unify_corresp.htm
UNIFY CORPORATION
1420 Rocky Ridge Drive, Suite 380
Roseville, CA 95834
August 10,
2010
VIA EDGAR
Securities and
Exchange Commission
100 F Street,
N.E.
Washington, DC
20549
Attention: |
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Ms. Jan Woo |
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Ms. Maryse Mills-Apenteng |
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Division of Corporation Finance |
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Re: |
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Unify Corporation |
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Preliminary Information Statement on Schedule 14C |
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Filed July 19, 2010 |
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File No. 001-11807 |
Ladies and
Gentlemen:
In connection with
the response to the comments of the staff of the Division of Corporation Finance
(the “Staff”) of the United States Securities and Exchange Commission (the
“Commission”), as set forth in the Staff’s letter dated July 26, 2010 with
respect to the Company’s Preliminary Information Statement on Schedule 14C (the
“Preliminary Schedule 14C”) which was filed with the Commission by the
registrant on July 19, 2010 prepared by our counsel, K&L Gates LLP, and
filed with the Commission on August 10, 2010 and attached hereto as Exhibit A, we acknowledge that:
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we are responsible
for the adequacy and accuracy of the disclosure in the filing;
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Staff comments or
changes to disclosure in response to Staff comments do not foreclose the
Commission from taking any action with respect to the filing; and
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we may not assert
Staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United
States.
Securities and
Exchange Commission
August 10, 2010
Page 2
Thank you for your
assistance. If you should have any questions, please call Jude M. Sullivan of
K&L Gates LLP, counsel to the Company, at (312) 781-7160.
Sincerely,
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UNIFY CORPORATION |
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By: |
/s/ Steven D. Bonham |
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Steven D. Bonham |
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Vice President and Chief Financial
Officer |
Exhibit A
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K&L Gates LLP 70 West Madison Street Suite 3100 Chicago, IL
60602-4207 |
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T 312.372.1121
www.klgates.com
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August 10, 2010
Jude M. Sullivan |
D 312.781.7160 |
F 312.345.9995 |
jude.sullivan@klgates.com |
VIA Telecopy (703)
813-6981
Securities and
Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Attention: |
|
Ms. Jan Woo |
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Ms. Maryse Mills-Apenteng |
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Division of Corporation Finance |
|
Re: |
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Unify Corporation |
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Preliminary Information Statement on Schedule 14C |
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Filed July 19, 2010 |
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File No. 001-11807 |
Ladies and
Gentlemen:
On behalf of Unify Corporation (the “Company”
or the “registrant”), we are pleased to submit this response to the comments of
the staff of the Division of Corporation Finance (the “Staff”) of the United
States Securities and Exchange Commission (the “Commission”), as set forth in
the Staff’s letter dated July 26, 2010 with respect to the Company’s Preliminary
Information Statement on Schedule 14C (the “Preliminary Schedule 14C”) which was
filed with the Commission by the registrant on July 19, 2010.
The information set forth herein has been
supplied by the registrant to respond to the Staff’s comments, and all of the
responses set forth herein to the Staff’s comments have been reviewed and
approved by the registrant. For convenience, each of the Staff’s consecutively
numbered comments is set forth herein in italics, followed by the registrant’s
response.
* * * *
*
Securities and
Exchange Commission
August 10, 2010
Page 2
General
1. Comment: You state that the purpose of the Information Statement is to notify
stockholders that you have received written consents approving (i) the issuance
of 1,771,429 shares of common stock that could be issued upon conversion of the
$6.2 million in Convertible Notes; and (ii) the issuance of shares of common
stock issuable upon exercise of the Hercules Warrant. Please tell us whether you
also received written consents to approve the issuance of the 2,085,714 shares
of common stock. It appears that the issuance of these shares is part of one
transaction that exceeds 20% of your total shares
outstanding.
Response: The
registrant did not receive written consents approving the acquisition of Daegis
or the issuance of the 2,085,714 shares of common stock. The only items covered
by the written consent were (i) the issuance of 1,771,429 shares of common stock
that could be issued upon conversion of the $6.2 million in Convertible Notes;
and (ii) the issuance of shares of common stock issuable upon exercise of the
Hercules Warrant.
By way of background, in the registrant’s
initial Notification of Listing of Additional Shares filed with The NASDAQ Stock
Market in relation to the acquisition of Daegis, the registrant took the
position that the acquisition did not require any stockholder action under
NASDAQ Listing Rule 5635 (or otherwise under NASDAQ rules) because (i) the
2,085,714 shares of common stock constituted less than twenty percent (20%) of
the outstanding shares of the registrant, and (ii) by their terms, the
Convertible Notes and Hercules Warrant were not convertible or exercisable,
respectively, until the registrant’s stockholders approved the issuance of
shares at such conversion or exercise. NASDAQ’s response to this position was
that the conversion price adjustments in the Convertible Notes and the
anti-dilution adjustments in the Hercules Warrant could result in potential
“alternative outcomes,” so under Listing Rule 5635 the potential alternative
outcomes under the Convertible Notes and the Hercules Warrant needed to be
either eliminated or approved by the registrant’s stockholders before any shares
(including the initial 2,085,714 shares) could be issued in the Daegis
acquisition. In order to address NASDAQ’s concern without delaying the timing of
the closing of the acquisition or the funding of the Hercules credit facility,
and with the acquiescence of NASDAQ, the registrant received written consents
related to (i) the issuance of 1,771,429 shares of common stock that could be
issued upon conversion of the $6.2 million in Convertible Notes; and (ii) the
issuance of shares of common stock issuable upon exercise of the Hercules
Warrant, but did not receive consents related to the acquisition of Daegis or
the issuance of the 2,085,714 shares of common stock issued directly to the
Daegis shareholders.
2. Comment: Please tell us whether you have received, or intend to seek,
shareholder approval of the proposed merger with Daegis. If you believe
shareholder approval is not required for the merger under Delaware law, please
provide us with your analysis in support of this position.
Securities and
Exchange Commission
August 10, 2010
Page 3
Response: The
registrant has not received and does not intend to seek stockholder approval of
the merger. The acquisition of Daegis was accomplished by merger of a
wholly-owned subsidiary of the registrant with and into Daegis, with Daegis
surviving as a wholly owned subsidiary of the registrant. Because the registrant is not a party
to the merger, and because the registrant had sufficient authorized but unissued
shares of common stock available to complete the merger and the conversion of
the Convertible Notes and exercise of the Hercules Warrant without amending its
certificate of incorporation to authorize additional shares, the acquisition of
Daegis may be completed without consent of the registrant’s stockholders.
Registrant’s sole stockholder approval requirement is the requirement of NASDAQ
Listing Rule 5635, and that issue was addressed, with NASDAQ’s approval, by
receipt of written consent of stockholders approving (i) the issuance of
1,771,429 shares of common stock that could be issued upon conversion of the
$6.2 million in Convertible Notes; and (ii) the issuance of shares of common
stock issuable upon exercise of the Hercules Warrant.
3. Comment: We note that your proposal to issue shares of common stock is related
to your proposed merger with Daegis. Please advise us why you have not provided
the information required by Item 14 of Schedule 14A (applicable to Schedule 14C
pursuant to Item 1 thereof), including the financial statements, in connection
with this acquisition. See Note A to Schedule 14A.
Response: The written
consent to which the Preliminary Schedule 14C relates addresses only the
issuance of shares of registrant common stock at conversion of the Convertible
Notes and exercise of the Hercules Warrant – it does not relate to the
acquisition of Daegis, the issuance of common stock in connection with this
acquisition, or the credit facility entered into by the registrant to provide
the cash portion of the purchase price for Daegis. The acquisition agreement and
the credit agreement were filed with and briefly described in the registrant’s
Form 8-K filed on July 1, 2010.
If the consent addressed a charter amendment
or other matter that would have delayed the closing of the acquisition until
twenty (20) days after distribution of the Schedule 14C the registrant would
have included the Item 14 disclosures. In this case - where the acquisition has
(with NASDAQ approval) already been completed and the Schedule 14C relates only
to the issuance of common stock upon conversion or exercise of certain
derivative securities issued as part of the acquisition consideration, the
registrant does not believe that the matters covered by the written consent
“involve” the merger to the extent that inclusion of the Item 14 information is
required under Note A to Schedule 14A.
4. Comment: We note your disclosure that stockholders holding approximately 55.35%
of your voting power have approved the proposals included in the information
statement. Please identify the stockholders from whom you received consents.
Describe the sequence of events through which the consents of these shareholders
were obtained and provide your analysis as to whether such activities constitute
a solicitation, as defined in Rule 14a-1(1).
Response:
Consenting Stockholders: The consenting stockholders were: AWM Investment Company, Inc. (Special
Situations Funds); Jurika Family Trust; Blueline Partners, LLC; Diker
Management, LLC; Sophrosyne Technology Fund; Wellington Trust Company, N.A.;
Emancipation Capital; and the
following officers and directors of the registrant individually: Todd E. Wille
(CEO and Director); Steven D. Bonham (CFO); Steven D. Whiteman (Director);
Timothy P. Bacci (Director); Richard M. Brooks (Director); Robert J. Majteles
(Director); Tery R. Larrew (Director).
Securities and
Exchange Commission
August 10, 2010
Page 4
Sequence of Events:
During calendar year 2009, the registrant’s management team and board of
directors, after consulting informally with the registrant’s larger shareholders
(including Special Situations, Jurika, Blueline, Diker Management, Sophrsyne,
Wellington Trust and Emancipation Capital), tasked St. Charles Capital with
identifying potential acquisition candidates for the registrant through which
the registrant could either expand its existing application development,
migration, archiving and data management solutions businesses or expand into new
lines of business that could take advantage of the registrant’s existing
archiving and data management capabilities. One of the potential acquisition
candidates identified was Daegis.
After Daegis was identified as a potential
acquisition target, the registrant’s management team and board of directors
discussed alternative means of financing the potential acquisition. These
discussions included:
- seeking potential sources of debt
financing (such as Hercules);
- considering a new registered
offering for cash to raise acquisition capital; and
- discussing with the registrant’s
large shareholders the potential private placement of either debt or equity
securities to all or a portion of these shareholders to finance the Daegis
acquisition.
After the registrant
received the proposed terms of the Hercules financing, the registrant’s board of
directors determined that the cash portion of the Daegis purchase price would be
funded through a debt financing.
On June 22, 2010, the registrant and outside counsel participated in an
informal discussion of the Daegis acquisition with representatives of the NASDAQ
Listing Qualifications group, and after this discussion the registrant filed its
Additional Share Notification and supporting documents with The NASDAQ Stock
Market. In a telephone conference on June 24, 2010, the registrant and its
outside counsel were advised that (i) in the view of the Listing Qualifications
group, the conversion price adjustment provisions of the Convertible Notes and
the anti-dilution adjustment provisions of the Hercules Warrant presented
alternative outcomes under NASDAQ Listing Rule 5635 and (ii) because of the
potential alternative outcomes, the registrant could not issue any shares in
connection with the acquisition of Daegis until the registrant’s stockholders
approved the issuances to which the alternative outcomes relate. The NASDAQ
Listing Qualifications group also agreed that if the registrant’s stockholders
approved the issuance of shares of common stock issuable at conversion of the
Convertible Notes and at exercise of the Hercules Warrant, the Rule 5635 issue
would be resolved and the acquisition could close without (x) stockholder approval of the acquisition or (y)
stockholder approval of the direct issuance of 2,085,714 shares of common stock
to the Daegis shareholders.
Securities and
Exchange Commission
August 10, 2010
Page 5
Based on this
discussion with Nasdaq, the registrant’s board of directors and management team
contacted the consenting stockholders (all of whom have direct relationships
with board members and/or were involved in discussions regarding the potential
Daegis acquisition and its funding) to inquire as to whether they believed it
would be in the best interest of the registrant to close the Hercules financing
and the Daegis acquisition immediately (by executing the stockholder consent to
the matters covered in the consent) or to delay the closing until the registrant
could schedule a formal stockholder meeting. The consenting stockholders were
all of the view that it was in the best interests of the registrant to close the
Daegis acquisition as expeditiously as possible and executed the written consent
in order to satisfy NASDAQ’s Rule 5635 concern.
Acknowledgments
In responding to the Staff’s comments
regarding the review of the Preliminary Schedule 14C, the registrant
acknowledges that:
- it is responsible for the adequacy
and accuracy of the disclosure in the filing;
- Staff comments or changes to
disclosure in response to Staff comments do not foreclose the Commission from
taking any action with respect to the filing; and
- the registrant may not assert
Staff comments as a defense in any proceeding initiated by the Commission or
any person under the federal securities laws of the United States.
This response does not include an amended
Preliminary Information Statement because we believe any amendment requires
further discussion and resolution of the Staff comments and our responses
thereto. Please contact the undersigned to discuss the Staff comments and this
response, or to set up a time to schedule a more formal conference call to
discuss these issues.
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Sincerely, |
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By: |
/s/ Jude M.
Sullivan |
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cc: |
Todd E. Wille, CEO, Unify Corporation |
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Steven D. Bonham, CFO, Unify
Corporation |