UNITED STATES | |||
SECURITIES AND EXCHANGE COMMISSION | |||
Washington, D.C. 20549 | |||
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SCHEDULE 14A | |||
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Proxy Statement Pursuant to Section 14(a) of | |||
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Filed by the Registrant x | |||
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Filed by a Party other than the Registrant o | |||
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Check the appropriate box: | |||
o | Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
x | Definitive Proxy Statement | ||
o | Definitive Additional Materials | ||
o | Soliciting Material Pursuant to §240.14a-12 | ||
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CorVu Corporation | |||
(Name of Registrant as Specified In Its Charter) | |||
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||
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Payment of Filing Fee (Check the appropriate box): | |||
o | No fee required. | ||
x | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
| (1) | Title of each class of securities to which transaction applies: | |
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| Common stock, $0.01 par value per share | |
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| (2) | Aggregate number of securities to which transaction applies: | |
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| 49,527,724 shares of Common Stock and 360,000 shares of Preferred Stock, | |
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| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
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| $0.40 for each share of Common Stock | |
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| (4) | Proposed maximum aggregate value of transaction: | |
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| (stock, options and warrants) | |
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| $19,810,909.60 for shares of Common Stock outstanding Total consideration $22,313,093.16 | |
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The filing fee was determined by adding (x) the product of (i) the number of shares of common stock that are proposed to be acquired in the merger, and (ii) the merger consideration of $0.40 in cash per share of common stock, plus (y) the product of (i) the number of shares of preferred stock that are proposed to be acquired in the merger, and (ii) the merger consideration of $2.33333 in cash per share of preferred stock, plus (z) the amount expected to be paid to holders of options and warrants to purchase shares of common stock per share of common stock which is the difference between the exercise price of the options and the $0.40 per share price. The payment of the filing fee, calculated in accordance with Exchange Act Rule 0 11(c)(1), was calculated by multiplying the total consideration by .00003070. | |||
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| (5) | Total fee paid: | |
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| $685.01 | |
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o | Fee paid previously with preliminary materials. | ||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||
| (1) | Amount Previously Paid: | |
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| (2) | Form, Schedule or Registration Statement No.: | |
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| (3) | Filing Party: | |
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| (4) | Date Filed: | |
CorVu Corporation
3400 West 66th Street
Suite 445
Edina, MN 55435
April 24, 2007
To Our Shareholders:
You are cordially invited to attend a special meeting of the shareholders of CorVu Corporation, a Minnesota corporation (“CorVu”), which will be held on Thursday, May 10, 2007 at 8:00 a.m. local time, in Pepin/Vermillion conference room on the 40th floor of the offices of Fredrikson & Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota. At the special meeting, you will be asked to consider and vote upon a proposal to approve the acquisition of CorVu by Rocket Software, Inc., a Delaware corporation (“Rocket Software”), pursuant to the Agreement and Plan of Merger dated as of March 5, 2007 among Rocket Software, Rocket Software Minnesota, Inc. (“Newco”), a wholly-owned subsidiary of Rocket Software, and CorVu.
The merger agreement provides for, among other things, the merger of Newco with and into CorVu, with CorVu surviving the merger and becoming a wholly-owned subsidiary of Rocket Software. If the merger is completed and except for shareholders who have properly exercised their dissenters’ rights under Minnesota law, each holder of common stock will be entitled to receive $0.40, without interest, for each share of common stock, and each holder of Series B Convertible Preferred Stock will be entitled to receive $2.33333, without interest, for each share of preferred stock. Upon completion of the merger, CorVu will cease to be a public company.
The two independent members of the board of directors who comprise the special committee that the board of directors established and authorized to review and consider this transaction have unanimously approved the merger and the merger agreement. Accordingly, the special committee of the board of directors unanimously recommends that CorVu’s shareholders vote “FOR” the approval of the merger agreement. In considering the special committee’s unanimous recommendation that shareholders approve the merger agreement, shareholders should be aware that members of CorVu’s board of directors and its special committee and CorVu’s executive officers have interests in the merger both similar to and potentially different than those of other shareholders. The attached proxy statement provides a detailed description of such interests.
The proxy statement attached to this letter contains important information about the proposed merger and the special meeting. We encourage you to read the proxy statement carefully because it describes the proposed merger and other related matters, including the terms of the merger agreement and the conditions to the completion of the merger. The proxy statement is dated April 24, 2007 and is first being mailed to shareholders on or about April 24, 2007.
Under CorVu’s Articles of Incorporation, as amended and restated, the merger agreement must be approved by (a) the affirmative vote of the holders of a majority of the outstanding shares of common stock and the holders of a majority of the outstanding shares of preferred stock, voting together as a single class on an as-converted basis, and (b) the affirmative vote of the holders of a majority of the outstanding shares of preferred stock, voting as a separate class. Your vote is very important. Only shareholders of record of CorVu common and preferred stock at the close of business on April 23, 2007 will be entitled to notice of and to vote at the meeting or any adjournment or postponement thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO VOTE YOUR SHARES BY MAIL BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOU OWN SHARES THAT ARE REGISTERED UNDER DIFFERENT NAMES OR HELD IN MORE THAN ONE ACCOUNT BY A BANK, BROKER OR OTHER NOMINEE HOLDER, PLEASE VOTE ALL OF YOUR SHARES SHOWN ON ALL OF YOUR PROXY CARDS.
Voting by proxy will not prevent you from voting your shares in person if you later decide to
attend the special meeting and vote in person.
Thank you for your continued support.
CorVu Corporation
Edina, Minnesota
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| /s/ Joseph J. Caffarelli |
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April 24, 2007 |
| Joseph J. Caffarelli, Chief Executive Officer | |
CorVu Corporation
3400 West 66th Street
Suite 445
Edina, MN 55435
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
May 10, 2007
TO OUR SHAREHOLDERS:
A special meeting of shareholders of CorVu Corporation, a Minnesota corporation, will be held on Thursday, May 10, 2007, at 8:00 a.m. local time, in the Pepin/Vermillion conference room on the 40th floor of the offices of Fredrikson & Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota, for the following purposes:
1. To consider and vote on a proposal to approve the Agreement and Plan of Merger dated as of March 5, 2007 by and among Rocket Software, Inc. a Delaware corporation, Rocket Software Minnesota, Inc., a Minnesota corporation and a wholly-owned subsidiary of Rocket Software (“Newco”), and CorVu, pursuant to which Newco will be merged with and into CorVu, with CorVu surviving the merger as a wholly-owned subsidiary of Rocket Software. Upon completion of the merger, each share of CorVu’s common stock (other than shares held by shareholders who properly assert their dissenters’ rights under Minnesota law) will be converted into the right to receive $0.40 in cash, without interest, and each share of CorVu’s Series B Convertible Preferred Stock (other than shares held by shareholders who properly assert their dissenters’ rights under Minnesota law) will be converted into the right to receive $2.33333 in cash, without interest. If the merger is completed, CorVu will cease to be a public company.
2. To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies to vote FOR approval of the Agreement and Plan of Merger if there are
insufficient votes present and cast at the special meeting to approve the Agreement and Plan of Merger.
CorVu has two classes of voting securities outstanding, namely common stock, with a par value of $0.01 per share, and Series B Convertible Preferred Stock, with a par value of $0.01 per share. Only holders of CorVu common and preferred stock at the close of business on April 23, 2007 are entitled to notice of and to vote at the special meeting.
Your vote is important, regardless of the number of shares you own. The approval of the merger agreement requires (a) the affirmative vote of the holders of a majority of the outstanding shares of common stock and the holders of a majority of the outstanding shares of preferred stock, voting together in a single class on an as-converted basis, and (b) the affirmative vote of the holders of a majority of the outstanding shares of preferred stock, voting as a separate class. Therefore, abstentions and broker non-votes will have the same effect as a vote against the merger agreement.
The proposal to adjourn the meeting, if necessary or appropriate, requires the affirmative vote of the holders of a majority of the outstanding shares of common stock and preferred stock that are present in person or by proxy at the meeting. Abstentions are considered present and entitled to vote and therefore will have the same effect as a vote against any proposal to adjourn the meeting, whereas broker non-votes are not considered present and entitled to vote and will not affect any proposal to adjourn the special meeting. Three of our shareholders have entered into agreements with Rocket Software, Inc. pursuant to which these shareholders are obligated to vote an aggregate of 10,102,745 shares of our common stock FOR approval of the merger agreement, which represents 20.4% of our issued and outstanding common stock and
19.9% of our issued and outstanding capital stock (on an as-converted basis) that has the power to vote on the merger.
The two independent members of the board of directors who comprise the special committee that the board of directors established and authorized to review and consider this transaction, have unanimously approved the merger and the merger agreement. Accordingly, the special committee unanimously recommends that CorVu’s shareholders vote “FOR” the approval of the merger agreement. In considering the special committee’s unanimous recommendation that shareholders approve the merger agreement, shareholders should be aware that members of CorVu’s board of directors and its special committee and CorVu’s executive officers have interests in the merger both similar to and potentially different than those of other shareholders. The attached proxy statement provides a detailed description of such interests.
If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote in favor of the approval of the merger agreement and in favor of the proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies. If you fail to return your proxy card, the effect will be that your shares of CorVu common or preferred stock will not be counted for the purposes of determining whether a quorum is present at the special meeting and, because both proposals require a certain percentage vote to pass, will effectively act as votes against the proposals. If you are a shareholder of record and do attend the special meeting and wish to vote in person, you will be entitled to do so.
Shareholders of CorVu who do not vote “FOR” the approval of the merger agreement will have the right to demand the fair value of their shares if the merger is completed, but only if they comply with all of the requirements of the laws of the State of Minnesota, which are summarized in, and attached as Annex C to the accompanying proxy statement.
By order of the Special Committee of the Board of Directors
| /s/ Joseph J. Caffarelli |
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| Joseph J. Caffarelli, Chief Executive Officer | |
Edina, Minnesota
April 24, 2007
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER | 7 | |
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| Recommendation of the Special Committee of the Board of Directors | 12 |
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| Interests of Our Directors and Executive Officers in the Merger | 27 |
| Material U.S. Federal Income Tax Consequences to U.S. Holders | 30 |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 50 | ||
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Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act |
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Articles of Incorporation of Rocket Software Minnesota, Inc. |
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CorVu Corporation
3400 West 66th Street
Suite 445
Edina, MN 55435
PROXY STATEMENT
Special Meeting of Shareholders
To be Held Thursday, May 10, 2007, at 8:00 a.m. local time at the offices of
Fredrikson & Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota
Unless we otherwise indicate or unless the context requires otherwise: all references in this document to “CorVu,” “we,” “our,” and “us” refer to CorVu Corporation and its subsidiaries; all references to “Rocket Software” refer to Rocket Software, Inc.; all references to “Newco” refer to Rocket Software Minnesota, Inc.; all references to the “merger agreement” refer to the Agreement and Plan of Merger dated as of March 5, 2007 among Rocket Software, Newco and CorVu, a copy of which is attached as Annex A to this proxy statement; all references to the “merger” refer to the merger contemplated by the merger agreement; all references to “Common Shares” refer to the shares of CorVu’s common stock, par value $0.01 per share; all references to “Preferred Shares” refer to the shares of CorVu’s Series B Convertible Preferred Stock, par value $0.01 per share; all references to “Capital Shares” refer to both Common Shares and Preferred Shares; all references to “ComVest Group” refer to ComVest Group Holdings, LLC; all references to “ComVest Investment” refer to “ComVest Investment Partners II LLC”; all references to “Mr. MacIntosh” refer to Justin MacIntosh; and all references to Mrs. MacIntosh refer to Delia MacIntosh.
The mailing address of CorVu’s principal executive office is 3400 West 66th Street, Edina, Minnesota 55435. CorVu expects that this proxy statement, the related proxy card and the Notice of Special Meeting will first be mailed to shareholders on or about April 24, 2007.
• The Parties to the Merger Agreement. CorVu Corporation, a Minnesota corporation, Rocket Software, Inc., a Delaware corporation, and Rocket Software Minnesota, Inc., a Minnesota corporation and a wholly-owned subsidiary of Rocket Software.
• The Merger Agreement. You are being asked to consider and vote upon the approval of a merger agreement providing for the acquisition of CorVu by Rocket Software through a merger of Newco with and into CorVu, with CorVu surviving the merger as a wholly-owned subsidiary of Rocket Software. Upon effectiveness of the merger, (a) each outstanding Common Share (other than shares held by shareholders who properly assert dissenters’ rights under Minnesota law) will be converted into the right to receive $0.40 in cash, without interest, (b) each Preferred Share (other than shares held by shareholders who properly assert dissenters’ rights under Minnesota law) will be converted into the right to receive $2.33333 in cash, without interest, and (c) CorVu will cease to be a public company. See “The Merger Agreement” beginning on page 33.
• Certain Effects of the Merger. At the effective time of the merger, all assets of every description and the business of each of CorVu and Newco shall vest in CorVu, as the surviving corporation, and all debts, claims, liabilities and obligations of each of CorVu and Newco shall become the debts, claims, liabilities and obligations of the surviving corporation, all as provided under the Minnesota Business Corporation Act. CorVu will be a wholly-owned subsidiary of Rocket Software and cease to be a
public company following the merger. See “The Merger - Certain Effects of the Merger” beginning on page 25.
• Merger Consideration. Upon effectiveness of the merger, unless you properly assert your dissenters’ rights under Minnesota law, you will be entitled to receive $0.40 in cash, without interest, for each Common Share that you own, less any applicable withholding taxes, and $2.33333 in cash, without interest, for each Preferred Share that you own, less any applicable withholding taxes. See “The Merger Agreement - Merger Consideration” beginning on page 34. Immediately prior to the merger, all outstanding options to acquire Common Shares will become fully vested. Each holder of an option or a warrant to purchase Common Shares will be entitled to receive in cash an amount equal to (i) the number of Common Shares subject to such option or warrant, multiplied by (ii) the merger consideration of $0.40 less the exercise price of such option or warrant and less any applicable withholding taxes. See “The Merger Agreement - Treatment of Options and Warrants to Acquire Common Shares” beginning on page 35.
• Market Prices of CorVu’s Common Shares. CorVu’s Common Shares are quoted on the Over The Counter Bulletin Board (“OTCBB”) under the trading symbol “CRVU.” The closing sale price of a Common Share on March 2, 2007, which was the last trading day before the announcement of the execution of the merger agreement, was $0.28 per share. On April 19, 2007, which was the last trading day before the printing of this proxy statement, the closing sale price of a Common Share was $0.38 per share. As a result of the merger, CorVu will be a privately-held company and the Common Shares will cease to be quoted on the OTCBB. See “Market Prices of CorVu’s Common Shares” beginning on page 49.
• Recommendation by Special Committee. The special committee of our board of directors (consisting
of two disinterested board members, Daniel R. Fishback and Ismail Kurdi), in accordance with the powers and authority delegated to it by our board of directors, unanimously approved the merger and unanimously recommends that CorVu’s shareholders vote “FOR” the approval of the merger agreement. See “The Merger - Recommendation of the Special Committee” beginning on page 20.
• Share Ownership of Directors, Executive Officers and Principal Shareholders; Votes. As of the record date for the special meeting, the current directors and executive officers of CorVu have sole or share voting power with respect to an aggregate of 35,899,664 Common Shares (excluding shares subject to options), representing approximately 72.5% of the outstanding Common Shares. Mr. David C. Carlson, our Chief Financial Officer, owns 50,000 Preferred Shares, representing approximately 13.9% of the outstanding Preferred Shares. ComVest Investment, our largest single shareholder, holds 22,000,000 Common Shares, representing approximately 44.4% of the outstanding Common Shares; Mr. Robert L. Priddy, one of our directors, shares the voting power of the Common Shares registered in the name of ComVest Investment. Mr. MacIntosh, another of our directors, has sole or shared voting power over an aggregate of 11,958,701 Common Shares (approximately 24.1% of the outstanding Common Shares), 7,541,733 of which (approximately 15.2% of all outstanding Common Shares) are held in street name by Barleigh Wells Limited for Opella Holdings Limited, and 3,700,957 of which (approximately 7.5% of the outstanding Common Shares) are registered in the name of his spouse, Mrs. MacIntosh. Each of our directors and executive officers has informed CorVu that they intend to vote all of their Common Shares and Preferred Shares “FOR” the approval of the merger agreement. See “The Special Meeting - Voting by Directors and Executive Officers” beginning on page 13.
• Fairness Opinion of Cherry Tree Securities, LLC. Given the affiliation of ComVest Group with ComVest Investment, our largest single shareholder, the special committee engaged Cherry Tree Securities, LLC, which we refer to as “Cherry Tree,” as its independent financial advisor to analyze
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the fairness, from a financial point of view, of the consideration to be paid pursuant to the merger agreement to the holders of Common Shares, and to provide its opinion in that regard. On March 2, 2007, Cherry Tree rendered to the special committee its opinion to the effect that, as of that date and based upon and subject to the various considerations and assumptions set forth therein, the merger consideration to be received by holders of Common Shares pursuant to the merger was fair, from a financial point of view, to those holders. The full text of the Cherry Tree opinion, which sets forth the assumptions made, matters considered, and limitations on the scope of review undertaken by Cherry Tree in rendering its opinion, is attached to this proxy statement as Annex B. The Cherry Tree opinion was provided to the special committee in connection with its consideration of the merger. The Cherry Tree opinion does not constitute a recommendation as to how any shareholder should vote on the proposal to approve the merger agreement or any other matter. CorVu and the special committee encourage CorVu’s shareholders to read the Cherry Tree opinion carefully and in its entirety. Cherry Tree was paid an aggregate fee of $100,000 for its services. The summary of the Cherry Tree opinion in this proxy statement is qualified in its entirety by reference to the full text of the Cherry Tree opinion. See “The Merger – Opinion of Cherry Tree Securities, LLC” beginning on page 20.
• Material U.S. Federal Income Tax Consequences. The merger will be a taxable transaction for U.S. federal income tax purposes. In general, you will recognize gain or loss equal to the difference between the cash you receive in the merger and your adjusted tax basis in your Capital Shares that are cancelled in the merger. Because determining the tax consequences of the merger can be complicated and depends in part on your particular circumstances, we urge you to consult your own tax advisor regarding the particular tax consequences of the merger to you. See “The Merger - Material U.S. Federal Income Tax Consequences” beginning on page 30.
• Dissenters’ Rights of Appraisal. The laws of the State of Minnesota provide you, as a shareholder, with the right to dissent from the proposal to approve the merger agreement and to demand the fair value of your Common Shares or Preferred Shares, respectively, as determined by a court proceeding, and to receive payment in cash based on that valuation. The ultimate amount you receive for your shares as a dissenting shareholder in a dissenter’s proceeding may be more, less or the same as the amount you would have received under the merger agreement. Your failure to follow exactly the procedures specified under the laws of the State of Minnesota will result in the loss of your dissenters’ rights. See “Dissenters’ Rights of Appraisal” beginning on page 53 and Annex C, Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act.
• Conversion of Shares; Payment Procedures. As soon as practicable after the effective time of the merger, a paying agent mutually acceptable to Rocket Software and CorVu will mail to all shareholders of CorVu a letter of transmittal and instructions for surrendering Capital Shares in exchange for the applicable merger consideration. You should not return any share certificates, options or warrants you hold with the enclosed proxy card, and you should not forward your share certificates to the paying agent without a letter of transmittal. See “The Merger Agreement - Conversion of Shares; Payment Procedures” beginning on page 34.
• Timing and Likelihood of Closing. We anticipate that the effective time of merger will occur within seven business days following approval of the merger agreement at the special meeting, assuming satisfaction or waiver of all other conditions to the merger. However, because the merger is subject to certain conditions, the exact timing of the completion of the merger and the likelihood of the consummation thereof cannot be predicted. If any of the conditions in the merger agreement are not satisfied or waived, the merger agreement may be terminated and the merger would not be completed. See “The Merger Agreement - Conditions to the Completion of the Merger” beginning on page 43.
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• Conditions to the Completion of the Merger. Prior to the consummation of the merger, a number of conditions must be satisfied (or waived by Rocket Software or CorVu, as appropriate, to the extent permitted by law). These include, among others:
• the approval of the merger agreement by CorVu’s shareholders;
• the absence of any law or order by any governmental authority which prohibits the consummation of the merger;
• the availability of sufficient funds to Rocket Software and Newco;
• the truth and accuracy as of the closing date of CorVu’s, Rocket Software’s and Newco’s representations and warranties, subject to certain qualifications;
• the performance, in all material respects, by each of CorVu,Rocket Software, and Newco of its obligations under the merger agreement;
• no “material adverse effect” having occurred with respect to CorVu;
• CorVu not exceeding a certain maximum net working capital deficit; and
• no assertion of dissenters’ rights by holders of more than ten percent (10%) of the outstanding Capital Shares.
See “The Merger Agreement - Conditions to the Completion of the Merger” beginning on page 43.
• Termination of the Merger Agreement. The merger agreement may be terminated upon the occurrence of various events specified in the merger agreement, including, among other things:
• the mutual agreement of CorVu and Rocket Software;
• the failure to consummate the merger by June 30, 2007;
• the failure of CorVu’s shareholders to approve the merger agreement at the special meeting or any adjournment of the special meeting;
• if our special committee, pursuant to and in compliance with the terms of the merger agreement, has either (i) approved or recommended to the shareholders any superior competing transaction, or (ii) withheld, withdrawn or modified its recommendation of the merger agreement;
• certain types of breaches of the non-terminating party’s representations, warranties or obligations under the merger agreement which are not cured within a specified cure period; or
• the existence of a law or governmental order prohibiting the merger.
See “The Merger Agreement - Termination of the Merger Agreement” beginning on page 46.
• Termination Fee and Expenses. If the merger agreement is terminated under certain circumstances, CorVu will be obligated to pay a termination fee of up to $1,000,000 to Rocket Software. In certain circumstances, if CorVu or Rocket Software terminates the merger agreement because the merger has not occurred on or before June 30, 2007, and at such time Rocket Software has no other right to terminate the merger agreement, and with the exception of the financing condition, all conditions to Rocket Software’s obligation to consummate the merger are met, then Rocket Software must pay to CorVu a termination fee of $1,000,000. Under certain circumstances, if CorVu terminates the merger agreement to enter into an acquisition agreement for a superior competing transaction, CorVu is required to pay Rocket software a termination fee of $1,000,000. Such payments are intended to be liquidated damages and each party’s sole and exclusive remedy arising out of such terminations. For
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additional details on these matters, see “The Merger Agreement – Termination Fee” and “The Merger Agreement - - Expenses” beginning on pages 47 and 48.
• Financing of the Merger and Related Transactions. Rocket Software and Newco estimate that the total amount of funds necessary to consummate the merger and the related transactions (including payment of the aggregate merger consideration for outstanding Common Shares, Preferred Shares and payment of the aggregate amount payable to the holders of options and warrants) will be approximately $22.3 million, which is expected to be funded by cash, third party loans and/or other sources of immediately available funds. The consummation of the merger and the related transactions are subject to Rocket Software and/or Newco obtaining the necessary financing. However, if Rocket Software and Newco are not able to secure financing sufficient to complete the merger and the merger is not completed for that reason, Rocket Software is required to pay a termination fee to CorVu of $1,000,000. This amount has been escrowed by Rocket Software under an escrow agreement with CorVu and U.S. Bank National Association, which the parties entered into concurrently with the execution and delivery of the merger agreement. Rocket Software has entered into a commitment letter with a well-known financial institution to provide financing in an amount sufficient to pay the merger consideration. See “The Merger - Financing of the Merger and Related Transactions” beginning on page 26.
• Record Date, Quorum and Voting Power. You are entitled to vote at the special meeting if you owned Capital Shares at the close of business on April 23, 2007, the record date for the special meeting. Each Common Share outstanding on the record date is entitled to one vote, and each Preferred Share outstanding on the record date is entitled to 3 and 1/3 votes, on each matter submitted to shareholders for approval at the special meeting. As of the record date, there were 49,527,274 Common Shares and 360,000 Preferred Shares outstanding and entitled to vote at the special meeting. A quorum will be considered present at the special meeting if the holders of a majority of the voting power of the outstanding Capital Shares entitled to vote are present at the meeting, either in person or represented by proxy. See “The Special Meeting - Record Date, Quorum and Voting Power” beginning on page 12.
• Shareholder Vote Required to Approve the Merger Agreement. For us to complete the merger, shareholders as of the close of business on the record date holding at least a majority of the voting power of the outstanding Capital Shares, plus shareholders as of the close of business on the record date holding at least a majority of the outstanding Preferred Shares voting as a separate class, must vote “FOR” the approval of the merger agreement. See “The Special Meeting - Required Vote” beginning on page 13.
• Option and Support Agreements. ComVest Investment and Mr. and Mrs. MacIntosh each entered into option and support agreements with Rocket Software pursuant to which they are obligated to vote an aggregate of 10,102,745 Common Shares, under certain terms and conditions, FOR approval of the merger agreement and against any competing transaction. Each of these shareholders also granted Rocket Software an irrevocable proxy to vote the shares at issue if the shareholder does not take certain actions specified in the agreements that are consistent with the shareholder’s voting covenants. Moreover, these shareholders granted to Rocket Software an option to purchase the number of shares subject to each voting agreement at a purchase price of $0.40 per share upon written notice within nine months after certain designated events that are beyond Rocket Software’s control, including the shareholder’s failure to observe or perform any obligation under the option and support agreement or the Special Committee’s approval or recommendation of a competing transaction. See “The Merger - Option and Support Agreements” beginning on page 31.
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• Interests of Our Directors and Executive Officers in the Merger. In considering the unanimous recommendation of the special committee of the board of directors to vote “FOR” the approval of the merger agreement, CorVu’s shareholders should be aware that some of CorVu’s executive officers and members of CorVu’s board of directors may have interests in the transaction that are different from, and/or in addition to, the interests of CorVu’s shareholders generally. Such differing or additional interests in the transaction may present them with actual or potential conflicts of interest. These differing interests include the following arrangements:
• Accelerated vesting of unvested stock options held by CorVu’s executive officers and directors in connection with the cancellation and settlement of all stock options as part of the merger;
• Employment agreements between CorVu, its Chief Executive Officer and its Chief Financial Officer that, among other things, provide severance benefits upon termination of employment in connection with transactions such as the merger; and
• Certain indemnification rights of CorVu’s directors and executive officers.
See “The Merger - Interests of Our Directors and Executive Officers in the Merger” beginning on page 27.
• ComVest Group Holdings, LLC as financial advisor. ComVest Group, an affiliate of ComVest Investment, our largest single shareholder, served as CorVu’s financial advisor in connection with the merger pursuant to an engagement letter dated June 15, 2006. Upon consummation of the merger, ComVest Group will receive for the financial advisory services rendered a fee in the amount of $837,000. See “The Merger – Background of the Merger” beginning on page 16.
• Regulatory and Other Governmental Approvals. Except for the required filing of the articles of merger with the Secretary of State of Minnesota at or before the effective time of the merger, we are unaware of any material foreign, federal or state regulatory requirements or approvals required for the completion of the merger. See “The Merger - Regulatory and Other Governmental Approvals” beginning on page 31.
• No Solicitation. The merger agreement restricts our ability to, among other things, solicit or engage in discussions or negotiations with a third party regarding specified transactions involving CorVu or to change or withdraw our recommendation to approve the merger agreement. Notwithstanding these restrictions, under certain circumstances, the special committee may respond to an unsolicited written proposal for an alternative acquisition or terminate the merger agreement and withdraw, modify or change its recommendation to approve the merger agreement and enter into an acquisition agreement with respect to a “superior competing transaction” (as defined in the section entitled “The Merger Agreement - No Solicitation; Superior Competing Transaction” beginning on page 40), so long as CorVu otherwise complies with the terms of the merger agreement. The special committee of the board of directors may also withhold, withdraw, or modify its recommendation to approve the merger agreement if (i) it determines in good faith that the competing transaction is superior to the merger proposal and (ii) it concludes in good faith (after consultation with its advisors) that it is required to do so in order to comply with its fiduciary duties to CorVu shareholders under applicable law. However, Rocket Software has the right, within three business days of its receipt of written notice from CorVu of the proposal for the superior competing transaction, to agree to make adjustments to the terms and conditions of the merger agreement, and CorVu must negotiate in good faith, to allow Rocket Software to match or improve upon the economic or other terms of the purportedly superior competing transaction. See “The Merger Agreement - No Solicitation; Superior Competing Transaction” beginning on page 40.
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
Q: When and where is the special meeting?
A: The special meeting of CorVu’s shareholders will be held on Thursday, May 10, 2007, at 8:00 a.m. local time, in the Pepin/Vermillion conference room on the 40th floor of the offices of Fredrikson & Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota.
Q: What matters will you be asked to vote on at the special meeting?
A: You will be asked to vote on two proposals:
• the approval of the merger agreement pursuant to which CorVu will become a wholly-owned subsidiary of Rocket Software and, except for Common or Preferred Shares held by a shareholder who properly asserts dissenters’ rights under Minnesota law, each Common Share will be converted into the right to receive $0.40 in cash and each Preferred Share will be converted into the right to receive $2.33333 in cash; and
• the adjournment of the meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the merger agreement.
Q: Who is soliciting your proxy?
A: The proxy is being solicited by the special committee of the board of directors of CorVu.
Q: How does the special committee recommend that you vote on the proposals?
A: The members of the special committee unanimously recommend that you vote:
• “FOR” the proposal to approve the merger agreement; and
• “FOR” adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies to vote for the approval of the merger agreement.
Q: When is the merger expected to be completed?
A: We expect to complete the merger during the second half of May 2007, but no later than June 30, 2007.
Q: What vote of shareholders is required to approve the merger agreement?
A: Approval of the merger agreement requires that shareholders holding a majority of the Capital Shares outstanding (on an as-converted basis) as of the close of business on April 23, 2007, the record date for the special meeting, voting together as a single class, as well as the shareholders holding a majority of the Preferred Shares outstanding as of the close of business on the record date and voting as a separate class, vote “FOR” the approval of the merger agreement. Three of our shareholders entered into option and support agreements with Rocket Software. Under these agreements, the shareholders have agreed, under certain terms and conditions, to vote an aggregate of 10,102,745 Common Shares, which represents approximately 19.9% of the voting power of the issued and outstanding Capital Shares in favor of the merger and against competing transactions.
Q: What vote of shareholders is required to adjourn the meeting to solicit additional proxies?
A: The proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies to vote for approval of the Merger Agreement requires the approval of a majority of the Capital Shares present (in person or by proxy and on an as-converted basis) and entitled to vote on this proposal at the meeting.
Q: Who is entitled to vote?
A: Shareholders as of the close of business on April 23, 2007, the record date for the special meeting, are entitled to receive notice of and to attend and vote at the special meeting. On the record
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date, 49,527,274 Common Shares, held by 176 shareholders of record, and 360,000 Preferred Shares, held by eleven shareholders of record, were outstanding and entitled to vote. You may vote all shares you owned as of the record date. You are entitled to one vote for each Common Share you own. Each Preferred Share, when voted together with the Common Shares as one single class, is entitled to 3 and 1/3 votes.
Q: What does it mean if you get more than one proxy card?
A: If you have Common Shares and/or Preferred Shares that are registered in different names and/or are held in more than one account, you will receive more than one proxy card. Please follow the directions for voting on each of the proxy cards you receive to ensure that all of your shares are voted.
Q: How do you vote without attending the special meeting?
A: If you are a registered shareholder (that is, if you hold your shares in your name), you may vote your shares by mail by following the instructions included with the enclosed proxy card.
If you hold your shares through a broker, bank or other nominee, you should follow the separate voting instructions provided by your broker, bank or other nominee with this proxy statement.
Q: How do you vote in person at the special meeting?
A: If you are a registered shareholder, you may attend the special meeting and vote your shares in person at the special meeting by giving us a signed proxy card or ballot before the voting is closed. If you want to do that, please bring proof of identification with you. Even if you plan to attend the special meeting, we recommend that you vote your shares in advance as described above, so your vote will be counted even if you later decide not to attend.
If your shares are held in “street name”, through a broker, bank or other nominee holder, only your nominee holder can vote your shares. (Shares purchased through a broker, typically, are registered and held in the name of an entity designated by the brokerage firm, in which event the shares are referred to as being held in “street name”.)
Q: If your shares are held in “street name” by your broker, bank or other nominee, will your nominee vote your shares for you?
A: Only if you provide instructions to your broker, bank or other nominee on how to vote. You should follow the directions provided by your broker, bank or other nominee with this proxy statement regarding how to instruct your nominee to vote your shares. Without instructions from you, your shares will not be voted. If your broker, bank or other nominee fails to contact you, you should contact your broker, bank, or other nominee directly.
Q: Can you change your vote?
A: You may revoke or change your proxy at any time before it is voted. If you are a registered shareholder, you may revoke or change your proxy before it is voted by:
• filing a notice of revocation, which is dated a later date than the proxy you wish to revoke, with an officer of CorVu; or
• submitting a duly executed proxy bearing a later date.
Simply attending the special meeting in person will not constitute revocation of a proxy. If your shares are held in “street name”, you should follow the instructions of your broker, bank or other nominee regarding revocation or change of proxies.
Q: What happens if you sell your shares before the special meeting?
A: If you were a shareholder of record on April 23, 2007, the record date, you retain your right to vote at the special meeting, even if you sell your shares after that date. If you held your CorVu shares in
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“street name” on the record date, you retain your right to direct your broker or other nominee to vote at the special meeting, even if you sell your shares after that date. However, if you transfer your CorVu shares after the record date but prior to the date on which the merger becomes effective, you will not be entitled to the merger consideration for those shares that you have sold. The right to receive the merger consideration for such shares will pass to the person who owns the shares immediately prior to the effectiveness of the merger.
Q: What is a quorum?
A: A quorum of the holders of the outstanding Capital Shares must be present to conduct business at the special meeting. A quorum is present if the holders of a majority of the outstanding Common Shares and the outstanding Preferred Shares, calculated on an as-converted basis, entitled to vote are present in person or by proxy at the meeting. Abstentions are counted as present for the purpose of determining whether a quorum is present.
Q: How are votes counted?
A: For the proposal relating to the approval of the merger agreement, you may vote “for”, “against” or “abstain”. Approval of the merger agreement requires (a) the affirmative vote of the holders of at least a majority of the outstanding Common Shares and of the Preferred Shares, voting together as a single class on an as-converted basis, and (b) the affirmative vote of the holders of at least a majority of the outstanding Preferred Shares, voting as a separate class. Abstentions will count for the purpose of determining whether a quorum is present, and will have the same effect as a vote against the merger agreement.
For the proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies to vote for approval of the merger agreement, you may vote “for”, “against” or “abstain”. The proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of the holders of a majority of the outstanding Common Shares that are present in person or by proxy at the special meeting and entitled to vote on this proposal. Abstentions are considered present and entitled to vote and therefore will have the same effect as a vote against any proposal to adjourn the meeting, whereas broker non-votes are not considered present and entitled to vote and will not affect the proposal to adjourn the special meeting.
If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the approval of the merger agreement, and “FOR” adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
A broker non-vote generally occurs when a broker, bank or other nominee holding shares on your behalf does not vote on a proposal because the nominee has not received your voting instructions and lacks discretionary power to vote the shares. Nominee holders will not have discretion to vote shares without instructions from the beneficial owner thereof because the matters to be voted on are not “routine” matters as to which such discretion applies. Broker non-votes will not count as votes cast on a proposal.
Q: Is it important for you to vote?
A: Yes, because we cannot conduct the vote to approve the merger agreement without a quorum (as described above) of the holders of the outstanding Capital Shares present at the special meeting and we need the affirmative vote in favor of the merger agreement by the holders of a majority of the outstanding Capital Shares, voting as a single class on an as-converted basis, and the affirmative vote by the holders of a majority of the outstanding Preferred Shares, voting as a separate class.
Q: Are you entitled to dissenters’ rights?
A: Under Minnesota law, a shareholder is entitled to dissenters’ rights with respect to the merger if such shareholder (a) gives written notice to CorVu before the merger is submitted to a vote at the special
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meeting that such shareholder objects to the merger proposal and intends to demand payment of the fair value for his or her shares if the merger agreement is approved, (b) does not vote his or her shares in favor of approval of the merger agreement and (c) carefully follows the statutory procedure for perfecting dissenters’ rights set forth in Sections 302A.471 and 302A.473 of the Minnesota Business Corporation Act, a copy of which is attached to this proxy statement as Annex C. See “Dissenters’ Rights of Appraisal” beginning on page 53.
Q: Who will bear the cost of this solicitation?
A: The expenses of preparing, printing and mailing this proxy statement and the proxies solicited hereby will be borne by CorVu. Additional solicitation may be made by telephone, facsimile or other contact by certain directors, officers, employees or agents of CorVu, none of whom will receive additional compensation therefor.
Q: Will a proxy solicitor be used?
A: No. CorVu has decided not to retain the services of a proxy solicitor at the present time.
Q: Should you send in your share certificates now?
A: No. Assuming the merger is completed, you will receive, shortly thereafter, a letter of transmittal with instructions informing you how to send your share certificates to the paying agent in order to receive the merger consideration, without interest. You should use the letter of transmittal to exchange your CorVu shares for the merger consideration to which you are entitled as a result of the merger. DO NOT SEND ANY SHARE CERTIFICATES, OPTIONS OR WARRANTS WITH YOUR PROXY.
Q: Who can help answer your other questions?
A: If you have more questions about the special meeting or the merger, you should contact David C. Carlson, Chief Financial Officer, at (952) 944-7777.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement, and the documents to which we refer you in this proxy statement, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and may be based on estimates and assumptions. Forward-looking statements include information concerning possible or assumed future results of operations of CorVu, the expected completion and timing of the merger and other information relating to the merger. There are forward-looking statements throughout this proxy statement, including, among others, under the headings “Summary,” “The Merger,” “The Merger - Opinion of Cherry Tree Securities, LLC” and in statements made in the future tense or containing the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimates” or other similar expressions. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the actual results, events or developments we anticipate will be realized or occur, or that they will have the expected effects on the business or operations of CorVu. These forward-looking statements speak only as of the date on which the statements were made and we undertake no obligation to publicly update or revise any forward-looking statements made in this proxy statement or elsewhere as a result of new information, future events or otherwise, except as mandated by applicable law. In addition to other factors and matters contained or incorporated in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:
• the satisfaction of the conditions to the merger, including the receipt of the required shareholder approval;
• the uncertain effect of the announcement of the merger on our business relationships, operating results and business generally, including our ability to retain key employees, suppliers and customers;
• the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including circumstances that may require us to pay a termination fee to Rocket Software;
• the risk that the merger may not be completed in a timely manner or at all, which may materially adversely affect our business future prospects and the price of our Common Shares, which are quoted on the OTCBB;
• the risk that we may be subject to litigation in connection with the merger;
• risks related to diverting management’s attention from our ongoing business operations;
• the amount of the costs, fees, expenses and charges related to the merger;
• our ability to make the proper strategic choices with respect to pursuing profitable growth in our business; and
• the other risks and uncertainties set forth in CorVu’s publicly filed documents, including CorVu’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006.
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Time, Place and Purpose of the Special Meeting
This proxy statement is being furnished to our shareholders in connection with the solicitation of proxies by the special committee of our board of directors for use at the special meeting of shareholders to be held on Thursday, May 10, 2007, starting at 8:00 a.m. local time, in the Pepin/Vermillion conference room on the 40th floor of the offices of Fredrikson & Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota. The purpose of the special meeting is for our shareholders to consider and vote upon two proposals: (1) to approve the merger agreement, and (2) to approve the adjournment of the meeting, if necessary or appropriate, to solicit additional proxies to vote for approval of the merger agreement if there are insufficient votes to approve the merger agreement. A copy of the merger agreement is attached to this proxy statement as Annex A. This proxy statement, the notice of the special meeting and the enclosed form of proxy are first being mailed to our shareholders on or about April 24, 2007.
Recommendation of the Special Committee of the Board of Directors
The two independent members of the board of directors comprising the special committee that the board of directors established and authorized to review and consider this transaction, have unanimously approved the merger and the merger agreement. Accordingly, the special committee unanimously recommends that CorVu’s shareholders vote “FOR” the approval of the merger agreement. In considering the special committee’s unanimous recommendation that shareholders approve the merger agreement, shareholders should be aware that members of CorVu’s board of directors and CorVu’s executive officers have interests in the merger both similar to and potentially different than those of other shareholders. Please see the section entitled “The Merger – Interests of Our Directors and Executive Officers in the Merger” beginning on page 27 for a description of such interests.
Record Date, Quorum and Voting Power
The holders of record of Capital Shares at the close of business on April 23, 2007, the record date for the special meeting, are entitled to receive notice of, and to attend and vote at, the special meeting. As of the record date, there were 49,527,274 Common Shares and 360,000 Preferred Shares issued and outstanding, all of which are entitled to be voted at the special meeting.
Each outstanding Common Share on the record date entitles the holder to one vote on each matter submitted to shareholders for a vote at the special meeting. Each outstanding Preferred Share on the record date entitles the holder to 3 and 1/3 votes on each such matter.
A quorum of the holders of the outstanding Capital Shares must be present to conduct business at the special meeting, including conducting the vote on the two proposals described in this proxy statement. A quorum is present if the holders of a majority of the voting power of all Capital Shares entitled to vote are present in person or by proxy at the special meeting. Abstentions will count for the purpose of determining whether a quorum is present. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment or postponement of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will need to be established at the reconvened meeting.
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For us to complete the merger, shareholders as of the close of business on the record date holding at least a majority of the voting power of the outstanding Capital Shares (that is, Common and Preferred Shares, on an as-converted basis, voting as one class), as well as shareholders as of the close of business on the record date holding at least a majority of the outstanding Preferred Shares, must vote in favor of approval of the merger agreement. Abstentions and broker non-votes will have the same effect as a vote against the merger agreement. The proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies requires the approval of a majority of the voting power of the Capital Shares entitled to vote at the special meeting and present in person or by proxy. Abstentions are considered present and entitled to vote and therefore will have the same effect as a vote against any proposal to adjourn the meeting, whereas broker non-votes are not considered present and entitled to vote and will not affect the proposal to adjourn the special meeting.
In order for your Capital Shares to be included in the vote, if you are a registered shareholder (that is, if you hold your shares in certificated form), you must submit your proxy and vote your shares by signing, dating and returning the enclosed proxy in the postage prepaid envelope provided, or you may vote in person at the special meeting.
If your shares are held in “street name” by your broker, bank or other nominee, you should instruct your broker, bank or other nominee how to vote your shares using the instructions provided by your nominee holder. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker, bank or other nominee directly for directions on how to vote your shares. A broker non-vote generally occurs when a broker, bank or other nominee holding shares on your behalf does not vote on a proposal because the nominee has not received your voting instructions and lacks discretionary power to vote the shares. Broker non-votes and abstentions will not count as votes cast on the proposal to approve the merger, and will therefore have the same effect as a vote cast against that proposal.
Voting by Directors and Executive Officers
As of April 23, 2007, the record date for the special meeting, the current directors and executive officers of CorVu have sole or share voting power with respect to an aggregate of 35,899,664 Common Shares (excluding shares subject to options and warrants), representing approximately 72.5% of the outstanding Common Shares. Mr. David C. Carlson, our Chief Financial Officer, owns 50,000 Preferred Shares, representing approximately 13.9% of the outstanding Preferred Shares. Each of our directors and executive officers has informed CorVu that he intends to vote all of his Capital Shares “FOR” the approval of the merger agreement and “FOR” the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
Mr. Robert L. Priddy, one of our directors, shares in the voting power of 22,000,000 Common Shares registered in the name of ComVest Investment, our largest single shareholder. Mr. MacIntosh, one of our directors, his spouse, Mrs. MacIntosh, and ComVest Investment each entered into option and support agreements with Rocket Software pursuant to which they have agreed to vote an aggregate of 10,102,745 Common Shares, under certain terms and conditions, in favor of the merger and against any competing transaction. Each of these shareholders also granted Rocket Software an irrevocable proxy to vote the shares at issue if the shareholder does not take certain actions specified in the agreement that are consistent with the shareholder’s voting covenants. Moreover, these shareholders granted to Rocket Software an option to purchase the number of shares subject to each voting agreement at a purchase price of $0.40 per share upon written notice within nine months after certain designated events that are beyond Rocket Software’s control, including the shareholder’s failure to observe or perform any obligation under
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the option and support agreement or the Special Committee’s approval or recommendation of a competing transaction.
If you vote your Capital Shares by signing and dating a proxy, your shares will be voted at the special meeting in accordance with your instructions. If no instructions are indicated on your signed and dated proxy card, your shares will be voted “FOR” the approval of the merger agreement, and “FOR” adjournment of the meeting, if necessary or appropriate to solicit additional proxies.
You may revoke or change your proxy at any time before it is voted. If you have not voted through a broker, bank or other nominee because you are the registered shareholder, you may revoke or change your proxy before it is voted by:
• filing a notice of revocation that is dated after the date of the proxy you wish to revoke with an officer of CorVu; or
• submitting a duly executed proxy bearing a later date.
Simply attending the special meeting will not constitute revocation of a proxy. If your shares are held in “street” name, you should follow the instructions of your broker, bank or other nominee regarding revocation or change of proxies.
Under Minnesota law, no matter other than the proposal to approve the merger agreement and the proposal to adjourn the meeting, if necessary or appropriate to solicit additional proxies, may be brought before the special meeting.
Shareholders should NOT send share certificates, options or warrants with their proxy cards. If the merger is completed, shareholders will be mailed a transmittal letter form following the completion of the merger with instructions for use in effecting the surrender of shares in exchange for the applicable merger consideration.
Expenses of Proxy Solicitation
The expenses of preparing, printing and mailing this proxy statement and the proxies solicited hereby will be borne by CorVu. Additional solicitation may be made by telephone, facsimile or other contact by certain directors, officers, employees or agents of CorVu, none of whom will receive additional compensation therefor. CorVu will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable expenses for forwarding material to the beneficial owners of shares held of record by others.
Although it is not currently expected, the special meeting may be adjourned for the purpose of soliciting additional proxies to vote for the approval of the merger agreement. Any adjournment may be made without notice, other than by an announcement made at the special meeting. If the special meeting is adjourned for the purpose of soliciting additional proxies, shareholders of CorVu who have already sent in their proxies may revoke them prior to their use at the special meeting, reconvened following such adjournment, in the manner described above.
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THE PARTIES TO THE MERGER AGREEMENT
We are a corporation incorporated under the laws of the State of Minnesota with our principal executive offices at 3400 West 66th Street, Suite 445, Edina, MN 55435. Our telephone number is (952) 944-7777. We are a holding company that develops and sells business performance management software products and related professional services through our subsidiaries. CorVu was incorporated as J.B Goodhouse on September 29, 1983. On April 28, 1988, it changed its name to Lockermate Corporation, and on October 20, 1992, it changed its name to Minnesota American, Inc. Following the merger of CorVu Corporation, a privately held company, with and into Minnesota American, Inc. on January 14, 2000, CorVu continued to operate the business of the privately held company and changed its name to “CorVu Corporation”.
Rocket Software, Inc., which we refer to as Rocket Software, is a Delaware corporation incorporated in 1990. It is a global software development firm that builds enterprise infrastructure products for the world’s leading OEMs, networks and software companies. Rocket Software’s current lines of business complement and extend strategic OEM offerings in the areas of business intelligence, enterprise and mobile security, relational databases, mobile and wireless computing, and operational support systems (OSS). Rocket’s current OEM relationships and technology partners include IBM, EMC, HP, RSA Security, Microsoft, Nortel, and Motorola. The business address of Rocket Software is 275 Grove Street, Newton, MA 02466-2272 and its telephone number is (617) 614-4321.
Rocket Software Minnesota, Inc.
Rocket Software Minnesota, Inc., which we refer to as Newco, is a Minnesota corporation incorporated under the laws of the State of Minnesota on March 1, 2007 for the sole purpose of entering into the merger agreement and completing the merger with CorVu. Newco is a wholly-owned subsidiary of Rocket Software. Newco has not engaged in any business except in anticipation of the merger. The business address of Newco is c/o Rocket Software, Inc., 275 Grove Street, Newton, MA 02466-2272 and its telephone number is (617) 614-4321.
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We regularly review and assess strategic alternatives available to build and maximize shareholder value. Our board of directors and our management share the view that our revenue growth goals can only be achieved through organic growth combined with the acquisition of other companies with complimentary technologies. Given the challenges facing companies our size in today’s market place we have also been open to consider the option of being acquired ourselves if an appropriate opportunity were to be available. Therefore, on June 15, 2006, we engaged ComVest Group, an affiliate of our largest single shareholder, ComVest Investment, to provide financial advisory services to us with regard to a potential acquisition transaction or series of transactions. The services to be provided by ComVest Group included, but were not limited to, identifying and contacting potential transaction partners. The compensation payable to ComVest Group for its services did not include a monthly retainer, but was based solely on the value of any transaction in which CorVu would engage. Upon consummation of the merger, ComVest Group will receive a fee in the amount of $837,000 plus reimbursement of expenses up to $10,000.
Following its engagement, ComVest Group analyzed our strategic opportunities and began to identify potential candidates for a business combination transaction. By November 25, 2006, ComVest Group had contacted on our behalf a total of 128 companies mostly in the areas of business intelligence and business performance management software, 26 of which entered into nondisclosure agreements with us to exchange confidential information to enable the parties to further evaluate their mutual interest in a business combination. These contacts resulted in serious additional negotiations and discussions between us and two entities interested in acquiring us, one of which was Rocket Software. On November 3, 2006, Rocket Software provided to us a non-binding letter of interest in which they indicated that they were willing to negotiate the acquisition of CorVu based upon an enterprise value of approximately $25 million for CorVu and subject to confirmatory due diligence and the terms and conditions negotiated for definitive transaction documents. Further due diligence meetings and discussions, including several on-site visits and conference calls, between us and Rocket, and between us and the other entity, followed. Whereas Rocket Software continued to pursue discussions with us, the other potential acquirer discontinued discussions at the end of December 2006.
At its meeting on January 4, 2007, our board of directors discussed with legal counsel the need to establish a special committee consisting of disinterested directors to oversee and direct the process of responding to acquisition proposals we might receive. At that meeting, the board formed a special committee consisting of two disinterested directors, Messrs. Daniel R. Fishback and Ismail Kurdi, and delegated to the special committee the power and authority of the board with regard to any acquisition offer, including, but not limited to, the authority to evaluate offers, direct negotiations, make the final determination regarding such offer on behalf of CorVu and make any recommendation to our shareholders as to whether to accept such offer.
On January 15, 2007, we received the first draft of a merger agreement from Rocket Software’s legal counsel.
The special committee decided to engage an independent investment banking firm to obtain an opinion regarding the fairness, from a financial point of view, of any consideration to be paid to the holders of our Common Stock in an acquisition. The special committee met with representatives of three investment banking firms during its meeting on January 16, 2007. At its subsequent meeting on January 18, 2007, the special committee determined to engage Cherry Tree Securities, LLC (“Cherry
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Tree”) based on Cherry Tree’s qualification, expertise and reputation. During that meeting, the special committee also discussed with ComVest Group the efforts ComVest Group undertook since its engagement in June of 2006.
Our management and legal counsel as well as ComVest Group continued to negotiate the terms and condition of the proposed merger agreement with Rocket Software and its counsel while concurrently conducting and completing the due diligence process, which included meetings with the financial advisors of Rocket Software. Our legal counsel reported to the special committee on the progress of the negotiations during special committee meetings held on January 22, January 25, February 26, and in the morning of March 2, 2007, and discussed with the special committee their views and input on the progress of, and specific matters subject to, negotiations.
During a meeting on January 24, 2007, our board of directors discussed the refinancing of our outstanding promissory note to ComVest Investment in the principal amount of $1.5 million and the redemption of the issued and outstanding shares of our Series C Convertible Preferred Stock (“Series C Preferred Stock”) for $1.7 million. All these securities were held by ComVest Investment. The discussion was prompted by the fact that interest payments under the note as well as dividend payments on the Series C Preferred Stock were scheduled to increase from 9% to 12% per annum each beginning February 11, 2007. We had received an offer from Commerce Bank to provide us with financing at a rate well below 12% per annum to prepay the promissory note and redeem the Series C Preferred Stock, thereby significantly reducing our ongoing financing and debt service costs. Moreover, the board discussed that a redemption of the Series C Preferred Stock prior to a potential change of control such as a merger, would eliminate the need to pay a liquidation preference for the Series C Preferred Stock, resulting in an additional $850,000 potentially being made available for distribution as merger consideration to all other shareholders of CorVu if such transaction were to be completed. The board therefore authorized the new credit facility, together with the prepayment of the promissory note to ComVest Investment and the redemption of the Series C Preferred Stock. We closed on the new credit facility on February 20, 2007, at which time we prepaid the note and redeemed all outstanding shares of the Series C Preferred Stock as intended.
During this period, negotiations to finalize a merger agreement continued with Rocket Software. While maintaining its offer to assume an enterprise value of $25 million for CorVu, as a result of the additional financial due diligence performed, Rocket Software proposed at this time to pay merger consideration of $0.40 in cash per each Common Share. Despite intensive negotiations with our management and ComVest Group, Rocket Software was not willing to increase the enterprise value assumed.
On March 2, 2007, the parties concluded negotiations with respect to the terms and conditions of the definitive merger agreement, reflecting the $0.40 per share cash price for the Common Shares.
During a meeting of the special committee in the evening of March 2, 2007, Cherry Tree delivered to the special committee its oral opinion as the committee’s independent financial advisor, which was confirmed by delivery of a written opinion dated March 2, 2007 addressed to the special committee, that, as of such date and based upon and subject to various considerations and assumptions set forth in its written opinion, the merger consideration of $0.40 in cash per share to be received by the holders of the Common Shares pursuant to the merger was fair, from a financial point of view, to those holders. The full text of the written opinion of Cherry Tree, which sets forth the assumptions made, matters considered and limitations on the scope of review undertaken by Cherry Tree in rendering is opinion, is attached as Annex B to this proxy statement.
17
Following additional discussion and deliberation, the special committee unanimously approved the merger with Rocket Software and Newco, the merger agreement and the other agreements contemplated by the merger agreement, authorized CorVu to enter into the merger agreement and such other agreements and resolved to recommend that our shareholders approve the merger agreement. The merger agreement was executed by all parties effective as of Monday, March 5, 2007. CorVu issued a press release announcing the merger early on March 5, 2007.
In reaching its decision to approve the merger agreement, authorize CorVu to enter into the merger agreement and recommend that our shareholders approve the merger agreement, the special committee consulted with our financial and legal advisors and our management. The special committee considered a number of potentially positive factors, including the following material factors:
• the current and historical market prices of our Common Shares, and the fact that the $0.40 per share to be paid for each share of our Common Shares in the merger represents a premium of approximately 42.9% over the closing price of our Common Shares on March 2, 2007, the last trading day before we announced the merger, and a premium of approximately 36.5% over the average closing price for the period from December 1, 2006 through March 2, 2007;
• the certainty to our shareholders of realizing in cash a fair value for their investment as a result of the merger, as compared to the potential shareholder value that may be generated from continuing as a stand-alone company or through other strategic alternatives that may or may not be available or successful;
• the potentially challenging alternatives to the sale of CorVu, including continuing to operate CorVu on a stand-alone basis;
• the fact that an extensive sale process was conducted by us, with the assistance of our financial and legal advisors, which involved engaging in discussions with 128 parties to determine their interest in acquiring CorVu, entering into confidentiality agreements with 26 parties, receiving two non-binding indications of interest to acquire CorVu, and ultimately, one definitive proposal to acquire CorVu;
• the price proposed by Rocket Software was the result of extensive negotiations between the parties and represented the highest offer that we had received for the acquisition of CorVu;
• the opinion of Cherry Tree that the consideration to be received by the holders of our Common Shares in the proposed merger is fair, from a financial point of view, to such holders (see “The Merger—Opinion of Cherry Tree Securities, LLC” beginning on page 20 and the full written opinion of Cherry Tree attached as Annex B to this proxy statement);
• the terms of the merger agreement and the related agreements, including:
• Rocket Software’s willingness to deposit $1,000,000 into escrow upon signing of the merger agreement, which amount will be payable to us if the merger is not consummated due to the lack of sufficient funds available to Rocket Software and Newco;
• our ability, under certain limited circumstances, to furnish information to and conduct negotiations with third parties regarding other transaction proposals; and
18
• our ability to terminate the merger agreement in order to accept a financially superior competing transaction, subject to paying Rocket Software a termination fee of $1,000,000;
• our business, operations, assets, financial condition, strategy and prospects, as well as the risks to such strategies and prospects, the industry and the challenges facing the industry, specifically smaller companies such as CorVu;
• recent acquisitions of and by larger, better financed competitors, and the entry of substantially larger, well-funded software companies into the market which were not previously active in our segment of the business performance market; and
• the availability of dissenters’ rights to our shareholders who properly exercise their statutory rights (see “Dissenters’ Rights of Appraisal ” beginning on page 53 and Annex C to this proxy statement).
The special committee also considered and balanced against the potentially positive factors a number of potentially negative factors concerning the merger, including the following material factors:
• the risk that the merger might not be completed in a timely manner, or at all, and the risks and costs to us if the merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential effect on business and customer relationships;
• the fact that the merger consideration consists of cash and will therefore generally be taxable to our shareholders for U.S. federal income tax purposes;
• the customary restrictions on the conduct of our business prior to the completion of the merger, requiring us to conduct our business in all material respects only in the ordinary course, subject to specific limitations, which may delay or prevent us from undertaking extraordinary business opportunities that may arise pending completion of the merger;
• the restrictions on our ability to solicit or engage in discussions or negotiations with a third party regarding other proposals and the requirement that we pay Rocket Software fees and reimburse expenses of up to $1,000,000, in certain circumstances, including if we accept a superior competing transaction;
• the fact that the merger agreement requires CorVu to not have a greater net working capital deficit than negative $5,463,000 as a condition to the closing; and
• the fact that our shareholders will lose the opportunity to participate in any future earnings or growth of CorVu and will not benefit from future appreciation in value of CorVu, if any.
During its consideration of the transaction with Rocket Software, the special committee was also aware that all of our directors and executive officers have interests in the merger that are, or may be, different from, or in addition to, those of our shareholders generally, as described under “The Merger—Interests of Our Directors and Executive Officers in the Merger” beginning on page 27.
The special committee did not assign relative weights to the above factors or the other factors considered by it. In addition, the special committee did not reach any specific conclusion on each factor
19
considered, but conducted an overall analysis of these factors. Individual members of the special committee may have given different weights to different factors.
After taking into account all of the factors set forth above, as well as others that it deemed relevant, the special committee determined that the potentially positive factors outweighed the potentially negative factors. On that basis, the special committee unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement and unanimously resolved to recommend that our shareholders approve the merger agreement.
Recommendation of the Special Committee
On March 2, 2007, after evaluating a variety of business, financial and market factors and consulting with our legal and financial advisors, and after due discussion and due consideration, the special committee unanimously authorized and approved the merger, the merger agreement and the other agreements we entered into contemporaneously with the merger agreement and unanimously resolved to recommend that CorVu’s shareholders approve the merger agreement. ACCORDINGLY, THE SPECIAL COMMITTEE UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE MERGER AGREEMENT.
Opinion of Cherry Tree Securities, LLC
Pursuant to an engagement letter dated January 19, 2007, the special committee engaged Cherry Tree to render an opinion to the special committee as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of the Common Shares as a result of the proposed merger between Rocket Software and CorVu. On March 2, 2007, Cherry Tree rendered its oral opinion to the special committee subsequently confirmed in writing to the effect that, as of that date and based upon and subject to the various considerations and assumptions set forth in its opinion letter, the $0.40 per share to be received by holders of Common Shares pursuant to the merger was fair, from a financial point of view, to those holders.
The full text of Cherry Tree’s opinion, which sets forth the assumptions made, matters considered, and limitations on the scope of review undertaken by Cherry Tree in rendering its opinion, is attached to this proxy statement as Annex B. CorVu and the special committee encourage CorVu’s shareholders to read Cherry Tree’s opinion carefully and in its entirety. The summary of the Cherry Tree analyses in this proxy statement is qualified in its entirety by reference to the full text of the Cherry Tree opinion.
The Cherry Tree opinion was provided to CorVu’s special committee in connection with its consideration of the merger and addresses only the fairness, from a financial point of view, as of the date of the Cherry Tree opinion, of the $.40 per share to be received by the holders of CorVu’s Common Shares. The opinion does not address any other aspect of the merger. The amount of the merger consideration was determined through negotiations between ComVest Group, CorVu’s financial advisor, and Rocket Software. The Cherry Tree opinion does not constitute a recommendation as to how any shareholder should vote on the merger or any other matter.
For purposes of the opinion set forth herein, Cherry Tree reviewed and considered such financial and other information and matters as it deemed relevant, including:
• the Agreement and Plan of Merger labeled “Execution Version” provided to Cherry Tree on March 2, 2007, and several prior drafts of the merger agreement;
20
• publicly available financial and business information of CorVu;
• internal financial statements and other financial and business information of CorVu prepared by the management of CorVu;
• financial projections prepared by the management of CorVu;
• discussions with senior executives about CorVu’s past and current operations and financial condition, the prospects for CorVu, and characteristics and trends in the markets CorVu serves;
• reported prices and trading activity for Common Shares;
• publicly available financial, stock price and other information for certain publicly-traded companies; and
• financial terms, to the extent publicly available, of certain acquisition transactions deemed relevant or comparable by Cherry Tree.
Cherry Tree has advised CorVu that it performed such financial analyses and considered such other information as it deemed appropriate for the purposes of its opinion.
In its review and analysis and in rendering its opinion, Cherry Tree assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy, completeness and fair presentation of all financial and other information that was provided to Cherry Tree by CorVu or that was obtained by Cherry Tree from public sources (including, without limitation, the information described above). With respect to CorVu’s financial projections provided to Cherry Tree, Cherry Tree assumed that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of CorVu’s management as to its future performance. Cherry Tree assumed that no material change in the assets, financial condition or prospects of CorVu had occurred since the date of the most recent financial statements made available to it.
Cherry Tree’s opinion is based on the information available to it and the financial, economic, market and other conditions as they existed and were subject to evaluation as of the date of its opinion. Cherry Tree has no obligation to update, revise or reaffirm its opinion based on information which becomes available or developments which occur after the date of its opinion, and expressly disclaims any responsibility to do so.
Cherry Tree did not make any independent valuation or appraisal of CorVu’s assets or liabilities, nor was it furnished with any such valuation or appraisal, and expressed no opinion regarding the liquidation value of CorVu or any of its assets. Cherry Tree made no independent investigation of any legal or accounting matters that may affect CorVu or the merger. Cherry Tree did not opine on, nor did its opinion consider, the tax consequences of the merger.
Cherry Tree’s opinion was for the information of the special committee in its consideration of the merger, and did not address the relative merits of the merger as compared to any alternative transactions or strategies that might be available to CorVu, nor did it address the underlying business decision by CorVu to engage in the merger.
In preparing its opinion, Cherry Tree performed a variety of financial and comparative analyses. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analysis and the applications of those methods to the particular circumstances and, therefore, is not susceptible to partial analysis or summary description. Cherry Tree believes that its analyses must be considered as a whole.
21
Considering any portion of Cherry Tree’s analyses or the factors considered by Cherry Tree, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the conclusion expressed in Cherry Tree’s opinion. Accordingly, the conclusion reached by Cherry Tree is based on all analyses and factors taken as a whole and also on the application of Cherry Tree’s own experience and judgment.
The following is a summary of the material financial and comparative analyses performed by Cherry Tree that were presented to the special committee on March 2, 2007 in connection with the delivery of Cherry Tree’s opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Cherry Tree’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Cherry Tree’s financial analyses.
Stock Price Trading Range Analysis
Cherry Tree noted that the merger consideration of $0.40 represented:
• a premium of approximately 43% over the closing price of $0.28 on March 1, 2007, one day prior to the date of Cherry Tree’s opinion letter;
• a premium of approximately 28% over the average closing price of $.312 for the one-week period prior to March 2, 2007;
• a premium of approximately 35% over the average closing price of $.297 for the one-month period prior to March 2, 2007; and
• a premium of approximately 34% over the average closing price of $.299 for the three-month period prior to March 2, 2007.
Cherry Tree also noted that there has been limited trading volume in the Common Shares during the three months prior to March 2, 2007.
Guideline Company Analyses
Using publicly available information and information provided by CorVu’s management, Cherry Tree derived various financial multiples and other ratios for CorVu and a group of business intelligence software companies selected by Cherry Tree, which are referred to herein as the “Guideline Companies”. The Guideline Companies consist of the following entities:
• Business Objects S.A.
• Cognos Corporation
• Hyperion Solutions Corporation
• Actuate Corporation
• Applix, Inc.
• Microstrategy Corporation
Financial Multiples
Cherry Tree derived various financial multiples for CorVu and each of the Guideline Companies. Cherry Tree noted that, due to prior years’ losses, CorVu’s pre-tax income was not currently taxed. As a
22
result, Cherry Tree calculated certain multiples for CorVu on both a non-taxed and taxed basis, assuming a tax rate of 35%.
Cherry Tree also noted that five of the Guideline Companies reported their results and publicly provided future earnings guidance on both a Generally Accepted Accounting Principles (“GAAP”) and non-GAAP basis. Those five Guideline Companies provided reconciliations between their GAAP and non-GAAP income statements. The items in the reconciliations included adding back to income the expense of stock based compensation resulting from the implementation of FAS 123R, as well as various other adjustments as specified by each Guideline Company. For purposes of its analyses, Cherry Tree adjusted CorVu’s GAAP income statement for its option and warrant expense to derive non-GAAP financial information.
For each of CorVu and the Guideline Companies, Cherry Tree compared the March 1, 2007 closing stock price (for CorVu, $.40 was used) to:
• Trailing twelve months GAAP diluted earnings per share (“EPS”);
• Trailing twelve months non-GAAP diluted EPS;
• Next fiscal year diluted GAAP EPS; and
• Next fiscal year diluted non-GAAP EPS.
For each of the Guideline Companies, Cherry Tree derived an estimated enterprise value equal to the market capitalization (stock price multiplied by the number of shares outstanding) plus interest bearing debt minus cash. For CorVu, Cherry Tree calculated an estimated enterprise value of $24.5 million based on the $.40 per share to be received by the holders of CorVu’s Common Stock. Cherry Tree compared the enterprise values for each of CorVu and the Guideline Companies to:
• Trailing twelve months GAAP earnings before interest, taxes, depreciation and amortization (“EBITDA”);
• Trailing twelve months GAAP cash flow from operations (“CFO”);
• Trailing twelve months GAAP cash flow from operations minus capital expenditures (“FCFO”); and
• Trailing twelve months non-GAAP EBITDA.
These analyses produced the following multiples comparing CorVu to the Guideline Companies:
|
| Guideline Companies |
|
|
| |||
|
| Mean |
| Median |
| CorVu |
| |
Stock Price To: |
|
|
|
|
|
|
| |
Trailing Twelve Months GAAP Diluted EPS |
| 33.1X |
| 31.3X |
| 23.9X |
| |
| CorVu if Taxed @35% |
|
|
|
|
| 36.7X |
|
Trailing Twelve Months Non-GAAP Diluted EPS |
| 24.5X |
| 23.4X |
| 20.2X |
| |
| CorVu if Taxed @35% |
|
|
|
|
| 31.1X |
|
Next fiscal year Diluted GAAP EPS |
| 33.1X |
| 34.3X |
| 19.3X |
| |
| CorVu if Taxed @35% |
|
|
|
|
| 29.7X |
|
Next fiscal year Diluted Non-GAAP EPS |
| 22.1X |
| 22.4X |
| 16.8X |
| |
| CorVu if Taxed @35% |
|
|
|
|
| 25.9X |
|
|
|
|
|
|
|
|
| |
Enterprise Value To: |
|
|
|
|
|
|
| |
Trailing Twelve Months GAAP EBITDA |
| 19.8X |
| 21.5X |
| 22.3X |
| |
Trailing Twelve Months GAAP CFO |
| 14.3X |
| 14.9X |
| 35.0X |
| |
Trailing Twelve Months GAAP FCFO |
| 15.7X |
| 16.0X |
| 40.1X |
| |
Trailing Twelve Months Non-GAAP EBITDA |
| 15.1X |
| 15.2X |
| 19.6X |
| |
23
Earnings before interest and taxes (“EBIT”) Margin and Revenue Growth
For each of CorVu and the Guideline Companies, Cherry Tree calculated the following.
• GAAP EBIT margins for the trailing twelve months
• Non-GAAP EBIT margins for the trailing twelve months
• Year-over-year revenue growth for the twelve months ended December 31, 2006
• Year-over-year revenue growth for the quarters ended September 30th and December 31, 2006
• Year-over-year license revenue growth for the quarters ended September 30th and December 31, 2006
The following table compares CorVu to the Guideline Companies:
|
| Guideline Companies |
|
|
| |||||
|
| Mean |
| Median |
| CorVu |
| |||
Trailing Twelve Months Revenue (million) |
| $ | 587.9 |
| $ | 572.4 |
| $ | 14.4 |
|
|
|
|
|
|
|
|
| |||
EBIT Margin GAAP |
| 13.4% |
| 9.9% |
| 6.8% |
| |||
EBIT Margin Non-GAAP |
| 19.2% |
| 17.3% |
| 7.8% |
| |||
|
|
|
|
|
|
|
| |||
Revenue Growth Yr./Yr. 12 Months Ended 12/31/06 |
| 19.6% |
| 16.6% |
| 1.2% |
| |||
|
|
|
|
|
|
|
| |||
Total Revenue Growth Yr./Yr. 9/30 Quarter |
| 23.2% |
| 18.5% |
| -11.4% |
| |||
Total Revenue Growth Yr./Yr. 12/31 Quarter |
| 21.6% |
| 18.5% |
| -14.0% |
| |||
|
|
|
|
|
|
|
| |||
License Revenue Growth Yr./Yr. 9/30 Quarter |
| 23.2% |
| 11.0% |
| -43.4% |
| |||
License Revenue Growth Yr./Yr. 12/31 Quarter |
| 25.7% |
| 20.9% |
| -27.9% |
| |||
Guideline Transaction Analyses
Cherry Tree identified two acquisition transactions in CorVu’s industry segment for which Cherry Tree believed there was sufficiently complete information to derive data suitable for comparing with the merger. The two transactions are the acquisition of Crystal Decisions, Inc. by Business Objects S.A. (agreement signed July 18, 2003) and the acquisition of Hyperion Solutions Corporation by Oracle Corporation (agreement signed March 1, 2007).
Based on the terms of these acquisitions at the time their acquisition agreements were signed, for each of these acquisitions, Cherry Tree calculated selected enterprise value multiples and compared them to the multiples in the CorVu merger as shown below.
|
| Crystal Decisions |
| Hyperion |
| CorVu |
|
|
|
|
|
|
|
|
|
Enterprise Value to: |
|
|
|
|
|
|
|
CFO |
| 13.5X |
| 15.5X |
| 35.0X |
|
FCFO |
| 20.5X |
| 17.4X |
| 40.1X |
|
EBITDA |
| 13.6X |
| 21.5X |
| 22.3X |
|
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Other Factors
Cherry Tree noted that for the first six months of CorVu’s fiscal year 2007:
• CorVu’s total revenue was approximately 13% lower than in the comparable period in CorVu’s fiscal year 2006;
• CorVu’s license revenue was approximately 34% lower than in the comparable period in CorVu’s fiscal year 2006;
• CorVu’s operating income and EBITDA were negative compared to positive operating income and EBITDA in the comparable period in CorVu’s fiscal year 2006;
• CorVu’s total revenue was approximately 15% below the forecast provided to Cherry Tree;
• CorVu’s license revenue was approximately 34% below the forecast provided to Cherry Tree;
• CorVu’s operating income and EBITDA were negative to a greater extent than in the forecast provided to Cherry Tree.
Cherry Tree also noted that CorVu was expected to have significant negative working capital at the time of its acquisition.
The Cherry Tree opinion was one of many factors taken into consideration by the special committee in making its determination to approve the merger and should not be considered determinative of the views of the special committee with respect to the merger or the merger consideration.
Pursuant to the engagement letter with Cherry Tree, CorVu paid to Cherry Tree a retainer of $35,000 upon signing of the engagement letter and $65,000 in connection with Cherry Tree rendering its opinion. In addition, CorVu agreed to reimburse Cherry Tree for its expenses and to indemnify Cherry Tree for liabilities and expenses arising out of its engagement. Cherry Tree’s fee was not conditioned upon the completion of the merger.
If the merger agreement is approved by CorVu’s shareholders and the other conditions to the closing of the merger are satisfied or waived, Newco will be merged with and into CorVu, with CorVu surviving the merger as a wholly-owned subsidiary of Rocket Software. Following the merger, CorVu will cease to be a public company and the entire equity in CorVu will be controlled by Rocket Software (through the conversion, at the time of the merger, of each share of common stock of Newco into one share of common stock of the surviving corporation).
When the merger is completed, each Common Share outstanding immediately prior to the effective time of the merger (other than shares held by shareholders who properly exercise dissenters’ rights in compliance with all of the required procedures under the laws of the State of Minnesota) will be converted into the right to receive $0.40 in cash, without interest, less any applicable withholding taxes, and each Preferred Share outstanding immediately prior to the effective time of the merger (other than shares held by shareholders who properly exercise dissenters’ rights in compliance with all of the required procedures under the laws of the State of Minnesota) will be converted into the right to receive $2.33333 in cash, without interest, less any applicable withholding taxes.
The merger agreement provides that at the effective time of the merger, each outstanding option to acquire Capital Shares will become fully vested and will be converted into the right to receive an amount in cash, without interest, less applicable withholding taxes, equal to (i) the number of Capital Shares subject to such option, multiplied by (ii) the excess of $0.40 over the per share exercise price of such option. The merger agreement further provides that at the effective time of the merger, each
25
outstanding warrant to acquire Capital Shares (except for a certain warrant held by ComVest Investment which is subject to a warrant waiver agreement) will become exercisable, and converted into the right to receive an amount in cash, without interest, less applicable withholding taxes, equal to (i) the number of Capital Shares subject to such warrant, multiplied by (ii) the excess of $0.40 over the per share exercise price of such warrant.
In connection with the merger, as described in the section entitled “The Merger - Interests of Our Directors and Executive Officers in the Merger,” our executive officers and certain of our directors will receive benefits and be subject to obligations that are different from, or in addition to, the benefits and obligations of the shareholders of CorVu generally.
At the effective time of the merger, CorVu’s shareholders will cease to have any direct or indirect ownership interests in CorVu or any rights as Company shareholders. Therefore, the current shareholders of CorVu will not participate in future earnings or growth of CorVu, if any, and will not benefit from appreciation in value of CorVu, if any.
The Common Shares are currently registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are quoted on the Over The Counter Bulletin Board (“OTCBB”) under the symbol “CRVU.” As a result of the merger, Rocket Software will own all issued and outstanding shares of common stock of CorVu. It is expected that immediately following the effectiveness of the merger, the registration of the Common Shares under the Exchange Act, and the quoting of trading of the Common Shares on the OTCBB will be terminated. This termination will make certain provisions of the Exchange Act, such as the requirement of furnishing a proxy or information statement in connection with shareholders’ meetings, no longer applicable to CorVu and will eliminate any public trading market for CorVu’s shares. Also, after the effective time of the merger, CorVu will no longer be required to file periodic reports with the Securities and Exchange Commission (the “SEC”).
At the effective time of the merger, the officers and directors of Newco will become the officers and directors of the surviving corporation, until they are removed or until their respective successors are duly elected and qualified. At the effective time of the merger, the articles of incorporation and bylaws of Newco, both as in effect at the effective time of the merger, will become the articles of incorporation and the bylaws of the surviving corporation.
In addition, from the effective time of the merger, Rocket Software has agreed that all rights to indemnification existing in favor of, and all exculpations and limitations of the personal liability of, CorVu’s directors, officers, employees and agents as set forth in CorVu’s articles of incorporation and its bylaws, and in the organizational documents of CorVu’s subsidiaries, for any liabilities in connection with any claims or actions arising out of any acts or omissions in their capacity as officers, directors or employees of CorVu occurring at or prior to the effective time, including the merger, shall continue in full force and effect for a period of not less than six years following the effective time of the merger. The merger agreement also requires that, for a period of six years after the effective time, Rocket Software will cause CorVu, as the surviving corporation, to purchase “tail” directors and officers insurance policy, subject to certain conditions.
Financing of the Merger and Related Transactions
Rocket Software and Newco estimate that the total amount of funds necessary to make the payments of the merger consideration to the holders of Capital Shares, options and warrants will be approximately $22.3 million, which is expected to be funded by cash, third party loans and/or other sources of funds. The foregoing estimate does not take into account the exercise by any shareholders of dissenters’ rights under Minnesota law which may result in their being entitled to receive consideration
26
less than, more than or equal to the merger consideration that would have been payable to them under the terms of the merger agreement. The consummation of the merger is conditioned upon Rocket Software and Newco having sufficient funds available, and if they do not by June 30, 2007 and all other conditions to the merger have been met, Rocket Software is required to pay a termination fee to CorVu of $1,000,000. The amount of the termination fee was deposited into escrow by Rocket Software under an escrow agreement with CorVu and U.S. Bank National Association on the date that the merger agreement was signed.
Rocket Software has entered into a commitment letter with a well-known financial institution that provides for financing in an amount sufficient to fund the cash consideration payable pursuant to the merger and for other general corporate purposes.
Interests of Our Directors and Executive Officers in the Merger
In addition to their interests in the merger as shareholders, our directors and executive officers have interests in the merger that differ from, or are in addition to, your interests as a shareholder. In considering the recommendation of our special committee to vote “FOR” the approval of the merger agreement, you should be aware of these interests. Except as described below, such persons have, to our knowledge, no material interest in the merger that differs from the interests of other CorVu shareholders generally.
Treatment of Stock Options and Warrants
As of April 23, 2007, there were 6,433,357 Common Shares subject to outstanding stock options and warrants beneficially owned by our current executive officers and directors. Each outstanding stock option or warrant that remains unexercised as of the completion of the merger, whether or not the option or warrant is vested or exercisable, will be canceled, and the holder of any stock options or warrants that have an exercise price of less than $0.40 will be entitled to receive a cash payment, without interest and less applicable withholding taxes, equal to the product of:
• the number of Common Shares subject to such option(s) or warrant(s) as of the effective time of the merger, multiplied by
• the excess of $0.40 over the exercise price per Common Share subject to such option or warrant.
The table below sets forth, for each of CorVu’s directors and executive officers, (a) the number of Common Shares subject to exercisable options assuming a closing date of June 30, 2007, (b) the number of Common Shares subject to exercisable warrants , assuming a closing date of June 30, 2007, (c) the number of additional Common Shares subject to options that would be unexercisable as of June 30, 2007 and that will become exercisable upon effectiveness of the merger, (d) the aggregate number of shares subject to exercisable options, options that will become exercisable as a result of the merger, and warrants; and (e) the value of all such options and warrants, calculated by multiplying (i) the excess of $0.40 over the per share exercise price of the option or warrant, respectively, by (ii) the number of shares subject to the option or warrant, and without regard to deductions for income taxes and other withholding amounts.
27
|
| Common Shares Subject |
| Common Shares |
| Common Shares Subject |
| Aggregate Common Shares |
| ||||||||||||
Name |
| Number |
| Value |
| Number |
| Value |
| Number |
| Value |
| Number |
| Value |
| ||||
Joseph J. Caffarelli |
| 1,358,750 |
| $ | 181,594 |
| — |
| $ | — |
| 1,543,750 |
| $ | 208,406 |
| 2,902,500 |
| $ | 390,000 |
|
Justin M. MacIntosh |
| 940,000 |
| 260,000 |
| 560,000 | (1) | 112,000 | (1) | — |
| — |
| 1,500,000 | (1) | 372,000 | (1) | ||||
Ismail Kurdi |
| 170,440 |
| 25,851 |
| — |
| — |
| 172,500 |
| 29,325 |
| 342,940 |
| 55,176 |
| ||||
David C. Carlson |
| 546,250 | (2) | 63,050 | (2) | 116,667 |
| 23,333 |
| — |
| — |
| 662,917 | (2) | 86,383 | (2) | ||||
James L. Mandel |
| 113,750 |
| 13,438 |
| — |
| — |
| 146,250 |
| 24,863 |
| 260,000 |
| 38,301 |
| ||||
Daniel R. Fishback |
| 112,500 |
| 15,625 |
| — |
| — |
| 137,500 |
| 23,175 |
| 250,000 |
| 38,800 |
| ||||
Robert L. Doretti |
| 127,500 |
| 17,625 |
| — |
| — |
| 137,500 |
| 23,275 |
| 265,000 |
| 40,900 |
| ||||
Robert L. Priddy |
| 112,500 |
| 16,125 |
| — |
| — |
| 137,500 |
| 23,275 |
| 250,000 |
| 39,400 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Totals |
| 3,481,690 |
| $ | 593,308 |
| 116,667 |
| $ | 23,333 |
| 2,275,000 |
| $ | 332,319 |
| 6,433,357 |
| $ | 1,060,960 |
|
(1) Mr. MacIntosh disclaims beneficial ownership of these warrants which are registered in the name of his spouse.
(2) Mr. Carlson disclaims beneficial ownership of 43,195 of the shares that may be purchased upon exercise of options with an aggregate value of $7,208.45 because the pecuniary interest in these shares was transferred to his ex-spouse under a divorce decree from January 2003.
Employment Agreements
CorVu has previously entered into an employment agreement with Joseph J. Caffarelli, CorVu’s Chief Executive Officer, and an employment and a change-of-control agreement with David C. Carlson, CorVu’s Chief Financial Officer. These agreements provide for severance payments in certain circumstances. The agreements, as amended, with each of these officers are summarized below.
Joseph J. Caffarelli
On August 1, 2005, CorVu entered into an Employment Agreement with Joseph J. Caffarelli to serve as its President and Chief Executive Officer. The agreement was subsequently amended on July 20, 2006. Pursuant to the amended agreement, Mr. Caffarelli receives an annual base salary of $250,000 per year, plus performance bonuses based on CorVu’s performance. The agreement has a term of twenty-four months and is automatically renewed for additional twenty-four-month periods unless terminated earlier by either party. Either party may terminate the agreement upon sixty (60) days prior written notice. If CorVu terminates the agreement without cause or Mr. Caffarelli terminates the agreement with good reason (such as CorVu’s failure to continue his appointment as chief executive officer or his election to CorVu’s board of directors), Mr. Caffarelli will receive severance pay in the form of salary continuation (1) for the balance of the term of the agreement if there are at least six months remaining on such term or (2) for the balance of the term of the agreement plus six months if there are fewer than six months remaining on the term of the employment agreement. In addition to the above, upon termination of the agreement due to a change of control, Mr. Caffarelli will receive a payment in an amount equal to eighteen months of his then-current annual base salary, plus any performance bonus he is otherwise entitled to. Mr. Caffarelli participates in all CorVu retirement, welfare and other benefit programs CorVu provides for its executive officers. The employment agreement subjects him to customary confidentiality and non-compete obligations.
David C. Carlson
Effective July 15, 1996, CorVu entered into a one-year employment agreement with David C. Carlson. Pursuant to the agreement Mr. Carlson serves as the Chief Financial Officer. The term of the
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agreement is automatically renewed for successive one-year periods unless the agreement is terminated earlier. Effective August 1, 2006, Mr. Carlson receives an annual base salary in the amount of $172,000 per year and can earn bonus compensation based on CorVu’s achievement of quarterly budgeted results and the achievement of personal objectives as agreed upon by CorVu and Mr. Carlson. Mr. Carlson participates in all CorVu retirement, welfare and other benefit programs CorVu provides for its executive officers. Both parties to the agreement can terminate the agreement without cause upon 60 days prior written notice. On November 15, 2006, CorVu and Mr. Carlson entered into a Change of Control, Confidentiality, Inventions and Copyrights Agreement. This agreement provides that Mr. Carlson will receive a lump sum payment equal to six months of his then current base salary shortly after any voluntary or involuntary termination of Mr. Carlson’s employment, if such termination occurs within one year of a change of control and is caused by any of the following events: (1) CorVu terminates or fails to renew Mr. Carlson’s employment without cause; (2) his responsibilities and/or tasks are reduced or he is demoted; (3) his compensation is reduced; (4) as a condition of continued employment, he is required to relocate; (5) his responsibilities are changed to require, in his opinion, an extensive amount of travel, or (6) as a condition of continued employment, he is required to sign an agreement which in his opinion is objectionable. In addition, if Mr. Carlson’s employment is terminated under any of those circumstances, CorVu shall continue to provide at its expense family health, dental and life insurance benefits for a period of six months following the termination of employment, and all of Mr. Carlson’s unvested stock options shall become fully vested. As a condition to receiving these payments and benefits, Mr. Carlson will be required to execute and not rescind a release of claims in favor of CorVu.
Set forth below is an estimate of the severance and change of control benefits payable to each of the named executive officers assuming that the merger is consummated on June 30, 2007 and that such officer’s employment is terminated immediately following the merger. This amount does not include the value of continuing health care benefits or other values shown on the table above regarding the cash to be received in exchange for stock options or warrants to purchase the Common Shares. The employment status of these persons following the merger is uncertain.
Name |
| Estimated Cash Severance Amount |
| |
Joseph J. Caffarelli |
| $ | 520,833 |
|
David C. Carlson |
| $ | 86,000 |
|
Indemnification and Insurance
From the effective time of the merger, Rocket Software has agreed that all rights to indemnification existing in favor of, and all exculpations and limitations of the personal liability of, CorVu’s directors, officers, employees and agents as set forth in CorVu’s articles of incorporation and its bylaws, and in the organizational documents of CorVu’s subsidiaries, for any liabilities in connection with any claims or actions arising out of any acts or omissions in their capacity as officers, directors or employees of CorVu occurring at or prior to the effective time, including the merger, shall continue in full force and effect for a period of not less than six years following the effective time of the merger. The merger agreement also requires that, for a period of six years after the effective time, Rocket Software will cause CorVu, as the surviving corporation, to purchase “tail” directors and officers insurance coverage, of at least the same coverage and amounts as under CorVu’s current insurance policy, provided, that if the surviving corporation cannot obtain such tail insurance policy for $100,000 (the “Maximum Premium”) or less, the surviving corporation shall only be obligated to maintain the most advantageous insurance coverage obtainable for an annual premium equal to the Maximum Premium.
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Material U.S. Federal Income Tax Consequences to U.S. Holders
The following is a general discussion of the material U.S. federal income tax consequences of the merger only with regard to U.S. holders of the Capital Shares that are converted into the right to receive cash in the merger. “U.S. holder” means an individual citizen or resident of the United States, a domestic corporation, an estate the income of which is subject to U.S. federal income taxation regardless of its source, or a trust (if a U.S. court is able to exercise primary supervision over the trust and if one or more U.S. persons have the authority to control all substantial decisions of the trust or the trust has validly elected to be treated as a U.S. person). We base this summary on the provisions of the Internal Revenue Code of 1986, as amended through the date hereof (the “Code”), applicable current and proposed U.S. Treasury Regulations, judicial authority, and administrative rulings and practice, all of which are subject to change, possibly on a retroactive basis. This discussion assumes that U.S. holders hold their Capital Shares as capital assets.
Holders of Capital Shares who are not U.S. holders may have different U.S. federal income tax consequences than those described below and are urged to consult their own tax advisors regarding the tax treatment (including under U.S. federal, state, local or non-U.S. laws) to them of any cash received pursuant to the merger.
In addition, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of such holder’s particular circumstances, or that may apply to a U.S. holder that is subject to special treatment under the U.S. federal income tax laws (including, for example, insurance companies, brokers or dealers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting for their securities, shareholders subject to the alternative minimum tax, persons that have a functional currency other than the U.S. dollar, tax-exempt organizations, U.S. expatriates, pass through entities (e.g., partnerships) and persons investing in such entities, financial institutions, mutual funds, non-U.S. persons, U.S. holders who hold Capital Shares as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders who acquired Common Shares through the exercise of employee stock options or other compensation arrangements or shareholders who hold (actually or constructively) an equity interest in the surviving corporation after the merger). This discussion does not address the tax consequences of payments made to the holders of options or warrants to acquire Common Shares. In addition, the discussion does not address any tax considerations that may apply to U.S. holders under state, local or non-U.S. laws or U.S. federal laws other than those pertaining to the U.S. federal income tax.
The receipt of cash pursuant to the merger by U.S. holders of Capital Shares will be treated as a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder of Capital Shares will recognize gain or loss equal to the difference between the amount of cash received in exchange for such Capital Shares and the U.S. holder’s adjusted tax basis in the Capital Shares surrendered in the merger. The gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if, on the date of the merger, the Capital Shares were held by the U.S. holder for more than one year. In the case of U.S. holders who are individuals, long-term capital gain is currently eligible for reduced rates of federal income tax. There are limitations on the deductibility of capital losses.
A U.S. holder of Capital Shares (other than a corporation or other exempt recipient) may be subject, under certain circumstances, to information reporting on the cash received pursuant to the merger. In addition, unless an exemption applies, a U.S. holder or other payee that exchanges Capital Shares for cash may be subject to backup withholding at a rate of 28% unless such holder or other payee provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited
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against a U.S. holder’s U.S. federal income tax liability, provided that such holder timely and properly furnishes the required information to the Internal Revenue Service.
The foregoing is not tax advice. Holders of Capital Shares should consult their own tax advisors to determine the U.S. federal, state and local and non-U.S. tax consequences of the merger to them in view of their own particular circumstances.
Regulatory and Other Governmental Approvals
Except with respect to the filing of the articles of merger with the Minnesota Secretary of State, we are unaware of any material foreign, federal or state regulatory requirements or approvals required for the completion of the merger.
Whether or not the merger is completed, in general, all fees and expenses incurred in connection with the merger will be paid by the party incurring those fees and expenses. If the merger agreement is terminated, CorVu will, in specified circumstances, be required to reimburse Rocket Software and Newco for various fees and expenses. See “The Merger Agreement - Expenses” beginning on page 48.
On March 5, 2007, each of ComVest Investment and Mr. and Mrs. MacIntosh entered into an option and support agreement with Rocket Software. These shareholders agreed, pursuant to these agreements, to vote an aggregate of 10,102,745 Common Shares, under certain terms and conditions, in favor of the adoption of the merger agreement and against any competing transaction. Each of these shareholders also granted Rocket Software an irrevocable proxy to vote the shares at issue if the shareholder does not take certain actions specified in the agreement that are consistent with the shareholder’s voting covenants. Each proxy and all of the voting covenants in the agreements terminate upon the termination of the merger agreement that results in the payment to Rocket Software of a termination fee in accordance with the terms of the merger agreement. In addition, these shareholders granted to Rocket Software an option to purchase the number of shares subject to each voting agreement at a purchase price of $0.40 per share upon written notice within nine months after certain designated events that are beyond Rocket Software’s control, including the shareholder’s failure to observe or perform any obligation under the option and support agreement or the special committee’s approval or recommendation of a competing transaction.
Management Employment Acknowledgement
Concurrently with the execution and delivery of the merger agreement, upon Rocket Software’s request, four of our employees provided an employment acknowledgement in which they confirmed their then-current interest to continue their employment with CorVu for a minimum of three months following the merger, with the same duties, responsibilities and rights, including salary and benefits, as prior to the merger. No additional consideration was paid for such acknowledgments, and none of our executive officers was asked to provide such an acknowledgement.
In February 2005, Mr. MacIntosh agreed to indemnify CorVu for potential tax liabilities of certain European subsidiaries of CorVu that were no longer in existence in excess of $400,000. At the time, Mr. MacIntosh escrowed certain Common Shares he owned with CorVu’s outside legal counsel as
31
security for his indemnification obligations. In a letter agreement with CorVu and Rocket Software and an escrow agreement with Rocket Software and CorVu’s legal counsel, both dated March 5, 2007, Mr. MacIntosh affirmed that such indemnification would be available to CorVu after the merger and agreed that the merger consideration payable for the currently escrowed Common Shares be paid into an escrow account and be released to him only under certain circumstances, such as the expiration of any such potential tax liabilities in excess of $400,000.
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The summary of the terms of the merger agreement below and elsewhere in this proxy statement does not purport to describe all the terms of the merger agreement and is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and which we incorporate by reference into this document. We urge you to read carefully the merger agreement in its entirety.
The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any financial information about CorVu, Rocket Software or Newco. Financial information about CorVu can be found in the documents incorporated by reference in this proxy statement and in the public filings CorVu makes with the SEC, which are available at www.sec.gov.
The merger agreement contains representations and warranties of CorVu, Rocket Software and Newco as of specific dates, subject, in some cases, to specified exceptions and qualifications contained in the merger agreement or in the disclosure schedule delivered in connection therewith. The statements embodied in those representations and warranties were made solely for purposes of the contract between CorVu, on the one hand, and Rocket Software and Newco, on the other hand, and may be subject to important qualifications and limitations agreed upon by CorVu, on the one hand, and Rocket Software and Newco, on the other hand, in connection with negotiating its terms. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to contractual standards of materiality that differ from standards of materiality under U.S. federal securities or other laws, or may have been used for the purpose of allocating risk between CorVu, on the one hand, and Rocket Software and Newco, on the other hand, rather than establishing matters as facts. Therefore, shareholders should not unduly rely on the existence of such representations and warranties in determining how to vote at the special meeting.
In accordance with and subject to the terms of the merger agreement and the Minnesota Business Corporation Act, which we refer to as the MBCA, Newco, a wholly-owned subsidiary of Rocket Software, will merge with and into CorVu, with CorVu surviving the merger. As a result of the merger, at the effective time of the merger, the separate corporate existence of Newco will cease, and CorVu will continue as a wholly-owned subsidiary of Rocket Software.
The merger will become effective at such time as the articles of merger are duly filed with the Minnesota Secretary of State. The parties will execute and file articles of merger with the Minnesota Secretary of State and make all other filings or recordings required under the MBCA in connection with the merger at or immediately following the closing. The parties agreed that the closing of the merger will take place on a date no later than seven business days after the satisfaction (or, to the extent permitted by law, waiver) of all of the conditions set forth in the merger agreement (other than those conditions which by their nature cannot be satisfied until closing) or on such other date as Rocket Software and CorVu may agree.
Articles of Incorporation and Bylaws
The merger agreement provides that the articles of incorporation of Newco, as in effect immediately prior to the Effective Time, will be the articles of incorporation of CorVu after the merger is completed, and that the bylaws of Newco, as in effect immediately prior to the Effective Time, will be the
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bylaws of CorVu after the merger is completed. The articles of incorporation of Newco are attached to this proxy statement as Annex D.
The merger agreement provides that each Common Share outstanding immediately prior to the effective time of the merger will be converted at the effective time of the merger into the right to receive $0.40 in cash, without interest, less any applicable withholding taxes, and that each Preferred Share outstanding immediately prior to the effective time of the merger will be converted at the effective time of the merger into the right to receive $2.33333 in cash, without interest, less any applicable withholding taxes. Any Capital Shares owned by Newco or Rocket Software will be cancelled and cease to exist at the effective time of the merger and no consideration will be delivered or deliverable in exchange for those shares. If dissenters’ rights for any Common or Preferred Shares are properly asserted by any of CorVu’s shareholders, then those shares will be treated as described in the Section entitled “Dissenters’ Rights of Appraisal” beginning on page 53.
The price of $0.40 per Common Share to be received in the merger was determined through arm’s-length negotiations. The price of $2.33333 per Preferred Share was determined based on the merger consideration payable for the Common Shares and with reference to the express rights, preferences and privileges of the Preferred Shares as set forth in CorVu’s articles of incorporation, as amended. After the merger is completed, CorVu shareholders will have the right to receive the merger consideration (or pursue dissenters’ rights if you have followed the procedure under the MBCA), but you will no longer have any rights as a shareholder of CorVu. Shareholders will receive the merger consideration after exchanging their share certificates in accordance with the instructions contained in the letter of transmittal that the paying agent for the merger will send to the shareholders shortly after completion of the merger.
Conversion of Shares; Payment Procedures
The conversion of Common Shares and Preferred Shares (other than dissenting shares) into the right to receive $0.40 and $2.33333 per share in cash, respectively, without interest and minus any required withholding for taxes, will occur automatically at the effective time of the merger. At or prior to the effective time of the merger, Rocket Software will appoint a bank, trust company or other person mutually acceptable to CorVu and Rocket Software, to serve as paying agent to administer payment of the merger consideration in exchange for certificates representing the Capital Shares. No later than the effective time of the merger, Rocket Software will deposit or cause to be deposited with the paying agent cash in an amount sufficient to pay the aggregate merger consideration payable pursuant to the merger. As soon as reasonably practicable after the effective time of the merger, the paying agent will mail to the holders of record of Capital Shares a letter of transmittal and instructions explaining how to surrender their share certificates to the paying agent in exchange for the merger consideration. Upon surrender of a certificate for cancellation to the paying agent, together with a duly completed and validly executed letter of transmittal and any other documents customarily required by the paying agent, the holder of such certificate will be entitled to receive the appropriate merger consideration in cash, less any withholding taxes.
Shareholders should not return their share certificates with the enclosed proxy card, and they should not forward their share certificates to the paying agent without a letter of transmittal.
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Treatment of Options and Warrants to Acquire Common Shares
At the effective time of the merger, each outstanding option or warrant to purchase our Common Shares, whether or not then vested and exercisable, will be canceled and converted into the right to receive an amount in cash equal to the excess (if any) of the $0.40 per share cash merger consideration over the exercise price per share of the option, multiplied by the number of shares subject to the option or warrant, without interest and less any applicable withholding taxes. Each holder of an option or warrant to purchase Common Shares shall surrender the option or warrant certificate, as the case may be, to Rocket Software, together with written instructions from the holder of such option or warrant regarding the recipient of any payments. Upon receipt of such items, Rocket Software shall direct the paying agent to make the appropriate payments. If the exercise price of any option or warrant to purchase Common Shares is equal to or greater than $0.40 per share, the holder of such option or warrant shall not be entitled to receive any merger consideration for such option or warrant which shall be cancelled.
Representations and Warranties
The merger agreement contains customary representations and warranties made by CorVu to Rocket Software and Newco and customary representations and warranties made by Rocket Software and Newco to CorVu, subject in some cases, to specified exceptions and qualifications contained in the merger agreement or in the disclosure schedule delivered in connection therewith. None of the representations and warranties contained in the merger agreement will survive after the effective time of the merger.
The statements contained in those representations and warranties were made solely for the purposes of the merger agreement and may be subject to important qualifications and limitations. For example, some of CorVu’s, Rocket’s and Newco’s representations and warranties are qualified by materiality or knowledge or are qualified by a material adverse effect standard.
For purposes of the merger agreement, the term “material adverse effect” with respect to CorVu means any circumstance, change in or effect on the business, assets or liabilities of CorVu or any subsidiary of CorVu that, individually or in the aggregate with all other circumstances, changes in, or effects on such business, assets or liabilities of CorVu or any subsidiary of CorVu: (i) is or is reasonably likely to be materially adverse to the business, operations, assets or liabilities (including contingent liabilities), employee relationships, customer or supplier relationships, results of operations or the condition (financial or otherwise) of CorVu and its subsidiaries taken as a whole or (ii) is reasonably likely to materially adversely effect the ability of the corporation surviving the merger to operate or conduct its business in the manner in which CorVu currently conducts its business; but excluding any changes or effects resulting from (i) general changes in economic, or financial or capital market conditions, in each case which do not affect disproportionately CorVu and its subsidiaries, taken as a whole, (ii) terrorism, war or the outbreak of hostilities, (iii) changes in conditions generally applicable to the industries in which CorVu and its subsidiaries are involved, in each case which do not affect CorVu and its subsidiaries, taken as a whole, to a materially disproportionate degree relative to other companies in such industries, (iv) changes in the law or generally accepted accounting principles, or (v) from the announcement of the merger, the taking of any action contemplated or required by this Agreement, or the consummation of the transactions contemplated hereby.
Some of the representations and warranties in the merger agreement may not be accurate or complete as of any specified date, may be subject to contractual standards of materiality that differ from the standards of materiality under U.S. securities or other laws, or may have been used for the purpose of allocating risk between CorVu, on the one hand, and Rocket Software and Newco, on the other hand, rather than establishing matters as facts.
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The representations and warranties made by Newco and Rocket Software relate to, among other things:
• their organization, good standing and corporate power to operate their properties and conduct their businesses;
• their corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement and the valid and binding nature of the merger agreement;
• the absence of any conflict with or breach of their organizational documents, applicable law or certain agreements as a result of entering into the merger agreement and consummating the merger; and
• the written information regarding Newco or Rocket Software provided to CorVu for purposes of inclusion in this proxy statement being free from any false or misleading statements with respect to any material fact at the time the same is provided.
CorVu’s representations and warranties relate to, among other things:
• our and our subsidiaries’ organization, good standing and corporate power to operate our businesses;
• our true and correct organizational documents;
• ownership of our subsidiaries;
• our capital structure;
• our corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement and the valid and binding nature of the merger agreement;
• the inapplicability of state anti-takeover statutes;
• the absence of any conflict with or breach of our organizational documents, applicable law or certain agreements as a result of entering into the merger agreement and consummating the merger;
• the accuracy of information contained in registration statements, reports and other documents filed with the SEC since January 1, 2004 and the financial statements included in the SEC documents;
• this proxy statement being free from false or misleading statements or omissions with respect to any material fact;
• our compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002;
• the absence of undisclosed liabilities;
• the absence of any material adverse effect since June 30, 2006;
• tax matters;
• our intellectual property;
• the absence of pending or threatened litigation against us or our subsidiaries;
• environmental matters;
36
• our employee benefit plans;
• our compliance with applicable laws;
• our labor matters;
• our insurance policies;
• the receipt of an opinion from Cherry Tree; and
• the absence of undisclosed broker’s or finder’s fees.
Conduct of Business Pending the Merger
CorVu has agreed that from and after March 5, 2007 until the effective time of the merger (or, if applicable, the date on which the merger agreement is terminated), except as may be agreed by Rocket Software in writing or as expressly contemplated by the merger agreement, CorVu must and must cause each of our subsidiaries to:
• conduct its operations according to its ordinary and usual course of business consistent with past practice in compliance in all material respects with all applicable laws;
• pay its debts and taxes when due;
• pay or perform other material obligations when due (and so long as consistent with such obligation, with no less diligence or effort that would be applied in the absence of our obligation to do so pursuant to the merger agreement) ;
• use commercially reasonable efforts to preserve intact its current business organizations;
• keep available the service of its current officers and employees; and
• preserve its relationships with customers, suppliers and others having business dealings with it to the end that goodwill and ongoing businesses will not be impaired in any material respect at or prior to the effective time of the merger.
Further, CorVu has agreed that during the same period, except (i) as may be required by law, (ii) as may be expressly permitted pursuant to the merger agreement or (iii) as previously disclosed to Rocket Software, CorVu and our subsidiaries will not do any of the following without the prior written consent of Rocket Software:
37
38
39
No Solicitation; Superior Competing Transaction
Upon the signing of the merger agreement, we agreed to cease and terminate, and to direct our officers, directors, employees, investment bankers, attorneys or other advisors or representatives to cease and terminate, all activities, discussions, solicitations, communications or negotiations with a “third party,” i.e. any party other than Rocket Software, Newco or their affiliates, with respect to any “competing transaction” (as defined below). Moreover, we agreed that while the merger agreement is in effect we will not, and will not permit our subsidiaries, nor authorize or permit any officer, director or employee of, or any investment banker, attorney or other advisor or representative of, CorVu or any of our subsidiaries to:
However, in the event CorVu receives a bona fide, unsolicited written proposal or offer not subsequently withdrawn for a competing transaction from a third party, under specified circumstances, we may furnish information with respect to us and our subsidiaries to, and participate in discussions and negotiations directly or through our representatives with, any such third party in response to such unsolicited offer or proposal, provided, that:
• we receive the unsolicited offer or proposal prior to our shareholders’ approval of the merger agreement by the vote required;
• the special committee, acting reasonably and in good faith (after consultation with CorVu’s outside legal counsel and financial adviser), determines by majority vote (excluding any members of the committee that are not independent of the third party making the proposal or offer) that this unsolicited proposal or offer is reasonably likely to result in a “superior competing transaction” (as defined below);
• the proposal or offer did not result from our violation of non-solicitation provisions of the merger agreement;
40
• prior to furnishing any information with respect to us and our subsidiaries, the third party executes a nondisclosure agreement at least as restrictive as the existing confidentiality agreement between us and Rocket Software;
• prior to taking any such actions in response to such unsolicited offer or proposal, we deliver written notice advising Rocket Software that we intend to take action in response to this offer or proposal, and such written notice includes the material terms and conditions of the applicable offer or proposal, the identity of the third party making such offer or proposal, and any written materials and correspondence (or a summary of any oral communications) from or to that third party or its advisors; and
• we provide Rocket Software at least three business days from the date of delivery of such written notice to agree to make adjustments to the terms and conditions of the merger agreement to match or improve upon the economic or other terms of the purportedly superior competing transaction, and we must negotiate in good faith with respect thereto.
We have agreed to as promptly as reasonably practicable (and to use our reasonable best efforts to within one business day following receipt by CorVu or any of our advisors) notify Rocket Software of the receipt of any proposal for a competing transaction or a written request for nonpublic information relating to CorVu or any of our subsidiaries or for access to the business properties, assets, personnel, books or records of CorVu or any of its subsidiaries by any third party that indicates it may be considering making, or has made, a proposal for a competing transaction. With such notice, we have agreed to provide Rocket Software the material terms and conditions of that proposal, indication of interest or request and the identity of the third party submitting such proposal, indication or request. In addition, we have agreed to keep Rocket Software reasonably informed, on a current basis, of the status and material details of any such proposal, indication or request (including of any meeting of our board of directors or committee thereof at which the board or such committee is reasonably expected to consider any competing transaction).
The term “competing transaction” means the acquisition of beneficial ownership (as such term is defined under Rule 13(d) of the Exchange Act) of all or more than 15% of the assets of CorVu and our subsidiaries, taken as a whole, or 15% or more of any class or series of equity securities of CorVu, whether pursuant to a merger, consolidation or other business combination or other transaction, sale of shares of stock, sale of assets, tender offer, exchange offer or similar transaction or series of related transactions, which is structured to permit such a third party to acquire beneficial ownership of more than 15% of the assets of CorVu and our subsidiaries, taken as a whole, or 15% or more of any class or series of equity securities of CorVu.
The term “superior competing transaction” means a competing transaction that (i) is reasonably likely to result in terms which are more favorable from a financial point of view to the holders of the Capital Shares than the merger, (ii) is reasonably capable of being consummated within a reasonable period of time, and (iii) for which financing, to the extent required, is committed.
Change of Special Committee Recommendation
Prior to shareholder approval of the merger agreement by the vote required, in response to the receipt of an unsolicited bona fide written proposal or offer for a competing transaction, if the special committee:
(1) determines that it has received a proposal for a superior competing transaction; and
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(2) reasonably determines in good faith (after consultation with CorVu’s outside legal counsel and financial advisors) that it is required to take any or all of the following actions in order to comply with its fiduciary duties under applicable law,
then, the special committee may withdraw, modify or change its approval or recommendation of the merger agreement, approve or recommend to our shareholders the superior competing transaction, terminate the merger agreement (subject to certain additional conditions set forth in the merger agreement), or publicly announce its intention to do any of the foregoing. However, prior to the special committee taking any of the foregoing actions, CorVu must give written notice to Rocket Software of a proposal for a superior competing transaction (including the material terms and conditions and the identity of the person making any such proposal), which written notice shall state CorVu's intention to take such actions. Rocket Software has the right, within three business days of delivery of such written notice, to agree to make adjustments to the merger agreement and to match or improve upon the economic or the terms of the superior competing transaction.
Reasonable Best Efforts Covenants
Subject to the terms and conditions set forth in the merger agreement, each of CorVu, Rocket Software and Newco will use its reasonable best efforts to:
• take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner possible, the merger and the other transactions contemplated by the merger agreement, including using its reasonable best efforts to obtain approval by CorVu’s shareholders of the merger agreement, all necessary or appropriate waivers, consents, and approvals, to effect all necessary registrations, filings and submissions, and to challenge or lift any injunction or other legal bar to the merger;
• cooperate with each other in taking, or causing to be taken, all actions necessary to terminate the registration of the Common Shares under the Exchange Act at the effective time of the merger; and
• keep each other reasonably informed of the status of their respective efforts to consummate the transactions contemplated by the merger agreement, including by furnishing each other with such necessary information and reasonable assistance as it may reasonably request in connection with its preparation of necessary filings or submissions of information to any governmental authority and by giving prompt notice of developments such as any representation or warranty no longer being true, any failure to satisfy any of its agreements or covenants under the merger agreement, a change in facts or circumstances such that such fact or circumstance would have been required to be disclosed had it existed at the time the merger agreement was signed.
We have agreed to duly call, notice and hold a special meeting and to prepare and mail this proxy statement and solicit proxies to vote FOR approval of the merger agreement in accordance with applicable legal requirements. We have also agreed that, subject to certain limited exceptions, the special committee of our board of directors will recommend that our shareholders approve the merger agreement and the merger and that we will include such recommendation in the proxy statement.
42
During normal business hours and upon reasonable advance notice, we and our subsidiaries shall afford to the officers, employees, counsel, accountants and other authorized representatives of Rocket Software, in order to evaluate the transactions contemplated by the merger agreement and from time to time evaluate our net working capital, reasonable access to our properties, books, records, facilities, officers, directors and accountants and shall furnish or make available reasonably promptly to such representatives all information concerning our business, properties and personnel as may reasonably be requested. Any such access shall be conducted under the supervision of our personnel and in a manner that does not unreasonably interfere with our normal business operations. Rocket Software agrees that it and its representatives shall not use any such information for any purpose unrelated to the consummation of the transactions contemplated by the merger agreement. The confidentiality agreement between CorVu and Rocket Software dated September 11, 2006 shall apply to any information provided to Rocket Software.
The parties agreed to consult with each other and to mutually agree upon any press releases or public announcements pertaining to the merger agreement and the merger prior to their issuance, except as may be required by applicable law or by obligations under any agreement with the OTCBB, in which case the party proposing to issue such press release or to make such public announcement shall consult in good faith with the other parties before issuing any such press releases or making any such public announcements.
Rocket Software and Newco agreed that all rights to indemnification in favor of, and all exculpations and limitations of the personal liability of, our directors, officers, employees and agents in our articles of incorporation and our bylaws and the respective organizational documents of our subsidiaries, as in effect on the date of the merger agreement, will continue in full force and effect for a period of not less than six years following the effective time of the merger. Any rights to indemnification in respect of any such claim asserted or made within such time period shall continue until the disposition of the respective claim, and Parent and Newco are obligated to obtain “tail” directors’ and officers’ liability insurance and fiduciary insurance coverage effective as of the effective time of the merger covering such claims; provided, that Parent is only obligated to obtain the “tail” insurance coverage on such terms and for such duration as reasonably can be obtained for $100,000.
Confidentiality, Assignment and Loyalty Agreements
We agreed to use our commercially reasonable best efforts to cause each person (i) who currently provides services to us as employee, consultant or independent contractor or (ii) who is hired after the date of the merger agreement and prior to the effective time of the merger to execute a standard confidentiality, assignment and loyalty agreement in a form agreed upon by the parties.
Conditions to the Completion of the Merger
The obligations of the parties to complete the merger are subject to the satisfaction or waiver (where permissible) of the following conditions:
• CorVu’s shareholders shall have approved the merger agreement in accordance with applicable law and CorVu’s articles of incorporation and bylaws;
43
• no law enjoining or prohibiting the consummation of the transactions contemplated by the merger agreement shall be in effect; and
• all consents, orders and approvals of governmental authorities legally required for the consummation of the merger and the other transactions contemplated by the merger agreement shall have been obtained and be in effect at the effective time of the merger.
The obligations of CorVu to complete the merger are subject to the satisfaction or waiver (where permissible) of the following additional conditions:
• The representations and warranties that Rocket Software and Newco made in the merger agreement, without regard to any qualification or reference to “material”, “material adverse effect” or similar variation thereof, must be true and correct at and as of the effective time of the merger as though made on and as of such date (except that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date), except for those failures to be true and correct which, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse change in the financial condition, business, assets, liabilities, properties or results of operations of Rocket Software and its subsidiaries, taken as a whole (with certain changes resulting from certain events excepted), which would prevent Rocket Software from performing its obligations to deliver the merger consideration due under the merger agreement. At the closing, CorVu must receive a certificate of a duly authorized officer of Rocket Software to the foregoing effect.
• Rocket Software and Newco must have performed and complied with in all material respects their obligations under the merger agreement required to be performed or complied with on or prior to the effective time of the merger. CorVu must have received a certificate of a duly authorized officer of Rocket Software to the foregoing effect.
The obligations of Rocket Software and Newco to complete the merger are subject to the satisfaction or waiver (where permissible) of the following additional conditions:
• CorVu’s representations and warranties contained in the merger agreement, without regard to any qualification or reference to “material”, “material adverse effect” or similar variation thereof, must be true and correct at and as of the effective time of the merger as though made on and as of such date (except that those representations and warranties which address matters only as of a particular date shall remain true and correct as of such date) except for those failures to be true and correct which, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect with regard to CorVu. At the closing, Rocket Software must receive a certificate of a duly authorized officer of CorVu to the foregoing effect.
• CorVu must have performed and complied with in all material respects its obligations under the merger agreement, required to be performed or complied with on or prior to the effective time of the merger. Rocket Software must have received a certificate of a duly authorized officer of CorVu to the foregoing effect.
• All consents, approvals and authorizations necessary for CorVu to consummate the merger and the other transactions contemplated by the merger agreement shall have been obtained (including any consents needed from holders of options and warrants).
• �� Dissenters’ rights shall not have been asserted by Holders of more than ten percent (10%) of the outstanding Capital Shares.
No material adverse effect with respect to CorVu and our subsidiaries may have occurred.
44
• No legal action shall be pending that has a reasonable likelihood of success challenging the merger agreement or the transactions contemplated thereby, seeking to delay, restrain or prohibit the merger or seeking to prohibit or impose material limitations on the ownership or operations of all or a material portion of the operations or assets of CorVu or any of its subsidiaries that would be effective after the effective time of the merger, or seeking the payment of any material amount of damages.
• Rocket Software and Newco shall have sufficient funds available to them to consummate the merger.
• Except for a certain term loan in the principal amount of $3,200,000, as evidenced by that certain promissory note, dated as February 20, 2007 issued by CorVu in favor of Commerce Bank pursuant to a certain Term Loan Agreement, dated as of February 20, 2007 between CorVu and Commerce Bank, there may be no other indebtedness of CorVu outstanding as of the effective time, other than accounts payable, trade payables and capital lease obligations incurred in the ordinary course of business. CorVu must deliver to Rocket Software evidence of the repayment of a promissory note issued to ComVest on February 11, 2005, and of the termination of any related liens.
• CorVu’s outside legal counsel must provide a legal opinion to Rocket Software.
• Rocket Software must receive a certificate of a duly authorized officer of CorVu certifying (i) that the disclosure schedule provided by CorVu to Rocket Software at the execution of the merger agreement accurately and completely sets forth all of the fees and expenses payable by CorVu in connection with the merger and (ii) that such fees and expenses do not exceed, in the aggregate, $1,900,000 (including the full amount of any reimbursable expenses). Rocket Software must have received an executed release, in a form reasonably satisfactory to Rocket Software, from each person to whom any of these transaction fees and expenses were payable, and pursuant to which CorVu, the surviving corporation, Rocket Software and Newco and any affiliate of any of them, are fully released from any obligation or liability in respect of any amounts in excess of the respective amounts owed to such person as set forth in CorVu’s disclosure schedule.
• An agreement between CorVu and ComVest Investment dated March 5, 2007, pursuant to which ComVest Investment waived its rights to purchase Common Shares under a certain warrant without payment, must remain in full force and effect and may not have been amended since the execution thereof.
• CorVu must deliver to Rocket Software the following documents: (i) a certified copy of the appropriate corporate resolutions authorizing the execution, delivery and performance of the merger agreement and the merger, (ii) a certified copy of the resolutions duly adopted by CorVu’s shareholders adopting the merger agreement, (iii) a good standing certificate, or equivalent document, certified by the Secretary of State of the State of Minnesota, and dated no more than two (2) business days prior to the closing date (iv) a copy of CorVu’s articles of incorporation, certified by the Secretary of State of the State of Minnesota as of no more than two (2) business days prior to the closing date, and (v) a certificate executed by a duly authorized officer of CorVu to the effect that neither CorVu nor any of its subsidiaries is a U.S. real property holding company.
• The net working capital deficit as of the closing date must be no greater than negative $5,463,000.
45
• Cherry Tree’s opinion relating to the fairness of the merger consideration to be paid for the Common Shares must be delivered and not subsequently modified, amended, withdrawn or rescinded.
• �� CorVu must deliver to Rocket Software executed copies of all confidentiality, assignment and loyalty agreements which CorVu had an obligation to use its commercially reasonable best efforts to cause to be executed by employees, consultants and independent contractors following the date of the merger agreement.
• The tax indemnification agreement between Justin MacIntosh, Rocket Software and CorVu must be in full force and effect in favor of CorVu, and shall be available to and enforceable by the corporation surviving the merger from and after the effective time of the merger.
• Rocket Software must have received all original certificates representing shares of all Series C Stock marked “cancelled”, as well as other evidence to demonstrate that all previously issued and outstanding shares of CorVu’s Series C Stock were redeemed.
Termination of the Merger Agreement
The merger agreement may be terminated and the merger abandoned at any time prior to the effective time (even after CorVu’s shareholders have approved the merger agreement):
By CorVu and Rocket Software:
• upon the mutual written consent of CorVu and Rocket Software.
By CorVu or Rocket Software, if:
• there is in force a law permanently restraining, enjoining or otherwise prohibiting the merger and such law has become final and non appealable and not subject to challenge;
• CorVu has not obtained the necessary shareholder approval of the merger agreement at a duly called shareholders’ meeting at which a quorum was present, or any adjournment thereof, provided, that CorVu may not exercise this termination right if CorVu has breached certain provisions of the merger agreement); or
• the merger has not occurred on or before June 30, 2007, unless such party’s failure to fulfill any material obligation under the merger agreement was the principal cause of, or resulted in, the failure of the merger to occur on or before such date.
By Rocket Software, if:
• Rocket Software is not in material breach of certain of its obligations under the merger agreement, and CorVu materially breaches any representation, warranty, covenant or agreement contained in the merger agreement that gives rise to a failure to meet certain closing conditions, and such breach or failure or CorVu is not cured, or is incapable of being cured within ten (10) days after the receipt by CorVu of written notice;
• the special committee withdraws or modifies or changes its recommendation of the merger agreement or the merger in a manner adverse to Rocket Software or Newco; or
• CorVu has approved or recommended a competing transaction.
46
By CorVu, if:
• CorVu is not in material breach of certain of its obligations under the merger agreement, and Rocket Software materially breaches any representation, warranty, covenant or agreement contained in the merger agreement that gives rise to a failure to meet certain closing conditions, and such breach or failure of Rocket Software is not cured, or is incapable of being cured within ten (10) days after the receipt by Rocket Software of written notice; or
• the special committee withdraws, modifies or changes its recommendation of the merger agreement or the merger, and at such time, a proposal or offer constituting a superior competing transaction exists and CorVu concurrently enters into a definitive agreement providing for the consummation of such superior competing transaction. However, if CorVu terminates the merger agreement on this basis, CorVu must comply with certain additional conditions prior to and at termination.
In the event of termination of the merger agreement for one of the reasons named above, the merger agreement shall immediately become void and except for the payment of certain termination fees, there shall be no liability or obligation of the parties with respect to the merger agreement. However, the termination of the merger agreement does not relieve any party from liability for any fraud or breach of any representation, warranty, covenant or other agreement contained in the merger agreement occurring prior to termination.
If the merger agreement is terminated under certain circumstances, CorVu or Rocket Software may be obligated to pay the other party a termination fee or reimburse the other party’s reasonable out-of-pocket costs and expenses as follows:
• If either Rocket Software or CorVu terminates the merger agreement due to CorVu’s failure to obtain CorVu’s shareholders approval of the merger agreement by the vote required, then CorVu is obligated to reimburse Rocket Software the amount of expenses (including any financing commitment fees) actually incurred by Rocket Software or Newco in connection with the merger agreement or the transactions contemplated thereby up to a maximum of one million dollars ($1,000,000).
• If the merger agreement is terminated:
(i) by CorVu for failure to obtain the necessary shareholder approval, or because the merger has not occurred on or before June 30, 2007 (plus any additional time due to the SEC review of this proxy statement, as described above), and within nine months of such termination, CorVu and/or our shareholders enter into a definitive agreement for or consummate a competing transaction in which at least 50% of CorVu’s assets or stock are transferred;
(ii) by Rocket Software because the special committee withdrew or modified or changed its recommendation of the merger agreement or the merger in a manner adverse to Rocket Software or Newco, or CorVu approved or recommended a competing transaction; or
(iii) by CorVu because the special committee withdrew, modified or changed its recommendation of the merger, and at such time, a proposal or offer constituting a superior competing transaction existed and CorVu concurrently enters into a definitive agreement providing for the consummation of such superior competing transaction;
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then CorVu must pay Rocket Software a nonrefundable fee in the amount of $1,000,000. This fee will be reduced by any expense reimbursement amount that CorVu was obligated to pay to Rocket Software previously in connection with the termination of the merger agreement.
• If either party terminates the merger agreement because the merger has not occurred on or before June 30, 2007 (plus any additional time due to the SEC review of this proxy statement, as described above), at such time Rocket Software has no other right to terminate the merger agreement, and with the exception of the financing condition, all conditions to Rocket Software’s obligation to consummate the merger are met, then Rocket Software must pay to CorVu a nonrefundable fee of $1,000,000. Rocket Software deposited this amount into escrow to be held under an escrow agreement with CorVu and U.S. Bank National Association on the date that the merger agreement was signed.
The foregoing termination fee and expense reimbursement provisions are intended to be liquidated damages and the sole and exclusive remedy of the parties.
Except as described above, all costs and expenses incurred in connection with the merger agreement and the transactions contemplated thereby are payable by the party incurring such expenses.
Any provision of the merger agreement may be amended or waived by the parties at any time prior to the consummation of the merger, before or after shareholder approval has been obtained. However, after approval of the merger agreement by CorVu’s shareholders, no amendment shall be made that changes the merger consideration payable or adversely affects the rights of CorVu’s under the merger agreement or requires by law futher approval by CorVu’s shareholders, unless the approval of CorVu’s shareholders for such amendment is obtained.
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MARKET PRICES OF CORVU’S COMMON SHARES
Common Shares are quoted on the OTCBB under the symbol CRVU.OB. Quotations in the following table are based on information provided by the “Historical Quotes” database of LexisNexis(R), which includes data provided by SunGard Management Solutions (R). The quotations represent inter-dealer prices, without retail markup, markdown or commission, and do not necessarily represent actual transactions.
|
| High Bid |
| Low Bid |
| ||||
Fiscal Quarter ended |
|
|
|
|
|
|
| ||
September 30, 2004 |
| $ | 0.55 |
|
| $ | 0.27 |
|
|
December 31, 2004 |
| 0.36 |
|
| 0.16 |
|
| ||
March 31, 2005 |
| 0.35 |
|
| 0.20 |
|
| ||
June 30, 2005 |
| 0.20 |
|
| 0.12 |
|
| ||
|
|
|
|
|
|
|
| ||
September 30, 2005 |
| $ | 0.40 |
|
| $ | 0.12 |
|
|
December 31, 2005 |
| 0.26 |
|
| 0.15 |
|
| ||
March 31, 2006 |
| 0.41 |
|
| 0.24 |
|
| ||
June 30, 2006 |
| 0.41 |
|
| 0.34 |
|
| ||
|
|
|
|
|
|
|
| ||
September 30, 2006 |
| $ | 0.49 |
|
| $ | 0.37 |
|
|
December 31, 2006 |
| 0.48 |
|
| 0.27 |
|
| ||
March 31, 2007 |
| 0.38 |
|
| 0.28 |
|
| ||
The closing sale price of the Common Shares on the OTCBB on March 2, 2007, the last trading day before CorVu announced the execution of the merger agreement, was $0.28 per share. The average trading price of the shares over the prior three-month period was approximately $0.2977. On April 19, 2007, the last trading day before this proxy statement was printed, the closing price of our Common Shares on the OTCBB was $0.38 per share. You are encouraged to obtain current market quotations for the Common Shares in connection with voting your shares.
CorVu has not paid any cash dividends in prior years and it is currently restricted by the terms of the merger agreement from paying cash dividends. As of April 23, 2007, we had 187 shareholders of record.
49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as of April 23, 2007 concerning the beneficial ownership of our Capital Shares by: (i) each of our directors, (ii) our Chief Executive Officer and the two most highly compensated executive officers other than our Chief Executive Officer, (iii) the persons known by us to own more than 5% of a class of our voting stock, and (iv) all directors and executive officers as a group. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares owned by them. The beneficial ownership percentages reflected in the table below are based on 49,527,274 Common Shares and 360,000 Preferred Shares outstanding as of April 23, 2007. Except as otherwise indicated, the address of each person in this table is c/o CorVu Corporation, 3400 West 66th Street, Suite 445, MN 55435.
|
| Common Stock (1) |
| Series B Preferred Stock (1) |
| ||||
Name (and Address of 5% |
| Shares |
| Percent |
| Shares |
| Percent |
|
|
|
|
|
|
|
|
|
|
|
Joseph J. Caffarelli (2) |
| 1,360,250 | (3) | 2.7 | % | — |
| 0 | % |
Justin M. MacIntosh(2) |
| 13,458,701 | (4) | 26.4 | % | — |
| 0 | % |
Ismail Kurdi(2) |
| 1,799,932 | (5) | 3.6 | % | — |
| 0 | % |
David C. Carlson(2) |
| 833,327 | (6) | 1.7 | % | 50,000 | (7) | 13.9 | % |
James L. Mandel(2) |
| 253,311 | (8) |
| * | — |
| 0 | % |
Daniel R. Fishback (2) |
| 112,500 | (9) |
| * | — |
| 0 | % |
Robert L. Doretti (2) |
| 127,500 | (10) |
| * | — |
| 0 | % |
Robert L. Priddy (2) |
| 25,512,500 | (11) | 48.1 | % | — |
| 0 | % |
Directors and executive officer as a group (includes 8 in group) |
| 43,458,021 | (12) | 76.1 | % | 50,000 |
| 13.9 | % |
|
|
|
|
|
|
|
|
|
|
Delia S. MacIntosh |
| 13,458,701 | (13) | 26.4 | % | — |
| 0 | % |
Opella Holdings Limited(14) |
| 7,541,733 | (15) | 15.2 | % | — |
| 0 | % |
Dominic K.K. Sum(14) |
| 7,541,733 | (16) | 15.2 | % | — |
| 0 | % |
ComVest Investment Partners II LLC (17) |
| 25,400,000 | (18) | 48.0 | % | — |
| 0 | % |
Rocket Software, Inc. (19) |
| 10,102,745 | (20) | 20.4 | % | — |
| 0 | % |
The George McKay Reid Revocable Trust (21) |
| — |
| 0 | % | 50,000 |
| 13.9 | % |
Roderic Holliday-Smith (22) |
| — |
| 0 | % | 50,000 |
| 13.9 | % |
Henry Gold (23) |
| — |
| 0 | % | 50,000 |
| 13.9 | % |
Polaris Partners LP (24) |
| — |
| 0 | % | 50,000 |
| 13.9 | % |
John Scott (25) |
| — |
| 0 | % | 30,000 |
| 8.3 | % |
John Colson (26) |
| — |
| 0 | % | 30,000 |
| 8.3 | % |
Marjorie Scott (27) |
| — |
| 0 | % | 20,000 |
| 5.5 | % |
* less than 1%
(1) For each person or group, any securities that the person or group has the right to acquire within 60 days of April 23, 2007 pursuant to options, warrants, conversion privileges or other rights, have been added to the total amount of outstanding shares when determining the percent owned by such person or group.
(2) Address: 3400 West 66th Street, Suite 445, Edina, MN 55435.
50
(3) Mr. Caffarelli’s beneficial ownership includes 1,358,750 shares that Mr. Caffarelli may purchase upon exercise of stock options.
(4) Mr. MacIntosh’s beneficial ownership includes (i) 7,541,733 shares registered in the name of Opella Holdings Ltd. (see also footnotes 15 and 16), (ii) 940,000 shares that may be purchased upon exercise of options held by Mr. MacIntosh, and (iii) 3,700,957 shares and a warrant to purchase 560,000 shares held by Mr. MacIntosh’s spouse. Mr. MacIntosh disclaims beneficial ownership of the shares and the warrant owned by his spouse.
(5) Mr. Kurdi’s beneficial ownership includes 170,440 shares that may be purchased upon exercise of options.
(6) Mr. Carlson’s beneficial ownership includes 546,250 shares that may be purchased upon exercise of options and 116,667 shares that may be purchased upon exercise of warrants. Mr. Carlson disclaims beneficial ownership of 70,695 of the shares that may be purchased upon exercise of options because the pecuniary interest in these shares was transferred to his ex-spouse under a divorce decree from January 2003.
(7) Mr. Carlson’s shares of Series B Preferred Stock are convertible into 166,667 shares of common stock.
(8) Mr. Mandel’s beneficial ownership includes (i) 113,750 shares that may be purchased upon exercise of options held by Mr. Mandel and (ii) 15,350 shares held by Mr. Mandel’s spouse. Mr. Mandel disclaims beneficial ownership of the shares owned by his spouse.
(9) Represents 112,500 shares that Mr. Fishback may purchase upon exercise of stock options.
(10) Represents 127,500 shares that Mr. Doretti may purchase upon exercise of stock options.
(11) Mr. Priddy’s beneficial ownership includes (i) 112,500 shares that may be purchased upon exercise of stock options, (ii) 22,000,000 shares held by ComVest Investment Partners II LLC, and (iii) 3,400,000 shares that ComVest Investment Partners II LLC may purchase upon exercise of a warrant. Mr. Priddy is a member of ComVest II Partners LLC, the managing member of ComVest Investment Partners II LLC.
(12) Includes 7,558,357 shares of the executive officers and directors as a group that may be purchased upon exercise of stock options and warrants.
(13) Mrs. MacIntosh’s beneficial ownership includes (i) a warrant to purchase 560,000 shares held by herself, (ii) 7,541,733 shares registered in the name of Opella Holdings Ltd. (see also footnotes 4, 16 and 17), and (iii) 716,011 shares and an option to purchase 940,000 shares held by Mrs. MacIntosh’s spouse. Mrs. MacIntosh disclaims beneficial ownership of the shares registered in the name of Opella Holdings Ltd. and the shares and options held by her spouse.
(14) Address: c/o Tempio Corporate Consultants Limited, Suite 701, 7/F, 6-8 Pottinger Street, Central, HONG KONG.
(15) Opella Holdings Limited as trustee of The Asia Pacific Technology Trust is the beneficial owner of 7,541,733 shares of Common Stock registered in the name of Barleigh Wells Limited as street name holder. Opella Holdings Limited shares beneficial ownership of the shares with Mr. MacIntosh (see footnote 4) and Mr. Sum (see footnote 16).
51
(16) Mr. Sum is the sole shareholder of Opella Holdings Limited (see footnote 15). The director of Opella Holdings Limited is Pio Services Limited whose sole shareholder is Tempio Group of Companies Limited which in turn is wholly owned by Mr. Sum. Pio Services Limited has two directors, one of which is Mr. Sum.
(17) Address: One North Clematis, West Palm Beach, FL 33401. According to a Schedule 13D filed on February 22, 2005, ComVest Investment Partners II LLC shares voting and dispositive power with regard to all of the CorVu securities registered in its name with the following entities and individuals: ComVest II Partners LLC, the managing member of ComVest Investment Partners II LLC; Commonwealth Associates Group Holdings, LLC, the managing member of ComVest II Partners LLC; Michael Falk, the chairman and principal member of Commonwealth Associates Group Holdings, LLC; and Robert Priddy (see footnote 11).
(18) Includes 3,400,000 shares that may be purchased upon exercise of a warrant.
(19) Address: 275 Grove Street, Newton, MA 02466-2273.
(20) Includes 10,102,745 shares of Common Stock that Rocket Software may vote due to irrevocable proxies granted by certain shareholders, subject to certain terms and conditions set forth in option and support agreements.
(21) Address: 3114 West 28th Street, Minneapolis, MN 55416.
(22) Address: Apt. 202, 1 Wallis St., Woollahra, NSW 1350, Australia.
(23) Address: 874 East 9th St, Brooklyn, NY 11230.
(24) Address: 530 Fifth Avenue, New York, NY 10036.
(25) Address: 1309 Madera Ct., Keller, TX 76248.
(26) Address: 530 Marin St, Alpharetta, GA 30022.
(27) Address: 610 26th St, Santa Monica, CA 90402.
52
DISSENTERS’ RIGHTS OF APPRAISAL
The following summary of the rights of dissenting shareholders is qualified in its entirety by the provisions of Sections 302A.471 and 302A.473 of the MBCA. The text of Sections 302A.471 and 302A.473 is set out in full as Annex C to this proxy statement. The right to dissent is applicable only to CorVu shareholders as of the record date for the special meeting. Any shareholder wishing to avail himself or herself of his or her rights to dissent as provided by Sections 302A.471 and 302A473 of the MBCA should seek legal advice, as failure to comply strictly with the provisions of Sections 302A.471 and 302A.473 of the MBCA may prejudice such shareholder’s right of dissent.
Under the MBCA, a shareholder can invoke the right to receive payment of the fair value of his or her shares if the shareholder dissents, under Section 302A.473 of the MBCA, from a proposal by CorVu to merge.
Any shareholder wishing to dissent, and obtain payment in cash of the fair value of his or her shares, must adhere strictly to the following procedure:
• He or she must give written notice to CorVu before the special meeting of shareholders at which the merger is submitted to a vote, or at the special meeting but before the vote on the merger, that he or she objects to the merger proposal and that the shareholder proposes to demand payment of the fair value of his or her shares if the merger proposal is approved. The dissenting shareholder may not vote his or her shares in favor of the merger.
• After the date on which the shareholders approve the merger, CorVu must give written notice to the dissenting shareholder(s) that the merger proposal was approved.
• Within 30 days of the date of the notice referred to above, each dissenting shareholder must give to CorVu written notice of his or her decision to dissent and deposit his or her share certificates with CorVu, such notice to include a demand for payment of fair value of his or her shares.
A shareholder who dissents must do so in respect of all shares that he or she holds in CorVu.
Notwithstanding this deposit, the dissenter shall retain all rights as a shareholder of CorVu until the merger takes effect.
After the merger becomes effective or after CorVu receives a valid demand for payment, whichever is later, CorVu shall remit payment to the dissenting shareholders of the amount CorVu estimates to be the fair value of the shares held by such shareholder, plus interest, accompanied by certain financial information about CorVu, an estimate of the fair value of the shares, the method used for determining fair value, and a copy of Sections 302A.471 and 302A.473 of the MBCA.
If a dissenting shareholder believes that the amount remitted by CorVu is less than the fair value of the shares, with interest, the dissenting shareholder may give written notice to CorVu of his or her estimate of fair value, with interest, within 30 days after CorVu mails such remittance and must demand payment of the difference. UNLESS A SHAREHOLDER MAKES SUCH A DEMAND WITHIN SUCH THIRTY-DAY PERIOD, THE SHAREHOLDER WILL BE ENTITLED ONLY TO THE AMOUNT REMITTED BY CORVU. Within 60 days after CorVu receives such a demand from a shareholder, it will be required either to pay the shareholder the amount demanded (or agreed to after discussion between the shareholder and CorVu) or to file in court a petition requesting that the court determine the fair value of the shares, with interest.
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All shareholders who have demanded payment for their shares, but have not reached agreement with CorVu, will be made parties to such court proceeding. The court will then determine whether the dissenting shareholders have fully complied with the provisions of Section 302A.473 of the MBCA and will determine the fair value of the shares, taking into account any and all factors the court finds relevant (including the recommendation of any appraisers appointed by the court), computed by any method that the court, in its discretion, sees fit to use, whether or not such method was used by CorVu or a shareholder. The expenses of the court proceeding will be assessed against CorVu, except that the court may assess part or all of those costs and expenses against a shareholder whose action in demanding payment is found to be arbitrary, vexatious, or not in good faith. The fair value of CorVu’s shares means the fair value of the shares immediately before the effective time of the merger. Under Section 302A.471 of the MBCA, a shareholder of CorVu has no right at law or equity to set aside the consummation of the merger, except if such consummation is fraudulent with respect to such shareholder. Any shareholder making a demand for payment of fair value for his or her shares may withdraw the demand at any time before the determination by a court of the fair value of the shares by filing with CorVu written notice of such withdrawal.
The address for purposes of making a dissenter’s demand is:
CorVu Corporation
400 West 66th Street
Suite 445
Edina, MN 55435
Attn: Chief Financial Officer
ADJOURNMENT OF THE SPECIAL MEETING
CorVu is asking its shareholders to vote on a proposal to adjourn the special meeting, if necessary or appropriate, in order to allow for the solicitation of additional proxies if there are insufficient votes at the time of the meeting to approve the merger agreement.
If the merger is completed, we will no longer be a publicly held company and there will be no public participation in any future meetings of shareholders. However, if the merger is not completed, our shareholders will continue to be entitled to attend and participate in our shareholder meetings.
If the merger is not completed, a shareholder may submit a proposal intended to be presented at the 2007 annual meeting to CorVu by June 30, 2007, to be considered for inclusion in CorVu’s proxy statement and related proxy for the 2007 annual meeting. If a shareholder proposal, intended to be presented at the 2007 annual meeting but not included in CorVu’s proxy statement and proxy, is received by CorVu after September 16, 2007, then the individuals named as proxies in CorVu’s proxy form for the 2007 annual meeting will have discretionary authority to vote shares represented by such proxies on the shareholder proposal, if presented at the meeting, without including information about the proposal in CorVu’s proxy materials.
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Other Business at Special Meeting
The board of directors does not know of any other business that may be presented for consideration at the special meeting.
Multiple Shareholders Sharing One Address
In accordance with Rule 14a-3(e)(1) under the Exchange Act, one proxy statement will be delivered to two or more shareholders who share an address, unless we have received contrary instructions from one or more of the shareholders. We will deliver promptly upon written or oral request a separate copy of the proxy statement to a shareholder at a shared address to which a single copy of the proxy statement was delivered. Requests for additional copies of the proxy statement, and requests that in the future separate proxy statements be sent to shareholders who share an address, should be directed to CorVu Corporation, 400 West 66th Street, Suite 445, Edina, MN 55435, telephone: (952) 944-7777. In addition, shareholders who share a single address but receive multiple copies of the proxy statement may request that in the future they receive a single copy by contacting us at the address and phone number set forth in the prior sentence.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information that we file with the SEC at its Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Our public filings are also available to the public from document retrieval services and the Internet website maintained by the SEC at www.sec.gov.
Any shareholder, including any beneficial owner, to whom this proxy statement is delivered may request copies of proxy statements, reports and other information concerning us, without charge, by written or telephonic request directed to us at CorVu Corporation, 400 West 66th Street, Suite 445, Edina, MN 55435, telephone: (952) 944-7777 or from the SEC through the SEC’s website at the address provided above.
No persons have been authorized to give any information or to make any representations other than those contained in this proxy statement and, if given or made, such information or representations must not be relied upon as having been authorized by us or any other person. This proxy statement is dated April 24, 2007. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to shareholders shall not create any implication to the contrary.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ROCKET SOFTWARE, INC.,
ROCKET SOFTWARE MINNESOTA, INC.
AND
CORVU CORPORATION
Dated as of March 5, 2007
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MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SECURITIES IN THE MERGER |
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Share Consideration for the Merger; Conversion or Cancellation of Shares in the Merger |
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Conditions to Parent’s and Newco’s Obligations to Effect the Merger |
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Attachments |
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Exhibit A – Warrant Waiver Agreement |
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Exhibit B – Option and Support Agreement |
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Exhibit C - Management Employment Acknowledgement |
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Exhibit D - Officers and Directors of Surviving Corporation |
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Exhibit E – Form of Confidentiality, Assignment and Loyalty Agreement |
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Exhibit F – Form of Opinion |
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Exhibit G - Certificate |
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Company Disclosure Schedule |
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Schedule A Shareholder Register |
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Schedule B Net Working Capital |
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of March 5, 2007, by and among Rocket Software, Inc., a Delaware corporation (“Parent”), Rocket Software Minnesota, Inc., a Minnesota corporation and a direct wholly-owned Subsidiary of Parent (“Newco”), and CorVu Corporation, a Minnesota corporation (the “Company”).
RECITALS
WHEREAS, each of Parent and the Company has determined that it is in its best interests for Parent to acquire the Company, upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, concurrently herewith, ComVest Investment Partners II LLC, a Delaware limited liability company (“ComVest”) is entering into an agreement in the form of Exhibit A attached (the “Warrant Waiver Agreement”), pursuant to which it is agreeing that the Protective Warrant issued to ComVest as of February 11, 2005 pursuant to which ComVest is entitled to purchase up to 2,000,000 shares of common stock of the Company, par value $0.01 per share (“Common Stock”) upon the happening of certain events (the “ComVest Protective Warrant”), automatically shall be cancelled without payment immediately prior to the Effective Time;
WHEREAS, ComVest, Justin M. MacIntosh and Delia MacIntosh are executing and delivering an Option and Support Agreement to Parent substantially in the form attached hereto as Exhibit B (the “Option and Support Agreement”), pursuant to which, among other things, such persons are agreeing to vote certain shares for the Merger and Parent has the option to purchase a portion of such holder’s Common Stock, as more fully described in the respective Option and Support Agreements;
WHEREAS, prior to the date hereof, the Company has redeemed and retired each formerly outstanding share of Series C Convertible Preferred Stock, par value $100.00 per share (the “Series C Stock”), of the Company, such that none of such securities currently are outstanding;
WHEREAS, prior to the date hereof, the Company has paid in full and forever extinguished any payment or other obligations with respect to the Senior Secured Promissory Note in the initial principal amount of $1,500,000 issued in favor of ComVest as of February 11, 2005 (the “ComVest Note”);
WHEREAS, concurrently herewith, each of the Key Employees is entering into an employment agreement, a form of which is attached hereto as Exhibit C(each, a “Management Employment Acknowledgement”);
WHEREAS, concurrently herewith, Parent and Company are executing and delivering to U.S. Bank National Association, a national banking association (the “Escrow Agent”), an escrow agreement (the “Escrow Agreement”), and Parent is depositing One Million Dollars ($1,000,000) (the “Escrow Fund”), to serve as a source of payment if Parent is required to pay the Company the fee provided in Section 8.5(d) hereof;
WHEREAS, a duly constituted committee of disinterested members of the board of directors of the Company (the “Special Committee”), has determined that this Agreement and the transactions contemplated hereby, including the Merger, are in the best interests of the shareholders of the Company, has approved this Agreement and the transactions contemplated hereby in accordance with the Minnesota Business Corporation Act (the “MBCA”), and has resolved to recommend that the shareholders of the Company adopt this Agreement and approve the Merger at a special meeting of shareholders to be duly called and held by the Company;
WHEREAS, the board of directors of each of Parent and Newco has approved this Agreement, the Merger and the other transactions contemplated by this Agreement; and
WHEREAS, Parent, Newco and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, Parent, Newco and the Company hereby agree as follows:
1.1 The Merger. Subject to the terms and conditions of this Agreement, at the Effective Time (as defined below), the Company and Newco shall consummate a merger (the “Merger”) in which (a) Newco shall be merged with and into the Company and the separate corporate existence of Newco shall thereupon cease, (b) the Company shall be the surviving corporation in the Merger and shall continue to be governed by the Laws (as defined below) of the State of Minnesota, and (c) the separate corporate existence of the Company shall continue unaffected by the Merger. The corporation surviving the Merger is sometimes hereinafter referred to as the “Surviving Corporation.”
1.2 Effective Time. As soon as practicable after the satisfaction or waiver of the conditions set forth in Article VII hereof, the appropriate parties hereto shall execute in the manner required by the MBCA and file with the Minnesota Secretary of State appropriate articles of merger relating to the Merger (the “Articles of Merger”), and the parties hereto shall take such other reasonable and further actions as may be required by Law to make the Merger effective. The time that the Merger becomes effective in accordance with applicable Law is hereinafter referred to as the “Effective Time.”
1.3 Effects of the Merger. The Merger shall have the effects set forth in Section 302A.641 of the MBCA.
1.4 Closing. The closing of the Merger (the “Closing”) shall take place (a) at the offices of Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, MN 55402-1425 on the third business day following the date on which the last of the conditions set forth in Article VII hereof shall be fulfilled or waived in accordance with this Agreement, or (b) at such other place, time and date and in such other manner as Parent and the Company may agree.
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2.1 Articles of Incorporation. The Articles of Incorporation of Newco, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation, until thereafter further amended in accordance with the MBCA and the provisions of such Articles of Incorporation, except that such Articles of Incorporation shall be amended so as to change the name of Newco to “CorVu Corporation”.
2.2 Bylaws. The Bylaws of Newco, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation, until thereafter amended in accordance with the MBCA and the provisions of Newco’s Articles of Incorporation and such Bylaws.
2.3 Directors and Officers. From and after the Effective Time, the directors and officers of the Surviving Corporation shall be those individuals listed on Exhibit D until their successors have been duly elected or appointed and qualified, or until their earlier death, resignation or removal, in accordance with the Surviving Corporation’s Articles of Incorporation and Bylaws.
ARTICLE III.
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SECURITIES IN THE MERGER
3.1 Share Consideration for the Merger; Conversion or Cancellation of Shares in the Merger. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Newco, the Company, the Surviving Corporation or the holders of any outstanding shares of the Company’s Capital Stock described in Section 4.2 below, each share of such Capital Stock (collectively, the “Shares,” and each, a “Share”) shall be treated as follows:
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3.2 Stock Options and Warrants.
(a) Prior to the Effective Time, the Board of Directors shall adopt such resolutions and take such other actions as are required to approve and effect the matters contemplated by this Section 3.2. The Company shall use its best efforts to obtain any necessary consents of the holders of Options and Warrants (each as defined below) to effect this Section 3.2.
(b) The Company shall take all necessary steps to ensure that each option to acquire shares of capital stock of the Company (“Option”) that has been granted under the Company’s 1996 Stock Option Plan or the Company’s 2005 Equity Incentive Plan (collectively, the “Option Plans”), or otherwise, and is outstanding as of immediately prior to the Effective Time, and each warrant to purchase Capital Stock, that is outstanding as of immediately prior to the Effective Time (the “Warrants”), other than the ComVest Protective Warrant, will (i) become fully exercisable or “vested” as of immediately prior to the Effective Time, and (ii) at the Effective Time, automatically shall be cancelled and converted into the right to receive, upon compliance with the provisions noted below, a lump sum cash payment in an amount equal to the product of the following:
less applicable taxes required to be withheld pursuant to Section 3.2(f).
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3.3 Payment for Securities in the Merger. The manner of making payment for Shares, Options and Warrants in the Merger shall be as follows:
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3.5 No Further Rights or Transfers. Except for the surrender of the Certificates representing the Shares in exchange for the right to receive the Per Share Merger Consideration with respect to each Share or the perfection of dissenters’ rights with respect to the Dissenting Shares, at and after the Effective Time, a holder of Shares shall cease to have any rights as a shareholder of the Company, and no transfer of Shares shall thereafter be made on the stock transfer books of the Company.
3.6 Certain Company Actions. Prior to the Effective Time, each of the Company and Parent shall take all such steps as may be required (to the extent permitted under applicable Law) to cause any dispositions of Shares (including derivative securities with respect to Shares) resulting from the transactions contemplated by Article III of this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with respect to the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the representations and warranties in this Article IV to Parent and Newco, except as qualified or supplemented by sections in the Company Disclosure Schedule attached hereto.
4.1 Corporate Organization and Qualification. The Company is a corporation, duly incorporated, validly existing and in good standing under the Laws of the State of Minnesota and is qualified and in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated or the business conducted by it require such
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qualification, except failure to so qualify or be in good standing would not have a Company Material Adverse Effect (as hereinafter defined in Section 9.1). Each of the Subsidiaries (as hereinafter defined in Section 9.1) of the Company is duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and is qualified and in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated or the business conducted by it require such qualification, except where failure to so qualify or be in good standing would not have a Company Material Adverse Effect (as hereinafter defined in Section 9.1). The Company has all requisite corporate power and authority to own its properties and to carry on its business as it is now being conducted. Each of the Subsidiaries of the Company has all requisite power and authority to own its properties and to carry on its business as it is now being conducted. The Company has previously made available to Parent complete and correct copies of the Company Articles, and the Company’s Restated Bylaws, as amended and in effect on the date hereof (the “Company Bylaws”), and the certificate of incorporation and bylaws (or other comparable organizational documents) of each of its Subsidiaries (the “Subsidiary Organizational Documents”).
4.2 Capitalization; Subsidiaries.
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4.3 Authority Relative to This Agreement. The Company has the requisite corporate power and authority to execute and deliver this Agreement and each instrument required hereby to be executed and delivered by it at the Closing, to perform its obligations hereunder or thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement and each instrument required hereby to be executed and delivered by the Company at the Closing and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Special Committee and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, other than the approval of the Merger and the adoption of this Agreement by holders of the Shares in accordance with the MBCA and the Company Articles. This Agreement has been duly and validly executed and delivered by the Company and, assuming that this Agreement constitutes the legal, valid and binding agreement of Parent and Newco, constitutes the legal, valid and binding agreement of
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the Company, enforceable against the Company in accordance with its terms, except that such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’ rights generally, and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law).
4.4 Consents and Approvals; No Violation.
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4.5 SEC Reports; Financial Statements.
4.6 Absence of Certain Changes or Events. As of the date of this Agreement, since June 30, 2006, the Company has not suffered any Company Material Adverse Effect, and to the Knowledge of the Company, no fact, condition or circumstance exists that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
4.7 Litigation. As of the date of this Agreement, there are no actions, claims, suits, proceedings, governmental investigations, inquiries or subpoenas (collectively, “Actions”), pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any property or asset of the Company or any of its Subsidiaries.
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4.8 Absence of Undisclosed Liabilities. Except for obligations required or permitted to be incurred in connection with the transactions contemplated hereby, neither the Company nor any of its Subsidiaries has any material liabilities or obligations of any nature (whether accrued, absolute or contingent, asserted or unasserted, due or to become due) of the type required by GAAP to be reflected as a liability on a consolidated balance sheet of the Company, other than liabilities and obligations (i) reflected on the balance sheet included in the Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 2006, or (ii) incurred after December 31, 2006 in the ordinary course of business consistent with past practice and immaterial in amount.
4.9 Proxy Statement. The Proxy Statement (as defined below) and other materials distributed to the Company’s shareholders in connection with the Merger, including any amendments or supplements thereto, will comply in all material respects with applicable federal securities Laws, and the Proxy Statement and any other proxy materials will not, (a) at the time that it or any amendment or supplement thereto is mailed to the Company’s shareholders, (b) at the time of the Shareholders Meeting (as defined below) or (c) at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information that is supplied in writing by Newco or Parent expressly for inclusion in the Proxy Statement.
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4.11 Employee Benefit Plans; Labor Matters.
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4.12 Environmental Laws and Regulations. The Company and each of its Subsidiaries and their respective properties are in compliance in all material respects with all
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applicable federal, state, local and foreign Laws and regulations relating to pollution or protection of human health or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., and any amendments thereto, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., and any amendments thereto, the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq., any other Laws now in effect relating to, or imposing liability or standards of conduct concerning, any Hazardous Materials (as defined in Section 9.1) (collectively, “Environmental Laws”). Neither the Company nor any of its Subsidiaries has received within the period of five (5) years prior to the Effective Time written notice of, or, to the Knowledge of the Company, is the subject of, any action, cause of action, claim, investigation, demand or notice by any Person alleging material liability under or noncompliance in any material respect with any Environmental Law or advising it that it is or may be responsible, or potentially responsible, for material response costs with respect to a release or threatened release of any Hazardous Materials. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries nor anyone acting on their behalf in the course of so acting, has used, generated, stored, released, manufactured, processed, treated, transported or disposed of any Hazardous Materials on, beneath or about any premises owned or used by the Company or any of its Subsidiaries at any time, except for Hazardous Materials that were and are used, generated, stored, released, manufactured, processed, treated, transported and disposed of in the ordinary course of business in material compliance with all applicable Environmental Laws. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has caused or is aware of any release or threat of release of any Hazardous Materials on, beneath or about any premises owned or used by the Company or any of its Subsidiaries at any time, except such releases that are in material compliance with all applicable Environmental Laws.
For purposes of this Agreement, the “Company’s Registered Intellectual Property” shall mean the above categories (i), (ii) and (iii), collectively.
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4.14 Compliance with Laws. (a) Neither the Company nor any of its Subsidiaries has in any material respect violated or failed to comply with, or is in any material respect in default under, any Law, applicable to the Company or any of its Subsidiaries or any of their respective material assets and material properties and non-compliance with which has resulted or would be reasonably likely to result in a material adverse effect upon the Company, such Subsidiary or such asset or property, as the case may be, and (b) neither the Company nor any of its Subsidiaries has received any written notice from any governmental authority or other Person claiming any material violation of any Law with respect to the Company, any of its Subsidiaries or any of their respective businesses.
4.15 Takeover Statutes. The Special Committee has taken all action necessary to render inapplicable to the Merger and to the transactions contemplated by this Agreement the provisions of Section 302A.673 of the MBCA restricting business combinations with “interested shareholders” (including any such restrictions that may arise on account of the Option and Support Agreements entered into after such Special Committee meeting). The Company does not have any stockholder or shareholder rights agreement or any similar type of anti-takeover protections or defenses.
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4.16 Agreements, Contracts and Commitments. (a) Section 4.16 of the Company Disclosure Schedule contains a list of the following written contracts, agreements, understandings or other instruments or obligations to which either the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or has committed to be bound (the “Contracts”) as of the date hereof:
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4.17 Permits. The Company and each of its Subsidiaries hold all material permits, licenses, variances, exemptions, orders, registrations, certificates and other approvals from all governmental authorities that are required from them to own, lease or operate their assets and to carry on their businesses as presently conducted in compliance with all applicable Law (the “Company Permits”). Neither the Company nor any of its Subsidiaries is in material violation of the terms of any such Company Permit. To the Knowledge of the Company, the Merger, in and of itself, would not cause the revocation or cancellation of any Company Permit.
4.18 Brokers, Finders and Others. Except for the fees and expenses in the total amount of Eight Hundred Thirty Seven Thousand Dollars ($837,000) (plus $10,000 of reimbursable expenses) payable to ComVest Group Holdings, LLC and $100,000 (plus a maximum of $100 of reimbursable expenses) payable to Cherry Tree Securities, LLC (“Cherry Tree”), the Company has not employed, and to the Knowledge of the Company, no other Person has made any arrangement by or on behalf of the Company with, any Person in connection with the transactions contemplated by this Agreement which would be entitled to any investment banking, brokerage, finder’s or similar fee or commission in connection with this Agreement or the transactions contemplated hereby.
4.19 Opinion of Financial Advisor. The Special Committee has received the opinion of Cherry Tree to the effect that, as of the date hereof, the Per Share Merger Consideration to be received by the shareholders of the Company for each share of Common Stock pursuant to the Merger is fair to such shareholders from a financial point of view (such opinion that the Per Share Merger Consideration is fair from a financial point of view, the “Fairness Opinion”). Cherry Tree has consented to being named in and to the inclusion of a copy of the Fairness Opinion in its entirety and a description of its analysis and other bases for the Fairness Opinion in customary form in the Proxy Statement.
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4.21 Insurance. The Company and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in its businesses in which the Company and the Subsidiaries are engaged. True and correct copies of all such insurance contracts and policies have been provided to Parent, and none have been subsequently amended, terminated or not renewed. Neither the Company nor any Subsidiary has any reason to believe that it or the Surviving Corporation will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
4.22 Books and Records. The books and records of the Company and each of its Subsidiaries are true and complete in all material respects, and the matters contained therein are appropriately reflected in the financial statements to the extent required to be reflected therein. Without limiting the foregoing, the minute books of the Company and its Subsidiaries contain accurate records of all meetings and accurately reflect all other actions taken by the stockholders, boards of directors and all committees of the boards of directors of the Company and the Subsidiaries. Copies of all such books and records (including a copy of the stock register for each) of the Company and each Company Subsidiary have been provided by the Company to Parent.
4.23 Foreign Corrupt Practices. Neither the Company nor any Company Subsidiary, nor to the Knowledge of the Company, any agent or other Person acting on behalf of the Company or any of its Subsidiaries, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any of its Subsidiaries (or made by any Person acting on its behalf or any of its Subsidiaries to the Knowledge of the Company) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.
4.24 Affiliate Transactions; Sarbanes-Oxley Act.
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4.25 Expenses. Section 4.25 of the Company Disclosure Schedule sets forth a true and complete list of all Company Expenses, including the maximum amount of the obligation (including the maximum amount of any reimbursable expenses) and to whom the respective Company Expenses are payable. Except for the Company Expenses, which shall in no event exceed $1,900,000 in the aggregate (including the full amount of any reimbursable expenses), neither the Company nor any of its Subsidiaries is obligated (and the Surviving Corporation will not be obligated following the Effective Time) to pay any fees or reimburse any expense in connection with this Agreement and the transactions contemplated hereby.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco represent and warrant, jointly and severally, to the Company that:
5.1 Corporate Organization and Qualification. Each of Parent and Newco is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation and is qualified and in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated, or the business conducted, by it require such qualification, except where the failure to so qualify or be in such good standing would not have a Parent Material Adverse Effect. Each of Parent and Newco has all requisite power and authority (corporate or otherwise) to own its properties and to carry on its business as it is now being conducted.
5.2 Authority Relative to This Agreement. Each of Parent and Newco has the requisite corporate power and authority to execute and deliver this Agreement and each instrument required hereby to be executed and delivered by it at Closing, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement and each instrument required hereby to be executed and delivered by Parent or Newco at Closing, and the consummation by Parent and Newco of the transactions contemplated hereby and thereby have been duly and validly authorized by the respective boards of directors of Parent and Newco and by Parent as the sole shareholder of Newco, and no other corporate proceedings on the part of Parent and Newco are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Newco and, assuming that this Agreement constitutes the legal, valid and binding agreement of the Company, constitutes the
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legal, valid and binding agreement of each of Parent and Newco, enforceable against each of them in accordance with its terms, except that such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or hereafter in effect relating to creditors’ rights generally, and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
5.3 Consents and Approvals; No Violation. Neither the execution and delivery by Parent or Newco of this Agreement or any instrument required hereby to be delivered by Parent and Newco at the Closing, nor the performance by Parent and Newco of their respective obligations hereunder or thereunder, nor the consummation by Parent and Newco of the transactions contemplated hereby, will:
5.4 Proxy Statement. None of the information supplied by Parent or Newco in writing for inclusion in the Proxy Statement will, (a) at the time that it or any amendment or supplement thereto is mailed to the Company’s shareholders, (b) at the time of the Shareholders Meeting or (c) at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. No representation or warranty is made by Parent or Newco with respect to (i) statements made or
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incorporated by reference in the Proxy Statement based on information supplied by the Company expressly for inclusion or incorporation by reference therein or (ii) statements regarding Parent or Newco that become incorrect after the filing or mailing of the Proxy Statement which the Company does not correct by amending or supplementing the Proxy Statement to the extent appropriate with a reasonable period of time after written notice of such change from Parent or Newco.
5.5 Interim Operations of Newco. Newco was formed solely for the purpose of engaging in the transactions contemplated hereby and has not engaged in any business activities or conducted any operations, other than in connection with the transactions contemplated hereby.
5.6 Brokers and Finders. Neither Parent nor Newco has employed, and to the Knowledge of Parent, no other Person has made any arrangement by or on behalf of Parent or Newco with, any investment banker, broker, finder, consultant or intermediary in connection with the transactions contemplated by this Agreement which would be entitled to any investment banking, brokerage, finder’s or similar fee or commission in connection with this Agreement or the transactions contemplated hereby.
5.7 Company Stock. Neither Parent nor Newco is, nor at any time during the last four years has it been, an “interested shareholder” of the Company as defined in Section 302A.011 subd. 49 of the MBCA. As of the date hereof, and except to the extent of the rights set forth in the Option and Support Agreements, neither Parent nor Newco is a “beneficial owner” (as defined in Section 302A.011 subd. 41 of the MBCA) of any Shares.
ARTICLE VI.
COVENANTS AND AGREEMENTS
6.1 Conduct of Business of the Company. The Company agrees that during the period from the date of this Agreement to the Effective Time (unless Parent shall otherwise agree in writing and except as otherwise contemplated by this Agreement), the Company will, and will cause each of its Subsidiaries to, conduct its operations according to its ordinary and usual course of business consistent with past practice in compliance in all material respects with all applicable Laws, pay its debts and taxes when due (subject to good faith disputes over such debts), pay or perform other material obligations when due, and, to the extent consistent therewith, with no less diligence and effort than would be applied in the absence of this Agreement, use commercially reasonable efforts to preserve intact its current business organizations, keep available the service of its current officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it to the end that goodwill and ongoing businesses shall not be impaired in any material respect at or prior to the Effective Time. Without limiting the generality of the foregoing, and except as otherwise expressly permitted in this Agreement, or as set forth in Section 6.1 of the Company Disclosure Schedule, prior to the Effective Time, neither the Company nor any of its Subsidiaries will, without the prior written consent of Parent:
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6.2 No Solicitation of Transactions.
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6.3 Reasonable Best Efforts to Complete Transactions.
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6.4 Shareholders Meeting; Proxy Statement.
(i) (A) use all commercially reasonable efforts to promptly prepare and, no later than fifteen (15) business days after the date of this Agreement, file with the SEC a proxy statement complying with applicable requirements of Law and all of the proxy rules of the SEC for the purposes of considering and taking action upon this Agreement (the “Proxy Statement”), (B) obtain and furnish the information required to be included by it in the Proxy Statement and, after consultation with Parent and Newco, respond promptly to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof, and (C) undertake to obtain the Company Shareholder Approval, unless the Company has received and accepted an offer for a
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Superior Competing Transaction and has terminated this Agreement pursuant to Section 8.4(ii);
(ii) include in the Proxy Statement the unanimous recommendation of the Special Committee that the shareholders of the Company vote in favor of the approval of this Agreement and the Merger and use its reasonable best efforts to solicit from the shareholders of the Company proxies in favor of adoption of this Agreement and approval of the Merger for the Shareholders Meeting; provided, that, notwithstanding anything to the contrary set forth in this Agreement, the Special Committee may withdraw, modify or amend its recommendation if, permitted by and in accordance with Section 6.2;
(iii) duly call, give notice of, convene and hold a special meeting of its shareholders for the purpose of obtaining Company Shareholder Approval (the “Shareholders Meeting”), to be held thirty (30) days following the filing of the definitive Proxy Statement with the SEC (even in the case that the Special Committee has withdrawn, modified or amended its recommendation that the shareholders approve this Agreement and the Merger); and
(iv) if at any time prior to the Shareholders Meeting any information relating to the Company, or any of its Affiliates, officers or directors, should be discovered which should be set forth in an amendment or supplement to the Proxy Statement, so that it would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Company shall promptly notify Parent and shall promptly file an appropriate amendment or supplement describing such information with the SEC and, to the extent required by Law, disseminate it to the shareholders of the Company.
(a) The Company shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, counsel, accountants and other authorized representatives of Parent (“Representatives”), in order to evaluate the transactions contemplated by this Agreement and
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from time to time evaluate the Company’s Net Working Capital, reasonable access, during normal business hours and upon reasonable advance notice throughout the period prior to the Effective Time, to its properties, books, records, facilities, officers, directors and accountants and, during such period, shall (and shall cause each of its Subsidiaries to) furnish or make available reasonably promptly to such Representatives all information concerning its business, properties and personnel as may reasonably be requested; provided, however, that any such access shall be conducted under the supervision of personnel of the Company and in a manner that does not unreasonably interfere with the normal operations of the Company. Parent agrees that it shall not, and shall cause its Representatives not to, use any information obtained pursuant to this Section 6.5 for any purpose unrelated to the consummation of the transactions contemplated by this Agreement.
6.6 Publicity. The parties shall consult with each other and shall mutually agree upon any press releases or public announcements pertaining to this Agreement and the Merger and shall not issue any such press releases or make any such public announcements prior to such consultation and agreement, except as may be required by applicable Law or by obligations pursuant to any agreement with any automated quotation system, in which case the party proposing to issue such press release or make such public announcement shall consult in good faith with, the other parties before issuing any such press releases or making any such public announcements; provided, that no such consultation shall be required to make any disclosure or otherwise take any action expressly permitted by Section 6.2.
6.7 Indemnification of Directors and Officers.
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6.8 Invention Assignment Agreements. The Company shall use its commercially reasonable best efforts to cause each Person who (i) is currently employed by the Company or any of its Subsidiaries or is providing services to the Company or any of its Subsidiaries as a consultant or an independent contractor, or (ii) is hired by the Company or any Subsidiary after the date of this Agreement and through the Effective Time who has material responsibilities or makes or has made material contributions with respect to the development of any Proprietary Products (including, designing, writing, testing or working on any software code contained in a Proprietary Product) to execute a Confidentiality, Assignment and Loyalty
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Agreement, in the form attached hereto as Exhibit E as promptly as reasonably practicable after the date of this Agreement.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party’s Obligations to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger are subject to the satisfaction or written waiver by the party protected by the condition to be satisfied or waived, at or prior to the Effective Time, of the following conditions:
7.2 Conditions to the Company’s Obligations to Effect the Merger. The obligations of the Company to effect the Merger are subject to the satisfaction, at or prior to the Effective Time, of the following additional conditions (any of which may be waived by the Company, in whole or in part, at any time prior to the Effective Time):
7.3 Conditions to Parent’s and Newco’s Obligations to Effect the Merger. The obligations of Parent and Newco to effect the Merger are subject to the satisfaction, at or prior to the Effective Time, of the following additional conditions (any of which may be waived by Parent and Newco, in whole or in part, at any time prior to the Effective Time):
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ARTICLE VIII.
TERMINATION; WAIVER
8.1 Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (even after obtaining the Company Shareholder Approval), by the mutual written consent of Parent and the Company.
8.2 Termination by Either Parent or the Company. This Agreement may be terminated and the Merger may be abandoned by Parent or the Company if (i) there is in force a Law permanently restraining, enjoining or otherwise prohibiting the Merger and such Law shall have become final and non-appealable and not subject to challenge, (ii) the Company Shareholder Approval shall not have been received at the Shareholders Meeting duly called and held at which a quorum was present or any adjournment thereof; provided that the right to terminate this Agreement pursuant to this Section 8.2(ii) (A) shall not be available to the Company if the Company has breached the provisions of Section 6.2 or 6.4, and (B) shall be subject to the Company’s obligation to pay any amounts determined to be payable to Parent under Section 8.5 as and when due, or (iii) the Effective Time shall not have occurred on or before June 30, 2007 (the “Termination Date”); provided, that (A) the right to terminate this Agreement pursuant to this Section 8.2(iii) shall not be available to any party whose failure to fulfill any of its obligations under this Agreement results in such failure to close, and (B) the Termination Date for any termination by the Company pursuant to this Section 8.2(iii) shall be extended by the number of days in excess of thirty (30) days that is required to obtain final SEC approval of the Proxy Statement (measured from the date of the first filing of the preliminary Proxy Statement with the SEC until the date the Proxy Statement is cleared by the SEC to be mailed to the shareholders of the Company).
8.3 Termination by Parent. This Agreement may be terminated by Parent prior to the Effective Time (even after receipt of the Company Shareholder Approval), if (i) there shall have been a breach of representation, warranty or covenant of the Company that gives rise to a failure of the conditions to Closing in Sections 7.3(a) or 7.3(b), which breach or failure is not cured, or is incapable of being cured, within ten (10) days after the receipt by the Company of written notice, provided, that at such time Parent shall not be in breach of its representations, warranties, or covenants such that the conditions in Sections 7.2(a) or 7.2(b) are not then capable of being satisfied other than as a result of the Company’s actions or omissions, (ii) the Special Committee withdraws or modifies or changes its recommendation of this Agreement or the Merger in a manner adverse to Parent or Newco, or (iii) the Company shall have approved or recommended a Competing Transaction.
8.4 Termination by the Company. This Agreement may be terminated by the Company and the Merger may be abandoned at any time prior to the Effective Time if (i)
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there shall have been a breach of representation, warranty or covenant of Parent or Newco that gives rise to a failure of the conditions to Closing in Sections 7.2(a) or 7.2(b), which breach or failure is not cured, or is incapable of being cured, within ten (10) days after the receipt by Parent of written notice, provided, that at such time the Company shall not be in breach of its representations, warranties, or covenants such that the conditions in Sections 7.3(a) or 7.3(b) are not then capable of being satisfied, other than as a result of Parent’s actions or omissions, or (ii) the Special Committee withdraws or modifies or changes its recommendation of this Agreement or the Merger and there exists at such time a proposal or offer for a Competing Transaction that constitutes a Superior Competing Transaction and the Company concurrently enters into, a definitive agreement providing for the consummation of such Superior Competing Transaction; provided, that, in the case of any such termination by the Company, (A) prior to such termination, the Company shall have complied with its obligations under Section 6.2(d), (B) Parent does not make, within three (3) business days of receipt of the written notice to be delivered pursuant to Section 6.2(d), an irrevocable unconditional offer that the Special Committee reasonably and in good faith determines is at least as favorable to the stockholders of the Company as the proposal or offer for such Superior Competing Transaction, it being understood that the Company shall not enter into such binding agreement during such three (3) business day period, and (C) the Company shall timely pay the Termination Fee or Expense Reimbursement to Parent required by Section 8.5(b) within the applicable time period specified in Section 8.5.
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8.6 Extension; Waiver. At any time prior to the Effective Time, each of Parent, Newco and the Company may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document, certificate or writing delivered pursuant hereto, or (iii) waive compliance by the other parties hereto with any of the agreements or conditions contained herein. Any agreement on the part of any party hereto to any such extension or waiver shall be valid only if set forth in any instrument in writing signed on behalf of such party. The failure of any party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights.
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ARTICLE IX.
ADDITIONAL DEFINITIONS
9.1 Certain Definitions. As used herein the following terms have the following respective meanings:
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10.1 Payment of Expenses. If the Merger is not consummated, each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated hereby.
10.2 Survival of Confidentiality. None of the representations, warranties, covenants and other agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of any such representations, warranties, covenants and other agreements, shall survive beyond the earlier of (i) termination of this Agreement, or (ii) the Effective Time, except for (A) those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Effective Time and(B) the provisions of this Article X. Each party hereto agrees that, except for the representations and warranties contained in this Agreement or in a certificate delivered at the Closing, none of the Company, Parent or Newco makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement, the documents and the instruments referred to herein, or the transactions contemplated hereby or thereby, notwithstanding the delivery or disclosure to any other party or other party’s representatives of any documentation or other information with respect to any one or more of the foregoing. The Confidentiality Agreement shall survive the execution and delivery of this Agreement and any termination of this Agreement in accordance with the terms of such Confidentiality Agreement, and the provisions of such Confidentiality Agreement shall apply to all information and material delivered by any party hereunder.
10.3 Modification or Amendment. Subject to the applicable provisions of the MBCA, at any time prior to the Effective Time, the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties; provided, however, that after approval of this Agreement by the shareholders of the Company, no amendment shall be made which changes the consideration payable in the Merger or adversely affects the rights of the Company’s shareholders hereunder, or which by Law requires further approval by the Company’s shareholders, without the approval of such shareholders; provided, further that if the amendment adversely affects the rights of only a
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particular shareholder (or holders of a separate class or series of securities), then this Agreement may be amended with the approval of only that shareholder or those affected holders.
10.4 Waiver of Conditions. The conditions to each of the parties’ obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Law.
10.5 Counterparts. For the convenience of the parties hereto, this Agreement may be executed (by facsimile or pdf signature) in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.
10.6 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Minnesota, without giving effect to the principles of conflicts of law thereof.
10.7 Notices. Unless otherwise set forth herein, any notice, request, instruction or other document to be given hereunder by any party to the other parties shall be in writing and shall be deemed duly given (i) upon delivery, when delivered personally, (ii) one (1) business day after being sent by overnight courier or when sent by facsimile transmission (with a confirming copy sent by overnight courier), and (iii) five (5) business days after being sent by registered or certified mail, postage prepaid, as follows:
If to the Company:
CorVu Corporation
3400 W. 66th St.
Suite 445
Edina, MN 55435
Attn: Joseph Caffarelli, CEO
Facsimile No.: (952) 843-7752
With copies (which shall not constitute effective notice) to:
CorVu Corporation
3400 W. 66th St.
Suite 445
Edina, MN 55435
Attn: David Carlson, CFO
Facsimile No.: (952) 843-7752
and to
Fredrikson & Byron, P.A.
200 South Sixth Street
Suite 4000
Minneapolis, MN 55402-1425
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Attn: John H. Stout, Esq.
Facsimile No.: (612) 492-7077
If to Parent or Newco:
Rocket Software, Inc.
275 Grove Street
Newton, MA 02466-2273
Attn: Johan Magnusson Gedda
Facsimile No.: (617) 630-7173
With a copy (which shall not constitute effective notice) to:
Bingham McCutchen LLP
355 South Grand Avenue
Los Angeles, CA 90071-3106
Attn: David Robbins, Esq.
Facsimile No.: (213) 830-8660
or to such other Persons or addresses as may be designated in writing by the party to receive such notice.
10.8 Entire Agreement; Assignment. This Agreement (including the exhibits, schedules, documents and instruments referred to herein, including the Confidentiality Agreement) constitutes the entire agreement of the parties and supersedes all prior or contemporaneous agreements and understandings, both written and oral, among the parties hereto, or any of them, with respect to the collective subject matter hereof. All exhibits and schedules (including the Company Disclosure Schedule) attached to this Agreement are expressly made a part of, and incorporated by reference into, this Agreement. This Agreement may not be assigned by any of the parties hereto by operation of Law or otherwise without the written consent of the other parties except that (a) Parent may assign any or all of its rights hereunder to any Affiliate of Parent and Newco may assign any or all of its rights hereunder to any other newly organized corporation under the Laws of the State of Minnesota, all of the capital stock of which is owned directly or indirectly by Parent; provided, that Parent shall remain liable on a direct and primary basis for the performance of any such Affiliate or direct or indirect Subsidiary, and (b) Parent or Newco may assign its rights hereunder to any lender financing any portion of the Total Merger Consideration.
10.9 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and assigns. Nothing in this Agreement, express or implied, other than the right to receive the consideration payable in the Merger pursuant to Article III hereof, is intended to or shall confer upon any other Person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement; provided, however, that the provisions of Section 6.7 shall inure to the benefit of and be enforceable by the Indemnified Parties.
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10.10 Obligation of Parent. Whenever this Agreement requires Newco or the Surviving Corporation to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause Newco or the Surviving Corporation to take such action and a guarantee of the performance thereof.
10.11 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in a manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
10.12 Specific Performance. The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at Law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at Law or in equity.
10.13 Certain Interpretations. For purposes of this Agreement:
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be executed by their respective duly authorized officers as of the date first above written.
| CORVU CORPORATION | |||
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| By: | /s/ David C. Carlson |
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| Name: David C. Carlson | |||
| Title: Chief Financial Officer | |||
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| ROCKET SOFTWARE, INC. | |||
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| By: | /s/ Johan Magnusson Gedda |
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| Name: Johan Magnusson Gedda | |||
| Title: Executive Vice President | |||
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| ROCKET SOFTWARE MINNESOTA, INC. | |||
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| By: | /s/ Johan Magnusson Gedda |
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| Name: Johan Magnusson Gedda | |||
| Title: | |||
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Opinion of Cherry Tree Securities, LLC
CHERRY TREE | 301 Carlson Parkway, Suite 103 |
| Minnetonka, Minnesota 55305 |
| Voice:952.893.9012 | Fax:952.893.9036 |
| www.cherrytree.com |
March 2, 2007
Special Committee of the Board of Directors
CorVu Corporation
3400 W. 66th Street
Edina, MN 55435
Gentlemen:
We understand that Rocket Software, Inc. (“Rocket”) intends, through a wholly-owned subsidiary named Newco, to enter into a Merger pursuant to the terms of an Agreement and Plan of Merger (“Merger Agreement”), with CorVu Corporation (the “Company”). The terms of the Merger Agreement provide for each share of the Company’s Common Stock to be converted into the right to receive $.40 in cash at closing (“Merger Consideration”). We further understand that the Company has outstanding 360,000 shares of a Series B Convertible Preferred Stock (“Series B”). Pursuant to the terms of the Merger Agreement, the Series B holders will receive $2.33 per share of Series B.
We also understand that the Company’s 17,000 shares of a Series C Convertible Preferred Stock and a $1.5 million Note to Comvest Investment Partners II LLC were redeemed and repaid, respectively, on or about February 20, 2007. A bank loan in the amount of $3.2 million was incurred for those purposes.
We assume that the final terms of the merger will be substantially identical to the terms contained in the Merger Agreement labeled Execution Version which was provided to Cherry Tree Securities, LLC (“Cherry Tree”) on March 2.
Pursuant to a January 19, 2007 engagement letter between the Special Committee of the Board of Directors of the Company and Cherry Tree, Cherry Tree was engaged to render an opinion on the fairness, from a financial point of view, of the Merger Consideration to be paid to the holders of Common Stock pursuant to the terms of the Merger Agreement. Our engagement relates only to the expression of our opinion and none of our fee is conditioned on the completion of the Merger. We were not authorized to and did not solicit any expressions of interest from any
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parties with respect to the sale of all or any part of the Company or any alternative transaction. We did not negotiate the terms of the Merger Agreement with Rocket.
For purposes of the opinion set forth herein, we have reviewed and considered such financial and other information and matters as we deemed relevant, including:
a) the Merger Agreement labeled Execution Version provided to Cherry Tree on March 2, 2007 and several prior drafts;
b) publicly available financial and business information of the Company;
c) internal financial statements and other financial and business information of the Company prepared by the management of the Company;
d) financial projections prepared by the management of the Company;
e) discussions with senior executives about the Company’s past and current operations and financial condition, the prospects for the Company, and characteristics and trends in the markets the Company serves;
f) reported prices and trading activity for the Company’s common stock;
g) publicly available financial, stock price and other information for certain publicly-traded companies; and
h) financial terms, to the extent publicly available, of certain acquisition transactions.
We performed such financial analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
For the purposes of this opinion, we have assumed and relied upon, without independent verification, the accuracy and completeness of the information supplied or otherwise made available to us by the Company and the information obtained by us from other public sources. With respect to the financial projections prepared by the Company, we have assumed that they were reasonably prepared on basis reflecting the best currently available estimates and judgments of the future financial performance of the Company. We have assumed there has been no material change in the assets, financial condition or prospects of the Company since the date of the most recent financial statements made available to us.
We have not made any independent valuation or appraisal of the assets or liabilities of the Company, nor have we been furnished with any such valuation or appraisal, and express no opinion regarding the liquidation value of the Company or any of its assets. Our opinion is necessarily based on the information available to us and the financial, economic, market and other conditions as they exist and are subject to evaluation as of the date hereof. We have no obligation to update, revise or reaffirm our opinion based on information which becomes available or developments which occur after the date of this letter, and expressly disclaim any responsibility to do so.
We have made no independent investigation of any legal or accounting matters that may affect the Company or the merger. We do not opine on, nor does our opinion consider, the tax consequences of the merger.
This letter is for the information of the Special Committee of the Board of Directors of the Company and only in connection with its consideration of the proposed Merger. This letter may
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not be used for any other purpose without our prior written consent, except that this letter may be included in its entirety in any information sent to the Company’s shareholders in connection with the Merger.
This opinion relates solely to the proposed $.40 per share Merger Consideration. We offer no recommendation or opinion about the Company’s underlying business decision to effect or support the Merger, the relative merits of the Merger to the Company or its shareholders, whether or not the Merger should be consummated, the process used in connection with the Merger, how any shareholder should vote with respect to the Merger or whether or not shareholders should or should not exercise any rights that they may have with respect to the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date hereof that the proposed Merger Consideration of $.40 per share is fair, from a financial point of view, to the holders of the Company’s Common Stock.
Sincerely, | |
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/s/ Michael Bochert |
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Managing Director | |
Cherry Tree Securities, LLC | |
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MINNESOTA STATUTES 2006, SECTION 302A.471 AND 302A.473
302A.471. Rights of dissenting shareholders
Subdivision 1. Actions creating rights. A shareholder of a corporation may dissent from, and obtain payment for the fair value of the shareholder’s shares in the event of, any of the following corporate actions:
(a) unless otherwise provided in the articles, an amendment of the articles that materially and adversely affects the rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of the shares, including a provision respecting a sinking fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to acquire shares, securities other than shares, or rights to purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or to cumulate votes, except as the right may be excluded or limited through the authorization or issuance of securities of an existing or new class or series with similar or different voting rights; except that an amendment to the articles of an issuing public corporation that provides that section 302A.671 does not apply to a control share acquisition does not give rise to the right to obtain payment under this section; or
(5) eliminates the right to obtain payment under this subdivision;
(b) a sale, lease, transfer, or other disposition of property and assets of the corporation that requires shareholder approval under section 302A.661, subdivision 2, but not including a disposition in dissolution described in section 302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a disposition for cash on terms requiring that all or substantially all of the net proceeds of disposition be distributed to the shareholders in accordance with their respective interests within one year after the date of disposition;
(c) a plan of merger, whether under this chapter or under chapter 322B, to which the corporation is a constituent organization, except as provided in subdivision 3, and except for a plan of merger adopted under section 302A.626;
(d) a plan of exchange, whether under this chapter or under chapter 322B, to which the corporation is a party as the corporation whose shares will be acquired by the acquiring organization, except as provided in subdivision 3;
(e) a plan of conversion adopted by the corporation; or
(f) any other corporate action taken pursuant to a shareholder vote with respect to which the articles, the bylaws, or a resolution approved by the board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert dissenters’ rights as to less than all of the shares registered in the name of the shareholder, unless the shareholder dissents with respect to all the shares that are beneficially owned by another person but registered in the name of the shareholder and discloses the name and address of each beneficial owner on whose behalf the shareholder dissents. In that event, the rights of the dissenter shall be determined as if the shares as to which the shareholder has dissented and the other shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert dissenters’ rights with respect to shares held on behalf of the beneficial owner, and shall be treated as a dissenting shareholder under the terms of this
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section and section 302A.473, if the beneficial owner submits to the corporation at the time of or before the assertion of the rights a written consent of the shareholder.
Subd. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a resolution approved by the board otherwise provide, the right to obtain payment under this section does not apply to a shareholder of (1) the surviving corporation in a merger with respect to shares of the shareholder that are not entitled to be voted on the merger and are not canceled or exchanged in the merger or (2) the corporation whose shares will be acquired by the acquiring organization in a plan of exchange with respect to shares of the shareholder that are not entitled to be voted on the plan of exchange and are not exchanged in the plan of exchange.
(b) If a date is fixed according to section 302A.445, subdivision 1, for the determination of shareholders entitled to receive notice of and to vote on an action described in subdivision 1, only shareholders as of the date fixed, and beneficial owners as of the date fixed who hold through shareholders, as provided in subdivision 2, may exercise dissenters’ rights.
(c) Notwithstanding subdivision 1, the right to obtain payment under this section, other than in connection with a plan of merger adopted under section 302A.621, is limited in accordance with the following provisions:
(1) The right to obtain payment under this section is not available for the holders of shares of any class or series of shares that is listed on the New York Stock Exchange or the American Stock Exchange or designated as a national market security on the Nasdaq Stock Market.
(2) The applicability of clause (1) is determined as of:
(i) the record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action described in subdivision 1; or
(ii) the day before the effective date of corporate action described in subdivision 1 if there is no meeting of shareholders.
(3) Clause (1) is not applicable, and the right to obtain payment under this section is available pursuant to subdivision 1, for the holders of any class or series of shares who are required by the terms of the corporate action described in subdivision 1 to accept for such shares anything other than shares, or cash in lieu of fractional shares, of any class or any series of shares of a domestic or foreign corporation, or any other ownership interest of any other organization, that satisfies the standards set forth in clause (1) at the time the corporate action becomes effective.
Subd. 4. Other rights. The shareholders of a corporation who have a right under this section to obtain payment for their shares, or who would have the right to obtain payment for their shares absent the exception set forth in paragraph (c) of subdivision 3, do not have a right at law or in equity to have a corporate action described in subdivision 1 set aside or rescinded, except when the corporate action is fraudulent with regard to the complaining shareholder or the corporation.
History: 1981 c 270 s 80; 1987 c 203 s 2,3; 1988 c 692 s 10; 1991 c 49 s 16; 1992 c 517 art 1 s 15; 1993 c 17 s 40; 1994 c 417 s 5; 1997 c 10 art 1 s 24; 1999 c 85 art 1 s 11; 2000 c 264 s 6,7; 2002 c 311 art 1 s 20; 2004 c 199 art 14 s 16,17; 2006 c 250 art 1 s 27-29
302A.473. Procedures for asserting dissenters’ rights
Subdivision 1. Definitions. (a) For purposes of this section, the terms defined in this subdivision have the meanings given them.
(b) “Corporation” means the issuer of the shares held by a dissenter before the corporate action referred to in section 302A.471, subdivision 1 or the successor by merger of that issuer.
(c) “Fair value of the shares” means the value of the shares of a corporation immediately before the effective date of the corporate action referred to in section 302A.471, subdivision 1.
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(d) “Interest” means interest commencing five days after the effective date of the corporate action referred to in section 302A.471, subdivision 1, up to and including the date of payment, calculated at the rate provided in section 549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting at which any action described in section 302A.471, subdivision 1 is to be voted upon, the notice of the meeting shall inform each shareholder of the right to dissent and shall include a copy of section 302A.471 and this section and a brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by the shareholders and the corporation holds a shareholder meeting, a shareholder who is entitled to dissent under section 302A.471 and who wishes to exercise dissenters’ rights must file with the corporation before the vote on the proposed action a written notice of intent to demand the fair value of the shares owned by the shareholder and must not vote the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed action has been approved by the board and, if necessary, the shareholders, the corporation shall send to (i) all shareholders who have complied with subdivision 3, (ii) all shareholders who did not sign or consent to a written action that gave effect to the action creating the right to obtain payment under section 302A.471, and (iii) all shareholders entitled to dissent if no shareholder vote was required, a notice that contains:
(1) the address to which a demand for payment and certificates of certificated shares must be sent in order to obtain payment and the date by which they must be received;
(2) any restrictions on transfer of uncertificated shares that will apply after the demand for payment is received;
(3) a form to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf the shareholder dissents, acquired the shares or an interest in them and to demand payment; and
(4) a copy of section 302A.471 and this section and a brief description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting shareholder must demand payment and deposit certificated shares or comply with any restrictions on transfer of uncertificated shares within 30 days after the notice required by paragraph (a) was given, but the dissenter retains all other rights of a shareholder until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes effect, or after the corporation receives a valid demand for payment, whichever is later, the corporation shall remit to each dissenting shareholder who has complied with subdivisions 3 and 4 the amount the corporation estimates to be the fair value of the shares, plus interest, accompanied by:
(1) the corporation’s closing balance sheet and statement of income for a fiscal year ending not more than 16 months before the effective date of the corporate action, together with the latest available interim financial statements;
(2) an estimate by the corporation of the fair value of the shares and a brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description of the procedure to be followed in demanding supplemental payment.
(b) �� The corporation may withhold the remittance described in paragraph (a) from a person who was not a shareholder on the date the action dissented from was first announced to the public or who is dissenting on behalf of a person who was not a beneficial owner on that date. If the dissenter has complied with subdivisions 3 and 4, the corporation shall forward to the dissenter the materials described in paragraph (a), a statement of the reason for
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withholding the remittance, and an offer to pay to the dissenter the amount listed in the materials if the dissenter agrees to accept that amount in full satisfaction. The dissenter may decline the offer and demand payment under subdivision 6. Failure to do so entitles the dissenter only to the amount offered. If the dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit of certificates or the imposition of transfer restrictions on uncertificated shares, it shall return all deposited certificates and cancel all transfer restrictions. However, the corporation may again give notice under subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the amount remitted under subdivision 5 is less than the fair value of the shares plus interest, the dissenter may give written notice to the corporation of the dissenter’s own estimate of the fair value of the shares, plus interest, within 30 days after the corporation mails the remittance under subdivision 5, and demand payment of the difference. Otherwise, a dissenter is entitled only to the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand under subdivision 6, it shall, within 60 days after receiving the demand, either pay to the dissenter the amount demanded or agreed to by the dissenter after discussion with the corporation or file in court a petition requesting that the court determine the fair value of the shares, plus interest. The petition shall be filed in the county in which the registered office of the corporation is located, except that a surviving foreign corporation that receives a demand relating to the shares of a constituent domestic corporation shall file the petition in the county in this state in which the last registered office of the constituent corporation was located. The petition shall name as parties all dissenters who have demanded payment under subdivision 6 and who have not reached agreement with the corporation. The corporation shall, after filing the petition, serve all parties with a summons and copy of the petition under the Rules of Civil Procedure. Nonresidents of this state may be served by registered or certified mail or by publication as provided by law. Except as otherwise provided, the Rules of Civil Procedure apply to this proceeding. The jurisdiction of the court is plenary and exclusive. The court may appoint appraisers, with powers and authorities the court deems proper, to receive evidence on and recommend the amount of the fair value of the shares. The court shall determine whether the shareholder or shareholders in question have fully complied with the requirements of this section, and shall determine the fair value of the shares, taking into account any and all factors the court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit to use, whether or not used by the corporation or by a dissenter. The fair value of the shares as determined by the court is binding on all shareholders, wherever located. A dissenter is entitled to judgment in cash for the amount by which the fair value of the shares as determined by the court, plus interest, exceeds the amount, if any, remitted under subdivision 5, but shall not be liable to the corporation for the amount, if any, by which the amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs and expenses of a proceeding under subdivision 7, including the reasonable expenses and compensation of any appraisers appointed by the court, and shall assess those costs and expenses against the corporation, except that the court may assess part or all of those costs and expenses against a dissenter whose action in demanding payment under subdivision 6 is found to be arbitrary, vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply substantially with this section, the court may assess all fees and expenses of any experts or attorneys as the court deems equitable. These fees and expenses may also be assessed against a person who has acted arbitrarily, vexatiously, or not in good faith in bringing the proceeding, and may be awarded to a party injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney for the dissenters out of the amount awarded to the dissenters, if any.
History: 1981 c 270 s 81; 1987 c 104 s 30-33; 1993 c 17 s 41,42; 1997 c 10 art 1 s 25; 2004 c 199 art 14 s 18,19
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Articles of Incorporation of
Rocket Software Minnesota, Inc.
The undersigned incorporator, being a natural person 18 years of age or older, in order to form a corporate entity under Minnesota Statutes, Chapter 302A, hereby adopts the following Articles of Incorporation:
ARTICLE I
The name of this Corporation is Rocket Software Minnesota, Inc.
ARTICLE II
The registered office of this Corporation is located at 590 Park Street, Suite 6, St. Paul, MN 55103. The name of the registered agent is National Registered Agents, Inc.
ARTICLE III
This Corporation is authorized to issue an aggregate total of 1,000 shares, all of which shall be designated Common Stock, having a par value of $.01 per share.
ARTICLE IV
The name and address of the incorporator of this Corporation are as follows:
Michael A. Stanchfield
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402
ARTICLE V
No shareholder of this Corporation shall have any cumulative voting rights.
ARTICLE VI
No shareholder of this Corporation shall have any preemptive rights by virtue of Section 302A.413 of the Minnesota Statutes (or similar provisions of future law) to subscribe for, purchase, or acquire any shares of the Corporation of any class, whether unissued or now or hereafter authorized, or any obligations or other securities convertible into or exchangeable for any such shares.
ARTICLE VII
The names of the first directors of this Corporation are as follows:
Johan Magnusson Gedda
Andrew Younnis
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ARTICLE VIII
Any action required or permitted to be taken at a meeting of the Board of Directors of this Corporation not needing approval by the shareholders under Minnesota Statutes, Chapter 302A, may be taken by written action signed, or consented to by authenticated electronic communication, by the number of directors that would be required to take such action at a meeting of the Board of Directors at which all directors were present.
ARTICLE IX
No director of this Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty by such director as a director; provided, however, that this Article shall not eliminate or limit the liability of a director to the extent provided by applicable law (1) for any breach of the director’s duty of loyalty to the Corporation or its shareholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 302A.559 or 80A.23 of the Minnesota Statutes (or similar provisions of future law), (4) for any transaction from which the director derived an improper personal benefit, or (5) for any act or omission occurring prior to the effective date of this Article. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, 2007.
| /s/ Michael A. Stanchfield |
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| Michael A. Stanchfield | |
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PROXY
CORVU CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
May 10, 2007
The undersigned hereby appoints Joseph J. Caffarelli and David C. Carlson and each of them, as proxies, with full power of substitution, to vote all shares of Capital Stock of CorVu Corporation that the undersigned is entitled to vote at the Special Meeting of Shareholders of CorVu to be held on Thursday, May 10, 2007, at 8:00 a.m. local time, in the Pepin/Vermillion conference room on the 40th floor of the offices of Fredrikson & Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota, and at any adjournment or postponement thereof, upon the matters described in the Notice of Special Meeting and Proxy Statement dated April 24, 2007, receipt of which is hereby acknowledged, subject to any direction indicated on this card, hereby revoking any proxy heretofore executed by the undersigned to vote at said meeting.
The Special Committee of the Board of Directors recommends a vote “FOR” Proposals 1 and 2.
1. | Approval of the Agreement and Plan of Merger dated as of March 5, 2007 among Rocket Software, Inc., Rocket Software Minnesota, Inc. and CorVu Corporation (the “Merger Agreement”). |
o FOR o AGAINST o ABSTAIN
2. | Approval of the adjournment of the meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Merger Agreement. |
o FOR o AGAINST o ABSTAIN
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THE
MERGER AGREEMENT, AND FOR THE ADJOURNMENT OF THE SPECIAL MEETING IF
NECESSARY OR APPROPRIATE.
| Please sign and date this Proxy below and return in the enclosed envelope. |
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| Dated: | , 2007 |
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| Please date and sign your name as it appears hereon. When | |
THIS PROXY IS SOLICITED ON BEHALF OF THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS.
