Termination.......................................36
ARTICLE 8. MISCELLANEOUS......................................................37
8.1 Amendment and Modification..................................37
8.2 Waiver of Compliance; Consents..............................37
8.3 Investigation; Survival of Representations and Warranties...37
8.4 Notices.....................................................37
8.5 Assignment..................................................38
8.6 Governing Law...............................................38
8.7 Counterparts................................................39
8.8 Knowledge...................................................39
8.9 Interpretation..............................................39
8.10 Publicity...................................................39
8.11 Entire Agreement............................................39
8.12 Severability................................................39
8.13 Specific Performance........................................39
8.14 Expenses....................................................40
EXHIBITS:
Exhibit A:........Plan of Merger
Exhibit B:........Form of Articles of Incorporation
Exhibit C:........Form of Bylaws
Exhibit D:........Form of Registration Rights Agreement
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is dated
as of November 17, 1999, by and between CorVu Corporation, a Minnesota
corporation ("CorVu") and Minnesota American, Inc., a Minnesota corporation (the
"MNAC").
WHEREAS, the Boards of Directors of CorVu and MNAC have approved the
merger of CorVu with and into MNAC (the "Merger") upon the terms and subject to
the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants, and agreements contained herein,
the parties hereto agree as follows:
ARTICLE 1.
THE MERGER; CONVERSION OF SHARES
1.1......The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2 hereof), CorVu shall
be merged with and into MNAC in accordance with the provisions of the Minnesota
Business Corporation Act (the "MBCA"), whereupon the separate corporate
existence of CorVu shall cease, and MNAC shall continue as the surviving
corporation (the "Surviving Corporation"). From and after the Effective Time,
the Surviving Corporation shall possess all the property, rights, privileges,
immunities, powers, and franchises and be subject to all the debts, liabilities,
obligations, restrictions, disabilities, and duties of CorVu and MNAC, all as
more fully described in the MBCA.
1.2......Effective Time. As soon as practicable after each of the
conditions set forth in Article 6 has been satisfied or, to the extent permitted
hereunder, waived on the Closing Date (as defined in Section 2.1), MNAC and
CorVu will file, or cause to be filed, with the Secretary of State of the State
of Minnesota, articles of merger for the Merger, which articles of merger shall
include the Plan of Merger attached hereto as Exhibit A and be in the form
required by and executed in accordance with the applicable provisions of the
MBCA. The Merger shall become effective at the time such filing is made or, if
agreed to by CorVu and MNAC, such later time or date set forth in the Articles
of Merger (the "Effective Time").
1.3......Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of CorVu or MNAC or any holder of any
share of capital stock of CorVu or MNAC:
(a) Each share of common stock of CorVu, $.01 par value per
share ("CorVu Common Stock"), issued and outstanding immediately prior
thereto (except for shares as to which the holders thereof have
asserted dissenters' rights pursuant to Sections 302A.471 and 302A.473
of the MBCA and pursuant to Section 1.4 below) shall be converted into,
subject to Section 1.6(f), the right to receive 1.125 (the "Conversion
Ratio") shares of common stock of MNAC, par value $.01 per share (the
"MNAC Common Stock").
(b) Each share of MNAC Common Stock and each share of MNAC
Preferred Stock issued and outstanding immediately prior to the
Effective Time shall (except for shares as to which the holders thereof
have asserted dissenters' rights pursuant to Sections 302A.471 and
302A.473 of the MBCA and pursuant to Section 1.5 below) remain issued
and outstanding and unaffected by the Merger.
1.4......CorVu Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of CorVu Common Stock held by a holder who has
properly asserted dissenters' rights pursuant to Sections 302A.471 and
302A.473 of the MBCA with respect to such shares and who, as of the
Effective Time, has not effectively withdrawn or lost such rights shall
not be converted into or represent a right to receive shares of MNAC
Common Stock pursuant to Section 1.3(a), but the holder thereof shall
only be entitled to such rights as are granted by the MBCA.
(b) Notwithstanding the provisions of subsection (a) of this
Section, if any holder of CorVu Common Stock who asserts dissenters'
rights with respect to such CorVu Common Stock under the MBCA
effectively withdraws or loses (through failure to perfect or
otherwise) such dissenters' rights then, as of the later of the
Effective Time or the occurrence of such event, such holder's CorVu
Common Stock shall automatically be converted into and represent only
the right to receive the shares of MNAC Common Stock as provided in
Section 1.3(a), without interest thereon, upon surrender of the
certificate or certificates representing such CorVu Common Stock.
(c) CorVu shall give MNAC (i) prompt notice of any notice of
intent to assert dissenters' rights with respect to any CorVu Common
Stock, withdrawals of such notices, and any other instruments served
pursuant to the MBCA and received by CorVu and (ii) the opportunity to
participate in all negotiations and proceedings with respect to
assertion of dissenters' rights with respect to CorVu Common Stock
under the MBCA. CorVu shall not, except with the prior written consent
of MNAC, voluntarily make any payment with respect to any assertion of
dissenters' rights with respect to CorVu Common Stock or offer to
settle or settle any such demands.
1.5 MNAC Dissenters' Rights
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of MNAC Common Stock or MNAC Preferred Stock held
by a holder who has properly asserted dissenters' rights pursuant to
Sections 302A.471 and 302A.473 of the MBCA with respect to such shares
and not otherwise withdrawn or lost such rights with respect thereto
shall not represent shares of Common Stock or Preferred Stock of the
Surviving Corporation, but the holder thereof shall only be entitled to
such rights as are granted by the MBCA.
(b) MNAC shall give CorVu (i) prompt notice of any notice of
intent to assert dissenters' rights with respect to any MNAC Common
Stock, withdrawals of such notices, and any other instruments served
pursuant to the MBCA and received by MNAC and (ii) the opportunity to
participate in all negotiations and proceedings with respect to
assertion of dissenters' rights with respect to MNAC Common Stock under
the MBCA. MNAC shall not, except with the prior written consent of
CorVu, voluntarily make any payment with respect to any assertion of
dissenters' rights with respect to MNAC Common Stock or offer to settle
or settle any such demands.
1.6 Exchange of CorVu Common Stock.
(a) At or prior to the Effective Time, MNAC shall cause MNAC's
stock transfer agent to act as exchange agent (the "Exchange Agent")
hereunder. As promptly as practicable after the Effective Time, with
respect to the shares of MNAC Common Stock into which shares of CorVu
Common Stock have been converted pursuant to Section 1.3(a), MNAC shall
deliver written instructions to the transfer agent instructing such
transfer agent to issue such shares of MNAC Common Stock pursuant to
the provisions of this Section 1.6. As promptly as practicable after
the Effective Time, MNAC shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of CorVu
Common Stock ("CorVu Certificates"), who has not previously delivered
such CorVu Certificates to MNAC at the Closing, a form letter of
transmittal and instructions for such holder's use in effecting the
surrender of the CorVu Certificates in exchange for certificates
representing shares of MNAC Common Stock and cash in lieu of any
fractional shares.
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall distribute to holders of shares of CorVu Common
Stock, upon surrender to the Exchange Agent of one or more CorVu
Certificates for cancellation, together with a duly executed letter of
transmittal, (i) one or more certificates representing the number of
whole shares of MNAC Common Stock into which the shares represented by
the CorVu Certificate(s) shall have been converted pursuant to Section
1.3(a), (ii) a bank check in the amount of cash into which the shares
represented by the CorVu Certificate(s) shall have been converted
pursuant to Section 1.6(f) (relating to fractional shares), and (iii)
any dividends or other distributions to which such holder is entitled
pursuant to Section 1.6(c), and the CorVu Certificate(s) so surrendered
shall be canceled. In the event of a transfer of ownership of CorVu
Common Stock that is not registered in the transfer records of CorVu,
it shall be a condition to the issuance of shares of MNAC Common Stock
that the CorVu Certificate(s) so surrendered shall be properly endorsed
or be otherwise in proper form for transfer and that such transferee
shall (i) pay to the Exchange Agent any transfer or other taxes
required or (ii) establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(c) Holders of CorVu Common Stock will be entitled to any
dividends or other distributions pertaining to the MNAC Common Stock
received in exchange therefor that become payable to persons who are
holders of record of MNAC Common Stock as of a record date that follows
the Effective Time, but only after they have surrendered their CorVu
Certificates for exchange. MNAC shall deposit with the Exchange Agent
any such dividend or other distributions, and subject to the effect, if
any, of applicable law, the Exchange Agent shall receive, hold, and
remit any such dividends or other distributions to each such record
holder entitled thereto, without interest, at the time that such CorVu
Certificates are surrendered to the Exchange Agent for exchange.
(d) All certificates evidencing shares of MNAC Common Stock
that are issued upon the surrender for exchange of CorVu Certificates
in accordance with the terms hereof, together with any cash paid for
fractional shares pursuant to Section 1.6(f) hereof, shall be deemed to
have been issued in full satisfaction of all rights pertaining to the
shares of CorVu Common Stock represented by the surrendered CorVu
Certificates. All certificates evidencing shares of MNAC Common Stock
that are issued in accordance with the terms hereof shall bear the
following legend:
"The securities represented by this certificate have not been
registered under the federal Securities Act of 1933, as
amended, or applicable state securities laws and may not be
sold, transferred, assigned, pledged, offered or otherwise
disposed in the absence of an effective registration statement
under applicable securities laws or an opinion of counsel
reasonably satisfactory to the issuer that such registration
is not required."
(e) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of CorVu Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
CorVu Certificates representing such shares are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided
in this Article 1. As of the Effective Time, the holders of CorVu
Certificates representing shares of CorVu Common Stock shall cease to
have any rights as stockholders of CorVu, except such rights, if any,
as they may have pursuant to the MBCA or this Agreement. Except as
provided above, until such CorVu Certificates are surrendered for
exchange, each such CorVu Certificate shall, after the Effective Time,
represent for all purposes only the right to receive a certificate or
certificates evidencing the number of whole shares of MNAC Common Stock
into which the shares of CorVu Common Stock shall have been converted
pursuant to the Merger as provided in Section 1.3(a) hereof, the right
to receive the cash value of any fraction of a share of MNAC Common
Stock as provided in Section 1.6(f) hereof and the right to receive any
dividends or distributions as provided in Section 1.6(c).
(f) No fractional shares of MNAC Common Stock and no
certificates or scrip therefor, or other evidence of ownership thereof,
shall be issued in connection with the Merger, no dividend or other
distribution of MNAC shall relate to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote
or to any rights of a shareholder of MNAC. All fractional shares of
MNAC Common Stock to which a holder of CorVu Common Stock immediately
prior to the Effective Time would otherwise be entitled, at the
Effective Time, shall be aggregated if and to the extent multiple CorVu
Certificates of such holder are submitted together to the Exchange
Agent. If a fractional share results from such aggregation, then (in
lieu of such fractional share) the Exchange Agent shall pay to each
holder of shares of CorVu Common Stock who otherwise would be entitled
to receive such fractional share of MNAC Common Stock an amount of cash
(without interest) determined by multiplying (i) the average of the
closing "bid" and "ask" prices of a share of MNAC Common Stock as
reported by the Nasdaq OTC Bulletin Board on the Closing Date (or if no
prices are quoted for such Closing Date, the most recent trading day
preceding the Closing Date), by (ii) the fractional share of MNAC
Common Stock to which such holder would otherwise be entitled. MNAC
will make available to the Exchange Agent any cash necessary for this
purpose.
(g) In the event any CorVu Certificates shall have been lost,
stolen, or destroyed, the Exchange Agent shall issue in respect of such
lost, stolen, or destroyed CorVu Certificates, upon the holder thereof
making of an affidavit of such fact and agreeing to indemnify and hold
harmless MNAC from any costs and expenses of such lost certificate
later being presented for exchange, such shares of MNAC Common Stock,
cash for fractional shares, if any, and dividends or other
distributions, if any, as may be required pursuant to this Article 1.
1.7 Stock Options and Warrants.
(a) Each option or warrant to purchase shares of CorVu Common
Stock that is outstanding at the Effective Time, whether or not
exercisable and whether or not vested (a "CorVu Option"), shall,
without any action on the part of CorVu or the holder thereof, be
assumed by MNAC in such manner that MNAC (i) is a corporation "assuming
a stock option in a transaction to which Section 424(a) applies" within
the meaning of Section 424 of the Code and the regulations thereunder,
or (ii) to the extent that Section 424 of the Code does not apply to
any such CorVu Option, would be such a corporation if Section 424 of
the Code were applicable to such CorVu Option. MNAC shall assume
CorVu's 1996 Stock Option Plan (the "CorVu Option Plan"). From and
after the Effective Time, all references to CorVu in the CorVu Options
shall be deemed to refer to the Surviving Corporation. The CorVu
Options assumed by MNAC shall be exercisable upon the same terms and
conditions as under the CorVu Options (including provisions regarding
vesting and the acceleration thereof) except that (i) such CorVu
Options shall entitle the holder to purchase from the Surviving
Corporation the number of shares of MNAC Common Stock (rounded down to
the nearest whole number of such shares) that equals the product of the
Conversion Ratio multiplied by the number of shares of CorVu Common
Stock subject to such CorVu Option immediately prior to the Effective
Time, (ii) the option exercise price per share of MNAC Common Stock
shall be an amount (rounded up to the nearest full cent) equal to the
exercise price per share of CorVu Common Stock in effect immediately
prior to the Effective Time divided by the Conversion Ratio, and (iii)
the CorVu Options shall vest to the extent required pursuant to the
current terms of such CorVu Options or other agreements as described in
Section 4.3 of the CorVu Disclosure Schedule (as defined below). Except
to the extent required pursuant to the current terms of such CorVu
Options or other agreements as described in Section 4.3 of the CorVu
Disclosure Schedule, CorVu shall not take any action to accelerate the
vesting of any CorVu Options.
(b) As promptly as practicable after the Effective Time, the
Surviving Corporation shall issue to each holder of a CorVu Option a
written instrument informing such holder of the assumption by MNAC of
such CorVu Option. MNAC shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of MNAC Common Stock
for delivery upon exercise of CorVu Options pursuant to the terms set
forth in this Section 1.7. MNAC shall use its commercially reasonable
efforts to cause those CorVu Options that qualified as incentive stock
options prior to the Effective Time to continue to qualify as incentive
stock options immediately after the Effective Time. As promptly as
practicable after the Surviving Corporation becomes subject to the
reporting obligations of Section 13 of the Securities Exchange Act of
1934 (the "1934 Act"), MNAC shall file a registration statement on Form
S-8 (or any successor form) with respect to the shares of MNAC Common
Stock subject to CorVu Options issued under the CorVu Option Plan and
shall use commercially reasonable efforts to maintain such registration
statement (or any successor form), including the current status of any
related prospectus or prospectuses, for so long as such CorVu Options
remain outstanding.
1.8 Capitalization Changes. If, between the date of this Agreement and
the Effective Time, the outstanding shares of MNAC Common Stock or CorVu Common
Stock shall have been changed into or exchanged in accordance with the terms of
Sections 5.1 or 5.2, respectively, for a different number of shares or a
different class by reason of any reorganization, reclassification, subdivision,
recapitalization, split-up, combination, exchange of shares, stock dividend or
other similar transaction, the Conversion Ratio and calculations set forth in
this Agreement shall be appropriately adjusted to reflect such reorganization,
reclassification, subdivision, recapitalization, split-up, combination, exchange
of shares, stock dividend or other similar transaction. This section shall not
constitute either party's consent to the other party effecting such
reorganization, reclassification, subdivision, recapitalization, split-up,
combination, exchange of shares, stock dividend or other similar transaction.
1.9 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of MNAC, as in effect immediately prior to the
Effective Time, shall be amended as of the Effective Time to read as set forth
on Exhibit B to this Agreement.
1.10 Bylaws of the Surviving Corporation. The Bylaws of MNAC, as in
effect immediately prior to the Effective Time, shall be amended as of the
Effective Time to read as set forth on Exhibit C to this Agreement.
1.11 Directors and Officers of the Surviving Corporation. As of the
Effective Time, the officers and directors of MNAC shall resign and be replaced
by such persons as are designated by CorVu; provided that CorVu agrees to (i)
designate an uneven number of members of the Surviving Corporation's Board of
Directors with a majority being outside directors, and (ii) designate two
members of the current MNAC Board of Directors to serve as directors of the
Surviving Corporation in accordance with the MBCA and the Articles of
Incorporation and Bylaws of the Surviving Corporation.
ARTICLE 2.
CLOSING
2.1 Time and Place. Subject to the satisfaction or waiver of the
provisions of Article 6, the closing of the Merger (the "Closing") shall take
place at 11:00 a.m., local time, on the date that the later of the Required MNAC
Shareholder Vote (as defined in Section 3.2) and the Required CorVu Shareholder
Vote (as defined in Section 4.2) is obtained, or as soon thereafter as is
reasonably practicable, and in any event no later than the second business day
after all conditions to Closing have been satisfied or waived, or on such other
date and/or at such other time as CorVu and MNAC may mutually agree. The date on
which the Closing actually occurs is herein referred to as the "Closing Date."
The Closing shall take place 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.
2.2 Filings at the Closing. At the Closing, subject to the provisions
of Article 6, CorVu and MNAC shall cause the Articles of Merger to be filed in
accordance with the provisions of Section 302A.615 of the MBCA, and take any and
all other lawful actions and do any and all other lawful things necessary to
cause the Merger to become effective.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF MNAC
Except as set forth in a document of even date herewith and
concurrently delivered herewith, referring specifically to the representations
and warranties in this Agreement that identifies by section number to which such
disclosure relates (the "MNAC Disclosure Schedule"), MNAC hereby makes the
following representations and warranties to CorVu:
3.1 Organization. MNAC and each subsidiary of MNAC (referred to herein
as a "MNAC Subsidiary") is a corporation duly organized, validly existing, and,
to the extent applicable under the laws of such jurisdiction, in good standing
under the laws of its respective jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such
corporate power and authority would not, individually or in the aggregate, have
a MNAC Material Adverse Effect (as defined below). MNAC and each MNAC Subsidiary
is duly qualified and in good standing to do business in each jurisdiction in
which the property owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, reasonably be expected to have a MNAC Material Adverse Effect (as
defined below). "MNAC Material Adverse Effect" means an effect that is
materially adverse to (i) the business of MNAC and the MNAC Subsidiaries,
considered as a whole, (ii) MNAC's ability to perform any of its material
obligations under this Agreement or to consummate the Merger, or (iii) the
ability of the Surviving Corporation to conduct the business of the Surviving
Corporation following the Effective Time, except in each case for (x) any
occurrence or condition affecting MNAC's or the Surviving Corporation's industry
generally, or (y) any changes in general economic, regulatory or political
conditions. The jurisdictions in which MNAC and each MNAC Subsidiary are
incorporated are listed in the MNAC Disclosure Schedule. MNAC has heretofore
delivered or made available to CorVu or its advisers complete and accurate
copies of the Articles of Incorporation, Bylaws and other governing instruments
of MNAC and each MNAC Subsidiary, as currently in effect, and of the
organizational documents and agreements defining the rights of MNAC or any MNAC
Subsidiary with respect to any material joint ventures, partnerships or other
business in which MNAC owns a less-than-100% interest. Neither MNAC nor any MNAC
Subsidiary, directly or indirectly, owns or controls or has any equity,
partnership, or other ownership interest in any corporation, partnership, joint
venture, or other business association or entity that is material to MNAC and
its Subsidiaries, considered as a whole.
3.2 Authorization. MNAC has all necessary corporate power and authority
to execute and deliver this Agreement and, subject to obtaining the necessary
approval of its shareholders, to consummate the transactions contemplated
hereby. The execution and delivery by MNAC of this Agreement and the other
agreements contemplated hereby to which MNAC is a party, and the consummation by
MNAC of the transactions contemplated hereby and thereby, have been duly and
validly authorized and approved by MNAC's Board of Directors, no other action of
MNAC's Board of Directors or corporate proceeding on the part of MNAC or any
Subsidiary are necessary to authorize this Agreement, and, subject to obtaining
the approval and adoption of this Agreement and approval of the Merger by the
holders of a majority of the shares of MNAC Common Stock outstanding as of the
record date of MNAC's shareholder meeting (the "Required MNAC Shareholder
Vote"), no other action of MNAC's Board of Directors or corporate action on the
part of MNAC or any Subsidiary is necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by MNAC and, assuming due execution and delivery by the other parties
hereto, constitutes the valid and binding obligation of MNAC, enforceable
against MNAC in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency, and the relief of debtors and
rules of law governing specific performance, injunctive relief, or other
equitable remedies.
3.3 Capitalization. As of the date hereof, the authorized capital stock
of MNAC consists of (i) 10,000,000 shares of MNAC Common Stock, par value $.01
per share, of which 3,959,610 shares are issued and outstanding, and (ii)
1,000,000 shares of MNAC Preferred Stock, par value $10.00 per share, of which
39,226 are issued or outstanding. All issued and outstanding shares of capital
stock of each MNAC Subsidiary are owned, beneficially and of record, by MNAC,
free and clear of any mortgage, pledge, security interest, encumbrance, lien or
other charge of any kind ("Lien"). All issued and outstanding shares of MNAC
Common Stock and Preferred Stock have been, and the shares of MNAC Common Stock
to be issued pursuant to Article 1 will be, when issued, duly authorized,
validly issued, fully paid and nonassessable. Except for options and warrants to
purchase an aggregate 742,000 shares of MNAC Common Stock listed in the MNAC
Disclosure Schedule, as of the date of this Agreement, there are not any
outstanding or authorized subscriptions, options, warrants, calls, rights,
convertible securities, commitments, restrictions, arrangements, or any other
agreements of any character to which MNAC or any MNAC Subsidiary is a party
that, directly or indirectly, (i) obligate MNAC or any MNAC Subsidiary to issue
any shares of capital stock or any securities convertible into, or exercisable
or exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock, (ii) call for or relate to the sale, pledge, transfer, or other
disposition or encumbrance by MNAC or any MNAC Subsidiary of any shares of its
capital stock, or (iii) to the knowledge of MNAC, relate to the voting or
control of such capital stock. The MNAC Disclosure Schedule sets forth a
complete and accurate list of all stock options, warrants, and other rights to
acquire MNAC Common Stock, including the name of the holder, the date of grant,
acquisition price, number of shares, exercisability schedule, and, in the case
of options, the type of option under the Code. None of such options, warrants or
other rights shall be subject to adjustment or modification as a result of the
Merger.
3.4 Financial Statements. MNAC's audited consolidated financial
statements at and for the year ended September 30, 1999 (the "MNAC 1999
Financials"), (i) were prepared in accordance with United States generally
accepted accounting principles ("US GAAP") applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto), and (ii) fairly present in all material respects the consolidated
financial position of MNAC as of the dates thereof and the income, cash flows,
and changes in shareholders' equity for the periods involved. The statements of
earnings included in the MNAC 1999 Financials do not contain any items of
special or nonrecurring income or any other income not earned in the ordinary
course of business required to be disclosed separately in accordance with US
GAAP, except as expressly specified in the applicable statement of operations or
notes thereto.
3.5 Absence of Undisclosed Liabilities. Neither MNAC nor any MNAC
Subsidiary has any liabilities or obligations of any nature (whether absolute,
accrued, contingent, or otherwise) except (a) liabilities or obligations that
are accrued or reserved against in the audited consolidated balance sheet of
MNAC as of September 30, 1999 contained in MNAC 1999 Financials (the "MNAC
Audited Balance Sheet") or in the notes thereto, (b) liabilities incurred since
September 30, 1999 in the ordinary course of business and of a type and in an
amount consistent with past practice, and (c) liabilities or obligations that
would not, individually or in the aggregate, reasonably be expected to have a
MNAC Material Adverse Effect.
3.6 Consents and Approvals. Except for (i) any applicable requirements
of the Securities Act of 1933 and regulations thereunder (the "1933 Act") and
state securities laws, (ii) obtaining the Required MNAC Shareholder Vote, and
(iii) the filing and recordation of appropriate merger documents as required by
the MBCA, the authorization and approval by MNAC's Board of Directors and the
execution and delivery by MNAC of this Agreement and the other agreements
contemplated hereby to which MNAC is a party and the consummation by MNAC of the
transactions contemplated hereby and thereby will not: (a) violate any provision
of the Articles of Incorporation or Bylaws of MNAC or any MNAC Subsidiary; (b)
violate any statute, law, rule, regulation, order, or decree of any federal,
state, local, or foreign governmental or regulatory body or authority (a
"Governmental Body") or any nongovernmental self-regulatory agency) by which
MNAC or any MNAC Subsidiary or any of their respective properties or assets may
be bound; (c) require any filing with or permit, consent, or approval to be
obtained from any Governmental Body or any nongovernmental self-regulatory
agency; or (d) result in any violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, result in the loss
of any material benefit under, or give rise to any right of termination,
cancellation, increased payments, or acceleration under, or result in the
creation of any Lien (as defined in Section 3.3) on any of the properties or
assets of MNAC or any MNAC Subsidiary under, any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
authorization, agreement, or other instrument or obligation to which MNAC or any
MNAC Subsidiary is a party, or by which it or any of its properties or assets
may be bound, except, in the case of clauses (b), (c) and (d), for any such
filings, permits, consents or approvals or violations, breaches, defaults, or
other occurrences that would not, individually or in the aggregate, reasonably
be expected to prevent or delay consummation of any of the transactions
contemplated hereby in any material respect, or otherwise prevent MNAC from
performing its obligations under this Agreement in any material respect, and
would not, individually or in the aggregate, reasonably be expected to have a
MNAC Material Adverse Effect. Section 3.6 of the MNAC Disclosure Schedule lists
each note, bond, mortgage, indenture, license, franchise, permit, authorization,
agreement, or other instrument or obligation to which MNAC or any MNAC
Subsidiary is a party, or by which it or any of its properties or assets may be
bound, under or with respect to which the transactions contemplated by this
Agreement will result in any violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, result in the loss
of any benefit under, or give rise to any right of termination, cancellation,
increased payments, or acceleration under, or result in the creation of any Lien
on any of the properties or assets of MNAC or any MNAC Subsidiary, except for
violations, defaults, losses, rights and Liens that would not, individually or
in the aggregate, reasonably be expected to have a MNAC Material Adverse Effect.
3.7 Compliance with Laws. To the best of MNAC's knowledge, neither MNAC
nor any MNAC Subsidiary is in default or violation of any applicable federal,
state, local, or foreign laws, ordinances, regulations, interpretations,
judgments, decrees, injunctions, permits, licenses, certificates, governmental
requirements, orders, or other similar items of any court or other Governmental
Body (and including those of any nongovernmental self-regulatory agency and
including environmental laws or regulations), except for such defaults or
violations that would not, individually or in the aggregate, reasonably be
expected to have a MNAC Material Adverse Effect.
3.8 Litigation. There are no claims, actions, suits, proceedings or, to
the knowledge of MNAC, investigations or reviews of any kind, pending or, to the
knowledge of MNAC, threatened in writing, against MNAC or any MNAC Subsidiary or
any asset or property of MNAC or any MNAC Subsidiary, except for such claims,
actions, suits, proceedings, investigations or reviews that would not,
individually or in the aggregate, reasonably be expected to have a MNAC Material
Adverse Effect.
3.9 Absence of Material Adverse Changes. Since September 30, 1999 there
has not been any (a) MNAC Material Adverse Effect; (b) damage, destruction, or
loss, not covered by insurance, that would, individually or in the aggregate,
reasonably be expected to have a MNAC Material Adverse Effect; or (c) material
change by MNAC or any MNAC Subsidiary in accounting methods or principles used
for financial reporting purposes, except as required by a change in applicable
law or generally accepted accounting principles and concurred with by MNAC's
independent public accountants.
3.10 Officers, Directors and Employees. Prior to the date hereof, MNAC
has provided to CorVu a list that completely and accurately sets forth the name
and current annual salary rate of each officer of MNAC or any MNAC Subsidiary
whose total remuneration for the last fiscal year was, or for the current fiscal
year is expected to be, in excess of $75,000, together with a summary of the
bonuses, commissions, additional compensation, and other like cash benefits, if
any, paid or payable to such persons for the last fiscal year and proposed for
the current fiscal year. The MNAC Disclosure Schedule completely and accurately
sets forth (i) the names of all former officers of MNAC or of any MNAC
Subsidiary whose employment with MNAC or any MNAC Subsidiary has terminated
either voluntarily or involuntarily during the preceding 12-month period; and
(ii) the names of the officers (with all positions and titles indicated) and
directors of MNAC and of each MNAC Subsidiary. Except as would not, individually
or in the aggregate, reasonably be expected to have a MNAC Material Adverse
Effect: (i) no unfair labor practice complaint against MNAC or any MNAC
Subsidiary is pending before the National Labor Relations Board, and there is no
labor strike, slowdown or stoppage pending or, to the knowledge of MNAC,
threatened in writing against or involving MNAC or any MNAC Subsidiary; (ii) no
unionizing efforts have, to the knowledge of MNAC, been made by employees of
MNAC or any MNAC Subsidiary, neither MNAC nor any MNAC Subsidiary is a party to
or subject to any collective bargaining agreement, and no collective bargaining
agreement is currently being negotiated by MNAC or any MNAC Subsidiary; and
(iii) there is no labor dispute pending or, to the knowledge of MNAC, threatened
in writing between MNAC or any MNAC Subsidiary and its employees.
3.11 Taxes. Except for such matters that, individually or in the
aggregate, would not have a MNAC Material Adverse Effect, (i) MNAC and each MNAC
Subsidiary have filed, or have obtained extensions to file (which extensions
have not expired without filing), all state, local, United States, foreign, or
other tax reports and returns required to be filed by any of them; (ii) MNAC and
each MNAC Subsidiary have duly paid, or accrued on their books of account, all
taxes (including estimated taxes) shown as due on such reports and returns (or
such extension requests), or assessed against them, other than taxes being
contested in good faith in proper proceedings and (iii) the liabilities and
reserves for taxes reflected on MNAC Audited Balance Sheet are adequate to cover
all taxes payable by MNAC or any MNAC Subsidiary for all taxable periods and
portions thereof ending on or before the dates thereof. To MNAC's knowledge, no
tax audits are pending against and no claims for taxes have been received in
writing by MNAC or any MNAC Subsidiary, other than audits and claims that,
individually and in the aggregate, are not reasonably expected to have a MNAC
Material Adverse Effect. Neither MNAC nor any MNAC Subsidiary has, with regard
to any assets or property held, acquired or to be acquired by any of them, filed
a consent to the application of Section 341(f)(2) of the Code. Neither MNAC nor
any MNAC Subsidiary has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from constituting
a reorganization qualifying under Section 368(a) of the Code. MNAC is not aware
of any agreement, plan or other circumstance that would prevent the Merger from
so qualifying under Section 368(a) of the Code.
For the purposes of this Agreement, "tax" shall mean and include taxes,
duties, withholdings, assessments, and charges assessed or imposed by any
governmental authority (together with any interest, penalties and additions to
tax imposed with respect thereto), including but not limited to all federal,
state, county, local, and foreign income, profits, gross receipts, import, ad
valorem, real and personal property, franchise, license, sales, use, value
added, stamp, transfer, withholding, payroll, employment, excise, custom, duty,
and any other taxes, obligations and assessments of any kind whatsoever; "tax"
shall also include any liability for taxes arising as a result of being (or
ceasing to be) a member of any affiliated, consolidated, combined, or unitary
group as well as any liability for taxes under any tax allocation, tax sharing,
tax indemnity, or similar agreement.
3.12 Contracts. The MNAC Disclosure Schedule lists, and MNAC has
heretofore furnished to CorVu complete and accurate copies of (or, if oral, the
MNAC Disclosure Schedule states all material provisions of), (a) every
employment, material consulting, severance or change of control agreement or
arrangement for the benefit of any director, officer, employee, other person or
shareholder of MNAC or any MNAC Subsidiary or any affiliate thereof in effect as
of the date of this Agreement to which MNAC or any MNAC Subsidiary is a party or
by which MNAC or any MNAC Subsidiary or any of their properties or assets is
bound, and (b) every contract, agreement, or understanding to which MNAC or any
MNAC Subsidiary is a party that would reasonably be expected to involve payments
by or to MNAC or any MNAC Subsidiary in excess of $50,000 during MNAC's current
2000 fiscal year or in excess of $100,000 in the aggregate during MNAC's 2000
and 2001 fiscal years, or would have a MNAC Material Adverse Effect, or that is
material and was not made in the ordinary course of business. Neither MNAC nor
any MNAC Subsidiary is in material violation of or in default under any
contract, plan, agreement, understanding, arrangement or obligation that is
material to MNAC and the MNAC Subsidiaries considered as a whole, except for
such violations or defaults that would not, individually or in the aggregate,
reasonably be expected to have a MNAC Material Adverse Effect. As of the date of
this Agreement, neither MNAC nor any MNAC Subsidiary is a party to any contract,
plan, agreement, understanding, arrangement or obligation (i) that restricts
MNAC's, or after the Merger would restrict the Surviving Corporation's, ability
to conduct any line of business, or (ii) that imposes on MNAC or any MNAC
Subsidiary material obligations not reflected in the MNAC 1999 Financials.
3.13 Intellectual Property Rights. The MNAC Disclosure Schedule
contains a complete and accurate list of all material patents, trademarks, trade
names, service marks, copyrights, and all applications for or registrations of
any of the foregoing as to which MNAC or any MNAC Subsidiary is the owner or a
licensee (the "MNAC Intellectual Property"). MNAC and each MNAC Subsidiary owns,
free and clear of any Lien (as defined in Section 3.3), other than Liens granted
in connection with MNAC's credit facility and Liens that would not be reasonably
expected to have a MNAC Material Adverse Effect, or is licensed to use, all
patents, trademarks, trade names, service marks, copyrights, applications for or
registrations of any of the foregoing comprising MNAC Intellectual Property. No
claim has been asserted or, to the knowledge of MNAC, threatened in writing by
any person, with respect to the use of MNAC Intellectual Property or challenging
or questioning the validity or effectiveness of any license or agreement with
respect thereto, except for such claims that, individually or in the aggregate,
would not reasonably be expected to have a MNAC Material Adverse Effect. To the
knowledge of MNAC, neither the use of MNAC Intellectual Property by MNAC or any
MNAC Subsidiary in the present conduct of its business nor any product or
service of MNAC or any Subsidiary infringes on the valid intellectual property
rights of any person in a manner that, individually or in the aggregate, would
reasonably be expected to have a MNAC Material Adverse Effect. Except as would
not, individually or in the aggregate, reasonably be expected to have a MNAC
Material Adverse Effect, (i) all MNAC Intellectual Property listed in the MNAC
Disclosure Schedule has the status indicated therein and, unless provided
otherwise, all applications are still pending in good standing and have not been
abandoned, and (ii) to the knowledge of MNAC, the MNAC Intellectual Property is
valid and has not been challenged in any judicial or administrative proceeding.
To the knowledge of MNAC, no person or entity nor such person's or entity's
business or products has infringed, or misappropriated any MNAC Intellectual
Property, or currently is infringing, or misappropriating any MNAC Intellectual
Property, except as would not, individually or in the aggregate, reasonably be
expected to have a MNAC Material Adverse Effect.
3.14 Year 2000 Compliance. To the best of MNAC's knowledge, all
hardware and software used by MNAC in the ordinary course of business is Year
2000 Compatible. For purposes of this Agreement, "Year 2000 Compatible" means
that neither performance nor functionality is affected by dates prior to,
during, spanning or after January 1, 2000, and shall include, but not be limited
to: (i) accurately processing (including, but not limited to, calculating,
comparing and sequencing) date/time data from, into and between the twentieth
and twenty-first centuries and the years 1999 and 2000 and leap year
calculations; (ii) functioning without error, interruption or decreased
performance relating to such date/time data; (iii) accurately processing such
date/time data when used in combination with other Year 2000 Compatible
technology; (iv) accurate date/time data century recognition; (v) calculations
that accurately use same-century and multi-century formulas and date/time
values; (vi) date/time interface values that reflect the correct century; and
(vii) processing, storing, receiving and outputting all date/time data in a
format that accurately indicates the century of the date/time data.
3.15 Benefit Plans.
(a) Neither MNAC nor any MNAC Subsidiary sponsors, maintains,
contributes to, or has, within the past five years, sponsored,
maintained, or contributed to or been required to contribute to, any
"employee pension benefit plan" ("Pension Plan"), as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including, solely for the purpose of
this subsection, a plan excluded from coverage by Section 4(b)(5) of
ERISA. Each such Pension Plan presently maintained by MNAC or any MNAC
Subsidiary is, in all material respects, in compliance with applicable
provisions of ERISA, the Code, and other applicable law and MNAC or
such MNAC Subsidiary has performed all of its obligations under such
Pension Plan except for such obligations that would not, individually
or in the aggregate, reasonably be expected to have a MNAC Material
Adverse Effect.
(b) Neither MNAC nor any MNAC Subsidiary sponsors, maintains,
contributes to, or has, within the past five years, sponsored,
maintained, or contributed to or been required to contribute to, any
Pension Plan that is subject to Title IV of ERISA.
(c) Neither MNAC nor any MNAC Subsidiary sponsors, maintains,
or contributes to any "employee welfare benefit plan" ("Welfare Plan"),
as such term is defined in Section 3(1) of ERISA, whether insured or
otherwise, and any such Welfare Plan presently maintained by MNAC or
any MNAC Subsidiary is, in all material respects, in compliance with
the provisions of ERISA, the Code, and all other applicable laws,
including, but not limited to, Section 4980B of the Code and the
regulations thereunder, and Part 6 of Title I of ERISA. Neither MNAC
nor any MNAC Subsidiary has established or contributed to any
"voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(d) Neither MNAC nor any MNAC Subsidiary currently maintains
or contributes to any oral or written bonus, profit-sharing,
compensation (incentive or otherwise), commission, stock option, or
other stock-based compensation, retirement, severance, change of
control, vacation, sick or parental leave, dependent care, deferred
compensation, cafeteria, disability, hospitalization, medical, death,
retiree, insurance, or other benefit or welfare or other similar plan,
policy, agreement, trust, fund, or arrangement providing for the
remuneration or benefit of all or any MNAC employees, directors or any
other person, that is neither a Pension Plan nor a Welfare Plan
(collectively, the "MNAC Compensation Plans").
(e) With respect to the Pension Plans, Welfare Plans or MNAC
Compensation Plans, no event has occurred and, to the knowledge of
MNAC, there exists no condition or set of circumstances, in connection
with which MNAC or any MNAC Subsidiary would be subject to any
liability under the terms of such Plans (other than the payment of
benefits thereunder), ERISA, the Code or any other applicable law that
would, individually or in the aggregate, reasonably be expected to have
a MNAC Material Adverse Effect.
(f) The IRS has issued favorable determination letters with
respect to all MNAC and MNAC Subsidiary Pension Plans that are intended
to be qualified under Section 401(a) of the Code. MNAC has provided or
made available to CorVu summaries of all Pension Plans, Welfare Plans,
Compensation Plans, and related agreements, and complete and accurate
copies of all annual reports (Form 5500), favorable determination
letters, current summary plan descriptions, and all employee handbooks
or manuals. MNAC has provided or made available to CorVu (i) copies of
all employment agreements with officers of MNAC or any MNAC Subsidiary
(or copies of forms of agreements setting forth representative
employment terms and conditions); (ii) copies of all severance, bonus
or incentive agreements, programs and policies of MNAC or any MNAC
Subsidiary with or relating to any of its employees; and (iii) copies
of all plans, programs, agreements and other arrangements of MNAC or
any MNAC Subsidiary with or relating to any of its employees that
contain change in control provisions.
(g) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any MNAC or MNAC Subsidiary Pension Plan, Welfare Plan,
Compensation Plan, or other arrangement that will or may result in any
payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits, or obligation to fund benefits.
3.16 Minute Books. MNAC has previously made available to CorVu or its
representatives all of the minutes of meetings of and corporate actions or
written consents by the shareholders, Boards of Directors, and committees of the
Boards of Directors of MNAC and each MNAC Subsidiary.
3.17 No Finders. No act of MNAC or any MNAC Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments in the amounts specified in
the MNAC Disclosure Schedule to those parties identified thereon who have acted
as a finder for MNAC or have been retained by MNAC as financial advisors
pursuant to the agreements or other documents described in the MNAC Disclosure
Schedule, copies of which have been provided or made available to CorVu or its
advisors prior to the date of this Agreement.
3.18 Proxy Statement. The MNAC Proxy Statement (as defined in Section
5.5 hereof) and any amendments or supplements thereto (i) will comply in all
material respects with all applicable laws, and (ii) not contain any untrue
statement of a material fact or omit to state any 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; provided, however,
that no representation or warranty is made by MNAC with respect to information
relating to CorVu or any affiliate of CorVu supplied by CorVu specifically for
inclusion in the Proxy Statement.
3.19 State Takeover Laws. The Board of Directors of MNAC has approved
the transactions contemplated by this Agreement, such that the provisions of
Section 302A.673 (entitled "Business Combinations") of the MBCA will not apply
to this Agreement or any of the transactions contemplated hereby.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF CORVU
Except as set forth in a document of even date herewith and
concurrently delivered herewith, referring specifically to the representations
and warranties in this Agreement that identifies by section number to which such
disclosure relates (the "CorVu Disclosure Schedule"), CorVu hereby makes the
following representations and warranties to MNAC:
4.1 Organization. CorVu and each subsidiary of CorVu (referred to
herein as a "CorVu Subsidiary") is a corporation duly organized, validly
existing, and, to the extent applicable under the laws of such jurisdiction, is
in good standing under the laws of its respective jurisdiction of incorporation
and has all requisite corporate power and authority to own, lease, and operate
its properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing or in good standing or to have such
corporate power and authority would not, individually or in the aggregate, have
a CorVu Material Adverse Effect (as defined below). CorVu and each CorVu
Subsidiary is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased, or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a CorVu
Material Adverse Effect (as defined below). "CorVu Material Adverse Effect"
means an effect that is materially adverse to (i) the business of CorVu and the
CorVu Subsidiaries, considered as a whole, (ii) CorVu's ability to perform any
of its material obligations under this Agreement or to consummate the Merger, or
(iii) the ability of the Surviving Corporation to conduct the business of the
Surviving Corporation following the Effective Time, except in each case for (x)
any occurrence or condition affecting CorVu's or the Surviving Corporation's
industry generally, or (y) any changes in general economic, regulatory or
political conditions. The jurisdictions in which CorVu and each CorVu Subsidiary
are incorporated are listed in the CorVu Disclosure Schedule. CorVu has
heretofore delivered or made available to MNAC or its advisers complete and
accurate copies of the Articles of Incorporation, Bylaws and other governing
instruments of CorVu and each CorVu Subsidiary, as currently in effect, and of
the organizational documents and agreements defining the rights of CorVu or any
CorVu Subsidiary with respect to any material joint ventures, partnerships or
other business in which CorVu owns a less-than-100% interest. Neither CorVu nor
any CorVu Subsidiary, directly or indirectly, owns or controls or has any
equity, partnership, or other ownership interest in any corporation,
partnership, joint venture, or other business association or entity that is
material to CorVu and its Subsidiaries, considered as a whole.
4.2 Authorization. CorVu has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
necessary approval of its shareholders, to consummate the transactions
contemplated hereby. The execution and delivery by CorVu of this Agreement and
the other agreements contemplated hereby to which CorVu is a party, and the
consummation by CorVu of the transactions contemplated hereby and thereby, have
been duly and validly authorized and approved by CorVu's Board of Directors, no
other action of CorVu's Board of Directors or corporate proceeding on the part
of CorVu or any Subsidiary are necessary to authorize this Agreement, and,
subject to obtaining the approval and adoption of this Agreement and approval of
the Merger by the holders of a majority of the shares of CorVu Common Stock
outstanding as of the record date of CorVu's shareholder meeting (the "Required
CorVu Shareholder Vote"), no other action of CorVu's Board of Directors or
corporate action on the part of CorVu or any Subsidiary is necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by CorVu and, assuming due execution and
delivery by the other parties hereto, constitutes the valid and binding
obligation of CorVu , enforceable against CorVu in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency, and
the relief of debtors and rules of law governing specific performance,
injunctive relief, or other equitable remedies.
4.3 Capitalization. As of the date hereof, the authorized capital stock
of CorVu consists of (i) 25,000,000 shares of CorVu Common Stock, par value $.01
per share, of which 10,591,893 shares are issued and outstanding, and (ii)
25,000,000 shares of undesignated CorVu stock, par value $.01 per share, none of
which are issued or outstanding. All issued and outstanding shares of capital
stock of each CorVu Subsidiary are owned, beneficially and of record, by CorVu,
free and clear of any Lien. All issued and outstanding shares of CorVu Common
Stock have been validly issued, are fully paid and nonassessable. Except for
options and warrants to purchase an aggregate 3,599,500 shares of CorVu Common
Stock listed in CorVu Disclosure Schedule, as of the date of this Agreement
there are not any outstanding or authorized subscriptions, options, warrants,
calls, rights, convertible securities, commitments, restrictions, arrangements,
or any other agreements of any character to which CorVu or any CorVu Subsidiary
is a party that, directly or indirectly, (i) obligate CorVu or any CorVu
Subsidiary to issue any shares of capital stock or any securities convertible
into, or exercisable or exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock, (ii) call for or relate to the sale, pledge,
transfer, or other disposition or encumbrance by CorVu or any CorVu Subsidiary
of any shares of its capital stock, or (iii) to the knowledge of CorVu, relate
to the voting or control of such capital stock. The CorVu Disclosure Schedule
sets forth a complete and accurate list of all stock options, warrants, and
other rights to acquire CorVu Common Stock, including the name of the holder,
the date of grant, acquisition price, number of shares, exercisability schedule,
and, in the case of options, the type of option under the Code. No consent of
holders of CorVu Options is required to carry out the provisions of Section 1.7.
4.4 Financial Statements. CorVu's audited consolidated financial
statements at and for the year ended June 30, 1999 and unaudited consolidated
financial statements at and for the quarter ended September 30, 1999
(collectively the "CorVu 1999 Financials"), (i) were prepared in accordance with
US GAAP applied on a consistent basis during the periods involved (except as may
be indicated therein or in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC), and (ii) fairly present in
all material respects the consolidated financial position of CorVu as of the
dates thereof and the income, cash flows, and changes in shareholders' equity
for the periods involved (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments that were not and are not,
individually or in the aggregate, expected to have a CorVu Material Adverse
Effect). The statements of earnings included in the CorVu 1999 Financials do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business required to be disclosed separately in
accordance with US GAAP, except as expressly specified in the applicable
statement of operations or notes thereto.
4.5 Absence of Undisclosed Liabilities. Neither CorVu nor any CorVu
Subsidiary has any liabilities or obligations of any nature (whether absolute,
accrued, contingent, or otherwise) except (a) liabilities or obligations that
are accrued or reserved against in the audited consolidated balance sheet of
CorVu as of June 30, 1999 contained in CorVu 1999 Financials (the "CorVu Audited
Balance Sheet") or in the notes thereto, (b) liabilities or obligations that are
accrued or reserved against in the unaudited balance sheet of CorVu as of
September 30, 1999 (the "CorVu Interim Balance Sheet"), (c) liabilities incurred
since September 30, 1999 in the ordinary course of business and of a type and in
an amount consistent with past practice, and (d) liabilities or obligations that
would not, individually or in the aggregate, reasonably be expected to have a
CorVu Material Adverse Effect.
4.6 Consents and Approvals. Except for (i) any applicable requirements
of the 1933 Act and state securities laws, (ii) obtaining the Required CorVu
Shareholder Vote, and (iii) the filing and recordation of appropriate merger
documents as required by the MBCA, the authorization and approval by CorVu's
Board of Directors and the execution and delivery by CorVu of this Agreement and
the other agreements contemplated hereby to which CorVu is a party and the
consummation by CorVu of the transactions contemplated hereby and thereby will
not: (a) violate any provision of the Articles of Incorporation or Bylaws of
CorVu or any CorVu Subsidiary; (b) violate any statute, law, rule, regulation,
order, or decree of any federal, state, local, or foreign governmental or
regulatory body or authority (a "Governmental Body") or any nongovernmental
self-regulatory agency) by which CorVu or any CorVu Subsidiary or any of their
respective properties or assets may be bound; (c) require any filing with or
permit, consent, or approval to be obtained from any Governmental Body or any
nongovernmental self-regulatory agency; or (d) result in any violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default under, result in the loss of any material benefit under, or give rise to
any right of termination, cancellation, increased payments, or acceleration
under, or result in the creation of any Lien (as defined in Section 4.3) on any
of the properties or assets of CorVu or any CorVu Subsidiary under, any of the
terms, conditions, or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, authorization, agreement, or other instrument or
obligation to which CorVu or any CorVu Subsidiary is a party, or by which it or
any of its properties or assets may be bound, except, in the case of clauses
(b), (c) and (d), for any such filings, permits, consents or approvals or
violations, breaches, defaults, or other occurrences that would not,
individually or in the aggregate, reasonably be expected to prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect, or otherwise prevent CorVu from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, reasonably be expected to have a CorVu Material Adverse Effect.
Section 4.6 of CorVu Disclosure Schedule lists each note, bond, mortgage,
indenture, license, franchise, permit, authorization, agreement, or other
instrument or obligation to which CorVu or any CorVu Subsidiary is a party, or
by which it or any of its properties or assets may be bound, under or with
respect to which the transactions contemplated by this Agreement will result in
any violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default under, result in the loss of any benefit under, or
give rise to any right of termination, cancellation, increased payments, or
acceleration under, or result in the creation of any Lien on any of the
properties or assets of CorVu or any CorVu Subsidiary, except for violations,
defaults, losses, rights and Liens that would not, individually or in the
aggregate, reasonably be expected to have a CorVu Material Adverse Effect.
4.7 Compliance with Laws. To the best of CorVu's knowledge, neither
CorVu nor any CorVu Subsidiary is in default or violation of any applicable
federal, state, local, or foreign laws, ordinances, regulations,
interpretations, judgments, decrees, injunctions, permits, licenses,
certificates, governmental requirements, orders, or other similar items of any
court or other Governmental Body (and including those of any nongovernmental
self-regulatory agency and including environmental laws or regulations), except
for such defaults or violations that would not, individually or in the
aggregate, reasonably be expected to have a CorVu Material Adverse Effect.
4.8 Litigation. There are no claims, actions, suits, proceedings or, to
the knowledge of CorVu, investigations or reviews of any kind, pending or, to
the knowledge of CorVu, threatened in writing, against CorVu or any CorVu
Subsidiary or any asset or property of CorVu or any CorVu Subsidiary, except for
such claims, actions, suits, proceedings, investigations or reviews that would
not, individually or in the aggregate, reasonably be expected to have a CorVu
Material Adverse Effect.
4.9 Absence of Material Adverse Changes. Since September 30, 1999 there
has not been any (a) CorVu Material Adverse Effect; (b) damage, destruction, or
loss, not covered by insurance, that would, individually or in the aggregate,
reasonably be expected to have a CorVu Material Adverse Effect; or (c) material
change by CorVu or any CorVu Subsidiary in accounting methods or principles used
for financial reporting purposes, except as required by a change in applicable
law or generally accepted accounting principles and concurred with by CorVu's
independent public accountants.
4.10 Officers, Directors and Employees. Prior to the date hereof, CorVu
has provided to MNAC a list that completely and accurately sets forth the name
and current annual salary rate of each officer of CorVu or any CorVu Subsidiary
whose total remuneration for the last fiscal year was, or for the current fiscal
year is expected to be, in excess of $75,000, together with a summary of the
bonuses, commissions, additional compensation, and other like cash benefits, if
any, paid or payable to such persons for the last fiscal year and proposed for
the current fiscal year. The CorVu Disclosure Schedule completely and accurately
sets forth (i) the names of all former officers of CorVu or of any CorVu
Subsidiary whose employment with CorVu or any CorVu Subsidiary has terminated
either voluntarily or involuntarily during the preceding 12-month period; and
(ii) the names of the officers (with all positions and titles indicated) and
directors of CorVu and of each CorVu Subsidiary. Except as would not,
individually or in the aggregate, reasonably be expected to have a CorVu
Material Adverse Effect: (i) no unfair labor practice complaint against CorVu or
any CorVu Subsidiary is pending before the National Labor Relations Board, and
there is no labor strike, slowdown or stoppage pending or, to the knowledge of
CorVu, threatened in writing against or involving CorVu or any CorVu Subsidiary;
(ii) no unionizing efforts have, to the knowledge of CorVu, been made by
employees of CorVu or any CorVu Subsidiary, neither CorVu nor any CorVu
Subsidiary is a party to or subject to any collective bargaining agreement, and
no collective bargaining agreement is currently being negotiated by CorVu or any
CorVu Subsidiary; and (iii) there is no labor dispute pending or, to the
knowledge of CorVu, threatened in writing between CorVu or any CorVu Subsidiary
and its employees.
4.11 Taxes. Except for such matters that, individually or in the
aggregate, would not have a CorVu Material Adverse Effect, (i) CorVu and each
CorVu Subsidiary have filed, or have obtained extensions to file (which
extensions have not expired without filing), all state, local, United States,
foreign, or other tax reports and returns required to be filed by any of them;
(ii) CorVu and each CorVu Subsidiary have duly paid, or accrued on their books
of account, all taxes (including estimated taxes) shown as due on such reports
and returns (or such extension requests), or assessed against them, other than
taxes being contested in good faith in proper proceedings and (iii) the
liabilities and reserves for taxes reflected on the CorVu Audited Balance Sheet
or CorVu Interim Balance Sheet are adequate to cover all taxes payable by CorVu
or any CorVu Subsidiary for all taxable periods and portions thereof ending on
or before the dates thereof. To CorVu's knowledge, no tax audits are pending
against and no claims for taxes have been received in writing by CorVu or any
CorVu Subsidiary, other than audits and claims that, individually and in the
aggregate, are not reasonably expected to have a CorVu Material Adverse Effect.
Neither CorVu nor any CorVu Subsidiary has, with regard to any assets or
property held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f)(2) of the Code. Neither CorVu nor any CorVu
Subsidiary has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Merger from constituting
a reorganization qualifying under Section 368(a) of the Code. CorVu is not aware
of any agreement, plan or other circumstance that would prevent the Merger from
so qualifying under Section 368(a) of the Code.
4.12 Contracts. The CorVu Disclosure Schedule lists, and CorVu has
heretofore furnished to MNAC complete and accurate copies of (or, if oral, the
CorVu Disclosure Schedule states all material provisions of), (a) every
employment, material consulting, severance or change of control agreement or
arrangement for the benefit of any director, officer, employee, other person or
shareholder of CorVu or any CorVu Subsidiary or any affiliate thereof in effect
as of the date of this Agreement to which CorVu or any CorVu Subsidiary is a
party or by which CorVu or any CorVu Subsidiary or any of their properties or
assets is bound, and (b) every contract, agreement, or understanding to which
CorVu or any CorVu Subsidiary is a party that would reasonably be expected to
involve payments by or to CorVu or any CorVu Subsidiary in excess of $50,000
during CorVu's current 2000 fiscal year or in excess of $100,000 in the
aggregate during CorVu's 2000 and 2001 fiscal years, or would have a CorVu
Material Adverse Effect, or that is material and was not made in the ordinary
course of business. Neither CorVu nor any CorVu Subsidiary is in material
violation of or in default under any contract, plan, agreement, understanding,
arrangement or obligation that is material to CorVu and the CorVu Subsidiaries
considered as a whole, except for such violations or defaults that would not,
individually or in the aggregate, reasonably be expected to have a CorVu
Material Adverse Effect. As of the date of this Agreement, neither CorVu nor any
CorVu Subsidiary is a party to any contract, plan, agreement, understanding,
arrangement or obligation (i) that restricts CorVu's, or after the Merger would
restrict the Surviving Corporation's, ability to conduct any line of business,
or (ii) that imposes on CorVu or any CorVu Subsidiary material obligations not
reflected in the CorVu 1999 Financials.
4.13 Intellectual Property Rights. The CorVu Disclosure Schedule
contains a complete and accurate list of all material patents, trademarks, trade
names, service marks, copyrights, and all applications for or registrations of
any of the foregoing as to which CorVu or any CorVu Subsidiary is the owner or a
licensee (the "CorVu Intellectual Property"). CorVu and each CorVu Subsidiary
owns, free and clear of any Lien (as defined in Section 3.3), other than Liens
granted in connection with CorVu's credit facility and Liens that would not be
reasonably expected to have a CorVu Material Adverse Effect, or is licensed to
use, all patents, trademarks, trade names, service marks, copyrights,
applications for or registrations of any of the foregoing comprising CorVu
Intellectual Property. No claim has been asserted or, to the knowledge of CorVu,
threatened in writing by any person, with respect to the use of CorVu
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement with respect thereto, except for such
claims that, individually or in the aggregate, would not reasonably be expected
to have a CorVu Material Adverse Effect. To the knowledge of CorVu, neither the
use of CorVu Intellectual Property by CorVu or any CorVu Subsidiary in the
present conduct of its business nor any product or service of CorVu or any
Subsidiary infringes on the valid intellectual property rights of any person in
a manner that, individually or in the aggregate, would reasonably be expected to
have a CorVu Material Adverse Effect. Except as would not, individually or in
the aggregate, reasonably be expected to have a CorVu Material Adverse Effect,
(i) all CorVu Intellectual Property listed in the CorVu Disclosure Schedule has
the status indicated therein and, unless provided otherwise, all applications
are still pending in good standing and have not been abandoned, and (ii) to the
knowledge of CorVu, the CorVu Intellectual Property is valid and has not been
challenged in any judicial or administrative proceeding. To the knowledge of
CorVu, no person or entity nor such person's or entity's business or products
has infringed, or misappropriated any CorVu Intellectual Property, or currently
is infringing, or misappropriating any CorVu Intellectual Property, except as
would not, individually or in the aggregate, reasonably be expected to have a
CorVu Material Adverse Effect.
4.14 Year 2000 Compliance. To the best of CorVu's knowledge, all
hardware and software used, and all software developed and sold, by CorVu in the
ordinary course of business is Year 2000 Compatible (as defined in Section
3.14).
4.15 Benefit Plans.
(a) Neither CorVu nor any CorVu Subsidiary sponsors,
maintains, contributes to, or has, within the past five years,
sponsored, maintained, or contributed to or been required to contribute
to, any "employee pension benefit plan" ("Pension Plan"), as such term
is defined in Section 3(2) of ERISA, including, solely for the purpose
of this subsection, a plan excluded from coverage by Section 4(b)(5) of
ERISA. Each such Pension Plan presently maintained by CorVu or any
CorVu Subsidiary is, in all material respects, in compliance with
applicable provisions of ERISA, the Code, and other applicable law and
CorVu or such CorVu Subsidiary has performed all of its obligations
under such Pension Plan except for such obligations that would not,
individually or in the aggregate, reasonably be expected to have a
CorVu Material Adverse Effect.
(b) Neither CorVu nor any CorVu Subsidiary sponsors,
maintains, contributes to, or has, within the past five years,
sponsored, maintained, or contributed to or been required to contribute
to, any Pension Plan that is subject to Title IV of ERISA.
(c) Neither CorVu nor any CorVu Subsidiary sponsors,
maintains, or contributes to any "employee welfare benefit plan"
("Welfare Plan"), as such term is defined in Section 3(1) of ERISA,
whether insured or otherwise, and any such Welfare Plan presently
maintained by CorVu or any CorVu Subsidiary is, in all material
respects, in compliance with the provisions of ERISA, the Code, and all
other applicable laws, including, but not limited to, Section 4980B of
the Code and the regulations thereunder, and Part 6 of Title I of
ERISA. Neither CorVu nor any CorVu Subsidiary has established or
contributed to any "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code.
(d) Neither CorVu nor any CorVu Subsidiary currently maintains
or contributes to any oral or written bonus, profit-sharing,
compensation (incentive or otherwise), commission, stock option, or
other stock-based compensation, retirement, severance, change of
control, vacation, sick or parental leave, dependent care, deferred
compensation, cafeteria, disability, hospitalization, medical, death,
retiree, insurance, or other benefit or welfare or other similar plan,
policy, agreement, trust, fund, or arrangement providing for the
remuneration or benefit of all or any CorVu employees, directors or any
other person, that is neither a Pension Plan nor a Welfare Plan
(collectively, the "CorVu Compensation Plans").
(e) With respect to the Pension Plans, Welfare Plans or CorVu
Compensation Plans, no event has occurred and, to the knowledge of
CorVu, there exists no condition or set of circumstances, in connection
with which CorVu or any CorVu Subsidiary would be subject to any
liability under the terms of such Plans (other than the payment of
benefits thereunder), ERISA, the Code or any other applicable law that
would, individually or in the aggregate, reasonably be expected to have
a CorVu Material Adverse Effect.
(f) The IRS has issued favorable determination letters with
respect to all CorVu and CorVu Subsidiary Pension Plans that are
intended to be qualified under Section 401(a) of the Code. CorVu has
provided or made available to MNAC summaries of all Pension Plans,
Welfare Plans, Compensation Plans, and related agreements, and complete
and accurate copies of all annual reports (Form 5500), favorable
determination letters, current summary plan descriptions, and all
employee handbooks or manuals. CorVu has provided or made available to
MNAC (i) copies of all employment agreements with officers of any of
CorVu or any CorVu Subsidiary (or copies of forms of agreements setting
forth representative employment terms and conditions); (ii) copies of
all severance, bonus or incentive agreements, programs and policies of
any of CorVu or any CorVu Subsidiary with or relating to any of its
employees; and (iii) copies of all plans, programs, agreements and
other arrangements of any of CorVu or any CorVu Subsidiary with or
relating to any of its employees that contain change in control
provisions.
(g) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any CorVu or CorVu Subsidiary Pension Plan, Welfare Plan,
Compensation Plan, or other arrangement that will or may result in any
payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits, or obligation to fund benefits.
4.16 Minute Books. CorVu has previously made available to MNAC or its
representatives all of the minutes of meetings of and corporate actions or
written consents by the stockholders, Boards of Directors, and committees of the
Boards of Directors of CorVu and each CorVu Subsidiary.
4.17 No Finders. No act of CorVu or any CorVu Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments to Jon Adams Financial Co.
L.L.P. ("JAF") as described in the CorVu Disclosure Schedule.
ARTICLE 5.
COVENANTS
5.1 Conduct of Business of MNAC. From the date of this Agreement to the
Effective Date, unless CorVu shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by this Agreement, MNAC shall not, directly
or indirectly: (a) amend or propose to amend its Articles of Incorporation or
Bylaws; (b) issue, sell or grant any of equity securities, or securities
convertible into or exchangeable for MNAC equity securities, other than (i)
grants of stock options to purchase up to an aggregate 25,000 shares of MNAC
Common Stock (net of options terminated or forfeited during such period) at not
less than fair market value at the date of grant, and (ii) issuances of shares
of MNAC Common Stock pursuant to the exercise or conversion of stock options,
warrants or Series A Preferred Stock outstanding on the date of this Agreement
or granted pursuant to clause (i) above); (c) reclassify, subdivide or otherwise
change outstanding shares of capital stock of MNAC whether by stock dividend,
reverse stock split, distribution of securities convertible into MNAC capital
stock or otherwise; (d) acquire (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or assets thereof; (e) default in its
obligations under any material debt, contract or commitment which default
results in the acceleration of obligations due thereunder; (f) enter into or
propose to enter into, or modify or propose to modify, any agreement,
arrangement, or understanding with respect to any of the foregoing matters; (g)
declare or pay any dividend or distribution; or (h) conduct its business other
than in the ordinary course on an arm's length basis and in accordance in all
material respects with all applicable laws, rules and regulations and MNAC's
past custom and practice.
5.2 Conduct of Business of CorVu. From the date of this Agreement to
the Effective Date, unless MNAC shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by this Agreement, CorVu shall not, directly
or indirectly: (a) amend or propose to amend its Articles of Incorporation or
Bylaws; (b) issue, sell or grant any of equity securities, or securities
convertible into or exchangeable for CorVu equity securities, other than the (i)
grants of stock options to purchase up to an aggregate 25,000 shares of CorVu
Common Stock (net of options terminated or forfeited during such period) at not
less than fair market value at the date of grant, (ii) the grant of CorVu shares
and warrants to JAF as described in Section 4.17 of the CorVu Disclosure
Schedule, (iii) completion of the proposed bridge financing described in Section
5.2 of the CorVu Disclosure Schedule, and (iv) issuances of shares of CorVu
Common Stock pursuant to the exercise of stock options or warrants outstanding
on the date of this Agreement or granted pursuant to clause (i) above); (c)
reclassify, subdivide or otherwise change outstanding shares of capital stock of
CorVu whether by stock dividend, reverse stock split, distribution of securities
convertible into CorVu capital stock or otherwise; (d) acquire (by merger,
exchange, consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership, joint venture or other business organization or
division or assets thereof; (e) default in its obligations under any material
debt, contract or commitment which default results in the acceleration of
obligations due thereunder; (f) enter into or propose to enter into, or modify
or propose to modify, any agreement, arrangement, or understanding with respect
to any of the foregoing matters; (g) declare or pay any dividend or
distribution; or (h) conduct its business other than in the ordinary course on
an arm's length basis and in accordance in all material respects with all
applicable laws, rules and regulations and CorVu's past custom and practice.
5.3 No Solicitation. MNAC and CorVu shall not, and shall cause their
respective officers, directors, employees, representatives, agents, or
affiliates (including, but not limited to any investment banker, attorney, or
accountant), not to, directly or indirectly, solicit, knowingly encourage,
initiate, or participate in any way in discussions or negotiations with, or
knowingly provide any nonpublic information to, any corporation, partnership,
person, or other entity or group (other than a party to this Agreement)
concerning any proposed Alternative Transaction, or otherwise knowingly
facilitate any effort or attempt to make or implement an Alternative
Transaction. For purposes of this Agreement, "Alternative Transaction" shall
mean any of the following involving MNAC or CorVu, respectively: (i) any tender
offer, exchange offer, merger, consolidation, share exchange, business
combination or similar transaction involving capital stock of MNAC or CorVu,
respectively; (ii) any transaction or series of related transactions pursuant to
which any person or entity (or its shareholders), other than MNAC or CorVu or
their respective affiliates, (a "Third Party") acquires shares (or securities
exercisable for or convertible into shares) representing more than 50% of the
outstanding shares of any class of capital stock of MNAC or CorVu, respectively;
or (iii) any sale, lease, exchange, licensing, transfer or other disposition
pursuant to which a Third Party acquires control of more than 50% of the assets
(including, but not limited to, intellectual property assets) of MNAC or CorVu,
respectively (determined by reference to the fair market value of such assets),
in a single transaction or series of related transactions. MNAC and CorVu will
immediately cease and terminate all discussions, if any, that have taken place
prior to the date hereof with Third Parties concerning any proposed Alternative
Transaction, and will request that such Third Parties promptly return any
confidential information furnished by MNAC or CorVu, respectively. MNAC and
CorVu will not waive any provision of any confidentiality, standstill or similar
agreement entered into with any third party regarding any proposed Alternative
Transaction, and prior to the Closing shall enforce all such agreements in
accordance with their terms. MNAC and CorVu will promptly communicate to each
other the name of the person or entity submitting, and the terms and conditions
of, any proposal or written inquiry that it receives after the date hereof in
respect of any proposed Alternative Transaction or a reasonably detailed
description of any such information requested from it after the date hereof or
of any such negotiations or discussions being sought to be initiated or
continued with MNAC or CorVu, respectively, after the date hereof in respect of
a proposed Alternative Transaction; provided, however, that this Agreement shall
not prohibit the Board of Directors of MANC or CorVu from:
(i) prior to approval of the Merger by its respective shareholders,
furnishing nonpublic information to or affording access to its
properties, books or records, or entering into discussions or
negotiations with, any person or entity that makes an unsolicited
Superior Proposal (as defined below), if, and only to the extent that,
(a) the Board of Directors of MNAC or CorVu, as the case may
be, determines in good faith after consultation with its
independent legal counsel, that such action is so required
under applicable law in order for the Board of Directors or
MNAC or CorVu, as the case may be, to comply with its
applicable fiduciary duties to its shareholders imposed by
law,
(b) prior to first furnishing nonpublic information to, or
first entering into substantive discussions and negotiations
with, such person or entity after the date hereof, MNAC or
CorVu, as the case may be (x) provides at least 24 hours prior
written notice to the other party to the effect that it
intends to furnish information to, or enter into discussions
or negotiations with, such person or entity, and naming and
identifying the person or entity making the Superior Proposal,
and (y) receives from such person or entity an executed
confidentiality agreement to the effect that such Third Party
will not disclose any confidential information of MNAC or
CorVu, as the case may be; and
(c) MNAC or CorVu, as the case may be, concurrently provides
the other party with all non-public information to be provided
to such Third Party that such other party has not previously
received, and MNAC or CorVu, as the case may be, keeps the
other party informed, on a regular basis, of the status, terms
and conditions and all other material information with respect
to any such discussions or negotiations; or
(ii) to the extent applicable, complying with Rule 14e-2 promulgated
under the 1934 Act with regard to a proposed Alternative Transaction or
making such disclosure to its shareholders as in the reasonable
judgment of the Board of Directors of MNAC or CorVu, as the case may
be, with the advice of independent counsel, is required under
applicable law.
Nothing in this Section 5.3 shall (x) permit MNAC or CorVu to terminate this
Agreement (except as specifically provided in Article 7 hereof), or (y) permit
MNAC or CorVu to enter into any agreement providing for an Alternative
Transaction (other than the confidentiality agreement as provided, and in the
circumstances and under the conditions set forth, above) for as long as this
Agreement remains in effect. For purposes of this Agreement, a "Superior
Proposal" shall mean a proposal for an Alternative Transaction that the Board of
Directors of MNAC or CorVu, as the case may be, has reasonably and in good faith
determined (with the advice of its financial advisors and taking into account
all legal, financial and regulatory aspects of the likelihood of the
consummation of such Alternative Transaction, including, but not limited to, the
conditions to consummation and the consequences under such Alternative
Transaction proposal of any material adverse effects or changes in MNAC or
CorVu, as the case may be) to be more favorable to MNAC's or CorVu's,
respectively, shareholders than the transactions contemplated by this Agreement.
5.4 Access and Information.
(a) Except as required pursuant to any confidentiality
agreement or similar agreement or arrangement to which MNAC, CorVu or
any of their respective Subsidiaries is a party (in which case MNAC or
CorVu shall use all commercially reasonable efforts to provide
acceptable alternative arrangements, not in violation of such agreement
or arrangement, for disclosure to the other party) or pursuant to
applicable law, MNAC and CorVu shall afford to the other party, and to
the other party's accountants, officers, directors, employees, counsel,
and other representatives, reasonable access during normal business
hours upon reasonable prior notice, from the date hereof through the
Effective Time, to all of its properties, books, contracts,
commitments, and records, and, during such period, MNAC and CorVu shall
each furnish promptly to the other party all information concerning
MNAC's or CorVu's businesses, prospects, properties, liabilities,
results of operations, financial condition, officers, employees,
investigators, distributors, customers, and suppliers as the other
party may reasonably request and reasonable opportunity to contact and
obtain information from such officers, employees, investigators,
distributors, customers, and suppliers as the other party may
reasonably request. During the period from the date hereof to the
Effective Time, the parties shall in good faith meet and correspond on
a regular basis for mutual consultation concerning the conduct of
MNAC's and CorVu's businesses and, in connection therewith, CorVu and
MNAC shall be entitled, during normal business hours upon reasonable
prior notice and in a manner that does not unreasonably interfere with
the other party's business, to have employees or other representatives
present at the offices of the other party and its subsidiaries to
observe, and be kept informed concerning such other party's operations
and business planning.
(b) Prior to closing and if, for any reason, the transactions
contemplated by this Agreement are not consummated, neither MNAC nor
CorVu nor any of their officers, employees, attorneys, accountants and
other representatives, shall disclose to third parties or otherwise use
any confidential information received from the other party in the
course of investigating, negotiating, and performing the transactions
contemplated by this Agreement; provided, however, that nothing shall
be deemed to be confidential information which:
(i) is known to the party receiving the information
at the time of disclosure;
(ii) becomes publicly known or available without the
disclosure thereof by the party receiving the information in
violation of this Agreement; or
(iii) is rightfully received by the party receiving
the information from a third party.
This provision shall not prohibit the disclosure of information
required to be made under federal or state securities laws. If any
disclosure is so required, the party making such disclosure shall
consult with the other party prior to making such disclosure, and the
parties shall use all reasonable efforts, acting in good faith, to
agree upon a text for such disclosure which is satisfactory to both
parties.
5.5 Approval of MNAC and CorVu Shareholders.
(a) MNAC shall promptly take all action necessary in accordance with
the MBCA and MNAC's Articles of Incorporation and Bylaws to cause a
special meeting of MNAC's shareholders (the "MNAC Shareholders
Meeting") to be duly called and held as soon as reasonably practicable
following the date hereof for the purposes of (i) voting upon the
Merger and the adoption and approval of this Agreement (ii) amending
MNAC's Articles of Incorporation to increase the number of shares
authorized thereunder from 10,000,000 to 100,000,000, and (iii) to the
extent reasonably practicable, approving the sale of MNAC's LockerMate
Subsidiary if required by the MBCA. At such meeting, MNAC shall submit
such items to the vote of the MNAC shareholders and use its reasonable
best efforts to obtain the approval by MNAC's shareholders of each of
such three items. As soon as practicable after the date hereof, MNAC
shall prepare and mail a proxy statement (such proxy statement,
together with notice of meeting, form of proxy, and any letter or other
materials to MNAC's shareholders included therein are referred to in
this Agreement as the "MNAC Proxy Statement"). CorVu shall furnish to
MNAC all information concerning CorVu and its subsidiaries, officers,
directors and shareholders, and shall take such other action and
otherwise cooperate, as MNAC may reasonably request in connection with
such MNAC Proxy Statement. MNAC shall cause the MNAC Proxy Statement to
comply with all applicable laws and not to contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
The MNAC Proxy Statement shall include the recommendation of MNAC's
Board of Directors in favor of the Merger, unless the Board of
Directors of MNAC determines in good faith after consultation with its
independent legal counsel, that to do so would violate its applicable
fiduciary duties to its shareholders imposed by law. Unless and until
this Agreement is validly terminated pursuant to Article 7, nothing
herein shall limit or eliminate in any way MNAC's obligation to call,
give notice of, convene and hold the MNAC Shareholders Meeting and at
such meeting submit this Agreement and the Merger to a vote of MNAC's
shareholders (and not postpone or adjourn such meeting or the vote by
MNAC's shareholders upon this Agreement and the Merger to another date
without CorVu's approval).
(b) CorVu shall promptly take all action necessary in accordance with
the MBCA and CorVu's Articles of Incorporation and Bylaws to cause a
special meeting of CorVu's shareholders (the "CorVu Shareholders
Meeting") to be duly called and held as soon as reasonably practicable
following the date hereof for the purposes of (i) voting upon the
Merger and the adoption and approval of this Agreement, and (ii)
approving the increase in shares reserved under the CorVu Option Plan
from 1,500,000 to 3,500,000. At such meeting, CorVu shall submit such
items to the vote of the CorVu shareholders and use its best efforts to
obtain the approval by CorVu's shareholders of each of such items. As
soon as practicable after the date hereof, CorVu shall prepare and mail
a proxy statement (such proxy statement, together with notice of
meeting, form of proxy, and any letter or other materials to CorVu's
shareholders included therein are referred to in this Agreement as the
"CorVu Proxy Statement"). MNAC shall furnish to CorVu all information
concerning MNAC and its subsidiaries, officers, directors and
shareholders, and shall take such other action and otherwise cooperate,
as CorVu may reasonably request in connection with such CorVu Proxy
Statement. CorVu shall cause the CorVu Proxy Statement to comply with
all applicable laws and not to contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The CorVu
Proxy Statement shall include the recommendation of CorVu's Board of
Directors in favor of the Merger, unless the Board of Directors of
CorVu determines in good faith after consultation with its independent
legal counsel, that to do so would violate its applicable fiduciary
duties to its shareholders imposed by law. Unless and until this
Agreement is validly terminated pursuant to Article 7, nothing herein
shall limit or eliminate in any way CorVu's obligation to call, give
notice of, convene and hold the CorVu Shareholders Meeting and at such
meeting submit this Agreement and the Merger to a vote of CorVu's
shareholders (and not postpone or adjourn such meeting or the vote by
CorVu's shareholders upon this Agreement and the Merger to another date
without MNAC's approval).
5.6 Consents. MNAC will, at its cost and expense, use all reasonable
efforts to obtain all approvals and consents of all third parties necessary on
the part of MNAC or any MNAC Subsidiary to consummate the transactions
contemplated hereby. CorVu agrees to cooperate with MNAC in connection with
obtaining such approvals and consents. CorVu will, at its cost and expense, use
all reasonable efforts to obtain all approvals and consents of all third parties
necessary on the part of CorVu or any CorVu Subsidiary to consummate the
transactions contemplated hereby. MNAC agrees to cooperate with CorVu in
connection with obtaining such approvals and consents.
5.7 Further Actions. Subject to the terms and conditions herein
provided and without being required to waive any conditions herein (whether
absolute, discretionary, or otherwise), each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
5.8 Regulatory Approvals. MNAC and CorVu each agree to use commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things as may be necessary under applicable laws or
regulations for the consummation of the Merger or any of the other transactions
contemplated hereby, and each party shall give the other information reasonably
requested by such other party pertaining to it and its subsidiaries and
affiliates to enable such other party to take such actions.
5.9 Certain Notifications. MNAC shall promptly notify CorVu in writing
of the occurrence of any event that will or could reasonably be expected to
result in the failure by MNAC or its affiliates to satisfy any of the conditions
specified in Section 6.1 or 6.2. CorVu shall promptly notify MNAC in writing of
the occurrence of any event that will or could reasonably be expected to result
in the failure by CorVu or its affiliates to satisfy any of the conditions
specified in Section 6.1 or 6.3.
5.10 Securities Laws. MNAC shall take any action required to be taken
under 1933 Act or state blue sky or securities laws in connection with the
issuance of MNAC Common Stock pursuant to the Merger.
5.11 Disposition of MNAC Subsidiaries. Prior to the Effective Time,
MNAC will sell, transfer or otherwise dispose of substantially all of the assets
or capital stock of LockerMate Corp., a Minnesota corporation and wholly-owned
subsidiary of MNAC ("LockerMate"). Prior to the Effective Time, MNAC will also
sell, transfer or otherwise dispose of substantially all of the assets or
capital stock of Favorite Memories, Inc., a Minnesota corporation and
wholly-owned subsidiary of MNAC ("Favorite Memories"). MNAC will use its
reasonable best efforts to maximize the present value (as calculated pursuant to
Section 6.2(c)) of the sales price or disposal value of each of LockerMate and
Favorite Memories.
5.12 Resignations and Elections of Directors. At the Effective Time,
MNAC will deliver the voluntary resignations of each officer of MNAC and each
director of MNAC who is not designated to be a director of the Surviving
Corporation in accordance with Section 1.11. The continuing MNAC directors shall
appoint the other persons designated by CorVu to be directors of the Surviving
Corporation upon the consummation of the Merger.
5.13 Registration Rights Agreement. At the Effective Date, MNAC shall
execute and deliver the Registration Rights Agreement in the form of the
attached Exhibit D.
5.14 Plan of Reorganization. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code. From and after the date of this
Agreement, each party hereto shall use all reasonable efforts to cause the
Merger to qualify, and shall not, without the prior written consent of the other
parties hereto, knowingly take any actions or cause any actions to be taken that
could prevent the Merger from qualifying as a reorganization under the
provisions of Section 368(a) of the Code.
5.15 Directors and Officer Liability. For six years after the Effective
Time, the Surviving Corporation will indemnify and hold harmless the present and
former officers and directors of each of MNAC and CorVu in respect of acts or
omissions occurring prior to the Effective Time including, without limitation,
matters related to the transactions contemplated by this Agreement, to the
extent provided under MNAC's articles of incorporation and bylaws in effect on
the date hereof, provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For six years after
the Effective Time, the Surviving Corporation will use its best efforts to
provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to and including the Effective Time covering each such
person currently covered by MNAC's officers' and directors' liability insurance
policy, and each present and former officer or director of CorVu, on terms with
respect to coverage and amount no less favorable than those of MNAC's policy in
effect on the date hereof, provided that, in satisfying its obligation under
this Section, the Surviving Corporation shall not be obligated to pay premiums
in excess of 200% of the amount per annum MNAC paid in its last full fiscal
year, which amount has been disclosed to CorVu. It is understood that such
obligation to indemnify (but not to maintain insurance) shall apply to claims of
which the Surviving Corporation shall have been notified prior to the expiration
of such six-year period regardless of when such claims shall have been disposed
of.
ARTICLE 6.
CLOSING CONDITIONS
6.1 Conditions to Obligations of CorVu and MNAC. The respective
obligations of each party to consummate the Merger shall be subject to the
fulfillment at or prior to the Closing of the following conditions, any or all
of which may be waived, in whole or in part, to the extent permitted by
applicable law:
(a) No Injunction. Neither CorVu nor MNAC shall be subject to
any final order, decree, or injunction of a court of competent
jurisdiction within the United States that is then in effect and (i)
has the effect of making the Merger illegal or otherwise prohibiting
the consummation of the Merger, or (ii) would impose any material
limitation on the ability of the Surviving Corporation to effectively
operate the CorVu business.
(b) Shareholder Approval. The approval of the shareholders of
MNAC and CorVu referred to in Section 5.5 hereof shall have been
obtained, in accordance with the MBCA and MNAC's and CorVu's respective
Articles of Incorporation and Bylaws.
(c) Exemption From Registration. The issuance of the Merger
Shares shall be exempt from registration under the 1933 Act and
applicable state and foreign securities laws.
6.2 Conditions to Obligations of CorVu. The obligations of CorVu to
consummate the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions, any or all of which may be
waived by CorVu, in whole or in part, to the extent permitted by applicable law:
(a) Representations and Warranties True. The representations
and warranties of MNAC contained in this Agreement, without regard to
any qualification or reference to "MNAC Material Adverse Effect," shall
be true and correct on the Closing Date as though such representations
and warranties were made on such date, except that those
representations and warranties that address matters only as of the date
hereof or another particular date shall remain true and correct as of
such date, and except in any case for any inaccuracies of
representations and warranties that, individually or in the aggregate,
have not had, or would not reasonably be expected to have, a MNAC
Material Adverse Effect. CorVu shall have received a certificate to the
foregoing effect signed by the Chief Executive Officer of MNAC.
(b) Performance. MNAC shall have performed and complied in all
material respects with all material covenants required by this
Agreement to be performed or complied with by it on or prior to the
Closing, and CorVu shall have received a certificate to such effect
signed by the Chief Executive Officer of MNAC.
(c) Minimum Consideration and Net Worth. MNAC shall have sold,
transferred or otherwise disposed of all or substantially all of the
assets and liabilities or capital stock of its two wholly-owned
subsidiaries, LockerMate and Favorite Memories, and, after giving
effect to such transactions, shall have as of the Closing (i) a
consolidated net worth of at least $1,000,000, (ii) cash of at least
$750,000, and (iii) cash, plus the discounted present value of accounts
and notes receivable and future contract payments, minus current
liabilities, minus any non-balance sheet liabilities, and minus any
severance or pension plan liabilities described in Section 3.15 of the
MNAC Disclosure Schedule, equal to or greater than in the aggregate
$1,000,000. For purposes of this Agreement, present value shall be
calculated as follows: (i) 25% annual discount rate for notes
receivable and unconditional contract payments, and 50% annual discount
rate for performance-related, conditional contract payments, using
zero-growth projections.
(d) Tax Opinion. CorVu shall have received an opinion of
Fredrikson & Byron, P.A., counsel to CorVu, addressed to CorVu, based
upon representations of CorVu and MNAC and normal assumptions, and
dated the Closing, to the effect that, subject to customary conditions
and representations, the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that each of CorVu and MNAC will be considered a party to
such reorganization. CorVu and MNAC hereby agree to provide to such
counsel certificates acceptable to such counsel setting forth the
customary representations which may be relied upon by such counsel in
rendering such opinion.
(e) MNAC Dissenting Shares. The percentage of outstanding
shares of MNAC Common Stock or Preferred Stock (on an as converted
basis) held by MNAC shareholders who have (i) asserted dissenters'
rights pursuant to Sections 302A.471 and 302A.473 of the MBCA and (ii)
as of the Effective Time, have not effectively withdrawn or lost such
rights, shall not exceed five percent (5%) of the issued and
outstanding shares of MNAC Common Stock.
(f) MNAC Financials. MNAC's audited financials for the year
ended September 30, 1999, if not delivered in final form to CorVu prior
to the date hereof, shall not contain any material adverse changes from
the preliminary version thereof previously delivered to CorVu.
6.3 Conditions to Obligations of MNAC. The obligation of MNAC to
consummate the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions, any or all of which may be
waived by MNAC, in whole or in part, to the extent permitted by applicable law:
(a) Representations and Warranties True. The representations
and warranties of CorVu contained in this Agreement, without regard to
any qualification or reference to "CorVu Material Adverse Effect,"
shall be true and correct on the Closing Date as though such
representations and warranties were made on such date, except that
those representations and warranties that address matters only as of a
particular date shall remain true and correct as of such date, and
except in any case for any inaccuracies of representations and
warranties that, individually or in the aggregate, have not had, or
would not reasonably be expected to have, a CorVu Material Adverse
Effect. MNAC shall have received a certificate to the foregoing effect
signed by the Chief Executive Officer of CorVu.
(b) Performance. CorVu shall have performed and complied in
all material respects with all material covenants required by this
Agreement to be performed or complied with by it on or prior to the
Closing, and MNAC shall have received a certificate to such effect
signed by the Chief Executive Officer of CorVu.
(c) CorVu Dissenting Shares. The percentage of outstanding
shares of CorVu Common Stock held by CorVu shareholders who have (i)
asserted dissenters' rights pursuant to Sections 302A.471 and 302A.473
of the MBCA and (ii) as of the Effective Time, have not effectively
withdrawn or lost such rights, shall not exceed five percent (5%) of
the issued and outstanding shares of CorVu Common Stock.
(d) CorVu Financials. CorVu's audited financials for the year
ended June 30, 1999, if not delivered in final form to MNAC prior to
the date hereof, shall not contain any material adverse changes from
the preliminary version thereof previously delivered to MNAC.
ARTICLE 7.
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the shareholders of MNAC
and/or CorVu, only:
(a) by mutual written consent duly authorized by the Board of
Directors of CorVu and the Board of Directors of MNAC;
(b) by either CorVu or MNAC if the Merger shall not have been
consummated on or before January 15, 2000; provided, however, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have been the
proximate cause of, or resulted in, the failure to consummate the
Merger by such date;
(c) by either CorVu or MNAC if a court of competent
jurisdiction or an administrative, governmental, or regulatory
authority has issued a final nonappealable order, decree, or ruling, or
taken any other action, having the effect of permanently restraining,
enjoining, or otherwise prohibiting the Merger;
(d) by either MNAC or CorVu if at the MNAC Shareholders
Meeting, the requisite vote of the shareholders of MNAC for approval
and adoption of this Agreement and the Merger is not obtained; provided
that the right to terminate this Agreement under this Section 7.1(d)
will not be available to any party whose failure to perform any
material obligation under this Agreement has been the proximate cause
of, or resulted in, the failure to obtain the requisite vote of the
shareholders of MNAC;
(e) by either MNAC or CorVu if at the CorVu Shareholders
Meeting, the requisite vote of the shareholders of CorVu for approval
and adoption of this Agreement and the Merger is not obtained; provided
that the right to terminate this Agreement under this Section 7.1(e)
will not be available to any party whose failure to perform any
material obligation under this Agreement has been the proximate cause
of, or resulted in, the failure to obtain the requisite vote of the
shareholders of CorVu;
(f) by CorVu if either (i) MNAC has breached its obligations
under Section 5.3 in any material respect (provided that for the
purposes of this clause (i), actions of representatives or agents of
MNAC who are not officers, directors or employees of MNAC which do not
result in a proposal for an Alternative Transaction shall not be deemed
to be a breach of Section 5.3 so long as MNAC has used commercially
reasonable efforts to cause such representatives and agents to comply
with Section 5.3), (ii) the Board of Directors of MNAC has recommended,
approved, or authorized MNAC's acceptance or execution of a definitive
agreement providing for, an Alternative Transaction, as defined in
Section 5.3, (iii) the Board of Directors of MNAC has modified in a
manner materially adverse to CorVu or withdrawn its approval or
recommendation of this Agreement and the Merger or its recommendation
that shareholders of MNAC adopt and approve this Agreement and the
Merger, (iv) MNAC has failed to call the MNAC Shareholders Meeting or
failed to mail the MNAC Proxy Statement to its shareholders within 30
days after the date of this Agreement or failed to include in such
statement the recommendation referred to above, or (v) a tender offer
or exchange offer for any outstanding shares of MNAC Common Stock is
commenced, and the Board of Directors of MNAC either (A) recommends in
favor of acceptance of such tender offer or exchange offer by its
shareholders, or (B) takes no position with respect to the acceptance
of such tender offer or exchange offer by its shareholders;
(g) by MNAC if either (i) CorVu has breached its obligations
under Section 5.3 in any material respect (provided that for purposes
of this clause (i), actions of representatives or agents of CorVu who
are not officers, directors or employees of CorVu which do not result
in a proposal for an Alternative Transaction shall not be deemed to be
a breach of Section 5.3 so long as CorVu has used commercially
reasonable efforts to cause such representatives and agents to comply
with Section 5.3), (ii) the Board of Directors of CorVu has
recommended, approved, or authorized CorVu's acceptance or execution of
a definitive agreement providing for, an Alternative Transaction, as
defined in Section 5.3, (iii) the Board of Directors of CorVu has
modified in a manner materially adverse to MNAC or withdrawn its
approval or recommendation of this Agreement and the Merger or its
recommendation that shareholders of CorVu adopt and approve this
Agreement and the Merger, (iv) CorVu has failed to call the CorVu
Shareholders Meeting or failed to mail the CorVu Proxy Statement to its
shareholders within 30 days after the date of this Agreement or failed
to include in such statement the recommendation referred to above, or
(v) a tender offer or exchange offer for any outstanding shares of
CorVu Common Stock is commenced, and the Board of Directors of CorVu
either (A) recommends in favor of acceptance of such tender offer or
exchange offer by its shareholders, or (B) takes no position with
respect to the acceptance of such tender offer or exchange offer by its
shareholders;
(h) by MNAC prior to approval of the Merger at the MNAC
Shareholder Meeting if (i) it is not in material breach of its
obligations under this Agreement and has complied with, and continues
to comply with, all requirements and procedures of Section 5.3 in all
material respects, (ii) the Board of Directors of MNAC has complied
with, and continues to comply with, all requirements and procedures of
Section 5.3 in all material respects and has authorized, subject to
complying with the terms of this Agreement, MNAC to enter into a
binding written agreement concerning a transaction that constitutes a
Superior Proposal and MNAC notifies CorVu in writing that it intends to
enter into such agreement, attaching the most current version of such
agreement to such notice, (iii) CorVu does not make, within five
business days after receipt of MNAC's written notice of its intention
to enter into a binding agreement for a Superior Proposal, any offer
that the Board of Directors of MNAC reasonably and in good faith
determines, after consultation with its financial and legal advisors,
is at least as favorable to the shareholders of MNAC as the Superior
Proposal and during such five business-day period MNAC reasonably
considers and discusses in good faith all proposals submitted by CorVu
and, without limiting the foregoing, meets with, and causes its
financial advisors and legal advisors to meet with, CorVu and its
advisors from time to time as requested by CorVu to reasonably consider
and discuss in good faith CorVu's proposals, and (iv) MNAC pays to
CorVu the fee required by Section 7.2(a) to be paid to CorVu in the
manner therein provided. MNAC agrees (x) that it will not enter into a
binding agreement referred to in clause (ii) above until at least the
sixth business day after CorVu has received the notice required by
clause (ii) above, and (y) to notify CorVu promptly if its intention to
enter into a binding agreement referred to in its notice to CorVu shall
change at any time after giving such notice;
(i) by CorVu prior to approval of the Merger at the CorVu
Shareholder Meeting if (i) it is not in material breach of its
obligations under this Agreement and has complied with, and continues
to comply with, all requirements and procedures of Section 5.3 in all
material respects, (ii) the Board of Directors of CorVu has complied
with, and continues to comply with, all requirements and procedures of
Section 5.3 in all material respects and has authorized, subject to
complying with the terms of this Agreement, CorVu proposes to enter
into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and CorVu notifies MNAC in writing that
it intends to enter into such agreement, attaching the most current
version of such agreement to such notice, (iii) MNAC does not make,
within five business days after receipt of CorVu's written notice of
its intention to enter into a binding agreement for a Superior
Proposal, any offer that the Board of Directors of CorVu reasonably and
in good faith determines, after consultation with its financial and
legal advisors, is at least as favorable to the shareholders of CorVu
as the Superior Proposal and during such five business-day period CorVu
reasonably considers and discusses in good faith all proposals
submitted by MNAC and, without limiting the foregoing, meets with, and
causes its financial advisors and legal advisors to meet with, MNAC and
its advisors from time to time as requested by MNAC to reasonably
consider and discuss in good faith MNAC's proposals, and (iv) CorVu
pays to MNAC the fee required by Section 7.2(b) to be paid to MNAC in
the manner therein provided. CorVu agrees (x) that it will not enter
into a binding agreement referred to in clause (ii) above until at
least the sixth business day after MNAC has received the notice
required by clause (ii) above, and (y) to notify MNAC promptly if its
intention to enter into a binding agreement referred to in its notice
to MNAC shall change at any time after giving such notice;
(j) by CorVu, if (i) CorVu is not in material breach of its
obligations under this Agreement and (ii) there has been a material
breach by MNAC of any of its representations, warranties, or
obligations under this Agreement such that the conditions in Section
6.2 will not be satisfied ("Terminating MNAC Breach"); provided,
however, that, if such Terminating MNAC Breach is curable by MNAC
through the exercise of reasonable best efforts and such cure is
reasonably likely to be completed prior to the applicable date
specified in Section 7.1(b), then for so long as MNAC continues to
exercise reasonable best efforts, CorVu may not terminate this
Agreement under this Section 7.1(j); or
(k) by MNAC, if (i) MNAC is not in material breach of its
obligations under this Agreement and (ii) there has been a material
breach by CorVu of any of its representations, warranties, or
obligations under this Agreement such that the conditions in Section
6.3 will not be satisfied ("Terminating CorVu Breach"); provided,
however, that, if such Terminating CorVu Breach is curable by CorVu
through the exercise of reasonable best efforts and such cure is
reasonably likely to be completed prior to the applicable date
specified in Section 7.1(b), then for so long as CorVu continues to
exercise reasonable best efforts, MNAC may not terminate this Agreement
under this Section 7.1(k); or
7.2 Effect of Termination.
(a) In recognition of the time, efforts, and expenses expended
and incurred by CorVu with respect to MNAC and the opportunity that the
Merger presents to CorVu, if this Agreement is terminated pursuant to
Section 7.1(d) and within 12 months thereafter MNAC enters into an
agreement for an Alternative Transaction, or is terminated pursuant to
Sections 7.1(f) or 7.1(h) then, in any such event, MNAC will pay to
CorVu, upon the termination date, by wire transfer of immediately
available funds to an account designated by CorVu for such purpose), a
fee equal to $250,000.
(b) In recognition of the time, efforts, and expenses expended
and incurred by MNAC with respect to CorVu and the opportunity that the
Merger presents to MNAC, if this Agreement is terminated pursuant to
Section 7.1(e) and within 12 months thereafter CorVu enters into an
agreement for an Alternative Transaction, or is terminated pursuant to
Sections 7.1(g) or 7.1(i) then, in any such event, CorVu will pay to
MNAC, upon the termination date, by wire transfer of immediately
available funds to an account designated by MNAC for such purpose), a
fee equal to $250,000.
(c) MNAC and CorVu each acknowledges that the agreements
contained in this Section 7.2 are an integral part of the transactions
contemplated by this Agreement and are not a penalty, and that, without
these agreements, neither MNAC nor CorVu would not enter into this
Agreement. If either party fails to pay promptly the fee due pursuant
to this Section 7.2, such party shall also pay to the other party such
other party's costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on
the amount of the unpaid fee under this section, accruing from its due
date, at an interest rate per annum equal to two percentage points in
excess of the prime commercial lending rate quoted by Norwest Bank
Minnesota, N.A. Any change in the interest rate hereunder resulting
from a change in such prime rate shall be effective at the beginning of
the day of such change in such prime rate.
(d) Except as provided in the next sentence of this paragraph,
in the event of the termination of this Agreement pursuant to any
paragraph of Section 7.1, the obligations of the parties to consummate
the Merger will expire, and none of the parties will have any further
obligations under this Agreement except pursuant to Sections 5.4, 7.2,
8.10 and 8.14; provided that nothing herein shall relieve any party
from liability for the breach of any of its representations,
warranties, covenants or agreements set forth herein occurring prior to
the date of termination.
ARTICLE 8.
MISCELLANEOUS
8.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by written agreement of
CorVu, and MNAC at any time prior to the Effective Time with respect to any of
the terms contained herein; provided, however, that, after the approval of this
Agreement by the shareholders of CorVu, no amendment may be made that would
reduce the amount or change the type of consideration into which each share of
CorVu Common Stock shall be converted upon consummation of the Merger or which
would otherwise require stockholder approval under applicable law unless such
stockholder approval shall have been obtained. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.2 Waiver of Compliance; Consents. Any failure of CorVu on the one
hand, or MNAC on the other hand, to comply with any obligation, covenant,
agreement, or condition herein may be waived by MNAC or CorVu, respectively,
only by a written instrument signed by an officer of the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing.
8.3 Investigation; Survival of Representations and Warranties. The
respective representations and warranties of CorVu and MNAC contained herein or
in any certificates or other documents delivered prior to or at the Closing
shall not be deemed waived or otherwise affected by any investigation made by
any party hereto. The representations and warranties set forth in Articles 3 and
4 and in any certificate delivered pursuant hereto shall terminate at the
Effective Time.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial
courier service or otherwise, or by telecopier, or three days after such notice
is mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to CorVu to it at:
CorVu Corporation
Attention: David Carlson
3400 West 66th Street, Suite 445
Edina, MN 55435
Fax: (612) 843-7752
with a copy to
Fredrikson & Byron, P.A.
Attention: John H. Stout
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402-3397
Fax: (612) 347-7077
(b) If to MNAC, to it at:
Minnesota American, Inc.
Attention: Pierce McNally
14853 Deveau Place
Minnetonka, MN 55345-2126
Fax: (612) 945-9755
with a copy to:
Oppenheimer Wolff & Donnelly
Attention: Richard G. Lareau
45 South Seventh Street
Minneapolis, MN 55402
Fax: (612) 607-7100
8.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Except for the provisions of Article I (the "Third Party Provisions"), this
Agreement is not intended to confer upon any other person, except the parties
hereto, any rights or remedies hereunder, and no third person shall be a third
party beneficiary of this Agreement. The Third Party Provisions may be enforced
by the beneficiaries thereof.
8.6 Governing Law. This Agreement shall be governed by the laws of the
State of Minnesota (regardless of the laws that might otherwise govern under
applicable Minnesota principles of conflicts of law).
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 Knowledge. As used in this Agreement or the instruments,
certificates or other documents required hereunder, the term "knowledge" of a
party hereto shall mean actual knowledge of the directors or executive officers
of such party.
8.9 Interpretation. The Table of Contents, article and section headings
contained in this Agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. This Agreement shall
be construed without regard to any presumption or other rule requiring the
resolution of any ambiguity regarding the interpretation or construction hereof
against the party causing this Agreement to be drafted.
8.10 Publicity. Upon execution of this Agreement by CorVu and MNAC, the
parties shall jointly issue a press release, as agreed upon by them. The parties
intend that all future statements or communications to the public or press
regarding this Agreement or the Merger will be mutually agreed upon by them,
except as provided in the following sentence. Neither party shall, without such
mutual agreement or the prior consent of the other, file any documents or issue
any statement or communication to the public or to the press regarding this
Agreement, or any of the terms, conditions, or other matters with respect to
this Agreement, except as required by law and then only (a) upon the advice of
such party's legal counsel; (b) to the extent required by law; and (c) following
prior notice to, and consultation with, the other party (which notice shall
include a copy of the proposed statement or communication to be issued to the
press or public). The foregoing shall not restrict CorVu's or MNAC's
communications with their employees or customers in the ordinary course of
business.
8.11 Entire Agreement. This Agreement, including the exhibits and
schedules hereto, embodies the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and the understandings between the parties with
respect to such subject matter.
8.12 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
8.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
8.14 Expenses. Except as otherwise provided in this Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Reorganization as of the date first above written.
CORVU CORPORATION
By: /s/ Dave Carlson
Its: Chief Financial Officer
MINNESOTA AMERICAN, INC.
By: /s/ Pierce McNally
Pierce McNally, Chairman and
Chief Executive Officer
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
MINNESOTA AMERICAN, INC.
ARTICLE 1 - NAME
1.1) The name of the corporation shall be CorVu Corporation.
ARTICLE 2 - REGISTERED OFFICE
2.1) The registered office of the corporation is located at 3400 West
66th Street, Edina, Minnesota 55435.
ARTICLE 3 - CAPITAL STOCK
3.1) Authorized Shares; Establishment of Classes and Series. The
aggregate number of shares the corporation has authority to issue shall be
100,000,000 shares, and which shall consist of 75,000,000 shares of Common
Stock, par value $0.01, 1,000,000 shares of Series A Convertible Preferred
Stock, par value $10.00, and 24,000,000 undesignated shares. The Board of
Directors of the corporation is authorized to establish from the undesignated
shares, by resolution adopted and filed in the manner provided by law, one or
more classes or series of shares, to designate each such class or series (which
may include but is not limited to designation as additional shares of Common or
Series A Convertible Preferred Stock), and to fix the relative rights and
preferences of each such class or series.
3.2) Issuance of Shares. The Board of Directors of the corporation is
authorized from time to time to accept subscriptions for, issue, sell and
deliver shares of any class or series of the corporation to such persons, at
such times and upon such terms and conditions as the Board shall determine,
establishing a price in money or other consideration, or a minimum price, or a
general formula or method by which the price will be determined.
3.3) Issuance of Rights to Purchase Shares. The Board of Directors is
further authorized from time to time to grant and issue rights to subscribe for,
purchase, exchange securities for, or convert securities into, shares of the
corporation of any class or series, and to fix the terms, provisions and
conditions of such rights, including the exchange or conversion basis or the
price at which such shares may be purchased or subscribed for.
3.4) Issuance of Shares to Holders of Another Class or Series. The
Board is further authorized to issue shares of one class or series to holders of
that class or series or to holders of another class or series to effectuate
share dividends or splits.
3.5) Rights, Preferences and Terms of Series A Preferred Stock. The
shares of Series A Convertible Preferred Stock (the "Series A Stock") shall earn
dividends and be convertible into Common Stock of the corporation on the terms,
and subject to the conditions, set forth in this Section 3.5.
(a) Voting Privileges. Except as otherwise required by the Minnesota
Business Corporation Act, each share of the Series A Stock shall have the right
to the same number of votes as the number of shares of Common Stock into which
each share of Series A Stock is convertible with respect to any matter submitted
to a vote of the shareholders of the corporation.
(b) Dividends. The holders of the shares of Series A Stock shall be
entitled to receive, when and as declared by the Board of Directors, yearly
dividends from the surplus or net profits of the corporation at a rate of 6.5%
per annum and no more, payable semi-annually on July 1 and January 1 with proper
adjustment for any dividend period which is less than a full six month period.
Such dividends shall be payable before any dividends shall be paid upon, or set
apart for, the Common Stock and shall be cumulative, so that if in any
semi-annual dividend period, dividends at the rate of 6.5% per annum shall not
have been paid upon or set apart for the Series A 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 Common Stock.
(c) Liquidation Preference. In the event of an involuntary or voluntary
liquidation or dissolution of the corporation at any time, the holders of shares
of Series A Stock shall be entitled to receive out of the assets of the
corporation an amount equal to $10.00 per share. In the event of either an
involuntary or a voluntary liquidation or dissolution of the corporation,
payment shall be made to the holders of Series A Stock in the amounts herein
fixed before any payment shall be made or any assets distributed to the holders
of Common Stock or any class of capital stock of the corporation ranking junior
to the Series A Stock with respect to payment upon dissolution or liquidation of
the corporation. If, upon any liquidation or dissolution of the corporation, the
assets available for distribution shall be insufficient to pay the holders of
all outstanding shares of Series A Stock the full amounts to which they shall be
entitled, the holder of such shares shall be paid pro rata in any such
distribution.
(d) Redemption. The corporation may, to the extent that funds are
legally available therefor, redeem the Series A Stock on the following dates at
the following prices:
Redemption Date Redemption Price
May 20, 1994 - May 19, 1995 $10.50
May 20, 1995 - May 19, 1996 $10.80
May 20, 1996 - May 19, 1997 $11.10
May 20, 1997 - May 19, 1998 $11.40
on or after May 20, 1998 $11.70
In addition, the value of earned and unpaid dividends will be added to
the redemption price.
In the event of a redemption of less than all of the outstanding shares
of Series A Stock, redemptions as among the holders of such shares of Series A
Stock shall be on a pro rata basis.
The corporation shall give notice by mail of redemptions to the holders
of record of the shares of Series A Stock at least 20 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
shareholder at the Shareholder'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 A 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.
If the corporation deposits, on or prior to any dated fixed for
redemption of shares of Series A Stock, with any bank or trust company having
capital and surplus of at least $10,000,000, as a trust fund, a sufficient sum
to redeem on the date fixed for redemption thereof the shares then called for
redemption, with instructions and authority to such bank or trust company to pay
the redemption price on or after the date of such deposit, then notwithstanding
that any certificate for shares so called for redemption shall not have been
surrendered for cancellation, the shares so called for redemption shall no
longer be deemed to be outstanding and all rights with respect thereto shall
forthwith cease and terminate, except only the right of the holders thereof to
receive from such bank or trust company, at any time after the date of such
deposit, the sum so deposited, without interest, and the right to convert such
shares as provided in paragraph (e) below shall in all events expire on the
business day next preceding the date fixed by the Board of Directors as the date
of redemption. Any funds so deposited and unclaimed at the end of one year from
such redemption date shall be released or repaid to the corporation, after which
the holders of the shares so called for redemption shall be entitled to receive
payment of the redemption price only from the corporation.
All Series A Stock redeemed hereunder shall immediately upon the
redemption thereof be canceled and restored to the status of authorized but
unissued Series A Stock.
(e) Conversion Right. At the option of the holders thereof, the shares
of Series A Stock shall be convertible, at the office of the corporation (or at
such other office or offices, if any, as the Board of Directors may designate),
into fully paid and nonassessable shares of Common Stock. Each share of Series A
Stock shall be convertible into Common Stock at the rate of eight shares of
Common Stock for each share of Series A Stock (the "Conversion Ratio"). The
Conversion Ratio shall be subject to adjustment from time to time in certain
instances as hereinafter provided. In case of the call for redemption of any
shares of Series A Stock at any time prior to the date of issuance of shares of
Common Stock by the corporation upon conversion of shares of Series A Stock in
accordance with the provisions of this Section 3.5, such right of conversion
shall cease and terminate as to the shares designated for redemption as of the
date which is one business day prior to the date set for redemption as set forth
in the notice of redemption given in accordance with the provisions hereof,
unless default shall be made in the payment of the redemption price. The
following provisions shall govern such right of conversion:
(1) In order to convert shares of Series A Stock into shares of
Common Stock, the holder thereof shall surrender at any office
hereinabove mentioned the certificate or certificates
therefor, duly endorsed to the corporation or in blank, and
give 10 days' prior written notice to the corporation at such
office that such holder elects to convert such shares. Shares
of Series A Stock shall be deemed to have been converted
immediately prior to the close of business on the day of
surrender of such shares for conversion as herein provided,
and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock
at such time. As promptly as practicable on or after the
conversion date, the corporation shall issue and deliver or
cause to be issued and delivered at such office a certificate
or certificates for the number of shares of Common Stock
issuable upon such conversion.
(2) In case the corporation shall at any time subdivide the
outstanding shares of its Common Stock, or shall issue a stock
dividend on its outstanding Common Stock, the Conversion Ratio
in effect immediately prior to such subdivision or the
issuance of such dividend shall be proportionately increased,
and in case the corporation shall at any time combine the
outstanding shares of its Common Stock, the Conversion Ratio
in effect immediately prior to such combination shall be
proportionately decreased, effective at the close of business
on the date of such subdivision, dividend or combination, as
the case may be.
(3) If any capital reorganization or reclassification of the
capital stock of the corporation, or consolidation or merger
of the corporation with another corporation, or the sale of
all or substantially all of its assets to another corporation
shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a
condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holders of Series A Stock shall
thereafter have the right to receive upon the basis and upon
the terms and conditions specified herein and in lieu of the
shares of the Common Stock immediately theretofore receivable
upon the conversion of Series A Stock, such shares of stock,
securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such
Common Stock equal to the number of shares of such stock
immediately theretofore receivable upon the conversion of
Series A Stock had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all
dividends unpaid and accumulated or accrued thereon to the
date of such reorganization, reclassification, consolidation,
merger or sale, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the
holders of Series A Stock to the end that the provisions
hereof (including without limitation provisions for
adjustments of the Conversion Ratio) shall thereafter be
applicable, as nearly as may be in relation to any shares of
stock, securities or assets thereafter receivable upon
conversion of Series A Stock. The corporation shall not effect
any such consolidation, merger or sale, unless prior to the
consummation thereof the successor corporation (if other than
the corporation) resulting from such consolidation or merger
or the corporation purchasing such assets shall assume by
written instrument executed and mailed to the holders
appearing on the books of the corporation, the obligation to
deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such
holder may be entitled to receive.
(f) Definition of Common Stock. As used herein the term "Common Stock"
shall mean and include the corporation's presently authorized Common Stock, par
value $.01 per share, and shall also include any capital stock of any class of
the corporation hereafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the corporation; provided that the
shares receivable pursuant to conversion of shares of Series A Stock shall
include shares designated as Common Stock of the corporation as of the date of
issuance of such shares of Series A Stock, or, in case of any reclassification
of the outstanding shares thereof, the stock, securities or assets provided for
above.
(g) No Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion. Instead of any fraction of a share which would otherwise
be issuable, the corporation shall pay a cash adjustment in respect of such
fraction in an amount equal to the same fraction multiplied by $10.00, the
product of which shall be divided by the Conversion Ratio.
(h) Notice of Noncash Dividends, Stock Purchase Rights, Capital
Reorganization and Dissolutions. In case:
(1) the corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a
dividend, or any other distribution, payable otherwise than in
cash; or
(2) the corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe
for or purchase any shares of stock of any class or to receive
any other rights; or
(3) of any capital reorganization of the corporation,
reclassification of the capital stock of the corporation
(other than a subdivision or combination of its outstanding
shares of Common Stock), consolidation or merger of the
corporation with or into another corporation or conveyance of
all or substantially all of the assets of the corporation to
another corporation (in each case, other than to a subsidiary
of the corporation); or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the corporation;
then, in any such case, the corporation shall cause to be mailed to the holders
of the Series A Stock at the address maintained in the register of holders of
Series A Stock by the corporation or its transfer agent, at least ten days prior
to the date hereinafter specified, a notice stating the date on which (i) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (ii) such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which holders Series A Stock of record shall
be entitled to exchange their shares of for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger
conveyance, dissolution, liquidation or winding up.
ARTICLE 4 - RIGHTS OF SHAREHOLDERS
4.1) No Preemptive Rights. No shares of any class or series of the
corporation shall entitle the holders to any preemptive rights to subscribe for
or purchase additional shares of that class or series or any other class or
series of the corporation now or hereafter authorized or issued.
4.2) No Cumulative Voting Rights. There shall be no cumulative voting
by the shareholders of the corporation.
ARTICLE 5 - MERGER, EXCHANGE, SALE OF ASSETS AND DISSOLUTION
5.1) Where approval of shareholders is required by law, the affirmative
vote of the holders of at least a majority of the voting power of all shares
entitled to vote shall be required to authorize the corporation (i) to merge
into or with one or more other corporations, (ii) to exchange its shares for
shares of one or more other corporations, (iii) to sell, lease, transfer or
otherwise dispose of all or substantially all of its property and assets,
including its good will, or (iv) to commence voluntary dissolution.
ARTICLE 6 - AMENDMENT OF ARTICLES OF INCORPORATION
6.1) After the issuance of shares by the corporation, any provision
contained in these Articles of Incorporation may be amended, altered, changed or
repealed by the affirmative vote of the holders of at least a majority of the
voting power of the shares present and entitled to vote at a duly held meeting
or such greater percentage as may be otherwise prescribed by the laws of the
State of Minnesota.
ARTICLE 7 - LIMITATION OF DIRECTOR LIABILITY
7.1) To the fullest extent permitted by Chapter 302A, Minnesota
Statutes, as the same exists or may hereafter be amended, a director of this
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.
RESTATED BYLAWS
OF
CORVU CORPORATION
ARTICLE 1.
OFFICES
1.1) Offices. The address of the registered office of the corporation
shall be designated in the Articles of Incorporation, as amended from time to
time. The principal executive office of the corporation shall be located at 3400
West 66th Street, Edina, Minnesota 55435 and the corporation may have offices at
such other places within or without the State of Minnesota as the Board of
Directors shall from time to time determine or the business of the corporation
requires.
ARTICLE 2.
MEETINGS OF SHAREHOLDERS
2.1) Regular Meetings. Regular meetings of the shareholders of the
corporation entitled to vote shall be held on an annual or other less frequent
basis as shall be determined by the Board of Directors or by the chief executive
officer; provided, that if a regular meeting has not been held during the
immediately preceding 15 months, a shareholder or shareholders holding three
percent (3%) or more of the voting power of all shares entitled to vote may
demand a regular meeting of shareholders by written notice of demand given to
the chief executive officer or chief financial officer of the corporation. At
each regular meeting, the shareholders, voting as provided in the Articles of
Incorporation and these Bylaws, shall elect qualified successors for directors
who serve for an indefinite term or for directors whose terms have expired or
are due to expire within six months after the date of the meeting, and shall
transact such other business as shall come before the meeting. No meeting shall
be considered a regular meeting unless specifically designated as such in the
notice of meeting or unless all the shareholders entitled to vote are present in
person or by proxy and none of them objects to such designation.
2.2) Special Meetings. Special meetings of the shareholders entitled to
vote may be called at any time by the Chairman of the Board, the chief executive
officer, the chief financial officer, two or more directors, or a shareholder or
shareholders holding ten percent (10%) or more of the voting power of all shares
entitled to vote who shall demand such special meeting by giving written notice
of demand to the chief executive officer or the chief financial officer
specifying the purposes of the meeting.
2.3) Meetings Held Upon Shareholder Demand. Within thirty (30) days
after receipt by the chief executive officer or the chief financial officer of a
demand from any shareholder or shareholders entitled to call a regular or
special meeting of shareholders, the Board of Directors shall cause such meeting
to be called and held on notice no later than ninety (90) days after receipt of
such demand. If the Board of Directors fails to cause such a meeting to be
called and held, the shareholder or shareholders making the demand may call the
meeting by giving notice as provided in Section 2.5 hereof at the expense of the
corporation.
2.4) Place of Meetings. Meetings of the shareholders shall be held at
the principal executive office of the corporation or at such other place, within
or without the State of Minnesota, as is designated by the Board of Directors,
except that a regular or special meeting called by or at the demand of a
shareholder shall be held in the county where the principal executive office of
the corporation is located.
2.5) Notice of Meetings. Except as otherwise specified in Section 2.6
or required by law, a written notice setting out the place, date and hour of any
regular or special meeting shall be given to each holder of shares entitled to
vote not less than five days nor more than sixty (60) days prior to the date of
the meeting; provided, that notice of a meeting at which there is to be
considered a proposal (i) to dispose of all, or substantially all, of the
property and assets of the corporation or (ii) to dissolve the corporation shall
be given to all shareholders of record, whether or not entitled to vote; and
provided further, that notice of a meeting at which there is to be considered a
proposal to adopt a plan of merger or exchange shall be given to all
shareholders of record, whether or not entitled to vote, at least fourteen (14)
days prior thereto. Notice of any special meeting shall state the purpose or
purposes of the proposed meeting, and the business transacted at all special
meetings shall be confined to the purposes stated in the notice.
2.6) Waiver of Notice. A shareholder may waive notice of any meeting
before, at or after the meeting, in writing, orally or by attendance. Attendance
at a meeting by a shareholder is a waiver of notice of that meeting unless the
shareholder objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened, or objects
before a vote on an item of business because the item may not be lawfully
considered at such meeting and does not participate in the consideration of the
item at such meeting.
2.7) Quorum and Adjourned Meeting. The holders of a majority of the
voting power of the shares entitled to vote at a meeting, represented either in
person or by proxy, shall constitute a quorum for the transaction of business at
any regular or special meeting of shareholders. If a quorum is present when a
duly called or held meeting is convened, the shareholders present may continue
to transact business until adjournment, even though the withdrawal of a number
of shareholders originally present leaves less than the proportion or number
otherwise required for a quorum. In case a quorum is not present at any meeting,
those present shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
number of shares entitled to vote shall be represented. At such adjourned
meeting at which the required amount of shares entitled to vote shall be
represented, any business may be transacted which might have been transacted at
the original meeting.
2.8) Voting. At each meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy duly
appointed by an instrument in writing subscribed by such shareholder. Each
shareholder shall have one (1) vote for each share having voting power standing
in each shareholder's name on the books of the corporation except as may be
otherwise provided in the terms of the share. Upon the demand of any
shareholder, the vote for directors or the vote upon any question before the
meeting shall be by ballot. All elections shall be determined and all questions
decided by a majority vote of the number of shares entitled to vote and
represented at any meeting at which there is a quorum except in such cases as
shall otherwise be required by statute or the Articles of Incorporation.
2.9) Order of Business. The suggested order of business at any regular
meeting and, to the extent appropriate, at all other meetings of the
shareholders shall, unless modified by the presiding chairman, be:
1. Call of roll
2. Proof of due notice of meeting or waiver of notice
3. Determination of existence of quorum
4. Reading and disposal of any unapproved minutes
5. Reports of officers and committees
6. Election of directors
7. Unfinished business
8. New business
9. Adjournment.
ARTICLE 3.
DIRECTORS
3.1) General Powers. The business and affairs of the corporation shall
be managed by or under the direction of a Board of Directors.
3.2) Number, Term and Qualifications. The Board of Directors shall
consist of one or more members. At each regular meeting, the shareholders shall
determine the number of directors; provided, that between regular meetings the
authorized number of directors may be increased or decreased by the shareholders
or increased by the Board of Directors. Each director shall serve for an
indefinite term that expires at the next regular meeting of shareholders, and
until such director's successor is elected and qualified, or until such
director's earlier death, resignation, disqualification, or removal as provided
by statute.
3.3) Vacancies. Vacancies on the Board of Directors may be filled by
the affirmative vote of a majority of the remaining members of the Board, though
less than a quorum; provided, that newly created directorships resulting from an
increase in the authorized number of directors shall be filled by the
affirmative vote of a majority of the directors serving at the time of such
increase. Persons so elected shall be directors until their successors are
elected by the shareholders, who may make such election at the next regular or
special meeting of the shareholders.
3.4) Quorum and Voting. A majority of the directors currently holding
office shall constitute a quorum for the transaction of business. In the absence
of a quorum, a majority of the directors present may adjourn a meeting from time
to time until a quorum is present. If a quorum is present when a duly called or
held meeting is convened, the directors present may continue to transact
business until adjournment even though the withdrawal of a number of directors
originally present leaves less than the proportion or number otherwise required
for a quorum. Except as otherwise required by law or the Articles of
Incorporation, the acts of a majority of the directors present at a meeting at
which a quorum is present shall be the acts of the Board of Directors.
3.5) Board Meetings; Place and Notice. Meetings of the Board of
Directors may be held from time to time at any place within or without the State
of Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the corporation, except as may be otherwise
unanimously agreed orally, or in writing, or by attendance. Any director may
call a Board meeting by giving 24 hours notice to all directors of the date and
time of the meeting. The notice need not state the purpose of the meeting, and
may be given by mail, telephone, telegram, or in person. If a meeting schedule
is adopted by the Board, or if the date and time of a Board meeting has been
announced at a previous meeting, no notice is required.
3.6) Waiver of Notice. A director may waive notice of any meeting
before, at or after the meeting, in writing, orally or by attendance. Attendance
at a meeting by a director is a waiver of notice of that meeting unless the
director objects at the beginning of the meeting to the transaction of business
because the meeting is not lawfully called or convened and does not participate
thereafter in the meeting.
3.7) Absent Directors. A director may give advance written consent or
opposition to a proposal to be acted on at a Board meeting. If the director is
not present at the meeting, consent or opposition to a proposal does not
constitute presence for purposes of determining the existence of a quorum, but
consent or opposition shall be counted as a vote in favor of or against the
proposal and shall be entered in the minutes of the meeting, if the proposal
acted on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected.
3.8) Compensation. Directors who are not salaried officers of the
corporation shall receive such fixed sum and expenses per meeting attended or
such fixed annual sum or both as shall be determined from time to time by
resolution of the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving this corporation in any other
capacity and receiving proper compensation therefor.
3.9) Committees. The Board of Directors may, by resolution approved by
affirmative vote of a majority of the Board, establish committees having the
authority of the Board in the management of the business of the corporation only
to the extent provided in the resolution. Committees may include a special
litigation committee consisting of one or more independent directors or other
independent persons to consider legal rights or remedies of the corporation and
whether those rights and remedies should be pursued. Each such committee shall
consist of one or more natural persons (who need not be directors) appointed by
the affirmative vote of a majority of the directors present, and shall, other
than special litigation committees, be subject at all times to the direction and
control of the Board. A majority of the members of a committee present at a
meeting shall constitute a quorum for the transaction of business.
3.10) Order of Business. The suggested order of business at any meeting
of the Board of Directors shall, to the extent appropriate and unless modified
by the presiding chairman, be:
1. Roll call
2. Proof of due notice of meeting or waiver of notice, or
unanimous presence and declaration by presiding chairman
3. Determination of existence of quorum
4. Reading and disposal of any unapproved minutes
5. Reports of officers and committees
6. Election of officers
7. Unfinished business
8. New business
9. Adjournment.
ARTICLE 4.
OFFICERS
4.1) Number and Designation. The corporation shall have one or more
natural persons exercising the functions of the offices of chief executive
officer and chief financial officer. The Board of Directors may elect or appoint
such other officers or agents as it deems necessary for the operation and
management of the corporation including, but not limited to, a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary and a Treasurer,
each of whom shall have the powers, rights, duties and responsibilities set
forth in these Bylaws unless otherwise determined by the Board. Any of the
offices or functions of those offices may be held by the same person.
4.2) Election, Term of Office and Qualification. At the first meeting
of the Board following each election of directors, the Board shall elect
officers, who shall hold office until the next election of officers or until
their successors are elected or appointed and qualify; provided, however, that
any officer may be removed with or without cause by the affirmative vote of a
majority of the Board of Directors present (without prejudice, however, to any
contract rights of such officer).
4.3) Resignation. Any officer may resign at any time by giving written
notice to the corporation. The resignation is effective when notice is given to
the corporation, unless a later date is specified in the notice, and acceptance
of the resignation shall not be necessary to make it effective.
4.4) Vacancies in Office. If there be a vacancy in any office of the
corporation, by reason of death, resignation, removal or otherwise, such vacancy
may, or in the case of a vacancy in the office of chief executive officer or
chief financial officer shall, be filled for the unexpired term by the Board of
Directors.
4.5) Chief Executive Officer. Unless provided otherwise by a resolution
adopted by the Board of Directors, the chief executive officer (a) shall have
general active management of the business of the corporation; (b) shall, when
present and in the absence of the Chairman of the Board, preside at all meetings
of the shareholders and Board of Directors; (c) shall see that all orders and
resolutions of the Board are carried into effect; (d) shall sign and deliver in
the name of the corporation any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the corporation, except in cases in
which the authority to sign and deliver is required by law to be exercised by
another person or is expressly delegated by the Articles, these Bylaws or the
Board to some other officer or agent of the corporation; (e) may maintain
records of and certify proceedings of the Board and shareholders; and (f) shall
perform such other duties as may from time to time be assigned to the chief
executive officer by the Board.
4.6) Chief Financial Officer. Unless provided otherwise by a resolution
adopted by the Board of Directors, the chief financial officer (a) shall keep
accurate financial records for the corporation; (b) shall deposit all monies,
drafts and checks in the name of and to the credit of the corporation in such
banks and depositories as the Board of Directors shall designate from time to
time; (c) shall endorse for deposit all notes, checks and drafts received by the
corporation as ordered by the Board, making proper vouchers therefor; (d) shall
disburse corporate funds and issue checks and drafts in the name of the
corporation, as ordered by the Board; (e) shall render to the chief executive
officer and the Board of Directors, whenever requested, an account of all
transactions undertaken as chief financial officer and of the financial
condition of the corporation; and (f) shall perform such other duties as may be
prescribed by the Board of Directors or the chief executive officer from time to
time.
4.7) Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board and shall exercise general
supervision and direction over the more significant matters of policy affecting
the affairs of the corporation, including particularly its financial and fiscal
affairs.
4.8) President. Unless otherwise determined by the Board, the President
shall be the chief executive officer. If an officer other than the President is
designated chief executive officer, the President shall perform such duties as
may from time to time be assigned to the President by the Board. If the office
of Chairman of the Board is not filled, the President shall also perform the
duties set forth in Section 4.7.
4.9) Vice President. Each Vice President shall have such powers and
shall perform such duties as may be specified in these Bylaws or prescribed by
the Board of Directors. In the event of absence or disability of the President,
the Board of Directors may designate a Vice President or Vice Presidents to
succeed to the power and duties of the President.
4.10) Secretary. The Secretary shall, unless otherwise determined by
the Board, be secretary of and attend all meetings of the shareholders and Board
of Directors, and may record the proceedings of such meetings in the minute book
of the corporation and, whenever necessary, certify such proceedings. The
Secretary shall give proper notice of meetings of shareholders and shall perform
such other duties as may be prescribed by the Board of Directors or the chief
executive officer from time to time.
4.11) Treasurer. Unless otherwise determined by the Board, the
Treasurer shall be the chief financial officer of the corporation. If an officer
other than the Treasurer is designated chief financial officer, the Treasurer
shall perform such duties as may be prescribed by the Board of Directors or the
chief executive officer from time to time.
4.12) Delegation. Unless prohibited by a resolution approved by the
affirmative vote of a majority of the directors present, an officer elected or
appointed by the Board may delegate in writing some or all of the duties and
powers of such officer to other persons.
ARTICLE 5.
INDEMNIFICATION
5.1) Indemnification. The corporation shall indemnify such persons, for
such expenses and liabilities, in such manner, under such circumstances, and to
such extent, as permitted by Minnesota Statutes, Section 302A.521, as now
enacted or hereafter amended.
ARTICLE 6.
SHARES AND THEIR TRANSFER
6.1) Certificate of Stock. Every owner of stock of the corporation
shall be entitled to a certificate, in such form as the Board of Directors may
prescribe, certifying the number of shares of stock of the corporation owned by
such shareholder. The certificates for such stock shall be numbered (separately
for each class) in the order in which they are issued and shall, unless
otherwise determined by the Board, be signed by the chief executive officer, the
chief financial officer, or any other officer of the corporation. A signature
upon a certificate may be a facsimile. Certificates on which a facsimile
signature of a former officer, transfer agent or registrar appears may be issued
with the same effect as if such person were such officer, transfer agent or
registrar on the date of issue.
6.2) Stock Record. As used in these Bylaws, the term "shareholder"
shall mean the person, firm or corporation in whose name outstanding shares of
capital stock of the corporation are currently registered on the stock record
books of the corporation. The corporation shall keep, at its principal executive
office or at another place or places within the United States determined by the
Board, a share register not more than one year old containing the names and
addresses of the shareholders and the number and classes of shares held by each
shareholder. The corporation shall also keep at its principal executive office
or at another place or places within the United States determined by the Board,
a record of the dates on which certificates representing shares were issued.
Every certificate surrendered to the corporation for exchange or transfer shall
be cancelled and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled (except as provided for in Section 6.4 of this Article 6).
6.3) Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate
(or the shareholder's legal representative or duly authorized attorney-in-fact)
and upon surrender for cancellation of the certificate or certificates for such
shares. The shareholder in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof for all purposes as regards the
corporation; provided, that when any transfer of shares shall be made as
collateral security and not absolutely, such fact, if known to the corporation
or to the transfer agent, shall be so expressed in the entry of transfer; and
provided, further, that the Board of Directors may establish a procedure whereby
a shareholder may certify that all or a portion of the shares registered in the
name of the shareholder are held for the account of one or more beneficial
owners.
6.4) Lost Certificate. Any shareholder claiming a certificate of stock
to be lost or destroyed shall make an affidavit or affirmation of that fact in
such form as the Board of Directors may require, and shall, if the directors so
require, give the corporation a bond of indemnity in form and with one or more
sureties satisfactory to the Board of at least double the value, as determined
by the Board, of the stock represented by such certificate in order to indemnify
the corporation against any claim that may be made against it on account of the
alleged loss or destruction of such certificate, whereupon a new certificate may
be issued in the same tenor and for the same number of shares as the one alleged
to have been destroyed or lost.
ARTICLE 7.
GENERAL PROVISIONS
7.1) Record Dates. In order to determine the shareholders entitled to
notice of and to vote at a meeting, or entitled to receive payment of a dividend
or other distribution, the Board of Directors may fix a record date which shall
not be more than sixty (60) days preceding the date of such meeting or
distribution. In the absence of action by the Board, the record date for
determining shareholders entitled to notice of and to vote at a meeting shall be
at the close of business on the day preceding the day on which notice is given,
and the record date for determining shareholders entitled to receive a
distribution shall be at the close of business on the day on which the Board of
Directors authorizes such distribution.
7.2) Distributions; Acquisitions of Shares. Subject to the provisions
of law, the Board of Directors may authorize the acquisition of the
corporation's shares and may authorize distributions whenever and in such
amounts as, in its opinion, the condition of the affairs of the corporation
shall render it advisable.
7.3) Fiscal Year. The fiscal year of the corporation shall be
established by the Board of Directors.
7.4) Seal. The corporation shall have such corporate seal or no
corporate seal as the Board of Directors shall from time to time determine.
7.5) Securities of Other Corporations.
(a) Voting Securities Held by the Corporation. Unless
otherwise ordered by the Board of Directors, the chief executive
officer shall have full power and authority on behalf of the
corporation (i) to attend and to vote at any meeting of security
holders of other companies in which the corporation may hold
securities; (ii) to execute any proxy for such meeting on behalf of the
corporation; and (iii) to execute a written action in lieu of a meeting
of such other company on behalf of this corporation. At such meeting,
by such proxy or by such writing in lieu of meeting, the chief
executive officer shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the
corporation might have possessed and exercised if it had been present.
The Board of Directors may from time to time confer like powers upon
any other person or persons.
(b) Purchase and Sale of Securities. Unless otherwise ordered
by the Board of Directors, the chief executive officer shall have full
power and authority on behalf of the corporation to purchase, sell,
transfer or encumber securities of any other company owned by the
corporation which represent not more than 10% of the outstanding
securities of such issue, and may execute and deliver such documents as
may be necessary to effectuate such purchase, sale, transfer or
encumbrance. The Board of Directors may from time to time confer like
powers upon any other person or persons.
7.6) Shareholder Agreements. In the event of any conflict or
inconsistency between these Bylaws, or any amendment thereto, and any
shareholder control agreement as defined in Minnesota Statutes, Section
302A.457, whenever adopted, such shareholder control agreement shall govern.
ARTICLE 8.
MEETINGS
8.1) Telephone Meetings and Participation. A conference among directors
by any means of communication through which the directors may simultaneously
hear each other during the conference constitutes a Board meeting, if the same
notice is given of the conference as would be required for a meeting, and if the
number of directors participating in the conference would be sufficient to
constitute a quorum at a meeting. Participation in a meeting by that means
constitutes presence in person at the meeting. A director may participate in a
Board meeting not heretofore described in this paragraph, by any means of
communication through which the director, other directors so participating, and
all directors physically present at the meeting may simultaneously hear each
other during the meeting. Participation in a meeting by that means constitutes
presence in person at the meeting. The provisions of this section shall apply to
committees and members of committees to the same extent as they apply to the
Board and directors.
8.2) Authorization Without Meeting. Any action of the shareholders, the
Board of Directors, or any committee of the corporation which may be taken at a
meeting thereof, may be taken without a meeting if authorized by a writing
signed by all of the holders of shares who would be entitled to vote on such
action, by all of the directors (unless less than unanimous action is permitted
by the Articles of Incorporation), or by all of the members of such committee,
as the case may be.
ARTICLE 9.
AMENDMENTS OF BYLAWS
9.1) Amendments. Unless the Articles of Incorporation provide
otherwise, these Bylaws may be altered, amended, added to or repealed by the
affirmative vote of a majority of the members of the Board of Directors. Such
authority in the Board of Directors is subject to the power of the shareholders
to change or repeal such Bylaws, and the Board of Directors shall not make or
alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies on the Board, or fixing
the number of directors or their classifications, qualifications or terms of
office, but the Board may adopt or amend a Bylaw to increase the number of
directors.
The undersigned, ____________________________, Secretary of CorVu
Corporation, hereby certifies that the foregoing Restated Bylaws were duly
adopted as the Bylaws of the corporation by its shareholders on
________________, 1999.
Secretary
Attest:
President
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING:
SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN.
SUBSCRIPTION AGREEMENT
AND
LETTER OF INVESTMENT INTENT
April 27, 1999
CorVu Corporation
3400 W. 66th Street
Suite 445
Edina, Minnesota 55435
Ladies and Gentlemen:
I hereby subscribe for the purchase of One Hundred Fifty Thousand
Units, each Unit consisting of one share of common stock of CorVu Corporation, a
Minnesota corporation (the "Company") and one warrant to purchase one share of
common stock of the Company at the price of One Cent ($.01) per share. The price
per Unit shall be Two Dollars ($2) for an aggregate purchase price of Three
Hundred Thousand Dollars ($300,000), upon the terms and conditions set forth
below. I acknowledge that this subscription is contingent upon acceptance in
whole or in part by the Company and herewith submit a check payable to "CorVu
Corporation" in full payment for such Units.
I understand that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), on the ground that
the acquisition of the Shares by me is exempt under Section 4(2) thereof.
In partial consideration of the issuance of the Shares to me, I hereby
represent, warrant and agree as follows:
1. Knowledge of Reliance. I understand and recognize that the Company,
in claiming a Section 4(2) exemption for the issuance of the Shares, is relying
upon the statements and representations made by me in this letter.
2. Investment Purpose in Acquiring the Shares.
a) Generally. I am acquiring the Shares for my account for
investment purposes only and not with a view to their resale or distribution. I
have no present intention to divide my participation with others or to resell or
otherwise dispose of all or any part of the Shares. In making these
representations, I understand that in the view of the Securities and Exchange
Commission the statutory exemption referred to above would not be available if,
notwithstanding my representations, I have in mind merely acquiring the Shares
for resale upon the occurrence or nonoccurrence of some predetermined event.
b) Compliance With Securities Act. I agree that if I sell or
distribute the Shares in the future, I shall do so pursuant to the requirements
of the Securities Act and applicable state securities laws. I agree that I will
not transfer any part of the Shares without (i) an effective registration under
the Securities Act and applicable state securities laws, or (ii) obtaining an
opinion of counsel satisfactory in form and substance to counsel for the Company
stating that the proposed transaction will not result in a prohibited
transaction under the Securities Act and applicable state securities laws.
c) Restrictive Legend. I agree that you may place a
restrictive legend on the Shares containing substantially the following
language:
"The Shares represented by this certificate have not
been registered under either the Securities Act of
1933, as amended, or applicable state securities
laws, and are subject to an investment letter. They
may not be sold, offered for sale or transferred in
the absence of an effective registration under the
Securities Act of 1933, as amended, and the
applicable state securities laws, or an opinion of
counsel satisfactory in form and substance to counsel
for the Company that such transaction will not result
in a prohibited transaction under the Securities Act
of 1933, as amended, or the applicable state
securities laws."
d) Stop Transfer Order. I agree that the Company may place a
stop transfer order with its registrar and stock transfer agent covering all
certificates representing the Shares.
3. Knowledge of Restrictions Upon Transfer of the Shares. I understand
that the Shares are not freely transferable and may in fact be prohibited from
sale for an extended period of time and that, as a consequence thereof, I may
have extremely limited opportunities to dispose of the Shares. I understand that
Rule 144 of the Securities and Exchange Commission permits the transfer of
"restricted securities" of the type here involved only under certain conditions,
including a minimum one-year holding period and availability to the public of
certain information concerning the Company.
4. Information About the Company. I acknowledge that I am a director of
the Company and that, by reason of my relationship with the Company as well as
other actions taken by me, I am fully aware of and advised concerning the
present financial condition of the Company, its business affairs and its
prospects for future business.
5. Knowledgeable Investor. I understand that an investment in the
Company is speculative and involves a high degree of risk, and that there can be
no assurance that I will receive any return of or on my investment. I can bear
the economic risk of an investment in the Shares for an indefinite period of
time, can afford to sustain a complete loss of such investment, have no need for
liquidity in connection with an investment in the Shares, and can afford to hold
the Shares indefinitely.
Yours very truly,
Ismail Kurdi
Address:
ACCEPTANCE
This Subscription Agreement and Letter of Investment Intent is accepted
as of April 27, 1999.
CORVU CORPORATION
By:
Its:
<PAGE>
April 27, 1999
WARRANT
To Purchase 150,000 Shares of Common Stock
of
CorVu Corporation
THIS CERTIFIES THAT, for good and valuable consideration, Ismail Kurdi
("Kurdi"), or his registered assigns, is entitled to subscribe for and purchase
from CorVu Corporation, a Minnesota corporation (the "Company"), at any time up
to and including April 26, 2006, One Hundred Fifty Thousand (150,000) fully paid
and nonassessable shares of the Common Stock of the Company at the price of $.01
per share (the "Warrant Exercise Price"), subject to the antidilution provisions
of this Warrant; provided, however, that any purchases by the Holder must be in
25,000-share blocks. The shares which may be acquired upon exercise of this
Warrant are referred to herein as the "Warrant Shares." As used herein, the term
"Holder" means Kurdi, any party who acquires all or a part of this Warrant as a
registered transferee of Kurdi, or any record holder or holders of the Warrant
Shares issued upon exercise, whether in whole or in part, of the Warrant. The
term "Common Stock" means and includes the Company's presently authorized common
stock, no par value, and shall also include any capital stock of any class of
the Company hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding up of the Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for such shares.
(b) This Warrant is transferable in whole or in part, subject to
applicable federal and state securities laws and regulations. This Warrant may
not be sold, transferred, assigned, hypothecated or divided into two or more
Warrants of smaller denominations, nor may any Warrant shares issued pursuant to
exercise of this Warrant be transferred, except as provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if Kurdi shall be such Holder, an agreement of indemnity
by such Holder shall be sufficient for all purposes of this Section 2. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. The Company shall pay all expenses,
taxes (other than stock transfer taxes), and other charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the next
section, certificates for the Warrant Shares so purchased shall be delivered to
the Holder within a reasonable time, not exceeding fifteen (15) days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the right to purchase the
number of Warrant Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into the
kind and amount of shares of stock and other securities and property which he
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Warrant
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section with respect to the rights and interests
thereafter of any Holders of the Warrant, to the end that the provisions set
forth in this Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Warrant.
The provisions of this Subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws; and provided further that the prospective transferee or
purchaser shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply with the
exemptions relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to this Section 7 may not
be effected without registration or qualification of this Warrant or such
Warrant Shares the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit his activities in respect to such as, in the
opinion of both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means:
(i) if the Company's Common Stock is traded on an exchange or
is quoted on the Nasdaq National Market, then the average closing or
last sale prices, respectively, reported for the ten (10) business days
immediately preceding exercise of the Warrant,
(ii) if the Company's Common Stock is not traded on an
exchange or on the Nasdaq National Market but is traded on the Nasdaq
SmallCap Market or other over-the-counter market, then the average
closing bid and asked prices reported for the ten (10) business days
immediately preceding the exercise of the Warrant, and
(iii) if the Company's Common Stock is not traded on an
exchange, the Nasdaq National Market, or the Nasdaq SmallCap Market or
other over-the-counter market, then the price established by the
Company's Board of Directors.
IN WITNESS WHEREOF, CorVu Corporation has caused this Warrant to be
signed by its duly authorized officer and this Warrant to be dated April 27,
1999.
"Company"
CorVu Corporation
By
Its
<PAGE>
To: CorVu Corporation
NOTICE OF EXERCISE OF WARRANT -- To Be
Executed by the Registered Holder in Order
to Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
------------------------------
(Print Name)
Please insert social security
or other identifying number
of registered holder of
certificate (______________) Address:
------------------------------
------------------------------
Date: _________, 19__ ______________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
<PAGE>
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto __________________________________________________ the right to
purchase the securities of CorVu Corporation to which the within Warrant relates
and appoints ____________________, attorney, to transfer said right on the books
of CorVu Corporation with full power of substitution in the premises.
Dated:________________ _____________________________
(Signature)
Address:
------------------------------
------------------------------
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING:
SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN.
SUBSCRIPTION AGREEMENT
AND
LETTER OF INVESTMENT INTENT
June 30, 1999
CorVu Corporation
3400 W. 66th Street
Suite 445
Edina, Minnesota 55435
Ladies and Gentlemen:
I hereby subscribe for the purchase of One Hundred Twenty Five Thousand
Units, each Unit consisting of one share of common stock of CorVu Corporation, a
Minnesota corporation (the "Company") and one warrant to purchase one share of
common stock of the Company at the price of One Cent ($.01) per share. The price
per Unit shall be Two Dollars ($2) for an aggregate purchase price of Two
Hundred Fifty Thousand Dollars ($250,000), upon the terms and conditions set
forth below. I acknowledge that this subscription is contingent upon acceptance
in whole or in part by the Company and herewith submit a check payable to "CorVu
Corporation" in full payment for such Units.
I understand that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), on the ground that
the acquisition of the Shares by me is exempt under Section 4(2) thereof.
In partial consideration of the issuance of the Shares to me, I hereby
represent, warrant and agree as follows:
1. Knowledge of Reliance. I understand and recognize that the Company,
in claiming a Section 4(2) exemption for the issuance of the Shares, is relying
upon the statements and representations made by me in this letter.
2. Investment Purpose in Acquiring the Shares.
a) Generally. I am acquiring the Shares for my account for
investment purposes only and not with a view to their resale or distribution. I
have no present intention to divide my participation with others or to resell or
otherwise dispose of all or any part of the Shares. In making these
representations, I understand that in the view of the Securities and Exchange
Commission the statutory exemption referred to above would not be available if,
notwithstanding my representations, I have in mind merely acquiring the Shares
for resale upon the occurrence or nonoccurrence of some predetermined event.
b) Compliance With Securities Act. I agree that if I sell or
distribute the Shares in the future, I shall do so pursuant to the requirements
of the Securities Act and applicable state securities laws. I agree that I will
not transfer any part of the Shares without (i) an effective registration under
the Securities Act and applicable state securities laws, or (ii) obtaining an
opinion of counsel satisfactory in form and substance to counsel for the Company
stating that the proposed transaction will not result in a prohibited
transaction under the Securities Act and applicable state securities laws.
c) Restrictive Legend. I agree that you may place a
restrictive legend on the Shares containing substantially the following
language:
"The Shares represented by this certificate have not
been registered under either the Securities Act of
1933, as amended, or applicable state securities
laws, and are subject to an investment letter. They
may not be sold, offered for sale or transferred in
the absence of an effective registration under the
Securities Act of 1933, as amended, and the
applicable state securities laws, or an opinion of
counsel satisfactory in form and substance to counsel
for the Company that such transaction will not result
in a prohibited transaction under the Securities Act
of 1933, as amended, or the applicable state
securities laws."
d) Stop Transfer Order. I agree that the Company may place a
stop transfer order with its registrar and stock transfer agent covering all
certificates representing the Shares.
3. Knowledge of Restrictions Upon Transfer of the Shares. I understand
that the Shares are not freely transferable and may in fact be prohibited from
sale for an extended period of time and that, as a consequence thereof, I may
have extremely limited opportunities to dispose of the Shares. I understand that
Rule 144 of the Securities and Exchange Commission permits the transfer of
"restricted securities" of the type here involved only under certain conditions,
including a minimum one-year holding period and availability to the public of
certain information concerning the Company.
4. Information About the Company. I acknowledge that I am a director of
the Company and that, by reason of my relationship with the Company as well as
other actions taken by me, I am fully aware of and advised concerning the
present financial condition of the Company, its business affairs and its
prospects for future business.
5. Knowledgeable Investor. I understand that an investment in the
Company is speculative and involves a high degree of risk, and that there can be
no assurance that I will receive any return of or on my investment. I can bear
the economic risk of an investment in the Shares for an indefinite period of
time, can afford to sustain a complete loss of such investment, have no need for
liquidity in connection with an investment in the Shares, and can afford to hold
the Shares indefinitely.
Yours very truly,
Ismail Kurdi
Address:
ACCEPTANCE
This Subscription Agreement and Letter of Investment Intent is accepted
as of June 30, 1999.
CORVU CORPORATION
By:
Its:
<PAGE>
June 30, 1999
WARRANT
To Purchase 125,000 Shares of Common Stock
of
CorVu Corporation
THIS CERTIFIES THAT, for good and valuable consideration, Ismail Kurdi
("Kurdi"), or his registered assigns, is entitled to subscribe for and purchase
from CorVu Corporation, a Minnesota corporation (the "Company"), at any time up
to and including June 29, 2006, One Hundred Twenty Five Thousand (125,000) fully
paid and nonassessable shares of the Common Stock of the Company at the price of
$.01 per share (the "Warrant Exercise Price"), subject to the antidilution
provisions of this Warrant; provided, however, that any purchases by the Holder
must be in 25,000-share blocks. The shares which may be acquired upon exercise
of this Warrant are referred to herein as the "Warrant Shares." As used herein,
the term "Holder" means Kurdi, any party who acquires all or a part of this
Warrant as a registered transferee of Kurdi, or any record holder or holders of
the Warrant Shares issued upon exercise, whether in whole or in part, of the
Warrant. The term "Common Stock" means and includes the Company's presently
authorized common stock, no par value, and shall also include any capital stock
of any class of the Company hereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution, or winding up of the Company.
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(a) The rights represented by this Warrant may be exercised by the
Holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by written notice of exercise (in the form attached hereto) delivered to
the Company at the principal office of the Company prior to the expiration of
this Warrant and accompanied or preceded by the surrender of this Warrant along
with a check in payment of the Warrant Exercise Price for such shares.
(b) This Warrant is transferable in whole or in part, subject to
applicable federal and state securities laws and regulations. This Warrant may
not be sold, transferred, assigned, hypothecated or divided into two or more
Warrants of smaller denominations, nor may any Warrant shares issued pursuant to
exercise of this Warrant be transferred, except as provided in Section 7 hereof.
2. Exchange and Replacement. Subject to Sections l and 7 hereof, this
Warrant is exchangeable upon the surrender hereof by the Holder to the Company
at its office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of Warrant Shares purchasable
hereunder, each of such new Warrants to represent the right to purchase such
number of Warrant Shares (not to exceed the aggregate total number purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if Kurdi shall be such Holder, an agreement of indemnity
by such Holder shall be sufficient for all purposes of this Section 2. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any exchange or replacement. The Company shall pay all expenses,
taxes (other than stock transfer taxes), and other charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Section 2.
3. Issuance of the Warrant Shares.
(a) The Company agrees that the shares of Common Stock purchased hereby
shall be and are deemed to be issued to the Holder as of the close of business
on the date on which this Warrant shall have been surrendered and the payment
made for such Warrant Shares as aforesaid. Subject to the provisions of the next
section, certificates for the Warrant Shares so purchased shall be delivered to
the Holder within a reasonable time, not exceeding fifteen (15) days after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired, a new Warrant representing the right to purchase the
number of Warrant Shares, if any, with respect to which this Warrant shall not
then have been exercised shall also be delivered to the Holder within such time.
(b) Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for Warrant Shares upon exercise of this
Warrant except in accordance with exemptions from the applicable securities
registration requirements or registrations under applicable securities laws.
Nothing herein, however, shall obligate the Company to effect registrations
under federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available when the
Holder seeks to exercise the Warrant, the Warrant exercise period will be
extended, if need be, to prevent the Warrant from expiring, until such time as
either registrations become effective or exemptions are available, and the
Warrant shall then remain exercisable for a period of at least 30 calendar days
from the date the Company delivers to the Holder written notice of the
availability of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and agreements as may
be required solely to comply with the exemptions relied upon by the Company, or
the registrations made, for the issuance of the Warrant Shares.
4. Covenants of the Company. The Company covenants and agrees that all
Warrant Shares will, upon issuance, be duly authorized and issued, fully paid,
nonassessable, and free from all taxes, liens, and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
5. Antidilution Adjustments. The provisions of this Warrant are subject
to adjustment as provided in this Section 5.
(a) The Warrant Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock
into a greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Warrant Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Warrant
Exercise Price, by (b) the total number of shares of Common Stock outstanding
immediately after such event (including the maximum number of shares of Common
Stock issuable in respect of any securities convertible into Common Stock), and
the resulting quotient shall be the adjusted Warrant Exercise Price per share.
An adjustment made pursuant to this Subsection shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. If, as a result of an adjustment
made pursuant to this Subsection, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive shares of two or more
classes of capital stock or shares of Common Stock and other capital stock of
the Company, the Board of Directors (whose determination shall be conclusive)
shall determine the allocation of the adjusted Warrant Exercise Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this Subsection shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case may be. In the
event that at any time as a result of an adjustment made pursuant to this
Subsection, the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive any shares of the Company other than shares of Common
Stock, thereafter the Warrant Exercise Price of such other shares so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to Common Stock contained in this Section.
(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Warrant Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Warrant (as adjusted as a
result of all adjustments in the Warrant Exercise Price in effect prior to such
adjustment) by the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise Price.
(c) In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Warrant then
outstanding shall have the right thereafter to convert such Warrant into the
kind and amount of shares of stock and other securities and property which he
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Warrant
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section with respect to the rights and interests
thereafter of any Holders of the Warrant, to the end that the provisions set
forth in this Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Warrant.
The provisions of this Subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
6. No Voting Rights. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder of the Company.
7. Notice of Transfer of Warrant or Resale of the Warrant Shares.
(a) Subject to the sale, assignment, hypothecation, or other transfer
restrictions set forth in Section 1 hereof, the Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Warrant or
transferring any Warrant Shares of such Holder's intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon receiving such
written notice, the Company shall present copies thereof to the Company's
counsel and to counsel to the original purchaser of this Warrant. If in the
opinion of each such counsel the proposed transfer may be effected without
registration or qualification (under any federal or state securities laws), the
Company, as promptly as practicable, shall notify the Holder of such opinion,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of
Warrant Shares received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by the Holder to the Company;
provided that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon transfer
thereof necessary or advisable in the opinion of counsel and satisfactory to the
Company to prevent further transfers which would be in violation of Section 5 of
the Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws; and provided further that the prospective transferee or
purchaser shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply with the
exemptions relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b) If in the opinion of either of the counsel referred to in this
Section 7, the proposed transfer or disposition of this Warrant or such Warrant
Shares described in the written notice given pursuant to this Section 7 may not
be effected without registration or qualification of this Warrant or such
Warrant Shares the Company shall promptly give written notice thereof to the
Holder, and the Holder will limit his activities in respect to such as, in the
opinion of both such counsel, are permitted by law.
8. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant, but in any case where the holder would, except for the
provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Warrant for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Warrant Exercise Price represented by such
fractional share, plus (b) the proportional part of the Warrant Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means:
(i) if the Company's Common Stock is traded on an exchange or
is quoted on the Nasdaq National Market, then the average closing or
last sale prices, respectively, reported for the ten (10) business days
immediately preceding exercise of the Warrant,
(ii) if the Company's Common Stock is not traded on an
exchange or on the Nasdaq National Market but is traded on the Nasdaq
SmallCap Market or other over-the-counter market, then the average
closing bid and asked prices reported for the ten (10) business days
immediately preceding the exercise of the Warrant, and
(iii) if the Company's Common Stock is not traded on an
exchange, the Nasdaq National Market, or the Nasdaq SmallCap Market or
other over-the-counter market, then the price established by the
Company's Board of Directors.
IN WITNESS WHEREOF, CorVu Corporation has caused this Warrant to be
signed by its duly authorized officer and this Warrant to be dated June 30,
1999.
"Company"
CorVu Corporation
By
Its
<PAGE>
To: CorVu Corporation
NOTICE OF EXERCISE OF WARRANT To Be Executed
by the Registered Holder in Order to
Exercise the Warrant
The undersigned hereby irrevocably elects to exercise the attached Warrant to
purchase for cash, _________________ of the shares issuable upon the exercise of
such Warrant, and requests that certificates for such shares (together with a
new Warrant to purchase the number of shares, if any, with respect to which this
Warrant is not exercised) shall be issued in the name of
------------------------------
(Print Name)
Please insert social security
or other identifying number
of registered holder of
certificate (______________) Address:
------------------------------
------------------------------
Date: _________, 19__ ______________________________
Signature*
*The signature on the Notice of Exercise of Warrant must correspond to the name
as written upon the face of the Warrant in every particular without alteration
or enlargement or any change whatsoever. When signing on behalf of a
corporation, partnership, trust or other entity, PLEASE indicate your
position(s) and title(s) with such entity.
<PAGE>
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrants.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto __________________________________________________ the right to
purchase the securities of CorVu Corporation to which the within Warrant relates
and appoints ____________________, attorney, to transfer said right on the books
of CorVu Corporation with full power of substitution in the premises.
Dated:________________ _____________________________
(Signature)
Address:
------------------------------
------------------------------
IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING:
SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN.
SUBSCRIPTION AGREEMENT
AND
LETTER OF INVESTMENT INTENT
June 30, 1999
CorVu Corporation
3400 W. 66th Street
Suite 445
Edina, Minnesota 55435
Ladies and Gentlemen:
I hereby subscribe for 395,000 shares of common stock of CorVu
Corporation, a Minnesota corporation (the "Corporation"), in full satisfaction
and payment of the principal amount of my cash advances to the Corporation
during the period from to , aggregating the principal amount of $790,000.
I understand that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), on the ground that
the acquisition of the Shares by me is exempt under Section 4(2) thereof.
In partial consideration of the issuance of the Shares to me, I hereby
represent, warrant and agree as follows:
1. Knowledge of Reliance. I understand and recognize that the
Corporation, in claiming the above referenced Securities Act exemption for the
issuance of the Shares, is relying upon the statements and representations made
by me in this letter.
2. Investment Purpose in Acquiring the Shares.
a) Generally. I am acquiring the Shares for my account for
investment purposes only and not with a view to their resale or distribution. I
have no present intention to divide my participation with others or to resell or
otherwise dispose of all or any part of the Shares. In making these
representations, I understand that in the view of the Securities and Exchange
Commission the statutory exemption referred to above would not be available if,
notwithstanding my representations, I have in mind merely acquiring the Shares
for resale upon the occurrence or nonoccurrence of some predetermined event.
b) Compliance With Securities Act. I agree that if I sell or
distribute the Shares in the future, I shall do so pursuant to the requirements
of the Securities Act and applicable state securities laws. I agree that I will
not transfer any part of the Shares without (i) an effective registration under
the Securities Act and applicable state securities laws, or (ii) obtaining an
opinion of counsel satisfactory in form and substance to counsel for the
Corporation stating that the proposed transaction will not result in a
prohibited transaction under the Securities Act and applicable state securities
laws.
c) Restrictive Legend. I agree that you may place a
restrictive legend on the Shares containing substantially the following
language:
"The Shares represented by this certificate have not
been registered under either the Securities Act of
1933, as amended, or applicable state securities
laws, and are subject to an investment letter. They
may not be sold, offered for sale or transferred in
the absence of an effective registration under the
Securities Act of 1933, as amended, and the
applicable state securities laws, or an opinion of
counsel satisfactory in form and substance to counsel
for the Corporation that such transaction will not
result in a prohibited transaction under the
Securities Act of 1933, as amended, or the applicable
state securities laws."
d) Stop Transfer Order. I agree that the Corporation may place
a stop transfer order with its registrar and stock transfer agent covering all
certificates representing the Shares.
3. Knowledge of Restrictions Upon Transfer of the Shares. I understand
that the Shares are not freely transferable and may in fact be prohibited from
sale for an extended period of time and that, as a consequence thereof, I may
have extremely limited opportunities to dispose of the Shares. I understand that
Rule 144 of the Securities and Exchange Commission permits the transfer of
"restricted securities" of the type here involved only under certain conditions,
including a minimum one-year holding period and availability to the public of
certain information concerning the Corporation.
4. Information About the Corporation. I acknowledge that I am a
director of the Corporation and that, by reason of my relationship with the
Corporation as well as other actions taken by me, I am fully aware of and
advised concerning the present financial condition of the Corporation, its
business affairs and its prospects for future business.
5. Knowledgeable Investor. I understand that an investment in the
Corporation is speculative and involves a high degree of risk, and that there
can be no assurance that I will receive any return of or on my investment. I can
bear the economic risk of an investment in the Shares for an indefinite period
of time, can afford to sustain a complete loss of such investment, have no need
for liquidity in connection with an investment in the Shares, and can afford to
hold the Shares indefinitely.
Yours very truly,
Ismail Kurdi
Address:
ACCEPTANCE
This Subscription Agreement and Letter of Investment Intent is accepted
as of June 30, 1999.
CORVU CORPORATION
By:
Its:
EMPLOYMENT AGREEMENT
EFFECTIVE DATE: July 1, 1999
PARTIES AND ADDRESSES:
CorVu Corporation
3400 West 66th Street, Suite 445
Edina, MN 55345 (the "Company")
Justin MacIntosh
Level 4, 1 James Place
North Sydney NSW 2060 AUSTRALIA ("Executive")
RECITALS:
A. The Company is a Minnesota corporation engaged principally in the
business of developing, manufacturing and selling business software programs.
B. Executive is currently employed as the Company's Chairman, President
and Chief Executive Officer pursuant to an employment agreement which terminates
June 30, 1999.
C. The Company and Executive desire to enter into an employment
agreement pursuant to which Executive will serve as the Company's Chief
Executive Officer for the three year period ending June 30, 2002.
This Employment Agreement will be referred to as the "Agreement."
AGREEMENTS:
In consideration of the mutual promises and undertakings set forth
herein, the Company and Executive agree as follows:
ARTICLE 1
Term of Employment, Duties and Supervision
1.1) Employment; Term. The Company hereby employs Executive as its
Chairman, President and Chief Executive Officer pursuant to the terms of this
Agreement, and Executive hereby accepts such employment as of the date hereof.
Unless terminated pursuant to Articles 4 or 5, the term of employment shall
continue until June 30, 2002 (the "Term"), and thereafter shall renew
automatically for successive terms of one year each, upon the terms and
conditions set forth in this Agreement, as such may be modified by mutual
written agreement of the parties from time to time; provided, however, that
either Executive or the Company may terminate the employment of Executive during
the Term in accordance with, and subject to the right of Executive to receive
payments and other benefits that may be due pursuant to, Article 5. Each
12-month period commencing July 1 through June 30 during the Term is referred to
as an "Employment Year".
1.2) Duties; Title.
(a) Executive agrees, during his employment, to devote his
full time and best efforts to the business of the Company, including,
without limitation, the performance of those duties and
responsibilities reasonably and customarily associated with the
position of the Company's Chairman, President and Chief Executive
Officer; provided, however, that Executive's duties and
responsibilities consistent with Executive's position shall be subject
to determination by the Company's Board of Directors. While serving as
Chief Executive Officer, Executive shall be granted such powers and
authority as are reasonably and customarily associated with the
position of chief executive officer.
(b) Executive shall report to, and at all times shall be
subject to the direction of, the Company's Board of Directors and/or
its designee.
(c) Executive's title shall remain subject to the control of
the Board of Directors; provided, however, that during the term of this
Agreement, Executive shall always be designated as a principal
executive officer of the Company.
1.3) Additional Requirements. Executive, at all times during his
employment with the Company, shall comply with the Company's reasonable
standards, regulations and policies as determined or set forth by the Board of
Directors from time to time and as applicable to all employees and/or executive
employees of the Company.
1.4) Outside Activities. The Company acknowledges and agrees that from
time to time Executive may serve as a member of the Board of Directors of one or
more businesses or nonprofit entities other than the Company; provided, however,
that Executive provides the Company's Board of Directors with information about
each proposed directorship, including time required by such directorship,
whether such directorship may involve conflicts of interest with the Company or
its interests, the types of risks which such directorship may involve, and any
other factors Executive or the Board of Directors considers material respecting
such directorship. The Company's Board of Directors shall promptly consider all
submissions by Executive pursuant to this Paragraph 1.4. The Company's Board of
Directors may request in good faith that Executive not accept a particular
directorship, or more than a specific number of directorships, or that Executive
resign from a particular directorship, and Executive agrees to honor such
requests.
ARTICLE 2
Compensation
2.1) Compensation. Subject to Paragraph 4.2 and Articles 5, 7, 8 and 9
hereof, Executive shall be paid compensation for the performance of his duties
hereunder as follows:
(a) Salary. The Company shall pay Executive a base salary at
the rate of $330,000 for the Employment Year commencing July 1, 1999,
$380,000 for the Employment Year commencing July 1, 2000, and $420,000
for the Employment Year commencing July 1, 2001, payable monthly, which
may be adjusted from time to time by the Board of Directors. The
Company shall be entitled to deduct or withhold all taxes and charges
which the Company may be required to deduct or withhold therefrom.
(b) Options. Executive shall also be granted options to
purchase a total of 600,000 shares of the Company's common stock at
$1.50 per share, with 200,000 of said options vesting on July 1, 1999,
200,000 options vesting on July 1, 2000, and 200,000 options vesting on
July 1, 2001. The options must be exercised within 7 years from the
date of grant of the options and shall be subject to such other terms
and conditions as are contained in a Stock Option Agreement between
Company and Executive evidencing such options.
2.2) Termination of Compensation. Except as provided in Articles 4, 7,
8 and 9 of this Agreement, the Company's obligation to pay compensation to
Executive under this Article 2 shall terminate at the close of business on the
date on which Executive's employment is terminated; provided, however, that the
Company shall remain liable to pay Executive any amounts due Executive for
services rendered prior to such termination date pursuant to Paragraph 2.1(a).
ARTICLE 3
Expenses
3.1) Expenses. During the term of this Agreement, Executive shall be
entitled to prompt reimbursement by the Company for all reasonable, ordinary and
necessary travel, entertainment and other business related expenses incurred by
Executive (in accordance with the policies and procedures established by the
Company from time to time) in the performance of his duties and responsibilities
under this Agreement; provided, however, that Executive shall properly account
for such expenses in accordance with federal, state and local tax requirements
and the Company's policies and procedures.
ARTICLE 4
Benefits
4.1) Vacations; Holidays. Executive shall be entitled to four (4) weeks
of paid vacation plus all holidays in accordance with the Company's policies in
effect from time to time. Executive shall not be entitled to carry unused
vacation forward from one Employment Year to the next. Executive shall not be
entitled to compensation in any form in lieu of use of vacation and/or holiday
time off.
4.2) Compensation During Sickness or Disability.
(a) Subject to the remaining provisions of this Paragraph 4.2,
Executive shall be entitled to receive the monthly portion of
Executive's annual base salary in accordance with Article 2 hereof for
absences for physical or mental illness or injury during any Employment
Year which do not give rise to a determination of Executive's
disability pursuant to Paragraph 4.2(b) below.
(b) Subject to Paragraph 4.2(j), if, during any Employment
Year, Executive is absent from Executive's employment for more than
twenty (20) consecutive business days at any one time or more than
forty (40) business days in total, by reason of physical or mental
illness or injury, as determined by the Company or an examining
physician or mental health professional acceptable to the Company, or
in the event any other accident or occurrence gives rise to the
likelihood of Executive's absence for more than the period of time
specified above for reason of physical or mental illness or injury, as
determined by the Company or an examining physician or mental health
professional acceptable to the Company, Executive shall be deemed
disabled for the purposes hereof. In such event, Executive shall be
entitled to receive his base salary under Article 2, continued payment
by the Company of Executive's share of health, life and disability
insurance premiums (to the extent such benefits are offered by the
Company to its executive employees and subject to the conditions or
limitations of such insurance plans) during the first 90 calendar days
from the date such disability is determined to have occurred, and,
during such period, the Company may discontinue all other payments to
or on behalf of Executive under this Agreement. After such 90 calendar
day period, the Company shall terminate all payments to Executive.
Notwithstanding anything herein to the contrary, such 90 calendar day
period shall begin to run from the date such disability is determined
to have occurred, regardless of whether Executive has any unused
vacation. Executive shall not be entitled to any payments for unused
vacation in conjunction with the application of this Paragraph 4.2,
except to the extent any leave taken by Executive under this Paragraph
4.2 qualifies as a leave under the Family and Medical Leave Act, 29
U.S.C. Section 2601, et seq., in which event Executive may choose to
use unused vacation instead of disability under this Paragraph 4.2. If
Executive exercises such right, any unused vacation taken shall offset
any period of disability leave that otherwise would have been paid
under this Paragraph 4.2(b).
(c) If prior to any termination of Executive's employment
under this Paragraph 4.2 Executive is able to resume performance of his
duties under this Agreement, and if within six months of the resumption
of such duties Executive is again absent from his employment by reason
of physical or mental illness or injury for a period of more than ten
business days such subsequent disability period shall be deemed to be a
continuation of the immediately preceding disability period, and the
disability payments made by the Company to Executive shall be made only
for the remainder, if any, of the ninety (90) calendar day income
continuation period provided for above, and in no event shall
disability payments hereunder be made for a period or periods
aggregating more than ninety (90) calendar days.
(d) Any disability period commencing after Executive has
returned to his employment hereunder and has given reasonable and
proper attention to his duties for a continuous period of 180 calendar
days shall be deemed a new period of disability for purposes of this
Paragraph 4.2.
(e) Any disability compensation payable under this Article 4
shall be reduced by:
(i) any amount which is paid to Executive under any
private disability benefit plan or arrangement to which the
Company contributes or has contributed;
(ii) any benefits paid or payable to Executive on
account of the disability of Executive under any worker's
compensation law, occupational disease law, or similar
legislation of any state or of the federal government;
(iii) 50% of the amount of any related benefit which
Executive would be entitled to receive under the Federal
Social Security Act as in effect at the time the payment
hereunder is made; and
(iv) any benefits paid or payable to Executive under
any law of any state or of the federal government now in force
or hereafter enacted as compensation, wages or benefits in
lieu of wages on account of disability.
(f) Subject to a determination by the Company that Executive
is capable of returning to part or full-time employment, the
determination of the Company being conclusive if made with the advice
of a competent physician or mental health professional selected by it,
Executive may return to part-time or full-time employment at any time
prior to any termination of Executive's employment under this Paragraph
4.2. Following Executive's return to employment:
(i) if Executive returns to full-time employment, his
compensation shall be determined as though Executive had not
been disabled; or
(ii) if Executive returns to part-time employment,
Executive shall be entitled to a reasonable amount of
compensation for Executive's services rendered to the Company
as determined by a reasonable standard to be set by the
Company's Board of Directors.
(g) If Executive's employment is terminated, except for the
reasons stated in subparagraph (a), (b), (c)(iv) or (v), or (d) of
Paragraph 5.1 hereof, while the Company is making disability payments
to Executive, Executive shall be entitled to receive the disability
payments to which Executive would otherwise be entitled pursuant to the
provisions of this Paragraph 4.2.
(h) The Company shall comply with all applicable state and
federal laws relating to the disability of an employee, including laws
regarding reasonable accommodation requirements and laws governing the
granting of medical leaves of absence.
4.3) Life and Health Insurance; Other Benefits. During Executive's
employment, the Company shall provide such deferred compensation, disability
insurance, life insurance, health insurance and other benefits to Executive as
the Company provides for its executive officers, and such additional benefits as
the Company's Board of Directors may determine in its sole discretion; provided
that, the Company may exclude Executive from participation in any 401(k) plan
which the Company implements to the extent deemed advisable to ensure the
continued qualification of such plan under applicable tax laws and in lieu
thereof compensate Executive appropriately to make up for his exclusion. Nothing
in this Paragraph 4.3 shall be construed to require the Company to provide
Executive with any identified or other benefits.
ARTICLE 5
Termination
5.1) Events of Termination. Executive's employment hereunder:
(a) May be terminated by mutual written agreement of the
parties.
(b) Shall terminate immediately upon the death of Executive.
(c) May be terminated by the Company upon written notice to
Executive for "Cause", which shall mean the following:
(i) Material failure of Executive to (a) faithfully,
diligently or competently perform the material duties,
requirements and responsibilities of his employment as
established pursuant to this Agreement, or (b) take reasonable
direction consistent with the position for which he has been
employed as described in Article 1 from the Board of Directors
or its designee; or
(ii) Failure of Executive to materially comply with
the reasonable policies, regulations and directives of the
Company as in effect from time to time; or
(iii) Any act or omission on the part of Executive
which constitutes a material failure to comply with material
provisions of this Agreement; or
(iv) Any act or omission on the part of Executive
which is clearly and materially harmful to the reputation or
business of the Company, including, but not limited to,
conduct which is inconsistent with federal and state laws
respecting harassment of, or discrimination against, one or
more of the Company's employees; or
(v) Conviction of Executive of, or a guilty or nolo
contendere plea by Executive with respect to, any crime
punishable as a felony; or any bar against Executive from
serving as a director, officer or employee of any firm the
securities of which trade publicly.
No reasonable action, omission or failure by
Executive shall constitute "cause" if done or omitted to be
done by Executive in good faith and with a reasonable belief
that any such act, omission or failure was in the best
interests of the Company.
In the event of termination pursuant to subparagraphs
(i) through (iv) above, the Company shall give Executive
written notice (the "Cause Notice") of proposed termination
which provides reasonable detail as to the cause or causes
asserted by the Company and sets forth the date of a meeting
of the Company's Board of Directors, which date shall be no
sooner than five days after the date on which the Cause Notice
is given, at which Executive may appear, with an advisor of
his choice if Executive so desires, to discuss Executive's
proposed termination. At such meeting Executive and
Executive's advisor will honor requests by the director
presiding at the meeting to leave the meeting to allow for
discussion by the directors in Executive's absence. At such
time as the Board of Directors reaches a decision with respect
to Executive's termination, whether at the meeting set forth
in the notice to Executive, or at a subsequent meeting, if the
decision to terminate Executive is affirmed by the Board of
Directors, Executive will be given written notice of such
affirmation and Executive's employment will terminate
immediately upon the giving of such notice. In the event of
termination pursuant to subparagraph (v) above, Executive's
termination shall be immediate upon the giving of written
notice.
(d) Shall terminate in accordance with the provisions of
Paragraph 4.2(b) hereof. Nothing in Paragraph 4.2(b) hereof or in this
Paragraph 5.1(d) shall limit the right of either party to terminate
Executive's employment under any other subparagraph of Paragraph 5.1;
provided, however, that if Executive is receiving disability payments
under Paragraph 4.2(b) the Company may not terminate this Agreement
under Paragraphs 5.1(c)(i),(ii), or (iii), or (h).
(e) Shall terminate upon Executive's reaching the normal
retirement date established by the Company for senior management
employees of the Company, but in no event earlier than the compulsory
retirement age permitted under federal or similar law for senior
management employees.
(f) May be terminated by the Company, for any or no reason, on
60 days' written notice to Executive; provided that if at the time of
such termination "Cause" exists and the written notice specified in
subparagraph (c) above is given, then such termination by the Company
shall be considered to be pursuant to subparagraph (c) above.
(g) May be terminated by Executive, for any or no reason, on
60 days' written notice to the Company.
5.2) Compensation Upon Termination of Executive's Employment. In the
event that Executive's employment with the Company terminates, the following
provisions shall govern as applicable:
(a) If termination occurs pursuant to Paragraph 5.1(a) (by
mutual written agreement) the agreement of the parties shall control.
(b) If termination occurs pursuant to Paragraph 5.1(b) (for
death), all benefits shall terminate as of the termination date, and
the base salary shall terminate as provided in Paragraph 2.2.
(c) If termination occurs pursuant to Paragraph 5.1(c) (for
Cause) or 5.1(h) (resign without Good Reason), all benefits shall
terminate as of the termination date, and the base salary shall be paid
to the date of termination as provided in Paragraph 2.2.
(d) If termination occurs pursuant to Paragraph 5.1(d)
(disability), the provisions of Paragraph 4.2 shall govern the
termination of benefits and base salary.
(e) If termination occurs pursuant to Paragraph 5.1(e)
(retirement), the provisions of Paragraph 5.2(b) shall govern the
termination of benefits and base salary.
(f) If termination occurs pursuant to 5.1(f) (by the Company
without Cause) then Executive's base salary shall be paid to the date
of termination as provided in Paragraph 2.2 and in addition:
(i) the Company shall pay Executive, as severance
pay, in accordance with the Company's normal payroll practices
for executive employees, such number of consecutive monthly
installments of his base salary in effect as of the date of
termination as is equal to the greater of (A) the number of
months remaining in the Term (without regard to renewals) of
this Agreement, or (B) nine (9).
(ii) Executive shall be entitled to continued
participation in hospital and medical plans and programs of
the Company for such period as is provided by law following
termination of Executive's employment, subject to Executive's
paying the employee portion of the cost of such participation
and subject to termination of participation upon Executive
becoming entitled to comparable benefits on subsequent
employment.
(g) If termination occurs pursuant to Paragraph 5.1(g) the
compensation provisions of Paragraph 5.2(c) shall apply.
(h) All payments made to Executive under this Paragraph 5.2
shall be reduced by amounts (i) required to be withheld in accordance
with federal, state and local laws and regulations in effect at the
time of payment, or (ii) owed to the Company by Executive for any
amounts advanced, loaned or misappropriated.
5.3) Return of the Company Property. In the event of termination of
Executive's employment all corporate documents, records, files, credit cards,
computer disks and tapes, computer access card, codes and keys, file access
codes and keys, building and office access cards, codes and keys, materials,
equipment and other property of the Company which is in Executive's possession
shall be returned to the Company at its principal business office on the date of
termination of Executive's employment, or within five days thereafter if
termination occurs without notice. Executive may copy, at Executive's expense,
documents, records, materials and information of the Company only with the
Company's express, written permission.
ARTICLE 6
Inventions, Plans and Ideas
6.1) Definition. "Inventions, plans and ideas" as used in this Article
6 mean any discoveries, ideas, plans and improvements (whether or not they are
in writing or reduced to writing or embodied solely in practices of the Company)
or works of authorship (whether or not they are or can be patented or
copyrighted) that Executive makes, authors, or conceives (either alone or with
others) and that:
(a) concern the Company's business or the Company's research
or development or planning that can be demonstrated to relate to the
Company's then-current business or any planned business discussed with
the Board of Directors which the Company is actively exploring; or
(b) result from and relate to any work Executive performs for
the Company which work also meets the criteria of subparagraph (a); or
(c) use the Company's trade secret information.
6.2) Property of the Company. Executive agrees that all "inventions,
plans and ideas" he makes during the term of this Agreement will be the
Company's sole and exclusive property. Executive will, with respect to any such
"invention, plan or idea":
(a) keep current, accurate and complete records which will
belong to the Company and be kept and stored on the Company's premises
while Executive is employed by the Company.
(b) promptly and fully disclose the existence and describe the
nature of the invention, plan or idea to the Company in writing (upon
request).
(c) assign, and Executive hereby does assign, to the Company
all of his rights to any such "invention, plan or idea", and any
applications which he may make for patents, copyrights, trademarks or
service marks in any country.
(d) acknowledge and deliver promptly to the Company any
written instruments, and perform any other acts necessary in the
Company's reasonable opinion, to preserve property rights in any
invention, plan or idea against forfeiture, abandonment or loss, and to
obtain and maintain letters patent and/or copyrights and/or marks on
any invention, plan or idea and to vest the entire right and title to
such "invention, plan or idea" in the Company.
NOTICE: Pursuant to Minnesota Statutes ss. 181.78, Executive is hereby notified
that this Article 6 does not apply to any invention for which no equipment,
supplies, facility, or trade secret information of the Company was used and
which was developed entirely on Executive's own time, and (1) which does not
relate (a) directly to the business of the Company or (b) to the Company's
actual or demonstrably anticipated research or development, or (2) which does
not result from any work performed by the employee for the Company.
6.3) Executive Claims. Executive does not have, and will not assert,
any claims to or rights under any "inventions, plans or ideas" as having been
made, conceived, offered or acquired by Executive prior to his employment by the
Company. Further, and without limiting the foregoing, Executive has contributed
and assigned, and hereby does contribute and assign, to the Company all
"inventions, plans and ideas" within the meaning of this Article 6.
ARTICLE 7
Confidential Information
7.1) Definition. "Confidential Information" as used in this Article 7
means information (a) that is not generally known to the public and (b) that is
proprietary to the Company or that the Company is obligated to treat as
proprietary. Confidential Information shall include, without limitation:
(i) trade secret information about the Company and its
products and services; and
(ii) Any information that the Company reasonably considers or
treats as Confidential Information, or that Executive actually knows or
reasonably should know that the Company considers or treats as
Confidential Information (whether Executive or others originated it and
regardless of how Executive obtained it).
7.2) Use Prohibited. Except as required in his duties to the Company,
Executive will never knowingly, either during or after his employment by the
Company, use or disclose Confidential Information to any person not authorized
by the Company to receive it, excluding Confidential Information (a) which
becomes publicly available through a source other than Executive, (b) which is
made public by the Company, (c) which is received by Executive after termination
of this Agreement from a third party who obtained the information on a
non-confidential basis from the Company, (d) for which disclosure thereof the
Company has consented to in writing, or (e) that Executive is compelled to
disclose in any judicial or administrative proceeding. Promptly upon termination
of Executive's employment with the Company, Executive will turn over to the
Company all records, documents, materials and any compositions, articles,
devices, apparatus and other items that disclose, describe or embody
Confidential Information, including all copies and reproductions thereof, in
Executive's possession, regardless of who prepared them.
7.3) Violation by Executive. If it is determined by an arbitration
proceeding or a final, non-appealable judgment of a court of law or equity that
Executive has breached Article 7 with regard to material information, the
Company shall be relieved of further severance payments to Executive and
Executive shall repay to the Company all severance payments previously received.
ARTICLE 8
Competitive Activities Prohibited
8.1) Prohibition; Duration. Executive agrees that, during his
employment with the Company and for any period for which Company is making (or
has made in the case of a Change of Control) severance payments to Executive
pursuant to this Agreement after termination of Executive's employment,
Executive will not alone, or in any capacity with another firm, individual or
person:
(a) directly or indirectly, whether as an employee, officer,
director, shareholder, (provided, however, that passive investments in
publicly traded securities not exceeding five percent of the issuer's
capital stock shall be permitted), partner, agent, owner,
representative, consultant or otherwise, engage in any activity, in any
state or foreign country, that competes with the Company's products or
services produced, sold or rendered in the ordinary course of the
Company's business as of the date of Executive's termination, or
products or services demonstrated to have been formally planned and
approved before the date of Executive's termination for production or
sale;
(b) in any way interfere or attempt to interfere with the
Company's relationships with any of its then-current customers,
suppliers, vendors or investors; or
(c) employ or attempt to employ any of the Company's
employees, or the employees of any enterprise managed or owned by the
Company on behalf of any other entity competing with the Company;
provided, however, that in the event Executive's severance
payments are paid in a lump sum as a result of termination after a
"Change of Control", the period during which the provisions of this
Section 8.1 shall apply will be one year.
All of the above activities are "Competitive Activities".
8.2) Exception. Nothing in Paragraph 8.1 shall restrict the Executive's
employment by, or association with, an entity, venture or enterprise which
engages in a business with a product or service competitive with any product or
service, or planned product or service per Paragraph 8.1(a), of the Company so
long as Executive's employment or association with such entity, venture or
enterprise is limited to work which does not directly involve products or
services which compete with any product or service offered, or planned to be
offered per Paragraph 8.1(a), by the Company at the date of Executive's
termination.
8.3) Violation by Executive. If it is determined by an arbitration
proceeding or a final non-appealable judgment of a court of law or equity that
Executive has breached Article 8 in a material manner the Company shall be
relieved of further severance payments to Executive, and Executive shall repay
to the Company all severance payments previously received.
8.4) Notice to New Employer. Executive will, prior to accepting
employment with any new employer, inform that employer of this Agreement and
provide that employer with a copy of Article 8 of this Agreement.
ARTICLE 9
Certain Company Remedies
9.1) Certain Company Remedies. The parties acknowledge that the Company
will suffer irreparable harm if the Executive breaches Paragraph 5.3 and/or
Articles 6, 7 and/or 8 of this Agreement, either during or after its term.
Accordingly, the Company shall be entitled to any right or remedy it may have,
under this Agreement or otherwise, at law or equity, including but not limited
to, an injunction, enjoining or restraining Executive from any violation of
Paragraph 5.3 and/or Articles 6, 7 and/or 8 of this Agreement.
9.2) Payment of Fees and Expenses. If either party initiates or becomes
a party to a formal proceeding in law or equity, or under Article 10, involving
this Agreement, and if either party obtains a substantial portion of the relief
requested by that party (the "prevailing party"), then the non-prevailing party
shall pay all of its and the prevailing party's reasonable costs and expenses,
including reasonable attorneys' fees and expenses, incurred with respect to such
proceeding. If neither party obtains a substantial portion of the relief
requested each shall bear its/his own expenses. In the event Executive is
terminated pursuant to Paragraph 5.1 (c) and determines to challenge the
Company's determination of "Cause", the Company and Executive shall each bear
its/his own expenses in connection with any proceeding initiated by Executive
with respect to the determination as to "Cause".
ARTICLE 10
Arbitration
10.1) Agreement to Arbitrate. With the exception of the Company's
rights and remedies in connection with breaches by Executive of Paragraph 5.3
and/or Articles 6, 7 and/or 8 of this Agreement, all disputes or claims arising
out of or in any way relating to this Agreement, including the making of this
Agreement, shall be submitted to and determined by final and binding arbitration
under the rules of the American Arbitration Association. Arbitration proceedings
may be initiated by the Company or Executive upon notice to the other and to the
American Arbitration Association, and shall be conducted by three arbitrators
under the rules of the American Arbitration Association in Minneapolis,
Minnesota; provided, however, that the Company and Executive may agree,
following the giving of such notice, to have the arbitration proceedings
conducted with a single arbitrator. The notice must specify, in general, the
issues to be resolved in any such arbitration proceeding. The arbitrators shall
be selected by agreement of the Company and Executive from a list of 12 or more
arbitrators proposed to the Company and Executive by the American Arbitration
Association, or may be persons not on such list as agreed to by the Company and
Executive. If the Company and Executive fail to agree on one or more of the
persons to serve as arbitrators within 30 days of delivery of the list of
proposed arbitrators by the American Arbitration Association, then at the
request of the Company or Executive such arbitrators shall be selected at the
discretion of the American Arbitration Association.
In addition to any other procedures provided for under the rules of the
American Arbitration Association, upon written request, each party shall, at
least 14 days prior to the date of any hearing, provide to the opposite party a
copy of all documents relevant to the issues raised by any claim or counterclaim
and a list of all witnesses to be called by that party at the hearing.
10.2) Costs. The costs of proceedings under Article 10 shall be paid in
accordance with the provisions of Article 9.
ARTICLE 11
Indemnification
11.1) As to acts or omissions of Executive which are within the scope
of Executive's authority as an officer and/or director of the Company and/or any
affiliate of the Company, the Company shall indemnify Executive, and his legal
representatives and heirs to the maximum extent permitted by Minnesota law.
ARTICLE 12
Miscellaneous
12.1) Successors and Assigns. This Agreement is binding on and inures
to the benefit of the Company, and its successors and assigns. The Company
agrees that the Company shall be deemed to have materially breached this
Agreement if its successor or assign does not assume all of the Company's
material obligations under this Agreement. The rights and obligations of
Executive under this Agreement are personal and may not be assigned or
transferred without the express written consent of the Company.
12.2) Modification. This Agreement supersedes all prior agreements and
understandings between the parties. This Agreement may be modified or amended
only by a writing signed by the Company and Executive.
12.3) Waivers. No failure or delay by either the Company or Executive
in exercising any right or remedy under this Agreement shall be deemed a waiver
of any provision of this Agreement. Nor shall any single or partial exercise by
either the Company or Executive of any right or remedy under this Agreement
preclude either from otherwise or further exercising rights or remedies granted
under this Agreement.
12.4) Notices. Any and all notices referred to herein shall be deemed
properly given only if in writing and delivered personally or sent postage
prepaid, by certified mail, return receipt requested, as follows:
(a) To the Company, to the attention of the Company's Chief
Financial Officer, at its office set forth on page 1 of this Agreement
or at such other address as the Company may specify in writing to
Executive, with a copy to each member of the Company's Board of
Directors, and to Fredrikson & Byron, P.A., 1100 International Centre,
900 Second Avenue South, Minneapolis, Minnesota 55402, Attention: John
H. Stout.
(b) To Executive at his home address as it then appears on the
records of the Company, it being the duty of the Executive to keep the
Company informed of his current home address at all times.
The date on which notice to the Company or Executive shall be deemed to
have been given if mailed as provided above shall be the date on the certified
mail return receipt. Personal delivery to Executive shall be deemed to have
occurred on the date notice was delivered to Executive personally or deposited
in a mail box or slot or left with security or administrative personnel, at
Executive's residence by a representative of the Company or any messenger or
delivery service.
12.5) Action by Board of Directors. Any action required by the
Company's Board of Directors under this Agreement may be taken by majority vote
of a duly authorized committee having authority over the matter in question or
by a majority of the remaining members of the Board of Directors, not counting
Executive, then serving.
12.6) Judicial Review; Severability. In the event that a court of
competent jurisdiction determines that any of the provisions of this Agreement
are unreasonable, it may limit such provision to the extent it deems reasonable,
without declaring the provision or this Agreement invalid in its entirety. This
provision shall not be construed as an admission by the Company, but is only
included to provide the Company with the maximum possible protection for its
business, Confidential Information, Inventions, trade secrets and data,
consistent with the right of the Executive to earn a livelihood subsequent to
the termination of his employment.
To the extent any portion of any provision of this Agreement shall be
deemed invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and the remainder of this Agreement shall be
unaffected and shall continue in full force and effect.
The Company and Executive desire that this Agreement shall be given the
construction which renders its provisions valid and enforceable to the maximum
extent, not exceeding its express terms, permissible under applicable law.
12.7) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement on July 1, 1999 to be effective as of the effective date set forth
above.
Company: CORVU CORPORATION
By:
Its
Executive:
Justin MacIntosh ("Executive")
EMPLOYMENT AGREEMENT
EFFECTIVE DATE: July 15, 1996
PARTIES AND ADDRESSES:
CorVu Corporation
7901 Flying Cloud Drive, #100
Eden Prairie, MN 55344-7903 (the "Company")
David Carlson
18115 35th Ave. N.
Plymouth, MN 55447 ("Executive")
RECITALS:
A. The Company is a Minnesota corporation engaged principally in the
business of developing, manufacturing and selling business software programs.
B. Executive is a certified public accountant and has prior experience
as a principal financial officer of a business enterprise.
C. The Company and Executive desire to enter into an employment
agreement for Executive's services on the terms stated herein. This Employment
Agreement will be referred to as the "Agreement."
AGREEMENTS:
In consideration of the mutual promises and undertakings set forth
herein, the Company and Executive agree as follows:
ARTICLE 1
Term of Employment, Duties and Supervision
1.1) Employment; Term. The Company hereby employs Executive as its
Chief Financial Officer pursuant to the terms of this Agreement, and Executive
hereby accepts such employment as of the date hereof. Unless terminated pursuant
to Articles 4 or 5, the term of employment shall continue until July 14, 1999
(the "Term"), and thereafter shall renew automatically for successive terms of
one year each, upon the terms and conditions set forth in this Agreement, as
such may be modified by mutual written agreement of the parties from time to
time; provided, however, that either Executive or the Company may terminate the
employment of Executive during the Term in accordance with, and subject to the
right of Executive to receive payments and other benefits that may be due
pursuant to, Article 5. Each 12-month period commencing July 15 through the
following July 14 during the Term is referred to as an "Employment Year".
1.2) Duties; Title.
(a) Executive agrees, during his employment, to devote his full
time and best efforts to the business of the Company,
including, without limitation, the performance of those duties
and responsibilities reasonably and customarily associated
with the position of the Company's Chief Financial Officer;
provided, however, that Executive's duties and
responsibilities consistent with Executive's position shall be
subject to determination by the Company's Chief Executive
Officer. While serving as Chief Financial Officer, Executive
shall be granted such powers and authority as are reasonably
and customarily associated with the position of Chief
Financial Officer.
(b) Executive shall report to, and at all times shall be subject
to the direction of, the Company's Chief Executive Officer
and/or his designee.
(c) Executive's title shall remain subject to the control of the
Board of Directors.
1.3) Additional Requirements. Executive, at all times during his
employment with the Company, shall comply with the Company's reasonable
standards, regulations and policies as determined or set forth by the Board of
Directors from time to time and as applicable to all employees and/or executive
employees of the Company.
1.4) Outside Activities. The Company acknowledges and agrees that from
time to time Executive may serve as a member of the Board of Directors of one or
more businesses or nonprofit entities other than the Company; provided, however,
that Executive provides the Company's Board of Directors with information about
each proposed directorship, including time required by such directorship,
whether such directorship may involve conflicts of interest with the Company or
its interests, the types of risks which such directorship may involve, and any
other factors Executive or the Board of Directors considers material respecting
such directorship. The Company's Board of Directors shall promptly consider all
submissions by Executive pursuant to this Paragraph 1.4. The Company's Board of
Directors may request in good faith that Executive not accept a particular
directorship, or more than a specific number of directorships, or that Executive
resign from a particular directorship, and Executive agrees to honor such
requests.
ARTICLE 2
Compensation
2.1) Compensation. Subject to Paragraph 4.2 and Articles 5, 7, 8 and 9
hereof, Executive shall be paid compensation for the performance of his duties
hereunder as follows:
(a) Salary. The Company shall pay Executive a base salary at the
rate of $78,000 per year for the Employment Year commencing
July 15, 1996. Prior to the close of each Employment Year the
Company's Chief Executive Officer shall review Executive's
performance for such Employment Year and shall establish
Executive's base salary for the next succeeding Employment
Year. Executive's salary shall be payable monthly. The Company
shall be entitled to deduct or withhold all taxes and charges
which the Company may be required to deduct or withhold
therefrom.
(b) Bonus Compensation. Executive may earn a performance bonus for
each Employment Year, the aggregate amount of which may be up
to 25% of Executive's base salary for a particular Employment
Year. Fifty percent (50%) of such performance bonus shall be
based on the Chief Executive Officer's review and analysis of
Executive's management of the Company's cash flow,
establishment and maintenance of operating subsidiary
controls, preparation for and facilitation of the Company's
annual financial audits and providing requested reports and
other support to the Company's Chief Executive Officer, and is
thus subjective in nature. The remaining 50% of Executive's
bonus shall be based on the achievement by the Company of the
following objectives, and is thus quantitative in nature:
Fiscal 1997: Company pre-tax profits of $1 million or more;
Fiscal 1998: Company pre-tax profits of $2.5 million or more;
Fiscal 1999: Company pre-tax profits of $8.0 million or more.
At the discretion of the Chief Executive Officer, in any
Employment Year, Executive may be permitted to elect to
receive all or a portion of Executive's bonus in common stock
of the Company based on the per share option price of the
Company's common stock options on the date Executive's bonus
compensation is determined.
(c) No Past Salary or Other Obligations. Executive acknowledges
that at the date hereof the Company was not indebted to
Executive for any amount, whether arising out of Executive's
prior service to the Company or otherwise.
(d) Fiscal Year. For purposes of this Agreement the Company's
fiscal year is assumed to be June 30.
2.2) Termination of Compensation. Except as provided in Articles 4, 7,
8 and 9 of this Agreement, the Company's obligation to pay compensation to
Executive under this Article 2 shall terminate at the close of business on the
date on which Executive's employment is terminated; provided, however, that:
(a) the Company shall remain liable to pay Executive any amounts
due Executive for services rendered prior to such termination
date pursuant to Paragraph 2.1(a); and
(b) the Company shall calculate Executive's earned bonus
compensation pro rata to and including the date of
termination; and shall pay Executive any earned bonus within
sixty (60) days following the close of the month in which the
date of termination occurs, unless otherwise agreed. To the
extent portions of such bonus compensation are based on the
completion of specific tasks or objectives, and such tasks or
objectives have been completed prior to Executive's
termination, bonus portions allocable to same shall be paid in
full.
ARTICLE 3
Expenses
3.1) Expenses. During the term of this Agreement, Executive shall be
entitled to prompt reimbursement by the Company for all reasonable, ordinary and
necessary travel, entertainment and other business related expenses incurred by
Executive (in accordance with the policies and procedures established by the
Company from time to time) in the performance of his duties and responsibilities
under this Agreement; provided, however, that Executive shall properly account
for such expenses in accordance with federal, state and local tax requirements
and the Company's policies and procedures.
ARTICLE 4
Benefits
4.1) Vacations; Holidays. Executive shall be entitled to two weeks paid
vacation during his first Employment Year, three weeks during his second
Employment Year and four weeks for succeeding Employment Years, plus all
holidays in accordance with the Company's policies in effect from time to time.
Executive shall not be entitled to carry unused vacation forward from one
Employment Year to the next. Executive shall not be entitled to compensation in
any form in lieu of use of vacation and/or holiday time off.
4.2) Compensation During Sickness or Disability.
(a) Subject to the remaining provisions of this Paragraph 4.2,
Executive shall be entitled to receive the monthly portion of
Executive's annual base salary and bonus in accordance with
Article 2 hereof for up to ten business days for absences for
physical or mental illness or injury during any Employment
Year which do not give rise to a determination of Executive's
disability pursuant to Paragraph 4.2(b) below.
(b) As attendance on the job is agreed by Executive and Company to
be an essential function of Executive's position, the parties
further agree that in the event of a prolonged absence as
defined below the parties agree to the disability payments to
Executive as stated in this subparagraph. Subject to Paragraph
4.2(j), if, during any Employment Year, Executive is absent
from Executive's employment for more than ten (10) business
days, plus that number of unused vacation days which Executive
may also determine to utilize for absences by reason of
physical or mental illness or injury, at any one time or more
than forty (40) business days in total, by reason of physical
or mental illness or injury, as determined by an examining
physician or mental health professional acceptable to the
Company, or in the event any other accident or occurrence
gives rise to the likelihood of Executive's absence for more
than the period of time specified above for reason of physical
or mental illness or injury, as determined by the Company or
an examining physician or mental health professional
acceptable to the Company, Executive shall be deemed disabled
for the purposes hereof. In such event, Executive shall be
entitled to receive his bonus earned to the date of
disability. In addition, Executive shall be entitled to
receive fifty percent (50%) of his base salary under Article
2, continued payment by the Company of Executive's share of
health, life and disability insurance premiums (to the extent
such benefits are offered by the Company to its executive
employees and subject to the conditions or limitations of such
insurance plans) during the first 90 calendar days from the
date such disability is determined to have occurred, and,
during such period, the Company may discontinue all other
payments to or on behalf of Executive under this Agreement.
After such 90 calendar day period, the Company shall terminate
all payments to Executive. Notwithstanding anything herein to
the contrary, such 90 calendar day period shall begin to run
from the date such disability is determined to have occurred,
only after Executive has utilized all days to which Executive
is entitled and which Executive determines to use under
Paragraphs 4.1 and 4.2(a).
(c) If prior to any termination of Executive's employment under
this Paragraph 4.2 Executive is able to resume performance of
his duties under this Agreement, and if within ninety (90)
days of the resumption of such duties Executive is again
absent from his employment by reason of physical or mental
illness or injury such subsequent disability period shall be
deemed to be a continuation of the immediately preceding
disability period, and the disability payments made by the
Company to Executive shall be made only for the remainder, if
any, of the ninety (90) calendar day income continuation
period provided for above, and in no event shall disability
payments hereunder be made for a period or periods aggregating
more than ninety (90) calendar days in any 12-month period.
(d) Any disability compensation payable under this Article 4 shall
be reduced by:
(i) any amount which is paid to Executive under any
private disability benefit plan or arrangement to
which the Company contributes or has contributed;
(ii) any benefits paid or payable to Executive on account
of the disability of Executive under any worker's
compensation law, occupational disease law, or
similar legislation of any state or of the federal
government;
(iii) 50% of the amount of any related benefit which
Executive would be entitled to receive under the
Federal Social Security Act as in effect at the time
the payment hereunder is made; and
(iv) any benefits paid or payable to Executive under any
law of any state or of the federal government now in
force or hereafter enacted as compensation, wages or
benefits in lieu of wages on account of disability.
(e) Subject to a determination by the Company that Executive is
capable of returning to part or full-time employment, the
determination of the Company being conclusive if made with the
advice of a competent physician or mental health professional
selected by it, Executive may return to part-time or full-time
employment at any time prior to any termination of Executive's
employment under this Paragraph 4.2. Following Executive's
return to employment:
(i) if Executive returns to full-time employment, his
compensation shall be determined as though Executive
had not been disabled; or
(ii) if Executive returns to part-time employment,
Executive shall be entitled to a reasonable amount of
compensation for Executive's services rendered to the
Company as determined by a reasonable standard to be
set by the Company's Board of Directors.
(f) If Executive's employment is terminated, except for the
reasons stated in subparagraph (a), (b), (c)(iv) or (v), or
(d) of Paragraph 5.1 hereof, while the Company is making
disability payments to Executive, Executive shall be entitled
to receive the disability payments to which Executive would
otherwise be entitled pursuant to the provisions of this
Paragraph 4.2.
(g) The Company shall comply with all applicable state and federal
laws relating to the disability of an employee, including laws
regarding reasonable accommodation requirements and laws
governing the granting of medical leaves of absence.
4.3) Life and Health Insurance; Other Benefits. During Executive's
employment, the Company shall provide such benefits to Executive as the Company
provides for its executive officers from time to time, provided that the Company
may exclude Executive from participation in any 401(k) plan which the Company
implements to the extent deemed advisable to ensure the continued qualification
of such plan under applicable tax laws and in lieu thereof compensate Executive
appropriately to make up for his exclusion. Nothing in this Paragraph 4.3 shall
be construed to require the Company to provide or continue to provide Executive
with any benefits, nor shall Company be prohibited from cancelling benefits
which it determines to provide or requiring co-payments respecting such benefits
at any time.
ARTICLE 5
Termination
5.1) Events of Termination. Executive's employment hereunder:
(a) May be terminated by mutual written agreement of the parties.
(b) Shall terminate immediately upon the death of Executive.
(c) May be terminated by the Company upon written notice to
Executive for "Cause", which shall mean the following:
(i) Material failure of Executive to (a) faithfully,
diligently or competently perform the material
duties, requirements and responsibilities of his
employment as established pursuant to this Agreement,
or (b) take reasonable direction consistent with the
position for which he has been employed as described
in Article 1 from the Chief Executive Officer or his
designee; or
(ii) Failure of Executive to materially comply with the
reasonable policies, regulations and directives of
the Company as in effect from time to time; or
(iii) Any act or omission on the part of Executive which
constitutes a material failure to comply with
material provisions of this Agreement; or
(iv) Any act or omission on the part of Executive which is
clearly and materially harmful to the reputation or
business of the Company, including, but not limited
to, conduct which is inconsistent with federal and
state laws respecting harassment of, or
discrimination against, one or more of the Company's
employees; or
(v) Conviction of Executive of, or a guilty or nolo
contendere plea by Executive with respect to, any
crime punishable as a felony; or any bar against
Executive from serving as a director, officer or
employee of any firm the securities of which trade
publicly.
(d) Shall terminate in accordance with the provisions of Paragraph
4.2(b) hereof. Nothing in Paragraph 4.2(b) hereof or in this
Paragraph 5.1(d) shall limit the right of either party to
terminate Executive's employment under any other subparagraph
of Paragraph 5.1; provided, however, that if Executive is
receiving disability payments under Paragraph 4.2(b) the
Company may not terminate this Agreement under Paragraphs
5.1(c)(i) or (g).
(e) Shall terminate upon Executive's reaching the normal
retirement date established by the Company for senior
management employees of the Company, but in no event earlier
than the compulsory retirement age permitted under federal or
similar law for senior management employees.
(f) May be terminated by the Company, for any or no reason, on 60
days' written notice to Executive; provided that if at the
time of such termination "Cause" exists and the written notice
specified in subparagraph (c) above is given, then such
termination by the Company shall be considered to be pursuant
to subparagraph (c) above.
(g) May be terminated by Executive, for any or no reason, on 60
days' written notice to the Company.
5.2) Compensation Upon Termination of Executive's Employment. In the
event that Executive's employment with the Company terminates, the following
provisions shall govern as applicable:
(a) If termination occurs pursuant to Paragraph 5.1(a) (by mutual
written agreement) the agreement of the parties shall control.
(b) If termination occurs pursuant to Paragraph 5.1(b) (for
death), all benefits shall terminate as of the termination
date, and base salary and bonus shall terminate as provided in
Paragraph 2.2.
(c) If termination occurs pursuant to Paragraph 5.1(c) (for Cause)
or (g) (resign for any or no reason), all benefits shall
terminate as of the termination date, and base salary and any
earned bonus shall be paid to the date of termination as
provided in Paragraph 2.2.
(d) If termination occurs pursuant to Paragraph 5.1(d)
(disability), the provisions of Paragraph 4.2 shall govern the
termination of benefits, base salary and bonus.
(e) If termination occurs pursuant to Paragraph 5.1(e)
(retirement), the provisions of Paragraph 5.2(b) shall govern
the termination of benefits, base salary and bonus.
(f) If termination occurs pursuant to 5.1(f) (by the Company
without Cause) then Executive's base salary and any earned
bonus shall be paid to the date of termination as provided in
Paragraph 2.2.
(g) All payments made to Executive under this Paragraph 5.2 shall
be reduced by amounts (i) required to be withheld in
accordance with federal, state and local laws and regulations
in effect at the time of payment, or (ii) owed to the Company
by Executive for any amounts advanced, loaned or
misappropriated.
5.3) Continuation of Performance of Services After Notice of
Termination. In the event of termination of employment of Executive under the
notice provisions of Section 5.1(c) or during any period following a
notification of termination of Executive's employment by Company, Company may,
in its sole discretion, determine the date on which Executive is to discontinue
performing services for Company, which date may be any date after the notice is
given and prior to the actual date of termination of Executive's employment.
Nothing in this subparagraph shall be construed to prohibit Company from
requiring that Executive continue to perform Executive's duties under this
Agreement prior to the actual date of termination of Executive's employment,
subject to the rights of Executive under Section 4.1 of this Agreement. After
any notice of termination Company may also determine whether any continuing
services on the part of Executive shall be performed on or off the Company's
premises. In any event during any period after notice of termination of
Executive's employment and prior to the actual termination of Executive's
employment Executive shall be available to Company for consultation, and so
shall consult with Company, as to matters in which Executive was involved during
his employment with Company.
5.4) Return of the Company Property. In the event of termination of
Executive's employment all corporate documents, records, files, credit cards,
computer disks and tapes, computer access card, codes and keys, file access
codes and keys, building and office access cards, codes and keys, materials,
equipment and other property of the Company which is in Executive's possession
shall be returned to the Company at its principal business office on the date of
termination of Executive's employment, or within five days thereafter if
termination occurs without notice. Executive may copy, at Executive's expense,
documents, records, materials and information of the Company only with the
Company's express, written permission.
ARTICLE 6
Inventions, Plans and Ideas
6.1) Definition. "Inventions, plans and ideas" as used in this Article
6 mean any discoveries, ideas, plans and improvements (whether or not they are
in writing or reduced to writing or embodied solely in practices of the Company)
or works of authorship (whether or not they are or can be patented or
copyrighted) that Executive makes, authors, or conceives (either alone or with
others) and that:
(a) concern the Company's business or the Company's research or
development or planning that can be demonstrated to relate to
the Company's then-current business or any planned business
discussed with the Board of Directors which the Company is
actively exploring; or
(b) result from and relate to any work Executive performs for the
Company which work also meets the criteria of subparagraph
(a); or
(c) use the Company's trade secret information.
6.2) Property of the Company. Executive agrees that all "inventions,
plans and ideas" he makes during the term of this Agreement will be the
Company's sole and exclusive property. Executive will, with respect to any such
"invention, plan or idea":
(a) keep current, accurate and complete records which will belong
to the Company and be kept and stored on the Company's
premises while Executive is employed by the Company.
(b) promptly and fully disclose the existence and describe the
nature of the invention, plan or idea to the Company in
writing (upon request).
(c) assign, and Executive hereby does assign, to the Company all
of his rights to any such "invention, plan or idea", and any
applications which he may make for patents, copyrights,
trademarks or service marks in any country.
(d) acknowledge and deliver promptly to the Company any written
instruments, and perform any other acts necessary in the
Company's reasonable opinion, to preserve property rights in
any invention, plan or idea against forfeiture, abandonment or
loss, and to obtain and maintain letters patent and/or
copyrights and/or marks on any invention, plan or idea and to
vest the entire right and title to such "invention, plan or
idea" in the Company.
NOTICE: Pursuant to Minnesota Statutes ss. 181.78, Executive is hereby notified
that this Article 6 does not apply to any invention for which no equipment,
supplies, facility, or trade secret information of the Company was used and
which was developed entirely on Executive's own time, and (1) which does not
relate (a) directly to the business of the Company or (b) to the Company's
actual or demonstrably anticipated research or development, or (2) which does
not result from any work performed by the employee for the Company.
6.3) Executive Claims. Executive does not have, and will not assert,
any claims to or rights under any "inventions, plans or ideas" as having been
made, conceived, offered or acquired by Executive prior to his employment by the
Company. Further, and without limiting the foregoing, Executive has contributed
and assigned, and hereby does contribute and assign, to the Company all
"inventions, plans and ideas" within the meaning of this Article 6.
ARTICLE 7
Confidential Information
7.1) Definition. "Confidential Information" as used in this Article 7
means information (a) that is not generally known to the public and (b) that is
proprietary to the Company or that the Company is obligated to treat as
proprietary. Confidential Information shall include, without limitation:
(1) trade secret information about the Company and its products
and services; and
(2) Any information that the Company reasonably considers or
treats as Confidential Information, or that Executive actually
knows or reasonably should know that the Company considers or
treats as Confidential Information (whether Executive or
others originated it and regardless of how Executive obtained
it).
7.2) Use Prohibited. Except as required in his duties to the Company,
Executive will never knowingly, either during or after his employment by the
Company, use or disclose Confidential Information to any person not authorized
by the Company to receive it, excluding Confidential Information (a) which
becomes publicly available through a source other than Executive, (b) which is
made public by the Company, (c) which is received by Executive after termination
of this Agreement from a third party who obtained the information on a
non-confidential basis from the Company, (d) for which disclosure thereof the
Company has consented to in writing, or (e) that Executive is compelled to
disclose in any judicial or administrative proceeding. Promptly upon termination
of Executive's employment with the Company, Executive will turn over to the
Company all records, documents, materials and any compositions, articles,
devices, apparatus and other items that disclose, describe or embody
Confidential Information, including all copies and reproductions thereof, in
Executive's possession, regardless of who prepared them.
7.3) Violation by Executive. If it is determined by an arbitration
proceeding or a final, non-appealable judgment of a court of law or equity that
Executive has breached Article 7 with regard to material information the Company
shall be relieved of further severance payments to Executive, and Executive
shall repay to the Company all severance payments previously received.
ARTICLE 8
Competitive Activities Prohibited
8.1) Prohibition; Duration. Executive agrees that, during his
employment with the Company, Executive will not alone, or in any capacity with
another firm, individual or person:
(a) directly or indirectly, whether as an employee, officer,
director, shareholder, (provided, however, that passive
investments in publicly traded securities not exceeding five
percent of the issuer's capital stock shall be permitted),
partner, agent, owner, representative, consultant or
otherwise, engage in any activity, in any state or foreign
country, that competes with the Company's products or services
produced, sold or rendered in the ordinary course of the
Company's business as of the date of Executive's termination,
or products or services demonstrated to have been formally
planned and approved before the date of Executive's
termination for production or sale;
(b) in any way interfere or attempt to interfere with the
Company's relationships with any of its then-current
customers, suppliers, vendors or investors; or
(c) employ or attempt to employ any of the Company's employees, or
the employees of any enterprise managed or owned by the
Company on behalf of any other entity competing with the
Company.
All of the above activities are "Competitive Activities".
8.2) Exception. Nothing in Paragraph 8.1 shall restrict the Executive's
employment by, or association with, an entity, venture or enterprise which
engages in a business with a product or service competitive with any product or
service, or planned product or service per Paragraph 8.1(a), of the Company so
long as Executive's employment or association with such entity, venture or
enterprise is limited to work which does not directly involve products or
services which compete with any product or service offered, or planned to be
offered per Paragraph 8.1(a), by the Company at the date of Executive's
termination.
8.3) Violation by Executive. If it is determined by an arbitration
proceeding or a final non-appealable judgment of a court of law or equity that
Executive has breached Article 8 in a material manner the Company shall be
relieved of further severance payments to Executive, and Executive shall repay
to the Company all severance payments previously received.
8.4) Notice to New Employer. Executive will, prior to accepting
employment with any new employer, inform that employer of this Agreement and
provide that employer with a copy of Article 8 of this Agreement.
ARTICLE 9
Certain Company Remedies
9.1) Certain Company Remedies. The parties acknowledge that the Company
will suffer irreparable harm if the Executive breaches Paragraph 5.3 and/or
Articles 6, 7 and/or 8 of this Agreement, either during or after its term.
Accordingly, the Company shall be entitled to any right or remedy it may have,
under this Agreement or otherwise, at law or equity, including but not limited
to, an injunction, enjoining or restraining Executive from any violation of
Paragraph 5.3 and/or Articles 6, 7 and/or 8 of this Agreement.
9.2) Payment of Fees and Expenses. If either party initiates or becomes
a party to a formal proceeding in law or equity, or under arbitration, involving
this Agreement, and if either party obtains a substantial portion of the relief
requested by that party (the "prevailing party"), then the non-prevailing party
shall pay all of its and the prevailing party's reasonable costs and expenses,
including reasonable attorneys' fees and expenses, incurred with respect to such
proceeding. If neither party obtains a substantial portion of the relief
requested each shall bear its/his own expenses. In the event Executive is
terminated pursuant to Paragraph 5.1 (c) and determines to challenge the
Company's determination of "Cause", the Company and Executive shall each bear
its/his own expenses in connection with any proceeding initiated by Executive
with respect to the determination as to "Cause".
ARTICLE 10
Indemnification
10.1) As to acts or omissions of Executive which are within the scope
of Executive's authority as an officer and/or director of the Company and/or any
affiliate of the Company, the Company shall indemnify Executive, and his legal
representatives and heirs to the maximum extent permitted by Minnesota law.
ARTICLE 11
Miscellaneous
11.1) Successors and Assigns. This Agreement is binding on and inures
to the benefit of the Company, and its successors and assigns. the Company
agrees that the Company shall be deemed to have materially breached this
Agreement if its successor or assign does not assume all of the Company's
material obligations under this Agreement. The rights and obligations of
Executive under this Agreement are personal and may not be assigned or
transferred without the express written consent of the Company.
11.2) Modification. This Agreement supersedes all prior agreements and
understandings between the parties. This Agreement may be modified or amended
only by a writing signed by the Company and Executive.
11.3) Waivers. No failure or delay by either the Company or Executive
in exercising any right or remedy under this Agreement shall be deemed a waiver
of any provision of this Agreement. Nor shall any single or partial exercise by
either the Company or Executive of any right or remedy under this Agreement
preclude either from otherwise or further exercising rights or remedies granted
under this Agreement.
11.4) Notices. Any and all notices referred to herein shall be deemed
properly given only if in writing and delivered personally or sent postage
prepaid, by certified mail, return receipt requested, as follows:
(a) To the Company, to the attention of the Company's Chief
Executive Officer, at its office set forth on page 1 of this
Agreement or at such other address as the Company may specify
in writing to Executive, with a copy to each member of the
Company's Board of Directors, and to Fredrikson & Byron, P.A.,
1100 International Centre, 900 Second Avenue South,
Minneapolis, Minnesota 55402, Attention: John H. Stout.
(b) To Executive at his home address as it then appears on the
records of the Company, it being the duty of the Executive to
keep the Company informed of his current home address at all
times.
The date on which notice to the Company or Executive shall be deemed to have
been given if mailed as provided above shall be the date on the certified mail
return receipt. Personal delivery to Executive shall be deemed to have occurred
on the date notice was delivered to Executive personally or deposited in a mail
box or slot or left with security or administrative personnel, at Executive's
residence by a representative of the Company or any messenger or delivery
service.
11.5) Action by Board of Directors. Any action required by the
Company's Board of Directors under this Agreement may be taken by majority vote
of a duly authorized committee having authority over the matter in question or
by a majority of the remaining members of the Board of Directors, not counting
Executive, then serving.
11.6) Judicial Review; Severability. In the event that a court of
competent jurisdiction determines that any of the provisions of this Agreement
are unreasonable, it may limit such provision to the extent it deems reasonable,
without declaring the provision or this Agreement invalid in its entirety. This
provision shall not be construed as an admission by the Company, but is only
included to provide the Company with the maximum possible protection for its
business, Confidential Information, inventions, trade secrets and data,
consistent with the right of the Executive to earn a livelihood subsequent to
the termination of his employment.
To the extent any portion of any provision of this Agreement shall be
deemed invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and the remainder of this Agreement shall be
unaffected and shall continue in full force and effect.
The Company and Executive desire that this Agreement shall be given the
construction which renders its provisions valid and enforceable to the maximum
extent, not exceeding its express terms, permissible under applicable law.
11.7) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement on July 15, 1996 to be effective as of the effective date set forth
above.
CORVU CORPORATION ("the Company")
By: /s/ Justin MacIntosy
Justin MacIntosh, Chief Executive Officer
/s/ David Carlson
David Carlson ("Executive")
<PAGE>
July 20, 1998
Mr. David C. Carlson
18115 35th Ave N.
Plymouth, MN 55447
Dear David:
The following represents revisions to your employment agreement dated July 15,
1996 as previously discussed:
Salary - This confirms that your base salary is currently $100,000 per year
through and including July 15, 1999,
Quarterly Bonus - 25% based on attaining quarterly business plan profits and
personal performance as reviewed with the President/CEO of CorVu Corporation.
Please sign in the space below indicating your acceptance of the above.
Thanks for your continued efforts and, here's to a successful 1999 and beyond !
Kindest regards,
/s/ Justin M. MacIntosh
Justin M. MacIntosh
President and CEO
Agreed and Accepted
/s/ David C. Carlson 8/21/98
David C. Carlson Date
Chief Financial Officer
EMPLOYMENT AGREEMENT
EFFECTIVE DATE: January 2, 1997
PARTIES AND ADDRESSES:
CorVu Corporation
7901 Flying Cloud Drive, #100
Eden Prairie, MN 55344-7903 (the "Company")
Alan M. Missroon
160 Plantation Trace
Woodstock, GA 30188 ("Executive")
RECITALS:
A. The Company is a Minnesota corporation engaged principally in the
business of developing, manufacturing and selling business software programs.
B. The Company and Executive desire to enter into an employment
agreement for Executive's services on the terms stated herein. This Employment
Agreement will be referred to as the "Agreement." This Agreement represents the
complete agreement of the parties and supercedes any other understandings or
agreements whether written or oral.
AGREEMENTS:
In consideration of the mutual promises and undertakings set forth
herein, the Company and Executive agree as follows:
ARTICLE 1
Term of Employment, Duties and Supervision
1.1) Employment; Term. The Company hereby employs Executive as its Vice
President of Marketing pursuant to the terms of this Agreement, and Executive
hereby accepts such employment as of the date hereof. Unless terminated pursuant
to Articles 4 or 5, the term of employment shall continue until June 30, 1997
(the "Term"), and thereafter shall renew automatically for successive terms of
one year each, upon the terms and conditions set forth in this Agreement, as
such may be modified by mutual written agreement of the parties from time to
time; provided, however, that either Executive or the Company may terminate the
employment of Executive during the Term in accordance with, and subject to the
right of Executive to receive payments and other benefits that may be due
pursuant to, Article 5. Each 12-month period commencing July 1 through the
following June 30 during the Term is referred to as an "Employment Year".
1.2) Duties; Title.
(a) Executive agrees, during his employment, to devote his full
time and best efforts to the business of the Company,
including, without limitation, the performance of those duties
and responsibilities reasonably and customarily associated
with the position of the Company's Vice President of
Marketing; provided, however, that Executive's duties and
responsibilities consistent with Executive's position shall be
subject to determination by the Company's Chief Executive
Officer. While serving as Vice President of Marketing,
Executive shall be granted such powers and authority as are
reasonably and customarily associated with the position of
Vice President of Marketing. The Executive's duties will
consist of, but not be limited to the following:
i) Marketing Budget responsibility, including incurring
expenses within established budgets and guidelines,
ii) Balancing and coordinating business shows,
advertising, direct mail, seminars and PR news
releases,
iii) Directing and managing the public relations,
iv) Briefing industry press and analysts,
v) Analyzing impact and effect of marketing investment,
vi) Developing CorVu white paper and other marketing
collateral,
vii) Developing competitive product portfolios and
enabling internal awareness,
viii) Developing CorVu briefing papers for business shows
and seminars.
(b) Executive shall report to, and at all times shall be subject
to the direction of, the Company's Chief Executive Officer
and/or his designee.
(c) Executive's title shall remain subject to the control of the
Board of Directors.
1.3) Additional Requirements. Executive, at all times during his
employment with the Company, shall comply with the Company's reasonable
standards, regulations and policies as determined or set forth by the Board of
Directors from time to time and as applicable to all employees and/or executive
employees of the Company.
1.4) Outside Activities. The Company acknowledges and agrees that from
time to time Executive may serve as a member of the Board of Directors of one or
more businesses or nonprofit entities other than the Company; provided, however,
that Executive provides the Company's Board of Directors with information about
each proposed directorship, including time required by such directorship,
whether such directorship may involve conflicts of interest with the Company or
its interests, the types of risks which such directorship may involve, and any
other factors Executive or the Board of Directors considers material respecting
such directorship. The Company's Board of Directors shall promptly consider all
submissions by Executive pursuant to this Paragraph 1.4. The Company's Board of
Directors may request in good faith that Executive not accept a particular
directorship, or more than a specific number of directorships, or that Executive
resign from a particular directorship, and Executive agrees to honor such
requests.
1.5) Prior Agreements. Executive acknowledges and warrants that he is
not subject to any prior agreements that would in any way, restrict the
performance of his duties as Vice President of Marketing for the Company,
including the recruitment and hiring of other employees. If Executive is subject
to agreements which could restrict such activities, these agreements must be
fully disclosed to the Company by providing a copy of such agreements which will
then become a part of this agreement as Appendix 1.
ARTICLE 2
Compensation
2.1) Compensation. Subject to Paragraph 4.2 and Articles 5, 7, 8 and 9
hereof, Executive shall be paid compensation for the performance of his duties
hereunder as follows:
(a) Salary. The Company shall pay Executive a base salary at the
rate of $110,000 per year for the Employment Year commencing
January 2, 1997. Prior to the close of each Employment Year
the Company's Chief Executive Officer shall review Executive's
performance for such Employment Year and shall establish
Executive's base salary for the next succeeding Employment
Year. Executive's salary shall be payable monthly. The Company
shall be entitled to deduct or withhold all taxes and charges
which the Company may be required to deduct or withhold
therefrom.
(b) Bonus Compensation. Executive may earn performance bonuses for
each Employment Year, based on the following:
i) a bonus of $18,000 paid upon the achievement of
Company profits of $750,000 for the fiscal year ended
June 30, 1997,
ii) an additional bonus of $18,000 paid upon the
achievement of Company profits of $1,200,000 for the
fiscal year ended June 30, 1997,
iii) an additional bonus of $18,000 paid upon the
achievement of Company profits of $1,500,000 for the
fiscal year ended June 30, 1997.
Total bonuses of $54,000 which can be earned based on
achieving the Company profit goals detailed above are payable
on a quarterly basis, provided quarterly profit goals are
attained, based on the following formula: for the first
quarter ended September 30, 1996- 10% of bonus, for the second
quarter ended December 31, 1996- 15% of bonus, for the third
quarter ended March 31, 1997- 25% of bonus, for the fourth
quarter ended June 30, 1997- remainder of bonus not yet paid.
An additional quarterly bonus of $9,000 can be attained based
on the performance of duties indicated in Article 1.2 (a).
This bonus is subjective in nature and, as a result, will be
awarded at the discretion of the Chief Executive Officer.
(c) Stock Options. Executive is awarded options to purchase up to
100,000 shares of the Company's common stock at a price of
$2.85 per share. These options are exercisas follows: 30,000
shares after twelve months of employment, 40,000 after twenty
four months of employment, 30,000 after thirty six months of
employment.
(d) No Past Salary or Other Obligations. Executive acknowledges
that at the date hereof the Company was not indebted to
Executive for any amount, whether arising out of Executive's
prior service to the Company or otherwise.
(e) Fiscal Year. For purposes of this Agreement the Company's
fiscal year is assumed to be June 30.
2.2) Termination of Compensation. Except as provided in Articles 4, 7,
8 and 9 of this Agreement, the Company's obligation to pay compensation to
Executive under this Article 2 shall terminate at the close of business on the
date on which Executive's employment is terminated; provided, however, that:
(a) the Company shall remain liable to pay Executive any amounts
due Executive for services rendered prior to such termination
date pursuant to Paragraph 2.1(a); and
(b) the Company shall calculate Executive's earned bonus
compensation pro rata to and including the date of
termination; and shall pay Executive any earned bonus within
sixty (60) days following the close of the month in which the
date of termination occurs, unless otherwise agreed. To the
extent portions of such bonus compensation are based on the
completion of specific tasks or objectives, and such tasks or
objectives have been completed prior to Executive's
termination, bonus portions allocable to same shall be paid in
full.
ARTICLE 3
Expenses
3.1) Expenses. During the term of this Agreement, Executive shall be
entitled to prompt reimbursement by the Company for all reasonable, ordinary and
necessary travel, entertainment and other business related expenses incurred by
Executive (in accordance with the policies and procedures established by the
Company from time to time) in the performance of his duties and responsibilities
under this Agreement; provided, however, that Executive shall properly account
for such expenses in accordance with federal, state and local tax requirements
and the Company's policies and procedures.
ARTICLE 4
Benefits
4.1) Vacations; Holidays. Executive shall be entitled to two weeks paid
vacation during his first Employment Year, three weeks during his second
Employment Year and four weeks for succeeding Employment Years, plus all
holidays in accordance with the Company's policies in effect from time to time.
Executive shall not be entitled to carry unused vacation forward from one
Employment Year to the next. Executive shall not be entitled to compensation in
any form in lieu of use of vacation and/or holiday time off.
4.2) Compensation During Sickness or Disability.
(a) Subject to the remaining provisions of this Paragraph 4.2,
Executive shall be entitled to receive the monthly portion of
Executive's annual base salary and bonus in accordance with
Article 2 hereof for up to ten business days for absences for
physical or mental illness or injury during any Employment
Year which do not give rise to a determination of Executive's
disability pursuant to Paragraph 4.2(b) below.
(b) As attendance on the job is agreed by Executive and Company to
be an essential function of Executive's position, the parties
further agree that in the event of a prolonged absence as
defined below the parties agree to the disability payments to
Executive as stated in this subparagraph. Subject to Paragraph
4.2(j), if, during any Employment Year, Executive is absent
from Executive's employment for more than ten (10) business
days, plus that number of unused vacation days which Executive
may also determine to utilize for absences by reason of
physical or mental illness or injury, at any one time or more
than forty (40) business days in total, by reason of physical
or mental illness or injury, as determined by an examining
physician or mental health professional acceptable to the
Company, or in the event any other accident or occurrence
gives rise to the likelihood of Executive's absence for more
than the period of time specified above for reason of physical
or mental illness or injury, as determined by the Company or
an examining physician or mental health professional
acceptable to the Company, Executive shall be deemed disabled
for the purposes hereof. In such event, Executive shall be
entitled to receive his bonus earned to the date of
disability. In addition, Executive shall be entitled to
receive fifty percent (50%) of his base salary under Article
2, continued payment by the Company of Executive's share of
health, life and disability insurance premiums (to the extent
such benefits are offered by the Company to its executive
employees and subject to the conditions or limitations of such
insurance plans) during the first 90 calendar days from the
date such disability is determined to have occurred, and,
during such period, the Company may discontinue all other
payments to or on behalf of Executive under this Agreement.
After such 90 calendar day period, the Company shall terminate
all payments to Executive. Notwithstanding anything herein to
the contrary, such 90 calendar day period shall begin to run
from the date such disability is determined to have occurred,
only after Executive has utilized all days to which Executive
is entitled and which Executive determines to use under
Paragraphs 4.1 and 4.2(a).
(c) If prior to any termination of Executive's employment under
this Paragraph 4.2 Executive is able to resume performance of
his duties under this Agreement, and if within ninety (90)
days of the resumption of such duties Executive is again
absent from his employment by reason of physical or mental
illness or injury such subsequent disability period shall be
deemed to be a continuation of the immediately preceding
disability period, and the disability payments made by the
Company to Executive shall be made only for the remainder, if
any, of the ninety (90) calendar day income continuation
period provided for above, and in no event shall disability
payments hereunder be made for a period or periods aggregating
more than ninety (90) calendar days in any 12-month period.
(d) Any disability compensation payable under this Article 4 shall
be reduced by:
(i) any amount which is paid to Executive under any
private disability benefit plan or arrangement to
which the Company contributes or has contributed;
(ii) any benefits paid or payable to Executive on account
of the disability of Executive under any worker's
compensation law, occupational disease law, or
similar legislation of any state or of the federal
government;
(iii) 50% of the amount of any related benefit which
Executive would be entitled to receive under the
Federal Social Security Act as in effect at the time
the payment hereunder is made; and
(iv) any benefits paid or payable to Executive under any
law of any state or of the federal government now in
force or hereafter enacted as compensation, wages or
benefits in lieu of wages on account of disability.
(e) Subject to a determination by the Company that Executive is
capable of returning to part or full-time employment, the
determination of the Company being conclusive if made with the
advice of a competent physician or mental health professional
selected by it, Executive may return to part-time or full-time
employment at any time prior to any termination of Executive's
employment under this Paragraph 4.2. Following Executive's
return to employment:
(i) if Executive returns to full-time employment, his
compensation shall be determined as though Executive
had not been disabled; or
(ii) if Executive returns to part-time employment,
Executive shall be entitled to a reasonable amount of
compensation for Executive's services rendered to the
Company as determined by a reasonable standard to be
set by the Company's Board of Directors.
(f) If Executive's employment is terminated, except for the
reasons stated in subparagraph (a), (b), (c)(iv) or (v), or
(d) of Paragraph 5.1 hereof, while the Company is making
disability payments to Executive, Executive shall be entitled
to receive the disability payments to which Executive would
otherwise be entitled pursuant to the provisions of this
Paragraph 4.2.
(g) The Company shall comply with all applicable state and federal
laws relating to the disability of an employee, including laws
regarding reasonable accommodation requirements and laws
governing the granting of medical leaves of absence.
4.3) Life and Health Insurance; Other Benefits. During Executive's
employment, the Company shall provide such benefits to Executive as the Company
provides for its executive officers from time to time, provided that the Company
may exclude Executive from participation in any 401(k) plan which the Company
implements to the extent deemed advisable to ensure the continued qualification
of such plan under applicable tax laws and in lieu thereof compensate Executive
appropriately to make up for his exclusion. Nothing in this Paragraph 4.3 shall
be construed to require the Company to provide or continue to provide Executive
with any benefits, nor shall Company be prohibited from canceling benefits which
it determines to provide or requiring co-payments respecting such benefits at
any time.
ARTICLE 5
Termination
5.1) Events of Termination. Executive's employment hereunder:
(a) May be terminated by mutual written agreement of the parties.
(b) Shall terminate immediately upon the death of Executive.
(c) May be terminated by the Company upon written notice to
Executive for "Cause", which shall mean the following:
(i) Material failure of Executive to (a) faithfully,
diligently or competently perform the material
duties, requirements and responsibilities of his
employment as established pursuant to this Agreement,
or (b) take reasonable direction consistent with the
position for which he has been employed as described
in Article 1 from the Chief Executive Officer or his
designee; or
(ii) Failure of Executive to materially comply with the
reasonable policies, regulations and directives of
the Company as in effect from time to time; or
(iii) Any act or omission on the part of Executive which
constitutes a material failure to comply with
material provisions of this Agreement; or
(iv) Any act or omission on the part of Executive which is
clearly and materially harmful to the reputation or
business of the Company, including, but not limited
to, conduct which is inconsistent with federal and
state laws respecting harassment of, or
discrimination against, one or more of the Company's
employees; or
(v) Conviction of Executive of, or a guilty or nolo
contendere plea by Executive with respect to, any
crime punishable as a felony; or any bar against
Executive from serving as a director, officer or
employee of any firm the securities of which trade
publicly.
(d) Shall terminate in accordance with the provisions of Paragraph
4.2(b) hereof. Nothing in Paragraph 4.2(b) hereof or in this
Paragraph 5.1(d) shall limit the right of either party to
terminate Executive's employment under any other subparagraph
of Paragraph 5.1; provided, however, that if Executive is
receiving disability payments under Paragraph 4.2(b) the
Company may not terminate this Agreement under Paragraphs
5.1(c)(i) or (g).
(e) Shall terminate upon Executive's reaching the normal
retirement date established by the Company for senior
management employees of the Company, but in no event earlier
than the compulsory retirement age permitted under federal or
similar law for senior management employees.
(f) May be terminated by the Company, for any or no reason, on 60
days' written notice to Executive; provided that if at the
time of such termination "Cause" exists and the written notice
specified in subparagraph (c) above is given, then such
termination by the Company shall be considered to be pursuant
to subparagraph (c) above.
(g) May be terminated by Executive, for any or no reason, on 60
days' written notice to the Company.
5.2) Compensation Upon Termination of Executive's Employment. In the
event that Executive's employment with the Company terminates, the following
provisions shall govern as applicable:
(a) If termination occurs pursuant to Paragraph 5.1(a) (by mutual
written agreement), base salary will be paid for a period of
three months after the date of termination if such date occurs
within the first year of employment, with an additional one
month of base pay added for each year of employment to a
maximum of six months. In exchange for such compensation,
Executive agrees not to accept a position with another company
considered to be in a similar field or business as that of the
Company for a period of six months.
(b) If termination occurs pursuant to Paragraph 5.1(b) (for
death), all benefits shall terminate as of the termination
date, and base salary and bonus shall terminate as provided in
Paragraph 2.2.
(c) If termination occurs pursuant to Paragraph 5.1(c) (for Cause)
or (g) (resign for any or no reason), all benefits shall
terminate as of the termination date, and base salary and any
earned bonus shall be paid to the date of termination as
provided in Paragraph 2.2. In addition, Executive agrees not
to accept a position with another company considered to be in
a similar field or business as that of the Company for a
period of six months.
(d) If termination occurs pursuant to Paragraph 5.1(d)
(disability), the provisions of Paragraph 4.2 shall govern the
termination of benefits, base salary and bonus. In addition,
Executive agrees not to accept a position with another company
considered to be in a similar field or business as that of the
Company for a period of six months.
(e) If termination occurs pursuant to Paragraph 5.1(e)
(retirement), the provisions of Paragraph 5.2(b) shall govern
the termination of benefits, base salary and bonus. In
addition, Executive agrees not to accept a position with
another company considered to be in a similar field or
business as that of the Company for a period of six months.
(f) If termination occurs pursuant to 5.1(f) (by the Company
without Cause) then Executive's base salary will be paid for a
period of three months after the date of termination if such
date occurs within the first year of employment, with an
additional one month of base pay added for each year of
employment to a maximum of six months. In exchange for such
compensation, Executive agrees not to accept a position with
another company considered to be in a similar field or
business as that of the Company for a period of six months.
All payments made to Executive under this Paragraph 5.2 shall be reduced by
amounts (i) required to be withheld in accordance with federal, state and local
laws and regulations in effect at the time of payment, or (ii) owed to the
Company by Executive for any amounts advanced, loaned or misappropriated.
5.3) Continuation of Performance of Services After Notice of
Termination. In the event of termination of employment of Executive under the
notice provisions of Section 5.1(c) or during any period following a
notification of termination of Executive's employment by Company, Company may,
in its sole discretion, determine the date on which Executive is to discontinue
performing services for Company, which date may be any date after the notice is
given and prior to the actual date of termination of Executive's employment.
Nothing in this subparagraph shall be construed to prohibit Company from
requiring that Executive continue to perform Executive's duties under this
Agreement prior to the actual date of termination of Executive's employment,
subject to the rights of Executive under Section 4.1 of this Agreement. After
any notice of termination Company may also determine whether any continuing
services on the part of Executive shall be performed on or off the Company's
premises. In any event during any period after notice of termination of
Executive's employment and prior to the actual termination of Executive's
employment Executive shall be available to Company for consultation, and so
shall consult with Company, as to matters in which Executive was involved during
his employment with Company.
5.4) Return of the Company Property. In the event of termination of
Executive's employment all corporate documents, records, files, credit cards,
computer disks and tapes, computer access card, codes and keys, file access
codes and keys, building and office access cards, codes and keys, materials,
equipment and other property of the Company which is in Executive's possession
shall be returned to the Company at its principal business office on the date of
termination of Executive's employment, or within five days thereafter if
termination occurs without notice. Executive may copy, at Executive's expense,
documents, records, materials and information of the Company only with the
Company's express, written permission.
ARTICLE 6
Inventions, Plans and Ideas
6.1) Definition. "Inventions, plans and ideas" as used in this Article
6 mean any discoveries, ideas, plans and improvements (whether or not they are
in writing or reduced to writing or embodied solely in practices of the Company)
or works of authorship (whether or not they are or can be patented or
copyrighted) that Executive makes, authors, or conceives (either alone or with
others) and that:
(a) concern the Company's business or the Company's research or
development or planning that can be demonstrated to relate to
the Company's then-current business or any planned business
discussed with the Board of Directors which the Company is
actively exploring; or
(b) result from and relate to any work Executive performs for the
Company which work also meets the criteria of subparagraph
(a); or
(c) use the Company's trade secret information.
6.2) Property of the Company. Executive agrees that all "inventions,
plans and ideas" he makes during the term of this Agreement will be the
Company's sole and exclusive property. Executive will, with respect to any such
"invention, plan or idea":
(a) keep current, accurate and complete records which will belong
to the Company and be kept and stored on the Company's
premises while Executive is employed by the Company.
(b) promptly and fully disclose the existence and describe the
nature of the invention, plan or idea to the Company in
writing (upon request).
(c) assign, and Executive hereby does assign, to the Company all
of his rights to any such "invention, plan or idea", and any
applications which he may make for patents, copyrights,
trademarks or service marks in any country.
(d) acknowledge and deliver promptly to the Company any written
instruments, and perform any other acts necessary in the
Company's reasonable opinion, to preserve property rights in
any invention, plan or idea against forfeiture, abandonment or
loss, and to obtain and maintain letters patent and/or
copyrights and/or marks on any invention, plan or idea and to
vest the entire right and title to such "invention, plan or
idea" in the Company.
NOTICE: Pursuant to Minnesota Statutes ss. 181.78, Executive is hereby notified
that this Article 6 does not apply to any invention for which no equipment,
supplies, facility, or trade secret information of the Company was used and
which was developed entirely on Executive's own time, and (1) which does not
relate (a) directly to the business of the Company or (b) to the Company's
actual or demonstrably anticipated research or development, or (2) which does
not result from any work performed by the employee for the Company.
6.3) Executive Claims. Executive does not have, and will not assert,
any claims to or rights under any "inventions, plans or ideas" as having been
made, conceived, offered or acquired by Executive prior to his employment by the
Company. Further, and without limiting the foregoing, Executive has contributed
and assigned, and hereby does contribute and assign, to the Company all
"inventions, plans and ideas" within the meaning of this Article 6.
ARTICLE 7
Confidential Information
7.1) Definition. "Confidential Information" as used in this Article 7
means information (a) that is not generally known to the public and (b) that is
proprietary to the Company or that the Company is obligated to treat as
proprietary. Confidential Information shall include, without limitation:
(1) trade secret information about the Company and its products
and services; and
(2) Any information that the Company reasonably considers or
treats as Confidential Information, or that Executive actually
knows or reasonably should know that the Company considers or
treats as Confidential Information (whether Executive or
others originated it and regardless of how Executive obtained
it).
7.2) Use Prohibited. Except as required in his duties to the Company,
Executive will never knowingly, either during or after his employment by the
Company, use or disclose Confidential Information to any person not authorized
by the Company to receive it, excluding Confidential Information (a) which
becomes publicly available through a source other than Executive, (b) which is
made public by the Company, (c) which is received by Executive after termination
of this Agreement from a third party who obtained the information on a
non-confidential basis from the Company, (d) for which disclosure thereof the
Company has consented to in writing, or (e) that Executive is compelled to
disclose in any judicial or administrative proceeding. Promptly upon termination
of Executive's employment with the Company, Executive will turn over to the
Company all records, documents, materials and any compositions, articles,
devices, apparatus and other items that disclose, describe or embody
Confidential Information, including all copies and reproductions thereof, in
Executive's possession, regardless of who prepared them.
7.3) Violation by Executive. If it is determined by an arbitration
proceeding or a final, non-appealable judgment of a court of law or equity that
Executive has breached Article 7 with regard to material information the Company
shall be relieved of further severance payments to Executive, and Executive
shall repay to the Company all severance payments previously received.
ARTICLE 8
Competitive Activities Prohibited
8.1) Prohibition; Duration. Executive agrees that, during his
employment with the Company, Executive will not alone, or in any capacity with
another firm, individual or person:
(a) directly or indirectly, whether as an employee, officer,
director, shareholder, (provided, however, that passive
investments in publicly traded securities not exceeding five
percent of the issuer's capital stock shall be permitted),
partner, agent, owner, representative, consultant or
otherwise, engage in any activity, in any state or foreign
country, that competes with the Company's products or services
produced, sold or rendered in the ordinary course of the
Company's business as of the date of Executive's termination,
or products or services demonstrated to have been formally
planned and approved before the date of Executive's
termination for production or sale;
(b) in any way interfere or attempt to interfere with the
Company's relationships with any of its then-current
customers, suppliers, vendors or investors; or
(c) employ or attempt to employ any of the Company's employees, or
the employees of any enterprise managed or owned by the
Company on behalf of any other entity competing with the
Company.
All of the above activities are "Competitive Activities".
8.2) Exception. Nothing in Paragraph 8.1 shall restrict the Executive's
employment by, or association with, an entity, venture or enterprise which
engages in a business with a product or service competitive with any product or
service, or planned product or service per Paragraph 8.1(a), of the Company so
long as Executive's employment or association with such entity, venture or
enterprise is limited to work which does not directly involve products or
services which compete with any product or service offered, or planned to be
offered per Paragraph 8.1(a), by the Company at the date of Executive's
termination.
8.3) Violation by Executive. If it is determined by an arbitration
proceeding or a final non-appealable judgment of a court of law or equity that
Executive has breached Article 8 in a material manner the Company shall be
relieved of further severance payments to Executive, and Executive shall repay
to the Company all severance payments previously received.
8.4) Notice to New Employer. Executive will, prior to accepting
employment with any new employer, inform that employer of this Agreement and
provide that employer with a copy of Article 8 of this Agreement.
ARTICLE 9
Certain Company Remedies
9.1) Certain Company Remedies. The parties acknowledge that the Company
will suffer irreparable harm if the Executive breaches Paragraph 5.3 and/or
Articles 6, 7 and/or 8 of this Agreement, either during or after its term.
Accordingly, the Company shall be entitled to any right or remedy it may have,
under this Agreement or otherwise, at law or equity, including but not limited
to, an injunction, enjoining or restraining Executive from any violation of
Paragraph 5.3 and/or Articles 6, 7 and/or 8 of this Agreement.
9.2) Payment of Fees and Expenses. If either party initiates or becomes
a party to a formal proceeding in law or equity, or under arbitration, involving
this Agreement, and if either party obtains a substantial portion of the relief
requested by that party (the "prevailing party"), then the non-prevailing party
shall pay all of its and the prevailing party's reasonable costs and expenses,
including reasonable attorneys' fees and expenses, incurred with respect to such
proceeding. If neither party obtains a substantial portion of the relief
requested each shall bear its/his own expenses. In the event Executive is
terminated pursuant to Paragraph 5.1 (c) and determines to challenge the
Company's determination of "Cause", the Company and Executive shall each bear
its/his own expenses in connection with any proceeding initiated by Executive
with respect to the determination as to "Cause".
ARTICLE 10
Indemnification
10.1) As to acts or omissions of Executive which are within the scope
of Executive's authority as an officer and/or director of the Company and/or any
affiliate of the Company, the Company shall indemnify Executive, and his legal
representatives and heirs to the maximum extent permitted by Minnesota law.
ARTICLE 11
Miscellaneous
11.1) Successors and Assigns. This Agreement is binding on and inures
to the benefit of the Company, and its successors and assigns. the Company
agrees that the Company shall be deemed to have materially breached this
Agreement if its successor or assign does not assume all of the Company's
material obligations under this Agreement. The rights and obligations of
Executive under this Agreement are personal and may not be assigned or
transferred without the express written consent of the Company.
11.2) Modification. This Agreement supersedes all prior agreements and
understandings between the parties. This Agreement may be modified or amended
only by a writing signed by the Company and Executive.
11.3) Waivers. No failure or delay by either the Company or Executive
in exercising any right or remedy under this Agreement shall be deemed a waiver
of any provision of this Agreement. Nor shall any single or partial exercise by
either the Company or Executive of any right or remedy under this Agreement
preclude either from otherwise or further exercising rights or remedies granted
under this Agreement.
11.4) Notices. Any and all notices referred to herein shall be deemed
properly given only if in writing and delivered personally or sent postage
prepaid, by certified mail, return receipt requested, as follows:
(a) To the Company, to the attention of the Company's Chief
Executive Officer, at its office set forth on page 1 of this
Agreement or at such other address as the Company may specify
in writing to Executive, with a copy to each member of the
Company's Board of Directors, and to Fredrikson & Byron, P.A.,
1100 International Centre, 900 Second Avenue South,
Minneapolis, Minnesota 55402, Attention: John H. Stout.
(b) To Executive at his home address as it then appears on the
records of the Company, it being the duty of the Executive to
keep the Company informed of his current home address at all
times.
The date on which notice to the Company or Executive shall be deemed to have
been given if mailed as provided above shall be the date on the certified mail
return receipt. Personal delivery to Executive shall be deemed to have occurred
on the date notice was delivered to Executive personally or deposited in a mail
box or slot or left with security or administrative personnel, at Executive's
residence by a representative of the Company or any messenger or delivery
service.
11.5) Action by Board of Directors. Any action required by the
Company's Board of Directors under this Agreement may be taken by majority vote
of a duly authorized committee having authority over the matter in question or
by a majority of the remaining members of the Board of Directors, not counting
Executive, then serving.
11.6) Judicial Review; Severability. In the event that a court of
competent jurisdiction determines that any of the provisions of this Agreement
are unreasonable, it may limit such provision to the extent it deems reasonable,
without declaring the provision or this Agreement invalid in its entirety. This
provision shall not be construed as an admission by the Company, but is only
included to provide the Company with the maximum possible protection for its
business, Confidential Information, inventions, trade secrets and data,
consistent with the right of the Executive to earn a livelihood subsequent to
the termination of his employment.
To the extent any portion of any provision of this Agreement shall be
deemed invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and the remainder of this Agreement shall be
unaffected and shall continue in full force and effect.
The Company and Executive desire that this Agreement shall be given the
construction which renders its provisions valid and enforceable to the maximum
extent, not exceeding its express terms, permissible under applicable law.
11.7) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement on January 2, 1997 to be effective as of the effective date set forth
above.
CORVU CORPORATION ("the Company")
By: /s/ Justin MacIntosh
Justin MacIntosh, Chief Executive Officer
/s/ Alan M. Missroon
Alan M. Missroon ("Executive")
SUBLEASE AGREEMENT
This Sublease made this 1st day of June, 1998, by and between Arcadia
Financial Ltd., (formerly known as Olympic Financial, Ltd.), a Minnesota
Corporation whose address is 7825 Washington Avenue South, Bloomington,
Minnesota, 55439 ("Sublandlord"), and CorVu North America Inc., a Minnesota
Corporation ("Subtenant").
WITNESSETH:
WHEREAS, Sublandlord has entered into that certain Lease Agreement
dated July 5, 1996, (collectively referred to as "Prime Lease") between United
Properties Investment Company, a Minnesota Corporation ("Prime Landlord"), as
Landlord, and Sublandlord, as Tenant, covering the building (the "Building") at
3400 West 66th Street, City of Edina, County of Hennepin, State of Minnesota
(such lease is hereinafter referred to as the "Prime Lease" and such premises
are hereinafter referred to as the "Premises"); and
WHEREAS, Sublandlord wishes to sublet a portion of the Premises to
Subtenant and Subtenant wishes to sublease the same from Sublandlord upon all of
the terms and provisions herein set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Sublandlord hereby subleases to Subtenant and Subtenant hereby
subleases from Sublandlord a portion of the Premises, together with the
appurtenances, situated in the City of Edina, County of Hennepin, State of
Minnesota, more particularly described as follows:
3400 West 66th Street, Fourth Floor, Edina, Minnesota, containing
approximately 6,271 Rentable Square Feet (the "Subleased Premises") attached as
Sublease Exhibit A, for a term ("Term") to commence on August 1, 1998 (the
"Commencement Date") and to expire on August 31, 2002, subject to this Sublease
and upon the rentals, terms, covenants, conditions and provisions hereafter set
forth. Subtenant acknowledges that the rentable square footage is inclusive of a
13% load factor.
2. Subtenant covenants and agrees to pay to Sublandlord without offset
or deduction the monthly Base Rental on the first day of each month during the
Term, commencing on August 1, 1998 in the amounts as described below:
Month one (1): $0 monthly $0 per RSF/Year
Months two (2)
through forty-eight (48): $5,497.58 monthly $10.52 NNN per RSF/Year
In addition, commencing on September 1, 1998, and continuing monthly for the
balance of the term of the Sublease, Subtenant shall reimburse Sublandlord as
Additional Rent (as defined in the Prime Lease as an Operating Cost Adjustment),
all amounts which may become due under the Prime Lease for any operating costs
allocable to the Subleased Premises based upon the Rentable Square Foot (RSF)
office area allocable to the Subleased Premises. For 1998, Building operating
costs are estimated at $10.02 per RSF. Subtenant is aware that Subtenant will be
responsible for the operating expenses which are estimated to be $10.02 per
rentable square foot per annum and that the rate stated above is based on a
triple net rate. Within a reasonable time after Sublandlord's receipt of the
estimated costs for each calendar year of the Term, Sublandlord shall provide to
Subtenant, Prime Landlord's estimate of the per Rentable Square Foot operating
costs for the related calendar year, and the Additional Rent payable hereunder
each month of such calendar year shall be equal to 1/12th of the estimated
Additional Rent allocable to the Subleased Premises. Upon the expiration of each
calendar year, Sublandlord shall provide Subtenant a statement of the actual per
Rentable Square Foot operating costs allocable to the Subleased Premises for
such preceding calendar year as calculated by Landlord. If the actual per
Rentable Square Foot operating costs for such preceding calendar year differ
from the estimate for such year, Subtenant shall pay to Sublandlord within 30
days of demand the amount by which the actual costs exceed the amount paid by
Subtenant, or the Sublandlord shall credit the amount by which the amount paid
by Subtenant exceeds the actual costs to the Additional Rent due in the then
current year, or pay the amount in the last year of the Sublease, as the case
may be.
3. The parties agree that this Sublease shall be subject and
subordinate to all of the terms, covenants, conditions, and provisions of the
Prime Lease and to all the title and other matters to which the Prime Lease is
subject and subordinate as are applicable to the Subleased Premises. A copy of
the Prime Lease and all Amendments relating thereto shall be attached as
Sublease Exhibit B.
4. (a) The terms, covenants, conditions and provisions in the Prime
Lease (including, but not limited to, the remedies provided thereunder) are
incorporated herein by reference, and shall, as between Sublandlord and
Subtenant, constitute the terms, covenants, conditions and provisions of this
Sublease, except to the extent that they are inapplicable to, inconsistent with,
or modified by the provisions of this Sublease. The parties agree to observe and
perform the terms, covenants, conditions and provisions on their respective
parts to be observed and performed hereunder, including, but not limited to,
those terms, covenants, conditions and provisions of the Prime Lease which are
incorporated herein.
(b) Subtenant shall have all the rights of Sublandlord under Prime
Lease, in no case, have any rights in respect of the Subleased Premises greater
than Sublandlord's rights under the Prime Lease and Sublandlord shall have no
liability to Subtenant for any matter whatsoever for which Sublandlord does not
have at least co-extensive rights, as tenant, against the Prime Landlord under
the Prime Lease.
(c) The performance by Sublandlord of any of the terms and conditions
of this Sublease upon the Sublandlord's part to be performed shall be subject
and dependent upon the performance by the Prime Landlord under the Prime Lease
terms, covenants, conditions and provisions, expressed or implied, of the Prime
Lease on the part of the Prime Landlord under the Prime Lease to be performed,
and Sublandlord shall be under no obligation or liability whatsoever to the
Subtenant in the event that the Prime Landlord shall fail to perform any of the
terms or conditions contained therein on the part of the Prime Landlord to be
performed, but Sublandlord shall enforce all of its rights under the Prime Lease
for the benefit of Subtenant.
5. Security Deposit - Subtenant to pay a security deposit in the amount
of $21,250.00 for the faithful performance of all terms, covenants and
conditions of this Sublease. Subtenant agrees that Sublandlord may apply said
security deposit to remedy any failure by Subtenant to repair maintain premises
or to perform any other terms, covenants, and conditions contained herein. If
Subtenant has kept and performed all terms, covenants, and conditions of this
Lease during the term hereof, Sublandlord will on the termination hereof
promptly return said sum to Subtenant. Should Sublandlord use any portion of
said sum to cure any default by Subtenant hereunder, Subtenant shall forewith
replenish said sum to such original amount. Sublandlord shall not be required to
keep any security deposit separate from its general funds and Subtenant shall
not be entitled to interest on any such deposit. Upon the occurrence of any of
the defaults described in the Sublease document or the Prime Lease, said
security deposit shall be immediately due and payable Sublandlord, but only to
the extent that said portion of the security deposit is needed to cure default.
If Subtenant has kept and performed all terms, covenants and conditions of this
Sublease during the first year of the term hereof, Sublandlord will on the
expiration of the first year of the term return $10,630.00 to Subtenant.
6. Parking will be provided pursuant to the Prime Lease, but shall not
be less than 4 cars per 1,000 rentable square feet leased by Subtenant.
7. Nothing contained in this Sublease shall be construed to create
privity of estate or of contract between Subtenant and the Prime Landlord.
Neither Subtenant nor Sublandlord shall do or permit to be done any act or thing
which will constitute a breach or violation of any of the terms, covenants,
conditions or provisions of the Prime Lease and each indemnities the other from
all costs, damages or expenses arising out of a breach of the Lease caused by
the other party.
8. Subtenant will indemnify and hold Sublandlord harmless from and
against all losses, costs, damages, expenses and liability, including, but not
limited to, reasonable attorney's fees, which Sublandlord may incur or pay out
by reason of any injury to persons or property occurring in, on or about the
Subleased Premises, or by reasons of any breach or default hereunder on
Subtenant's part or by reason of any work done in or to the Subleased Premises
or any act or negligence on the part of Subtenant, its agents, employees and
invitees. Subtenant shall cause Sublandlord and Prime Landlord to be listed as
additional insureds on all public liability, property damage and fire and
extended coverage insurance procured by Subtenant relating to the Subleased
Premises in accordance with the terms of the Prime Lease, provided, however,
that Sublandlord warrants that the Subleased Premises are in good working order
and comply with all applicable laws.
9. Subtenant agrees to accept the Subleased Premises in an as-is
condition with the exception of the space plan that has been mutually agreed
upon by Sublandlord and Subtenant. This space plan shall provide for Sublandlord
to demise said space and for the creation of a reception area for the Subtenant.
Cost of reception area to be determined and mutually agreed upon prior to
Sublease execution. Sublandlord and Subtenant agree that the Sublease Agreement
and the Subleased Premises include no furniture, fixtures, or equipment unless
such items are covered under a separate agreement.
10. Sublandlord's refusal to consent to or approve any matter or thing,
whenever Sublandlord's consent or approval is required under the terms of this
Sublease, shall be deemed reasonable if the Prime Landlord has refused to give
such consent or approval and such approval is required pursuant to the terms of
the Prime Lease.
11. (a) Notices and other communications hereunder shall be in writing,
and shall be delivered in person or made by certified mail addressed to the
parties at their respective addresses set forth above, or at any other address
which either party may hereafter designate for such purpose by written notice.
Notices to Sublandlord shall be sent to Director of Administrative Services,
Arcadia Financial Ltd., 7825 Washington Ave. So., Bloomington, MN 55439. Notices
to Subtenant shall be sent to: Dave Carlson, 3400 West 66th Street, Fourth
Floor, Edina, MN.
(b) Subtenant shall promptly deliver to Sublandlord copies of all
notices received by Subtenant from the Prime Landlord and copies of all notices
served upon the Prime Landlord under the terms of the Prime Lease.
(c) The time limits provided in the Prime Lease for the giving of
notices, making demands, performance of any act, condition or covenant or the
exercise of any rights, remedies or options are changed for the purposes of this
Sublease by lengthening or shortening the same, in each instance, by three (3)
days, as appropriate, so that notice may be given, demands made, or acts,
conditions or covenants performed or any rights, remedy or option herein
exercised by Sublandlord or Subtenant, as the case may be (and each party
covenants that it will do so) within the time limit relating thereto contained
in the Prime Lease.
12. Unless Prime Landlord agrees otherwise, if, for any reason, the
term of the Prime Lease is terminated prior to the expiration date of this
Sublease, this Sublease shall thereupon be terminated, and Sublandlord shall not
be liable to the Subtenant by reason thereof except for any prepaid rent which
shall be prorated to the time of actual eviction following termination, unless
said termination shall have been effected because of the breach or default of
the Sublandlord under the Prime Lease.
13. This Sublease is subject to and conditioned upon Prime Landlord's
consent in writing, which consent shall approve Subtenant's use of the Subleased
Premises as general office. Prime Landlord shall consent that Subtenant's use of
the Subleased Premises will not be disturbed so long as Subtenant is not in
default under the Sublease. If such consent is not obtained on or before the
Commencement Date, then this Sublease shall be void and terminated and the base
rent prorated. In the event Subtenant obtains possession of the Subleased
Premises prior to the Prime Landlord's approval, Subtenant agrees to immediately
vacate the Subleased Premises in the event this Sublease is terminated and to
indemnify and hold Sublandlord and Prime Landlord harmless from and against any
losses, costs, damages, expenses, and liability arising from its holding over,
including attorney's fees.
14. This Sublease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, successors in interest and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Lease under
seal the day and year first above written.
SUBLANDLORD:
WITNESS: Arcadia Financial Ltd.
A Minnesota Corporation
By:
Its: Senior Vice President
Date: 7/23/98
SUBTENANT:
WITNESS: CorVu North America Inc.
A Minnesota Corporation
By:
Its: CFO
Date: 7/9/98
<PAGE>
Exhibit "A"
[Floor Plan]
<PAGE>
CONSENT TO SUBLETTING OF PREMISES
United Properties Investment Company, Landlord under the Prime Lease
described as such in the foregoing Standard Sublease (the "Sublease Agreement"),
which Prime Lease is dated July 5, 1996, hereby consents to the subletting of
the subleased Premises (as defined in the Sublease Agreement) by Arcadia
Financial Ltd. (formerly known as Olympic Financial, Ltd.), as Sublessor, to
CorVu North America, Inc., a Minnesota corporation, as Sublessee, subject to and
conditioned upon the following:
a. That Sublessor, Arcadia Financial Ltd., shall remain obligated
under the Prime Lease for the full Term thereof for the prompt
payment when due of all rentals and other sums to be paid by
the Tenant under the Prime Lease and the keeping and
performance of all terms, covenants and provisions of the
Prime Lease to be kept and performed by the Tenant thereunder;
b. That this Consent shall not be deemed to waive Landlord's
right to approve or consent to any future subletting and/or
assignments with respect to the Prime Lease or the Premises
thereunder;
c. That the Sublease Agreement shall create no obligation or
liability on the Landlord whatsoever; and
d. Subtenant, CorVu North America, Inc. agrees to list United
Properties Investment Company as additional insureds on all
public liability, property damage and fire coverages in
accordance with the terms of the Prime Lease.
Dated this 27th day of July, 1998.
Sublandlord: Subtenant:
Arcadia Financial Ltd., a CorVu North America, Inc.,
Minnesota corporation a Minnesota corporation
By: By:
Its: Senior Vice President Its: CFO
Date: 8/3/98 Date: 7/30/98
Landlord:
United Properties Investment
Company
By:
Its: Asset Manager
Date: 7/29/98
COMMERCIAL LEASE
SUITABLE FOR SMALL OFFICE BUILDINGS, FACTORIES AND ANY
SHOP PREMISES WHICH ARE NOT THE SUBJECT OF THE RETAIL
LEASES ACT (1994) WHERE THE TERM OF LEASE (INCLUDING THE
PERIOD OF ANY OPTION) DOES NOT EXCEED THREE YEARS.
THIS LEASE is made in duplicate on the 15th day of April, 1999 at North Sydney
in the State of New South Wales.
BETWEEN VIESTALL PTY LTD OF LEVEL 4, 1 JAMES PLACE, NORTH SYDNEY (CAN 003 016
395), HEAD-LESSEE whose agent is BLAKELEYS PROPERTY CONSULTANTS PTY LTD OF 247
PACIFIC HIGHWAY, NORTH SYDNEY, AGENT AND CORVU AUSTRALASIA PTY LTD C/- CRISPIN &
JEFFREY SUB-TENANT (ACN 050 043 699) LEVEL 2, 57 GROSVENOR STREET, NEUTRAL BAY
GUARANTOR.
The landlord leases the premises known as LEVEL 4, 1 JAMES PLACE, NORTH SYDNEY
including all fixtures listed in the inventory which is signed by all parties
and attached as part of this lease.
The premises shall be used only as COMMERCIAL PREMISES.
The rent shall be THIRTEEN THOUSAND DOLLARS $13,000.00 per MONTH commencing on
the FIFTEENTH day of MAY, 1999 and payable in advance by the tenant on the FIRST
day of every MONTH to the landlord/agent at his above address or at any other
reasonable place as he notifies in writing.
The term of the lease shall be ONE YEAR AND FORTY FIVE DAYS commencing on the
FIFTEENTH day of MAY, 1999 and ending on the THIRTIETH day of JUNE, 2000.
Subject to Condition 32 of this lease the landlord offers a renewal of this
lease for a further term of _____ years.
Unless either party gives the other written notice at least one month before the
end of the term that vacant possession shall be given on that day, the lease
shall continue as a periodic lease from month to month at the same rent or at a
rent which both parties agree to.
The tenant's percentage of increases in rates, taxes and insurance premiums to
be paid in accordance with Condition 17 is ______%.
Municipal Rates: _____________19_________
Water and Sewerage Rates: 19_________/19____________
Land Tax: ______________ 19____________
The amount of cover for public liability referred to in Condition 4(b) is
$5,000,000.
The parties agree to the conditions set out above and on the following pages and
also to those conditions implied by Sections 84 and 85 of the Conveyancing Act,
1919, which are not expressly negatived or modified by this lease.
NOTE
It is advisable for the tenant to insure his own property and insure against his
liability for public risk as the occupier.
ISSUED BY THE REAL ESTATE INSTITUTE OF N.S.W.
<PAGE>
THE LANDLORD AGREES
1. To give possession of the premises to the tenant on the day on which the term
of the lease commences.
2. To ensure that the premises are in a reasonably fit condition for use at the
commencement of the lease.
3. To ensure that the external doors and windows contain locks and catches in
working order at the commencement of the lease.
4. (a) To insure the premises against damage arising from fire, lightning and
explosion and other hazards (including earthquake, storm and tempest, water
damage, explosion, impact, aircraft, riots/civil commotions and malicious
damage).
(b) To insure for public liability covering all sums which he shall become
legally liable to pay as owner and landlord for a minimum amount as noted on
the front page of this lease.
5. To allow the tenant to use and occupy the premises without unreasonable
interference by the landlord or his agent.
6. To pay council, water and sewerage rates and land tax promptly.
7. To provide the tenant with a stamped copy of the lease signed by both parties
as soon as practicable.
8. To issue rent receipts showing the tenant's name, the address of the
premises, the amount received, the date of payment and payment the period for
which the payment was made.
THE TENANT AGREES
9. To pay the rent promptly and in advance.
10. To obtain at his own expense all necessary consents that may be required
from municipal or shire or other authorities to carry on his proposed business
at the premises (being the use for which the premises are leased).
11. To pay all charges for gas, electricity and telephone and any excess water,
garbage or sanitary charges, relating to the tenant's use of the premises.
12. To take care of the premises and to keep them in a clean condition, and in
particular:
(a) To make no alterations or additions to the premises, including the
erection of any sign or antenna, without the written consent of the landlord.
(b) To do no decorating that involves marking, defacing or painting any part
of the premises, without the written consent of the landlord.
(c) To put nothing down any sink, toilet or drain likely to cause obstruction
or damage.
(d) To keep no animals or birds on the premises, without the written consent
of the landlord.
(e) To ensure that rubbish is not accumulated on the premises and to cause
all trade refuse to be removed regularly in a manner acceptable to the
landlord.
(f) To ensure that nothing is done that might prejudice any insurance which
the landlord has in relation to the premises.
(g) To notify the landlord promptly of any loss, damage or defect in the
premises.
(h) To notify the landlord promptly of any infectious disease, or the
presence of rats, cockroaches or similar pests.
13. Not to sleep or permit anyone to sleep on the premises nor to hold or permit
to be held any sale by action on the premises.
14. To ensure that he, his employees, licensees and agents observe, obey and
perform the Rules and Regulations forming part of this lease and such further
Rules and Regulations as the landlord may from time to time make and communicate
to the tenant (not being inconsistent with this lease) for the safety, care and
cleanliness of the premises and of the building.
15. (a) To do nothing in the building or keep anything therein that would
increase the insurance premium payable by the landlord on the building except
with the written consent of the landlord.
(b) To do nothing which would make any Insurance Policy void.
(c) To insure all external fixed glass and window frames for which the tenant
is responsible.
(d) To pay all insurance premiums increased as a result of his actions.
16. (a) To compensate and meet all claims of
(i) the landlord for the loss of or damage to part of whole of the
premises,
(ii) any person for the loss of or damage to his personal property,
and
(iii) any person for personal injury or death
as a result of any accident or neglect or a deliberate or
careless act on the premises or a breach of any condition of
the lease by the tenant, his employees or agents or any person
present on the premises with the consent of the tenant, his
employees or agents.
(b) In these circumstances the tenant shall meet all claims whether they are
made directly against him or against the landlord. Any resultant repairs to
the premises or to any other parts of the building shall be carried out at
the expense of the tenant by a builder approved by the landlord.
(Delete Condition 17 or 18 as applicable)
17. [Deleted]
18. [Deleted]
BOTH PARTIES AGREE THAT
19. If something happens to the premises so that the whole or a substantial part
can no longer be occupied, and the parties are in no way responsible, then
either party shall have the right to terminate the lease, provided written
notice is given within fourteen days of the event.
20. The landlord or his agent shall inspect the premises at the commencement of
the lease and on its termination and take note of their condition including
state of cleanliness, state or repair, and working order of appliances.
21. (a) The tenant shall have repaired in a proper way any damage to the
premises resulting from neglect or a deliberate or careless act or a breach of
any condition of the lease by the tenant or any person on the premises with his
consent.
(b) Except as in Condition 21(a), the landlord shall carry out without delay
all reasonable repairs necessary for the tenant's ordinary use and occupation
of the premises, having regard to the condition of the premises at the
commencement of the lease.
22. (a) The landlord shall respect the tenant's right to privacy.
(b) The tenant shall allow access to the landlord an his agent:
(i) when it is reasonable that they or either of them should view
the condition of the premises or carry out repairs, or
(ii) to erect "to let" signs and to show the premises to intending
tenants, after notice terminating the lease has been given, or
(iii) to erect "for sale" signs and to show the premises to
intending purchasers, after the landlord has given the tenant
notice of his wish to sell.
(c) The landlord shall give the tenant reasonable notice of the time and date
for such access. As far as possible it shall be convenient for both parties.
(d) The landlord may have access at any time with the consent of the tenant
or in the case of an emergency.
23. (a) The tenant shall pay all reasonable costs relating to the lease,
including stamp duty.
(b) The landlord shall pay all other costs relating to his management of the
premises.
24. Each party shall observe as applicable to himself all relevant statutes,
statutory regulations and by-laws relating to health, safety, noise and other
standards with respect to the premises.
25. Any written notice required or authorized by the lease:
(a) Shall be served on the tenant personally, or by pre-paid post to the
premises, or by being left there in the post box.
(b) Shall be served on the landlord by personal service on him or his agent,
or by pre-paid post to his or his agent's address as shown in the lease or as
notified in writing, or by being left in the post box at that address.
(c) Shall be deemed to be served on the second week day after posting, where
it is sent by pre-paid post.
(d) May take effect on any day of the month if it relates to the termination
of a periodic lease, provided it gives the required length of notice.
26. Where there has been a breach of any of the conditions of the lease by
either party, the other party shall take all reasonable steps to minimize any
resultant loss or damage.
27. (a) After a notice terminating the lease or demanding immediate possession
has been given, any acceptance of or demand for rent or money by the landlord
shall not of itself be evidence of a new lease with the tenant or alter the
legal effect of the notice.
(b) Where the tenant unlawfully remains in possession after the termination
of the lease, the landlord is entitled, in addition to any other claim, to
payments equal to the rent as compensation for the use and occupation of the
premises.
28. In any dispute or proceeding between the parties, both parties shall act
reasonably and without delay and make all admissions necessary to enable the
real issues to be decided.
29. (a) Where the lease has become a periodic lease from month to month, either
party may terminate it by giving one months written notice.
(b) The landlord shall have the right to re-enter the premises peacefully or
to continue the lease as a periodic lease from week to week:
(i) Where the tenant has failed to pay rent for a period in excess
of fourteen days, whether formally demanded or not, or
(ii) Where the tenant has seriously or persistently breached any of
the conditions of the lease, or
(iii) Upon the tenant being declared bankrupt or insolvent according
to the law or making any assignment for the benefit of
creditors or taking the benefit of any Act now or hereafter to
be in force for the relief of bankrupts or insolvents.
(Section 85(1)(d) of the Conveyancing Act, 1919, as amended,
is hereby verified accordingly.
(c) If the landlord intends to exercise his right to re-enter, he shall serve
the tenant with a written notice stating the reason and demanding immediate
possession.
(d) If the landlord intends to exercise his right to continue the lease as a
period lease from week to week, he shall serve the tenant with a written
notice stating the reason and informing the tenant of the variation to the
lease. Upon service of the notice, the lease shall continue with all its
conditions, except for the Term and Holding Over conditions, as a periodic
lease from week to week which may be terminated by one week's written notice
from either party.
(e) The landlord shall have the right to re-enter the premises without
giving notice, if he has reasonable grounds to believe that they have been
abandoned.
(f) The tenant shall have the right to terminate the lease if the landlord
has seriously or persistently breached any of its conditions, he shall give
the landlord fourteen days' written notice, indicating at the same time the
nature of the breach.
(g) Any action by the landlord or tenant in accordance with Conditions 29(b),
(c), (d), (e) or (f), shall not affect any claim for damages in respect of a
breach of a condition of the lease.
(h) The tenant may remove his fixtures and shall remove his signs provided
that any damage or defacement occasioned to any part of the premises in the
course of such removal shall be remedied by the tenant immediately and at his
own expense. If he fails to do so the landlord may do so at the tenants'
expense.
(i) Upon the termination or determination of the lease for any cause the
tenant shall promptly and peacefully give vacant possession of the premises
in the condition and state of repair required by Conditions 12 and 21(a) of
the lease, and at the same time hand over all keys.
30. (a) The tenant shall not assign or sub-let or part with possession of the
premises or any part thereof except with the written consent of the landlord.
(b) The landlord shall not withhold his consent unreasonably, provided that
the tenant gives him fourteen days notice and the tenant pays any reasonable
expenses involved in the landlord giving consent.
31. (a) The landlord will employ the caretaker or any other person or persons he
may think fit to clean all or any of the offices or rooms in the building of
which the premises form part.
(b) [Deleted]
(c) The landlord shall not be responsible to the tenant for any loss of
property from the premises however occurring or for any damage done to the
furniture or other effects of any tenant by the caretaker or any employees
of the landlord or by any other person or persons whatsoever.
32. (a) The tenant shall give to the landlord or his agent nor more than six (6)
months and not less than three (3) months prior to the expiration of the term
granted in this lease in writing if he wishes to take a renewal of the lease for
the further term offered. Provided he has duly and punctually paid the rent and
shall have duly performed and observed on his part all the conditions and
agreements contained in this lease up to the expiration of the term granted,
then the landlord will at the cost of the tenant grant to him the further term
at a rent which would at such time be current market rental of the premises.
(b) In the event of any dispute between the landlord and the tenant as to
such rent the rent shall be determined by the President of the Real Estate
Institute of New South Wales or his appointee. The total rent is not to be
less than the total rent payable just prior to the expiration of this lease
and the lease shall be subject to all other conditions as are contained in
this lease with the exception of the Option Condition. The costs of such
rental determination shall be borne in equal shares by the parties unless
otherwise agreed.
33. (a) The word "agent" in context with "landlord" includes the landlord's
estate agent or managing agent and any other person authorised to act on behalf
of the landlord.
(b) The word "landlord" includes the heirs, executors, administrators and
assigns of the landlord, and where the context permits includes the
landlord's agent.
(c) The word "tenant" includes the executors, administrators and permitted
assigns of the tenant.
(d) The word "fixtures" includes fittings, furniture, furnishings,
appliances, plant, machinery, and equipment.
(e) The word "month" shall mean calendar month.
(f) Where the context permits, words expressed in the singular include the
plural and vice versa, words expressed in the masculine gender include the
feminine, and words referring to a person include a company.
(g) Where two or more tenants or landlords are parties, the conditions of the
lease shall bind them jointly and individually.
(h) When this lease is signed by both parties and witnessed, it is a deed at
law from that time.
(i) Headings in the margin have been inserted to assist the parties but they
do not form a legal part of the lease.
34. In consideration of the landlord leasing the premises to the tenant in
accordance with this lease, the Guarantors for themselves and each of them and
each of their executors and administrators unconditionally agree that they and
each of them will be (with the tenant) jointly and severally liable to the
landlord for the payment of the rent and all other moneys payable by the tenant,
and also for the due performance and observance of all the terms and conditions
on the part of the tenant contained or implied. AND IT IS HEREBY EXPRESSLY
AGREED AND DECLARED that the landlord may grant to the tenant any time or
indulgence and may compound or compromise or release the tenant without
realising or affecting the liability of the Guarantors.
SPECIAL CONDITIONS
Special conditions forming part of this lease are to be signed by
both parties and attached.
RULES AND REGULATIONS
1. No sign, advertisement or notice shall be inscribed or painted or
affixed on any part of the outside or the inside of the premises except
of such colour, size and style and in such place upon or in the
building as are approved in writing by the landlord. Upon request by
the tenant, interior signs on glass doors and on the directory tablets
will be provided for him and at his expense by the landlord.
2. The tenant shall not obstruct the entrance passages, halls, staircases,
or fire escapes of the premises or use them or any part of them for any
purpose other than for going in and out of the premises.
3. The tenant will not obstruct or interfere with the rights of other
tenants or in any way injure or annoy them or conflict with the
regulations of any public authority or with the terms of any insurance
policy upon the building or its contents.
4. The tenant shall not install or position any heavy equipment or article
without first obtaining the written consent of the landlord, which
consent may prescribe the maximum weight and the position in which such
heavy equipment or article may be placed or secured; the tenant shall
make good at his expense all damage caused to the building or any part
of it by the introduction, installation, presence or removal of any
heavy equipment or article of which the tenant has ownership, custody
or control. Before any safe or heavy article is moved into the building
due notice must be given to the landlord and the moving of it in and
about the building shall only be done under the supervision of the
landlord or his agent.
5. In the event of any emergency or other eventuality whereby the toilets
or washrooms on any floor are not available for use the landlord may
temporarily withdraw the right of exclusive use of all or any of toilet
or washroom areas and services not affected so as to ensure
availability of these facilities to all occupants of the building, and
no rental adjustment will be made during such temporary arrangements.
6. In carrying goods or furniture in the lifts priority shall at all times
be given to passenger traffic.
7. All doors and windows of the premises shall be securely fastened on all
occasions when the premises are left unoccupied. The landlord reserved
the right for this agents employees servants and workmen to enter and
fasten them if they are left unfastened or insecurely fastened.
PLEASE READ THIS LEASE THROUGH
CAREFULLY BEFORE AND AFTER SIGNATURE
We hereby enter into this lease and agree to all its conditions SIGNED BY THE
LANDLORD
In the presence of
Name of Witness
Signature of Landlord
Signature of Witness
SIGNED BY THE TENANT
In the presence of
Name of Witness
Signature of Tenant
Signature of Witness
SIGNED BY THE GUARANTOR
In the presence of
Name of Witness
Signature of Guarantor
Signature of Witness
THE COMMON SEAL OF CORVU THE COMMON SEAL OF THE COMMON SEAL of
AUSTRALASIA PTY LTD VIESTALL PTY LTD.
Was hereunto affixed by Was hereunto affixed by was hereunto affixed by
the authority of the the authority of the the authority of the
Board of Directors and Board of Directors and Board of Directors and
in the presence of: in the presence of: in the presence of:
[Signature illegible] [Signature illegible]
FORM OF SURRENDER OF LEASE
I, ______________________ proprietor of the lease do hereby in consideration of
___________________________________ surrender all my estate therein to the
landlord or the other present owner of the reversion thereon expectant.
In witness I have hereto subscribed my name this _____ day of _______________,
19____.
Signed
Accepted
THIS UNDERLEASE is made the day of One thousand nine hundred and ninety seven
BETWEEN MICHAEL JOHN HAYNES of 43 Royston Park Road Hatch End Middlesex RAYMOND
JOHN EVANS of Middlefield Clevelands Ealing London W13 and TERRANCE GUY HAWKER
of practising with others as Messrs. Donald Smith Seymour and Rooley
(hereinafter called "the Lessors") of the first part and CORVU PLC whose
Registered Office is situate at 121 Gloucester Place London W1H 3PJ (hereinafter
called "the Lessee") of the second part and CORVU CORPORATION (Company Number
41-1848048) whose Registered Office is at 7901 Flying Cloud Drive, Suite 100,
Eden Prairie, Minnesota 55344, USA (hereinafter called "the Surety") of the
third part.
WITNESSETH as follows:-
1. The Lessors HEREBY DEMISE (at the request of the Surety) unto the Lessee ALL
THAT suite of offices situate on the second floor (rear) of and being part of
the Building known as Craven House 40 Uxbridge Road London W5 ("the Premises")
which suite of offices is more particularly delineated and edged red on the plan
annexed to the Lease (hereinafter called "the Lease") dated the 23rd day of
April 1985 and made between Legal and General Assurance Society Limited
(hereinafter called "the Superior Landlords") of the one part and Star Micronics
UK Limited of the other part registered at H.M.Land Registry with Title Absolute
under Title Number NGL526204 TO HOLD unto the Lessee for a term of 5 years from
the 1st day of June 1997 expiring on the 12th day of June 2002 paying therefor
during the said term yearly and proportionately for any part of a year the rent
of 4,542 English Pounds plus VAT payable quarterly in advance on the usual
quarter days without any deduction the first of such payments to be made on the
25th day of March 1997.
2. Except as to the term of years granted and the rent reserved this demise is
made upon the same terms and subject to the same terms and subject to the same
reservations and to the same covenants on the part of the Lessors and Lessee
respectively and to the same stipulations and conditions as were expressed and
contained in the Lease as if the same were herein set forth at length.
3. The Lessee hereby covenants with the Lessors as follows:-
(1) To pay the rent reserved at the times and in manner aforesaid
(2) To pay the service charge by way of further rent as specified
in the Lease
(3) To observe and perform the covenants on the part of the Tenant
contained in the Lease
(4) Not to assign the whole of the Premises without the prior
written consent of the Lessor and Superior Landlords and
otherwise subject to the provisions in that behalf contained
in the Lease
<PAGE>
4. The Lessors hereby jointly and severally covenant with the Lessee
(1) To endeavour to procure that the Superior Landlords shall
observe and perform the covenants on the part of the Landlord
contained in the Lease and
(2) To permit the Lessee to have quiet and peaceable enjoyment of
the Premises without interruption by the Lessor or any person
rightfully claiming through under or in trust for the Lessor
and
(3) To use their reasonable endeavour to procure the consent of
the Superior Landlords as soon as possible pursuant to any
application for consent made to the Lessors by the Lessee
under the terms of this Lease and
(4) To pay the rent under the Lease and also the balance of any
service charge payable thereunder in so far as the same shall
not be payable by the Lessor under the terms hereof
5. If the Premises or any part thereof shall at any time during the term hereby
granted be rendered incapable of or unfit for occupation or use as the result of
a peril against which the building of which the same forms part is insured
pursuant to the covenant on the part of the Landlord contained in the Lease so
as to render the Premises incapable of or unfit for occupation or use the tents
payable hereunder or fair proportions of the same according to the nature and
extent of the damage sustained shall be suspended until the Premises shall again
be rendered capable of and fit for occupation and use provided that there shall
be no cesser of rents if any or to such extent as any insurance policy affected
by the Lessors shall have been rendered void or voidable in whole or in part by
the act or default of the Lessee or any person deriving title under the Lessee
or any of the servants or agents of the Lessee or of any such person PROVIDED
FURTHER that if the Building shall be so damaged as to necessitate demolition
and reconstruction the Lessors shall be entitled on giving to the Lessee not
less than six months' previous notice in writing to determine the term hereby
granted and at the expiration of such notice this Lease and everything herein
contained shall cease and be void and the Lessee shall not be liable for any
dilapidations and shall not be entitled to any compensation except that (if any)
payable under the provisions of the Landlord and Tenant Act 1954 but without
prejudice to the rights and remedies of the Lessors for any arrears of rent
PROVIDED ALSO that any dispute as to the proportion (if any) of rent which
should be suspended or as to the period of such suspension which may arise under
this sub-clause shall be referred to the decision of some competent person
(acting as an expert and not as an arbitrator) to be agreed upon by the Lessors
and by the Lessee or (in the event of failure so to agree) to be nominated by
the President for the time being of the Royal Institution of Chartered Surveyors
and the decision of such person (including any determination as to the costs of
such decision) shall accordingly be final and binding on both the Lessors and
the Lessee.
<PAGE>
6. If either party shall desire to determine the term hereby granted at the
expiration of the third year thereof and shall give to the other party not less
than six months previous notice in writing of such desire and shall up to the
time of such determination pay the rent and perform and observe the covenants on
the part of the Lessee hereinbefore reserved and contained then immediately on
the expiration of such third year the present demise and everything herein
contained shall cease and be void but without prejudice to the rights and
remedies of either party against the other in respect of any antecedent claim or
breach of covenant.
7. It is hereby agreed and declared between the parties pursuant to an Order of
the Kingston Upon Thames County Court made on the day of 1997 that the
provisions of Section 24 to 28 inclusive of the Landlord and Tenant Act 1954 (as
amended) shall not apply to this Lease.
8. The Lessee shall not be entitled to compensation on quitting the demised
premises.
IN WITNESS whereof the parties hereto have executed this document as a Deed the
day and year first above written.
Counterpart/
THE COMMON SEAL of )
CORVU PLC was hereunto )
affixed in the presence of:- )
Director:
Secretary:
THE COMMON SEAL of )
CORVU CORPORATION )
was hereunto affixed )
in the presence of:- )
Director:
Secretary:
CORVU AUSTRALASIA PTY LTD
ACN 050 043 699
("Approved Borrower")
AND
CORVU NORTH AMERICA INC
(FIN 41-1819469)
and CORVU PIC
(CRN 03096249)
("Security Provider")
AND
INTEGRAL BUSINESS FINANCE PTY LIMITED
ACN 007 559 749
("Integral Business")
LOAN AGREEMENT
ABBOTT TOUT
Solicitors
Level 42, MLC Centre
19-29 Martin Place
SYDNEY 2000
DX: 129
TEL: 9334 8555
FAX: 9334 8585
REF: RHT
<PAGE>
TABLE OF CONTENTS
Page
1. INTERPRETATION 1
1.1 Definitions 1
1.2 Other expressions 6
2. LOANS 6
2.1 Agreement to make Loans 6
2.2 Purpose 6
2.3 Amount and maturity date of each Loan 7
3. CONDITIONS PRECEDENT 7
3.1 Things to be received by Integral Business 7
3.2 Conditions precedent to each Loan 8
3.3 Other conditions precedent 9
3.4 How a copy must be certified 9
4. DRAWDOWN AND INTEREST 9
4.1 Drawdown 9
4.2 Interest Periods 9
4.3 Calculation of interest on Outstanding Amount 10
4.4 Payment of interest on Outstanding Amount 10
4.5 Default interest 10
4.6 Interest following judgment 10
5. FEES 11
5.1 Establishment Fee 11
5.2 Line Fee 11
5.3 Fees not refundable 11
6. REPAYMENT 11
6.1 Repayment 11
6.2 Early repayment and redrawing 11
6.3 Repayment of excess over Facility Limit 12
7. INDEMNITIES AND COSTS AND EXPENSES 12
7.1 Costs and expenses 12
7.2 Indemnity following Event of Default 12
7.3 Indemnity for failed drawing 12
7.4 Indemnity for early or late payment 13
7.5 Example of loss 13
8. GENERAL AND FINANCIAL OBLIGATIONS 13
8.1 Positive obligations 13
8.2 Negative obligations 14
8.3 Insurance Obligations 15
8.4 Security Coverage 17
8.5 Valuation 17
8.6 Advising of defaults 17
8.7 Procedures on Default 18
8.8 Approved Borrower and Security Provider to comply with directions18
9. REPORTING OBLIGATIONS AND ACCESS 18
9.1 Notices to Integral Business 18
9.2 Other information 18
9.3 Giving access to records and land 19
9.4 Financial statements 19
10. REPRESENTATIONS AND WARRANTIES 20
10.1 Representations and warranties 20
10.2 Representations and warranties repeated 21
10.3 Representations and warranties modified 22
11. PAYMENTS TO INTEGRAL BUSINESS 22
11.1 Payment to be on Business Day 22
11.2 Manner of payment 22
11.3 Deduction or withholding required 22
12. DEFAULT 23
12.1 Events of Default 23
12.2 Consequences of Event of Default 26
13. INCREASED COSTS 26
14. ILLEGALITY 26
15. PRESERVING INTEGRAL BUSINESS'RIGHTS, POWERS AND REMEDIES 26
15.1 Preservation 26
15.2 Moratorium legislation 27
15.3 Reinstating or replacing rights 27
15.4 Effect of release 27
15.5 Indemnities continuing 27
16. ASSIGNMENT 28
16.1 By Approved Borrower 28
16.2 By Integral Business 28
16.3 Effect of assignment 28
17. NOTICES 28
18. MISCELLANEOUS 29
18.1 No obligation to exercise rights or give consent 29
18.2 Consent must be in writing 29
18.3 Notification from Approved Borrower or Security Provider 30
18.4 Integral Business may set off 30
18.5 Approved Borrower must not set off 30
18.6 Applying receipts 30
18.7 Certain notices or demands 30
18.8 Severability 30
18.9 Entire agreement 31
18.10 Variation of agreement 31
18.11 Counterparts 31
18.12 Integral Business may disclose information 31
18.13 Governing law and jurisdiction 31
<PAGE>
LOAN AGREEMENT
AGREEMENT dated 26th day of February, 1998
BETWEEN CORVU AUSTRALASIA PTY LTD ACN 050 043 699 of Level 4, 1 James Place,
North Sydney NEW 2060 ("Approved Borrower")
AND CORVU NORTH AMERICA INC (FIN 41-1819469) and CORVU PIC (Company Number
03096249) C/- Level 4, l James Place, North Sydney NEW 2060
(collectively and individually "Security Provider")
AND INTEGRAL BUSINESS FINANCE PTY LIMITED ACN 077 559 749 of Level 3, 75
Castlereagh Street, Sydney NSW 2000 ("Integral Business")
1. INTERPRETATION
1.1 Definitions
In this document:
'Accounts' includes:
(a) profit and loss accounts and balance sheets; and
(b) statements, reports and notes attached to, or intended to be
read with, any document referred to in paragraph (a),
including auditors' reports and directors' reports.
'Approved Trade Debtor' means a trade debtor approved by Integral
Business.
'Approved Trade Debtor Limit' means at any time in respect of an
Approved Trade Debtor, the maximum amount of money which Integral
Business is prepared at that time to provide as Loans to the Approved
Borrower on the security of Designated Debts, as may be varied from
time to time in the absolute discretion of Integral Business.
'Australian Accounting Standards' means:
(a) accounting standards as defined in section 9 of the
Corporations Law; and
(b) the requirements of the Corporations Law for the preparation
and content of accounts; and
(c) generally accepted accounting principles and practices
consistently applied in Australia, except principles and
practices that are inconsistent with (a) or (b).
'Authorised Officer' means a person holding or acting in the office of
director, chief executive or secretary, or whose title includes the
word `Manager' or `Director'.
'Availability Period' means the period commencing on the date of this
document and expiring on the Termination Date, subject to the
provisions of Clause 6.3.
'Base Rate' for a particular Interest Period or other period means the
sum of the Margin and:
(a) the average bid rate (expressed as a percentage yield per
annum to maturity) (and rounded upwards if necessary to four
decimal places) displayed at or about 10.00 a.m. on the first
day of the Interest Period on the Reuters Monitor System on
the page designated `BBSY' for Bills having a tenor
approximately equal to the Interest Period or other period; or
(b) if Integral Business reasonably determines that the rate
specified in paragraph (a) cannot be readily determined, the
rate Integral Business determines is the appropriate
equivalent rate having regard to prevailing market conditions.
'Book Debts' means:
(a) book debts including, without limitation, all of the Approved
Borrower's or Security Provider's (as the case requires)
right, title and interest in the Invoices and the proceeds of
collection or realisation of the Invoices;
(b) debts other than book debts; and
(c) Collection Proceeds,
but excludes Cash Assets.
'Business Day' means a day on which banks (as defined in the Banking
Act 1959 (Cth)) are open for general banking business in Sydney,
excluding Saturdays and Sundays and public holidays in that place.
"Cash Assets" means:
(a) Collection Proceeds when credited to or paid into the
Designated Bank Account;
(b) moneys, funds or sums for the time being standing to the
credit of the Designated Bank Account;
(c) any indebtedness or liability in respect of any credit balance
for the time being in the Designated Bank Account of the bank
or financial institution where that account is held; and
(d) moneys, funds or assets withdrawn from, debited to or paid out
of the Designated Bank Account;
'Collateral Security' means a Guarantee, Security Interest or
negotiable instrument held or given, whether before or after this
document is executed, as security for or otherwise in connection with
the Money Owing.
"Collection Proceeds" means the proceeds of collection or realisation
of book and other debts comprising any form of property, including
without limitation cash, cheques, payment, money or credit orders,
transfers or transmissions of any kind by any means, bills of exchange
or promissory notes but excludes the proceeds of collection or
realisation of the Invoices.
'Commencement Date' means the date a Loan is first made to or at the
request of the Approved Borrower.
'CorVu Group' means the Approved Borrower, each Security Provider and
any related Corporation to any of the foregoing, and each of them.
'Designated Bank Account' means each of the accounts specified in
Schedule 1 and such other accounts of the Approved Borrower or Security
Provider with a bank or financial institution as nominated by Integral
Business and notified to the Approved Borrower and Security Provider
from time to time.
'Designated Debt' means any debt in respect of an Invoice which is the
subject of a Drawdown Notice under this document.
'Drawdown Notice' means the notice given by the Approved Borrower to
Integral Business in accordance with Clause 4.
'Event of Default' means each event listed in Clause 12.1.
'External Administrator' means an administrator, receiver, receiver and
manager, trustee, provisional liquidator, liquidator, inspector or any
other person (however described) holding or appointed to an analogous
office or acting or purporting to act in an analogous capacity.
'Facility Limit' means A$1,100,000.00 (one million one hundred thousand
dollars Australian).
'Facility Rate' means the aggregate of 5.0% per annum and the Base
Rate.
'Guarantee' means a guarantee, indemnity, letter of credit, letter of
comfort or any other obligation (whatever it is called and whatever its
nature) by which a person is responsible for another person's
obligation or debt.
'Interest Payment Date' means:
(a) the following dates:
Payment No. Date of Payment Payment No. Date of Payment
----------- --------------- ----------- ---------------
1 7
----------- --------------- ----------- ---------------
2 8
----------- --------------- ----------- ---------------
3 9
----------- --------------- ----------- ---------------
4 10
----------- --------------- ----------- ---------------
5 11
----------- --------------- ----------- ---------------
6 12
----------- --------------- ----------- ---------------
and
(b) the Termination Date; and
(c) after the Termination Date, the last day of each month.
'Interest Period' means an interest period determined under Clause 4.2.
'Invoice' means the invoice (which must be in a form acceptable to
Integral Business) given by either the Approved Borrower or the
Security Provider to an Approved Trade Debtor in respect of goods or
services or both supplied by the Approved Borrower or the Security
Provider (as the case requires) to the Approved Trade Debtor.
'Invoice Amount' means the total amount payable by an Approved Trade
Debtor on an Invoice.
'Loan' means each cash advance made by Integral Business to the
Approved Borrower under Clause 2.
'Loan Amount' means in relation to an Invoice, 80% of the Invoice
Amount for that Invoice.
'Margin' means 3.0 % per annum.
'Money Owing' means the amount determined for any day by Integral
Business to be the aggregate of all money owing or remaining unpaid by
the Approved Borrower to Integral Business on that day under this
document, whether the liability is actual or contingent.
'Outstanding Amount' means the aggregate amount of all outstanding
Loans less the aggregate of all principal repaid by the Approved
Borrower under this document, as calculated by Integral Business for
any day at 5.00 p.m. on that day.
'Public Authority' means the Crown, a government, a minister of a
government, a government department, a statutory corporation, or a
semi-government or judicial entity.
'Related Party' means:
(a) a person related to the Approved Borrower under section 50 of
the Corporations Law, and
(b) a person providing Collateral Security.
'Relevant Agreement' means:
(a) this document; and
(b) a Collateral Security; and
(c) an agreement between Integral Business and the Approved
Borrower; and
(d) a document (including a letter):
(i) that relates to the Money Owing or another Relevant
Agreement (other than a letter from the Approved
Borrower); or
(ii) that the Approved Borrower and Integral Business
agree is a Relevant Agreement; and
(e) the Securities.
'Securities' means:
(a) a first registered fixed and floating charge over all the
assets and undertaking of the Approved Borrower including a
fixed charge over the present and future Book Debts of the
Approved Borrower (encompassing its right and interest to
proceeds from invoices given to Approved Trade Creditors) and
a fixed charge over the trading bank accounts used to receive
deposits being the proceeds of goods and or services sold by
the Approved Borrower and any of its subsidiaries; and
(b) a first registered fixed and floating charge over all the
assets and undertaking of CorVu North America Inc (FIN
41-1819469) including a fixed charge over the present and
future Book Debts of CorVu Corporation (encompassing its right
and interest to proceeds from invoices given to Approved Trade
Creditors) and a fixed charge over the trading bank accounts
used to receive deposits being the proceeds of goods and or
services sold by CorVu North America Inc (FIN 41-1819469) and
any of its subsidiaries; and
(c) a first registered fixed and floating charge over all the
assets and undertaking of CorVu PIC (CRN 03096249) including a
fixed charge over the present and future Book Debts of CorVu
Plc (encompassing its right and interest to proceeds from
invoices given to Approved Trade Creditors) and a fixed charge
over the trading bank accounts used to receive deposits being
the proceeds of goods and or services sold by CorVu PIC (CRN
03096249) and any of its subsidiaries; and
(d) guarantees from all existing and future subsidiaries of the
Approved Borrower and the Security Provider; and
(e) covenants that the proceeds of goods and services sold by the
Approved Borrower and the Security Provider and any of their
subsidiaries are to be deposited into nominated accounts.
'Security Interest' means a mortgage, charge, lien, pledge,
hypothecation, encumbrance, assignment or trust of, over or in respect
of an asset or any other right by way of security (including, without
limitation, under any agency, hire purchase, title retention, sale and
repurchase or `flawed asset' or set-off arrangement) of a creditor to
have its claims satisfied prior to other creditors with or from the
proceeds of any asset and includes any agreement or document conferring
such a right.
'Security Provider' means CorVu North America Inc (FIN 41-1819469) and
CorVu PIC (CRN 03096249) and each of them.
'Security Trustee' means P.T. Limited ACN 004 454 666.
'Subsidiary' has the meaning given to it in section 46 of the
Corporations Law.
'Tax' includes a tax, levy, duty or charge (and associated penalty or
interest) imposed or withheld by a Public Authority. It does not
include income tax except tax deducted or withheld from a payment (such
as withholding tax).
'Termination Date' means the day three hundred and sixty five (365)
days after the date of this document or any earlier date on which the
Money Owing becomes payable under this document.
'Winding Up' includes:
(a) dissolution, liquidation, provisional liquidation and
bankruptcy; and
(b) a procedure which is equivalent or analogous in any
jurisdiction.
1.2 Other expressions
in this document, unless the contrary intention appears:
(a) the singular includes the plural and vice versa;
(b) other grammatical forms of defined words or expressions have
corresponding meanings;
(c) a reference to a party to this document includes that party's
successors and permitted assigns;
(d) a reference to a document or agreement includes that document
or agreement as novated, altered or replaced;
(e) when two or more persons are named as Approved Borrower:
(i) the term 'Approved Borrower' is a reference to each
of them alone and also to any two or more of them
together; and
(ii) this document binds them severally and jointly;
(f) a reference to any thing includes the whole or any part of
that thing and a reference to a group of things or persons
includes each thing or person in that group;
(g) 'dollars' and '$' refer to Australian currency;
(h) words implying natural persons include partnerships, bodies
corporate, associations and Public Authorities;
(i) a reference to any legislation or statutory instrument or
regulation is construed in accordance with the Acts
Interpretation Act 1901 (Cth) or the equivalent State
legislation, as applicable.
2. LOANS
2.1 Agreement to make Loans
Integral Business agrees to make multiple cash advances to the Approved
Borrower on the first day of each Interest Period during the
Availability Period.
2.2 Purpose
The purpose of each Loan is to provide the Approved Borrower with
working capital for its business as disclosed to Integral Business. A
Loan must not be used for any other purpose.
2.3 Amount and maturity date of each Loan
(a) Each Loan must be for an amount not greater than the Loan
Amount.
(b) No Loan may be made which has a maturity date later than the
Termination Date.
3. CONDITIONS PRECEDENT
3.1 Things to be received by Integral Business
Integral Business need not make a Loan unless Integral Business
receives all of the following things at least two Business Days before
the Commencement Date, and is satisfied in its absolute discretion with
both their form and substance:
(a) a certified copy of the memorandum and articles of association
and the certificate of incorporation of the Approved Borrower
and the Security Provider;
(b) a certified copy of the resolutions or approvals of the board
of directors of the Approved Borrower:
(i) approving the Approved Borrower Entering into and
executing each Relevant Agreement to which it is a
party; and
(ii) authorising an appropriate person or persons to
execute or take any action contemplated by this
document;
(c) a certified copy of the resolutions or approvals of the board
of directors of each Security Provider and each relevant
Related Party:
(i) approving the entering into and executing each
Security to which it is a party; and
(ii) authorising an appropriate person or persons to
execute or take any action contemplated by those
Securities;
(d) specimen signatures of the authorised signatories referred to
in Clauses 3.1(b)(ii) and 3.1 (c)(ii);
(e) evidence that any Public Authority approvals which are
necessary to authorise the transactions contemplated by ]his
document have been obtained;
(f) the Approved Borrower's and Security Provider's most recent
audited Accounts;
(g) each of the Securities properly executed and, if applicable,
in registrable form, as prepared by Integral Business or its
solicitors and containing the terms required by Integral
Business;
(h) satisfactory replies to all Integral Business's enquiries
about the property subject to the Securities;
(i) any documents of title to the property subject to the
Securities which Integral Business requests;
(j) any document ancillary to this document or the Securities
which Integral Business reasonably requests;
(k) the other information which Integral Business or its
solicitors reasonably request about the Approved Borrower, the
Securities or any property subject to the Securities; and
(l) a trade credit insurance policy satisfactory to Integral
Business in respect of the Facility at the cost and expense of
the Approved Borrower, with the interest of Integral Business
noted on the policy.
3.2 Conditions precedent to each Loan
Integral Business need not make available any Loan to the Approved
Borrower unless:
(a) it receives all of the following things in connection with the
applicable Approved Trade Debtor and that Loan at least five
(5) Business Days before the Commencement Date, and is
satisfied in its absolute discretion with both their form and
substance:
(i) a certified copy of the ledger of the Approved Trade
Debtors of each of the Approved Borrower and the
Security Provider and the Invoice (but Integral
Business may agree (in its absolute discretion) to
waive the requirement for the receipt by it of the
Invoice before the Commencement Date if once a
request is made by it, the Invoice is delivered to it
within two (2) days of the request being made);
(ii) evidence that the insurance cover extends to the
Approved Trade Debtor's debt to the Approved Borrower
or Security Provider, as the case requires.
(b) it is satisfied in its discretion that:
(i) the applicable Approved Trade Debtor Limit will not
be exceeded by Integral Business providing the Loan;
and
(ii) the Approved Borrower has a 'Dynamic Risk Score' from
Dunn & Bradstreet (Australia) Pty Limited of 64 or
higher;
(iii) the Facility Limit will not be exceeded by Integral
Business providing the Loan;
(iv) the Loan, if drawn down, would not and would not be
likely in the opinion of Integral Business to cause
the Approved Borrower or the Security Provider to
breach the undertakings given under Clauses 8.4 (a),
(b), (c) or (d); and
(v) no event has occurred which in the opinion of
Integral Business may have a material adverse effect
on the Approved Borrower or the Security Provider; or
(c) it is satisfied with the trade credit arrangements and
documents used or to be used by the Approved Borrower and the
Security Provider in connection with the Loan and the
applicable Approved Trade Debtor.
3.3 Other conditions precedent
Integral Business need not make available any Loan unless it is
satisfied that:
(a) the representations and warranties made and given by the
Approved Borrower and the Security Provider in Clause 10 are
correct and not misleading by omission or otherwise, as if
they had been made and given on the Commencement Date about
the facts existing at that time;
(b) no Event of Default has occurred (that has not been remedied
or waived) nor has any event occurred which with the giving of
notice, lapse of time or any determination could constitute an
Event of Default;
(c) Integral Business has received the fees due to it under Clause
5; and
(d) Integral Business has obtained an amount of money equivalent
to the amount of the Loan pursuant to its funding
arrangements.
3.4 How a copy must be certified
Where Clause 3.1 requires a copy of a document to be certified, the
certification must:
(a) be by a director or secretary of the relevant company;
(b) confirm that the copy is a true and complete copy;
(c) confirm that the document has not been amended or revoked; and
(d) unless Integral Business otherwise agrees, be given no earlier
than the date of this document.
4. DRAWDOWN AND INTEREST
4.1 Drawdown
Subject to this document, the Approved Borrower may draw down the first
Loan on any Business Day during the Availability Period and may draw
down subsequent Loans on any Interest Payment Date, in each case by
giving Integral Business at least 5 Business Days' notice of its
intention to draw down in the form set out in Schedule 2.
4.2 Interest Periods
(a) Interest for a Loan is calculated by reference to successive
Interest Periods. The first Interest Period for that Loan
starts on this Commencement Date for that Loan. Each other
Interest Period starts on the day after the last day of the
preceding Interest Period. Interest shall be payable in
arrears on the day three (3) days prior to the last day of
each Interest Period.
(b) The duration of all of the Interest Periods for a Loan will be
one (1) month.
However, after the Termination Date or the occurrence of an
Event of Default, the term of each Interest Period may be
determined by Integral Business in its absolute discretion. If
Integral Business fails to make a determination, the term of
any new Interest Period will be seven days unless Integral
Business otherwise agrees.
(c) Integral Business may, without the consent of the Approved
Borrower, adjust the term of any Interest Period to ensure
that:
(i) the first and last days of the Interest Period are
Business Days; and
(ii) the Interest Period does not end after the
Termination Date.
4.3 Calculation of interest on Outstanding Amount
Interest accrues daily on each Outstanding Amount at the Facility Rate
reducing to the Base Rate if interest is paid when due and there is no
subsisting Event of Default. Interest is calculated on a 365 day year
and the number of days elapsed since the Commencement Date or the last
date (as the case may be) for the applicable Loan.
4.4 Payment of interest on Outstanding Amount
The Approved Borrower must pay to Integral Business all accrued but
unpaid interest on each Outstanding Amount in arrears on each Interest
Payment Date for that Loan until the Money Owing in respect of that
Loan has been fully paid.
5.5 Default interest
If the Approved Borrower does not pay any amount payable under this
document (`Unpaid Amount') on the day on which it is due and as
required by Clause 12.2:
(a) the Approved Borrower must pay on demand interest on the
Unpaid Amount at the Facility Rate for each day the Unpaid
Amount remains unpaid and based on a 365 day year and an
Interest Period of 30 days; and
(b) any interest under paragraph (a) which has not been paid is
capitalised on each Interest Payment Date (or such other dates
as Integral Business determines). It then bears interest
itself under this Clause at the Facility Rate.
5.6 Interest following judgment
If the Approved Borrower's liability under this document is the subject
of a judgment or order:
(a) the Approved Borrower must pay interest to Integral Business
at the higher of the rate payable under that judgment or order
and the Facility Rate;
(b) the obligation to pay interest under this Clause is an
obligation separate from the judgment or order and will apply
despite the making of the judgment or order; and
(c) the interest which accrues under this Clause may be
capitalised on each Interest Payment Date (or such other dates
as Integral Business determines). It then bears interest
itself under this Clause at the Facility Rate.
5. FEES
5.1 Establishment Fee
The Approved Borrower must pay an establishment fee of $11,000.00 (and
disbursements incurred by Integral Business' legal representatives in
the preparation, signature and registration of this deed arid ancillary
documents) to Integral Business on or before the first Commencement
I)ate under this document.
5.2 Line Fee
The Approved Borrower must pay to Integral Business a line fee
calculated on a daily basis on the amount of the Facility Limit on each
day, at the rate of one point two five percent (1.25%) per annum. The
line fee applies whether or not a Loan has been drawn down. The first
line fee payment must t)e made on the date of this document. Subsequent
line fees must be paid in advance quarterly thereafter for the duration
of the Facility.
5.2 Fees not refundable
None of the fees referred to in this Clause is refundable or
rebateable.
6. REPAYMENT
6.1 Repayment
The Approved Borrower must pay the Money Owing in full to Integral
Business on the Termination Date, unless required earlier under Clauses
6.3 or 12.2.
6.2 Early repayment and redrawing
The Approved Borrower may repay all or part of a Loan before the
Repayment Date for that Loan only if:
(a) the Approved Borrower gives Integral Business at least 5
Business Days' notice in writing that it intends to repay, and
specifies the amount of the repayment and the date for
repayment.
That date must be the first day of the next Interest Period;
(b) it. repays the Loan in full, or the amount the Approved
Borrower wants to pay is:
(i) at least $20,000; and
(ii) a whole number multiple of $10,000;
(c) the Approved Borrower pays on the day specified in the notice.
If the Approved Borrower gives a notice contemplated by paragraph (a),
the Approved Borrower must make the payment specified in that notice
and must not revoke or purport to revoke that notice. A repayment made
under this Clause 6.2 does not reduce the Facility Limit and any amount
so repaid is available to be redrawn as a Loan subject to the terms of
this document.
6.3 Repayment of excess over Facility Limit
The Approved Borrower must upon demand in writing by Integral Business
repay to Integral Business the amount by which the Outstanding Amount
exceeds the Facility Limit at any time.
7. INDEMNITIES AND COSTS AND EXPENSES
7.1 Costs and expenses
The Approved Borrower indemnities Integral Business against, and must
pay on demand to Integral Business, all Taxes, costs and expenses
(including, but not limited to, legal costs and expenses on a full
indemnity basis) which Integral Business pays, or is liable to pay, in
connection with:
(a) a Relevant Agreement, or negotiating, preparing, completing,
registering or stamping a Relevant Agreement; or
(b) obtaining payment of the Money Owing; or
(c) protecting, enforcing or exercising a right, power or remedy
of Integral Business or a receiver or an attorney appointed
under a Relevant Agreement; or
(d) an Event of Default; or
(e) obtaining advice (including, but not limited to, legal advice)
from a professional person or consultant about any matter of
concern to Integral Business in connection with a Relevant
Agreement; or
(f) Integral Business providing financial accommodation to or at
the request of the Approved Borrower; or
(g) a receipt or payment of money under, or a transaction
contemplated by, a Relevant Agreement,
whether or not a Loan is drawn or Integral Business's obligations are
cancelled.
7.2 Indemnity following Event of Default
The Approved Borrower indemnities Integral Business against any loss,
foregone profit or expense Integral Business incurs or suffers as et
result of the occurrence of an Event of Default.
7.3 Indemnity for failed drawing
The Approved Borrower indemnities Integral Business against any loss,
foregone profit or expense that Integral Business incurs or suffer,,;
as a result of a drawdown not proceeding for any reason (except default
by Integral Business) following the issue of a drawdown notice under
Clause 4.
7.4 Indemnity for early or late payment
The Approved Borrower indemnities Integral Business against any loss,
foregone profit or expense Integral Business incurs or suffers as a
result of the Money Owing or any part of the Money Owing:
(a) being paid or repaid to Integral Business before the
Termination Date; or
(b) being paid or repaid to Integral Business after the date on
which it is due; or
(c) becoming payable to Integral Business early as a result of an
Event of Default.
7.5 Example of loss
The indemnity in Clause 7.4 includes loss, foregone profit and expense
incurred or suffered:
(a) in connection with Integral Business:
(i) changing, rearranging or ending any financial
arrangements entered into by it in connection with
the Money Owing (even if the financial arrangements
were entered into for a large pool of funds); or
(ii) redeploying or reinvesting the money paid or repaid
to Integral Business; and
(b) because Integral Business has lost the benefit of the
agreement that the Money Owing should be at a fixed rate or
outstanding for a fixed time or both. In this case, the amount
of the loss, foregone profit and expense is to be determined
by comparison with an available replacement loan at the time
of the payment or repayment.
8. GENERAL AND FINANCIAL OBLIGATIONS
8.1 Positive obligations
From the date of this document until the Money Owing is paid in full
the Approved Borrower and the Security Provider must:
(a) carry on its business in a proper and efficient way and
obtain, renew and maintain all licences, consents and
approvals advisable in connection with the Approved Borrower's
or Security Provider's business, as the case requires;
(b) maintain proper and adequate books and records in accordance
with applicable accounting standards;
(c) pay when due the Taxes assessed, levied or imposed on the
Approved Borrower or Security Provider (as the case requires)
or on assets held by it in any capacity;
(d) comply with the terms of each lease and mater al contract to
which it is a party;
(e) comply with all laws and with the mandatory requirements of
any Public Authority;
(f) do everything necessary to ensure that no Event of Default
occurs;
(g) ensure that no Loan made in connection with an Approved Trade
Debtor exceeds the Approved Trade Debtor Limit for that
Approved Trade Debtor; and
(h) promptly give notice to Integral Business of the occurrence of
any dispute in connection with an Approved Trade Debtor or any
event which would or would be likely to have a material
adverse effect on the business or financial condition of an
Approved Trade Debtor of which the Approved Borrower or the
Security Provider (as the case requires) is aware; and
(i) keep or cause to be kept proper books of account, in which it
will make true and perfect entries of all dealings and
transactions now or in the future conducted by it, including,
in respect of its business; and .
(j) credit or pay all Collection Proceeds immediately following
receipt by the Approved Borrower or the Security Provider (as
the case requires), or cause the Collection Proceeds to be
credited or paid directly, to or into the Designated Bank
Account, except where Integral Business has previously
directed or consented to a contrary arrangement.
8.2 Negative obligations
The Approved Borrower and the Security Provider must not, without
Integral Business's consent:
(a) materially change the nature of its business from the way it
is at the Commencement Date; or
(b) allow anything to be done to lessen Integral Business's
rights, powers or remedies under a Relevant Agreement; or
(c) provide financial accommodation to or at the request of a
Related Party or any person who would be a `related party' of
the Approved Borrower under section 243F of the Corporations
Law (as if that section applies to all companies and not just
public companies); or
(d) declare or pay a dividend if:
(i) it would have a material adverse effect on the
ability of the Approved Borrower or the Security
Provider, as the case requires to meet its
obligations under a Relevant Agreement; or
(ii) an Event of Default has occurred and has not been
remedied; or
(e) permit a Security Interest to affect any of the property or
assets of the Approved Borrower or the Security Provider, as
the case requires, except in favour of Integral Business; or
(f) acquire or dispose of an asset, or incur a liability, except
in the ordinary course of the Approved Borrower's or the
Security Provider's ( as the case requires) ordinary business
and on `arm's length' terms; or
(g) dispose of any of its book debts, monetary claims or revenue,
except to Integral Business.
8.3 Insurance Obligations
(a) Positive obligations
The Approved Borrower and the Security Provider must:
(i) maintain, with underwriters and on terms acceptable
to Integral Business:
(A) insurance over each Designated Debt for such
amount as Integral Business specified
against the risks Integral Business
specifies;
(B) worker's compensation, public risk, business
interruption, loss of rent insurance and the
other insurance which a prudent person would
have if involved in a business similar to
the Approved Borrower's or the Security
Provider's, as the case requires; and
(C) the other insurance which Integral Business
specifies;
(ii) ensure that this insurance:
(A) has the interest of Integral Business as
chargee or mortgagee endorsed on the policy;
or
(B) if Integral Business directs, is in both the
names of the Approved Borrower or the
Security Provider (as the case requires) and
Integral Business for their respective
rights and interests;
and, in the case of insurance in respect of
Designated Debts, has Integral Business and the
Security Trustee named as loss payee.
(iii) deliver to Integral Business:
(A) the insurance policies relating to this
insurance (`Insurance Policies'); and
(B) all alterations and additions to the
Insurance Policies, immediately after they
are issued; and
(iv) on request, give Integral Business Certificates of
currency for the Insurance Policies;
(v) punctually pay the sums (including stamp duty)
necessary to maintain every Insurance Policy arid
give Integral Business promptly on request the
receipt for this premium sum paid; and
(vi) notify Integral Business immediately of anything
which might give rise to a claim or right to claim
under an Insurance Policy.
(b) Negative obligations
The Approved Borrower and the Security Provider must not:
(i) do or allow anything to be done which might cause an
Insurance Policy to be prejudiced; or
(ii) without the consent of Integral Business, take steps
to bring about a material change to the cover under
an Insurance Policy; or
(iii) implement insurance other than as specified in Clause
8.3(a); or
(iv) make, enforce, settle or compromise a claim or do
anything inconsistent with the powers of Integral
Business under Clause 8.3(c).
(c) Insurance claims
Integral Business alone may:
(i) make, enforce, settle and compromise insurance or
compensation claims in connection with any property
which is the subject of a Security (including without
limitation any Designated Debt); and
(ii) sue for, recover, receive and give discharges for
money payable in connection with the Insurance
Policies.
(d) Insurance proceeds
(i) Integral Business may apply money payable under an
Insurance Policy either:
(A) in or towards payment of the Money Owing,
whether due or not; or
(B) in replacing, rebuilding or repairing, under
the supervision of Integral Business, or
Integral Business's builder or architect,
the property destroyed or damaged.
(ii) If the Approved Borrower or the Security Provider (
as the case requires) receives money payable under an
Insurance Policy before all the Money Owing has been
repaid and this document comes to an end, the
Approved Borrower or the Security Provider (as the
case requires) must pay it to Integral Business
immediately.
(e) Insurance cover for Debts
The Approved Borrower or the Security Provider (as the case
requires) must on demand by Integral Business irrevocably
direct the insurer in respect of an Insurance Policy for
Designated Debts to pay all money payable under any such
policy direct to the Designated Bank Account, or as Integral
Business otherwise specifies from time to time.
8.4 Security Coverage
The Approved Borrower and the Security Provider undertakes to Integral
Business that:
(a) where the Securities do not include a real property mortgage
in favour of Integral Business, the Outstanding Amount will
not at any time exceed 80% of the aggregate Face Value of all
outstanding Designated Debts from Approved Trade Debtors held
by Integral Business;
(b) subject to paragraph (c), where the Securities include a real
property mortgage given in favour of Integral Business, the
Outstanding Amount will not at any time exceed the amount
which is the aggregate of:
(i) 75% of the aggregate Face Value of all outstanding
Designated Debts from Approved Trade Debtors held by
Integral Business, plus
(ii) 67% of the Agreed Value of the real property
mortgaged in favour of Integral Business;
(c) where the Securities include a real property mortgage given in
favour of Integral Business, that amount which is 75% of the
Face Value of all outstanding Designated Debts from Approved
Trade Debtors held by Integral Business will be not less than
70% of the Outstanding Amount; and
(d) the Approved Borrower and the Security Provider will ensure
that at all times sufficient outstanding Designated Debts from
Approved Trade Debtors are held by Integral Business to ensure
that no breach of paragraphs (a), (b) or (c) of this clause
ever occurs.
8.5 Valuation
Integral Business may, in its absolute discretion, at any time appoint
and instruct a valuer to provide a valuation of all or part of the
Property.
The Approved Borrower indemnities Integral Business against, and must
pay on demand to Integral Business, all costs and expenses which
Integral Business pays, or is liable to pay, in connection with
obtaining valuations under this Clause.
8.6 Advising of defaults
The Approved Borrower and the Security Provider must promptly give
notice to Integral Business upon becoming aware of:
(a) the failure by an Approved Trade Debtor to pay any moneys due
under an Invoice the subject of a Designated Debt; or
(b) the occurrence of any other event which would be likely to
cause (a) to happen.
The events referred to in (a) and (b) are called "Non-Payment Events".
8.7 Procedures on Default
The Approved Borrower and the Security Provider must take such action
following the occurrence of a Non-Payment Event that Integral Business
requires it to take so as to:
(a) cause that Non-Payment Event to be remedied;
(b) recover the money the subject of the Non-Payment Event; and
(c) protect and preserve all of the rights of Integral Business in
respect of any applicable Invoice or Designated Debt.
8.8 Approved Borrower and Security Provider to comply with directions
Integral Business may (but is not obliged to) give directions and
instructions to the Approved Borrower or the Security Provider (as the
case requires) as to:
(a) the action to be taken pursuant to Clause 8.7;
(b) any other matter which Integral Business (acting reasonably)
believes may affect its rights under this document or the
Securities,
and the Approved Borrower or the Security Provider (as the case
requires) must comply with any such directions and instructions.
9. REPORTING OBLIGATIONS AND ACCESS
9.1 Notices to Integral Business
The Approved Borrower or the Security Provider (as the case requires)
must notify Integral Business as soon as it becomes aware of:
(a) an Event of Default or any other circumstance which could
become an Event of Default which with the giving of notice,
lapse of time or any determination could constitute an Event
of Default; or
(b) a representation or warranty in Clause 10, or in another
Relevant Agreement, becoming false or misleading (giving full
details); or
(c) the Approved Borrower or the Security Provide, acquiring or
intending to acquire a Subsidiary.
9.2 Other information
The Approved Borrower and the Security Provider must:
(a) give Integral Business copies of:
(i) its consolidated audited annual Accounts and those of
its Subsidiaries as soon as possible after its annual
balance date (and, at the latest, 120 days after that
date);
(ii) its consolidated semi-annual Accounts and those of
its Subsidiaries as soon as possible after six months
expires after its annual balance date (and, at the
latest, 90 days after that six months expires);
(iii) monthly management accounts including whatever
information Integral Business requires (in its
absolute discretion) within 30 days after the end of
each month;
(iv) monthly cashflow statements profit and loss accounts
and balance sheets and projections by geographic
location and business division within 30 days after
the end of each month; and
(v) aged debtors reports in the form and containing the
information required by Integral Business within 20
days after the end of each month;
(b) give Integral Business copies of the reports, accounts,
notices and circulars which the Approved Borrower or the
Security Provider (as the case requires) issues to its
members, as soon as they are issued;
(c) give Integral Business, in writing, promptly on request,
whatever other information it requires;
(d) as and when required by Integral Business, furnish Integral
Business with a statutory declaration made by two of its
director stating to the best of the knowledge of such
directors whether or not an Event of Default has occurred and,
if it has, setting out the details and the steps (if any)
taken to remedy or cure the same; and
(e) make available for inspection by Integral Business or any
person authorised by it, during normal business hours and upon
reasonable notice all books, board papers, board minutes and
records maintained by it under or for the purposes of this
document including, without limitation, all Invoices and other
documents in connection with Approved Trade Debtors.
9.3 Giving access to records and land
The Approved Borrower and the Security Provider must:
(a) ensure that its business and financial records arid those of
its Subsidiaries are available for inspection at reasonable
times by Integral Business and persons acting on Integral
Business's behalf; and
(b) allow Integral Business and persons acting on Integral
Business's behalf to inspect and to take copies of or extracts
from it and its Subsidiaries' business and financial records
and give reasonable assistance to them; and
(c) allow, or obtain for Integral Business and persons acting on
Integral Business's behalf, full access at all times to any
land or building occupied by it or its Subsidiaries.
9.4 Financial statements
All financial statements given to Integral Business must be:
(a) prepared and, if relevant, audited in accordance with
Australian Accounting Standards; and
(b) certified by two directors of the relevant company as an
accurate and complete statement of the financial position of
that company.
10. REPRESENTATIONS AND WARRANTIES
10.1 Representations and warranties
The Approved Borrower and the Security Provider each represent and
warrant to Integral Business that:
(a) the Approved Borrower, each Subsidiary of the Approved
Borrower and each Related Party that is a corporation was
properly incorporated and validly exists;
(b) the Approved Borrower and each Related Party has the power to
enter into each Relevant Agreement to which it is a party and
to carry out any transaction or obligation contemplated by it;
(c) all necessary action has been taken to make each Relevant
Agreement to which it is a party valid and binding on the
Approved Borrower or the Security Provider (as the case
requires) and to enable the Approved Borrower and the Security
Provider (as the case requires) to carry out any transaction
or obligation contemplated by them;
(d) the Approved Borrower and the Related Parties have observed
and performed the requirements of all laws, documents and
arrangements, where failure to do so may have a material
adverse effect on the Approved Borrower or a Related Party;
(e) executing and performing this document and the other Relevant
Agreements to which the Approved Borrower or a Related Party
is a party does not:
(i) conflict with any document or arrangement that binds
the Approved Borrower or a Related Party; or
(ii) result in a Security Interest (other than under a
Relevant Agreement) being created on, or a charge
crystallising over, an asset of the Approved Borrower
or a Related Party;
(f) neither the Approved Borrower nor any Relevant Party is a
trustee of any trust or settlement;
(g) the assets of the Approved Borrower and Related Parties are
free of any Security Interest other than the Collateral
Securities;
(h) no Event of Default has occurred;
(i) no other circumstance exists which could become an Event of
Default if a notice is given, a period of time lapses or
another requirement is fulfilled;
(j) the Accounts of the Approved Borrower and the :Security
Provider and their Subsidiaries which have been given to
Integral Business:
(i) are an accurate statement of their respective
financial positions for the period ending on the date
to which they are prepared;
(ii) disclose all actual and contingent liabilities; and
(iii) have been prepared in accordance with Australian
Accounting Standards, except for any departures from
those standards which are disclosed in the Accounts;
(k) there has been no change in the financial position of the
Approved Borrower, the Security Provider or their Subsidiaries
since the date to which the last Accounts given to Integral
Business were prepared, which could have a material adverse
effect on them or their Subsidiaries;
(1) all information provided to Integral Business by or on behalf
of the Approved Borrower or a Related Party is accurate and
not misleading by omission or otherwise (including, but not
limited to, information in a financial statement);
(m) all information contained in the Drawdown Notice is correct
and accurate;
(n) neither the Approved Borrower nor any Related Party has
entered into a Relevant Agreement because of any promise,
representation, statement or information given or offered by
or on behalf of Integral Business, even if in answer to an
enquiry by or for the Approved Borrower or Related Party;
(o) the Approved Borrower and each Related Party has relied on its
own investigations and enquiries regarding the nature of the
transactions contemplated by the Relevant Agreements and has
not relied on any information, advice or opinion (including
information, advice or opinions regarding interest rates or
currency exchanges) given or offered by or on behalf of
Integral Business, even if in answer to any enquiry by or for
the Approved Borrower or Related Party; and
(p) there is no dispute between the Approved Borrower or the
Security Provider (as the case requires) and an Approved Trade
Debtor in respect of an Invoice or Designated Debt that
relates to the supply of goods or services by the Approved
Borrower or the Security Provider (as the case requires) to
the Approved Trade Debtor, when the applicable Designated Debt
is endorsed in favour of Integral Business; and
(q) the Approved Borrower and the Security Provider are solvent
and there are no grounds to suspect that, on execution of each
Relevant Agreement to which the Approved Borrower is a party,
the Approved Borrower or the Security Provider (as the case
requires) will not be able to pay all its debts as and when
they become due and payable; and
(r) no Approved Trade Debtor is resident or incorporated in
Tasmania.
10.2 Representations and warranties repeated
The representations and warranties in this Clause are repeated on the
Commencement Date and on the last day of each Interest Period:
(a) with reference to the facts and circumstances at the time; and
(b) reading the Accounts referred to in Clause 10.1(j) as a
reference to the most recent financial statements given to
Integral Business under Clause 9.2.
10.3 Representations and warranties modified
The representations and warranties in this Clause apply unless:
(a) the Approved Borrower or the Security Provider (as the case
requires) makes a contrary written statement to Integral
Business in the seven days before they are made or repeated;
and
(b) Integral Business accepts the statement in writing.
11. PAYMENTS TO INTEGRAL BUSINESS
11.1 Payment to be on Business Day
If a payment under this document falls due on a day that is not a
Business Day, it must be paid on the previous Business Day.
11.2 Manner of payment
Payments must be made:
(a) to Integral Business, or as directed by it;
(b) to the credit of such account as notified by Integral Business
to the Approved Borrower);
(c) at or before 12 noon on the due date in the place where the
payment is to be made;
(d) in immediately available funds; and
(e) free of any set-off, deduction or counterclaim.
11.3 Deduction or withholding required
If the Approved Borrower must deduct or withhold Taxes from a payment
to Integral Business it must:
(a) make those deductions or withholdings (or both);
(b) pay the full amount deducted or withheld as required by the
relevant law;
(c) give Integral Business a receipt for each payment; and
(d) increase its payment to Integral Business to an amount which
will result in Integral Business receiving the full amount
which would have been received if no deduction or withholding
had been required.
12. DEFAULT
12.1 Events of Default
An Event of Default occurs if:
(a) (non-payment) the Approved Borrower does not pay the whole or
any part of the Money Owing when due; or
(b) (obligation not compiled with) the Approved Borrower or a
Related Party does not comply with an obligation (other than
an obligation to pay money referred to in Clause 12.1 (a))
under a Relevant Agreement or an event of default (however
described) occurs under a Relevant Agreement; or
(c) (security coverage) the Approved Borrower or the Security
Provider (or both) does not comply with clause 8.4; or
(d) (incorrect statement or representation) a statement or
representation:
(i) made to Integral Business by or on behalf of the
Approved Borrower or a Related Party; or
(ii) made in a certificate, report or opinion given to
Integral Business,
proves to be incorrect or misleading in any way which Integral
Business considers material; or
(e) (undertaking not complied with) an undertaking given to
Integral Business or Integral Business's solicitors by or on
behalf of the Approved Borrower or any Related Party is not
complied with promptly and, unless otherwise specified, within
30 days of giving the undertaking; or
(f) (funding applied for other purpose) a Loan is applied for a
purpose other than the purpose specified in Clause 2.2; or
(g) (cross default - repayment) indebtedness of the Approved
Borrower or a Related Party:
(i) becomes payable before its normal maturity because of
actual or potential default, or an event of default
(however described); or
(ii) is not paid when due after taking into account any
applicable grace period; or
(h) (cross default - cancellation) as a result of actual or
potential default, or an event of default (however described):
(i) a facility available to the Approved Borrower or a
Related Party is cancelled or terminated before its
normal expiry date; or
(ii) the Approved Borrower or a Related Party ceases to be
entitled to use a facility or undrawn financial
accommodation which was previously available; or
(i) (creditors) the Approved Borrower or a Related Party stops
payment to creditors generally or enters into an arrangement,
assignment or composition with its creditors (except with the
consent of Integral Business) or proposes to do so; or
(j) (business stopped) without the consent of Integral Business
the Approved Borrower or a Related Party stops or threatens to
stop carrying on its business; or
(k) (External Administrator):
(i) an External Administrator is appointed; or
(ii) the Approved Borrower, its liquidator, a secured
creditor, a Related Party or any person on their
behalf requests the appointment of an External
Administrator, `
to the Approved Borrower, a Related Party or any of their
assets; or
(l) (enforcement proceedings) execution or distress takes place or
is attempted or an order to execute a judgment (however
described) is made against the Approved Borrower or a Related
Party or any of their assets; or
(m) (Security Interest enforceable) a Collateral Security or a
Security Interest created or entered into by the Approved
Borrower or a Related Party becomes enforceable and any step
is taken to enforce it; or
(n) (prior trust not disclosed) the Approved Borrower did not
disclose to Integral Business in writing, before or at the
time this document was executed, the fact that:
(i) it was entering into the transactions contemplated by
this document as a trustee or in a trust capacity; or
(ii) all or any part of the assets held by it are held in
trust for or on behalf of any other person; or
(o) (Winding Up):
(i) an order is made for the Winding Up of the Approved
Borrower or a Related Party; or
(ii) proceedings are commenced or an application is made
for the Winding Up of the Approved Borrower or a
Related Party and not withdrawn or dismissed within
seven days; or
(iii) an effective resolution is passed or a meeting is
summoned or convened to consider a resolution for the
Winding Up of the Approved Borrower or a Related
Party, except with the consent of Integral Business
and for the purpose of amalgamation or
reconstruction; or
(p) (grounds for Winding Up) a circumstance specified in section
461 of the Corporations Law occurs to the Approved Borrower or
a Related Party; or
(q) (deregistration) a step is taken under section 572 or 574 of
the Corporations Law to cancel the registration of the
Approved Borrower or a Related Party; or
(r) (change in constituent documents) the Approved Borrower or a
Related Party alters its memorandum or articles of association
or other constituent documents without the consent of Integral
Business; or
(s) (business changed) the Approved Borrower or a Related Party
substantially changes the nature of its business without the
consent of Integral Business; or
(t) (capital reduction) the Approved Borrower or a Related Party:
(i) attempts to redeem its shares, to reduce its share
capital or to buy or to acquire shares in itself; or
(ii) passes a resolution of the type referred to in
section 188(2) of the Corporations Law,
without the consent of Integral Business; or
(u) (financial assistance) the Approved Borrower or a Related
Party passes a resolution under section 205(10) of the
Corporations Law without the consent of Integral Business; or
(v) (change in control) the control of the Approved Borrower or a
Related Party or the composition of the board of directors of
the Approved Borrower or a Related Party changes in any way
which Integral Business thinks is detrimental to its interests
under a Relevant Agreement, without the consent of Integral
Business; or
(w) (power of attorney) an Approved Trade Debtor or the Approved
Borrower or the Security Provider (or all) or any person on
their behalf for any reason claims that a power of attorney
under which it purports to execute any document did not give
full authority for the applicable attorney to sign that
document for and on behalf of the Approved Trade Debtor or
Approved Borrower or the Security Provider (as the case may
be); or
(x) (unenforceability) anyone finds, or the Approved Borrower or a
Related Party says that, a Relevant Agreement or a provision
of a Relevant Agreement is void, voidable or unenforceable, or
anyone becomes entitled to terminate or rescind all or any
part of a Relevant Agreement; or
(y) (creating Security Interest) the Approved Borrower or a
Related Party attempts to create a Security Interest on or in
connection with its assets or undertaking without the consent
of Integral Business; or
(z) (material adverse change) an event occurs which, in the
opinion of Integral Business, has a material adverse effect on
the Approved Borrower, a Related Party or property the subject
of a Collateral Security.
12.2 Consequences of Event of Default
After an Event of Default Integral Business may:
(a) declare the Money Owing payable. If so, the Money Owing
becomes immediately payable; or
(b) give notice to the Approved Borrower that the facility under
this document is cancelled. If so, all the obligations of
Integral Business under this document are immediately at an
end; or
(c) do both (a) and (b).
13. INCREASED COSTS
If Integral Business decides that:
(a) the cost to it of providing, funding or maintaining a Loan is
increased; or
(b) an amount payable or the effective return to it under this
document is reduced; or
(c) it must pay money (other than income tax on its overall net
income) or forgo interest or any other benefit in connection
with a Relevant Agreement,
because of any law or regulation or Public Authority directive or
request (including, but not limited to, those relating to taxation,
capital adequacy or reserve requirements or banking or monetary
controls) or any change in the way they are interpreted or applied,
then the Approved Borrower:
(d) indemnities Integral Business against that increased cost,
reduction, payment, foregone interest or other benefit; and
(e) must pay to Integral Business on demand whatever amount
Integral Business certifies is necessary to indemnify it.
14. ILLEGALITY
If Integral Business decides that it is unlawful to allow the
Outstanding Amount to remain outstanding:
(a) Integral Business must notify the Approved Borrower of that
decision promptly; and
(b) if Integral Business requires it, the Approved Borrower must
pay the Money Owing in full to Integral Business on the date
specified by Integral Business.
15. PRESERVING INTEGRAL BUSINESS' RIGHTS, POWERS AND REMEDIES
15.1 Preservation
(a) The fact that Integral Business does not exercise, or delays
the exercise of, any right, power or remedy does not affect
any of its other rights, powers or remedies.
(b) The fact that Integral Business delays the exercise of any
right, power or remedy does not constitute a waiver of that
right, power or remedy.
(c) The fact that Integral Business exercises a right, power or
remedy does not prevent Integral Business from exercising that
right, power or remedy again.
(d) This document does not operate to extinguish or prejudice any
right, power or remedy of Integral Business under a Relevant
Agreement or a negotiable instrument.
15.2 Moratorium legislation
A moratorium does not apply to a Relevant Agreement or the recovery of
the Money Owing except if:
(a) Integral Business agrees in writing that it does; or
(b) it cannot be excluded by law.
15.3 Reinstating or replacing rights
If any payment made to Integral Business in reduction of the Money
Owing is repaid or conceded to be void, voidable or repayable for any
reason, then, despite any release, settlement or discharge in
connection with the Money Owing:
(a) that payment has not discharged the relevant liability;
(b) Integral Business may recover the amount of that payment from
the Approved Borrower; and
(c) the Approved Borrower must:
(i) immediately do all acts and things Integral Business
requires to replace or reinstate this document and
any Collateral Security which has been released in
connection with that payment; and
(ii) indemnify Integral Business against and pay on demand
all costs and expenses in connection with replacing
or reinstating this document and any Collateral
Securities.
15.4 Effect of release
A full or partial release of this document by Integral Business does
not release the Approved Borrower from personal liability under this
document until Integral Business receives the Money Owing, regardless
of any:
(a) receipt given, payout figure quoted or other form of account
stated; or
(b) error or miscalculation by Integral Business.
15.5 Indemnities continuing
Each indemnity given by the Approved Borrower to Integral Business
under this document is a continuing indemnity. A full or partial
release of this document does not release the Approved Borrower from
liability under an indemnity unless the release is specifically of that
indemnity.
16. ASSIGNMENT
16.1 By Approved Borrower
The Approved Borrower may not assign or otherwise deal with its rights
under this document without Integral Business's consent.
16.2 By Integral Business
Integral Business may assign or otherwise deal with its rights and
benefits under this document.
16.3 Effect of assignment
If the rights and benefits of Integral Business under this document are
assigned, a reference in this document to:
(a) a rate of interest quoted or published by or for Integral
Business is a reference to whatever rate the person taking the
assignment decides is an approximately equivalent quoted or
published rate; and
(b) an increase in the cost to Integral Business of providing a
Loan is a reference to the increased cost to the person taking
the assignment of providing a Loan,
even if the interest rate or the cost to the person taking the
assignment is higher than it was before.
17. NOTICES
A notice, approval, consent or other communication in connection with
this agreement:
(a) must be given by an Authorised Officer of the relevant party;
(b) must be in writing; and
(c) must be left at the address of the addressee, or sent by
prepaid ordinary post (airmail if posted to or from a place
outside Australia) to the address of the addressee or sent by
facsimile to the facsimile number of the addressee at:
(i) in the case of the Approved Borrower and the Security
Provider
Address: Level 4, 1 James Place
NORTH SYDNEY NSW 2060
Attention: Justin Macintosh
Facsimile: 1 02 9959 3583
(ii) in the case of Integral Business:
Address: Level 3
75 Castlereagh Street
SYDNEY NSW 2000
Attention: Philip Carden
Facsimile: 02 9231 6200
or if the addressee notifies another address or facsimile
number, then to that address or facsimile number.
17.2 Unless a later time is specified in it, a notice, approval, consent or
other communication takes effect from the time it is received.
17.3 A letter or facsimile is taken to be received:
(a) in the case of personal delivery, when delivered to the
addressee;
(b) in the case of a posted letter, on the third Business Day
after posting; and
(c) in the case of facsimile, on production of a transmission
report by the machine from which the facsimile was sent which
indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient notified for the purpose of
this Clause,
but if the delivery or receipt is on a day which is not a Business Day
or is after 4:00 p.m. (addressee's time), it is taken to be received at
the commencement of business on the next Business Day.
18. MISCELLANEOUS
18.1 No obligation to exercise rights or give consent
Integral Business may:
(a) exercise or not exercise any right, power or remedy;
(b) give or not give consent; and
(c) make or not make a decision,
under this document, in its absolute discretion without giving a reason
and without being liable or accountable for the consequences.
18.2 Consent must be in writing
A consent given or a right, power or remedy waived by Integral Business
is effective only if given or waived in writing.
18.3 Notification from Approved Borrower or Security Provider
If the Approved Borrower or the Security Provider is required under
this document to notify Integral Business about anything, the Approved
Borrower or the Security Provider (as the case requires) must do so in
writing.
18.4 Integral Business may set off
Without any demand or notice, Integral Business may set off and apply
indebtedness it owes to the Approved Borrower (whatever the currency)
against the Money Owing:
(a) whether or not the indebtedness is owed alone or with any
other person; and
(b) whether or not the Money Owing is immediately payable.
18.5 Approved Borrower must not set off
The Approved Borrower must not claim, exercise or attempt to exercise a
right of set-off or any other right which might reduce or discharge the
Money Owing.
18.6 Applying receipts
Integral Business may apply or appropriate money received to reduce the
Money Owing in the order, and to satisfy whatever part of the Money
Owing, Integral Business sees fit.
18.7 Certain notices or demands
A notice from or demand by Integral Business stating:
(a) that a specified sum of money is owing or payable (or both)
under a Relevant Agreement; or
(b) that an Event of Default has occurred; or
(c) something relevant to the rights or obligations of Integral
Business or the Approved Borrower under a Relevant Agreement,
is admissible in proceedings and is conclusive evidence of the matters
stated except if there is manifest error.
18.8 Severability
(a) A construction of this document that results in all provisions
being enforceable is to be preferred to a construction that
does not so result.
(b) If, despite the application of paragraph (a), a provision of
this document is illegal or unenforceable:
(i) and it would be legal and enforceable if a word or
words were omitted, that word or those words are
severed; and
(ii) in any other case, the whole provision is severed,
and the remainder of this document continues in force.
18.9 Entire agreement
This document and the Collateral Security contain all the terms on
which a Loan is or will be provided and remain outstanding and
supersedes all prior communications about any Loan. If the terms of
this document conflict with the Collateral Security, the terms of this
document prevail.
18.10 Variation of agreement
A variation of this document must be in writing and signed by or for
Integral Business and by or for the Approved Borrower or the Security
Provider.
18.11 Counterparts
This document may be executed in any number of counterparts.
18.12 Integral Business may disclose information Integral Business may
disclose to:
(a) a potential assignee or participant; or
(b) a person contemplating entering into an agreement with
integral Business in connection with the Approved Borrower, a
Related Party or a Relevant Agreement,
any information about the Approved Borrower, a Related Party or a
Relevant Agreement which it considers appropriate.
18.13 Governing law and jurisdiction
This document is governed by the law applicable in New South Wales and
the Approved Borrower and the Security Provider submit to the
non-exclusive jurisdiction of the courts of New South Wales and courts
of appeal from them.
<PAGE>
SCHEDULE 1
DESIGNATED BANK ACCOUNTS
<PAGE>
SCHEDULE 2
DRAWDOWN NOTICE
To: Integral Business Finance Pty Limited
ACN 077 559 749
Level 3
75 Castlereagh Street
SYDNEY NSW 2000
We refer to the Loan Agreement dated August 1997 (the `Loan
Agreement;).
1. We give you irrevocable notice that CorVu Australasia Pty Ltd wishes to
draw down a Loan under the Loan Agreement as follows:
(a) the drawdown date is 1998;
(b) the amount of the Loan is $
2. We provide the following details:
- ------------ ------------- ------------- -------- ----------- ------------
Name of Approved Invoice Date Invoice Repayment Other
Approved Trade Amount Date Information
Trade Debtor Limit
Debtor (including
this Loan)
- ------------ ------------- ------------- -------- ----------- ------------
- ------------ ------------- ------------- -------- ----------- ------------
3. Please confirm the Base Rate for the Loan in due course.
4. Please pay the Loan to the credit of [account details].
5. We confirm that the representations and warranties in Clause 10 of the
Loan Agreement will be true on the date specified above.
6. Attached is:
(a) a certified copy of the ledger of Approved Trade Debtors of
the Approved Borrower; and
(b) the Invoice to which the Drawdown Notice relates.
DATED 1998
SIGNED for and on behalf of )
CORVU AUSTRALASIA PTY LTD )
ACN 050 043 699 by an authorised signatory in the )
presence of:
.............................. ...................................
Signature of witness Signature of authorised signatory
.............................. ...................................
Name in full (print) Name in full (print)
<PAGE>
EXECUTED as an agreement.
THE COMMON SEAL of )
CORVU AUSTRALASIA PTY LTD )
ACN 050 043 699 is affixed in accordance )
with its articles of association in the )
presence of:
/s/ Justin M. MacIntosh
.............................. ..................................
Secretary/Director Director
Justin M. MacIntosh
.............................. ..................................
Full name (please print) Full name (please print)
THE COMMON SEAL of CORVU PIC )
(Company Number 03096249) )
is affixed in accordance with its articles of )
association in the presence of: )
/s/ Ode Longue /s/ John Bornholt
.............................. ...................................
Secretary Director
Ode Longue John Bornholt
.............................. ...................................
Full name (please print) Full name (please print)
SIGNED for and on behalf of CORVU )
NORTH AMERICA INC (FIN 41-1819469) )
by an authorised signatory in the )
presence of: )
/s/ David Carlson
.............................. ...................................
Signature of Witness Signature of authorised signatory
David Carlson
.............................. ...................................
Name in full (print) Name in full (print)
<PAGE>
SIGNED for and on behalf of INTEGRAL )
BUSINESS FINANCE PTY LIMITED )
ACN 077 559 749 - by an authorised )
signatory in the presence of: )
.............................. ....................................
Signature of Witness Signature of authorised signatory
.............................. ....................................
Name in full (print) Name in full (print)
CORVU AUSTRALASIA PTY LTD
ACN 050 043 699
(Chargor)
and
INTEGRAL BUSINESS FINANCE PTY LIMITED
ACN 077 559 749
(Chargee)
SPECIFIC AND FLOATING CHARGE
ABBOTT TOUT
Solicitors
Level 42, MLC Centre
19-29 Martin Place
SYDNEY 2000
DX: 129 SYDNEY
TEL: 9334 8555
FAX: 9334 8585
REF: RHT
<PAGE>
CONTENTS
Clause Page No.
1 INTERPRETATION...........................................................1
1.1 Definitions...........................................................1
1.2 General...............................................................7
1.3 Statutory Covenants..................................................10
2 CHARGE..................................................................10
2.1 Charging Clause......................................................10
2.2 Priority Ranking.....................................................10
2.3 Representations and Warranties.......................................10
2.4 Further Assurance....................................................11
2.5 Collection Proceeds..................................................12
3 SECURED MONEYS..........................................................12
3.1 Payment..............................................................12
3.2 Costs................................................................12
3.3 Judgments............................................................13
3.4 Certificates.........................................................14
3.5 Specified Maximum Amount.............................................14
4 POSITIVE COVENANTS......................................................14
5 INSURANCE COVENANTS.....................................................16
5.1 Security Insurances..................................................16
5.2 Insurance Policy Contents............................................17
5.3 Chargee Rectification................................................18
5.4 Insurance Proceeds...................................................18
6 NEGATIVE COVENANTS......................................................18
7 EXPRESS CRYSTALLISATION.................................................20
7.1 Crystallisation Circumstances........................................20
7.2 Implicit Crystallisation.............................................20
7.3 De-crystallisation...................................................20
7.4 Crystallised Assets..................................................20
8 DEFAULT.................................................................21
8.1 Events of Default....................................................21
8.2 Enforcement..........................................................24
8.3 Default Rectification................................................24
9 ENFORCEMENT.............................................................24
9.1 Appointment of Receiver..............................................24
9.2 Powers...............................................................24
9.3 Agency...............................................................27
9.4 Chargee Powers.......................................................28
9.5 Receivership Termination.............................................28
9.6 Sale Proceeds........................................................28
9.7 Involuntary Loss.....................................................28
9.8 Purchaser Protection.................................................28
10 MONEY RECOVERY..........................................................30
10.1 Compensation Claims...............................................30
10.2 Insurance Claims..................................................30
10.3 Enforcement Proceeds..............................................30
10.4 Receipts..........................................................30
10.5 Surplus...........................................................31
11 STATUTORY PROVISIONS....................................................31
11.1 Additional Statutory Powers.......................................31
11.2 Statutory Power Modification......................................31
11.3 Leasing Exclusion.................................................31
11.4 Statutory Notice Exclusion........................................31
12 ATTORNEY................................................................32
12.1 Appointment.......................................................32
12.2 Functions.........................................................32
13 COLLATERAL SECURITY.....................................................32
13.1 Merger Exclusion..................................................32
13.2 Collateral Remedies...............................................32
14 CONTINUING SECURITY.....................................................32
14.1 Continuing Account................................................32
14.2 Contingent Liabilities............................................33
15 INDEMNITY...............................................................33
15.1 Defaults..........................................................33
15.2 Investigations....................................................33
16 STAMP DUTIES............................................................33
16.1 Liability.........................................................33
16.2 Financial Institutions Duty.......................................34
16.3 Indemnity.........................................................34
17 ASSIGNMENT..............................................................34
17.1 Chargee Assignment................................................34
17.2 Assignee Secured Moneys...........................................34
18 NOTICES.................................................................34
19 GOVERNING LAW AND JURISDICTION..........................................35
19.1 Governing Law.....................................................35
19.2 Jurisdiction......................................................35
20 WAIVERS AND REMEDIES....................................................35
20.1 Waivers...........................................................35
20.2 Remedies..........................................................35
21 SEVERABILITY............................................................35
22 SURVIVAL................................................................36
22.1 Representations...................................................36
22.2 Indemnities.......................................................36
23 MORATORIUM LEGISLATION..................................................36
24 THIRD PARTY SECURITY....................................................36
24.1 Guarantee.........................................................36
24.2 Demand Payment....................................................36
24.3 Separate Obligation...............................................37
24.4 Continuing Guarantee..............................................37
24.5 Future Dealings...................................................37
24.6 Guarantee Protection..............................................37
24.7 Marshalling Exclusion.............................................40
24.8 Recovery Receipts.................................................40
24.9 Subrogation Exclusion.............................................40
24.10 Suspense Account..................................................41
24.11 Insolvency Clawbacks..............................................41
24.12 Principal Indemnity...............................................42
24.13 Representation Exclusion..........................................42
24.14 Disclosure Exclusion..............................................42
24.15 Guarantee Interpretation..........................................42
25 COUNTERPARTS............................................................43
26 ATTORNEYS...............................................................43
<PAGE>
SPECIFIC AND FLOATING CHARGE
DEED OF CHARGE dated 26th day of February, 1998.
PARTIES
1 CORVU AUSTRALASIA PTY LTD (ACN 050 043 699) of Level 4, 1 James Place,
North Sydney, NSW, 2060 ("Chargor"); and
2 INTEGRAL BUSINESS FINANCE PTY LIMITED ACN 077 559749 of Level 3, 75
Castlereagh Street, Sydney NSW 2000 ("Chargee").
RECITALS
A The Chargee may in its discretion make or extend loans, advances,
credit facilities or other financial accommodation to the Debtor
defined below and/or the Chargor from time to time in the future.
B The Chargee also forbears to demand payment or sue for any loans,
advances, credit facilities or other financial accommodation previously
made or extended to the Debtor and/or the Chargor.
C This consideration is provided by the Chargee at the request of each of
the Debtor and the Chargor.
D The Chargor wishes to execute this Charge for the purpose of securing
payment to the Chargee of the loans, advances, credit facilities or
other financial accommodation.
OPERATIVE CLAUSES
THIS DEED WITNESSES as follows:
1 INTERPRETATION
1.1 Definitions
The following meanings apply to capitalised terms used in this Charge
unless the context otherwise requires:
"Attorney" means an attorney of the Chargor appointed pursuant to this
Charge;
"Authorisation" includes:
(a) any consent, authorisation, registration, filing, lodgment,
agreement, notorisation, certificate, permission, licence,
approval, authority or exemption from, by or with a
Governmental Agency; or
(b) in relation to any act, matter or thing which would be legally
prohibited or restricted in whole or in part if a Governmental
Agency intervenes or acts in any manner within a specified
period after its lodgment, filing, registration or
notification, the expiry of that period without intervention
or action;
"Authorised Officer" means:
(a) in relation to the Chargor, any director, secretary or person
for the time being notified in that capacity by the Chargor to
the Chargee; and
(b) in relation to the Chargee, any director, secretary, manager
or acting or assistant manager of the Chargee;
"Book Debts" means:
(a) book debts;
(b) debts other than book debts; and
(c) Collection Proceeds,
but excludes Cash Assets;
"Cash Assets" means:
(a) Collection Proceeds when credited to or paid into the
Designated Bank Account;
(b) moneys, funds or sums for the time being standing to the
credit of the Designated Bank Account;
(c) any indebtedness or liability in respect of any credit balance
for the time being in the Designated Bank Account of the bank
or financial institution where that account is held; and
(d) moneys, funds or assets withdrawn from, debited to or paid out
of the Designated Bank Account;
"Charged Property" means all the present and future undertaking,
property, rights and assets of the Chargor of any nature situated
anywhere in Australia or overseas, including without limitation
Intangible Assets;
"Collateral Security" means any present or future Security Interest,
Guarantee or other document or agreement in favour of the Chargee,
entered into by way of further assurance or intended to be primary or
collateral security for payment of the Secured Moneys, whether given,
created or permitted to subsist by any Security Party or any other
person and whether alone or jointly and/or severally;
"Collection Proceeds" means the proceeds of collection or realisation
of book and other debts comprising any form of property, including
without limitation cash, cheques, payment, money or credit orders,
transfers or transmissions of any kind by any means, bills of exchange
or promissory notes;
"Co-surety" means any person liable to the Chargee for payment of the
Secured Moneys, whether as principal or surety, jointly, severally or
jointly and severally;
"Credit Agreement" means each agreement entered into at any time
between the Debtor and/or the Chargor and the Chargee providing for or
relating to the making or extension of loans, advances, credit
facilities of other financial accommodation by the Chargee to the
Debtor and/or the Chargor or any other person at the express or implied
request of the Debtor and/or the Chargor;
"Crown" includes the Crown in right of the Commonwealth of Australia
and any State of the Commonwealth of Australia;
"Crystallisation Event" means any of the following events:
(a) any breach of or default under paragraphs (a) to (g) inclusive
of Clause 6 by or in relation to the Chargor;
(b) any Event of Default specified in paragraphs (e) to (m)
inclusive of Clause 8.1; or
(c) the preparation of or attempt to issue or effect any notice,
requisition or direction by or on behalf of the Commissioner
of Taxation pursuant to section 218 or 255 of the Income Tax
Assessment Act 1936, section 74 of the Sales Tax Assessment
Act 1992 or any similar legislation;
"Debtor" means:
(a) CorVu Australasia Pty Ltd (ACN 050 043 699) and
(b) when two or more persons are named above as the Debtor, each
Debtor separately and all Debtors collectively;
"Designated Bank Account" means a nominated account of the Chargor with
a bank or financial institution as notified at any time by the Chargee
to the Chargor;
"Environmental Law" means any statute or legislative provision relating
to any aspect of safety, health or the environment or any activity or
use of substances which is potentially hazardous or harmful to the
environment;
"Event of Default" means an event specified in Clause 8.1;
"Financial Indebtedness" means any indebtedness, present or future,
actual or contingent, in respect of:
(a) moneys borrowed or raised;
(b) any financial accommodation of any kind, including without
limitation indebtedness under or in relation to any:
(i) bill of exchange or acceptance credit;
(ii) Guarantee;
(iii) convertible note or redeemable share;
(iv) discounting or factoring arrangement, hire purchase
arrangement or finance or capital lease; or
(v) deferred purchase price for a period exceeding 90
days of any asset or service or any obligation to
deliver goods or provide services paid for in advance
by any financing party;
(c) any financial, gold or currency exchange agreement or
arrangement of any kind, including without limitation any
currency, principal or interest rate swap or futures agreement
or arrangement or hedging transaction; or
(d) any financing transaction of any kind,
but excludes liability for payment for goods and services incurred in
the ordinary course of business;
"Governmental Agency" means the Crown, any government, any governmental
ministry or department, or any Crown, governmental, semi-governmental,
statutory, parliamentary, administrative, fiscal, public, municipal,
local, judicial or regulatory entity, agency, instrumentality,
authority, court, commission or tribunal, and in relation to Charged
Property situated in a country or jurisdiction outside Australia
includes the equivalent in that foreign country or jurisdiction;
"Guarantee" in relation to a person, means any guarantee, indemnity,
undertaking, covenant, letter of credit, legally binding letter of
comfort, suretyship document, irrevocable offer, put option or other
legal obligation of any nature or description:
(a) to pay or purchase;
(b) to provide funds, whether by the advance of money, the
purchase of or subscription for Marketable Securities, the
purchase of assets, rights or services, or otherwise, for the
payment or discharge of;
(c) to indemnify against the consequences of default in the
payment of; or
(d) to be responsible for,
any indebtedness, liability or obligation or the financial condition or
the solvency or insolvency of any other person;
"Intangible Assets" means:
(a) the goodwill of a business;
(b) any business franchise or trade name; and
(c) any uncalled and called but unpaid capital and premiums on the
shares of the Chargor;
"Intellectual Property" means any intellectual or industrial property,
including without limitation:
(a) a patent, trade mark, service mark, copyright, registered
design, trade secret or confidential information; or
(b) a licence or other right to use or to grant the use, or to be
the registered proprietor or user, of any of the foregoing;
"Marketable Securities" means:
(a) debentures, stocks, shares, bonds or promissory notes created
or issued by any Governmental Agency or any company or other
corporate body, association or society;
(b) a prescribed interest as defined in the Corporations Law,
including without limitation an interest in a unit trust;
(c) an interest or share in a partnership or joint venture; or
(d) a right or option in relation to any of the foregoing,
but excludes cheques, payment orders and bills of exchange, other than
promissory notes;
"Material Adverse Effect" means, in the reasonable opinion of the
Chargee, a material adverse effect on:
(a) the ability of any Security Party to perform its obligations
under a Security Agreement to which it is a party;
(b) the financial condition or business of any Security Party; or
(c) the Security Agreements or the Charged Property, in each case
taken as a whole;
"Permitted Security Interest" means:
(a) any Collateral Security;
(b) any Security Interest arising in favour of any Governmental
Agency by operation of statute, where there is no default in
payment of any moneys due to that Governmental Agency or where
payment is disputed in good faith and in the opinion of the
Chargee on reasonable and substantial grounds; or
(c) any possessory lien arising by operation of law, where that
lien arises in the ordinary course of business and where there
is no default in payment of any moneys due to the lien
creditor;
"Receiver" means a receiver and/or manager appointed by or on behalf of
the Chargee under this Charge, and when two or more persons are so
appointed refers to each person severally as well as any two or greater
number of them jointly;
"Secured Moneys" means all moneys, liabilities, indebtedness and
obligations due and/or payable, whether actually or contingently and
whether alone, severally and/or jointly, from or by any Security Party
at the present or any future time to the Chargee on any account or
under any circumstances of any kind, including indebtedness of any
Security Party assigned to the Chargee, or under or in relation to or
in connection with any agreement, including without limitation any
Security Agreement, for the time being made or in force and effect
between any Security Party and the Chargee, including without
limitation by way of principal, interest, fees, costs, indemnities,
charges, taxes, expenses or payment of damages under or in relation or
in connection with, or as a result of any breach of or default under or
in relation to, that agreement;
"Security Agreement" means each of the following:
(a) each Credit Agreement;
(b) this Charge; and
(c) each Collateral Security;
"Security Insurances" means:
a) all the right, title and interest whether at law or in equity
of the Chargor in and to any policies or certificates of
insurance effected at any time by the Chargor for the purposes
of this Charge or in relation to any Charged Property or its
use or enjoyment, including insurances and compensation under
any law relating to workers' compensation;
(b) all moneys, benefits, sums, funds or other payments at any
time assured by, or to become payable to the Chargor under or
in connection with, the insurances;
(c) all claims, demands, actions, proceedings and remedies which
the Chargor may at any time have or assert against any insurer
or other person or to which the Chargor may at any time be
entitled under the insurances; and
(d) all certificates, policies or other documents evidencing the
right, title and interest of the Chargor in and to the
insurances;
"Security Interest" includes:
(a) any mortgage, charge, pledge, lien, trust or power created or
conferred in relation to an asset;
(b) any proprietary title or interest retained or reserved in an
asset;
(c) the deposit of money under any set-off or flawed asset
agreement;
(d) any other right conferred on, or an arrangement made with, any
creditor to be paid in priority or preference to other
creditors by recourse to an asset or its proceeds; or
(e) any agreement or arrangement to achieve or effect any of the
foregoing,
by way of security for the payment or performance of any debt or other
liability, but excludes any Permitted Security Interest;
"Security Licences" means all the right, title and interest, to the
extent assignable, of the Chargor in all or any licences or
Authorisations granted or issued to or otherwise held by the Chargor in
relation to or in correction with the Charged Property;
"Security Party" means each of:
(a) the Chargor;
(b) the Debtor; and
(c) each Co-surety;
"Subsidiary" in relation to:
(a) a body corporate, means a subsidiary within the meaning of
Division 6 of Part 1.2 of the Corporations Law;
(b) a trust, means a trust that would be a subsidiary within that
meaning if it were a company equating for this purpose:
(i) shares with the beneficial interests or units held in
the trust; and
(ii) the board of directors with the trustees; and
(c) a body corporate or subtrust owned or held as an asset of a
trust, means a subsidiary within any of the foregoing meanings
which would be applicable if the trust were a body corporate.
1.2 General
The following rules of interpretation apply in this Charge unless the
context otherwise requires:
(a) (headings): headings and subheadings are for convenience only
and shall not affect interpretation;
(b) (plurality): words denoting the singular number include the
plural, and the converse also applies;
(c) (gender): words denoting any gender include all genders;
(d) (cross-references): a reference to a clause, schedule,
annexure or exhibit is a reference to a clause of, or
schedule, annexure or exhibit to, this Charge;
(e) (legal personality): a reference to a person includes a
natural person, company, corporation, trust, partnership,
joint venture, or any other incorporated or unincorporated
body, society, association or entity;
(f) (writing): a reference to "writing" and cognate expressions
includes a facsimile transmission and any other means of
reproducing words in a tangible and permanently visible form;
(g) (document parties): a reference to a party to any document or
agreement includes its executors, administrators, successors
and permitted assigns and substitutes by way of assignment or
novation;
(h) (document amendment): a reference to any agreement or document
includes that agreement or document as amended, varied,
novated, supplemented or replaced from time to time;
(i) (agreements): the word "agreement" includes any Security
Interest, Guarantee, contract, deed, covenant, undertaking,
condition, provision or legally enforceable agreement or
arrangement, whether or not in writing, and the word
"document" includes any agreement as so defined in writing or
any certificate, consent, notice, instrument, certificate or
document of title or document of any kind;
(j) (legislation): a reference to legislation, including any
statute, enactment, ordinance, code or other legislation, or a
section or provision of that legislation, includes any order,
regulation, rule, bylaw, proclamation or statutory instrument
made or issued under that legislation and any amendment,
modification, consolidation, reenactment or replacement of, or
substitution for, that legislation from time to time;
(k) (legal rules): a reference to "judgment" includes a judgment,
order, decree, declaration or ruling of a court of competent
jurisdiction or Governmental Agency binding on a person or the
assets of that person, and a reference to any "law" or
anything being "legal" includes legislation, the rules of the
general law, including common law and equity, and any
judgment;
(l) (notices): a reference to any notice, claim, demand, consent,
agreement, approval, permission, authorisation, specification,
direction, disclosure, notification, request, requisition,
certificate, receipt, acknowledgment, communication,
appointment, waiver, acquiescence or indulgence being given or
made by a party to this Charge is a reference to its being
given or made in writing, and the expression "written notice"
includes any of the foregoing;
(m) (payment): the word "payment" and cognate expressions include
repayment;
(n) (rights): the word "right" or "power" includes right, power,
remedy, authority, discretion or option or right to make or
give any request, requisition, notice or demand, and the word
"consent" includes approval, agreement, permission or
authorisation;
(o) (assets): a reference to any "property" or "asset" includes
money, goods, things in action, land and every other
description of any real or personal property or asset, whether
present or future, tangible or intangible, vested or
contingent, including without limitation Intellectual
Property, and any legal or equitable right, title, estate,
interest, revenue or benefit in or under or derived from or
incidental to that property or asset;
(p) (real property): a reference to land or real property includes
any freehold, leasehold, strata title or strata leasehold
estate or interest in real property;
(q) (events of default): a reference to an Event of Default
"subsisting" at any time is an Event of Default that has not
been remedied by the Chargor or waived by the Chargee or where
the Chargor is not in full compliance with the terms and
conditions of any waiver as at that time;
(r) (partial references): a reference to moneys, agreements,
rights, powers, undertaking, business, property, assets,
things, indebtedness, liabilities, obligations, duties,
covenants or undertakings, including without limitation the
Secured Moneys and the Charged Property, includes all or any
part or lesser number of any of them;
(s) (time references): a reference to an act being done or capable
of being done or a right or power being exercised or capable
of being exercised "at any time" includes both present and
future time and its being done or exercised from time to time;
(t) (dollars references): a reference to "dollars" or "$" means
the lawful currency of the Commonwealth of Australia;
(u) (taxation): a reference to "taxes" includes taxes, levies,
imposts, deductions, charges, rates, duties, compulsory loans
and withholdings levied or imposed by any Governmental Agency,
including without limitation income, land, rating, stamp and
transaction taxes, duties and charges, together with
associated interest, penalties, charges, fees or other
amounts;
(v) (costs): a reference to "costs" includes costs, charges,
expenses, disbursements, fees, commissions, insurance premium
payments, levies, taxes and duties; and
(w) (liquidation): a reference to "liquidation", as applicable to
any person, includes receivership, management, administration,
compromise, arrangement, merger, amalgamation, reconstruction,
winding up, dissolution, assignment for the benefit of
creditors, scheme of arrangement or compromise with creditors,
bankruptcy or death.
1.3 Statutory Covenants
A reference in this Charge to an agreement contained in or arising
under this Charge includes an agreement implied in this Charge by
virtue of any legislation.
2 CHARGE
2.1 Charging Clause
The Chargor charges by way of equitable mortgage the Charged Property
to and in favour of the Chargee as a continuing security for payment by
the Chargor of the Secured Moneys as follows:
(a) (specific charge): by way of specific charge, all its:
(i) real property;
(ii) Security Licences;
(iii) Security Insurances;
(iv) fixed or moveable plant, machinery and equipment,
excluding any stock-in-trade or work-in-progress);
(v) Intellectual Property;
(vi) Intangible Assets;
(vii) Marketable Securities; and
(viii) Book Debts; and
(b) (floating charge): by way of floating charge, all its other
Charged Property, including without limitation stock-in-trade,
work-in-progress and cash in hand and at the bank.
2.2 Priority Ranking
This Charge shall rank first in point of priority in relation to the
Charged Property as against any other Security Interest at any time
created or arising over or in relation to the Charged Property.
2.3 Representations and Warranties
The Chargor represents and warrants to and in favour of the Chargee
that at all times during continuance of this Charge:
(a) (validity): the execution or performance of this Charge does
not contravene any provision of the memorandum or articles of
association of the Chargor or any agreement, law, judgment or
Authorisation of any Governmental Agency binding upon the
Chargor or its assets;
(b) (power): the Chargor is fully empowered to execute and perform
this Charge, which has been executed in accordance with its
memorandum and articles of association;
(c) (priority): this Charge ranks first in point of priority;
(d) (beneficial ownership): the Chargor holds the Charged Property
in its beneficial ownership and not as trustee or fiduciary
for any third party, except where the Chargor is trustee of a
trust which has been expressly disclosed in the terms of this
Charge or to the Chargee prior to its execution by the
Chargor; and
(e) (adverse interests): the Charged Property is not subject to
any Security Interest, whether ranking in priority to, equally
with or subsequent to this Charge, or any other adverse right
or interest of any third party, except:
(i) any Permitted Security Interest;
(ii) as notified by the Chargor to the Chargee prior to
the date of this Charge; or
(iii) in relation to real property, any adverse encumbrance
or interest, other than a Security Interest,
specified in a public register prior to the date of
this Charge.
2.4 Further Assurance
The Chargor must at any time, whether before or after the occurrence of
an Event of Default or demand for payment of the Secured Moneys, upon
request by the Chargee but at the full cost of the Chargor:
(a) (title documents): deposit with the Chargee documents of title
relating to the Charged Property in relation to which this
Charge ranks first in point of priority and, upon request, any
agreement relating to the Charged Property;
(b) (legal perfection): execute all legal or statutory mortgages
and assurances and other instruments, including written
acknowledgments or confirmations as to liability to the
Chargee in relation to the Secured Moneys in a form and
substance satisfactory to the Chargee and perform all acts
reasonably required for further or more effectually securing
to the Chargee the Charged Property or the rights of the
Chargee under this Charge or any other agreement between the
Chargor and the Chargee;
(c) (registration): use its best endeavours to ensure that any
document executed pursuant to this provision is duly stamped
and registered as required by the Chargee;
(d) (document completion): permit the Chargee, any Authorised
Officer of the Chargee, Receiver or Attorney, without
necessity for any further authority than this provision, to
complete any document or blank provision in any document
executed in favour or at the request of the Chargee, including
in any relevant case the insertion of the name of the Chargee,
its nominee or appointee or other person as holder,
proprietor, purchaser or transferee; and
(e) (subsidiaries): procure where applicable that each Subsidiary
for itself and in relation to its property complies with and
effectuates the foregoing.
2.5 Collection Proceeds
The Chargor must at all times during the continuance of this Charge,
whether prior or subsequent to the occurrence of an Event of Default,
credit or pay all Collection Proceeds immediately following receipt by
the Chargor, or cause the Collection Proceeds to be credited or paid
directly, to or into the Designated Bank Account, except where the
Chargee has previously directed or consented to a contrary arrangement.
3 SECURED MONEYS
3.1 Payment
(a) (Specific agreement): Where there is a Credit Agreement
between the Chargor and the Chargee which contains terms
contrary to payment of the Secured Moneys upon demand, the
Chargor must, subject to paragraph (c), pay the Secured Moneys
at the times and in the manner required by that Credit
Agreement.
(b) (Demand payment): In any other case, the Chargor must pay the
Secured Moneys to the Chargee upon demand by the Chargee,
which may be made at any time.
(c) (Default acceleration): If the Chargee has declared the
Secured Moneys to be immediately due and payable following the
occurrence of an Event of Default pursuant to paragraph (a) of
Clause 8.2, the Chargor must pay the Secured Moneys to the
Chargee upon demand by the Chargee, which may be made by the
Chargee at any time following that declaration.
3.2 Costs
The Chargor must indemnify the Chargee upon demand against, and the
Chargee shall be entitled by the authority of this provision at any
time to debit or charge to the Chargor or any account of the Chargor,
all costs, whether legally due or otherwise, which the Chargee or any
Receiver or Attorney may at any time incur in connection with:
(a) (secured moneys): the Secured Moneys, any Security Agreement
or any account of the Debtor and/or the Chargor;
(b) (security agreements): the preparation, negotiation,
execution, or completion of any Security Agreement, any
amendment or discharge of any Security Agreement or any
consent, approval, request, demand or waiver given or made
pursuant to a Security Agreement;
(c) (rectification): any actual, attempted or contemplated remedy
or rectification of any breach of or default under any
Security Agreement by any Security Party;
(d) (enforcement): any actual, attempted or contemplated
enforcement of the Security Agreements or demand for or
enforcement of payment of the Secured Moneys;
(e) (security rights): any actual, attempted or contemplated
exercise of any right conferred on the Chargee or any Receiver
or Attorney under any Security Agreement or by law;
(f) (security protection): any actual, attempted or contemplated
protection or preservation of, or defence or assertion of
title of the Chargor or the Chargee to, any Security Agreement
and/or the Charged Property;
(g) (insurances): any insurance indemnities or compensation
concerning the Charged Property or its use and enjoyment,
including without limitation insurances and compensation under
any law relating to workers' compensation;
(h) (reports): the survey, valuation, inspection, preservation,
maintenance or protection of or any report, review, audit or
environmental assessment relating to the Charged Property;
(i) (governmental inquiries): any inquiry or investigation by any
Governmental Agency concerning the Chargor or any transaction
or activity effected or carried on by the Chargor connected
with or capable of adversely affecting the Security
Agreements, the Charged Property or any transaction
contemplated by or effected or funded as a result of the
Security Agreements;
(j) (consultants): the engagement or retainer of solicitors,
counsel, advisers, experts and consultants for any of the
foregoing purposes or in relation to any matter of material
concern to the Chargee in connection with the Security
Agreements or the Charged Property, and in the case of
internal or external solicitors and counsel of the Chargee on
a full solicitor and own client indemnity basis; and/or
(k) (receipts/payments): the receipt or payment of any moneys
under or pursuant to, or under any transaction contemplated
by, any Security Agreement, including any moneys paid by the
Chargee by way of reimbursement to any third party.
3.3 Judgments
In the event of any liability of the Chargor under this Charge becoming
merged in any judgment the Chargor shall pay interest on the amount due
for the time being under the judgment at the rate charged or chargeable
by the Chargee in respect of the Secured Moneys to which the judgment
relates immediately prior to the entry or making of the judgment.
3.4 Certificates
A certificate signed by an Authorised Officer of the Chargee stating
the amount of the Secured Moneys at a date specified in the certificate
shall in the absence of manifest error constitute conclusive evidence
as against the Chargor that the amount so stated is the amount of the
Secured Moneys due from the Chargor under this Charge as at that date.
3.5 Specified Maximum Amount
(a) (Maximum specified amount): For the purposes of Section 282(3)
of the Corporations Law, this Charge shall in relation to, and
for the purpose of prior ranking in priority as against, any
other Security Interest secure prospective liabilities, as
defined in the Corporations Law, comprised within the Secured
Moneys for the time being up to a specified maximum amount of
$10 million.
(b) (Security preservation): If at any time the Secured Moneys
exceed the specified maximum amount referred to in paragraph
(a) all the Secured Moneys shall be and remain secured by this
Charge.
(c) (Full recovery): The specified maximum amount shall not limit
the right of the Chargee to enforce this Charge to recover the
full amount of the Secured Moneys, except and only to the
extent necessarily determined by the operation of the
provisions of Section 282(3) of the Corporations Law.
4 POSITIVE COVENANTS
The Chargor must as from the date and at all times during the
continuance of this Charge:
(a) (business practice): carry on its business in a proper and
efficient manner;
(b) (accounting records): keep accounting records as defined in
and required by the Corporations Law;
(c) (outgoings): duly and punctually pay and indemnify the Chargee
upon demand against all rents, charges and outgoings, and
rates, assessments and-taxes imposed by any Governmental
Agency, chargeable or payable at any time upon or in respect
of the Charged Property or upon or by the owner or occupier or
the Chargee if in possession as mortgagee and immediately upon
request deliver to the Chargee all notices received and
receipts for payments in relation to the foregoing;
(d) (governmental notices): immediately upon request by the
Chargee deliver to the Chargee any notice, order or other
document received by the Chargor from any Governmental Agency
in connection with the Charged Property;
(e) (security licence performance): perform and observe all
material terms and conditions of each Security Licence and
generally take all necessary action as to keep it valid,
subsisting and enforceable;
(f) (legal compliance): duly and punctually comply with and
observe all present and future legislation and all
requirements, orders and Authorisations of any Governmental
Agency in all cases where noncompliance or non-observance
would in the reasonable opinion of the Chargee be likely to
impose some charge or liability or disqualification upon any
material part of the Charged Property or would have a Material
Adverse Effect;
(g) (legal action): take or defend all legal proceedings at the
direction of the Chargee but at the full cost of the Chargor
that the Chargee may consider necessary or advisable for the
preservation, protection or recovery of the Charged Property;
(h) (security interest compliance): duly and punctually comply
with and observe all agreements and obligations binding on the
Chargor and contained or implied in any Security Interest,
charge, claim, interest or restriction on user relating to a
material part of the Charged Property;
(i) (good condition): keep the Charged Property in good repair,
working order and condition and from time to time make all
necessary and proper repairs, renewals, replacements and
improvements relating to the Charged Property;
(j) (intangible rights): preserve the currency and effectiveness
of its Intangible Assets, Intellectual Property and similar
assets material to its business at all times during any
applicable term, including all extensions or renewals;
(k) (compensation rights): diligently pursue all its rights to
compensation arising as a result of any legal action by a
Government Agency preventing or impeding the performance of
any Security Agreement or requiring the compulsory acquisition
or divestment of any Charged Property;
(1) (land acquisition): immediately notify the Chargee upon the
acquisition of any real property and, upon request by the
Chargee, execute pursuant to Clause 2.4 a legal or statutory
mortgage over that real property in favour of the Chargee;
(m) (subsidiary acquisition): immediately notify the Chargee upon
the acquisition, formation or incorporation by the Chargor of
any Subsidiary whether through purchase or subscription of
shares or by any other means and, upon request by the Chargee,
procure that Subsidiary to execute pursuant to Clause 2.4 a
specific and floating charge over all its present and future
assets, property and undertaking including its uncalled or
unpaid capital and share premiums in favour of the Chargee;
(n) (inspection): permit and procure any Subsidiary to permit the
Chargee, or any Authorised Officer, agent, adviser or
consultant of or other person authorised by the Chargee, upon
reasonable notice at any time to enter upon its land or
premises, inspect the Charged Property and take copies or
extracts from all accounting records, financial statements,
business, property or other records, statements, vouchers and
valuations and all other documents relating to the Chargor,
its Subsidiaries, the Charged Property or the Security
Agreements; and
(o) (assistance): for any purpose relating to this Charge do
everything within its power and control to provide and procure
that the officers, employees, agents and advisers of the
Chargor and its Subsidiaries provide all necessary information
and assistance to the Chargee or any Authorised Officer, agent
advisor, consultant of or other person authorised by the
Chargee.
5 INSURANCE COVENANTS
5.1 Security Insurances
The Chargor must as from the date and at all times during the
continuance of this Charge:
(a) (insurances): in the name of the Chargor and the Chargee:
(i) insure the Charged Property of an insurable nature to
its full replacement or reinstatement value or a
lesser amount approved by the Chargee; and
(ii) take out public risk, worker's compensation, product
liability and business interruption insurance and any
other insurance which the Chargee may reasonably
request or approve with respect to the Charged
Property,
in the manner and to the extent that is reasonable and
customary for property of the nature of the Charged Property;
(b) (premium payments): duly and punctually pay all premiums and
other costs necessary for effecting and maintaining in force
each insurance policy;
(c) (insurers): take out each insurance policy with an independent
and reputable insurer approved by the Chargee;
(d) (information): deliver to the Chargee certificates of currency
and other details reasonably requested by the Chargee in
relation to the insurances;
(e) (annual report): upon request by the Chargee, provide to the
Chargee within 90 days after the end of the financial year of
the Chargor in each year a report as to the insurances as at
the date of the report and claims and other material events
with respect to the insurances during the previous 12 months;
(f) (non-prejudice): not do, permit or omit anything which may
prejudice any insurance policy or any potential claim under
the insurance policy;
(g) (chargee collection): do all things and provide all documents,
evidence and information necessary to enable the Chargee to
collect or recover any moneys due or to become due in respect
of any insurance policy;
(h) (claim notification): notify the Chargee of:
(i) the occurrence of any event giving rise to any claim
under an insurance policy in excess of $5,000; and
(ii) any material variation of any insurance policy,
as soon as possible after it becomes aware of that event or
variation; and
(i) (non-cancellation): without the prior consent of the Chargee,
not do, permit or omit anything to cause the cancellation of,
or a material change or reduction in, any insurance policy.
5.2 Insurance Policy Contents
The Chargor must, to the extent reasonably and commercially
practicable, procure that each insurance policy effected pursuant to
this Charge contains terms and conditions reasonably satisfactory to
the Chargee and, without, limitation, provides that:
(a) (loss payee): the Chargee is named as loss payee;
(b) (deductibles): the amount of any excess or deductible payable
by the insured in respect of any claim shall not exceed the
customary amount for policies of a similar kind;
(c) (set-off waiver): the insurer waives its right to set off or
counter claim or make any other deduction or withholding as
against the Chargee;
(d) (premium waiver): the insurer waives all claims for insurance
premiums or costs against the Chargee;
(e) (termination restriction): if any premiums or other amounts in
respect of any insurance policy are not paid, the insurer must
not terminate the policy unless it has given prior notice of
not less than 15 days to the Chargee and the premiums or other
amounts have not been paid by the Chargor or any other person
prior to the expiry of the period of that notice; and
(f) (cancellation restriction): the insurer must not refuse or
reduce a claim or cancel or avoid the insurance policy in
relation to the interest of the Chargee by reason of the
fraud, action, neglect or other prejudicial conduct of, or
breach of any term, warranty, declaration or condition of the
insurance policy by, any other person.
5.3 Chargee Rectification
If any default is made by the Chargor in effecting or maintaining any
insurance policy required by this Charge or if any insurance policy
becomes void or voidable for any reason, the Chargee may without
obligation effect or maintain that insurance policy at the full cost of
the Chargor.
5.4 Insurance Proceeds
The Chargor must use the proceeds of the insurance policies received in
respect of any Charged Property which has been destroyed, lost or
damaged to the extent necessary in the replacement, repair or
reinstatement of the Charged Property, except that:
(a) (excess proceeds): where the proceeds exceed the cost of
replacement, repair or reinstatement, the excess must be paid
to the Chargee to be applied to that extent in satisfaction of
the Secured Moneys; and
(b) (debt repayment): where the proceeds are received directly by
the Chargee, if:
(i) an Event of Default is subsisting; or
(ii) replacement, repair or reinstatement of the Charged
Property by the Chargor is precluded,
the Chargee must apply the proceeds together with all accrued
interest to that extent in satisfaction of the Secured Moneys,
whether due or payable or not, but otherwise the Chargee must
account for the proceeds to the Chargor.
6 NEGATIVE COVENANTS
The Chargor must not at any time during the continuance of this Charge
without the prior consent of the Chargee:
(a) (security interests): execute or create, or attempt to execute
or create, any Security Interest over or affecting the Charged
Property;
(b) (assignments): convey, transfer, assign, deal with, dispose of
or make any bailment of the Charged Property in relation to
which this Charge operates as a specific charge;
(c) (leases): lease the Charged Property or accept any surrender
of lease or surrender or forfeit any lease comprising the
Charged Property in relation to which this Charge operates as
a specific charge;
(d) (book debts): assign factor, discount or otherwise deal with
or dispose of any Book Debts in relation to which this Charge
operates as a specific charge, except for:
(i) collection and realisation in the usual course of
business; and
(ii) the credit or payment of the Collection Proceeds to
or into the Designated Bank Account or otherwise in
accordance with any direction or consent of the
Chargee at any time;
(e) (consignments, trusts): enter into any agreement, arrangement
or course of dealing whereby it agrees specifically to account
to or hold upon trust for any person the proceeds of sale,
including cash, book and other debts and negotiable and
similar instruments, arising out of or in connection with any
goods in its possession sold by the Chargor, whether or not in
the ordinary course of its business, with the express or
implied authority of their owner, being a person other than
the Chargor, and must not attempt to enter into any such
agreement, arrangement or course of dealing;
(f) (sale and lease-back): convey, transfer, assign, deliver, deal
with or dispose of the Charged Property in relation to which
this Charge for the time being operates as a floating charge
with the intention or for the purpose directly or indirectly
of retaining or accepting delivery of possession of the
Charged Property under or pursuant to any agreement or
arrangement, whether or not containing an option for the
Chargor to purchase, and must not attempt to make any such
conveyance, transfer, assignment, delivery, dealing or
disposition;
(g) (deposits): deposit, or attempt to deposit, any funds or
moneys with any person, other than the Chargee, or pursuant to
any Security Agreement, upon terms or in circumstances where:
(i) those funds or moneys are repayable to or
withdrawable by the Chargor upon condition that the
Chargor shall pay or discharge any other
indebtedness, whether present or future, actual or
contingent, or perform or observe any other
obligation or agreement due to or made with that
person or any other person; or
(ii) in relation to the deposit that person stipulates for
or would otherwise for the time being be entitled
pursuant to any express agreement with the Chargor to
claim or assert any right or equity of set-off or
counterclaim, excluding any such right or equity
arising by operation or implication of any law or by
virtue of Chargee's custom or usage;
(h) (charge protection): do or suffer any act, omission or thing
which might cause this Charge to be prejudicially affected or
any material part of the Charged Property to become liable to
surrender, forfeiture, cancellation or prejudice in any manner
or subject to any charge or liability imposed by any
Government Agency;
(i) (alterations): except as required by the terms of any lease
existing as at the date of this Charge, pull down, alter,
extend or remove the Charged Property in relation to which
this Charge operates as a specific charge or erect any further
improvements on the Charged Property;
(j) (statutory protection): take any steps to obtain protection
under any legislation or take any steps pursuant to any
legislation which provides for the curtailment, postponement,
defeat, extinguishment or suspension of the rights of the
Chargee in relation to the Charged Property without giving to
the Chargee prior notice of its intention to do so; or
(k) (surrenders): surrender the Charged Property to, or exchange
the Charged Property for other land of any tenure or estate
with, any Governmental Agency or other person, whether or not
the Chargor gives or receives any money or other consideration
for doing so.
7 EXPRESS CRYSTALLISATION
7.1 Crystallisation Circumstances
The floating charge created by this Charge shall automatically
crystallise and subsequently operate as a specific charge instantly and
immediately:
(a) (crystallisation notice): upon receipt by the Chargor of a
notice given by the Chargee at any time, whether prior or
subsequent to the occurrence of an Event of Default, that this
Charge shall crystallise, in relation to all or any part of
the Charged Property as specified in the notice; and
(b) (crystallisation event): upon the occurrence of a
Crystallisation Event, in relation to all the Charged
Property.
7.2 Implicit Crystallisation
The floating charge created by this Charge shall crystallise upon the
occurrence of any act, event or circumstance in accordance with any
term implied by law into this Charge, in addition to any express term
contained in this Charge.
7.3 De-crystallisation
The Chargee may by notice to the Chargor waive the crystallisation of
the floating charge created by this Charge for any reason, whether
pursuant to an express or implied term, to operate with retrospective
or prospective effect as specified in the notice.
7.4 Crystallised Assets
The Chargor must at all times subsequent to the crystallisation of the
floating charge created by this Charge in relation to any Charged
Property, including without limitation Cash Assets, pay, apply or
otherwise deal with that Charged Property in accordance with any
direction from the Chargee to the Chargor at any time.
8 DEFAULT
8.1 Events of Default
The occurrence of any of the following events shall constitute an Event
of Default:
(a) (money payments): any Security Party fails to make, in the
manner and currency required, any payment on the due date of
any moneys due under any Security Agreement;
(b) (non-monetary obligations): any Security Party fails to
perform or observe any other obligation under any Security
Agreement and, if in the opinion of the Chargee the failure is
capable of remedy, within 14 days following notice by the
Chargee requiring that Security Party to remedy the failure;
(c) (misrepresentation): any representation, warranty, undertaking
or statement made or deemed to be made or repeated by any
Security Party in any Security Agreement, or in any document
delivered to the Chargee under, pursuant to or in connection
with any Security Agreement, is not complied with or proves to
be untrue in any respect which would have a Material Adverse
Effect;
(d) (cross-default):
(i) any Financial Indebtedness of any Security Party in
excess of $5,000 or its equivalent in other
currencies becomes due and payable or capable of
being declared due and payable prior to its stated
maturity after the expiration of any applicable
period of grace;
(ii) any Security Party fails to pay when due after the
expiration of any applicable period of grace any
Financial Indebtedness in excess of $5,000 or its
equivalent in other currencies; or;
(iii) any Security Interest over any assets of any Security
Party securing an amount in excess of $5,000 or its
equivalent in other currencies is or becomes
enforceable in consequence of any breach or event of
default under the terms of that Security Interest;
(e) (receiver): or a receiver and/or manager is appointed over, or
a secured creditor takes possession of, any assets of any
Security Party;
(f) (administrator): an administrator of any Security Party is
appointed;
(g) (execution): a distress, attachment or other execution is
levied or enforced against any assets of any Security Party
for any amount exceeding $5,000 or its equivalent in other
currencies;
(h) (winding up):
(i) an application for the winding up or dissolution of
any Security Party, not being frivolous or vexatious
or wholly disputed in good faith and in the opinion
of the Chargee on reasonable and substantial grounds,
is filed;
(ii) an order is made for the winding up or dissolution of
any Security Party; or
(iii) a resolution is passed for the winding up or
dissolution of any Security Party, except with the
prior consent of the Chargee for the purposes of a
solvent reconstruction or amalgamation;
(i) (arrangement/composition): without the prior consent of the
Chargee, any Security Party enters into any scheme of
arrangement or composition with its creditors generally or any
class of creditors;
(j) (insolvency): any Security Party stops payment generally or is
unable to pay its debts when they fall due or within the
meaning of Section 460(2) of the Corporations Law;
(k) (business cessation): any Security Party ceases or threatens
to cease to carry on its business without the prior consent of
the Chargee;
(1) (uncalled capital release): any Security Party passes a
resolution rendering any of its uncalled share capital
incapable of being called up except in its winding up;
(m) (capital reduction): without the prior consent of the Chargee,
any Security Party:
(i) reduces its capital or purchases its own shares,
excluding the redemption of redeemable preference
shares;
(ii) passes, or calls of a meeting to consider, a
resolution to reduce its capital, to authorise the
purchase of its own shares or under section 188(2) or
205(10) of the Corporations Law or any equivalent
provision; or
(iii) applies to a court to call any such meeting or to
sanction any such resolution, reduction or purchase;
(n) (inspector): any inspector is appointed pursuant to the
Corporations Law to investigate all or any part of the affairs
of any Security Party in relation to a possible contravention
of the Corporations Law, where the appointment would have a
Material Adverse Effect;
(o) (memorandum/articles amendment): without the prior consent of
the Chargee, the memorandum or articles of association of any
Security Party are amended in any manner which would have a
Material Adverse Effect;
(p) (control change): without the prior consent of the Chargee:
(i) any Security Party becomes a Subsidiary of another
person subsequent to the date of this Charge; or
(ii) any person becomes entitled to hold, exercise or
control, directly or indirectly, beneficially or
otherwise, more than 50 per centum of the issued
share capital or voting power at meetings of
directors or shareholders of any Security Party, not
being a person so entitled at the date of this
Charge;
(q) (authorisation revocation): any Authorisation expires or is
repealed, revoked, terminated, cancelled or withheld without
replacement or renewal or is amended or modified, which would
have a Material Adverse Effect;
(r) (security vitiation):
(i) any provision of a Security Agreement is terminated
or is or becomes void, illegal, invalid,
unenforceable or of limited force and effect;
(ii) any person other than the Chargee becomes entitled to
terminate or rescind any provision of a Security
Agreement; or
(iii) any person makes any claim or allegation to that effect,
which would have a Material Adverse Effect;
(s) (compulsory acquisition): any Governmental Agency compulsorily
acquires or requires the sale or divestment of all or a
material part of the Charged Property;
(t) (governmental interference): any appropriation, restraint,
restriction, prohibition, intervention or law made or imposed
by any Governmental Agency prevents or impedes the performance
of any Security Agreement;
(u) (litigation): any Security Party is affected by any
litigation, arbitration, tax claim, dispute or administrative
proceeding, not being frivolous or vexatious or wholly
disputed in good faith and in the opinion of the Chargee on
reasonable and substantial grounds, the final adverse outcome
of which would have a Material Adverse Effect; or
(v) (environmental event):
(i) any Government Agency or other person takes any
action, or makes or imposes any claim or requirement
for substantial expenditure or cessation or
alteration of activity, under any Environmental Law,
which would have a Material Adverse Effect; or
(ii) any circumstance arises which in the reasonable
opinion of the Chargee acting on the advice of an
independent expert may give rise to any such action,
claim or requirement.
8.2 Enforcement
At any time following the occurrence of any Event of Default, whether
or not within the control of the Chargor, which is subsisting the
Chargee may:
(a) (debt acceleration): declare the Secured Moneys to be
immediately due and payable, in which case the Secured Moneys
shall become immediately due and payable; and/or
(b) (security enforcement): enforce this Charge and/or any
Collateral Security and exercise all its rights arising
consequent upon default, whether conferred or arising pursuant
to this Charge and/or any other Collateral Security or
otherwise.
8.3 Default Rectification
If the Chargor defaults in the due performance or observance of any
agreement or obligation or commits a breach of any representation or
warranty contained in this Charge, the Chargee shall be entitled,
without obligation and without prejudice to its other rights, to do or
procure all things and to pay or procure payment of all moneys
necessary to rectify that default or breach to the satisfaction of the
Chargee at the full cost of the Chargor.
9 ENFORCEMENT
9.1 Appointment of Receiver
At any time after the Secured Moneys shall have become payable and/or
this Charge become enforceable the Chargee or its Authorised Officer
may:
(a) (appointment): appoint any person or persons to be a Receiver
of the whole or any part of the Charged Property; and
(b) (replacement): remove any Receiver and in case of the removal,
retirement or death of any Receiver appoint a replacement.
9.2 Powers
A Receiver shall, without need for the consent of the Chargor, have the
following powers unless specifically excluded by the terms of his
appointment:
(a) (possession): to take possession of, collect, get in and enter
into receipt of the rents and profits of the Charged Property;
(b) (collection): to convert, liquidate or reduce the Charged
Property into money or immediately available funds;
(c) (contracts): to enter into any contract, agreement,
arrangement or obligation with any person for any purpose
connected with this Charge, or the Charged Property or the
powers and functions of the Receiver upon and subject to such
terms and conditions as the Receiver thinks fit;
(d) (contractual performance): to perform, observe, carry out and
enforce specific performance of, exercise or refrain from
exercising the Chargor's rights and powers under, or otherwise
obtain the benefit of, vary or rescind any contracts, rights,
instruments and arrangements comprising the Charged Property
entered into or held by the Chargor or the Receiver in the
exercise of his powers and functions, in the name of the
Chargor or otherwise;
(e) (employees): to engage or employ managers, solicitors,
officers, auctioneers or other employees or agents for or in
relation to the performance of any rights of the Chargee or
the powers and functions of the Receiver conferred by this
Charge at such salaries or remuneration as the Receiver thinks
fit;
(f) (investment):
(i) to invest, deposit or hold the Charged Property and
its proceeds of sale or realisation in such form or
mode of investment for the time being as the Receiver
in his absolute discretion thinks fit;
(ii) with similar power to vary, transpose or re-invest
the investments or deposits at any time; and
(iii) if any Secured Moneys for the time being remain
contingent, to exercise the foregoing powers until
the Secured Moneys shall cease to be contingent;
(g) (bank accounts): to operate to the exclusion of the Chargor on
any Chargee account in the name of the Chargor relating to the
Charged Property, whether alone or jointly, and withdraw any
moneys to the credit of the account;
(h) (cheques): to sign and endorse or authorise any person to sign
and endorse cheques, promissory notes, bills of exchange and
other negotiable instruments, in the name of the Chargor or
otherwise-
(i) (business): to carry on or concur in carrying on the business
of the Chargor and make and effect all repairs, purchases and
insurances;
(j) (borrowing): with the prior consent of the Chargee:
(i) to borrow moneys or raise financial accommodation
from the Chargee or any other person at any time for
the purposes of the powers or functions of the
Receiver, whether in the name of the Chargor or
otherwise;
(ii) to secure moneys or accommodation borrowed or raised
by Security Interest over the Charged Property,
whether ranking in priority to, equally with or
subsequent to this Charge,
without the Chargee being bound to inquire as to the necessity
for or propriety of that borrowing or raising of financial
accommodation or being responsible for the misapplication or
non-application of any moneys so borrowed or raised;
(k) (property management): to erect, pull down, alter, rebuild
and/or add to any new or existing building or improvement on
the Charged Property comprising land and do all acts which the
Chargor might do in the ordinary conduct of its business for
the protection or improvement of, or obtaining income or
returns from, the Charged Property;
(1) (leasing): to lease, let, sublease or sublet the Charged
Property:
(i) whether or not the Receiver shall have taken
possession;
(ii) whether or not preparatory to sale;
(iii) whether in the name of the Chargor or otherwise;
(iv) for any term of years, from year to year, or for a
term less than a year;
(v) with or without an option to purchase or taking a
premium; and
(vi) at such rent and generally upon and subject to such
terms and conditions as the Receiver thinks fit;
(m) (sale): to sell or concur in selling the Charged Property:
(i) whether or not the Receiver shall have taken
possession;
(ii) by public auction, private treaty, tender or any
combination of those methods;
(iii) for cash or on credit;
(iv) in one lot or in parcels;
(v) with or without special conditions or stipulations as
to title or time or manner of payment of purchase
moneys or otherwise;
(vi) with power to permit time for payment of the purchase
moneys, with or without interest, secured by mortgage
on the property sold or upon other security or
without security; and
(vii) generally upon and subject to such terms and
conditions as the Receiver thinks fit, without
responsibility for consequential loss;
(n) (resale): to buy in and rescind or vary any contract for sale
of the Charged Property and resell the Charged Property
without responsibility for loss;
(o) (transfers): to execute transfers, assignments, deeds and
assurances of the Charged Property, in the name and on behalf
of the Chargor or otherwise;
(p) (options): to grant or accept options to or exercisable by or
on behalf of the Chargor or any person for the purpose of or
in connection with the sale, purchase, leasing or hiring of
the Charged Property or other assets owned or possessed by the
Chargor or that other person;
(q) (fixtures): to sever fixtures belonging to the Chargor and
sell them separately from the other Charged Property;
(r) (realisation): to sell, lease or sublease the Charged Property
together with assets subject to any Collateral Security by one
contract, at one price or rent or in any manner the Receiver
thinks fit, and apportion all costs, purchase moneys or rents
between the assets sold, leased or subleased;
(s) (receipts): to give notices of this Charge and effectual
receipts for all moneys and other assets which come into the
hands of the Receiver in the exercise of the powers and
functions of the Receiver;
(t) (compromises): to make any arrangement or compromise which the
Receiver thinks expedient in the interests of the Chargee;
(u) (legal actions): to take proceedings at law or in equity or
bankruptcy, in the name of the Chargor or otherwise, for the
purposes of the powers and functions of the Receiver;
(v) (liquidations): to make debtors bankrupt, wind up companies
and to do all things in connection with any bankruptcy or
winding up which the Receiver thinks necessary for the
recovery or protection of the Charged Property or the security
of the Chargee;
(w) (delegation): with the prior consent of the Chargee, to
delegate to any person the powers or functions of the
Receiver;
(x) (supplemental): to do all things necessary or convenient to
perform or observe the obligations of the Chargor contained in
this Charge; and
(y) (incidental): to do all other acts and things without
limitation as the Receiver thinks expedient in the interests
of the Chargee or for the purposes of the powers or functions
of the Receiver.
9.3 Agency
(a) (Pre-liquidation): A Receiver shall be the agent of the
Chargor who shall alone be responsible for the acts and
defaults of the Receiver.
(b) (Post-liquidation): The Receiver shall be or continue as agent
of the Chargor subsequent to the commencement of the winding
up of the Chargor to the fullest extent permitted by law but
otherwise shall be the agent of the Chargee.
9.4 Chargee Powers
The Chargee may without notice exercise the powers conferred on a
Receiver pursuant to this Charge at any time subsequent to the
occurrence of an Event of Default which is subsisting, whether or not a
Receiver has been previously appointed.
9.5 Receivership Termination
The Chargee may at any time terminate the receivership or give up
possession in relation to the Charged Property.
9.6 Sale Proceeds
(a) (Purchase money receipts): The Chargee or Receiver shall
account only for the amount of purchase moneys actually
received by the Chargee or Receiver for the sale, transfer or
assignment of the Charged Property, including without
limitation where the Charged Property is transferred subject
to a Security Interest back to secure unpaid purchase moneys.
(b) (Sale shortfall): The Chargor remains liable to the Chargee to
pay the Secured Moneys in excess of the amount of purchase
moneys actually received.
9.7 Involuntary Loss
(a) (Debt recovery): The Chargee or Receiver shall not be bound
to:
(i) give notice of this Charge to any debtor of the
Chargor or other person;
(ii) enforce payment of any moneys or debts payable to the
Chargor comprising the Charged Property; or
(iii) take any steps or proceedings for that purpose,
unless the Chargee or Receiver thinks fit.
(b) (Enforcement conduct): The Chargee or Receiver shall not be
answerable for any omission, delay, involuntary loss or
irregularity occurring in connection with the exercise or
non-exercise of the powers conferred by this Charge on the
Chargee or Receiver.
9.8 Purchaser Protection
(a) (Protected parties): This Charge shall benefit and protect any
person ("protected party") being:
(i) a purchaser, lessee, sublessee or other person having
dealings with or paying moneys to;
(ii) a public official responsible for the administration
of any public register relating to the title to
property or Security Interests affecting property or
created by any debtor or any officer acting on behalf
of that official in relation to the tender for
registration of any document executed by; or
(iii) any person claiming title or interest under any act
or document effected or executed by,
the Chargee or any Receiver or Attorney in the exercise or
purported exercise of powers conferred by this Charge.
(b) (Defects): The benefit and protection of this Charge shall
apply to or in relation to any fact, matter, thing or
circumstance prejudicially affecting the validity,
effectiveness, propriety and regularity of the exercise of
powers conferred by this Charge on the Chargee or Receiver or
Attorney ("defect"), including without limitation that:
(i) the Secured Moneys are not legally due or payable or
have been fully paid;
(ii) no Event of Default has occurred or is subsisting;
(iii) the Receiver or Attorney has not been validly
appointed;
(iv) any preliminary or other condition for the exercise
of powers has not been fulfilled;
(v) any exercise or purported exercise of powers is
improper or irregular;
(vi) any document has not been duly executed; or
(vii) any moneys received have been or may be misapplied or
improperly accounted for.
(c) (Defect inquiry exclusion): A protected party shall not be
required to inquire into the actual or potential occurrence or
existence of any defect.
(d) (Defect notice exclusion): A protected party shall not be
affected by notice, express, implied, imputed or constructive,
of the occurrence or existence of any actual or potential
defect.
(e) (Document conclusiveness): A protected party shall be entitled
to treat an act or document effected or executed by the
Chargee or Receiver or Attorney as conclusive evidence of its
validity and effectiveness, without necessity for proof of any
other fact, matter, thing or circumstance to exclude the
occurrence or existence of any actual or potential defect or
any objection to its registration in any public register by
reason of any defect.
10 MONEY RECOVERY
10.1 Compensation Claims
(a) (Chargee receipt): The Chargee shall receive all moneys which
may become payable, subsequent to an Event of Default which is
subsisting, by way of purchase moneys, compensation or
otherwise in respect of the Charged Property.
(b) (Claims): The Chargee shall have full power to claim,
compromise, agree, settle and execute releases for the
purchase, compensation or other moneys payable, for both the
Chargee and the Chargor without incurring liability to the
Chargor, whether or not the moneys are in any circumstances
potentially or contingently refundable or repayable.
10.2 Insurance Claims
The Chargee shall have full power, subsequent to an Event of Default
which is subsisting, to make, enforce, compromise and settle all claims
in the event of loss or damage to the Charged Property arising under
any Security Insurance, whether in the name of the Chargee, the Chargor
or both, and sue for, recover and give discharges for the money
proceeds.
10.3 Enforcement Proceeds
The Chargee or Receiver shall apply all moneys received by or on behalf
of the Chargee, subsequent to enforcement of this Charge, in the
following order:
(a) (costs): in payment of the costs of and incidental to the
appointment of the Receiver, if any, and the exercise of the
powers of, and all outgoings indebtedness and liabilities paid
or incurred by the Chargee or Receiver;
(b) (remuneration): in payment of remuneration to the Receiver, if
any, at such rate as may be agreed between the Receiver and
the Chargee at the time of or following his appointment;
(c) (secured moneys): in or towards the satisfaction of the
Secured Moneys in such order as the Chargee may at any time
require; and
(d) (surplus): the surplus, if any, shall be paid to the Chargor
or any other person entitled.
10.4 Receipts
The Chargee in applying enforcement proceeds in or towards the
satisfaction of the Secured Moneys shall credit the Chargor only with
the amount of moneys actually received by the Chargee in cash as from
the date of receipt.
10.5 Surplus
(a) (Interest exclusion): Surplus moneys in the hands of the
Chargee payable to the Chargor after satisfaction of the
Secured Moneys shall not carry interest.
(b) (Final credit): The Chargee may pay the surplus moneys to the
credit of an account in the name of the Chargor in the books
of the Chargee or any other bank or other financial
institution without the Chargee being under any further
liability in respect of the surplus moneys.
11 STATUTORY PROVISIONS
11.1 Additional Statutory Powers
The powers conferred on a mortgagee or a receiver and/or manager by law
shall be additional to the express powers conferred by this Charge or
any Collateral Security on the Chargee or any Receiver or Attorney but
by virtue of this provision shall also be deemed to be conferred by and
contained in this Charge.
11.2 Statutory Power Modification
To the fullest extent permitted by law, additional legal powers are
exercisable immediately following the occurrence of an Event of Default
which is subsisting, without any notice or expiration of time being
necessary, and are excluded or varied only to the extent that they are
inconsistent with the express terms of this Charge or any Collateral
Security.
11.3 Leasing Exclusion
The Chargor is not entitled to surrender any lease, accept any
surrender of lease or exercise any power of leasing conferred on the
Chargor by law, except as expressly permitted or contemplated by any
Security Agreement.
11.4 Statutory Notice Exclusion
To the fullest extent permitted by law, the requirement for notice or
lapse of time or compliance with any procedure under any legislation,
including without limitation Section 57 of the Real Property Act 1900
or Section Ill of the Conveyancing Act 1919 of New South Wales or any
equivalent statutory provision in force in any State or Territory,
prior to enforcement or exercise of any power under this Charge or any
Collateral Security by the Chargee is dispensed with and excluded.
12 ATTORNEY
12.1 Appointment
The Chargor under and by virtue of this Charge irrevocably appoints the
Chargee, every Authorised Officer of the Chargee and any Receiver
severally the Attorney of the Chargor, without rendering the Chargee
liable as mortgagee in possession and with full power for the Chargee
at any time to appoint a substitute and revoke any appointment.
12.2 Functions
An Attorney may prior or subsequent to the occurrence of an Event of
Default perform and effect all acts and things which:
(a) (chargor obligations): the Chargor should perform or effect
under its agreements contained or implied in this Charge;
(b) (chargee powers): the Chargee may perform or effect under the
powers conferred by this Charge or by law; or
(c) (security protection): the Chargee in its discretion considers
necessary or desirable for the effectiveness of the security
of this Charge or the protection or sale of the Charged
Property,
whether in the name of the Chargor or the Chargee or Attorney, at the
full cost of the Chargor.
13 COLLATERAL SECURITY
13.1 Merger Exclusion
This Charge because of its creation or provisions or any other reason
shall not merge with, discharge, postpone or otherwise affect
prejudicially any Collateral Security nor affect any or demand of the
Chargee at any time against any person, whether as surety or otherwise.
13.2 Collateral Remedies
A Collateral Security shall not in any way prejudicially affect the
provisions and rights of the Chargee contained or implied in this
Charge.
14 CONTINUING SECURITY
14.1 Continuing Account
This Charge shall be a continuing security and not be wholly or
partially discharged by the payment at any time of any Secured Moneys,
settlement of account or other matter or thing and apply to the balance
of the Secured Moneys at any time until a final discharge of this
Charge has been given to the Chargor.
14.2 Contingent Liabilities
The Chargor shall not be entitled to a final discharge of this Charge
so long as there is any actual or contingent liability of the Chargor
to the Chargee, or the Chargee for or on behalf of or in respect of the
Chargor, comprising part of the Secured Moneys, whether or not in any
case any contingent liability in existence at any time is at that time
presently capable of being ascertained.
15 INDEMNITY
15.1 Defaults
The Chargor must at any time indemnify the Chargee upon demand against
any loss or cost which the Chargee may incur as a consequence of any
default in payment of any amount due by the Chargor under any Security
Agreement, including without limitation principal, interest and costs,
or the occurrence of an Event of Default.
15.2 Investigations
The Chargor must also at any time indemnify the Chargee upon demand
against any loss or cost, including without limitation legal costs,
which the Chargee may incur in investigating any act, omission or event
which with the giving of notice and/or expiry of time would become an
Event of Default.
16 STAMP DUTIES
16.1 Liability
The Chargor must promptly within the applicable period prescribed by
law and in any event immediately pay to the Chargee upon demand an
amount equal to all stamp, transaction, registration and similar taxes,
including fines and penalties, which may be determined to be payable in
respect of or in connection with:
(a) (security agreements): the execution, delivery, performance or
enforcement of any Security Agreement;
(b) (funding increases): the funding or further or additional
funding of or any increase in financial accommodation by the
Chargee to the Chargor at any time pursuant to or secured by
any Security Agreement;
(c) (asset situs): the situs or change of situs at any present or
future date of the or any Charged Property; or
(d) (receipts/payments): the receipt or payment of any moneys
under any transaction contemplated by any Security Agreement,
including moneys paid by the Chargee by way of reimbursement
to any third party.
16.2 Financial Institutions Duty
Taxes shall include any financial institutions duty, bank debits tax or
other duties or taxes payable by return and duties or taxes passed on
to the Chargee by any bank or financial institution.
16.3 Indemnity
The Chargor shall indemnify the Chargee upon demand against all
liability with respect to or resulting from delay or omission to pay
taxes.
17 ASSIGNMENT
17.1 Chargee Assignment
The Chargee may at any time assign its rights under this Charge and any
Collateral Security, subject to the provisions of any other Security
Agreement.
17.2 Assignee Secured Moneys
In the event of the assignment of this Charge by the Chargee, the
Secured Moneys shall include all liabilities, indebtedness and
obligations, present or future, actual or contingent, due from or
payable by the Chargor to the assignee, whether or not incurred prior
to or in contemplation of that assignment.
18 NOTICES
All written notices to or by a party to this Charge shall:
(a) (authorised signatory): be signed by an Authorised Officer of
the sender; and
(b) (service): be deemed to be duly given or made:
(i) in the case of delivery in person or by post or
transmission by facsimile, transmission, when
delivered, left or received to or at the address or
number of the recipient specified in this Charge or
most recently notified to the sender; or
(ii) in the case of telex, on receipt by the sender of the
answerback code of the recipient at the end of
transmission,
but if delivery or receipt does not occur, or occurs later
than 4 p.m. local time, on a day on which business is
generally carried on in the place to which the written notice
is sent, it shall be deemed to have been duly given or made at
the commencement of the next business day in that place.
19 GOVERNING LAW AND JURISDICTION
19.1 Governing Law
This Charge shall be governed by and construed in accordance with the
laws of the State of New South Wales.
19.2 Jurisdiction
Any legal action or proceedings with respect to this Charge against the
Chargor or any of its property and assets may be brought in the courts
of the State of New South Wales ("State Courts") and, by execution and
delivery of this Charge, the Chargor:
(a) (submission): accepts, for itself and in respect of its
property and assets, generally and unconditionally the
non-exclusive jurisdiction of the State Courts;
(b) (convenient forum): in relation to any action or proceedings
in the State Courts at any present or future time, the Chargor
irrevocably waives any claim or objection as to venue or
inconvenience of forum; and
(c) (service): consents to service of process out of the State
Courts in any action or proceedings, effective upon receipt,
by the mailing of copies of process by registered or certified
airmail postage prepaid to it at its address for service of
written notices for the purposes of this Charge.
20 WAIVERS AND REMEDIES
20.1 Waivers
The failure to exercise or delay in exercising by the Chargee of any
right conferred by Charge shall not operate as a waiver and the single
or partial exercise of any right by the Chargee shall not preclude any
other or further exercise of that or any other right by the Chargee.
20.2 Remedies
The rights of the Chargee conferred by this Charge are cumulative and
are not exclusive of any rights provided by law.
21 SEVERABILITY
Any provision of this Charge which is prohibited or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the
extent of that prohibition or unenforceability, without invalidating
the remaining provisions of this Charge or affecting the validity or
enforceability of that provision in any other jurisdiction.
22 SURVIVAL
22.1 Representations
All representations and warranties in this Charge shall survive the
execution and delivery of any Security Agreement and the funding or
securing of financial accommodation under any Credit Agreement and
continue until a final discharge of the Security Agreements by the
Chargee.
22.2 Indemnities
Each indemnity in this Charge shall:
(a) (separate obligation): constitute an obligation of the Chargor
separate and independent from its other obligations under any
other agreement;
(b) (payment survival): survive the payment of the Secured Moneys
or the termination of any Security Agreement; and
(c) (final discharge): continue until a final discharge of the
Security Agreements by the Chargee.
23 MORATORIUM LEGISLATION
To the fullest extent permitted by law, the provisions of any present
or future legislation operating directly or indirectly to lessen or
otherwise vary or affect in favour of the Chargor any of its
obligations under this Charge or delay or otherwise prevent or
prejudicially affect the exercise by the Chargee or any Receiver of any
rights are negatived and excluded from this Charge.
24 THIRD PARTY SECURITY
24.1 Guarantee
The Chargor unconditionally and irrevocably and jointly and severally
with each Co-surety guarantees to the Chargee the due and punctual
payment by each other Security Party of the Secured Moneys due from
that Security Party to the Chargee ("Chargor Guarantee").
24.2 Demand Payment
The Chargor must pay to the Chargee upon demand at any time by the
Chargee the amount of the Secured Moneys due and payable from the
Debtor to the Chargee at that time under any Security Agreement and in
the manner and currency as provided in that Security Agreement.
24.3 Separate Obligation
The Chargor Guarantee shall:
(a) (principal obligation): be a principal and independent
obligation and not be treated as ancillary or collateral to
any other obligation created or arising in any manner or
circumstances;
(b) (collateral security): not be affected by any present or
future agreement or any present or future indebtedness,
liability or obligation, whether direct or contingent, joint
or several, due from any person to the Chargee;
(c) (preservation): be enforceable in spite of the extinguishment
or unenforceability for any reason of any obligation arising
under any agreement until full and final satisfaction in
accordance with this Charge; and
(d) (maturing instruments): be enforceable in spite of any
negotiable or other instrument or document being or remaining
in circulation or understandings prior to maturity or
otherwise.
24.4 Continuing Guarantee
The Chargor Guarantee shall be a continuing guarantee and not be wholly
or partially discharged by the payment at any time of any Secured
Moneys, settlement of account or other matter or thing and apply to the
balance of the Secured Moneys at any time until full and final
satisfaction in accordance with this Charge.
24.5 Future Dealings
The Chargee may at any time in its absolute discretion without
necessity for any consent by the Chargor:
(a) (funding increase): increase or otherwise vary the amount of
any present or future loans, advances, credit facilities or
other financial accommodation made or extended to the Debtor
or any other person;
(b) (document amendment): amend or vary any agreement in effect
between the Chargee and any person;
(c) (business transactions): transact any business with any person
or for or on account of any person at the request of any other
person.
24.6 Guarantee Protection
The Chargor Guarantee and the obligations of the Chargor under the
Chargor Guarantee shall not be affected at any time by:
(a) (waiver): the granting to any person by the Chargee of any
time, waiver or other indulgence or any agreement by the
Chargee to restrict any right of legal action or enforcement;
(b) (arrangement): any transaction, agreement or arrangement
effected between the Chargee and any person;
(c) (secured moneys): any increase or variation in the amount of
the Secured Moneys occurring for any reason;
(d) (document amendment): any amendment, variation, alteration,
supplement, renewal, replacement, substitution, assumption,
assignment or novation, whether for or without consideration,
of any agreement, or any right or obligation of any person
under any agreement;
(e) (document termination): any termination, expiry, rescission,
cancellation, extinguishment, avoidance or abandonment of any
agreement, or any right or obligation of any person under any
agreement;
(f) (document breach): any breach or repudiation of, or default
under, any agreement or obligation under any agreement by any
person;
(g) (document release): any total or partial release or discharge
by the Chargee of any agreement or right or obligation of the
Chargee or any person under any agreement;
(h) (security release): any total or partial release or discharge
by the Chargee of any right or asset from the effect of any
agreement, or any disclaimer, surrender, forfeiture,
extinguishment, resumption or determination by or in relation
to the Chargee or any person of any agreement or right or
asset subject to the effect of any agreement;
(i) (document perfection): the Chargee taking, completing or
perfecting, or any failure, delay or neglect in or refraining
from the taking, completion or perfection of, any agreement or
any right under any agreement;
(j) (document execution): any failure, refusal, neglect or delay
by any person concerning, or by the Chargee in requesting or
requiring, the execution or effective execution of any
agreement at any time by any person;
(k) (enforcement decisions): any exercise or enforcement or any
failure, delay or neglect in or refraining from, or lack of
ability or entitlement in, the exercise or enforcement by the
Chargee of any right conferred on the Chargee by any agreement
or by law;
(1) (enforcement realisation): any recovery or realisation or any
failure, delay or neglect in or refraining from, or lack of
ability or entitlement in, the recovery or realisation by the
Chargee of the Secured Moneys or any assets from any person or
of any assets subject to any agreement in total or partial
satisfaction of the Secured Moneys, including giving notice to
or taking legal action against any debtor of any person;
(m) (notification failure): the failure, delay or neglect in or
refraining from the notification by the Chargee or any person
to any other person of any breach of or default under any
agreement by any person or the Chargee or of any other act,
omission, fact or circumstance;
(n) (judgments): the Chargee obtaining judgment against any person
for or in relation to the payment or satisfaction of the
Secured Moneys;
(o) (distributions): the proof of debt or the receipt of any
dividend, distribution or other payment by the Chargee in or
out of the liquidation of any person;
(p) (liquidation): the liquidation of any person;
(q) (compromises): the Chargee becoming a party to or bound or
affected by any administration, compromise, moratorium,
suspension of payments or rights, restriction on rights or
enforcement, assignment of property, company arrangement, deed
of company arrangement, debt composition or scheme of
arrangement or reconstruction by any person or in relation to
any person or agreement;
(r) (document invalidity): the total or partial invalidity,
avoidance, unenforceability, liability to invalidation or
avoidance, illegality, frustration, failure, impairment or
limitation of force and effect of any agreement or its
execution by any person for any reason;
(s) (payment invalidity): the invalidity, avoidance,
unenforceability, liability to invalidation or avoidance,
illegality or irrecoverability for any reason of any payment
made or due to the Chargee, whether at the due or actual
payment date or at any subsequent time;
(t) (incapacity): any total or partial legal incapacity,
limitation, disability or other circumstance, or change in
circumstance, of or in relation to any person, including
without limitation any change in the constitution or
membership of any person;
(u) (powers): any total or partial deficiency, irregularity or
failure of authorisation in the powers of, or the conferral or
delegation of powers to, any person, whether in its own right
or any other purported capacity, to enter into or execute, or
perform or observe its obligations under, any agreement;
(v) (consents): any failure, delay or neglect in or refraining
from obtaining the consent of any person by the Chargee in
connection with any of the foregoing or for any purpose or
reason relating to the Chargor Guarantee or otherwise; or
(w) (residual): any other act, omission, laches, default, fact,
circumstance or thing which but for this provision might
legally operate:
(i) to release, discharge, terminate or prejudicially
affect the Chargor Guarantee or the obligations of
the Chargor under or in relation to the Chargor
Guarantee; or
(ii) in any manner to relieve or excuse the Chargor from
performance of or compliance with, or limit or
provide a defence to any legal action or proceedings
to enforce, the obligations of the Chargor under or
in relation to the Chargor Guarantee.
24.7 Marshalling Exclusion
(a) (Collateral security): The Chargee shall not be obliged to
marshall in favour of the Chargor any Collateral Security held
by the Chargee or assets that the Chargee may be entitled to
claim or receive.
(b) (Speciality security): The Chargee may in its absolute
discretion vary, exchange, renew, modify or release, or refuse
to complete, enforce or assign, any judgment, guarantee,
security, speciality or negotiable or other instrument held by
the Chargee, whether or not paid in satisfaction.
24.8 Recovery Receipts
(a) (Payments): All moneys received by the Chargee on account of
the Secured Moneys or from any person, including without
limitation any dividends following the liquidation of any
person, shall be payments in gross.
(b) (Distributions): The receipt by the Chargee of any
distribution, dividend or other payment out of or relating to
the liquidation of any person shall not prejudice the right of
the Chargee to recover the whole of the Secured Moneys from
any other person.
24.9 Subrogation Exclusion
The Chargor must not on any grounds, directly or indirectly, until full
payment of the Secured Moneys and final discharge of this Charge:
(a) (security agreements): claim the benefit of or any right of
subrogation to any Security Agreement held by the Chargee;
(b) (distributions): claim or receive the benefit of any
distribution, dividend or payment arising out of or relating
to the liquidation of any person;
(c) (proof): prove or claim in the liquidation of any person in
competition with the Chargee, so as to diminish any
distribution, dividend or payment which the Chargee would be
entitled to receive arising out of or relating to that
liquidation in the absence of that proof or claim; or
(d) (contribution): claim any right of contribution or indemnity
from any person in relation to any liability for payment of
the Secured Moneys;
24.10 Suspense Account
The Chargee shall be entitled to:
(a) (proof): prove in the liquidation of any person for the whole
of the Secured Moneys, including the amount of all payments
received from the Chargor pursuant to this Charge in respect
of the Secured Moneys;
(b) (suspense account credit): credit all payments from the
Chargor, whether received prior or subsequent to the
liquidation, to a suspense account in the name of the Chargor,
without obligation to apply the payments in or towards
satisfaction of the Secured Moneys;
(c) (appropriation): in the discretion of the Chargee at any time
appropriate the payments in or towards satisfaction of the
Secured Moneys; and
(d) (security retention): hold the payments prior to appropriation
as security for payment of the Secured Moneys;
until the Chargee has received full payment of the Secured Moneys with
the assistance of the payments.
24.11 Insolvency Clawbacks
(a) (Clawback liability): This provision shall apply in any case
where the Chargee is or becomes liable ("clawback liability")
under any law relating to liquidation or the protection of
creditors to repay, refund, restore or transfer to any person
moneys or assets or their equivalent money value.
(b) (Invalidated transaction): A clawback liability of the Chargee
for the purposes of this provision shall arise where a court
orders or the Chargee concedes or compromises a claim that the
payment or transaction ("invalidated transaction") pursuant to
which the Chargee received or recovered moneys or assets shall
be totally or partially invalidated or set aside.
(c) (Rights revival): In the case of a clawback liability, the
Chargee shall have all the same rights against any person in
relation to the Secured Moneys to the extent of the
invalidated transaction held by the Chargee immediately prior
to the occurrence of the invalidated transaction.
(d) (Security reinstatement): The Chargor must take all steps and
execute all documents necessary or convenient to restore to
the Chargee any Security Agreement held by the Chargee from
the Chargor immediately prior to the occurrence of an
invalidated transaction.
(e) (Indemnity): The Chargor must indemnify the Chargee upon
demand against all costs, including without limitation legal
costs on a full solicitor and own client indemnity basis,
incurred by the Chargee in connection with any negotiations or
proceedings relating to an invalidated transaction, despite
any other provision of this Charge.
24.12 Principal Indemnity
(a) (Indemnity liability): The Chargor must, despite any other
provision in this Charge, indemnify the Chargee against, and
pay to the Chargee upon demand by the Chargee an amount equal
to, all Secured Moneys that are or may be irrecoverable by the
Chargee from the Chargor as a surety ("principal indemnity").
(b) (Principal debtor liability): The principal indemnity shall be
a separate and additional liability of the Chargor as a
principal debtor, and not as a surety.
(c) (Irrecoverable moneys): The principal indemnity of the Chargor
shall apply in relation to Secured Moneys that are
irrecoverable for any reason, including without limitation any
legal incapacity, disability or limitation of or affecting any
person acting in its own right or any other purported capacity
or any other fact, matter, thing or circumstance.
(d) (Indemnity transactions): The principal indemnity of the
Chargor shall apply regardless of whether any transaction
relating to irrecoverable Secured Moneys was initially void or
voidable or subsequently avoided and regardless of whether the
Chargee had or ought to have had knowledge of any fact,
matter, thing or circumstance relating to that transaction.
24.13 Representation Exclusion
The Chargor acknowledges that this Charge has not been executed by the
Chargor as a result of or in reliance on any promise, representation,
warranty, statement, advice or information of any kind or nature given
or made to the Chargor by or on behalf of the Chargee, whether in
response to any inquiry by or on behalf of the Chargor or otherwise.
24.14 Disclosure Exclusion
The Chargor acknowledges that the Chargee was not prior to the
execution of this Charge by the Chargor and is not subsequently under
any duty to disclose to the Chargor, or perform, anything relating to
the business, affairs or financial condition of any Security Party or
its transactions with the Chargee.
24.15 Guarantee Interpretation
The following meanings apply to words and expressions used in this
Clause 24 relating to third party security:
(a) (chargor guarantee): the Chargor Guarantee has the meaning
defined in clause 24.1;
(b) (chargee): reference to the Chargee includes any Receiver or
Attorney;
(c) (person): reference to any person includes the Chargor, the
Debtor, any person named as a Chargor or a Debtor, any
Co-surety or any other person; and
(d) (agreement): reference to any agreement includes any Security
Agreement, Security Interest, Guarantee or other agreement
made or in force and effect at any time between the Chargee
and any person.
25 COUNTERPARTS
This Charge may be executed in any number of counterparts, all of which
taken together shall be deemed to constitute one and the same document.
26 ATTORNEYS
Each attorney executing this Charge respectively certifies that the
attorney has at the time of executing this Charge no notice of the
revocation of the power of attorney pursuant to which the attorney
executes this Charge.
<PAGE>
EXECUTION CLAUSE
Executed as a deed.
CHARGOR:
THE COMMON SEAL of )
CORVU AUSTRALASIA PTY LTD )
(ACN 050 043 699) )
was affixed in accordance with )
its Articles of Association )
in the presence of: )
Director
Full Name:
Director/Secretary
Full Name: Justin M. MacIntosh
CHARGEE:
THE COMMON SEAL of )
INTEGRAL BUSINESS FINANCE PTY )
LIMITED ACN 077 559 749 )
was affixed in accordance with )
its Articles of Association )
in the presence of: )
Director
Full Name:
Director/Secretary
Full Name:
Jon Adams Financial Co., L.L.P.
175 Westwood, Suite 1000
Wayata, MN 55391
Phone/612.473.4892
Fax/612.473.6988
12 May, 1999
Justin MacIntosh
Chairman, President and CEO
c/o CorVu Corporation
3400 West 66th Street
Suite 445
Edina, MN 55435
Via Facsimile - 612.325.5770
Re: Terms of Proposed Relationship
Dear Justin:
As we discussed, consistent with our role in working with you to
address the financial needs of CorVu Corporation and to assist you in
consummating a reverse merger transaction with a publicly-traded entity, we are
pleased to propose the following revised terms (an "Agreement") for retention of
the services of the Jon Adams Financial Co., L.L.P. ("JAF") on an exclusive
basis by CorVu Corporation (the "Company"):
1. JAF will assist the Company as its exclusive financial and business
advisor for four (4) months from the date of this Agreement to consummate a
reverse merger, merger, acquisition, strategic partnership, relationship or the
like (the "Transaction") on behalf of the Company. As used in this Agreement,
the term "Transaction" shall mean any merger, reverse merger, consolidation,
reorganization, recapitalization, business combination or other transaction
pursuant to which the Company acquires, or is acquired by, or combined with, a
third party or third parties. In connection with a Transaction and specifically
a reverse merger, JAF will endeavor to structure the Transaction such that the
Company will not sell, exchange, transfer, or hypothecate more than twenty-one
percent (21%) of its outstanding common stock in order to effectuate the
Transaction and that in the course of effectuating such a Transaction the
Company will receive approximately nine hundred thousand dollars ($900,000) as
consideration for its common stock (the "Initial Financing").
2. Following or during the course of effectuating a Transaction, JAF
and/or its affiliate Equity Securities Investments, Inc. ("Equity") and the
Company will enter into an agreement to use JAF's and/or Equity's best efforts
to engage in an underwriting on the Company's behalf for a period of four (4)
months from the close of the Transaction (the "Underwriting Agreement") to
secure via a secondary offering or through other alternative means,
approximately two to three million dollars ($2,000,000-$3,000,000) in debt or
equity financing for the Company from a private entity or fund (the "Subsequent
Financing"). Pursuant to this undertaking JAF and/or Equity will have the
exclusive right to represent the Company in a Subsequent Financing capacity for
a period of four (4) months from the date of the close of a Transaction;
provided, however, that if the Company elects to seek and does obtain financing
through the efforts of another entity or agent or in its principal capacity
directly during the relevant four (4) month period, then the Company agrees to
compensate JAF and/or Equity for its efforts by paying JAF and/or Equity a
termination fee of seventy five thousand dollars ($75,000) upon the closing of
any such financing.
3. In connection with JAF's activities on the Company's behalf, the
Company will furnish JAF with all information regarding the Company and data
concerning the Company and any Transaction, Initial Financing and/or Subsequent
Financing and, to the Company's best knowledge, any prospective financier or
financiers which JAF deems appropriate, and will provide JAF with access to the
Company's officers, directors, employees, independent accountants and legal
counsel. JAF will keep all information confidential in accordance with its
customary practice. The Company represents and warrants to the best of its
knowledge that all information made available to JAF by the Company will, at all
times during the period of the engagement of JAF hereunder, be complete and
correct in all material respects and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances under which
statements are made. The Company further represents and warrants that any
projections provided by it to JAF will have been prepared in good faith and will
be based upon assumptions which, in light of the circumstances under which they
are made, were reasonable. The Company acknowledges and agrees that, in
rendering its services hereunder, JAF will be using and relying on the
information (and information available from public sources and other sources
deemed reliable by JAF) without independent verification thereof. Furthermore,
in evaluating prospective financiers, JAF will be using information contained in
public reports and possibly other information furnished to JAF by such
prospective financier. JAF does not assume responsibility for the accuracy or
completeness of any information regarding the Company, any prospective financier
or any Transaction, Initial Financing and/or Subsequent Financing. Any advice
rendered by JAF pursuant to this Agreement may not be disclosed publicly without
our prior written consent.
4. In consideration of our services pursuant to this Agreement, JAF
shall be entitled to receive, and the Company agrees to pay JAF, the following
compensation:
a. Upon the consummation of a Transaction, the Company shall
compensate JAF for its efforts by providing to JAF three percent
(3.00%) of the outstanding common stock of the Company immediately
preceding a Transaction (based upon 9,490,700 shares of common stock of
the Company outstanding and subject to an appropriate adjustment
pursuant to standard anti-dilution provisions) and by providing to JAF
a five (5) year warrant (with standard anti-dilution provisions) to
purchase an additional one percent (1.00%) of the common stock of the
Company after a Transaction at the lesser of: (i) the per share price
equal to one hundred and twenty percent (120%) of the per share closing
price of the common stock of the Company at the first date upon which
it begins to publicly-trade; or (ii) the fair market value of the
common stock of the Company at the date at which a Transaction is
closed.
b. Upon the consummation of the Initial Financing in
connection with the Transaction, the Company shall compensate JAF in an
aggregate amount equal to five percent (5.00%) of the gross proceeds of
the Initial Financing.
c. Upon the consummation of any Subsequent Financing in
connection with the Transaction, pursuant to the to-be-executed
Underwriting Agreement, the-Company agrees to: (i) compensate JAF
and/or Equity in an aggregate amount equal to seven and one-half
percent (7.50%) of the gross proceeds of the Subsequent Financing plus
a non-accountable expense allowance in an amount equal to one percent
(1.00%) of the gross proceeds of the Subsequent Financing; and (ii)
grant to JAF and/or Equity a five (5) year warrant to purchase ten
percent (10.00%) of the equity stake sold to an investor or investors
at a price equal to the price paid by the investor or a simple average
of the price paid by multiple investors or any conversion price formula
utilized in connection with the Subsequent Financing; provided,
however, that in the event that the Subsequent Financing is
accomplished with a party identified in Appendix A, then the Company
agrees to compensate JAF and/or Equity in an aggregate amount equal to
five percent (5.00%) of the gross proceeds of the Subsequent Financing
plus a non-accountable expense allowance in an amount equal to one
percent (1.00%) of the gross proceeds of the Subsequent Financing and
to grant to JAF and/or Equity a five (5) year warrant to purchase seven
and one-half percent (7.50%) of the equity stake sold to an investor or
investors at a price equal to the price paid by the investor or a
simple average of the price paid by multiple investors or any
conversion price formula utilized in connection with the Subsequent
Financing.
d. JAF shall be entitled to the fees set forth in this
paragraph 4 with respect to any Transaction, Initial Financing and/or
Subsequent Financing consummated during the term or with respect to any
Transaction consummated within one (1) year after the date of
termination of this Agreement, if the party to such Transaction,
Initial Financing and/or Subsequent Financing was introduced to the
Company by JAF during the term of this Agreement.
5. In addition to the fees described in paragraph 4 above, the Company
agrees to reimburse JAF, upon request from time to time, for all reasonable
accountable out-of-pocket expenses incurred by JAF in connection with the
matters contemplated by this Agreement; provided however that JAF shall obtain
prior approval for expenses exceeding ten thousand dollars ($10,000) in the
aggregate. However, the limitation on the aggregate amount of such out-of-pocket
expenses in the preceding sentence shall not apply to any amount incurred by JAF
pursuant to the Indemnification Provisions (as such term is defined below).
6. The Company agrees to indemnify JAF in accordance with the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement, which Indemnification provisions are incorporated herein and made a
part hereof.
7. Either party hereby may terminate this Agreement at any time upon
written notice, without liability or continuing obligation, except as set forth
in the following sentence. Neither termination of this Agreement nor completion
of the assignment contemplated hereby shall affect: (i) any compensation earned
by JAF up to the date of termination or completion, as the case may be, (ii) any
compensation to be earned by JAF after termination pursuant to paragraph 4
hereof, (iii) the reimbursement of expenses incurred by JAF up to the date of
termination or completion, as the case may be, (iv) the provisions of paragraphs
4-9, inclusive, of this Agreement and (v) the attached Indemnification
Provisions which are incorporated herein, all of which shall remain operative
and in full force and effect.
8. The validity and interpretation of this Agreement shall be governed
by the laws of the State of Minnesota applicable to agreements made and to be
fully performed therein.
9. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified parties
hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
10. For the convenience of the parties, any number of counterparts of
this Agreement may be executed by the parties hereto. Each such counterpart
shall be deemed to be an original instrument, but all such counterparts taken
together shall constitute one and the same Agreement. This Agreement may not be
modified or amended except in writing signed by the parties hereto.
If the foregoing correctly sets forth our agreement, we would
appreciate your signing this letter in the space provided and returning it to
us.
Sincerely,
JON ADAMS FINANCIAL CO., L.L.P.
/s/ Edward S. Adams
Edward S. Adams, as Principal
Confirmed and agreed to this 12th
day of May, 1999
CORVU CORPORATION
By: /s/ Justin MacIntosh
Its: Chairman, President and Chief Executive Officer
<PAGE>
INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the Agreement (as such term is defined
below)) agrees to indemnify and hold harmless JAF against any and all losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including. without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which JAF is a party), directly or indirectly,
caused by, relating to, based upon, arising out of or in connection with (a)
JAF's acting for the Company, including, without limitation, any act or omission
by JAF in connection with its acceptance of or the performance or
non-performance of its obligations under the letter agreement dated May 12,
1999, between the Jon Adams Financial Company, L.L.P. and CorVu Corporation as
it maybe amended from time to time (the "Agreement"), (b) any untrue statement
or alleged untrue statement of a material fact or similar statements or
omissions in or from any information furnished to JAF or to any prospective
financier or any party to a Transaction, an Initial Financing and/or a
Subsequent Financing or (c) any Transaction, an Initial Financing and/or
Subsequent Financing (as such terms are defined in the Agreement); provided,
however, such indemnity agreement shall not apply to any portion of any such
loss, claim, damage, obligation, penalty, judgment, award, liability, cost,
expense or disbursement to the extent it is found in a final judgment by a court
of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct of JAF.
The Company also agrees that JAF shall not have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Company or to any person
(including, without limitation, Company shareholders) claiming through the
Company for or in connection with the engagement of JAF, except to the extent
that any such liability is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from JAF's gross negligence or willful misconduct.
These Indemnification Provisions shall be in addition to any liability which the
Company may otherwise have to JAF or the persons indemnified below in this
sentence and shall extend to the following: JAF, its respective affiliated
entities, directors, officers, employees, legal counsel, agents and controlling
persons (within the meaning of the federal securities laws). All references to
JAF in these Indemnification Provisions shall be understood to include any and
all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to which JAF
proposes to demand indemnification, it shall notify the Company with reasonable
promptness; provided, however, that any failure by JAF to notify the Company
shall not relieve the Company from its obligations hereunder. The Company shall
have the right to assume the defense of any such action with counsel of its
choice. JAF shall have the right to retain counsel of its own choice to
represent it, and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of JAF unless (a) the Company shall have
failed to assume the defense of such action or proceeding within a reasonable
time, or (b) the named parties to such action include JAF and JAF and the
Company shall have reasonably concluded that there may be a conflict in their
respective positions in conducting the defense of any such action or that there
may be legal defenses available to JAF which are different from those available
to the Company, in which case if JAF notifies the Company in writing that it
elects to employ separate counsel, the Company shall pay the fees, expenses and
disbursements of such counsel; and such counsel shall, to the extent consistent
with its professional responsibilities, cooperate with the Company and any
counsel designated by the Company; provided that in no event shall the Company
be obligated to pay the fees and expenses under this indemnity for more than one
firm of attorneys for JAF. The Company shall be liable for any settlement of any
claim against JAF made with the Company's written consent, which consent shall
not be unreasonably withheld. The Company shall not, without prior written
consent of JAF, settle or compromise any claim, or permit a default or consent
to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to JAF of an unconditional release from all liability in respect of
such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and JAF, on the other hand, shall contribute
to the losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements to which the indemnified person
maybe subject in accordance with the relative benefits received by the Company,
on the one hand, and JAF, on the other hand, and also the relative fault of the
Company on the one hand and JAF on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses or
disbursements and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation shall be
entitled to contribution from any person who is not also found liable for such
fraudulent misrepresentation. Notwithstanding the foregoing, JAF shall not be
obligated to contribute any amount hereunder that exceeds the amount of fees
previously received by JAF pursuant to this Agreement.
Neither termination nor completion of the engagement of JAF referred to above
shall affect these Indemnification Provisions which shall then remain operative
and in full force and effect.
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT (this "Agreement") is dated as of November
15, 1999, by and between CorVu Corporation (the "Company") and Gildea
Management Company-The Network Funds (the "Investor").
RECITALS:
WHEREAS, the Company is in the process of entering into a merger
agreement with Minnesota American, Inc. (the "Reverse Merger") which is not
expected to close until late December 1999; and
WHEREAS, the Company needs cash prior to such expected closing of the
Reverse Merger in order to be able to continue its planned investment in
infrastructure and growth; and
WHEREAS, the Company principal lender has indicated it is unwilling at
this time to increase the Company's line of credit; and
WHEREAS, Investor desires to lend funds to the Company on the terms and
conditions set forth in this Agreement.
AGREEMENT:
Accordingly, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Loan/Promissory Note. Investor agrees to lend to the Company Two
Hundred and Fifty Thousand Dollars ($250,000) and the Company agrees to deliver
to the Investor a subordinated unsecured promissory note, in the form attached
hereto as Exhibit A (the "Note"), in a like amount. The delivery of the Note
shall be made concurrently with delivery of funds to the Company in the amount
set forth above.
2. Conversion of the Note.
(a) Automatic Conversion. To the extent the principal of the
Note is outstanding on the closing of the Reverse Merger transaction,
the entire principal outstanding on the Note and all accrued interest
with respect to such principal shall be automatically converted into
shares of common stock of the Company (or the surviving corporation
pursuant to the Reverse Merger) at a price per share equal to Two
Dollars and No Cents ($2.00), less any shares previously issued on
partial conversion hereof pursuant to subsection (b) below, subject to
adjustment pursuant to sections 4(e) and 4(f) of the Note.
(b) Election to Convert. Notwithstanding the provisions set
forth above, Investor may at any time, at its option, by written notice
(the "Conversion Notice") to the Company, elect to convert all or any
part of the entire outstanding principal amount of the Note plus a pro
rata share of the accrued interest on the then outstanding balance into
common stock of the Company at a price per share equal to Two Dollars
and No Cents ($2.00) per share.
(c) Delivery of Conversion Shares. The Common Stock issued on
conversion of the Note (the "Conversion Shares") shall be delivered as
follows:
As promptly as practicable after conversion, the Company shall
deliver to Investor, or to such person or persons as are
designated by Investor in the Conversion Notice, a certificate
or certificates representing the number of shares of Common
Stock into which the Note or portion thereof is to be
converted in such name or names as are specified in the
Conversion Notice, together with, in the case of conversion of
the entire remaining principal balance hereof, any cash
payable in respect of a fractional share.
In the event that less than the entire outstanding principal
balance of the Note is converted hereunder, the Note shall not
be surrendered for cancellation but shall have the fact and
amount of conversion recorded on the face of the Note by
writing acknowledged by Investor and the Company. If less than
the entire principal balance of the Note is converted, the
amount of principal converted shall be reduced to the nearest
amount that results in no fractional shares.
(d) Reservation of Shares. The Company agrees that, during the
period within which the Note may be converted, the Company will at all
times have authorized and in reserve, and will keep available solely
for delivery upon the conversion of the Note, common stock and other
securities and properties as from time to time shall be receivable upon
the conversion of the Note, free and clear of all restrictions on
issuance, sale or transfer other than those imposed by law and free and
clear of all pre-emptive rights. The Company agrees that the common
stock represented by each and every Conversion Share delivered on the
conversion of the Note shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, and the Company
will take all such action as may be necessary to assure that the stated
value or par value per share of the common stock is at all times equal
to or less than the Conversion Price.
3. Warrants. In consideration of the loan, the Company shall issue to
Investor, concurrently with delivery of the Note, stock purchase warrants, in
the form attached hereto as Exhibit B (the "Warrant"), to purchase Two Hundred
and Twenty-Five Thousand (225,000) shares of Company Common Stock at an exercise
price of $.01 per share. If the Note is not paid when due, the number of shares
purchasable under the Warrant shall increase by Twelve Thousand Five Hundred
(12,500) shares, and further increase by an additional Twelve Thousand Five
Hundred (12,500) shares for each 60-day period thereafter that the Note remains
unpaid. The shares of Company Common Stock issuable upon exercise of the Warrant
are referred to hereinafter as the "Warrant Shares."
4. Repayment. All outstanding principal and accrued interest on the
Note shall be due and payable 120 days after the date hereof; provided, however,
that notwithstanding the foregoing, the entire principal outstanding on the Note
and all accrued interest with respect to such principal shall be automatically
converted into shares of common stock of the Company within three business days
after the closing of the Reverse Merger transaction. The Note may be prepaid at
any time without penalty.
5. Use of Proceeds. The Company will use the proceeds of the loan
solely for working capital and general corporate purposes.
6. Subordination. The Note shall be subordinate to all senior debt of
the Company as set forth in Section 6 of the Note.
7. Restrictions on Transfer. The Note, the Warrant, and the Warrant
Shares shall be subject to certain restrictions on transfer identified in the
Note and the Warrant.
8. Representations and Warranties of the Company. The Company
represents and warrants as follows:
(a) This Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, has been duly executed and
delivered by an authorized officer of the Company, and is a valid and
binding agreement on the part of the Company.
(b) All corporate action necessary to the authorization,
issuance, and delivery of the Note, the Warrant, and the Warrant Shares
has been taken on or prior to the date hereof.
(c) As of the date hereof, this Agreement, the Note, and the
Warrant, taken as a whole, do not contain an untrue statement of a
material fact or omit to state a material fact required in light of the
circumstances under which such statements were made to be stated in
such documents to make the statements in such documents, taken as a
whole, not misleading.
9. Representations and Warranties of the Investor. Investor represents
and warrants to the Company as follows:
(a) This Agreement has been duly authorized by all necessary
corporate or partnership action on behalf of Investor, has been duly
executed and delivered by an authorized officer of Investor, and is a
valid and binding agreement on the part of Investor.
(b) Investor is an "accredited investor" as defined in Rule
501(a) of Regulation D of the Securities Act of 1933 (the "Securities
Act"), and was not formed for the purpose of making this investment.
The Note and the Warrant are being purchased by Investor in Investor's
name solely for Investor's own beneficial interest and not as nominee
for, or on behalf of, or for the beneficial interest of, or with the
intention to transfer to, any other person, trust or organization.
(c) Investor has such knowledge and experience in financial
and business matters that Investor is capable of evaluating the merits
and risks of the prospective investment in the Note and Warrants and
has the net worth to undertake such risks. Investor is in a financial
position to hold the Note, the Warrant and the Warrant Shares for an
indefinite period of time and is able to bear the economic risk and
withstand a complete loss of Investor's investment therein. Investor
believes that the investment in the Note and Warrants is suitable for
the Investor based upon Investor's investment objectives and financial
needs.
(d) Investor realizes that (i) the purchase of the Note and
the Warrant is a long-term investment, (ii) Investor must bear the
economic risk of investment for an indefinite period of time because
the Note, the Warrant, and the Warrant Shares have not been registered
under the Securities Act or under the securities laws of any state and,
therefore, none of such securities can be sold unless they are
subsequently registered under said laws or exemptions from such
registrations are available; (iii) Investor may not be able to
liquidate Investor's investment in the event of an emergency or pledge
any of such securities as collateral for loans; and (iv) the
transferability of such securities is restricted and legends will be
placed on the Note and the Warrant and on any certificates representing
the Warrant Shares referring to the applicable restrictions on
transferability.
(e) Investor has been given access to full and complete
information regarding the Company and has utilized such access to
Investor's satisfaction for the purpose of obtaining information
concerning the Company and to obtain any additional information, to the
extent reasonably available, necessary to verify the accuracy of
information provided to Investor.
(f) Investor is not subject to the backup withholding
provisions of Section 3406(a)(i)(C) of the Internal Revenue Code of
1986, as amended (Note: You are subject to backup withholding if (i)
you fail to furnish your Social Security number or taxpayer
identification number herein; (ii) the Internal Revenue Service
notifies the Company that You furnished an incorrect Social Security
number or taxpayer identification number; (iii) you are notified that
you are subject to backup withholding; or (iv) you fail to certify that
you are not subject to backup withholding or you fail to certify your
Social Security number or taxpayer identification number).
(g) Investor does not own voting securities of any brokerage
firm. No director, officer, partner or 5% owner of Investor is also a
director, officer, partner, branch manager, registered representative,
employee, shareholder of, or similarly related to or employed by, a
brokerage firm.
10. Registration Rights.
(a) Each time the Company shall determine to proceed with the
actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for money
of any of its securities by it (other than a registration statement on
Forms S-4 and S-8, or successors thereto), the Company will give
written notice of its determination to Investor. Upon the written
request of Investor given within 30 days after the date of mailing of
any such notice from the Company, the Company will, except as herein
provided, cause all the Conversion Shares and the Warrant Shares issued
and to be issued upon exercise of the Warrants requested by Investor to
be registered, to be included in such registration statement, all to
the extent requisite to permit the sale or other disposition by
Investor of the Conversion Shares and the Warrant Shares to be so
registered; provided, however, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any such registration
initiated by it. If any such registration shall be underwritten in
whole or in part, the Company may require that the shares requested for
inclusion by Investor pursuant to this paragraph (a) be included in the
underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith
judgment of the managing underwriter of such public offering the
inclusion of all of the shares originally covered by a request for
registration made by Investor would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of
the shares of stock offered by the Company, the number of shares owned
by Investor and otherwise to be included in the underwritten public
offering may be reduced; provided, however, that any such required
reduction shall be pro rata among all persons (other than the Company)
who are participating in such offering. Those shares which are thus
excluded from such underwritten public offering shall be withheld from
the market by Investor for a period, not to exceed 180 days, which the
managing underwriter reasonably determines is necessary in order to
effect the underwritten public offering.
(b) With respect to each inclusion of securities in a
registration statement pursuant to this Section 10, the Company shall
bear the following fees, costs and expenses: all registration, filing
and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if the Company is
required to bear such fees and disbursements), all internal expenses,
the premiums and other costs of policies of insurance against liability
arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any
jurisdictions in which the securities to be offered are to be
registered or qualified. Fees and disbursements of special counsel and
accountants for the selling holders, underwriting discounts and
commissions, and transfer taxes for selling holders and any other
expenses relating to the sale of securities by the selling holders not
expressly included above shall be borne by the selling holders.
(c) The Company shall indemnify Investor, its officers and
directors and each person, if any, who controls Investor within the
meaning of Section 15 of the Securities Act against all losses, claims,
damages, and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement or prospectus (and as amended or supplemented) relating to
such registration, or caused by any omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances under which they are made, unless such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company expressly for use therein by
Investor.
(d) Investor shall indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act against all losses, claims,
damages, and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement or prospectus (and as amended or supplemented) relating to
such registration, or caused by any omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances under which they are made, provided that this paragraph
(d) shall apply only to statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
expressly for use therein by the Investor.
(e) The registration rights provided in this section shall
apply to the Conversion Shares and the Warrant Shares of the surviving
company received by the Investor as a result of the terms of the
Reverse Merger.
11. Other.
(a) This Agreement and the rights and obligations of the
parties hereunder shall not be assignable, in whole or in part, by any
party without the prior written consent of the other party, and neither
this Agreement nor any provision hereof may be amended, modified,
waived or discharged without the written consent of the party against
whom enforcement of such amendment, modification, waiver, or discharge
is sought.
(b) This Agreement, including the exhibits attached hereto,
constitutes the entire agreement of the parties relative to the subject
matter hereof and supersedes any and all other agreements and
understandings, whether written or oral, relative to the matters
discussed herein.
(c) This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, except for its
rules relating to conflicts of law.
(d) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) The Company agrees to reimburse Investor for up to $2,500
of fees or expenses incurred by Investor in connection with this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
CORVU CORPORATION
By:
Its:
GILDEA MANAGEMENT COMPANY-THE NETWORK FUNDS
By:
Its:
Address: ________________
Tax I.D. No.: ________________
<PAGE>
EXHIBIT A
THIS NOTE, AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE REOFFERED, SOLD, TRANSFERRED, PLEDGED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (1) REGISTRATION UNDER SUCH ACT OR LAWS
OR (2) AN OPINION OF COUNSEL FOR THE COMPANY OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
SUBORDINATED UNSECURED CONVERTIBLE PROMISSORY NOTE
$250,000 Minneapolis, Minnesota
November 15, 1999
FOR VALUE RECEIVED, the undersigned, CorVu Corporation, a Minnesota
corporation (the "Company"), promises to pay to Gildea Management Company--The
Network Funds, or its permitted successors and assigns ("Holder"), at Holder's
address set forth in the Loan Agreement (as defined below), or such other place
as Holder may designate in writing from time to time, the principal sum of Two
Hundred and Fifty Thousand Dollars ($250,000), in lawful money of the United
States, together with simple interest from the date hereof on the unpaid
principal balance outstanding from time to time at the rate of ten percent (10%)
per year (calculated on the basis of the actual number of days elapsed and a
360-day year). The entire unpaid principal balance on this Note and accrued
interest thereon shall be due and payable on 120 days from the date first above
written, unless converted prior thereto pursuant to the terms hereof.
1. Bridge Loan Agreement. This Note has been issued pursuant to the
terms and provisions of the Bridge Loan Agreement (the "Loan Agreement"), dated
as of __________________, between the Company and Holder, and this Note and
Holder are entitled to all the benefits provided for in the Loan Agreement.
2. Prepayment. This Note may be prepaid at any time without penalty.
3. Unsecured Note. This Note is unsecured and the Company and Holder
agree that this Note shall not be secured at any time in the future by a grant
of a security interest in any assets of the Company, whether or not those assets
are owned by the Company at this time or acquired by the Company on a date
subsequent to the date hereof. The provisions of this Section 3 are designed for
the benefit of the third party senior creditors as well as the Company and
Holder.
4. Conversion of this Note.
(a) Automatic Conversion. To the extent the principal of this
Note is outstanding on the closing of the Reverse Merger transaction,
the entire principal outstanding on this Note and all accrued interest
with respect to such principal shall be automatically converted into
shares of common stock of the Company or the surviving corporation
pursuant to the Reverse Merger at a price per share equal to Two
Dollars and No Cents ($2.00), less any shares previously issued on
partial conversion hereof pursuant to subsection (b) below, subject to
the adjustment pursuant to sections 4(e) and 4(f) of the Note.
(b) Election to Convert. Notwithstanding the provisions set
forth above, Investor may at any time, at its option, by written notice
(the "Conversion Notice") to the Company, elect to convert all or any
part of the entire outstanding principal amount of this Note plus a pro
rata share of the accrued interest on the then outstanding balance into
common stock of the Company at a price per share equal to Two Dollars
and No Cents ($2.00) per share.
(c) Delivery of Conversion Shares. The Common Stock issued on
conversion of this Note (the "Conversion Shares") shall be delivered as
follows:
As promptly as practicable after conversion, the Company shall
deliver to Investor, or to such person or persons as are
designated by Investor in the Conversion Notice, a certificate
or certificates representing the number of shares of Common
Stock into which this Note or portion thereof is to be
converted in such name or names as are specified in the
Conversion Notice, together with, in the case of conversion of
the entire remaining principal balance hereof, any cash
payable in respect of a fractional share.
In the event that less than the entire outstanding principal
balance of this Note is converted hereunder, this Note shall
not be surrendered for cancellation but shall have the fact
and amount of conversion recorded on the face of this Note by
writing acknowledged by Investor and the Company. If less than
the entire principal balance of this Note is converted, the
amount of principal converted shall be reduced to the nearest
amount that results in no fractional shares.
(d) Reservation of Shares. The Company agrees that, during the
period within which this Note may be converted, the Company will at all
times have authorized and in reserve, and will keep available solely
for delivery upon the conversion of this Note, common stock and other
securities and properties as from time to time shall be receivable upon
the conversion of this Note, free and clear of all restrictions on
issuance, sale or transfer other than those imposed by law and free and
clear of all pre-emptive rights. The Company agrees that the common
stock represented by each and every Conversion Share delivered on the
conversion of this Note shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, and the Company
will take all such action as may be necessary to assure that the stated
value or par value per share of the common stock is at all times equal
to or less than the Conversion Price.
(e) Protection Against Dilution. In case of any consolidation
with or merger of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the surviving or
continuing corporation), or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall (i) execute with the Holder an
agreement providing that the Holder shall have the right thereafter to
receive upon conversion of this Note solely the kind and amount of
shares of stock and other securities, property, cash or any combination
thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of shares of Common Stock for
which this Note might have been converted immediately prior to such
consolidation, merger, sale, lease or conveyance, (ii) make effective
provision in its articles of association or otherwise, if necessary, in
order to effect such agreement, and (iii) set aside or reserve, for the
benefit of the Holder, the stock, securities, property and cash to
which the Holder would be entitled upon conversion of this Note.
(f) Additional Protection Against Dilution. If the Company (i)
pays a dividend or makes a distribution on its Common Stock in shares
of its Common Stock; (ii) subdivides its outstanding shares of Common
Stock into a greater number of shares; (iii) combines its outstanding
shares of Common Stock into a smaller number of shares; (iv) makes a
distribution on its Common Stock in shares of its capital stock other
than Common Stock or (v) issues by reclassification of its Common Stock
any shares of its capital stock; then the conversion privilege and the
Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of this Note shall, upon conversion,
receive the number of shares of capital stock which such holder would
have owned immediately following such action if the Holder had
converted the Note immediately prior to such action. The adjustment
shall become effective immediately after the record date in the case of
a dividend or distribution and immediately after the effective date in
the case of a subdivision, combination or reclassification.
5. Notification of Reverse Merger. The Company shall notify Holder of
the anticipated closing of the Reverse Merger at least three (3) business days
prior to the date thereof. 6. Subordination. The indebtedness evidenced by this
Note is and shall remain subordinate in right of payment to all Senior Debt to
the extent and in the manner hereinafter set forth. "Senior Debt" shall mean the
principal and interest on indebtedness of the Company to financial institutions
for borrowed money (other than the indebtedness evidenced by this Note), and for
purchase money loans secured by real estate or personal property used in
connection with the business of the Company, whether created, incurred or
assumed before or after the date hereof, except such as by its terms is
expressly not superior in right of payment of this Note, and renewals,
extensions and refundings of any such indebtedness. The subordination provisions
contained in this Section 6 are expressly and only for the benefit of third
party senior creditors of the Company and shall in no way limit the rights or
remedies of Holder against the Company.
No payment of principal or interest on this Note shall be made if the Company is
in default or breach, or such payment would result in a default or breach, with
respect to any Senior Debt. For purposes of this paragraph, default or breach
with respect to any Senior Debt shall refer to a failure of the Company (i) to
pay in full when due the principal of or interest or premium on any such Senior
Debt, or any portion thereof, according to its terms, or (ii) to be in
compliance with any covenant in any loan agreement, security agreement or
related agreement between the Company and the holder of such Senior Debt. Upon
any distribution of assets of the Company, upon dissolution, winding up,
liquidation or reorganization of the Company, whether in bankruptcy, insolvency
or receivership proceedings, or upon an assignment for the benefit of the
Company, or otherwise, Senior Debt shall first be paid in full, or provision
made for such payment in cash, before any payment is made on account of the
principal of or interest on this Note. In such events, upon payment in full of
all Senior Debt, Holder shall be subrogated ratably to all rights of such Senior
Debtors to receive payments or distributions of the assets of the Company
applicable to such Senior Debt until the principal of and interest on this Note
shall be paid in full. If Holder receives any payment on the indebtedness owed
to it by the Company as evidenced by this Note that Holder is not entitled to
receive under the provisions of this Note, Holder will hold the amount so
received in trust for the third party senior creditors and will turn over such
payment to the third party senior creditors in the form received (except for the
endorsement of Holder where necessary) for application to the then-existing
Senior Debt, whether or not due. If Holder exercises any right of setoff which
Holder is not permitted to exercise under the provisions of this Note, Holder
will promptly pay over to the third party senior creditors, in immediately
available funds, an amount equal to the amount of the claims or obligations
offset.
Notwithstanding the foregoing, payment of principal and interest on this Note
shall not be subordinated to the prior payment of such Senior Debt as to all
amounts which actually are paid by the Company under this Note if the Company is
not in default or breach with respect to any Senior Debt at the time or times
such payment or payments are made.
7. Default. "Default" means any event which is, or after notice or
passage of time, or both, would be, an Event of Default. An "Event of Default"
occurs if:
(a) the Company fails to make any payment on this Note when
the same becomes due and payable, and such default continues for a
period of 15 days;
(b) the Company defaults in the payment of interest or
principal on any Senior Debt and such Senior Debt shall, as a result
thereof, have been accelerated (or comparable event shall have
occurred) so that the same shall have become due and payable prior to
the date on which the same would otherwise have become due and payable
and such acceleration has been in effect without rescission or
annulment for a period of 30 days; provided, however, that if such
default in the payment of interest or principal on any Senior Debt
shall be remedied or cured by the Company or waived by the holders of
such Senior Debt, or if such acceleration shall have been rescinded or
annulled by the holders of such Senior Debt, then, unless this Note
shall have been accelerated as provided in this Note, the Event of
Default hereunder by reason thereof shall be deemed likewise to have
been thereupon remedied, cured or waived without further action upon
the part of the Holder.
(c) proceedings under any bankruptcy or insolvency law or
other law for the reorganization, arrangement, composition or similar
relief or aid of debtors or creditors are commenced and such proceeding
remain undismissed and unstayed for a period of 60 days following
notice to the Company by the Holder.
(d) the Company is in material breach of any provision of this
Note, which breach continues for more than 15 days following notice to
the Company by the Holder.
If an Event of Default occurs and is continuing, the principal of and interest
on this Note shall become and be immediately due and payable without any
declaration or other act on the part of Holder.
Holder may waive an existing Default or Event of Default and its consequences.
When a Default or Event of Default is waived, it is cured and ceases.
8. Expenses of Enforcement. The Company agrees to reimburse Holder upon
demand for all reasonable out-of-pocket expenses, including reasonable
attorneys' fees, in connection with Holder's enforcement of the Company's
obligations hereunder.
9. Investment Intent. Holder, by acceptance hereof, agrees to give
written notice to the Company before transferring this Note of Holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Note. Promptly upon receiving such written notice, the Company shall
present copies thereof to counsel for the Company. If, in the opinion of such
counsel, the proposed transfer of this Note may be effected without registration
or qualification (under any federal or state law) of this Note, the Company, as
promptly as practicable, shall notify Holder of such opinion, whereupon Holder
shall be entitled to transfer this Note, all in accordance with the terms of the
notice delivered by Holder to the Company, provided that an appropriate legend
in substantially the form set forth at the end of this Note respecting the
foregoing restrictions on transfer and disposition may be endorsed on this Note.
10. Notices. All demands and notices to be given hereunder shall be
delivered or sent by certified mail, return receipt requested; in the case of
the Company, addressed to its corporate headquarters in Edina, Minnesota, and in
the case of Holder, addressed to the address written above, in either case,
until a new address shall have been substituted by like notice.
11. Amendment. Neither this Note nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
IN WITNESS WHEREOF, Company has caused this Note to be executed on its
behalf by its duly authorized officer on the day and year first above written.
CORVU CORPORATION
By:
Its:
<PAGE>
EXHIBIT B
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED,
PLEDGED OR OTHEWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH SECURITY OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THIS SECURITY
(CONCURRED TO BY COUNSEL FOR THE COMPANY) STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECUERITIES ACT OF 1933 AND ALL
APPLICABLE STATE SECURITIES LAWS.
WARRANT
FOR
SHARES OF COMMON STYOCK
OF
CORVU CORPORATION
FOR VALUE RECEIVED, Gildea Management Company-The Network Funds or its
successors or assigns ("Holder"), is hereby entitled to subscribe for and
purchase from CorVu Corporation, a Minnesota corporation (the "Company"), up to
Two Hundred and Twenty-Five Thousand (225,000) fully paid and non assessable
shares (the "Warrant Shares") of the Company's Common Stock, par value $.01 per
share (the "Common Stock") at an exercise price per share equal to $.01 per
share (the "Warrant Exercise Price").
This warrant may be exercised by Investor at any time prior to five
year anniversary of the date hereof.
This warrant is subject to the following provisions, terms and
conditions:
1. (a) The rights represented by this warrant may be exercised by
Holder, in whole or in part, by written notice of exercise substantially in the
form attached hereto delivered to the company at least twenty (20) days prior to
the intended date of exercise and by the surrender of this warrant (properly
endorsed if required) at the principal office of the Company and upon Holder's
payment to the Company by cash, certified check or bank draft of the purchase
price for such shares or by exercise of the Conversion Right as provided in (b)
below. The Warrant Shares so purchased shall be deemed to be issued as the close
of business on the date on which this warrant has been exercised by payment to
the Company of the Warrant Exercise Price, unless the Conversion Right has been
exercised. Certificates for the shares of stock so purchased, bearing the
restrictive legend set forth at the end of this warrant, shall be delivered to
the holder within fifteen (15) days after the rights represented by this warrant
shall have been so exercised, and, unless this warrant has expired, a new
warrant representing the number of Warrant Shares, if any, with respect to which
this warrant has not been exercised shall also be delivered to the Holder hereof
within such time. No fractional shares shall be issued upon the exercise of this
warrant.
(b) In lieu of payment, the rights represented by this warrant
may also be exercised by a written notice of exercise specifying that Holder
wishes to convert all of this warrant (the "Conversion Right") into that number
of shares of Common Stock equal to the quotient obtained by dividing (x) the
value of the shares subject to the warrant (determined by subtracting the
aggregate warrant exercise price in effect immediately prior to the exercise of
the Conversion Right from the aggregate fair market value of the shares of
Common Stock issuable upon exercise of this warrant immediately prior to the
exercise of the Conversion Right) by (y) the fair market value of one share of
Common Stock immediately prior to the exercise of the Conversion Right. For
purposes of this section 1(b), the fair market value of a share of Common Stock
as of a particular date (the "Determination Date") shall; mean:
(i) If the company's Common Stock is traded on an
exchange or is quoted on the Nasdaq Stock Market, then the closing or
last sale price, respectively, reported for the business day
immediately preceding the Determination Date.
(ii) If the company's Common Stock is not traded on
an exchange or on the Nasdaq Stock Market, then the mean of the closing
high bid and low asked prices reported for the business day immediately
preceding the Determination Date.
2. The Company covenants and agrees that all Warrant Shares that may be
issued upon the exercise of the rights represented by this warrant shall, upon
issuance, be duly authorized and issued, fully paid and nonassessable shares.
The Company further covenants and agrees that during the period within which the
rights represented by this warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this warrant, a sufficient
number of shares of its Common Stock to provide for the exercise of the rights
represented by this warrant.
3. The Warrant Exercise Price and the number of Warrant Shares shall be
subject to adjustment from time to time as provided in this Section 3.
(a) If the Company at any time divides the outstanding shares
of its Common Stock into a greater number of shares (whether pursuant to a stock
split, stock dividend or otherwise), and conversely, if the outstanding shares
of its common Stock are combined into a smaller number of shares, the Warrant
Exercise Price in effect immediately prior to such division or combination shall
be proportionately adjusted to reflect the reduction or increase in the value of
each such share.
(b) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of the
Company's Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for such shares, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, Holder shall
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this warrant and in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such shares of stock, other
securities or assets as would have been issued or delivered to Holder if it had
exercised this warrant and had received such shares of Common Stock prior to
such reorganization, reclassification, consolidation, merger or sale. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to Holder at the
last address of Holder appearing on the books of the Company, the obligation to
deliver to Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, Holder may be entitled to purchase.
(c) Upon each adjustment of the Warrant Exercise Price, Holder
shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares obtained by multiplying the
Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise Price
resulting from such adjustment.
(d) Upon any adjustment of the Warrant Exercise Price, the
Company shall give written notice thereof, by first class mail, postage prepaid,
addressed to the registered holder of this warrant at the address of such holder
as shown on the books of the Company, which notice shall state the Warrant
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares purchasable at such price upon the exercise of this
warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(e) This Warrant is issued in connection with a certain Bridge
Loan Agreement between the Company and the Holder and a Subordinated Unsecured
Promissory Note made by the company in favor of Holder, each dated as of the
date hereof. In addition to the foregoing adjustments, if the Company fails to
pay such Subordinated Unsecured Promissory Note when due, the number of shares
of Common Stock which Holder shall be entitled to purchase under this Warrant
shall be increased by 12,500, and further increase by an additional 12,500
shares for each 60-0day period thereafter that such Subordinated Unsecured
Promissory Note remains unpaid. Any adjustment pursuant to this subjection (e)
shall not affect the Warrant Exercise Price.
4. This Warrant shall not entitle Holder to any voting rights or other
rights as a shareholder of the Company.
5. Holder, by acceptance hereof, agrees to give written notice to the
Company before transferring this warrant or transferring any Warrant Shares of
Holder's intention to do so, describing briefly the manner of any proposed
transfer of this warrant or such Warrant Shares. Promptly upon receiving such
written notice, the Company shall present copies thereof to counsel for the
Company. If, in the opinion of such counsel, the proposed transfer of this
warrant or disposition of Warrant Shares may be effected without registration or
qualification (under any federal or state law) of this warrant or the Warrant
Shares, the Company, as promptly as practicable, shall notify Holder of such
opinion, whereupon Holder shall be entitled to transfer this warrant or such
Warrant Shares, all in accordance with the terms of the notice delivered by
Holder to the Company, provided that an appropriate legend in substantially the
form set forth at the end of this warrant respecting the foregoing restrictions
on transfer and disposition may be endorsed on this warrant or the certificates
for such Warrant Shares.
6. Subject to the provision of Section 5, this warrant and all rights
hereunder are transferable, in whole or in part, at the principal office of the
Company by Holder in person or by duly authorized attorney, upon surrender of
this warrant properly endorsed to any person or entity who represents in writing
that he/it is acquiring the warrant for investment and without any view to the
sale or other distribution thereof. Holder, by taking or holding this warrant,
consents and agrees that the bearer of this warrant, when endorsed, may be
treated by the Company and all other persons dealing with this warrant as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented by this warrant, or to the transfer hereof on the books of
the Company, any notice to the contrary notwithstanding; but until such transfer
on such books, the Company may treat the registered owner hereof as the owner
for all purposes.
7. Neither this warrant nor any term hereof my be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver discharge or
termination is sought.
8. Section 10 of the Bride Loan Agreement, dated as of the date hereof,
between the Company and Holder contains certain registration rights applicable
to the Warrant Shares.
IN WITNESS WHEREOF, the Company has caused this warrant to be signed
and delivered by a duly authorized officer as of the 15th day of November, 1999.
CORVU CORPORATION
By:
Its:
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT (this "Agreement") is dated as of November
15, 1999, by and between CorVu Corporation (the "Company") and Calton, Inc. (the
"Investor").
RECITALS:
WHEREAS, the Company is in the process of entering into a merger
agreement with Minnesota American, Inc. (the "Reverse Merger") which is not
expected to close until late December 1999; and
WHEREAS, the Company needs cash prior to such expected closing of the
Reverse Merger in order to be able to continue its planned investment in
infrastructure and growth; and
WHEREAS, the Company principal lender has indicated it is unwilling at
this time to increase the Company's line of credit; and
WHEREAS, Investor desires to lend funds to the Company on the terms and
conditions set forth in this Agreement.
AGREEMENT:
Accordingly, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Loan/Promissory Note. Investor agrees to lend to the Company Two
Hundred and Fifty Thousand Dollars ($250,000) and the Company agrees to deliver
to the Investor a subordinated unsecured promissory note, in the form attached
hereto as Exhibit A (the "Note"), in a like amount. The delivery of the Note
shall be made concurrently with delivery of funds to the Company in the amount
set forth above.
2. Conversion of the Note.
(a) Automatic Conversion. To the extent the principal of the
Note is outstanding on the closing of the Reverse Merger transaction,
the entire principal outstanding on the Note and all accrued interest
with respect to such principal shall be automatically converted into
shares of common stock of the Company (or the surviving corporation
pursuant to the Reverse Merger) at a price per share equal to Two
Dollars and No Cents ($2.00), less any shares previously issued on
partial conversion hereof pursuant to subsection (b) below, subject to
adjustment pursuant to sections 4(e) and 4(f) of the Note.
(b) Election to Convert. Notwithstanding the provisions set
forth above, Investor may at any time, at its option, by written notice
(the "Conversion Notice") to the Company, elect to convert all or any
part of the entire outstanding principal amount of the Note plus a pro
rata share of the accrued interest on the then outstanding balance into
common stock of the Company at a price per share equal to Two Dollars
and No Cents ($2.00) per share.
(c) Delivery of Conversion Shares. The Common Stock issued on
conversion of the Note (the "Conversion Shares") shall be delivered as
follows:
As promptly as practicable after conversion, the Company shall
deliver to Investor, or to such person or persons as are
designated by Investor in the Conversion Notice, a certificate
or certificates representing the number of shares of Common
Stock into which the Note or portion thereof is to be
converted in such name or names as are specified in the
Conversion Notice, together with, in the case of conversion of
the entire remaining principal balance hereof, any cash
payable in respect of a fractional share.
In the event that less than the entire outstanding principal
balance of the Note is converted hereunder, the Note shall not
be surrendered for cancellation but shall have the fact and
amount of conversion recorded on the face of the Note by
writing acknowledged by Investor and the Company. If less than
the entire principal balance of the Note is converted, the
amount of principal converted shall be reduced to the nearest
amount that results in no fractional shares.
(d) Reservation of Shares. The Company agrees that, during the
period within which the Note may be converted, the Company will at all
times have authorized and in reserve, and will keep available solely
for delivery upon the conversion of the Note, common stock and other
securities and properties as from time to time shall be receivable upon
the conversion of the Note, free and clear of all restrictions on
issuance, sale or transfer other than those imposed by law and free and
clear of all pre-emptive rights. The Company agrees that the common
stock represented by each and every Conversion Share delivered on the
conversion of the Note shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, and the Company
will take all such action as may be necessary to assure that the stated
value or par value per share of the common stock is at all times equal
to or less than the Conversion Price.
3. Warrants. In consideration of the loan, the Company shall issue to
Investor, concurrently with delivery of the Note, stock purchase warrants, in
the form attached hereto as Exhibit B (the "Warrant"), to purchase Two Hundred
and Twenty-Five Thousand (225,000) shares of Company Common Stock at an exercise
price of $.01 per share. If the Note is not paid when due, the number of shares
purchasable under the Warrant shall increase by Twelve Thousand Five Hundred
(12,500) shares, and further increase by an additional Twelve Thousand Five
Hundred (12,500) shares for each 60-day period thereafter that the Note remains
unpaid. The shares of Company Common Stock issuable upon exercise of the Warrant
are referred to hereinafter as the "Warrant Shares."
4. Repayment. All outstanding principal and accrued interest on the
Note shall be due and payable 120 days after the date hereof; provided, however,
that notwithstanding the foregoing, the entire principal outstanding on the Note
and all accrued interest with respect to such principal shall be automatically
converted into shares of common stock of the Company within three business days
after the closing of the Reverse Merger transaction. The Note may be prepaid at
any time without penalty.
5. Use of Proceeds. The Company will use the proceeds of the loan
solely for working capital and general corporate purposes.
6. Subordination. The Note shall be subordinate to all senior debt of
the Company as set forth in Section 6 of the Note.
7. Restrictions on Transfer. The Note, the Warrant, and the Warrant
Shares shall be subject to certain restrictions on transfer identified in the
Note and the Warrant.
8. Representations and Warranties of the Company. The Company
represents and warrants as follows:
(a) This Agreement has been duly authorized by all necessary
corporate action on behalf of the Company, has been duly executed and
delivered by an authorized officer of the Company, and is a valid and
binding agreement on the part of the Company.
(b) All corporate action necessary to the authorization,
issuance, and delivery of the Note, the Warrant, and the Warrant Shares
has been taken on or prior to the date hereof.
(c) As of the date hereof, this Agreement, the Note, and the
Warrant, taken as a whole, do not contain an untrue statement of a
material fact or omit to state a material fact required in light of the
circumstances under which such statements were made to be stated in
such documents to make the statements in such documents, taken as a
whole, not misleading.
9. Representations and Warranties of the Investor. Investor represents
and warrants to the Company as follows:
(a) This Agreement has been duly authorized by all necessary
corporate or partnership action on behalf of Investor, has been duly
executed and delivered by an authorized officer of Investor, and is a
valid and binding agreement on the part of Investor.
(b) Investor is an "accredited investor" as defined in Rule
501(a) of Regulation D of the Securities Act of 1933 (the "Securities
Act"), and was not formed for the purpose of making this investment.
The Note and the Warrant are being purchased by Investor in Investor's
name solely for Investor's own beneficial interest and not as nominee
for, or on behalf of, or for the beneficial interest of, or with the
intention to transfer to, any other person, trust or organization.
(c) Investor has such knowledge and experience in financial
and business matters that Investor is capable of evaluating the merits
and risks of the prospective investment in the Note and Warrants and
has the net worth to undertake such risks. Investor is in a financial
position to hold the Note, the Warrant and the Warrant Shares for an
indefinite period of time and is able to bear the economic risk and
withstand a complete loss of Investor's investment therein. Investor
believes that the investment in the Note and Warrants is suitable for
the Investor based upon Investor's investment objectives and financial
needs.
(d) Investor realizes that (i) the purchase of the Note and
the Warrant is a long-term investment, (ii) Investor must bear the
economic risk of investment for an indefinite period of time because
the Note, the Warrant, and the Warrant Shares have not been registered
under the Securities Act or under the securities laws of any state and,
therefore, none of such securities can be sold unless they are
subsequently registered under said laws or exemptions from such
registrations are available; (iii) Investor may not be able to
liquidate Investor's investment in the event of an emergency or pledge
any of such securities as collateral for loans; and (iv) the
transferability of such securities is restricted and legends will be
placed on the Note and the Warrant and on any certificates representing
the Warrant Shares referring to the applicable restrictions on
transferability.
(e) Investor has been given access to full and complete
information regarding the Company and has utilized such access to
Investor's satisfaction for the purpose of obtaining information
concerning the Company and to obtain any additional information, to the
extent reasonably available, necessary to verify the accuracy of
information provided to Investor.
(f) Investor is not subject to the backup withholding
provisions of Section 3406(a)(i)(C) of the Internal Revenue Code of
1986, as amended (Note: You are subject to backup withholding if (i)
you fail to furnish your Social Security number or taxpayer
identification number herein; (ii) the Internal Revenue Service
notifies the Company that You furnished an incorrect Social Security
number or taxpayer identification number; (iii) you are notified that
you are subject to backup withholding; or (iv) you fail to certify that
you are not subject to backup withholding or you fail to certify your
Social Security number or taxpayer identification number).
(g) Investor does not own voting securities of any brokerage
firm. No director, officer, partner or 5% owner of Investor is also a
director, officer, partner, branch manager, registered representative,
employee, shareholder of, or similarly related to or employed by, a
brokerage firm.
10. Registration Rights.
(a) Each time the Company shall determine to proceed with the
actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for money
of any of its securities by it (other than a registration statement on
Forms S-4 and S-8, or successors thereto), the Company will give
written notice of its determination to Investor. Upon the written
request of Investor given within 30 days after the date of mailing of
any such notice from the Company, the Company will, except as herein
provided, cause all the Conversion Shares and the Warrant Shares issued
and to be issued upon exercise of the Warrants requested by Investor to
be registered, to be included in such registration statement, all to
the extent requisite to permit the sale or other disposition by
Investor of the Conversion Shares and the Warrant Shares to be so
registered; provided, however, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any such registration
initiated by it. If any such registration shall be underwritten in
whole or in part, the Company may require that the shares requested for
inclusion by Investor pursuant to this paragraph (a) be included in the
underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If in the good faith
judgment of the managing underwriter of such public offering the
inclusion of all of the shares originally covered by a request for
registration made by Investor would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of
the shares of stock offered by the Company, the number of shares owned
by Investor and otherwise to be included in the underwritten public
offering may be reduced; provided, however, that any such required
reduction shall be pro rata among all persons (other than the Company)
who are participating in such offering. Those shares which are thus
excluded from such underwritten public offering shall be withheld from
the market by Investor for a period, not to exceed 180 days, which the
managing underwriter reasonably determines is necessary in order to
effect the underwritten public offering.
(b) With respect to each inclusion of securities in a
registration statement pursuant to this Section 10, the Company shall
bear the following fees, costs and expenses: all registration, filing
and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if the Company is
required to bear such fees and disbursements), all internal expenses,
the premiums and other costs of policies of insurance against liability
arising out of the public offering, and legal fees and disbursements
and other expenses of complying with state securities laws of any
jurisdictions in which the securities to be offered are to be
registered or qualified. Fees and disbursements of special counsel and
accountants for the selling holders, underwriting discounts and
commissions, and transfer taxes for selling holders and any other
expenses relating to the sale of securities by the selling holders not
expressly included above shall be borne by the selling holders.
(c) The Company shall indemnify Investor, its officers and
directors and each person, if any, who controls Investor within the
meaning of Section 15 of the Securities Act against all losses, claims,
damages, and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement or prospectus (and as amended or supplemented) relating to
such registration, or caused by any omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances under which they are made, unless such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Company expressly for use therein by
Investor.
(d) Investor shall indemnify the Company, its officers and
directors and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act against all losses, claims,
damages, and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement or prospectus (and as amended or supplemented) relating to
such registration, or caused by any omission or alleged omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances under which they are made, provided that this paragraph
(d) shall apply only to statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
expressly for use therein by the Investor.
(e) The registration rights provided in this section shall
apply to the Conversion Shares and the Warrant Shares of the surviving
company received by the Investor as a result of the terms of the
Reverse Merger.
11. Other.
(a) This Agreement and the rights and obligations of the
parties hereunder shall not be assignable, in whole or in part, by any
party without the prior written consent of the other party, and neither
this Agreement nor any provision hereof may be amended, modified,
waived or discharged without the written consent of the party against
whom enforcement of such amendment, modification, waiver, or discharge
is sought.
(b) This Agreement, including the exhibits attached hereto,
constitutes the entire agreement of the parties relative to the subject
matter hereof and supersedes any and all other agreements and
understandings, whether written or oral, relative to the matters
discussed herein.
(c) This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota, except for its
rules relating to conflicts of law.
(d) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) The Company agrees to reimburse Investor for up to $2,500
of fees or expenses incurred by Investor in connection with this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date set forth above.
CORVU CORPORATION
By:
Its:
CALTON, INC.
By:
Its:
Address: ________________
Tax I.D. No.: ________________
<PAGE>
EXHIBIT A
THIS NOTE, AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE REOFFERED, SOLD, TRANSFERRED, PLEDGED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (1) REGISTRATION UNDER SUCH ACT OR LAWS
OR (2) AN OPINION OF COUNSEL FOR THE COMPANY OR OTHER COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
SUBORDINATED UNSECURED CONVERTIBLE PROMISSORY NOTE
$250,000 Minneapolis, Minnesota
November 15, 1999
FOR VALUE RECEIVED, the undersigned, CorVu Corporation, a Minnesota corporation
(the "Company"), promises to pay to Calton, Inc., or its permitted successors
and assigns ("Holder"), at Holder's address set forth in the Loan Agreement (as
defined below), or such other place as Holder may designate in writing from time
to time, the principal sum of Two Hundred and Fifty Thousand Dollars ($250,000),
in lawful money of the United States, together with simple interest from the
date hereof on the unpaid principal balance outstanding from time to time at the
rate of ten percent (10%) per year (calculated on the basis of the actual number
of days elapsed and a 360-day year). The entire unpaid principal balance on this
Note and accrued interest thereon shall be due and payable on 120 days from the
date first above written, unless converted prior thereto pursuant to the terms
hereof.
1. Bridge Loan Agreement. This Note has been issued pursuant to the
terms and provisions of the Bridge Loan Agreement (the "Loan Agreement"), dated
as of __________________, between the Company and Holder, and this Note and
Holder are entitled to all the benefits provided for in the Loan Agreement.
2. Prepayment. This Note may be prepaid at any time without penalty.
3. Unsecured Note. This Note is unsecured and the Company and Holder
agree that this Note shall not be secured at any time in the future by a grant
of a security interest in any assets of the Company, whether or not those assets
are owned by the Company at this time or acquired by the Company on a date
subsequent to the date hereof. The provisions of this Section 3 are designed for
the benefit of the third party senior creditors as well as the Company and
Holder.
4. Conversion of this Note.
(a) Automatic Conversion. To the extent the principal of this
Note is outstanding on the closing of the Reverse Merger transaction,
the entire principal outstanding on this Note and all accrued interest
with respect to such principal shall be automatically converted into
shares of common stock of the Company or the surviving corporation
pursuant to the Reverse Merger at a price per share equal to Two
Dollars and No Cents ($2.00), less any shares previously issued on
partial conversion hereof pursuant to subsection (b) below, subject to
the adjustment pursuant to sections 4(e) and 4(f) of the Note.
(b) Election to Convert. Notwithstanding the provisions set
forth above, Investor may at any time, at its option, by written notice
(the "Conversion Notice") to the Company, elect to convert all or any
part of the entire outstanding principal amount of this Note plus a pro
rata share of the accrued interest on the then outstanding balance into
common stock of the Company at a price per share equal to Two Dollars
and No Cents ($2.00) per share.
(c) Delivery of Conversion Shares. The Common Stock issued on
conversion of this Note (the "Conversion Shares") shall be delivered as
follows:
As promptly as practicable after conversion, the Company shall
deliver to Investor, or to such person or persons as are
designated by Investor in the Conversion Notice, a certificate
or certificates representing the number of shares of Common
Stock into which this Note or portion thereof is to be
converted in such name or names as are specified in the
Conversion Notice, together with, in the case of conversion of
the entire remaining principal balance hereof, any cash
payable in respect of a fractional share.
In the event that less than the entire outstanding principal
balance of this Note is converted hereunder, this Note shall
not be surrendered for cancellation but shall have the fact
and amount of conversion recorded on the face of this Note by
writing acknowledged by Investor and the Company. If less than
the entire principal balance of this Note is converted, the
amount of principal converted shall be reduced to the nearest
amount that results in no fractional shares.
(d) Reservation of Shares. The Company agrees that, during the
period within which this Note may be converted, the Company will at all
times have authorized and in reserve, and will keep available solely
for delivery upon the conversion of this Note, common stock and other
securities and properties as from time to time shall be receivable upon
the conversion of this Note, free and clear of all restrictions on
issuance, sale or transfer other than those imposed by law and free and
clear of all pre-emptive rights. The Company agrees that the common
stock represented by each and every Conversion Share delivered on the
conversion of this Note shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, and the Company
will take all such action as may be necessary to assure that the stated
value or par value per share of the common stock is at all times equal
to or less than the Conversion Price.
(e) Protection Against Dilution. In case of any consolidation
with or merger of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the surviving or
continuing corporation), or in case of any sale, lease or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall (i) execute with the Holder an
agreement providing that the Holder shall have the right thereafter to
receive upon conversion of this Note solely the kind and amount of
shares of stock and other securities, property, cash or any combination
thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of shares of Common Stock for
which this Note might have been converted immediately prior to such
consolidation, merger, sale, lease or conveyance, (ii) make effective
provision in its articles of association or otherwise, if necessary, in
order to effect such agreement, and (iii) set aside or reserve, for the
benefit of the Holder, the stock, securities, property and cash to
which the Holder would be entitled upon conversion of this Note.
(f) Additional Protection Against Dilution. If the Company (i)
pays a dividend or makes a distribution on its Common Stock in shares
of its Common Stock; (ii) subdivides its outstanding shares of Common
Stock into a greater number of shares; (iii) combines its outstanding
shares of Common Stock into a smaller number of shares; (iv) makes a
distribution on its Common Stock in shares of its capital stock other
than Common Stock or (v) issues by reclassification of its Common Stock
any shares of its capital stock; then the conversion privilege and the
Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of this Note shall, upon conversion,
receive the number of shares of capital stock which such holder would
have owned immediately following such action if the Holder had
converted the Note immediately prior to such action. The adjustment
shall become effective immediately after the record date in the case of
a dividend or distribution and immediately after the effective date in
the case of a subdivision, combination or reclassification.
5. Notification of Reverse Merger. The Company shall notify Holder of
the anticipated closing of the Reverse Merger at least three (3) business days
prior to the date thereof.
6. Subordination. The indebtedness evidenced by this Note is and shall
remain subordinate in right of payment to all Senior Debt to the extent and in
the manner hereinafter set forth. "Senior Debt" shall mean the principal and
interest on indebtedness of the Company to financial institutions for borrowed
money (other than the indebtedness evidenced by this Note), and for purchase
money loans secured by real estate or personal property used in connection with
the business of the Company, whether created, incurred or assumed before or
after the date hereof, except such as by its terms is expressly not superior in
right of payment of this Note, and renewals, extensions and refundings of any
such indebtedness. The subordination provisions contained in this Section 6 are
expressly and only for the benefit of third party senior creditors of the
Company and shall in no way limit the rights or remedies of Holder against the
Company.
No payment of principal or interest on this Note shall be made if the Company is
in default or breach, or such payment would result in a default or breach, with
respect to any Senior Debt. For purposes of this paragraph, default or breach
with respect to any Senior Debt shall refer to a failure of the Company (i) to
pay in full when due the principal of or interest or premium on any such Senior
Debt, or any portion thereof, according to its terms, or (ii) to be in
compliance with any covenant in any loan agreement, security agreement or
related agreement between the Company and the holder of such Senior Debt. Upon
any distribution of assets of the Company, upon dissolution, winding up,
liquidation or reorganization of the Company, whether in bankruptcy, insolvency
or receivership proceedings, or upon an assignment for the benefit of the
Company, or otherwise, Senior Debt shall first be paid in full, or provision
made for such payment in cash, before any payment is made on account of the
principal of or interest on this Note. In such events, upon payment in full of
all Senior Debt, Holder shall be subrogated ratably to all rights of such Senior
Debtors to receive payments or distributions of the assets of the Company
applicable to such Senior Debt until the principal of and interest on this Note
shall be paid in full. If Holder receives any payment on the indebtedness owed
to it by the Company as evidenced by this Note that Holder is not entitled to
receive under the provisions of this Note, Holder will hold the amount so
received in trust for the third party senior creditors and will turn over such
payment to the third party senior creditors in the form received (except for the
endorsement of Holder where necessary) for application to the then-existing
Senior Debt, whether or not due. If Holder exercises any right of setoff which
Holder is not permitted to exercise under the provisions of this Note, Holder
will promptly pay over to the third party senior creditors, in immediately
available funds, an amount equal to the amount of the claims or obligations
offset.
Notwithstanding the foregoing, payment of principal and interest on this Note
shall not be subordinated to the prior payment of such Senior Debt as to all
amounts which actually are paid by the Company under this Note if the Company is
not in default or breach with respect to any Senior Debt at the time or times
such payment or payments are made.
7. Default. "Default" means any event which is, or after notice or
passage of time, or both, would be, an Event of Default. An "Event of Default"
occurs if:
(a) the Company fails to make any payment on this Note when
the same becomes due and payable, and such default continues for a
period of 15 days;
(b) the Company defaults in the payment of interest or
principal on any Senior Debt and such Senior Debt shall, as a result
thereof, have been accelerated (or comparable event shall have
occurred) so that the same shall have become due and payable prior to
the date on which the same would otherwise have become due and payable
and such acceleration has been in effect without rescission or
annulment for a period of 30 days; provided, however, that if such
default in the payment of interest or principal on any Senior Debt
shall be remedied or cured by the Company or waived by the holders of
such Senior Debt, or if such acceleration shall have been rescinded or
annulled by the holders of such Senior Debt, then, unless this Note
shall have been accelerated as provided in this Note, the Event of
Default hereunder by reason thereof shall be deemed likewise to have
been thereupon remedied, cured or waived without further action upon
the part of the Holder.
(c) proceedings under any bankruptcy or insolvency law or
other law for the reorganization, arrangement, composition or similar
relief or aid of debtors or creditors are commenced and such proceeding
remain undismissed and unstayed for a period of 60 days following
notice to the Company by the Holder.
(d) the Company is in material breach of any provision of this
Note, which breach continues for more than 15 days following notice to
the Company by the Holder.
If an Event of Default occurs and is continuing, the principal of and interest
on this Note shall become and be immediately due and payable without any
declaration or other act on the part of Holder.
Holder may waive an existing Default or Event of Default and its consequences.
When a Default or Event of Default is waived, it is cured and ceases.
8. Expenses of Enforcement. The Company agrees to reimburse Holder upon
demand for all reasonable out-of-pocket expenses, including reasonable
attorneys' fees, in connection with Holder's enforcement of the Company's
obligations hereunder.
9. Investment Intent. Holder, by acceptance hereof, agrees to give
written notice to the Company before transferring this Note of Holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Note. Promptly upon receiving such written notice, the Company shall
present copies thereof to counsel for the Company. If, in the opinion of such
counsel, the proposed transfer of this Note may be effected without registration
or qualification (under any federal or state law) of this Note, the Company, as
promptly as practicable, shall notify Holder of such opinion, whereupon Holder
shall be entitled to transfer this Note, all in accordance with the terms of the
notice delivered by Holder to the Company, provided that an appropriate legend
in substantially the form set forth at the end of this Note respecting the
foregoing restrictions on transfer and disposition may be endorsed on this Note.
10. Notices. All demands and notices to be given hereunder shall be
delivered or sent by certified mail, return receipt requested; in the case of
the Company, addressed to its corporate headquarters in Edina, Minnesota, and in
the case of Holder, addressed to the address written above, in either case,
until a new address shall have been substituted by like notice.
11. Amendment. Neither this Note nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
IN WITNESS WHEREOF, Company has caused this Note to be executed on its
behalf by its duly authorized officer on the day and year first above written.
CORVU CORPORATION
By:
Its:
<PAGE>
EXHIBIT B
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED,
PLEDGED OR OTHEWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH SECURITY OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THIS SECURITY
(CONCURRED TO BY COUNSEL FOR THE COMPANY) STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECUERITIES ACT OF 1933 AND ALL
APPLICABLE STATE SECURITIES LAWS.
WARRANT
FOR
SHARES OF COMMON STYOCK
OF
CORVU CORPORATION
FOR VALUE RECEIVED, Calton, Inc. or its successors or assigns
("Holder"), is hereby entitled to subscribe for and purchase from CorVu
Corporation, a Minnesota corporation (the "Company"), up to Two Hundred and
Twenty-Five Thousand (225,000) fully paid and non assessable shares (the
"Warrant Shares") of the Company's Common Stock, par value $.01 per share (the
"Common Stock") at an exercise price per share equal to $.01 per share (the
"Warrant Exercise Price").
This warrant may be exercised by Investor at any time prior to five
year anniversary of the date hereof.
This warrant is subject to the following provisions, terms and
conditions:
1. (a) The rights represented by this warrant may be exercised by
Holder, in whole or in part, by written notice of exercise substantially in the
form attached hereto delivered to the company at least twenty (20) days prior to
the intended date of exercise and by the surrender of this warrant (properly
endorsed if required) at the principal office of the Company and upon Holder's
payment to the Company by cash, certified check or bank draft of the purchase
price for such shares or by exercise of the Conversion Right as provided in (b)
below. The Warrant Shares so purchased shall be deemed to be issued as the close
of business on the date on which this warrant has been exercised by payment to
the Company of the Warrant Exercise Price, unless the Conversion Right has been
exercised. Certificates for the shares of stock so purchased, bearing the
restrictive legend set forth at the end of this warrant, shall be delivered to
the holder within fifteen (15) days after the rights represented by this warrant
shall have been so exercised, and, unless this warrant has expired, a new
warrant representing the number of Warrant Shares, if any, with respect to which
this warrant has not been exercised shall also be delivered to the Holder hereof
within such time. No fractional shares shall be issued upon the exercise of this
warrant.
(b) In lieu of payment, the rights represented by this warrant
may also be exercised by a written notice of exercise specifying that Holder
wishes to convert all of this warrant (the "Conversion Right") into that number
of shares of Common Stock equal to the quotient obtained by dividing (x) the
value of the shares subject to the warrant (determined by subtracting the
aggregate warrant exercise price in effect immediately prior to the exercise of
the Conversion Right from the aggregate fair market value of the shares of
Common Stock issuable upon exercise of this warrant immediately prior to the
exercise of the Conversion Right) by (y) the fair market value of one share of
Common Stock immediately prior to the exercise of the Conversion Right. For
purposes of this section 1(b), the fair market value of a share of Common Stock
as of a particular date (the "Determination Date") shall; mean:
(i) If the company's Common Stock is traded on an
exchange or is quoted on the Nasdaq Stock Market, then the closing or
last sale price, respectively, reported for the business day
immediately preceding the Determination Date.
(ii) If the company's Common Stock is not traded on
an exchange or on the Nasdaq Stock Market, then the mean of the closing
high bid and low asked prices reported for the business day immediately
preceding the Determination Date.
2. The Company covenants and agrees that all Warrant Shares that may be
issued upon the exercise of the rights represented by this warrant shall, upon
issuance, be duly authorized and issued, fully paid and nonassessable shares.
The Company further covenants and agrees that during the period within which the
rights represented by this warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this warrant, a sufficient
number of shares of its Common Stock to provide for the exercise of the rights
represented by this warrant.
3. The Warrant Exercise Price and the number of Warrant Shares shall be
subject to adjustment from time to time as provided in this Section 3.
(a) If the Company at any time divides the outstanding shares
of its Common Stock into a greater number of shares (whether pursuant to a stock
split, stock dividend or otherwise), and conversely, if the outstanding shares
of its common Stock are combined into a smaller number of shares, the Warrant
Exercise Price in effect immediately prior to such division or combination shall
be proportionately adjusted to reflect the reduction or increase in the value of
each such share.
(b) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of the
Company's Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for such shares, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, Holder shall
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this warrant and in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such shares of stock, other
securities or assets as would have been issued or delivered to Holder if it had
exercised this warrant and had received such shares of Common Stock prior to
such reorganization, reclassification, consolidation, merger or sale. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to Holder at the
last address of Holder appearing on the books of the Company, the obligation to
deliver to Holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, Holder may be entitled to purchase.
(c) Upon each adjustment of the Warrant Exercise Price, Holder
shall thereafter be entitled to purchase, at the Warrant Exercise Price
resulting from such adjustment, the number of shares obtained by multiplying the
Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Exercise Price
resulting from such adjustment.
(d) Upon any adjustment of the Warrant Exercise Price, the
Company shall give written notice thereof, by first class mail, postage prepaid,
addressed to the registered holder of this warrant at the address of such holder
as shown on the books of the Company, which notice shall state the Warrant
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares purchasable at such price upon the exercise of this
warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(e) This Warrant is issued in connection with a certain Bridge
Loan Agreement between the Company and the Holder and a Subordinated Unsecured
Promissory Note made by the company in favor of Holder, each dated as of the
date hereof. In addition to the foregoing adjustments, if the Company fails to
pay such Subordinated Unsecured Promissory Note when due, the number of shares
of Common Stock which Holder shall be entitled to purchase under this Warrant
shall be increased by 12,500, and further increase by an additional 12,500
shares for each 60-0day period thereafter that such Subordinated Unsecured
Promissory Note remains unpaid. Any adjustment pursuant to this subjection (e)
shall not affect the Warrant Exercise Price.
4. This Warrant shall not entitle Holder to any voting rights or other
rights as a shareholder of the Company.
5. Holder, by acceptance hereof, agrees to give written notice to the
Company before transferring this warrant or transferring any Warrant Shares of
Holder's intention to do so, describing briefly the manner of any proposed
transfer of this warrant or such Warrant Shares. Promptly upon receiving such
written notice, the Company shall present copies thereof to counsel for the
Company. If, in the opinion of such counsel, the proposed transfer of this
warrant or disposition of Warrant Shares may be effected without registration or
qualification (under any federal or state law) of this warrant or the Warrant
Shares, the Company, as promptly as practicable, shall notify Holder of such
opinion, whereupon Holder shall be entitled to transfer this warrant or such
Warrant Shares, all in accordance with the terms of the notice delivered by
Holder to the Company, provided that an appropriate legend in substantially the
form set forth at the end of this warrant respecting the foregoing restrictions
on transfer and disposition may be endorsed on this warrant or the certificates
for such Warrant Shares.
6. Subject to the provision of Section 5, this warrant and all rights
hereunder are transferable, in whole or in part, at the principal office of the
Company by Holder in person or by duly authorized attorney, upon surrender of
this warrant properly endorsed to any person or entity who represents in writing
that he/it is acquiring the warrant for investment and without any view to the
sale or other distribution thereof. Holder, by taking or holding this warrant,
consents and agrees that the bearer of this warrant, when endorsed, may be
treated by the Company and all other persons dealing with this warrant as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented by this warrant, or to the transfer hereof on the books of
the Company, any notice to the contrary notwithstanding; but until such transfer
on such books, the Company may treat the registered owner hereof as the owner
for all purposes.
7. Neither this warrant nor any term hereof my be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the party against which enforcement of the change, waiver discharge or
termination is sought.
8. Section 10 of the Bride Loan Agreement, dated as of the date hereof,
between the Company and Holder contains certain registration rights applicable
to the Warrant Shares.
IN WITNESS WHEREOF, the Company has caused this warrant to be signed
and delivered by a duly authorized officer as of the 15th day of November, 1999.
CORVU CORPORATION
By:
Its:
CORVU CORPORATION
1996 STOCK OPTION PLAN
(AS AMENDED THROUGH NOVEMBER 30, 1999)
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Affiliates" shall mean a Parent or Subsidiary of the Company.
(b) Committee" shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board. In the
event the Company's securities are registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, each of the members of
the Committee shall be a "Non-Employee Director" within the meaning of
Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Securities Exchange Act of 1934
as amended.
(c) The "Company" shall mean CorVu Corporation, a Minnesota
corporation.
(d) Fair Market Value" shall mean (i) if such stock is reported in the
national market system or is listed upon an established stock exchange
or exchanges, the reported closing price of such stock in such national
market system or on such stock exchange or exchanges on the date the
option is granted or, if no sale of such stock shall have occurred on
that date, on the next preceding day on which there was a sale of
stock; (ii) if such stock is not so reported in the national market
system or listed upon an established stock exchange, the average of the
closing "bid" and "asked" prices quoted by a recognized specialist in
the Common Stock of the Company on the date the option is granted, or
if there are no quoted "bid" and "asked" prices on such date, on the
next preceding date for which there are such quotes; or (iii) if such
stock is not publicly traded as of the date the option is granted, the
per share value as determined by the Board, in its sole discretion by
applying principles of valuation with respect to all such options.
(e) The "Internal Revenue Code" is the Internal Revenue Code of 1986,
as amended from time to time.
(f) "Option Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 12) reserved for options pursuant to
this Plan.
(g) The "Optionee" for purposes of Section 9 is an employee of the
Company or any Subsidiary to whom an incentive stock option has been
granted under the Plan. For purposes of Section 10, the "Optionee" is
the consultant or advisor to or director, employee or officer of the
Company or any Subsidiary to whom a nonqualified stock option has been
granted.
(h) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company's outstanding stock.
(i) The "Plan" means the CorVu Corporation 1996 Stock Option Plan, as
amended hereafter from time to time, including the form of Option
Agreements as they may be modified by the Board from time to time.
(j) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned,
directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
its Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers, directors, employees,
consultants, and advisors upon whose efforts the success of the Company and its
Subsidiaries will depend to a large degree.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code and "nonqualified
stock options" pursuant to Section 10 of this Plan. The grant of all such
options shall, to the extent required, comply with Section 16(b) of the
Securities Exchange Act of 1934, the Internal Revenue Code, or any other
applicable law or regulation. Adoption of this Plan shall be and is expressly
subject to the condition of approval by the shareholders of the Company within
twelve (12) months after the adoption of the Plan by the Board of Directors. In
no event shall any stock options be exercisable prior to the date this Plan is
approved by the shareholders of the Company. If shareholder approval of this
Plan is not obtained within twelve (12) months after the adoption of the Plan by
the Board of Directors, any stock options previously granted shall be revoked.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective upon its adoption by the Board of Directors
of the Company, subject to approval by the shareholders of the Company as
required in Section 2.
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time. The Board or the Committee, as the
case may be, shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to exclusive authority (where applicable and
within the limitations described herein) to determine, in its sole discretion,
whether an incentive stock option or nonqualified stock option shall be granted,
the individuals to whom, and the time or times at which, options shall be
granted, the number of shares subject to each option and the option price and
terms and conditions of each option. The Board, or the Committee, shall have
full power and authority to administer and interpret the Plan, to make and amend
rules, regulations and guidelines for administering the Plan, to prescribe the
form and conditions of the respective stock option agreements (which may vary
from Optionee to Optionee) evidencing each option and to make all other
determinations necessary or advisable for the administration of the Plan. The
Board's, or the Committee's, interpretation of the Plan, and all actions taken
and determinations made by the Board or the Committee pursuant to the power
vested in it hereunder, shall be conclusive and binding on all parties
concerned. No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith in connection with the
administration of the Plan.
In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Board or the Committee, as the case may be, shall from time to
time, at its discretion and without approval of the shareholders, designate
those employees, directors, officers, directors, consultants, and advisors of
the Company or of any Subsidiary to whom nonqualified stock options shall be
granted under this Plan; provided, however, that consultants or advisors shall
not be eligible to receive stock options hereunder unless such consultant or
advisor renders bona fide services to the Company or Subsidiary and such
services are not in connection with the offer or sale of securities in a capital
raising transaction. The Board or the Committee, as the case may be, shall, from
time to time, at its discretion and without approval of the shareholders,
designate those employees of the Company or any Subsidiary to whom incentive
stock options shall be granted under this Plan. The Board or the Committee may
grant additional incentive stock options or nonqualified stock options under
this Plan to some or all participants then holding options or may grant options
solely or partially to new participants. In designating participants, the Board
or the Committee shall also determine the number of shares to be optioned to
each such participant. The Board may from time to time designate individuals as
being ineligible to participate in the Plan.
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Option Stock. Three Million Five Hundred Thousand
(3,500,000) shares of Option Stock shall be reserved and available for options
under the Plan; provided, however, that the total number of shares of Option
Stock reserved for options under this Plan shall be subject to adjustment as
provided in Section 12 of the Plan. In the event that any outstanding option
under the Plan for any reason expires or is terminated prior to the exercise
thereof, the shares of Option Stock allocable to the unexercised portion of such
option shall continue to be reserved for options under the Plan and may be
optioned hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date as defined in
the Plan. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board.
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, certified check, Common Stock of the Company valued at
such stock's then Fair Market Value as defined in Section 9(d) below, or such
other form of payment as may be authorized by the Board or the Committee. The
Board or the Committee may, in its sole discretion, limit the forms of payment
available to the Optionee and may exercise such discretion any time prior to the
termination of the Option granted to the Optionee or upon any exercise of the
Option by the Optionee.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to the Plan shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Board or Committee and may vary from Optionee to Optionee; provided,
however, that each Optionee and each Option Agreement shall comply with and be
subject to the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the incentive stock option. To
the extent required to qualify the Option as an incentive stock option
under Section 422 of the Internal Revenue Code, or any successor
provision, or under the laws of or any other applicable law or
regulation, the option price per share shall not be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock per
share on the date the Board or the Committee, as the case may be,
grants the option; provided, however, that if an Optionee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any
Subsidiary, the option price per share of an incentive stock option
granted to such Optionee shall not be less than one hundred ten percent
(110%) of the Fair Market Value of the Common Stock per share on the
date of the grant of the option. The Board or the Committee, as the
case may be, shall have full authority and discretion in establishing
the option price and shall be fully protected in so doing.
(b) Term and Exercisability of Incentive Stock Option. The term during
which any incentive stock option granted under the Plan may be
exercised shall be established in each case by the Board or the
Committee, as the case may be. To the extent required to qualify the
Option as an incentive stock option under Section 422 of the Internal
Revenue Code, or any successor provision, or any other applicable law
or regulation, in no event shall any incentive stock option be
exercisable during a term of more than ten (10) years after the date on
which it is granted; provided, however, that if an Optionee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any
Subsidiary, the incentive stock option granted to such Optionee shall
be exercisable during a term of not more than five (5) years after the
date on which it is granted. The Option Agreement shall state when the
incentive stock option becomes exercisable and shall also state the
maximum term during which the option may be exercised. In the event an
incentive stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the Option Agreement. The Board or
the Committee, as the case may be, may accelerate the exercise date of
any incentive stock option granted hereunder which is not immediately
exercisable as of the date of grant.
(c) Other Provisions. The Option Agreement authorized under this
Section 9 shall contain such other provisions as the Board or the
Committee, as the case may be, shall deem advisable. Any such Option
Agreement shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary to ensure that such option
will be considered an "incentive stock option" as defined in Section
422 of the Internal Revenue Code or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to the Plan shall be
evidenced by a written Option Agreement. The Option Agreement shall be in such
form as may be approved from time to time by the Board or the Committee and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the nonqualified stock option.
Unless otherwise determined by the Board or the Committee, as the case
may be, the option price per share shall be one hundred percent (100%)
of the Fair Market Value of the Common Stock per share on the date the
Board or the Committee grants the option.
(b) Term and Exercisability of Nonqualified Stock Option. The term
during which any nonqualified stock option granted under the Plan may
be exercised shall be established in each case by the Board or the
Committee, as the case may be. The Option Agreement shall state when
the nonqualified stock option becomes exercisable and shall also state
the maximum term during which the option may be exercised. In the event
a nonqualified stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the stock option agreement. The Board
or the Committee, as the case may be, may accelerate the exercise date
of any nonqualified stock option granted hereunder which is not
immediately exercisable as of the date of grant.
(c) Withholding. The Company or a Subsidiary, as the case may be, shall
be entitled to withhold and deduct from future wages of the Optionee
all legally required amounts necessary to satisfy any and all
withholding and employment-related taxes attributable to the Optionee's
exercise of a nonqualified stock option. In the event the Optionee is
required under the Option Agreement to pay the Company, or make
arrangements satisfactory to the Company respecting payment of, such
withholding and employment-related taxes, the Board or Committee, as
the case may be, may, in its discretion and pursuant to such rules as
it may adopt, permit the Optionee to satisfy such obligation, in whole
or in part, by delivering shares of the Company's Common Stock or by
electing to have the Company withhold shares of Common Stock otherwise
issuable to the Optionee having a Fair Market Value equal to the
minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll
taxes, that are applicable to the supplemental income resulting from
the exercise of the nonqualified stock option. In no event may the
Company withhold shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Optionee's election to
have shares withheld for this purpose shall be made on or before the
date the option is exercised or, if later, the date that the amount of
tax to be withheld is determined under applicable tax law. Such
election shall be approved by the Board or Committee, as the case may
be, and otherwise comply with such rules as the Board or Committee may
adopt to assure compliance with Rule 16b-3, or any successor provision,
as then in effect, of the General Rules and Regulations under the
Securities Exchange Act of 1934, if applicable.
(d) Other Provisions. The Option Agreement authorized under this
Section 10 shall contain such other provisions as the Board, or the
Committee, as the case may be, shall deem advisable.
SECTION 11
TRANSFER OF OPTION
No incentive stock option shall be transferable, in whole or in part,
by the Optionee other than by will or by the laws of descent and distribution
and, during Optionee's lifetime, such option may be exercised only by the
Optionee. If the Optionee shall attempt any transfer of any incentive stock
option granted under the Plan during the Optionee's lifetime, such transfer
shall be void and the incentive stock option, to the extent not fully exercised,
shall terminate.
The Board or Committee, as the case may be, may, in its sole
discretion, permit the Optionee to transfer any or all nonqualified stock
options to any member of the Optionee's "immediate family" as such term is
defined in Rule 16a-1(e) promulgated under the Securities Exchange Act of 1934,
or any successor provision, or to one or more trusts whose beneficiaries are
members of such Optionee's "immediate family" or partnerships in which such
family members are the only partners; provided, however, that the Optionee
cannot receive any consideration for the transfer and such transferred
nonqualified stock option shall continue to be subject to the same terms and
conditions as were applicable to such nonqualified stock option immediately
prior to its transfer.
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Option Stock reserved under Section 6 hereof and the
number of shares of Option Stock covered by each outstanding option and the
price per share thereof shall be adjusted by the Board to reflect such change.
Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to
which the adjustment relates.
Unless otherwise provided in the stock option agreement, in the event
of the sale by the Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend, divestiture
(including a spin-off) or liquidation of the Company (collectively referred to
as a "transaction"), the Board may provide for one or more of the following:
(a) the equitable acceleration of the exercisability of any outstanding
options hereunder;
(b) the complete termination of this Plan and cancellation of
outstanding options not exercised prior to a date specified by the
Board (which date shall give Optionees a reasonable period of time in
which to exercise the options prior to the effectiveness of such
transaction);
(c) that Optionees holding outstanding incentive or nonqualified
options shall receive, with respect to each share of Option Stock
subject to such options, as of the effective date of any such
transaction, cash in an amount equal to the excess of the Fair Market
Value of such Option Stock on the date immediately preceding the
effective date of such transaction over the option price per share of
such options; provided that the Board may, in lieu of such cash
payment, distribute to such Optionees shares of stock of the Company or
shares of stock of any corporation succeeding the Company by reason of
such transaction, such shares having a value equal to the cash payment
herein; or
(d) the continuance of the Plan with respect to the exercise of options
which were outstanding as of the date of adoption by the Board of such
plan for such transaction and provide to Optionees holding such options
the right to exercise their respective options as to an equivalent
number of shares of stock of the corporation succeeding the Company by
reason of such transaction.
The Board may restrict the rights of or the applicability of this Section 13 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code, or any other applicable law or regulation.
The grant of an option pursuant to the Plan shall not limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 13.
INVESTMENT PURPOSE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation, those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Option Stock to Optionee, the Board or Committee, as the case
may be, may require Optionee to (a) represent that the shares of Option Stock
are being acquired for investment and not resale and to make such other
representations as the Board or Committee shall deem necessary or appropriate to
qualify the issuance of the shares as exempt from the Securities Act of 1933 and
any other applicable securities laws, and (b) represent that Optionee shall not
dispose of the shares of Option Stock in violation of the Securities Act of 1933
or any other applicable securities laws.
As a further condition to the grant of any nonqualified stock option or
the issuance of Option Stock to Optionee, Optionee agrees to the following:
(a) In the event the Company advises Optionee that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, and the underwriter(s) seek to
impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of
part or all of their stock purchase rights of the underlying Common
Stock, Optionee will not, for a period not to exceed 180 days from the
prospectus, sell or contract to sell or grant an option to buy or
otherwise dispose of any nonqualified stock option granted to Optionee
pursuant to the Plan or any of the underlying shares of Common Stock
without the prior written consent of the underwriter(s) or its
representative(s).
(b) In the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary
to reduce the number of issued but unexercised stock purchase rights so
as to comply with any states securities or Blue Sky law limitations
with respect thereto, the Board of Directors of the Company shall have
the right (i) to accelerate the exercisability of any nonqualified
stock option and the date on which such option must be exercised,
provided that the Company gives Optionee prior written notice of such
acceleration, and (ii) to cancel any options or portions thereof, in
reverse chronological order based on the date or dates on which such
options or portions thereof would have become exercisable according to
the original vesting schedule set forth in the related stock option
agreements, which Optionee does not exercise prior to or
contemporaneously with such public offering.
(c) In the event of a transaction (as defined in Section 11 of
the Plan) which is treated as a "pooling of interests" under generally
accepted accounting principles, Optionee will comply with Rule 145 of
the Securities Act of 1933 and any other restrictions imposed under
other applicable legal or accounting principles if Optionee is an
"affiliate" (as defined in such applicable legal and accounting
principles) at the time of the transaction, and Optionee will execute
any documents necessary to ensure compliance with such rules.
The Company reserves the right to place a legend on any stock
certificate issued upon exercise of an option granted pursuant to the
Plan to assure compliance with this Section 13.
SECTION 14.
RIGHTS AS A SHAREHOLDER
An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 12 of the Plan).
SECTION 15.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 12, shall
impair the terms and conditions of any option which is outstanding on the date
of such revision or amendment to the material detriment of the Optionee without
the consent of the Optionee. Notwithstanding the foregoing, no such revision or
amendment shall (i) materially increase the number of shares subject to the Plan
except as provided in Section 12 hereof, (ii) change the designation of the
class of employees eligible to receive options, (iii) decrease the price at
which options may be granted, or (iv) materially increase the benefits accruing
to Optionees under the Plan without the approval of the shareholders of the
Company if such approval is required for compliance with the requirements of the
Internal Revenue Code or any other applicable law or regulation. Furthermore,
the Plan may not, without the approval of the shareholders, be amended in any
manner that will cause incentive stock options to fail to meet the requirements
of Section 422 of the Internal Revenue Code, or any other applicable law or
regulation.
SECTION 16.
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ for any period.
CORVU CORPORATION
EXHIBIT 22 TO FORM 10-SB
List of Subsidiaries of Registrant
Name of the Subsidiary Jurisdiction of Incorporation
CorVu Australasia Pty Ltd New South Wales, Australia
CorVu North America Inc. Minnesota, U.S.A.
CorVu Plc England, Great Britain
Subsidiaries of CorVu Plc:
CorVu Benelux B.V. Netherlands
CorVu Deutschland GmbH Germany (in process of being formed)
