CORVU CORPORATION
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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The Annual Meeting of Shareholders of CorVu Corporation will be held on
December 18, 2003, at 3:00 p.m. (Minneapolis time), at the offices of Fredrikson
& Byron, on the 40th floor of the Pillsbury Center, 200 South Sixth Street,
Minneapolis, Minnesota, for the following purposes:
1. To set the number of directors at six (6).
2. To elect directors for the ensuing year.
3. To increase the number of shares authorized for issuance under
the Company's 1996 Stock Option Plan by 500,000 to 4,500,000
shares of the Company's Common Stock.
4. To ratify the selection of Virchow, Krause & Company, LLP, as
the Company's independent auditors for the current fiscal
year.
5. To consider and act upon such other matters as may properly
come before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on November 6,
2003, are entitled to notice of and to vote at the meeting or any adjournment
thereof.
Your vote is important. We ask that you complete, sign, date and return
the enclosed proxy in the envelope provided for your convenience. The prompt
return of proxies will save the Company the expense of further requests for
proxies.
BY ORDER OF THE BOARD OF DIRECTORS
Justin M. MacIntosh
Chief Executive Officer
November 10, 2003
Edina, Minnesota
CORVU CORPORATION
Annual Meeting of Shareholders
December 18, 2003
PROXY STATEMENT
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INTRODUCTION
Your Proxy is solicited by the Board of Directors of CorVu Corporation
("the Company") for use at the Annual Meeting of Shareholders to be held on
December 18, 2003, at the location and for the purposes set forth in the Notice
of Meeting, and at any adjournment thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit proxies personally
or by telephone.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the meeting by giving written notice of such revocation to the Secretary
of the Company. Proxies not revoked will be voted in accordance with the choice
specified by shareholders by means of the ballot provided on the proxy for that
purpose. Proxies that are signed but lack any such specification will, subject
to the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the number and slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instructions by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote proxy shall be
deemed present at the meeting for purposes of determining a quorum but shall not
be deemed to be represented at the meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the principal executive office of the Company is
3400 West 66th Street, Edina, Minnesota 55435. The Company expects that this
Proxy Statement, the related proxy and Notice of Meeting will first be mailed to
shareholders on or about November 10, 2003.
1
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed November 6, 2003, as
the record date for determining shareholders entitled to vote at the Annual
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the Annual Meeting. At the close of business on November 6, 2003, the
Company had 21,665,938 shares of Common Stock issued and outstanding. The Common
Stock is the only outstanding class of capital stock of the Company entitled to
vote. Each share of Common Stock is entitled to one vote on each matter to be
voted upon at the meeting. Holders of Common Stock are not entitled to
cumulative voting rights.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table provides information as of November 6, 2003,
concerning the beneficial ownership of the Company's voting securities by: (i)
each director of the Company, (ii) each executive officer named in the Summary
Compensation Table, (iii) the persons known by the Company to own more than 5%
of a class of voting stock of the Company, 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.
Name or Identity of
Beneficial Owner & Management Common Stock
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Number of Shares(1) Percent
Beneficially Owned of Class
Justin M. MacIntosh(2) 9,448,488(3) 41.8%
Ismail Kurdi(2) 1,674,492(4) 7.7%
David C. Carlson(2) 602,910(5) 2.7%
Alan M. Missroon, Jr.(2) 524,677(6) 2.4%
James L. Mandel(2) 264,061(7) 1.2%
Gary P. Smaby(2) 30,000(8) *
Directors and executive
officers as a group 12,544,628(9) 53.1%
Opella Holdings Limited(10) 7,541,733(11) 34.8%
Dominic K.K. Sum(10) 7,541,733(12) 34.8%
Troy Rollo (13) 1,138,200(14) 5.3%
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- ---------------
* less than 1%
(1) For each person or group, any securities that the person or group has
the right to acquire within 60 days pursuant to options, warrants,
conversion privileges or other rights, have been added to the total
amount of outstanding shares when determining the percent owned by such
person or group.
(2) Address: 3400 West 66th Street, Suite 445, Edina, MN 55435. (3) Mr.
MacIntosh's beneficial ownership includes (i) 7,541,733 shares
2
registered in the name of Barleigh Wells Limited (see also footnotes 11
and 12), (ii) 940,000 shares that may be purchased upon exercise of
options held by Mr. MacIntosh, and (iii) 250,744 shares held by Mr.
MacIntosh's spouse and a company controlled by his spouse. Mr.
MacIntosh disclaims beneficial ownership of the shares owned by his
spouse.
(4) Mr. Kurdi's beneficial ownership includes 55,000 shares that may be
purchased upon exercise of options.
(5) Mr. Carlson's beneficial ownership includes 432,500 shares that may be
purchased upon exercise of options. Mr. Carlson disclaims beneficial
ownership of 160,695 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.
(6) Mr. Missroon's beneficial ownership includes 395,000 shares that may be
purchased upon exercise of stock options.
(7) Mr. Mandel's beneficial ownership includes (i) 90,000 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.
(8) Mr. Smaby's beneficial ownership consists of 30,000 shares that may be
purchased upon exercise of stock options.
(9) Includes 1,942,500 shares of the executive officers and directors as a
group that may be purchased upon exercise of stock options.
(10) Address: c/o Tempio Corporate Consultants Limited, Suite 701, 7/F, 6-8
Pottinger Street, Central, HONG KONG.
(11) 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 3) and Mr. Sum (see footnote 12).
(12) Mr. Sum is the sole shareholder of Opella Holdings Limited (see
footnote 11). 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.
(13) Address: c/o CorVu Australasia Pty. Ltd., Level 4, 1 James Place, North
Sydney, NSW 2060, AUSTRALIA.
(14) Mr. Rollo's beneficial ownership includes 155,875 shares that may be
purchased upon exercise of stock options.
3
ELECTION OF DIRECTORS
(Proposals #1 and #2)
General Information
The Bylaws of the Company provide that the number of directors, which
shall not be less than one, shall be determined by the shareholders. The Board
of Directors recommends that the number of directors be set at six and that six
directors be elected at the Annual Meeting. Under applicable Minnesota law,
approval of the proposal to set the number of directors at six, as well as the
election of each nominee, requires the affirmative vote of the holders of the
majority of the voting power of the shares represented in person or by proxy at
the Annual Meeting with authority to vote on such matter, but not less than
5,416,436 shares.
In the absence of other instructions, each proxy will be voted for each
of the nominees listed below. If elected, each nominee will serve until the next
annual meeting of shareholders and until his successor shall be elected and
qualified. If, prior to the meeting, it should become known that any of the
nominees will be unable to serve as a director after the meeting by reason of
death, incapacity or other unexpected occurrence, the proxies will be voted for
such substitute nominee as is selected by the Board of Directors or,
alternatively, not voted for any nominee. The Board of Directors has no reason
to believe that any nominee will be unable to serve.
The names and ages of all of the director nominees and the positions
held by each with the Company are as follows:
Name Age Position
David C. Carlson 47 Chief Financial Officer; Director
Ismail Kurdi 34 Director
Justin M. MacIntosh 53 President, Chief Executive Officer; Director
James L. Mandel 47 Chairman of the Board; Director
Alan M. Missroon, Jr. 40 Senior Vice President of Corporate Strategy; Director
Gary P. Smaby 54 Director
David C. Carlson (Chief Financial Officer; Director). Before joining
CorVu Corporation as Chief Financial Officer in July 1996, Mr. Carlson gained
extensive experience in the area of accounting and business operations. He
served from July 1979 to July 1984 in the audit division of Arthur Andersen &
Co. From July 1984 to April 1989, he held the position of Controller and later,
Vice President of Finance at Canterbury Downs, a horse racing facility. He
joined the Minnesota Timberwolves, a professional sports franchise, in April
1989 as Controller, a position he subsequently held at a local health and
fitness chain until May 1996; the sports franchise and the health and fitness
chain were under common ownership. Mr. Carlson is responsible for all areas of
financial management of our Company. He became a member of the board of
directors of CorVu Corporation in December 1996.
4
Ismail Kurdi (Director). Mr. Kurdi received a Bachelor of Science from
Boston University in May 1992. From September 1992 to September 1993, he was
with Oxy USA, a subsidiary of Occidental Petroleum. In October 1993, he
relocated back to England where he is a real estate developer and investor. He
serves on the board of directors for several British property companies that are
not reporting companies. Mr. Kurdi was elected to the board of directors of
CorVu Corporation in December 1996. He currently spends approximately 10% of his
time on CorVu's business affairs.
Justin M. MacIntosh (President, Chief Executive Officer; Director).
After a career in the equity and real estate markets in Australia, Mr. MacIntosh
founded MACS Software Company, a provider of business application software, in
1977. He served as Chairman and CEO of MACS until he founded the former parent
company of CorVu in Australia in 1990. Since the incorporation of CorVu
Corporation in Minnesota in September 1995, Mr. MacIntosh has served as
Chairman, President and Chief Executive Officer, and as a director of the
Company.
James L. Mandel (Director). Mr. Mandel has been a director of CorVu
since 1987. He has been the Chief Executive Officer and a director of Vicom,
Inc. since September 1998. Vicom is a full service telecommunications company
that files reports under the Securities Exchange Act of 1934 and is
headquartered in Minneapolis. From January 1997 to September 1998, he was
Chairman of Call 4 Wireless LLC and from January 1992 to February 1997, he
served as a Vice President of Grand Casinos, Inc. Mr. Mandel was elected as
Chairman of CorVu's Board of Directors effective August 1, 2003. He currently
spends approximately 15% of his time on CorVu's business affairs.
Alan M. Missroon, Jr. (Senior Vice President of Corporate Strategy;
Director). Mr. Missroon gained his knowledge of the business intelligence market
while working at Burroughs Corporation (Unisys) and during his eight years (from
July 1987 to November 95) at IQ Software Corporation in which he held a variety
of positions in sales, sales management, product design, and marketing. From
December 1995 to December 1996, he worked at Praxis International. During 2002
and 2003, Mr. Missroon was responsible for directing the sales force in the
Americas region. In September 2003, Mr. Missroon was appointed as Senior Vice
President of Corporate Strategy, leading strategic relations with the analyst
and investor community and guiding the strategic direction of CorVu and its
products. He joined CorVu Corporation in January 1997 and was elected as one of
the directors of CorVu Corporation in February 1997.
Gary P. Smaby (Director). Mr. Smaby was elected as a director of the
Company in September 2003. In 1989 Mr. Smaby formed his own
technology-consulting firm, Smaby Group, Inc., serving as CEO. He is also one of
the managing partners of Quatris Fund since its formation in July 2000. He is
the 2003 President of the Minnesota Venture Capital Association, and serves on
the Board of Directors of several venture-financed start-ups, including Quatris
portfolio companies Unlimited Scale and Iconoculture. He also serves on the
Board of Finstad Center for Entrepreneurial Studies at St. Olaf College in
Northfield, MN, the Board of Trustees for the Science Museum of Minnesota,
Vesterheim Norwegian-American Museum in Decorah, Iowa, and the External Advisory
Board of the Deep Computing Institute at IBM TJ Watson Research Laboratory. He
currently spends approximately 10% of his time on CorVu's business affairs.
5
Committee and Board Meetings
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee, whose members are
Ismail Kurdi and James Mandel, is responsible for reviewing the Company's
internal control procedures, the quarterly and annual financial statements of
the Company, and reviewing with the Company's independent public accountants the
results of the annual audit. The Audit Committee met five times during fiscal
2003. The Compensation Committee, whose members are Ismail Kurdi and James
Mandel, recommends to the Board of Directors from time to time the salaries and
incentive compensation to be paid to executive officers of the Company and
administers the Company's stock option plan. The Compensation Committee met four
times during fiscal 2003. The Company does not have a nominating committee.
The Directors and Committee members often communicate informally to
discuss the affairs of the Company and, when appropriate, take formal Board and
Committee action by unanimous written consent of all Directors or Committee
members, in accordance with Minnesota law, rather than hold formal meetings.
During fiscal 2003, the Board of Directors held six formal meetings. Each
incumbent director attended 75% or more of the total number of meetings (held
during the period(s) for which he has been a director or served on committee(s))
of the Board and of committee(s) of which he was a member.
Directors' Compensation
For fiscal year 2002, directors who are not employees of CorVu were
compensated at the rate of $1,225 per month plus $1,225 for each Board meeting
attended and $500 for each committee meeting attended. In addition, on July 11,
2001, each nonemployee director received a five-year nonqualified option to
purchase 10,000 shares at an exercise price of $0.12 per share, which was the
market value of CorVu's common stock on the date of grant.
For fiscal year 2003, directors who are not employees of CorVu were
compensated at the rate of $1,250 per month plus $1,250 for each Board meeting
attended and $1,000 for each committee meeting attended. In addition, on July 1,
2002, each nonemployee director received a five-year nonqualified option to
purchase 25,000 shares at an exercise price of $0.39 per share, which was the
market value of CorVu's common stock on the date of grant.
For fiscal year 2004, on July 22, 2003, each nonemployee director
received a five-year nonqualified option to purchase 10,000 shares at an
exercise price of $0.82 per share, which was the market value of CorVu's common
stock on the date of grant. In addition, directors who are not employees of
CorVu will be compensated at the rate of $1,250 per month plus $1,250 for each
Board meeting attended and $1,000 for each committee meeting attended in fiscal
year 2004.
For his services as Chairman of the Board of Directors, James L. Mandel
receives a monthly compensation of $4,000. Mr. Mandel does not receive any
additional compensation for any Board and/or committee meeting attended.
6
As compensation for joining the Board of Directors, the Board granted
to Gary P. Smaby on October 31, 2003 a five-year nonqualified option to purchase
60,000 shares at an exercise price of $1.10 per share, which was the market
value of CorVu's common stock on October 30, i.e. the day prior to the date of
grant. Options to purchase 30,000 shares vested immediately, whereas the
remaining options will vest in equal installments on the anniversaries of the
grant in 2004, 2005 and 2006, respectively, assuming that Mr. Smaby is a
director of the Company on such anniversaries.
AUDIT COMMITTEE REPORT
The Board of Directors and the Audit Committee believe that the Audit
Committee's current member composition (two independent directors) satisfies the
rule of the National Association of Securities Dealers, Inc. ("NASD") that
governs audit committee composition, Rule 4310(c)(26)(B)(iii), including the
requirement that audit committee members all be "independent directors" as that
term is defined by NASD Rule 4200(a)(14).
In accordance with its written charter adopted by the Board of
Directors (filed as Appendix A to the proxy statement for the Company's 2001
Annual Meeting), the Audit Committee assists the Board of Directors with
fulfilling its oversight responsibility regarding the quality and integrity of
the accounting, auditing and financial reporting practices of the Company. In
discharging its oversight responsibilities regarding the audit process, the
Audit Committee:
(1) reviewed and discussed the audited financial statements with
management;
(2) discussed with the independent auditors the material required
to be discussed by Statement on Auditing Standards No. 61; and
(3) reviewed the written disclosures and the letter from the
independent auditors required by the Independence Standards
Board's Standard No. 1, and discussed with the independent
auditors any relationships that may impact their objectivity
and independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 2003, as filed with the Securities and Exchange
Commission.
Members of the Audit Committee:
Ismail Kurdi
James L. Mandel
7
AMENDMENT OF 1996 STOCK OPTION PLAN
(Proposal #3)
General
At the Annual Meeting, shareholders will be asked to approve an
increase of the number of shares of Common Stock reserved for issuance under the
CorVu Corporation 1996 Stock Option Plan (the "Plan") by 500,000 to a total of
4,500,000. As of November 3, options to purchase an aggregate of 3,799,751
shares of Company Common Stock are outstanding under the Plan. Under the current
Plan, therefore, only 200,249 shares of Company Common Stock are still available
for grant. The Board believes that it is necessary to increase the amount of
shares reserved under the Plan, because the Plan facilitates the employment and
retention of competent and qualified personnel and promotes the future growth of
the Company by furnishing incentives to officers, directors, employees,
consultants, and advisors upon whose efforts the success of the Company and its
Subsidiaries will depend. As of the date of the proxy, the Company had
approximately 120 employees, including officers, and three non-employee
directors.
Description of the 1996 Stock Option Plan
A general description of the material features of the Plan follows, but
this description is qualified in its entirety by reference to the full text of
the Plan, a copy of which may be obtained without charge upon request to the
Company's Chief Financial Officer.
General. Under the Plan, the Board of Directors (the "Board") or a
Committee which may be appointed from time to time by the Board (the
"Committee") may award incentive or nonqualified stock options to officers and
employees of the Company (including its subsidiaries and affiliates), or to
directors of or consultants or advisors to the Company, whose performance, in
the judgment of the Board or Committee, can have a significant effect on the
success of the Company.
Shares Available. The Plan currently provides for the issuance of up to
4,000,000 shares of Common Stock of the Company, provided, however, that the
total number of shares of Stock reserved for options under this Plan shall be
subject to adjustment as provided in the Plan. In the event (i) any portion of
an outstanding stock option under the Plan for any reason expires, or (ii) any
portion of an outstanding stock option is terminated prior to the exercise of
such option, the shares of Stock allocable to such portion of the option shall
continue to be reserved for stock options awards under the Plan and may be
optioned hereunder.
Administration and Types of Options. The Plan is administered by the
Board or a Committee (referred to as the "Administrator"). The Administrator
shall have all of the powers vested in it under the provisions of the Plan,
including but not limited to exclusive authority to determine, in its sole
discretion, whether an incentive stock option or a nonqualified stock option,
the individuals to whom, and the time or times at which, options shall be
granted, the number of shares subject to each option, the option price, and
terms and conditions of each option. The Compensation Committee has delegated
the actual granting of options to the Company's Chief Executive Officer and its
Chief Financial Officer. The Administrator shall have full power and authority
to administer and interpret the Plan, to make and amend rules, regulations and
guidelines for administering the Plan, to prescribe the form and conditions of
8
the respective stock option agreements (which may vary from Participant to
Participant) evidencing each option and to make all other determinations
necessary or advisable for the administration of the Plan. The Administrator's
interpretation of the Plan, and all actions taken and determinations made by the
Administrator pursuant to the power vested in it hereunder, shall be conclusive
and binding on all parties concerned.
Options. Options granted under the Plan may be either "incentive" stock
options within the meaning of Section 422 of the Internal Revenue Code ("IRC")
or "nonqualified" stock options that do not qualify for special tax treatment
under the IRC. No incentive stock option may be granted with a per share
exercise price less than the fair market value of a share of the Company's
Common Stock on the date the option is granted. The closing sale price of a
share of the Company's Common Stock was $1.15 on November 3, 2003. The Committee
will determine the term of the option (which in case of an incentive stock
option, may not exceed ten years) and how it will become exercisable. An
incentive stock option may not be transferred by an optionee except by will or
the laws of descent and distribution. In certain circumstances, a nonqualified
option may be transferred to a member of an optionee's family, a trust for the
benefit of such immediate family members or a partnership in which such family
members are the only partners.
Amendment. The Board may from time to time, suspend or discontinue the
Plan or revise or amend it in any respect; provided, however, that no such
revision or amendment shall impair the terms and conditions of any stock option
that is outstanding on the date of such revision or amendment to the material
detriment of the Participant without the consent of the Participant.
Notwithstanding the foregoing, no such revision or amendment shall (i) increase
the number of shares subject to the Plan, (ii) change the designation of the
class of employees eligible to receive stock options, (iii) decrease the price
at which options may be granted, or (iv) increase the benefits accruing to
Participants under the Plan, without the approval of the shareholders of the
Company if such approval is required for compliance with the requirements of any
applicable law or regulation. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that regulation will
cause incentive stock options to fail to meet the requirements of Section 422 of
the Internal Revenue Code
Federal Income Tax Matters
Options. Incentive stock options granted under the Plan are intended to
qualify for favorable tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended. Under Section 422, an optionee recognizes no taxable
income when the option is granted. Further, the optionee generally will not
recognize any taxable income when the option is exercised if he or she has at
all times from the date of the option's grant until three months before the date
of exercise been an employee of the Company. The Company ordinarily is not
entitled to any income tax deduction upon the grant or exercise of an incentive
stock option. Certain other favorable tax consequences may be available to the
optionee if he or she does not dispose of the shares acquired upon the exercise
of an incentive stock option for a period of two years from the granting of the
option and one year from the receipt of the shares.
Under present law, an optionee will not realize any taxable income on
the date a nonqualified option is granted pursuant to the Plan. Upon exercise of
the option, however, the optionee must recognize, in the year of exercise,
ordinary income equal to the difference between the option price and the fair
market value of the Company's Common Stock on the date of exercise. Upon the
sale of the shares, any resulting gain or loss will be treated as capital gain
or loss. The Company will receive an income tax deduction in its fiscal year in
which nonqualified options are exercised equal to the amount of ordinary income
9
recognized by those optionees exercising options, and must withhold income and
other employment related taxes on such ordinary income.
New Plan Benefits
The following table provides information as of June 30, 2003 about the
Company's equity compensation plans.
- -------------------------------------------------------------------------------------------------------------------------
Number of securities remaining
Number of securities to be Weighted average available for future issuance under
issued upon exercise of exercise price of equity compensation plans (excluding
outstanding options, outstanding options, securities reflected in column (a))
warrants and rights warrants and rights
- -------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- -------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 3,401,126 $1.13 598,874
approved by security
holders
- -------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 3,316,781 $1.86 *
not approved by security
holders (1)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL 598,874
- -------------------------------------------------------------------------------------------------------------------------
(1) As of June 30, 2003, options to purchase an aggregate of 1,349,439 shares of
the Company's Common Stock and warrants to purchase an aggregate of 1,967,342
shares of the Company's Common Stock were outstanding. The options had an
average remaining contractual life of 3 years and a weighted average exercise
price of $1.69 per share. The Company had granted these options as non-qualified
options to employees outside of the option plan because the exercise price was
below fair market value. The warrants were issued to vendors and other service
providers. The exercise prices range from $0.15 to $7 per share. The last
warrants will expire in June 2008.
* The Company's Board has the authority to grant options and warrants to
purchase shares of the Company's Common Stock outside of any equity compensation
plans approved by security holders.
Vote Required; Recommendation
The increase of the amount of shares of Company Common Stock reserved
for issuance under the Plan by 500,000 shares, from 4,000,000 to 4,500,000,
requires the affirmative vote of the holders of the greater of (1) a majority of
the voting power of the shares represented in person or by proxy at the Annual
Meeting with authority to vote on such matter or (2) a majority of the voting
power of the minimum number of shares that would constitute a quorum for the
transaction of business at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE INCREASE OF THE AMOUNT
OF SHARES RESERVED FOR ISSUANCE UNDER THE 1996 STOCK OPTION PLAN.
11
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Delia MacIntosh, the wife of Justin MacIntosh, the President and Chief
Executive Officer of CorVu and one of the Company's Directors, has advanced
money to CorVu under term notes. As of the end of fiscal year 2003, CorVu owed
approximately $767,000 on these notes, including accrued interest of
approximately $81,000. The term notes bear interest at 8.5% per annum and are
due on demand at any time on or after September 30, 2004. The notes expire
December 31, 2006 and are secured by substantially all of the assets of the
Company.
In September 2002, the Company entered into a consulting agreement with
GlobalNet Venture Partners, L.L.C. (GlobalNet) to provide management advisory
services for a period of 30 months. In exchange for these services, the Company
paid GlobalNet a fee of $26,500 per month. In addition, GlobalNet was to earn
additional fees under the agreement as a result of its involvement in obtaining
financing and for introducing and developing strategic partnerships resulting in
revenue to the Company. As part of the services to be provided under that
agreement, John A. Bohn, a principal of GlobalNet, agreed to serve as the
Company's Chairman of the Board for a period of 24 months. On July 30, 2003, the
Company entered into a restructuring agreement with GlobalNet pursuant to which
GlobalNet ceased providing monthly consulting services to CorVu. As part of the
restructuring agreement, Mr. Bohn resigned from his positions as director and
Chairman of the Board effective July 31, 2003.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash compensation paid or to be paid
by the Company, as well as certain other compensation, paid or accrued, during
each of the Company's last three fiscal years to the Chief Executive Officer and
to the other executive officers whose total annual salary and bonus paid or
accrued during fiscal year 2003 exceeded $100,000.
Long Term Compensation
--------------------------------------
Awards Payouts
-------------------------- -----------
Restricted Securities
Annual Compensation Stock Underlying LTIP All Other
Name and Principal Fiscal ---------------------- Sales Awards Options Payouts Compensation
Position Year Salary ($) Bonus ($) Commissions ($) ($) (#) ($) ($)
- -------------------- ---------- ------------ -------- ------------- ------------ ----------- ------------- -------------
Justin MacIntosh(1) 2003 325,160 231,447 53,898 -- -- -- --
Chief Executive 2002 278,818 192,656 20,594 -- -- -- --
Officer 2001 276,800 -- -- -- 40,000 -- --
David C. Carlson 2003 137,500 24,415 -- -- 100,000 -- --
Chief Financial 2002 116,667 29,166 -- -- -- -- --
Officer 2001 115,000 13,500 -- -- 125,000 -- --
Alan M. Missroon, Jr. 2003 150,000 -- 103,130 -- 100,000 -- --
Senior VP of 2002 150,000 -- 63,587 -- -- -- --
Corporate Strategy 2001 150,000 20,000 -- -- 125,000 -- --
11
- --------------
(1) $100,000 of 2001 salary amounts was subsequently forgiven by Mr. MacIntosh
as part of his amended employment contract.
Option Grants During 2003 Fiscal Year
The following table provides information regarding stock options
granted during fiscal 2003 to the named executive officers in the Summary
Compensation Table. The Company has not granted any stock appreciation rights.
Percent of Total
Number of Shares Options Granted to Exercise or
Underlying Options Employees Base Price Per
---
Name Granted (1) in Fiscal Year Share Expiration Date
- ---- ------------------- -------------------- ------ ---------------
David C. Carlson 100,000 (1) 25.2% $0.42 11/10/08
Alan M. Missroon 100,000 (1) 25.2% $0.42 11/10/08
- ---------------
(1) Options are exercisable in installments of 20,000 shares on November
11, 2002, 40,000 shares on November 11, 2003 and 40,000 shares on
November 11, 2004.
Option Exercises During 2003 Fiscal Year and Fiscal Year-End Option Values
No options were exercised by the named executive officers during fiscal
2003. The following table provides information related to the number and value
of options held at June 30, 2003:
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at Fiscal Year End Money Options at Fiscal Year End(1)
---------------------------------------------- ------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ---------------------- -------------------- ------------------- --------------------
Justin MacIntosh 940,000 -0- $ 30,400 $ -0-
David C. Carlson (2) 392,500 80,000 $ 86,475 $ 43,200
Alan M. Missroon, Jr. 355,000 80,000 $ 81,750 $ 43,200
- ------------
(1) Value is calculated on the basis of the difference between the option
exercise price and $0.96, the average of the closing bid and ask price on June
30, 2003, as quoted on the OTC Bulletin Board.
(2) Mr. Carlson disclaims beneficial ownership of 160,695 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.
12
Employment Agreements
Effective July 1, 1999, CorVu entered into a three-year employment
agreement with Justin MacIntosh. Pursuant to the agreement, Mr. MacIntosh served
as the Company's Chairman, President and Chief Executive Officer; in September
2002, Mr. MacIntosh resigned from his position as Chairman. During the term of
the agreement, Mr. MacIntosh was to be paid annual base salaries of $330,000 for
the first employment year, $380,000 for the second and $420,000 for the third
employment year. He was also granted options to purchase a total of 675,000
shares of the Company's Common Stock at $1.33 per share, with 225,000 of these
options vesting at the beginning of each employment year. Subsequently, on
January 1, 2001, CorVu reached an agreement with Mr. MacIntosh on an amendment
to his employment agreement. Base compensation was reduced to $180,000 per year.
In addition, Mr. MacIntosh was to receive bonus compensation based on the
achievement of certain pre-determined audited annual earnings before interest
and taxes. As part of this amendment, Mr. MacIntosh agreed to forgive
approximately $242,000 of compensation owed as of December 31, 2000. Mr.
MacIntosh will participate in any retirement, welfare and other benefit program
the Company provides for its executive officers. Mr. MacIntosh will receive
payments in the amount of at least 9 monthly installments of his annual base
salary in effect at the time of termination if we terminate his employment
without cause. Mr. MacIntosh is subject to certain confidentiality and
non-compete provisions under the agreement. In addition, Mr. MacIntosh receives
an annual salary of approximately $99,000 for his duties as Managing Director of
CorVu Australasia Pty Ltd and , effective October 1, 2001, an override
commission equal to 2.5% of all license revenue for the United Kingdom/Europe
region for his duties as Sales Director in that region. On February 28, 2003,
CorVu reached an agreement with Mr. MacIntosh on a further amendment to his
employment agreement whereby in addition to Mr. MacIntosh's base salary, he
became eligible to receive bonus compensation based on the Company's achievement
of certain pre-determined audited annual earnings before income taxes for the
Company's fiscal year 2003 retroactive to July 1, 2002.
Effective July 15, 1996, CorVu entered into a one-year employment
agreement with David C. Carlson that was amended as of July 20, 1998. Pursuant
to the agreement Mr. Carlson serves as the Company's Chief Financial Officer.
The term of the agreement is automatically renewed for successive one-year
periods unless the agreement has been terminated earlier. Effective July 15,
2002, Mr. Carlson received an annual base salary in the amount of $137,500 and
up to an additional 33% quarterly bonus payments, based on attaining quarterly
business plan results. Mr. Carlson will participate in any retirement, welfare
and other benefit program the Company provides for its executive officers. Both
parties to the agreement can terminate the agreement without cause upon 60 days
prior written notice. Mr. Carlson is subject to certain confidentiality
provisions under the agreement.
Effective January 2, 1997, CorVu entered into a one-year employment
agreement with Alan M. Missroon, Jr. The agreement is automatically renewed for
successive one year terms unless terminated earlier. Mr. Missroon receives an
annual base salary of $150,000 and an override commission equal to 2.5% of all
license and services revenue for The Americas region. Mr. Missroon will
participate in any retirement, welfare and other benefit program the Company
provides for its executive officers. If we terminate his employment without
cause, Mr. Missroon will receive his base salary for a period of three months
after the date of termination, with an additional one month of base pay added
for each year of employment up to a maximum of six months. Mr. Missroon is
subject to certain confidentiality and non-compete provisions under the
agreement.
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than 10 percent
of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders ("Insiders") are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company, during the fiscal year ended June 30, 2003,
all Section 16(a) filing requirements applicable to Insiders were complied,
except that the grant of options to the Company's non-employee directors
(Messrs. Mandel and Kurdi) as part of their director's compensation was not
reported within the two-business day period required by Form 4.
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
(Proposal #4)
Virchow, Krause & Company, LLP has acted as the Company's independent
accounting firm for the fiscal year ended June 30, 2003, and has been selected
as the Company's independent accounting firm for the current fiscal year 2004.
Although it is not required to do so, the Audit Committee wishes to submit the
selection of Virchow Krause & Company, LLP, for shareholders' ratification at
the Annual Meeting. If the selection is not ratified, the Audit Committee will
reconsider the selection. A representative of Virchow Krause & Company, LLP, is
expected to be present at the meeting, will be given an opportunity to make a
statement regarding financial and accounting matters of the Company if so
desired, and will be available at the meeting to respond to appropriate
questions from the Company's shareholders.
Audit Fees. The aggregate fees billed by the Company's auditors for
professional services rendered in connection with the audit of the Company's
annual financial statements for fiscal 2003 and 2002 and reviews of the
financial statements included in the Company's Forms 10-KSB for fiscal 2003 were
$48,690 and for fiscal 2002 were $45,595.
Unrelated Audit Fees. For fiscal 2003 and 2002, CorVu's auditors did
not bill any fees for assurance and related services that are reasonably related
to the performance of the audit or review of CorVu's financial statements and
are not reported under "Audit Fees" above.
Tax Fees. The aggregate fees billed by CorVu's auditors for
professional services for tax compliance, tax advise and tax planning were
$25,205 and $16,475 for fiscal 2003 and 2002, respectively.
14
All Other Fees. The aggregate fees billed by CorVu's auditors for all
other non-audit services rendered to the Company, such as attending meetings and
other miscellaneous financial consulting, in fiscal 2003 and 2002, were $9,815
and $8,490, respectively.
The Audit Committee meets prior to filing of any Form 10-QSB or 10-KSB
to approve those filings. In addition, the Audit Committee meets to discuss
audit plans and anticipated fees for audit and tax work prior to the
commencement of that work. Approximately 90% of all fees paid to the Company's
independent auditors are pre-approved by the Audit Committee.
The Company's Audit Committee has considered whether the provision of
the above non-audit services is compatible with maintaining the auditors'
independence and has determined that such services have not adversely affected
the auditors' independence.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If
any other matter properly comes before the meeting, the appointees named in the
proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 2004 annual meeting of shareholders must be
received by the Company by July 13, 2004, to be considered for inclusion in the
Company's proxy statement and related proxy for the 2004 annual meeting.
Also, if a shareholder proposal intended to be presented at the 2004
annual meeting but not included in the Company's proxy statement and proxy is
received by the Company after September 24, 2004, then management named in the
Company's proxy form for the 2004 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 the Company's proxy materials.
15
FORM 10-KSB
A COPY OF THE COMPANY'S FORM 10-KSB ANNUAL REPORT FOR THE FISCAL YEAR
ENDED JUNE 30, 2003 (WITHOUT EXHIBITS) ACCOMPANIES THIS NOTICE OF MEETING AND
PROXY STATEMENT. NO PART OF THE ANNUAL REPORT IS INCORPORATED HEREIN AND NO PART
THEREOF IS TO BE CONSIDERED PROXY SOLICITING MATERIAL. THE COMPANY WILL FURNISH
TO ANY SHAREHOLDER, UPON WRITTEN REQUEST, ANY EXHIBIT DESCRIBED IN THE LIST
ACCOMPANYING THE FORM 10-KSB, UPON THE PAYMENT, IN ADVANCE, OF REASONABLE FEES
RELATED TO THE COMPANY'S FURNISHING SUCH EXHIBIT(S). ANY REQUEST SHOULD INCLUDE
A REPRESENTATION THAT THE SHAREHOLDER WAS THE BENEFICIAL OWNER OF SHARES OF
CORVU COMMON STOCK ON NOVEMBER 6, 2003, THE RECORD DATE FOR THE 2003 ANNUAL
MEETING, AND SHOULD BE DIRECTED TO DAVID C. CARLSON, CHIEF FINANCIAL OFFICER, AT
THE COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
Justin M. MacIntosh
Chief Executive Officer
Dated: November 10, 2003
Edina, Minnesota
16
CORVU CORPORATION
PROXY FOR ANNUAL MEETING
Of Shareholders To Be Held December 18, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints JUSTIN M. MACINTOSH and DAVID C.
CARLSON, and each of them, with full power of substitution, as Proxies to
represent and vote, as designated below, all shares of Common Stock of CorVu
Corporation registered in the name of the undersigned at the Annual Meeting of
Shareholders of the Company to be held at 3:00 p.m. (Minneapolis time), at the
offices of Fredrikson & Byron, on the 40th floor of the Pillsbury Center, 200
South Sixth Street, Minneapolis, Minnesota, on December 18, 2003, and at any
adjournment thereof, and the undersigned hereby revokes all proxies previously
given with respect to the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
CORVU CORPORATION 2003 ANNUAL MEETING
The Board of Directors recommends that you vote FOR each proposal below.
1. Set the number of directors at six (6) |_| FOR |_| AGAINST |_| ABSTAIN
2. Elect directors: 1 - David C. Carlson |_| FOR all nomi- |_| WITHHOLD AUTHORITY
2 - Ismail Kurdi nees listed to the to vote for all nominees
3 - Justin M. MacIntosh left (except as listed to the left.
4 - James L. Mandel
5 - Alan M. Missroon, Jr. specified below).
6 - Gary P. Smaby
[------------------------------------------]
(Instructions: To withhold authority to vote for any individual nominee,
write the name of the nominee(s) in the box provided to the right).
3. Increasing the number of shares authorized for issuance under the 1996 |_| FOR |_| AGAINST |_| ABSTAIN
Stock Option Plan by 500,000 shares to 4,500,000 of Common Stock..
4. Ratify selection of Virchow, Krause & Company, LLP as |_| FOR |_| AGAINST |_| ABSTAIN
independent auditors.
5. In their discretion, upon such other business as may properly come before
the Meeting or any adjournment thereof.
Check appropriate box.
Indicate changes below:
Address Change? |_| Name Change? |_| Date__________________________ NO. OF SHARES ___________
Attending Meeting? |_| [ ]
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Signature(s) in Box
PLEASE DATE AND SIGN ABOVE exactly as name appears at
the left indicating, where appropriate, official
position or representative capacity. For stock held
in joint tenancy, each joint tenant should sign.