U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OF 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT
For the transition period from __________ to __________.
Commission File No. 000-29299
CorVu Corporation
(Exact name of registrant as specified in its charter)
Minnesota 41-1457090 (State of
Incorporation) (IRS Employer ID #)
3400 West 66th Street
Edina, Minnesota 55435
(Address of Principal Executive Offices)
952-944-7777
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months
(or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes ____ No X
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class: Common Stock, par value $.01 per share
Outstanding shares as of May 8, 2000: 19,500,654
<PAGE>
CorVu Corporation
Index to Form 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at March 31, 2000
(unaudited) and June 30, 1999 (audited) 2
Consolidated Statements of Cash Flows (unaudited)
for the nine month periods ended March 31, 2000 and
1999 3
Consolidated Statements of Operations (unaudited) for
the three and nine month periods ended March 31, 2000
and 1999 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Default Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
EXHIBIT INDEX 14
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
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CORVU CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 (Unaudited) and June 30, 1999
March 31,
2000 June 30,
Assets (Unaudited) 1999
------------------ ---------------
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Current assets:
Cash and cash equivalents $ 20,073 31,335
Stock subscription receivable -- 250,000
Trade accounts receivable, net of allowance for doubtful
accounts of $234,363 and $100,000, respectively 3,602,827 3,763,628
Prepaid expenses and other 211,163 176,163
------------------ ---------------
Total current assets 3,834,063 4,221,126
Property and equipment, net 162,862 152,941
------------------ ---------------
$ 3,996,925 4,374,067
================== ===============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 2,312,144 1,904,989
Accrued compensation 1,456,244 1,507,916
Deferred revenue 1,552,672 1,435,792
Accrued interest 50,621 370,287
Other accrued expenses 287,170 192,811
Convertible note payable -- 2,000,000
Notes payable 731,133 1,407,000
Director advances 293,595 444,826
------------------ ---------------
Total current liabilities 6,683,579 9,263,621
------------------ ---------------
Stockholders' deficit:
Undesignated, 24,000,000 shares -- --
Series A convertible preferred stock, par value $10 per share;
1,000,000 shares authorized; 1,700 shares issued and outstanding 17,000 --
Common stock, $0.01 par value; 75,000,000 shares authorized;
19,079,279 and 10,162,200 shares issued and outstanding 190,793 101,622
Additional paid-in capital 11,744,909 2,852,949
Accumulated deficit (14,250,159) (7,980,480)
Deferred compensation (725,550) (75,000)
Foreign currency translation adjustment 336,353 211,355
------------------ ---------------
Total stockholders' deficit (2,686,654) (4,889,554)
------------------ ---------------
Total liabilities and stockholders' deficit $ 3,996,925 4,374,067
================== ===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
Nine Month Periods Ended March 31, 2000 and 1999
2000 1999
----------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,269,679) (1,834,032)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 37,873 26,997
Warrants and stock options granted 2,128,741 419,554
Changes in operating assets and liabilities:
Accounts receivable 160,801 (404,121)
Other current assets (35,000) (124,062)
Accounts payable 407,155 118,170
Accrued compensation (51,672) 298,703
Deferred revenue 116,880 38,167
Accrued interest 20,423 104,573
Other accrued expenses 94,359 223,106
----------------------- -------------------
Net cash used in operating activities (3,390,119) (1,132,945)
----------------------- -------------------
Cash flows from investing activities:
Capital expenditures (47,794) (93,683)
----------------------- -------------------
Net cash used in investing activities (47,794) (93,683)
----------------------- -------------------
Cash flows from financing activities:
Proceeds from sale of common stock, net of costs 3,379,301 3,100
Collection of stock subscription receivable 250,000 --
Borrowings on notes payable 500,000 393,860
Repayment on notes payable (600,000) --
Borrowings on notes payable-director 300,000 486,001
Repayment on notes payable-director (450,000) --
Other (77,648) --
----------------------- -------------------
Net cash provided by financing activities 3,301,653 882,961
Effect of exchange rate changes on cash 124,998 132,196
----------------------- -------------------
Net increase (decrease) in cash and cash equivalents (11,262) (211,471)
Cash and cash equivalents at beginning of period 31,335 287,289
----------------------- -------------------
Cash and cash equivalents at end of period $ 20,073 75,818
======================= ===================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CORVU CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
For the Three and Nine Month Periods Ended March 31, 2000 and 1999
Three Months Ended Nine Months Ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Software $ 1,506,089 1,592,226 5,172,391 4,751,182
Maintenance, consulting, and other 1,574,403 821,028 3,937,660 2,649,315
---------------- --------------- -------------- --------------
Total revenues 3,080,492 2,413,254 9,110,051 7,400,497
---------------- --------------- -------------- --------------
Operating costs and expenses:
Cost of maintenance, consulting, and other 853,230 512,830 2,402,064 1,538,077
Product development 280,095 148,665 759,949 389,261
Sales and marketing 2,484,025 1,713,859 6,333,139 4,447,699
Costs of merger 1,429,339 -- 1,429,339 --
General and administrative 1,193,588 875,375 4,004,875 2,671,179
---------------- --------------- -------------- --------------
Total operating expenses 6,240,277 3,250,729 14,929,366 9,046,216
---------------- --------------- -------------- --------------
Operating loss (3,159,785) (837,475) (5,819,315) (1,645,719)
Interest expense, net (87,325) (67,526) (450,364) (188,313)
---------------- --------------- -------------- --------------
Net loss $ (3,247,110) (905,001) (6,269,679) (1,834,032)
================ =============== ============== ==============
Loss per common share--basic and diluted $ (0.19) (0.10) (0.50) (0.19)
Weighted average shares--basic and diluted 16,686,091 9,491,337 12,589,954 9,490,909
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
CorVu Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements For the
Three and Nine Month Periods Ended March 31, 2000 and 1999
(1) Unaudited Financial Statements
The accompanying unaudited consolidated financial statements of
CorVu Corporation and Subsidiaries 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) 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 1999, the Securities and Exchange Commission (SEC)
staff issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" (SAB 101). SAB 101 summarizes
certain of the SEC staff's views in applying generally accepted
accounting principles to revenue recognition in financial
statements. SAB 101 will be effective for the Company in the first
quarter of fiscal 2001. The adoption is not expected to have a
material impact on the Company's financial position or results of
operations.
(3) Summary of Significant Accounting Policies
(a) Revenue Recognition
The Company recognizes revenue in accordance with Statement of
Position Nos. 97-2 and 98-9, Software Revenue Recognition, with
Respect to Certain Transactions. 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) Stockholder's Deficit
Equity accounts as of March 31, 2000 have been adjusted to reflect
the conversion of shares in connection with the reverse merger
with Minnesota American, Inc. using a conversion rate of 1.125 to
1. This conversion has also been reflected in the calculation of
weighted average shares and resulting net loss per share for the
three and nine-month periods ended March 31, 2000.
(c) Net Loss per Common Share
Basic loss per common share is computed by dividing net loss by
the weighted average number of common shares outstanding during
the period. Diluted loss per common share is computed by dividing
net loss by the weighted average number of common shares
outstanding during the period assuming the exercise of dilutive
stock options and warrants. The dilutive effect of stock options
a warrants is computed using the average market price of the
Company's stock during each period under the treasury stock
method. In periods where losses have occurred, options and
warrants are considered anti-dilutive and thus have not been
included in the diluted loss per common share calculations.
(4) Comprehensive Income
Comprehensive income and its components, including all changes in
equity during a period except those resulting from investments by
owners or distributions to owners are as follows:
<TABLE>
<CAPTION>
-------------------- -------------------- ------------------- -------------------- ------------------
For the Three For the Three For the Nine For the Nine
Months Ended March Months Ended Months Ended March Months Ended
31, 2000 March 31, 1999 31, 2000 March 31, 1999
-------------------- -------------------- ------------------- -------------------- ------------------
-------------------- -------------------- ------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Net Loss $ (3,247,110) $ (905,001) $ (6,269,679) $ (1,834,032)
-------------------- -------------------- ------------------- -------------------- ------------------
-------------------- -------------------- ------------------- -------------------- ------------------
Other
comprehensive loss:
Foreign currency
translation
adjustment
$ 87,599 $ (8,195) $ 124,998 $ 132,196
-------------------- -------------------- ------------------- -------------------- ------------------
Total
comprehensive loss
$ (3,159,511) $ (913,196) $ (6,144,681) $ (1,701,836)
-------------------- -------------------- ------------------- -------------------- ------------------
</TABLE>
(5) 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 nine-month period
ended March 31, 2000, the Company incurred an operating loss of
$5,819,315 and used $3,390,119 of cash in operating activities. As
of March 31, 2000, the Company had an accumulated deficit of
$14,250,159, total stockholders' deficit of $2,686,654, and
negative working capital of $2,849,516. 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 $4.3 million in convertible
debt and 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 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.
(6) Note Payable
In February 1998, the Company entered into a loan agreement in the
amount of $927,014 with a third party lender. During fiscal 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 March 31, 2000
and June 30, 1999 the interest rates were 8.65% and 8.05%,
respectively. The outstanding principal balance became due on
December 15, 1999. In January 2000, the Company repaid $600,000
and continues discussions with the lender regarding repayment of
the remaining balance.
(7) Convertible Bridge Loan
On November 15, 1999, the Company 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. The Company has
recorded a non-cash expense of approximately $183,000 to reflect
the fair value of the warrants issued using the Black-Scholes
pricing model over the period the bridge loan was outstanding
during the nine month period ended March 31, 2000. In addition,
the Company recorded a non-cash expense of approximately $134,000
during the nine month period ended March31, 2000 to reflect the
difference between the $2 per share conversion price and $3 per
share. The fair value of the warrants and the conversion feature
were determined to be $1,345,000 and $250,000, respectively. The
value of the unamortized discount at the time of the conversion
was charged to Additional Paid-in Capital.
(8) 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. In addition, the Company received $950,000 in
cash from Minnesota American, Inc.
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. For
accounting purposes, the Company has estimated the value of the
stock and warrants issued to be $5.3125 per share, the closing
trading price of the stock on the date of the merger and,
accordingly, recorded a charge of approximately $2,124,000 in the
nine-month period ending March 31, 2000. This charge is recorded
in the fiscal quarter ended March 31, 2000 as a $950,000 reduction
to Additional Paid-in Capital based on the amount of cash received
in the merger, with the remainder ($1,174,000) shown as an
operating expense.
(9) Director Advance
In March 2000, the Company received a short-term loan for the
principal amount of $300,000 from a director. The loan was due on
April 30, 2000. Interest is payable based upon a bank index rate
plus 2% (11% as of March 31, 2000). The Company did not repay this
short-term loan on April 30, 2000 and is currently discussing
repayment terms with this director.
(10) Equity Financing
Subsequent to March 31, 2000, CorVu raised a total of $400,000
from the sale of common stock (priced at $4 per share). In
connection with the transactions, the Company also issued warrants
to purchase up to 30,000 shares of common stock at exercise prices
ranging from $4 to $7 per share.
(11) Warrant Dividend
In March 2000, the Company declared a warrant dividend to
shareholders of record as of April 28, 2000. For every ten shares
of common stock held, each shareholder will receive a warrant to
purchase one share of common stock at a price of $8. The warrant
is cancelable, at the Company's option, upon 30 days notice if the
Company's stock closes at a price of $12 per share or higher for
at least ten consecutive trading days.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the Three and Nine Month Periods Ended March 31, 2000 versus March 31, 1999
REVENUES:
Total revenue for the three and nine-month periods ended March 31, 2000
increased 28% and 23%, respectively, compared to the same periods a year ago.
Software and license fee revenues decreased $86,137 (5%) and increased $421,182
(9%) for the three and nine-month periods ended March 31, 2000, respectively,
from the same periods last year. CorVu's management believes several factors are
responsible for these variances. During fiscal year 2000, CorVu changed its
sales and marketing strategy, in order to become a seller of comprehensive
business software offerings for entire organizations. This has resulted in an
increase in the average dollar value of each sale. In addition, the number of
sales people employed increased substantially from 46 as of March 31, 1999 to 73
as of March 31, 2000. The increases discussed above were offset by other
factors: (1) 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 employed previously for the sale of separate tools and modules. As a
result, CorVu experienced temporarily a high turnover in its sales force. The
new sales personnel did not contribute significantly to corporate revenues
because they were not yet fully trained. (2) The described change in the sales
and marketing strategy resulted in an 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 $753,375 (92%) and
$1,288,345 (49%), for the three and nine month periods ended March 31, 2000,
respectively, from the same periods last year, 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 the increased customer base.
OPERATING EXPENSES:
Operating expenses increased by $2,989,548 (92%) and $5,883,150 (65%) for the
three and nine-month periods ended March 31, 2000, respectively, from the same
periods last year.
Cost of maintenance, consulting and other expenses increased $340,400 (66%) and
$863,987 (56%) and product development costs increased $131,430 (88%) and
$370,688 (95%) for the three and nine month periods ended March 31, 2000,
respectively, from the same periods last year. These increases were primarily
caused by the employment of additional professionals in both the consulting and
training services, as well as in the research and development area.
Sales and marketing expenses increased $770,166 (45%) and $1,885,440 (42%) for
the three and nine month periods ended March 31, 2000, respectively, from the
same periods last year, 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.
<PAGE>
Merger costs of $1,429,339 were incurred in the three and nine-month periods
ended March 31, 2000. Costs to complete the reverse merger transaction with
Minnesota American, Inc. included legal, accounting and broker fees.
General and administrative expenses increased $318,213 (36%) and $1,333,696
(50%) for the three and nine-month periods ended March 31, 2000, respectively,
from the same periods last year. The increases were caused by increased
overhead expenditures such as salaries, wages and benefits for administrative
personnel, office rent, equipment rent for computers and communication
equipment, professional services such as legal and accounting fees and
corporate travel expenses.
INTEREST EXPENSE, NET:
Interest expense, net increased by $19,799 (29%) and $262,051 (139%) for the
three and nine-month periods ended March 31, 2000, respectively, compared to the
same periods last year. In November 1999, the Company entered into two loan
agreements with third parties totaling $500,000. The agreement allowed the
holder to convert the debt into common stock at any time at a conversion rate of
$2 per share. In addition, the loan was automatically convertible into common
stock upon the closing of the merger with Minnesota American, Inc. The loan
agreements also called for the issuance of warrants to purchase up to 450,000
shares of common stock at an exercise price of $.01 per share. The increase in
interest expense, net was caused by the recording of approximately $271,000 of
non-cash interest expense charges related to this debt instrument. The non-cash
charges were required to (1) reflect the difference between the $2 per share
conversion price included within the agreements and $3 per share, the Company's
estimate of the fair value of the stock on the date of issuance and, (2) reflect
the fair value of the warrants attached to the debt instrument using the
Black-Scholes pricing model over the period the bridge loan was outstanding.
NET LOSSES:
CorVu Corporation incurred net losses of $3,247,110 and $6,269,679 for the three
and nine-month periods ended March 31, 2000, respectively, compared to net
losses of $905,001 and $1,834,032 for the three and nine-month periods ended
March 31, 1999, respectively.
Liquidity and Capital Resources
Total cash and cash equivalents decreased by $11,262 during the nine-month
period ended March 31, 2000 from $31,335 as of June 30, 1999 to $20,073 as of
March 31, 2000. Net cash used in operating activities was $3,390,119 for the
period ended March 31, 2000. This was caused by the net loss during the period
as discussed above. Net cash used in investing activities was $47,794 for fiscal
2000 reflecting the acquisition of office furniture and computer and office
software and equipment as part of the Company's expansion. Net cash provided by
financing activities was $3,301,653 for the period ended March 31, 2000.
Proceeds from the sale of common stock at prices ranging from $2.00-$4.00 per
share accounted for $3,379,301, net of financing costs. In addition, the Company
collected a stock subscription receivable in the amount of $250,000 and entered
into a $500,000 bridge loan facility as discussed above which was converted to
common stock on January 14, 2000. During the nine-month period ended March 31,
2000, the Company repaid $600,000 of an existing note payable. Additionally, the
Company received borrowings from a director of $300,000 and repaid director
loans in the amount of $450,000.
<PAGE>
In April 2000, the Company sold to four accredited investors a total of 100,000
shares of common stock, together with warrants to purchase up to 30,000 shares
at prices ranging from $4 to $7 per share, for a total purchase price of
$400,000. 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
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. CorVu's management believes that these activities will generate
sufficient cash flows to sustain CorVu's operations through the end of fiscal
2000.
Forward Looking Statements
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.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
During the quarter ended March 31, 2000, the Company made the following
sales of unregistered securities:
(a) In January 2000, the Company issued 13,356,780 shares of Common
Stock in connection with the merger (the "Merger") of former CorVu Corporation
into the Company. The issuance of such shares was deemed to be exempt from
registration under the Securities Act of 1933 by virtue of Rule 506 of
Regulation D thereunder. A restrictive securities legend has been placed on the
certificates representing the shares.
(b) In January 2000, in connection with the Merger, the Company issued
to Old CorVu's business advisor, Jon Adams Financial Co., L.L.P., 389,032 shares
of Common Stock as partial payment for services rendered. The issuance of such
shares was deemed to be exempt from registration under the Securities Act of
1933 by virtue of Rule 506 of Regulation D thereunder. A restrictive securities
legend has been placed on the certificate representing the shares.
<PAGE>
(c) In January 2000, before the Merger, the Company sold 100,000 shares
of Common Stock to Ismail Kurdi, a director of the Company, at a price of $2 per
share. The sale of such stock was deemed to be exempt from registration under
the Securities Act of 1933 by virtue of Rule 506 of Regulation D thereunder. The
purchaser represented his intention to acquire the securities for investment
purposes only and not with a view to the distribution thereof; in addition, a
restrictive securities legend has been placed on the certificate representing
the shares.
(d) In January 2000 the Company issued a 5-year 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. The issuance of such Warrant was deemed to be
exempt from registration under the Securities Act of 1933 by virtue of Rule 506
of Regulation D thereunder. A restrictive securities legend has been placed on
the Warrant certificate.
(e) In January 2000, the Company sold 500,000 shares of Common Stock
and Warrants to purchase 300,000 shares of Common Stock to two accredited
investors for a total purchase price of $1,000,000. The Warrants are exercisable
for a term of 5 years at exercise prices ranging from $2 to $8 per share. Equity
Securities Investments, Inc. received a commission of 7.5% plus a
non-accountable expense allowance of 1% in connection with the sales. The sale
of such securities was deemed to be exempt from registration under the
Securities Act of 1933 by virtue of Rule 506 of Regulation D thereunder. The
purchasers represented their intention to acquire the securities for investment
purposes only and not with a view to the distribution thereof; in addition, a
restrictive securities legend has been placed on the certificates representing
the securities.
(f) In January 2000 the Company issued 285,702 shares of Common Stock
at $2 per share to two business entities, both of which are accredited
investors, in consideration of the conversion of the outstanding principal and
interest under a loan agreement. The sale of such shares was deemed to be exempt
from registration under the Securities Act of 1933 by virtue of Rule 506 of
Regulation D thereunder. The purchasers represented their intention to acquire
the shares for investment purposes only and not with a view to the distribution
thereof; in addition, a restrictive securities legend has been placed on the
certificates representing the shares.
(g) In February 2000 the Company issued 20,000 shares of Common Stock
to one shareholder in connection with the conversion of preferred stock. The
issuance of such shares was deemed to be exempt from registration under the
Securities Act of 1933 by virtue of Section 3(a)(9) thereof. No commission or
other remuneration was paid or given, directly or indirectly, in connection with
such conversion.
(h) In February 2000, in connection with the exercise of stock options
by a former director, the Company sold 1,000 shares of Common Stock at a price
of $0.20 per share and 1,000 shares of Common Stock at a price of $0.13 per
share. The sale of such shares was deemed to be exempt from registration under
the Securities Act of 1933 by virtue of Rule 701 thereunder. A restrictive
securities legend has been placed on the certificate representing the shares.
Item 3. Default Upon Senior Securities.
The Company is in default on a loan agreement with a third party
lender. For details see Part I, Item 1., footnote 6 to Unaudited Consolidated
Financial Statements.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
A special meeting of the shareholders of the Company was held on
January 14, 2000.
At the special meeting the shareholders approved the sale of all of the
issued and outstanding capital stock of LockerMate Corporation by a vote of
2,621,022 shares in favor, with 21,000 shares against, 2,000 shares abstaining
and no broker non-votes.
At the special meeting the shareholders approved the Agreement and Plan
of Merger pursuant to which former CorVu Corporation was merged into the
Company, as well as the amendment and restatement of the Company's Articles of
Incorporation, by a vote of 2,624,022 shares in favor, with 26,000 shares
against, 4,000 shares abstaining and no broker non-votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index on page following Signatures.
(b) No reports on Form 8-K were filed during the quarter ended March
31, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CORVU CORPORATION
Date: May 15, 2000 By /s/ David C. Carlson
David C. Carlson
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
CORVU CORPORATION
FORM 10-QSB
FOR QUARTER ENDED MARCH 31, 2000
Exhibit Number Description
10.1 Agency Agreement, dated March 17, 2000, between the
Company and Equity Securities Investments, Inc.
27 Financial Data Schedule (filed in electronic format only)
AGENCY AGREEMENT
17 March, 2000
Edward S. Adams
President and CEO
Equity Securities Investments, Inc.
130 Cheshire Lane, Suite 103
Minnetonka, MN 55305
Re: Terms of Engagement
Dear Mr. Adams:
The undersigned, CorVu Corporation, a Minnesota corporation (the
"Company"), confirms its agreement with you, Equity Securities Investments, Inc.
(the "Agent"), subject to the terms and conditions stated herein, to act as the
Company's agent with respect to the offer and sale of Two Million Five Hundred
Thousand Dollars ($2,500,000) of the Company's Common Stock ("Common Shares"),
par value $.01 per share. The terms under which the Common Shares will be sold
are described in more detail in the Term Sheet attached hereto as Exhibit A. The
Common Shares, the Agent's Warrant (as defined below) and the Agent's Warrant
Shares (as defined below) are referred to herein collectively as the
"Securities."
1. Appointment of the Agent.
(1) The Company proposes to issue and sell through the Agent
to accredited investors, on a "best efforts" basis, an aggregate of Two Million
Five Hundred Thousand Dollars ($2,500,000) of Common Shares.
There is no minimum number of Common Shares required to be sold in the offering.
(2) Subject to the terms and conditions hereinafter set forth,
the Company hereby engages the Agent as its exclusive agent for a period ending
April 30, 2000, subject to extension for one or more periods of thirty (30) days
each by mutual agreement of the parties hereto, for the purpose of offering and
selling the Common Shares (the "Offering Period"), as provided in this
Agreement. The Agent agrees to use its best efforts to sell the Common Shares as
agent of the Company. It is understood and agreed that there is no obligation on
the part of the Agent to purchase any of the Common Shares not otherwise sold.
(3) As compensation for the Agent's services, the Company will
pay to the Agent a commission of seven and one-half percent (7.50%) of the
aggregate purchase price of the Common Shares sold in the offering and issued
and delivered by the Company. Such commissions will be due and payable by the
Company to the Agent on each Closing Date (as herein defined). The Company will
also issue to the Agent warrants for the purchase of Common Stock as set forth
in Section 8 hereof.
<PAGE>
(4) The first closing and each subsequent closing of the
offering contemplated hereby shall take place at such place, date and time as
shall be mutually agreed upon by the Company and the Agent, but each closing
shall take place promptly after Agent's receipt of funds. Each date of closing
is herein referred to as a "Closing Date," the first such date of closing is
herein referred to as the "First Closing Date" and the last such date of closing
is herein referred to as the "Final Closing Date."
(5) Pending the closing or closings, all funds in payment of
Common Shares shall be deposited in an escrow account with Century Bank. Funds
so deposited will be promptly made available to the Company.
2. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Agent as follows:
(1) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Minnesota, with full corporate power and authority to own, lease, and operate
its properties and conduct its business. The Company is duly qualified to do
business as a foreign corporation in good standing in each jurisdiction in which
the ownership or lease of its properties, or the conduct of its business,
requires such qualification and in which the failure to be so qualified or in
good standing would have a material adverse effect on the business of the
Company.
(2) The Company has no subsidiaries, other than disclosed.
(3) The Company has all necessary and material authorizations,
approvals and orders of and from all governmental regulatory officials and
bodies to own its properties and conduct its business, and is conducting its
business in substantial compliance with all applicable material laws, rules and
regulations of the jurisdictions in which it is conducting business. The Company
holds all material licenses, certificates, and permits from state, federal and
other regulatory authorities necessary for the conduct of its business.
(4) The Company is not in violation of its Articles of
Incorporation or Bylaws, or in default in any performance or observance of any
obligation, agreement, covenant or condition contained in any bond, debenture,
note or other evidence of indebtedness or in any material contract, indenture,
mortgage, loan agreement, joint venture or other agreement or instrument to
which the Company is a party or by which the Company or any of its properties is
bound and which default is material to the business of the Company, except for
that agreement relating to indebtedness connected with Integral Business Finance
Party Limited and certain provisions in one or more registration rights
agreement with certain shareholders of the Company. The Company is not in
violation of any law, order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or foreign, which
violation is material to the business of the Company.
(5) The Company has the full legal right, power and authority
to enter into this Agreement. This Agreement has been authorized, executed and
delivered by the Company and is a valid and binding agreement on the part of the
Company enforceable in accordance with its terms, except as enforceability may
be limited by the application of bankruptcy, insolvency, moratorium, or similar
<PAGE>
laws affecting the rights of creditors generally and judicial limitations on the
right of specific performance, and except as the enforceability of the
indemnification or contribution provisions hereof may be affected by applicable
federal or state securities laws. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a material default under, (i) the Company's Articles of Incorporation
or Bylaws, (ii) any indenture, mortgage, deed of trust, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease, contract, or
instrument to which the Company is a party or by which the property of the
Company is bound, excepting those certain registration rights agreements
referred to in subparagraph (4) above, or (iii) any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Company.
(6) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by the Company
of the transactions on its part herein contemplated, except such as may be
required under the 1933 Act or under any state or other securities or Blue Sky
laws.
(7) There are no actions, suits or proceedings pending before
any court or governmental agency, authority or body to which the Company is a
party or of which the business or property of the Company is the subject which
might result in any material adverse change in the condition (financial or
otherwise), business or prospects of the Company, materially and adversely
affect its properties or assets, or prevent consummation of the transactions
contemplated by this Agreement; and, to the best of the Company's knowledge, no
such actions, suits or proceedings are threatened.
(8) The Company has the duly authorized and outstanding
capitalization represented in its most recent public disclosures. The
outstanding shares of Common Stock of the Company are duly authorized and
validly issued, fully paid and nonassessable. There are no preemptive or other
rights to subscribe for or to purchase, or any restrictions upon the transfer of
the Securities pursuant to the Company's Articles of Incorporation, Bylaws, or
any other governing documents, or any other instrument to which the Company is a
party, and the offering or sale of the Securities as contemplated hereby does
not give rise to any rights by any party to purchase shares of Common Stock or
other securities of the Company. The certificates evidencing shares of Common
Stock comply as to form with all applicable provisions of the laws of the State
of Minnesota.
(9) The Securities offered pursuant to this Agreement have
been duly authorized by all necessary corporate action. Upon payment for the
Securities by the purchasers thereof and delivery of the Securities by the
Company as contemplated herein, the purchasers will acquire good and marketable
title to the Securities, free and clear of all liens, encumbrances or claims.
(10) The Agent's Warrants referred to in Section 8 hereof and
the shares of Common Stock issuable upon exercise of the Agent's Warrants (the
"Agent's Warrant Shares") have been duly authorized by all necessary corporate
action. The Agent's Warrants, when issued and delivered to the Agent, will
constitute valid and binding obligations of the Company in accordance with their
terms, except as enforceability may be limited by the application of bankruptcy,
<PAGE>
insolvency, moratorium or similar laws affecting the rights of creditors
generally and by judicial limitations on the right of specific performance. The
Agent's Warrant Shares have been duly authorized and, when issued in accordance
with the terms of this Agreement and of the Agent's Warrants, will be fully paid
and nonassessable, and subject to no preemptive rights or similar rights on the
part of any person or entity. A sufficient number of shares of Common Stock of
the Company have been reserved for issuance by the Company upon exercise of the
Agent's Warrants.
(11) The Company has good and marketable title to all of the
property, real and personal, represented by the Company as being owned by it,
free and clear of all liens, encumbrances, equities, charges or claims, except
as do not materially interfere with the uses made and to be made by the Company
of such property or as disclosed in the financial statements. The Company has
valid and binding leases to the real and/or personal property described in its
public disclosure documents as being under lease to it, except as to those
leases which are not material to the Company or the lack of enforceability of
which would not materially interfere with the use made and to be made by the
Company of such leased property.
(12) The Company owns or possesses adequate rights to use all
patents, copyrights, trademarks and proprietary rights or information reasonably
necessary for the conduct of its present or intended business and the Company
has not received any notice and is not aware of any infringement of or conflict
with asserted rights of others. There are no pending legal, governmental or
administrative proceedings relating to patents, copyrights, trademarks or
proprietary rights or information, to which the Company is a party or of which
any of its property is subject and no such proceedings are, to the best of the
Company's knowledge, threatened or contemplated against the Company by any
governmental agency or authority or others.
(13) The Company has filed all necessary federal and state
income and franchise tax returns and paid all taxes shown as due thereon and all
assessments received by it to the extent that such taxes have become due and
payable, except where the Company is contesting in good faith such taxes and
assessments. The Company has no knowledge of any tax deficiency which might be
asserted against it which would materially and adversely affect the Company's
business or properties.
(14) No labor disturbance by the employees of the Company
exists or, to the best of the Company's knowledge, is imminent which could
reasonably be expected to have a material adverse effect on the conduct of the
business, operations, financial condition or income of the Company.
(15) To the best of the Company's knowledge, the Company has
not sold any securities in violation of Section 5(a) of the 1933 Act, the
violation of which would have a material adverse effect on the Company.
(16) The Company is not disqualified from claiming exemption
under Regulation D by Rule 507 thereof, and meets the other requirements to
claim exemption under Rule 505 and Rule 506 of Regulation D.
(17) Neither the Company nor any of its predecessors or any
affiliated issuer as those terms are defined under the Rules and Regulations:
<PAGE>
(1) has filed a registration statement which is the
subject of any pending proceeding or examination under Section 8 of the
1933 Act or has been the subject of any refusal order or stop order
entered thereunder;
(2) is or has been subject to proceedings under Rule
258 of the Rules and Regulations or any similar rule adopted under
Section 3(b) of the 1933 Act, or to any order entered thereunder;
(3) has been convicted of any felony or misdemeanor
in connection with the purchase or sale of any security or involving
the making of any false filing with the Commission;
(4) is or has been subject to any order, judgment or
decree of any court of competent jurisdiction temporarily,
preliminarily or permanently restraining or enjoining such person from
engaging in or continuing any conduct or practice in connection with
the purchase or sale of any security or involving the making of any
false filing with the Commission; or
(5) is or has been subject to a United States Postal
Service false representation order.
(18) Neither the Company nor any of its directors, officers or
ten percent (10%) or more security holders, or any of its promoters presently
connected with it in any capacity:
(1) has been convicted of any felony or misdemeanor
in connection with the purchase or sale of any security, involving the
making of a false filing with the Commission or arising out of such
person's conduct of the business of an underwriter, broker, dealer,
municipal securities dealer or investment adviser;
(2) is or has been subject to any order, judgment or
decree of any court of competent jurisdiction temporarily,
preliminarily or permanently enjoining or restraining such person from
engaging in or continuing any conduct or practice in connection with
the purchase or sale of any security, involving the making of a false
filing with the Commission or arising out of such person's conduct of
the business of an underwriter, broker, dealer, municipal securities
dealer or investment adviser;
(3) is or has been subject to an order of the
Commission entered pursuant to Section 15(b), 15B(a) or 15B(c) of the
Securities Exchange Act of 1934 or Section 203(e) or (f) of the
Investment Advisers Act of 1940;
(4) is or has been suspended or expelled from
membership in, or suspended or barred from association with a member
of, a national or provincial security dealers association or a national
securities exchange or a Canadian securities exchange for any act or
omission constituting conduct inconsistent with just and equitable
principles of trade; or
(5) is or has been subject to a United States
Postal Service false representation order.
<PAGE>
3. Agreements of the Company. The Company hereby covenants and agrees
with the Agent that:
(1) The Company will use its best efforts to arrange for the
exemption or qualification of the private placement of the Common Shares in the
State of Minnesota and any other state the Agent may reasonably designate,
provided that such exemption or qualification may be obtained without causing
the Company extraordinary cost or hardship, and provided further, that the
Company shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent.
(2) The Company will advise the Agent promptly upon obtaining
knowledge of the issuance by the Commission or any state securities commission
of any action or order suspending the offer and/or sale of the Common Shares, or
of the institution of any proceeding for that purpose, will use its best efforts
to prevent the issuance of any such action or order and, if such an event
occurs, will obtain as soon as reasonably possible the withdrawal or lifting
thereof.
(3) The Company will not participate in any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D.
(4) The Company shall pay all costs and expenses incident to
the performance of its obligations under this Agreement including, without
limiting the generality of the foregoing, (i) all costs and expenses in
connection with the preparation, printing and filing (if required) of any
relevant materials (including financial statements and exhibits), and any
amendments or supplements thereto; (ii) the printing of any other instruments or
documents relating to any transaction contemplated in this Agreement; (iii) the
issuance and delivery of the Securities, including taxes, if any; (iv) the cost
of all instruments or certificates representing the Securities; (v) the fees and
expenses of the Transfer Agent, if any; (vi) the fees and disbursements of legal
counsel for the Company; (vii) the fees and other charges of the independent
public accountants of the Company; (viii) the cost of furnishing to the Agent,
and all postage and courier charges relating to the distribution by the Agent
of, copies of relevant materials (including appropriate exhibits), and any
amendments or supplements thereto; and (ix) all costs (including attorney's fees
and filing fees) of obtaining exemption from registration of the offer and sale
of the Common Shares under the laws of the Blue Sky jurisdictions designated by
the Agent. The Company's legal counsel shall be responsible for determining and
making any filings or taking any other action necessary to comply with
applicable Blue Sky laws, and shall provide the Agent with a written memorandum
summarizing such actions.
(5) If the offering proposed herein is terminated (i) for any
reason within the control of the Company; (ii) based upon the fact that there
has been a material adverse change in the financial or other affairs of the
Company since the date of the last financial statements of the Company provided
to the Agent; (iii) because any of the Company's warranties or representations
in this Agreement prove untrue; or (iv) because there shall have occurred such a
material change in general economic, political or financial conditions or
because the effect of international conditions on the financial markets in the
<PAGE>
United States becomes such as, in the Agent's judgment, makes it inadvisable to
proceed with the sale of the Common Shares, then the Company shall reimburse the
Agent for its actual, accountable, out-of-pocket expenses (including reasonable
fees and disbursements of legal counsel to the Agent) incurred with respect to
the offering contemplated by this Agreement in an amount not to exceed Ten
Thousand Dollars ($10,000). All reimbursements pursuant to this paragraph shall
occur within thirty (30) days after the Agent delivers to the Company a written
itemization of such expenses. The Agent shall not be responsible for any
expenses of the Company or other parties, relating to the offering contemplated
hereby or otherwise, if such offering is not consummated.
(6) For each period specified below, ending on or
before December 31, 2000, the Company will:
(1) furnish to the Agent, within one hundred twenty
(120) days after the close of each fiscal year, audited annual
consolidated financial statements of the Company and its subsidiaries,
if any, for such fiscal year.
(2) furnish to the Agent, within sixty (60) days
after the end of each of the first three quarters of each fiscal year,
appropriate quarterly consolidated financial statements of the Company
and its subsidiaries, if any, in such form as to disclose the Company's
financial condition at the end of, and results of operations for such
period, which financial statements need not be audited; and
(3) furnish to the Agent copies of all statements and
notices to security holders of the Company and such other information
as the Agent may reasonably request.
(7) The Company shall obtain waivers, in a form satisfactory
to the Agent, of any preemptive or other rights held by any holders of the
Company's capital stock or rights to acquire capital stock, whether such
preemptive rights are held by law or agreement.
(8) The Company will comply with any applicable requirements
of the Investment Company Act of 1940, as amended.
4. Representations and Warranties of Agent. The agent hereby represents
and warrants that:
(1) The Agent is a member in good standing of the
National Association of Securities Dealers, Inc.
(2) The Agent is a registered broker-dealer in good standing
under the appropriate laws and regulations of each of the states in which
offers, offers for sale, or sales of the Common Shares will be made by the
Agent.
(3) The Agent will not offer, solicit offers to buy or sell
the Common Shares by any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D and will not offer any of the
Common Shares for sale, or solicit any offers to subscribe for or buy any of the
Common Shares or otherwise negotiate with any person in respect of any of the
Common Shares, other than in compliance with Regulation D.
(4) The Agent will make offers to sell Common Shares to, sell
to or solicit offers to subscribe for Common Shares from, persons only from
those states or other jurisdictions where the Company has either qualified or
<PAGE>
registered the offering for sale or determined that an exemption from such
qualification or registration is available under the applicable securities or
Blue Sky laws of such states or jurisdictions.
(5) No person or firm other than the Agent, or any Sub-Agent
designated by the Agent pursuant to Section 1(f), is entitled to the commission
to be paid pursuant to this Agreement. The Agent shall indemnify and hold the
Company harmless against any claim, demand, action, judgment, settlement, or
other loss resulting from a claim by any person or firm other than the Agent for
compensation in connection with the services contemplated by this Agreement to
be performed by the Agent.
5. Conditions of the Agent's Obligations. The obligations of the Agent
as provided herein shall be subject to the condition that all representations
and warranties and other statements herein of the Company are materially true
and correct, the condition that the Company shall have materially performed all
of its obligations hereunder which are to be performed prior to the sale of the
Common Shares and closing hereunder, and to the satisfaction of the following
additional conditions on or before each Closing Date:
(1) No stop order suspending the offer and/or sale of the
Common Shares in any state shall have been issued and no proceeding for that
purpose shall have been initiated or, to the knowledge of the Company or the
Agent, threatened, by any State.
(2) At each Closing Date, the Company shall deliver to the
Agent a written statement of officers of the Company, in form and substance
satisfactory to the Agent certifying that, at that date, (i) the representations
and warranties of the Company pursuant to Section 2 of this Agreement are true
and correct in all material respects, (ii) the Company has performed all of the
obligations required of it pursuant to this Agreement in all material respects,
and (iii) no order suspending the qualification or exemption of the Common
Shares under any state securities or Blue Sky law or preventing or purporting to
prevent the offer and sale of the Common Shares has been issued, and no
proceedings therefor are pending or threatened, by the Securities and Exchange
Commission or by any authority administering any state securities or Blue Sky
law.
(3) The Agent shall have received such opinion or opinions as
the Agent may reasonably require, dated as of each Closing Date, in form and
substance satisfactory to the Agent, with respect to the sufficiency of all
corporate proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby, and the Company shall have furnished to said
counsel such documents as they may have requested for the purpose of enabling
them to pass upon such matters.
The Agent may waive, in writing or otherwise, the performance
of any one or more of the conditions specified in this Section 5 or extend the
time for their performance.
6. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless the Agent
against any losses, claims, damages or liabilities to which the Agent
may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact made by the Company, or which arise out of
<PAGE>
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Agent for any
reasonable legal or other expenses incurred by it in connection with
investigating or defending against any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission that was made
in reliance upon and in conformity with written information furnished
to the Company by the Agent for use in the preparation thereof.
(b) The Agent will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company
may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) a breach of the representations and
warranties of the Agent set forth in Section 4 of this Agreement, or
(ii) an untrue statement or alleged untrue statement of a material fact
made by the Agent.
(c) Promptly after receipt by an indemnified party under
subparagraph (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from
any liability that it may have to any indemnified party otherwise than
under such subsection. In any case such action shall be brought against
any indemnified party, and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel who shall be reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
such subsection for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation prior to such notice of
assumption.
(d) If the indemnification provided for in subparagraphs (a)
and (b) above is unavailable or insufficient to hold harmless an
indemnified party under subparagraphs (a) and (b) above, then each
indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subparagraphs (a) and (b) above, (1) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Agent on the other from the
offering of the Shares, or (2) if the allocation provided by clause (1)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (1) above but also the relative fault, as determined by a trier
of fact, of the Company on the one hand and the Agent on the other in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
<PAGE>
state a material fact relates to information supplied or statements
made by the Company or the Agent and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Agent agree that
it would not be just and equitable if contributions pursuant to this
subparagraph (d) were to be determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this subparagraph
(d). The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of
this subparagraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending against any action or claim which is
the subject of this Section. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have
and shall extend, upon the same terms and conditions, to each person,
if any, who controls the Agent within the meaning of the 1933 Act; and
the obligations of the Agent under this Section 6 shall be in addition
to any liability that the Agent may otherwise have and shall extend,
upon the same terms and conditions, to each director and officer of the
Company, and to each person, if any, who controls the Company within
the meaning of the 1933 Act.
7. Effective Date of This Agreement and Termination.
(1) This Agreement shall become effective when signed by the
Company and the Agent (the "Effective Date").
(2) This Agreement may be terminated by the Agent by notice to
the Company, in the event that, prior to the First Closing Date, the Company
shall have failed to a material degree to comply with any of the provisions
hereof on its part to be performed on or prior to such date or if to a material
degree any of the conditions, agreements, representations or warranties herein
contained shall not have been fulfilled within the respective times herein
provided for, without any obligation of any party to any other party, except as
may otherwise be provided herein.
8. Agent's Common Stock Purchase Warrants. On the Final Closing Date,
the Company shall sell to the Agent for $50.00 a warrant or warrants, as
designated by the Agent, in the form of Exhibit B hereto, for the purchase from
the Company of 30,000 shares of the Company's Common Stock. The Agent's Warrants
shall provide the Agent with a five year warrant to purchase 10,000 shares of
Common Stock at a per share price of $4.00 per share, a five year warrant to
purchase 10,000 shares of Common Stock at a per share price of $5.50 per share,
and a five year warrant to purchase 10,000 shares of Common Stock at a per share
price of $7.00 per share.
9. Survival of Indemnities, Contribution Agreements, Warranties and
Representations. The indemnity and contribution agreements of the Company and
the Agent contained in Section 6, the covenants of the Company set forth in
Section 3 hereof, and the Agent's representations and warranties set forth in
<PAGE>
Section 4 hereof shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Agent, the Company or any of
its directors and officers, or any controlling person referred to in Section
6(e), and shall survive the delivery of and payment for the Common Shares. The
aforesaid indemnity and contribution agreements shall also survive following any
termination or cancellation of this Agreement. Any successor of any party or of
any such controlling person or any legal representative of such controlling
person, as the case may be, shall be entitled to the benefit of the respective
indemnity and contribution agreements.
10. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or transmitted by facsimile and confirmed as follows:
If sent to the Agent:
Equity Securities Investments, Inc.
130 Cheshire Lane, Suite 103
Minnetonka, MN 55305
Attention: Edward S. Adams
Telephone: (612) 476-6633
Facsimile: (612) 476-8447
If sent to the Company:
CorVu Corporation
3400 West 66th Street
Suite 445
Edina, MN 55435
Attention: David Carlson
Telephone: (612) 843-7702
Facsimile: (612) 843-7752
with a copy to:
John H. Stout
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402
Telephone: (612) 347-7012
Facsimile: (612) 347-7077
11. Parties. This Agreement shall inure to the benefit of and be
binding upon the Agent and the Company and their respective successors and
assigns and the officers and directors and controlling persons referred to in
Section 6(e). Nothing expressed in this Agreement is intended or shall be
construed to give any person or corporation, other than the parties hereto and
their respective successors and assigns and the controlling persons, officers
and directors referred to in Section 6(e), any legal or equitable right, remedy
<PAGE>
or claim under or in respect of this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors and assigns
and said controlling persons and said officers and directors, and for the
benefit of no other person or corporation. No purchaser of any of the Shares
shall be construed a successor or assign by reason merely of such purchase. No
agent, Sub-Agent or participating dealer designated by the Agent shall be
construed a successor or assign of the Agent by reason of such designation.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed counterpart of this
Agreement, whereupon it will become a binding agreement between the Company and
the Agent in accordance with its terms.
Very truly yours,
CORVU CORPORATION
By /s/ David Carlson
David Carlson
Chief Financial Officer
The foregoing Agency Agreement is hereby confirmed and accepted by us as of the
date first above written.
EQUITY SECURITIES INVESTMENTS, INC.
By /s/ Edward S. Adams
Edward S. Adams
President and Chief Executive Officer
<PAGE>
WARRANT
To Purchase 25,000 Shares of Common Stock
of
CORVU CORPORATION
This Warrant and the Securities issuable upon exercise of this Warrant
have not been registered under the Securities Act of 1933 (the "1933
Act") or under any state securities or "Blue Sky" laws ("Blue Sky
Laws"). No transfer, sale, assignment, pledge, hypothecation or other
disposition of this Warrant or the Securities issuable upon exercise of
this Warrant or any interest therein may be made except (a) pursuant to
an effective registration statement under the Securities Act and any
applicable Blue Sky Laws or (b) in accordance with Section 7 hereof, if
the Company has been furnished with an opinion of counsel for the
holder, which opinion and counsel shall be reasonably satisfactory to
the Company, to the effect that no registration is required because of
the availability of an exemption from registration under the Securities
Act and applicable Blue Sky laws.
THIS CERTIFIES THAT, for $50 and other good and valuable
consideration, EQUITY SECURITIES INVESTMENTS, INC., or its registered assigns,
is entitled to subscribe for and purchase from CORVU CORPORATION, a Minnesota
corporation (the "Company"), at any time after _____________, 2000, [FINAL
CLOSING DATE] to and including ______________, 2005, [FINAL CLOSING DATE PLUS
FIVE YEARS] _____________________ (_______) fully paid and nonassessable shares
of the Common Stock of the Company at a price equal to 125% of the ten-day
average closing bid price for the ten trading day immediately prior to
_____________, 2000 [FINAL CLOSING DATE] of $1.00 per share (the "Warrant
Exercise Price"), subject to the anti-dilution provisions of this Warrant. This
Warrant is the of the "Agent's Warrants" referred to in the Agency Agreement
dated January __, 2000, by and between Equity Securities Investments, Inc. (the
"Placement Agent") and the Company (the "Agency Agreement").
As used herein, the following terms shall have the meanings
set forth below: (i) "Warrant Shares" means the shares which may be acquired
upon exercise of this Warrant; (ii) "Holder" means the Placement Agent, any
party who acquires all or a part of this Warrant as a registered transferee of
the Placement Agent, or any record holder or holders of the Warrant Shares
issued upon exercise, whether in whole or in part, of the Warrant; (iii) "Common
Stock" means the common stock, par value $.01 per share, of the Company, 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; and (iv) "Convertible Securities"
means any stock or other securities convertible into, or exchangeable for,
Common Stock.
<PAGE>
This Warrant is subject to the following provisions, terms and
conditions:
1. Exercise; Transferability.
(1) 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.
(2) Neither this Warrant nor the Warrant Shares may be sold,
assigned, hypothecated, or otherwise transferred except as provided in Section 7
hereof.
2. Exchange and Replacement. Subject to Sections 1 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 the Placement Agent 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.
(1) The Company agrees that the shares of Common Stock purchased
upon exercise of this Warrant 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 paragraph (b) of this Section 3, 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.
(2) 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.
<PAGE>
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. Anti-dilution Adjustments. The provisions of this Warrant are
subject to adjustment as provided in this Section 5.
(1) The Warrant Exercise Price shall be adjusted from time to time
such that in case the Company shall hereafter:
(1) pay any dividends on any class of stock of the Company
payable in Common Stock or securities convertible into Common Stock;
(2) subdivide its then outstanding shares of Common Stock into
a greater number of shares; or
(3) 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 in each case 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
<PAGE>
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.
(2) 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.
(3) 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 Section
5(a) 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.
(4) 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.
<PAGE>
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.
(1) 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. If in the opinion of 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.
(2) If in the opinion of 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 its activities in respect to such transfer or
disposition as, in the opinion of such counsel, are permitted by law.
8. Fractional Shares.
(1) 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 (i) the
excess, if any, of the Fair Market Value of such fractional share over the
proportional part of the Warrant Exercise Price represented by such fractional
share, plus (ii) the proportional part of the Warrant Exercise Price represented
by such fractional share.
(2) For purposes of this Section, the term "Fair Market Value" with
respect to shares of Common Stock as of a particular date (the "Determination
Date") shall mean:
(1) If the Company's Common Stock is traded on an exchange or
is quoted on The Nasdaq National Market, then the average closing or
<PAGE>
last sale prices, respectively, reported for the ten (10) business days
immediately preceding the Determination Date;
(2) 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 the local over-the-counter market, then the average closing
bid and asked prices reported for the ten (10) business days
immediately preceding the Determination Date; and
(3) If the Company's Common Stock is not traded on an
exchange, on The Nasdaq National Market, The Nasdaq SmallCap Market or
on the local over-the-counter market, then the fair market value of
Common Stock as determined in good faith by the Board of Directors of
the Company.
9. Registration Rights.
(1) Piggyback Registration. If the Company at any time within two
(2) years after complete exercise of this Warrant, but no more than six (6)
years from the date of this Warrant, proposes to register under the 1933 Act
(except by a Form S-4 or Form S-8 Registration Statement or any successor forms
thereto) or qualify for a public distribution under Section 3(b) of the 1933
Act, any of its equity securities or debt with equity features, it will give
written notice to all Holders of this Warrant, of any Warrants issued pursuant
to Section 2 and/or Section 3(a) hereof, and of any Warrant Shares, of its
intention to do so and, on the written request of any such Holder given within
twenty (20) days after receipt of any such notice (which request shall specify
the Warrant Shares intended to be sold or disposed of by such Holder and
describe the nature of any proposed sale or other disposition thereof), the
Company will use its best efforts to cause all such Warrant Shares, the Holders
of which shall have requested the registration or qualification thereof, to be
included in such registration statement proposed to be filed by the Company;
provided, however, that if a greater number of Warrant Shares is offered for
participation in the proposed offering than in the reasonable opinion of the
managing underwriter of the proposed offering can be accommodated without
adversely affecting the proposed offering, then the number of Warrant Shares
proposed to be offered by such Holders for registration, as well as the number
of securities of any other selling shareholders participating in the
registration, shall not be included or shall be proportionately reduced to a
number deemed satisfactory by the managing underwriter. With respect to each
inclusion of securities in a registration statement pursuant to this Section
9(a), the selling Holders shall pay the fees and disbursements of special
counsel and accountants for the selling Holders, and underwriting discounts or
commissions and transfer taxes applicable to the selling Holders' shares, and
the Company shall pay all other costs and expenses of the registration,
including but not limited to all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
all internal expenses, 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. The Company need
not maintain the effectiveness of any such registration, qualification,
notification or approval, whether or not at the request of the Holders, more
than nine (9) months following the effective date thereof.
(2) Demand Registration. Further, on a one-time basis only, during
the period commencing with the effective date of the Company's initial
<PAGE>
registration statement under the 1933 Act and ending five (5) years after the
date of this Warrant, upon request by the Holder or Holders of a majority in
interest of the total number of shares underlying Agents' Warrants issued
pursuant to the Agency Agreement, and of any shares acquired upon exercise of
the Agents' Warrants, the Company will promptly take all necessary steps to
register or qualify, under the 1933 Act and the securities laws of such states
as the Holders may reasonably request, such number of Warrant Shares issued and
to be issued upon exercise of the Warrants requested by such Holders in their
request to the Company. If Form S-3 is not available, the Company will have no
obligation to effect the registration provided for by this Section 9(b) until
such time as Form S-3 is available. After a demand for registration has been
made by a Holder or Holders of the requisite number of Agents' Warrants or
Warrant Shares, the Company will give written notice of the demand registration
to all Holders of this Warrant, of any Warrants issued pursuant to Section 2
and/or Section 3(a) hereof, and of any Warrant Shares and, on the written
request of any such Holder given within twenty (20) days after receipt of any
such notice (which request shall specify the Warrant Shares intended to be sold
or disposed of by such Holder), the Company will cause all such Warrant Shares,
the Holders of which shall have requested the registration or qualification
thereof, to be included in such demand registration statement. With respect to a
demand registration statement pursuant to this Section 9(b), the selling Holders
shall pay the fees and disbursements of special counsel and accountants for the
selling Holders, and underwriting discounts or commissions and transfer taxes
applicable to the selling Holders' shares, and the Company shall pay all other
costs and expenses of the registration, including but not limited to all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, all internal expenses, 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. The Company shall keep effective and maintain any registration,
qualification, notification, or approval specified in this Section 9(b) for such
period as may be reasonably necessary for such Holder or Holders of such Warrant
Shares to dispose thereof and from time to time shall amend or supplement the
prospectus used in connection therewith to the extent necessary in order to
comply with applicable law. The Company need not maintain the effectiveness of
any such registration, qualification, notification or approval, whether or not
at the request of the Holders, more than nine (9) months following the effective
date thereof.
(3) Miscellaneous.
(1) The registration rights pursuant to this Section 9
shall not be applicable if at the time the Holder seeks to exercise
the same, the Warrant Shares are eligible for sale pursuant to Rule
144 of the Act.
(2) If a registration effected pursuant to this Section
9 is an underwritten offering, any Warrant Shares to which the
registration rights in this Section 9 are applicable, but that are
not included in such registration, shall not be sold or otherwise
disposed of by the Holder for a period of 180 days after the
effective date of such registration, or such shorter period as may
be required by the underwriters for such offering.
(4) Indemnification. The Company hereby indemnifies each of the
Holders of this Warrant and of any Warrant Shares, and the officers and
<PAGE>
directors, if any, who control such Holders, within the meaning of Section 15 of
the 1933 Act, against all losses, claims, damages, and liabilities caused by (1)
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus prepared in connection with any
registration pursuant to this Section 9 (and as amended or supplemented if the
Company shall have furnished any amendments thereof or supplements thereto), any
Preliminary Prospectus (not corrected in the final, amended or supplemented
prospectus furnished to such Holders for distribution) or any state securities
law filings; (2) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading except insofar as such losses, claims, damages, or liabilities
are caused by any untrue statement or omission contained in information
furnished in writing to the Company by such Holder expressly for use therein;
and each such Holder by its acceptance hereof severally agrees that it will
indemnify and hold harmless the Company, each of its officers who signs such
Registration Statement, and each person, if any, who controls the Company,
within the meaning of Section 15 of the 1933 Act, with respect to losses,
claims, damages, or liabilities which are caused by any untrue statement or
omission contained in information furnished in writing to the Company by such
Holder expressly for use therein.
(5) Cooperation. Upon the exercise of registration rights pursuant
hereto, each Holder agrees to supply the Company with such information as may be
required by the Company to register or qualify the shares to be registered.
10. Additional Right to Convert Warrant.
(1) The Holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time after it is
exercisable, but prior to its expiration, into shares of Common Stock as
provided for in this Section 10. Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of any
Warrant Exercise Price) that number of shares of Common Stock equal to the
quotient obtained by dividing (i) the value of the Warrant at the time the
Conversion Right is exercised (determined by subtracting the aggregate Warrant
Exercise Price for the Warrant Shares in effect immediately prior to the
exercise of the Conversion Right from the aggregate Fair Market Value for the
Warrant Shares immediately prior to the exercise of the Conversion Right) by
(ii) the Fair Market Value of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(2) The Conversion Right may be exercised by the Holder, at any time
or from time to time after it is exercisable, but prior to its expiration, on
any business day by delivering a written notice in the form attached hereto (the
"Conversion Notice") to the Company at the offices of the Company exercising the
Conversion Right and specifying (i) the total number of shares of Common Stock
the Holder will purchase pursuant to such conversion and (ii) a place and date
not less than one or more than 20 business days from the date of the Conversion
Notice for the closing of such purchase.
(3) At any closing under Section 10(b) hereof, (i) the Holder will
surrender the Warrant, (ii) the Company will deliver to the Holder a certificate
or certificates for the number of shares of Common Stock issuable upon such
conversion, together with cash, in lieu of any fraction of a share, and (iii)
the Company will deliver to the Holder a new warrant representing the number of
<PAGE>
shares, if any, with respect to which the Warrant shall not have been exercised.
(4) For purposes of this section, the "Fair Market Value" of a share
of Common Stock as of a particular date shall be determined as provided in
Section 8(b) above.
IN WITNESS WHEREOF, CorVu Corporation has caused this Warrant to be
signed by its duly authorized officer and this Warrant to be dated ___________,
2000.
CORVU CORPORATION
By
Its
<PAGE>
SUBSCRIPTION FORM
(To be signed upon exercise of Warrant)
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________________ of the shares of Common Stock of CorVu
Corporation to which such Warrant relates and herewith makes payment of
$__________________ therefor in cash or by certified check and requests that the
certificate for such shares be issued in the name and delivered to the address
set forth below.
Dated: __________________
(Signature)
(Name)
(Name in which shares are to be issued, if different)
(Address)
(Social Security or Tax Ident. No.)
<PAGE>
CONVERSION NOTICE
(To be signed upon exercise of Warrant pursuant to Section 10)
The undersigned hereby irrevocably elects to exercise the conversion
right provided in Section 10 of the within Warrant for, and to acquire
thereunder, shares of Common Stock. If said number of shares shall not be all
the shares purchasable under the within Warrant, a new Warrant is to be issued
in the name of said undersigned for the balance remaining of the shares
purchasable thereunder rounded up to the next higher number of shares.
The undersigned hereby requests that the certificate for such shares be
issued in the name and delivered to the address set forth below.
Dated: ________________
(Signature)
(Name)
(Name in which shares are to be issued, if different)
(Address)
(Social Security or Tax Ident. No.)
<PAGE>
ASSIGNMENT FORM
(To be signed upon authorized transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto ______________________________ the right to purchase ____________
shares of Common Stock 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)
(Name)
(Name in which shares are to be issued, if different)
(Address of transferee)
(Social Security or Tax Ident. No. of transferee)
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<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 20,073
<SECURITIES> 0
<RECEIVABLES> 3,837,190
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0
17,000
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<EPS-BASIC> (.50)
<EPS-DILUTED> (.50)
</TABLE>
