<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): OCTOBER 15, 1998
QUARTERDECK CORPORATION
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
DELAWARE 0-19207 95-4320650
<S> <C> <C>
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
</TABLE>
13160 MINDANAO WAY
MARINA DEL REY, CALIFORNIA 90292
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 310-309-3700
NONE
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
This report is qualified in its entirety by reference to the
documents described herein and attached as exhibits hereto, which are
incorporated herein by this reference.
On October 15, 1998, Quarterdeck Corporation ("Quarterdeck"
or the "Company"), Symantec Corporation ("Symantec") and Oak Acquisition
Corporation, a wholly owned subsidiary of Symantec, entered into a definitive
merger agreement (the "Agreement") whereby Symantec will commence a cash tender
offer for all outstanding shares of the Company at a price of $0.52 per share,
for an aggregate consideration of approximately $65 million, including the
assumption of outstanding debt. The Agreement further provides for a merger of
Oak Acquisition Corporation with and into the Company in which all remaining
outstanding shares of the Company will be converted into the right to receive
$0.52 per share. Upon the completion of the tender offer and the consummation of
the subsequent proposed merger, the Company would become a wholly owned
subsidiary of Symantec. The transaction is subject to certain conditions,
including the tender of a majority of the shares of the Company and the
expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. A copy of the Agreement and of the joint
press release announcing the Agreement are attached as Exhibits 99.1 and 99.2
respectively, and are incorporated herein by reference.
In connection with the Agreement, Quarterdeck and Symantec concurrently
entered into a license agreement (the "License Agreement") under which
Quarterdeck granted Symantec the non-exclusive right to, among other things,
distribute Quarterdeck's CleanSweep product. The right to distribute will not
commence unless and until Symantec consummates the tender offer or an event
occurs that would give rise to the Company's obligation to pay a break-up fee
under the Agreement. A copy of the License Agreement is attached as Exhibit 99.3
and is incorporated herein by reference.
In connection with the Agreement, the Company has amended its Rights
Agreement, dated as of August 11, 1992 (as amended, the "Rights Agreement"),
made by and between the Company and American Stock Transfer & Trust Company, as
Successor Rights Agent to the original rights agent. The amendment exempts the
acquisition of shares of the Company's common stock by Symantec under the terms
of the Agreement from the operation of the Company's Rights Plan. A copy of the
Amendment to the Rights Agreement is attached as Exhibit 99.4 and is
incorporated herein by reference.
The Company also announced that after the close of market on October
15, 1998, it received notification of Nasdaq's decision to delist the Company's
shares from the Nasdaq Stock Market effective October 15, 1998 as a result of
the failure of the Company to meet certain continued listing requirements. The
Company had previously announced that it had been notified by Nasdaq that it was
scheduled for delisting pending the outcome of a hearing that was held in August
before the Nasdaq Listing Qualifications Panel. Shares of the Company's common
stock have commenced trading on the OTC Bulletin Board. A copy of the press
release announcing the delisting is attached as Exhibit 99.5 and is incorporated
herein by reference.
ITEM 7. EXHIBITS.
The following exhibits are filed with this current report on
Form 8-K:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Agreement and Plan of Merger, dated as of October 15, 1998,
by and between Symantec Corporation, Oak Acquisition
Corporation and Quarterdeck Corporation
99.2 Press Release of Quarterdeck Corporation and Symantec
Corporation dated October 15, 1998
99.3 License Agreement between Symantec Corporation and
Quarterdeck Corporation, dated October 15, 1998.
99.4 Second Amendment to Rights Agreement, dated as of October
15, 1998, by and between Quarterdeck Corporation and
American Stock Transfer & Trust Company, as successor
rights agent, amending that certain Rights Agreement, dated
as of August 11, 1992, as amended, made by and between
Quarterdeck Corporation and Bank of America National Trust
and Savings Association.
99.5 Press Release of Quarterdeck Corporation dated October 16,
1998
</TABLE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
QUARTERDECK CORPORATION
Date: October 19, 1998 By: /s/ King R. Lee
-------------------------------
King R. Lee
Interim Chief Executive Officer
and President
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Agreement and Plan of Merger, dated as of October 15, 1998,
by and between Symantec Corporation, Oak Acquisition
Corporation and Quarterdeck Corporation
99.2 Press Release of Quarterdeck Corporation and Symantec
Corporation dated October 15, 1998
99.3 License Agreement between Symantec Corporation and
Quarterdeck Corporation, dated October 15, 1998.
99.4 Second Amendment to Rights Agreement, dated as of October
15, 1998, by and between Quarterdeck Corporation and
American Stock Transfer & Trust Company, as successor
rights agent, amending that certain Rights Agreement, dated
as of August 11, 1992, as amended, made by and between
Quarterdeck Corporation and Bank of America National Trust
and Savings Association.
99.5 Press Release of Quarterdeck Corporation dated October 16,
1998
</TABLE>
<PAGE> 1
EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of October 15, 1998 (the
"AGREEMENT DATE"), among SYMANTEC CORPORATION, a Delaware corporation
("PARENT"), OAK ACQUISITION CORPORATION, a Delaware corporation and a
wholly-owned Subsidiary of Parent ("SUB"), and QUARTERDECK CORPORATION, a
Delaware corporation (the "COMPANY"). Certain defined terms used in this
Agreement shall have the meaning ascribed to them in Section 9.3.
WHEREAS, in furtherance of the acquisition of all of the capital stock
of the Company by Parent on the terms and subject to the conditions set forth in
this Agreement, Parent proposes to cause Sub to make a tender offer (as it may
be amended from time to time as permitted under this Agreement, the "OFFER") to
purchase all the issued and outstanding shares of Common Stock, par value $0.001
per share, of the Company and all associated rights (the "COMPANY COMMON
STOCK"), at a price per share of the Company Common Stock of not less than $0.52
net to the seller in cash and without interest thereon (such price, as may
hereafter be increased, the "OFFER PRICE"), subject to reduction for any
applicable federal backup or other applicable withholding or stock transfer
taxes, upon the terms and subject to the conditions set forth in Exhibit A, and
the Board of Directors of the Company has approved the Offer and has resolved to
recommend that the Company's stockholders accept the Offer;
WHEREAS, Sub has been formed for the sole purpose of enabling Parent to
acquire all of the capital stock of the Company and Sub has not conducted any
operations that were not related to, and for the purpose of, such acquisition;
WHEREAS, concurrently with the execution of this Agreement, the Company
and Parent have entered into the Technology License Agreement in the form
attached hereto as Exhibit B (the "LICENSE AGREEMENT") pursuant to which the
Company has granted Parent a worldwide, perpetual, non-exclusive license
(including a license to create and distribute derivative works) to the Company's
software product "CleanSweep" and has deposited in escrow the source code to
such product, and the Parent has agreed to pay certain royalties to the Company;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the Offer and the merger of Sub into the Company, as set
forth below (the "MERGER"), upon the terms and subject to the conditions set
forth in this Agreement, whereby each issued and outstanding share of the
Company Common Stock, other than shares owned directly or indirectly by Parent
or the Company and Dissenting Shares (as defined in Section 3.1(e)), will be
converted into the right to receive the Offer Price;
WHEREAS, each of the directors and executive officers of the Company
have entered into Stockholder Agreements with the Parent in the form attached
hereto as Exhibit C (the "Stockholder Agreements") in which each such person has
agreed to tender all shares of the Company Common Stock held by such person
pursuant to the Offer and to vote in favor of the Merger and against any
competing proposals;
<PAGE> 2
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE OFFER
1.1 The Offer.
(a) Subject to the provisions of this Agreement, Sub shall, and
Parent shall cause Sub to, within five business days of the public announcement
(on the Agreement Date or the following day) of the execution of this Agreement,
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT")) the Offer. The obligation of Sub to, and
of Parent to cause Sub to, commence the Offer and accept for payment, and pay
for, any shares of the Company Common Stock tendered pursuant to the Offer shall
be subject to the conditions set forth in Exhibit A and to the terms and
conditions of this Agreement. Sub expressly reserves the right unilaterally to
waive any conditions to the Offer (other than (without the Company's prior
written consent) the Minimum Tender Condition, as defined in Exhibit A), to
increase the price per Share payable in the Offer, to extend the duration of the
Offer or to make any other changes in the terms and conditions of the Offer;
provided, however, that no such change may be made which decreases the price per
Share payable in the Offer, reduces the maximum number of Shares to be purchased
in the Offer, imposes conditions to the Offer in addition to those set forth in
Exhibit A, changes the form of consideration payable in the Offer or amends any
other material terms of the Offer in a manner materially adverse to the
Company's stockholders; and provided further that if, at the expiration of the
Offer (as the same may be extended pursuant to this proviso), any condition
(other than the Minimum Tender Condition) shall not have been satisfied which
could reasonably be expected to be satisfied within the next succeeding ten (10)
business days, then the Offer shall be extended an additional ten (10) business
days (but in no event beyond the date forty-five (45) business days after the
date on which the Offer shall have been first commenced). Subject to the terms
and conditions of this Agreement and the Offer (including, if the Offer is
extended or amended, the terms and conditions of any such extension or
amendment), Sub shall, and Parent shall cause Sub to, accept for payment, and
pay for, all shares of the Company Common Stock validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the expiration of
the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the Securities and Exchange Commission (the "SEC") a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer, which shall contain an
offer to purchase and a related letter of transmittal and summary advertisement
(such Schedule 14D-1 and the documents included therein pursuant to which the
Offer will be made, together with any supplements or amendments thereto, the
"OFFER DOCUMENTS"). Parent and Sub represent and agree that the Offer Documents
shall comply as to form in all material respects with the Exchange Act, and the
rules and
2
<PAGE> 3
regulations promulgated thereunder and that the Offer Documents, on the date
first published, sent or given to the Company's stockholders, shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or Sub with respect
to information supplied by the Company specifically for inclusion in the Offer
Documents. Each of Parent, Sub and the Company agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall become false or misleading in any material respect,
and each of Parent and Sub further agrees to take all steps necessary to amend
or supplement the Offer Documents and to cause the Offer Documents as so amended
or supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable Federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review the Offer Documents and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. Parent and Sub agree to provide the Company and its counsel any
comments which Parent, Sub or their respective counsel may receive from the SEC
or its staff with respect to the Offer Documents promptly after the receipt of
such comments including a copy of any such comments that are made in writing.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any shares of the
Company Common Stock that Sub becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted resolutions approving this Agreement and
each Company Ancillary Agreement, the Offer and the Merger, determining that the
terms of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's stockholders accept
the Offer and tender their shares pursuant to the Offer and approve and adopt
this Agreement and the Company Ancillary Agreements and the Merger. The Company
represents that its Board of Directors has received the opinion of Broadview
Associates LLC that the proposed consideration to be received by the holders of
shares of the Company Common Stock pursuant to the Offer and the Merger is fair
to such holders from a financial point of view, and a complete and correct
signed copy of such opinion will be promptly delivered by the Company to Parent.
The Company hereby consents to the inclusion in the Offer Documents of the
recommendation of the Company's Board of Directors described in the first
sentence of this Section 1.2(a) (subject to Section 5.2) and will use all
reasonable efforts to obtain the consent of Broadview Associates LLC to the
inclusion in the Schedule 14D-9 of a copy of the written opinion referred to in
the preceding sentence.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, together with all
3
<PAGE> 4
exhibits, amendments and supplements thereto as well as the Information
Statement required pursuant to Section 14(f) under the Exchange Act,
collectively the "SCHEDULE 14D-9") containing the recommendation described in
paragraph (a) (subject to Section 5.2) and shall mail the Schedule 14D-9 to the
stockholders of the Company. The Company agrees that the Schedule 14D-9 shall
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information supplied by Parent or Sub specifically for inclusion
in the Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so
amended or supplemented to be filed with the SEC and disseminated to the
Company's stockholders, in each case as and to the extent required by applicable
Federal securities laws. Parent and its counsel shall be given a reasonable
opportunity to review the Schedule 14D-9 and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to stockholders of
the Company. The Company agrees to provide Parent and its counsel any comments
which the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments
including a copy of any such comments that are made in writing.
(c) In connection with the Offer, the Company shall cause its
transfer agent promptly to furnish Sub with mailing labels containing the names
and addresses of the record holders of the Company Common Stock as of a record
date and of those persons becoming record holders subsequent to such date,
together with copies of all lists of stockholders, security position listings
and, to the extent reasonably requested, computer files and other information in
the Company's possession or control regarding the record and beneficial owners
of the Company Common Stock, and shall furnish to Sub such information and
assistance (including updated lists of stockholders, mailing labels, security
position listings and computer files) as Parent may reasonably request in
communicating the Offer to the Company's stockholders. The Company represents
that the information provided to Parent pursuant to this paragraph shall be true
and correct as of its respective dates.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 2.3). Following the Effective Time, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "SURVIVING CORPORATION") and shall
4
<PAGE> 5
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL. Notwithstanding the foregoing, Parent may elect at any time prior to
the Merger to merge the Company with and into Sub instead of merging Sub into
the Company as provided above; provided, however, that the Company shall not be
deemed to have breached any of its representations, warranties, covenants or
agreements set forth in this Agreement and the Company Ancillary Agreements
solely by reason of such election. In such event, the parties agree to execute
an appropriate amendment to this Agreement and the Company Ancillary Agreements
in order to reflect the foregoing. At the election of Parent, any direct or
indirect subsidiary of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties agree to execute an
appropriate amendment to this Agreement and the Company Ancillary Agreements in
order to reflect the foregoing.
2.2 Closing. The closing of the Merger will take place at 10:00 a.m. on
the second business day after satisfaction or waiver of the conditions set forth
in Article VII (the "CLOSING DATE"), at the Palo Alto, California offices of
Fenwick & West LLP, counsel to Parent and Sub, unless another date or place is
agreed to in writing by the parties hereto. Parent and the Company agree to use
all reasonable efforts to close the Merger as soon as practicable following
consummation of the Offer, subject to Section 7.1 hereof.
2.3 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable on or after the Closing Date, the parties shall execute and file
a certificate of merger or other appropriate documents (in any such case, the
"CERTIFICATE OF MERGER") in accordance with the relevant provisions of the DGCL
and shall make all other filings or recordings required under the DGCL. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Delaware Secretary of State, or at such other time as Sub and the
Company shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "EFFECTIVE
TIME").
2.4 Effects of the Merger. The Merger shall have the effects set forth
in Section 259 of the DGCL.
2.5 Certificate of Incorporation and By-laws. The certificate of
incorporation and by-laws of the Surviving Corporation shall be amended and
restated, effective as of the Effective Time, to be identical to the certificate
of incorporation and by-laws of Sub until thereafter changed or amended as
provided therein or by applicable law.
2.6 Directors. The directors of Sub immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
2.7 Officers. The officers of the Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
5
<PAGE> 6
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $0.001 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
share of the Company Common Stock that is owned by the Company or by any
Subsidiary of the Company and each share of the Company Common Stock that is
owned by Parent, Sub or any other Subsidiary of Parent shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(c) Conversion of the Company Common Stock. Subject to Section
3.1(e), each issued and outstanding share of the Company Common Stock (other
than shares to be canceled in accordance with Section 3.1(b)) shall be converted
into the right to receive from the Surviving Corporation in cash, without
interest, the Offer Price. As of the Effective Time, all such shares of the
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of the Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration as provided in this Section 3.1(c), without interest.
(d) Conversion of the Preferred Stock. Subject to Section 3.1(e),
each issued and outstanding share of any class or series of preferred stock
issued by the Company (such stock, collectively, the "COMPANY PREFERRED STOCK")
shall be converted into the right to receive from the Surviving Corporation in
cash, without interest, the product obtained by multiplying (i) the Offer Price
by (ii) the number of shares of the Company Common Stock into which such share
of the Company Preferred Stock is convertible at the Effective Time under the
Certificate of Incorporation of the Company. As of the Effective Time, all such
shares of the Company Preferred Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of the Company Preferred Stock
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration as provided in this Section 3.1(d), without interest.
(e) Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any shares of the Company Common Stock or
Company Preferred Stock outstanding immediately prior to the Effective Time and,
in the case of Company Common Stock, held by a holder who has not voted in favor
of the Merger or consented thereto in writing,
6
<PAGE> 7
and, in the case of either Company Common Stock or Company Preferred Stock, who
has demanded appraisal (a "DISSENTING STOCKHOLDER") for such shares of Company
Common Stock or Company Preferred Stock in accordance with DGCL ("DISSENTING
SHARES") shall, to the extent provided in the DGCL, not be converted into the
right to receive Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal, but instead shall become
the right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to the DGCL. If, after the Effective Time, such
Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to the DGCL, his
shares of the Company Common Stock or Company Preferred Stock, as the case may
be, shall be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Consideration. The Company shall give Parent (i)
prompt notice of any demands for appraisal of shares of the Company Common Stock
or Company Preferred Stock received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands. The Company shall not, without the prior written consent of
Parent, make any payment with respect to, or enter into a binding settlement
agreement or make a written offer to settle, any demand for appraisal of
Dissenting Shares.
(f) Treatment of Options. At the Effective Time, each outstanding
Company Option shall be terminated and canceled. The Company agrees to give
written notice to each holder of a Company Option as soon as practicable (and in
any event within five (5) business days of the commencement of the Offer)
stating that such Company Option will terminate at the Effective Time, and
permitting the exercise of such Company Option (including any portion not yet
otherwise exercisable pursuant to the terms of such Company Option) during the
thirty (30) day period preceding the Effective Time. At the Effective Time, all
holders of cancelled Company Options having an exercise price that is less than
the Offer Price, other than directors, or the Chief Executive Officer, of the
Company, shall be entitled to receive an amount in cash equal to product of (i)
the difference between the Offer Price and the exercise price of such option,
multiplied by the number of shares of Company Common Stock issuable upon
exercise of such Company Option immediately prior to the Effective Time.
(g) Treatment of Convertible Debt Securities. Prior to the Effective
Time, the Company shall have entered into an agreement with each holder of a 6%
Convertible Senior Subordinated Note issued by the Company under the Note
Agreement, dated as of March 1, 1996, between the Company and The Northwestern
Mutual Life Insurance Company (all such securities, collectively, the
"CONVERTIBLE NOTES") providing that, immediately after the Effective Time, the
Surviving Corporation shall be entitled to repay all then-outstanding
Convertible Notes in their original principal amount and accrued interest
without premium or penalty, and within five (5) business days after the
Effective Time, the Parent shall cause the Surviving Corporation to repay in
full the then-outstanding principal of, and accrued interest on, such
Convertible Notes (unless the holder or holders thereof shall otherwise agree in
writing).
7
<PAGE> 8
3.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company to act as paying agent (the "PAYING AGENT") for the
payment of the Merger Consideration upon surrender of certificates representing
the Company Common Stock or Preferred Stock.
(b) Parent To Provide Funds. Parent shall make available to the
Paying Agent on a timely basis, as and when needed after the Effective Time,
funds necessary to pay for the shares of the Company Common Stock and Preferred
Stock pursuant to Section 3.1.
(c) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock and Company Preferred
Stock (in each case, the "CERTIFICATES") whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 3.1, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger Consideration, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of the Company Common Stock or the Company Preferred
Stock, as the case may be, which is not registered in the transfer records of
the Company, payment may be made to a person other than the person in whose name
the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender thereof the
Merger Consideration, without interest (other than Certificates representing
Dissenting Shares).
(d) No Further Ownership Rights in the Company Capital Stock. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of the Company Common Stock and the Company
Preferred Stock theretofore represented by such Certificates. After the
Effective Time, there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of the Company Common
Stock and the Company Preferred Stock which were outstanding immediately prior
to the Effective Time. If,
8
<PAGE> 9
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be canceled and
exchanged as provided in this Article III.
(e) Failure to Timely Surrender; No Liability. Promptly following
the date that is six (6) months after the Effective Time, the Paying Agent shall
return to the Surviving Corporation all Merger Consideration and other cash,
property and instruments in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in exchange therefor the Merger Consideration (without
interest thereon). Notwithstanding the foregoing, the Surviving Corporation
shall be entitled to receive from time to time all interest or other amounts
earned with respect to any cash deposited with the Paying Agent as such amounts
accrue or become available. If any Certificates shall not have been surrendered
prior to such date on which any payment pursuant to this Article III would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 4.1(e)), the cash payment in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any person
previously entitled thereto. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(f) Withholding Taxes. The right of any person to receive any
payment or consideration pursuant to this Agreement and the Company Ancillary
Agreements and the transactions contemplated herein and therein shall be subject
to any applicable requirements with respect to the withholding of Taxes.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, the Paying Agent shall
pay to such holder the Merger Consideration required pursuant to Section 3.1, in
exchange for each such lost, stolen or destroyed Certificate, upon the making of
an affidavit of that fact by the holder thereof with such assurances (including,
without limitation, the posting of a bond in an amount reasonably sufficient to
indemnify the Parent against any claim that may be made against it on account of
such Certificate) as the Paying Agent and the Parent, in their discretion and as
a condition precedent to the payment of the Merger Consideration, may each
reasonably require of the holder of such lost, stolen or destroyed Certificate.
(h) Return of Merger Consideration for Dissenting Shares. Any
portion of the Merger Consideration made available to the Paying Agent pursuant
to Section 3.2(b) for shares of the Company Common Stock or the Company
Preferred Stock for which appraisal rights have been perfected shall be returned
to Parent, upon demand.
(i) Supplementary Action. If at any time after the Effective Time,
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either the Company or Sub, or
otherwise to carry out the provision of this Agreement and the
9
<PAGE> 10
Company Ancillary Agreements, the officers and directors of the Surviving
Corporation are hereby authorized and empowered, in the name of and on behalf of
the Company and Sub, to execute and deliver any and all things necessary or
proper to vest or perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement and the Company Ancillary Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub that the statements contained in this
Article IV are true and correct except as expressly set forth herein and in the
disclosure schedule delivered by the Company to Parent and Sub prior to the
execution and delivery of this Agreement (the "COMPANY DISCLOSURE SCHEDULE").
The Company Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the numbered and lettered sections and paragraphs contained in
this Article IV and the disclosure in any section or paragraph shall qualify
other sections and paragraphs in this Article IV only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other sections and paragraphs.
(a) Organization, Standing and Corporate Power. The Company and each
of its Subsidiaries (other than inactive Subsidiaries that do not own any
material assets, do not have any material liabilities and do not conduct any
material operations) is a corporation or partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or partnership power and authority to
carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed individually or in the aggregate would not have a Material Adverse
Effect on the Company. The Company has provided to Parent complete and correct
copies of its certificate of incorporation and by-laws, in each case as amended
to the Agreement Date.
(b) Subsidiaries. All Subsidiaries of the Company and their
respective jurisdictions of incorporation or organization (other than inactive
Subsidiaries that do not own any material assets and do not conduct any material
operations) are identified in Section 4.1(b) of the Company Disclosure Schedule.
The outstanding shares of capital stock of each Subsidiary have been validly
issued and are fully paid and nonassessable and (except as may be required by
foreign jurisdictions as set forth in the Company Disclosure Schedule) are owned
by the Company, by another Subsidiary of the Company or by the Company and
another such Subsidiary, free and clear of all pledges, claims, liens, charges,
title retentions, mortgages, security interests and encumbrances of any kind or
nature whatsoever, other than liens for taxes that are not yet due and payable
(collectively, "LIENS") other than Liens disclosed in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1997 (the "1997
10-K") or the Company Disclosure Schedule. Except for the capital stock of its
10
<PAGE> 11
Subsidiaries and investments identified in the Company Disclosure Schedule, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
(c) Capital Structure.
(i) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock, per value $0.001 per share, and
2,000,000 shares of Company Preferred Stock, par value $0.001 per share,
1,000,000 shares of which are designated Series A Junior Participating Preferred
Stock, 200,000 of which are designated Series B Convertible Preferred Stock and
40,000 of which are designated Series C Convertible Preferred Stock, of which
73,531,703 shares of Company Common Stock are issued and outstanding, 1,143
shares of Company Common Stock are held by the Company in its treasury, no
shares of the Company Series A Junior Participating Preferred Stock are issued
and outstanding, no shares of the Company's Series B Preferred Stock are issued
and outstanding, and 4,248 shares of the Company's Series C Convertible
Preferred Stock (including 1,379 shares issuable upon exercise of outstanding
warrants to purchase Series C Convertible Preferred Stock) are issued and
outstanding (subject to any changes in the outstanding Common Stock after the
Agreement Date solely as a result of the issuance of any shares of Company
Common Stock after the Agreement Date pursuant to the exercise of Company
Options, or the conversion of Convertible Notes or Company Preferred Stock, that
were outstanding on the Agreement Date). As of the Agreement Date, the
outstanding shares of Series C Convertible Preferred Stock, together with all
shares of Series C Convertible Preferred Stock issuable upon exercise of
outstanding warrants to purchase Series C Convertible Preferred Stock, are
convertible into 16,030,188 shares of Company Common Stock.
(ii) Not more than 7,335,227 shares of the Company Common Stock
are reserved for issuance upon exercise of outstanding Company Options
(1,380,686 of which are issuable pursuant to options having an exercise price of
less than $0.52), assuming a net, or "cashless," exercise of such options, and,
except as set forth in Section 4.1(c) of the Company Disclosure Schedule, there
are no options, warrants or rights to acquire any shares of the Company's
capital stock or any other securities of the Company outstanding other than such
Company Options, the Convertible Notes and the outstanding Series C Preferred
Stock. Section 4.1(c) of the Company Disclosure Schedule sets forth a true and
complete list of the outstanding Company Options as of the Agreement Date,
setting forth in each case the issue date of such Company Option, the number of
shares of Company Common Stock subject to such Company Option, the exercise
price and vesting schedule of such Company Option, and a description of any
acceleration of such option which will be triggered by the Offer, the execution
of this Agreement and the Company Ancillary Agreements or the Closing of the
Merger.
(iii) Except as set forth in this Section 4.1(c), at the close
of business on the Agreement Date, no shares of capital stock, stock
appreciation rights or other equity or voting securities of the Company were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of the Company are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to
11
<PAGE> 12
preemptive rights. Except for the $25,000,000 principal amount of Convertible
Notes which are presently convertible into 1,180,359 shares of Company Common
Stock at a conversion price of in excess of $20.00, there are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth in this Section 4.1(c), there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver or sell additional shares of capital stock or other equity or
voting securities of the Company or of any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking. As of the Agreement Date, there are no outstanding contractual
obligations (i) of the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock or other equity securities of
the Company or any of its Subsidiaries or (ii) of the Company to vote or to
dispose of any shares of the capital stock of any of its Subsidiaries.
(d) Authority. The Company has all the requisite corporate power and
authority to enter into this Agreement and the Company Ancillary Agreements and,
subject to, if required by law, approval of the Merger by an affirmative vote of
the holders of a majority of the outstanding shares of the Company Common Stock
(the "COMPANY STOCKHOLDER APPROVAL"), to consummate the transactions
contemplated by this Agreement and the Company Ancillary Agreements. The
execution and delivery of this Agreement and the Company Ancillary Agreements by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company (subject, in the case of the consummation of the
Merger, to the Company Stockholder Approval if such approval is required by the
DGCL). This Agreement and the Company Ancillary Agreements have each been duly
executed and delivered by the Company and constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms (except as enforcement hereof and thereof may be limited
by (i) bankruptcy, insolvency, reorganization, moratorium and similar laws, both
state and federal, affecting the enforcement of creditors' rights or remedies in
general as from time to time in effect or (ii) the exercise by courts of equity
powers).
(e) Noncontravention. Except as set forth in the Company Disclosure
Schedule, the execution and delivery of this Agreement and the Company Ancillary
Agreements do not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions of hereof and thereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under, give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, require the consent or approval of any party under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries under (i) the certificate of incorporation or by-laws of the
Company or the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any Company Material Agreement (as defined in Section 4.1(x))
or (iii) any governmental filings and other matters referred to in the
12
<PAGE> 13
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a Material Adverse Effect on
the Company, (y) materially impair the ability of the Company to perform its
obligations under this Agreement or any Company Ancillary Agreement or (z)
prevent the consummation of any of the transactions contemplated by this
Agreement and the Company Ancillary Agreements. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"GOVERNMENTAL ENTITY"), is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
and the Company Ancillary Agreements by the Company or the consummation by the
Company of the transactions contemplated hereby and thereby, except for (1) the
filing of a pre-merger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"), (2) the
filing with the SEC and the National Association of Securities Dealers, Inc. of
(A) the Schedule 14D-9, (B) a proxy statement relating to the Company
Stockholder Approval, if such approval is required by law (as amended or
supplemented from time to time, the "PROXY STATEMENT"), and (C) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
this Agreement and the Company Ancillary Agreements and the transactions
contemplated hereby and thereby, (3) the filing of the Certificate of Merger
with the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business and
(4) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as would not individually or in the aggregate (A) have
a Material Adverse Effect on the Company, (B) materially impair the ability of
the Company to perform its obligations under this Agreement and the Company
Ancillary Agreements or (C) prevent or have a material adverse effect on the
ability of the parties to consummate any of the transactions contemplated by
this Agreement and the Company Ancillary Agreements.
(f) SEC Documents; Financial Statements.
(i) The Company has filed in a timely manner all required
reports, schedules, forms, statements and other documents with the SEC since
October 1, 1997. All such required reports, schedules, forms, statements and
other documents filed by the Company with the SEC (including those that the
Company may file subsequent to the date hereof) are referred to herein as the
"SEC DOCUMENTS." As of their respective filing dates, the SEC Documents complied
with the requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT") or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a 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. The Company does not have knowledge of any material fact
or information concerning the Company and existing on the Agreement Date which
is required to be made generally available to the public and which has not been,
or will not prior to or concurrently with the commencement of the Offer be, made
generally available to the public.
13
<PAGE> 14
(ii) The financial statements of the Company included in the SEC
Documents, including those filed after the date hereof until the Closing, (A)
are derived from and in accordance with the books and records of the Company and
its Subsidiaries; (B) comply or will comply with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (C) have been prepared or will be prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, with respect to footnote disclosure) applied on a basis consistent
with prior periods (except as otherwise stated in the notes thereto) and (D)
fairly present or will fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). The quarterly financial statements
included in the SEC Documents are prepared on a basis consistent with those
employed in the audited financial statements of the Company included in the 1997
10-K.
(iii) Neither the Company nor any of its Subsidiaries has any
liabilities of any nature (whether accrued, absolute, contingent, determined,
determinable or otherwise and whether due or to become due) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its Subsidiaries taken as a
whole, except liabilities (i) provided for in the consolidated balance sheet
included in the Company's Form 10-Q for the quarter ended June 30, 1998 (the
"BALANCE SHEET"), (ii) disclosed in an SEC Document or the Disclosure Schedule,
or (iii) incurred since June 30, 1998 (the "BALANCE SHEET DATE") in the ordinary
course of business consistent with past practices. All reserves established by
the Company and set forth in or reflected in the Balance Sheet are reasonably
sufficient and were established in accordance with generally accepted accounting
principles consistently applied. At the Balance Sheet Date, there were no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975) which are not adequately provided for in the Balance Sheet as
required by said Statement No. 5. On the day preceding the Agreement Date, the
Company has (i) total consolidated cash of at least $7,167,000 and (ii)
indebtedness for borrowed money not in excess of $25,000,000 (in each case
determined on a consolidated basis in accordance with GAAP on a basis consistent
with the Balance Sheet).
(g) Information Supplied. None of (i) the information supplied or to
be supplied by the Company specifically for inclusion or incorporation by
reference in the Offer Documents, (ii) the Schedule 14D-9, (iii) the information
to be filed by the Company in connection with the offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "INFORMATION STATEMENT") or (iv) the
Proxy Statement, will, in the case of the Offer Documents, the Schedule 14D-9
and the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Stockholders Meeting (as defined in
Section 6.1(a)), 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. The Schedule
14
<PAGE> 15
14D-9, the Information Statement and the Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub in writing specifically for
inclusion or incorporation by reference therein.
(h) Absence of Certain Changes or Events. Except as disclosed in the
Company Disclosure Schedule or in the SEC Documents filed and publicly available
prior to the Agreement Date (the "FILED SEC DOCUMENTS"), since June 30, 1998 the
Company and its Subsidiaries have conducted their respective business only in
the ordinary course of business consistent with past practices, and up to the
Agreement Date, there has not been with respect to the Company or any of its
Subsidiaries any:
(i) Material Adverse Change;
(ii) amendment or change in the Certificate of Incorporation or
Bylaws of the Company;
(iii) purchase, license, sale, assignment or other disposition
or transfer (or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer), of any of the assets or
properties of the Company or any of its Subsidiaries (including any Intellectual
Property Rights), other than (a) non-exclusive licenses of any product or
products of the Company or any of its Subsidiaries made in the ordinary course
of the Company's business consistent with its past practices, (b) purchases and
sales of assets (other than Intellectual Property Rights (as defined in Section
4.1(i)) in the ordinary course of business consistent with its past practices,
and (c) purchases and sales of assets (other than Intellectual Property Rights)
having a purchase price of less than $100,000 on an individual basis and less
than $250,000 in aggregate;
(iv) damage, destruction or loss of any property or asset,
whether or not covered by insurance, having (or reasonably likely with the
passage of time to have) a Material Adverse Effect on the Company;
(v) declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, any shares of the capital
stock of the Company, any split, combination or recapitalization of the capital
stock of the Company or any direct or indirect redemption, purchase or other
acquisition of any shares of the capital stock of the Company or any change in
any rights, preferences, privileges or restrictions of any outstanding stock or
other security of the Company;
(vi) obligation or liability incurred by the Company or any of
its Subsidiaries to any of its officers or directors except for normal and
customary compensation and expense allowances payable to officers in the
ordinary course of the Company's business consistent with past practices;
15
<PAGE> 16
(vii) making by the Company or any of its Subsidiaries of any
loan, advance or capital contribution to, or any investment in, any officer or
director of the Company or, to the knowledge of the Company, any firm or
business enterprise in which any such person had a direct or indirect material
interest at the time of such loan, advance, capital contribution or investment;
(viii) material adverse development in any litigation described
in any Filed SEC Document or in any litigation or proceeding required to be
disclosed in Section 4.1(j) of the Company Disclosure Schedule;
(ix) material increase in the volume or dollar amount of returns
(or claims therefor) of any of the Company's products by distributors,
customers, value added resellers, original equipment manufacturers or other
resellers of such product, or any claims for price adjustments by any such
parties with respect to any products of the Company that have been delivered to
such party, or any reason to believe that any such increases or claims are
likely;
(x) material change in the manner in which, or terms on which,
the Company or any of its Subsidiaries extends discounts or credits or rights to
return products or receive price adjustments to customers or distributors or
otherwise deals with its customers or distributors;
(xi) change in accounting methods, principles or practices by
the Company (other than as required by GAAP) or any material revaluation of any
of the assets of the Company or any of its Subsidiaries, or any material
write-offs of accounts receivable or write-downs of the value of capitalized
inventory not in the ordinary course of business consistent with past practices;
or
(xii) license, transfer or grant of a right under any Company IP
Rights (as defined in Section 4.1(i), other than non-exclusive licenses granted
in the ordinary course of the Company's business consistent with its past
practices.
(i) Intellectual Property.
(i) The Company and its Subsidiaries own, or have the valid
right or license to use, possess, sell or license, all Intellectual Property
Rights (as defined below) necessary or required for the conduct of the business
of the Company and its Subsidiaries as presently conducted, and such rights to
use, possess, sell or license are sufficient for such conduct of such business,
except as disclosed in Section 4.1(i) of the Company Disclosure Schedule (except
that as to patents and trademarks, such representation is made only to the
Company's knowledge). As used herein: (i) the term "INTELLECTUAL PROPERTY
RIGHTS" means, collectively, all worldwide intellectual property rights,
including, without limitation, patents, patent applications, patent rights,
trademark rights, service mark rights, trademark and service mark registrations
and applications therefor, trade dress rights, trade name rights, copyrights,
copyright registrations and applications therefor, mask work rights, mask work
registrations and applications therefor, franchises, licenses and trade secrets,
(ii) the term "COMPANY IP RIGHTS" means the Intellectual Property Rights that
the Company or any of its Subsidiaries own or have
16
<PAGE> 17
the right or license to use, possess, sell or license and (iii) the term
"COMPANY INTELLECTUAL PROPERTY" means all trademarks, service marks, inventions,
trade secrets, know how, customer lists, supplier lists, proprietary processes
and formulae, software source and object code, algorithms, architectures,
structures, screen displays, layouts, inventions, development tools, designs,
blueprints, specifications, technical drawings (or similar information in
electronic format), and all documentation and media constituting, describing or
relating to the above, including without limitation manuals, programmers' notes,
memoranda and records used or owned by the Company.
(ii) The execution, delivery and performance of this Agreement
and the Company Ancillary Agreements and the consummation of the Offer, the
Merger and the other transactions contemplated hereby and thereby will not
constitute a material breach of or default under any instrument, contract,
license or other agreement governing any Company IP Right or Company
Intellectual Property, to which the Company or any of its Subsidiaries is a
party that (i) is material to the Company or (ii) that materially affects any
material Company IP Rights or Company Intellectual Property that is
incorporated, embodied or used in the Company's ProComm or CleanSweep products,
or licensing or assigning such rights to the Company or any of its Subsidiaries
(collectively, the "COMPANY IP RIGHTS AGREEMENTS"), will not cause the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any material Company IP Right or materially impair the right of
the Company or any of its Subsidiaries or the Surviving Corporation to use,
possess, sell or license any material Company IP Right or portion thereof. There
are no royalties, honoraria, fees or other payments payable by the Company to
any third person by reason of the ownership, use, possession, license, sale or
disposition of any Company IP Rights or Company Intellectual Property by the
Company or any of its Subsidiaries other than (i) as disclosed in Section 4.1(i)
of the Company Disclosure Schedule and (ii) pursuant to agreements that did not
require the payment in the fiscal year ended September 30, 1998 of more than
$100,000 in the aggregate, and are not expected to require the payment in the
fiscal year ended September 30, 1999 of more than $150,000 in the aggregate by
the Company and its Subsidiaries.
(iii) Neither the development, manufacture, marketing, license,
sale, furnishing or intended use of either the Company's ProComm or CleanSweep
product or, to the Company's knowledge, any other product or service currently
licensed, marketed, utilized, sold, provided or furnished by the Company or any
of its Subsidiaries or currently under development by the Company or any of its
Subsidiaries, violates any license or agreement between the Company (or any
Subsidiary thereof) and any third party or, to the Company's knowledge,
infringes any patent or trademark, or infringes or misappropriates any other
Intellectual Property Right of any other party, except where the same could not
reasonably be expected to have a Material Adverse Effect. Except as expressly
disclosed in the Filed SEC Documents, there is, to the Company, no pending or,
threatened claim or litigation contesting the validity, ownership or right of
the Company or any of its Subsidiaries to use, possess, sell, license or dispose
of any Company IP Right or Company Intellectual Property or any other
Intellectual Property Rights used or embodied in either the Company's ProComm
product or its CleanSweep product, or to the Company's knowledge, any other
product marketed or licensed, or under development, by the Company or any of its
Subsidiaries, nor, to the knowledge of the
17
<PAGE> 18
Company, is there any basis for any such claim, nor has the Company received any
notice asserting that any Company IP Right or Company Intellectual Property or
the proposed use, sale, license or disposition thereof, or of any other
Intellectual Property Rights used or embodied in any product marketed or
licensed, or under development, by the Company, conflicts or will conflict with
the rights of any other party, nor, to the knowledge of the Company, is there
any basis for any such assertion, in each case except where the same would not
reasonably be expected to have a Material Adverse Effect.
(iv) The Company has taken such measures as are customary and
standard in its industry to protect, preserve and maintain all the Company's
(and its Subsidiaries') proprietary rights in the Company IP Rights and Company
Intellectual Property. All officers, employees and consultants of the Company
and any of its Subsidiaries who had access to proprietary information and who
either (a) were first employed or engaged by the Company within the two year
period ending on the Agreement Date or (b) were or are involved in the
development of any aspect of the Company's CleanSweep or ProComm product, or any
Company IP Rights or Company Intellectual Property that is incorporated,
embodied or used therein, have executed and delivered to the Company or its
predecessor in interest, or a Subsidiary of the Company, an agreement regarding
the protection of such proprietary information and the assignment of inventions
to the Company; and copies of the current standard form of such agreements have
been provided to Parent's counsel. The Company or its predecessor in interest,
or a Subsidiary of the Company, has secured valid written assignments or
licenses from all consultants, employees and entities who the Company directly
hired or engaged and were involved in, or who contributed to, the creation or
development of any Company IP Rights, Company Intellectual Property or other
Intellectual Property Rights that are incorporated, embodied or used in the
Company's CleanSweep or ProComm products or any other material Company IP Rights
or any Intellectual Property Rights, of the rights to such contributions that
the Company does not already own by operation of law. No current or former
employee, officer, director, consultant or independent contractor of the Company
or any Subsidiary of the Company has any right, license, claim or interest
whatsoever in or with respect to any material Company IP Rights or Company
Intellectual Property.
(v) Section 4.1(i) of the Company Disclosure Schedule contains a
complete list of all worldwide registrations of any patents with any
governmental authority, and all patent applications, made or held by, or
assigned to, the Company or any of its Subsidiaries. To the Company's knowledge,
all patents and all material registered trademarks, service marks and copyrights
held by the Company and its Subsidiaries are valid, enforceable and subsisting.
(vi) Section 4.1(i) of the Company Disclosure Schedule contains
a complete list of: (A) all licenses, sublicenses and other agreements as to
which the Company or any of its Subsidiaries is a party and pursuant to which
any person is authorized to use any Company IP Rights or Company Intellectual
Property (other than non-exclusive licenses granted in the ordinary course of
business) and (B) all licenses, sublicenses and other agreements to which the
Company or any of its Subsidiaries is a party and pursuant to which the Company
or any of its Subsidiaries is authorized to use any third party Intellectual
Property Rights, including software ("THIRD PARTY IP RIGHTS") which would be
infringed by, embody or are incorporated in,
18
<PAGE> 19
or form a part of, any product or service sold, licensed, distributed or
marketed by the Company or any of its Subsidiaries, in each case other than (a)
non-exclusive licenses in the ordinary course of business and (b) licenses of
Third Party IP Rights to the Company or any of its Subsidiaries that are not
material to any product currently being marketed or under development by the
Company.
(vii) To the Company's knowledge, there is no material
unauthorized use, disclosure, infringement or misappropriation of any Company IP
Rights or any Intellectual Property Right of the Company or any of its
Subsidiaries by any third party, including any employee or former employee of
the Company or any of its Subsidiaries.
(viii) Neither the Company nor any of its Subsidiaries, nor, to
the knowledge of the Company, any other party acting on its or their behalf, has
disclosed or delivered to any party, or permitted the disclosure or delivery to
any escrow agent or other party, of any Company Source Code (as defined below).
No event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or would reasonably be expected to,
result in the disclosure or delivery to any party of any Company Source Code
owned by the Company or, to the Company's knowledge, licensed to the Company
except, in the case of such licensed Company Source Code, where such disclosure
or delivery would not result in a breach of an obligation by the Company.
Section 4.1(i) of the Company Disclosure Schedule identifies each contract,
agreement and instrument (written or oral) pursuant to which the Company or any
of its Subsidiaries has deposited, or is or may be required to deposit, with an
escrow holder or any other party, any Company Source Code and further describes
whether the execution of this Agreement or the Company Ancillary Agreements, the
consummation of the Merger or any of the other transactions contemplated hereby
or thereby, in and of themselves, would reasonably be expected to result in the
release from escrow of any Company Source Code. As used in this Section 4.1(i),
"COMPANY SOURCE CODE" means any source code, or any material proprietary or
confidential portion of any source code, or any material algorithm contained in
any source code, of any product marketed or licensed, or under development, by
the Company or any of its Subsidiaries.
(ix) To the Company's knowledge, the Company's ProComm and
CleanSweep products (as currently being distributed by the Company and its
Subsidiaries) do not contain any defects or "bugs" that could reasonably be
expected to lead to data loss or system failure on the part of end-users that
use such product on the hardware and operating system platforms specified in the
product specifications and documentation provided to end-users with such
products.
(x) The Company's CleanSweep and ProComm products (as currently
being distributed by the Company and its subsidiaries) are each Year 2000
Compliant (as defined below), except as disclosed in Section 4.1(i) of the
Company Disclosure Letter. "YEAR 2000 COMPLIANT" means, as applied to such
products, that: (a) all dates received by the program require a century
indicator and all dates produced by the program include a century indicator, (b)
date calculations involving either a single century or multiple centuries
neither cause an abnormal ending nor generate incorrect results, (c) when
sorting by date, all records sort in
19
<PAGE> 20
accurate sequence, (d) the year 2000 is considered a leap year, (e) hard-coding
in century fields and date fields has been removed, and (f) no date fields are
used for other than date purposes. To the Company's knowledge, the Company and
its Subsidiaries will not be required to incur any material expense to make any
one or more of its products, or any software owned by it or licensed to it (and
used by it), Year 2000 Complaint, or any material liability as a result of the
failure of any of its products to be Year 2000 Compliant, except where the same
could not reasonably be expected to have a Material Adverse Effect, and except
for any expense incurred to correct items disclosed in Section 4.1(i) of the
Company Disclosure Schedule.
(j) Litigation. Except as disclosed in the Filed SEC Documents or
the Company Disclosure Schedule, there is no suit, action, arbitration,
proceeding, claim or investigation pending or, to the Company's knowledge,
threatened against the Company or any of its Subsidiaries (or any of their
respective officers, directors or employees in their capacity as such), that
individually or in the aggregate, if determined or resolved adversely to the
Company or such Subsidiary in accordance with the plaintiff's (or other adverse
party's) demand, could reasonably be expected to (i) have a Material Adverse
Effect on the Company, (ii) challenge or seek to enjoin or seek damages with
respect to the Company's entering into and performing this Agreement and the
Company Ancillary Agreements or impair the ability of the Company to perform its
obligations under this Agreement and the Company Ancillary Agreements or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement and the Company Ancillary Agreements, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its Subsidiaries having, or which is
reasonably likely to have, any effect referred to in the foregoing clause (i),
(ii) or (iii) above. A suit or action which has been filed with a state or local
court outside of California but which has not been served upon an employee or
director of the Company shall be deemed to have been threatened but not pending
for purposes of this paragraph.
(k) Employees, ERISA and Other Compliance.
(i) A list of all employees and officers of the Company and its
Subsidiaries as of the Agreement Date and their then-current compensation and
title and/or job description is set forth in Section 4.1(k) of the Company
Disclosure Schedule. The Company and its Subsidiaries do not have any employment
contracts currently in effect that by their terms, may not be terminated at will
without severance or other payment obligations in excess of those disclosed in
Section 4.1(k) of the Company Disclosure Schedule (other than oral agreements,
or agreements with persons that are not employed in the United States if both
(i) such agreement is not with an officer of the Company and (ii) the Company
does not have knowledge of such agreement). To the Company's knowledge, the
Company and its Subsidiaries do not utilize the services of a material number of
persons who should be but are not properly classified as employees for the
purposes of federal and applicable state tax laws, laws applicable to employee
benefits and other applicable law.
(ii) Neither the Company nor any of its Subsidiaries: (i) now
is, nor has ever been, subject to a union organizing effort; (ii) is subject to
any collective bargaining
20
<PAGE> 21
agreement with respect to any of its employees; (iii) is subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization or (iv) has any current labor disputes. There are no
controversies pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened, between the Company or any of its Subsidiaries (on the
one hand) and any of their respective employees (on the other hand), which
controversies have or could reasonably be expected to have a Material Adverse
Effect. To the Company's knowledge, all of the employees of the Company and its
Subsidiaries that are employed by the Company or any of its Subsidiaries in the
United States of America are legally permitted to be employed by the Company or
its Subsidiaries in the United States of America.
(iii) Section 4.1(k) of the Company Disclosure Schedule lists each
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); and each plan or arrangement
providing for insurance coverage (including any self-insured arrangements),
workers' benefits, vacation benefits, severance benefits, disability benefits,
death benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits for employees, consultants
or directors which is entered into, maintained or contributed to by the Company
or any of its Subsidiaries and covers any employee or former employee of the
Company or any of its Subsidiaries. Such contracts, plans and arrangements as
are described in this Section 4.1(k) are hereinafter collectively referred to as
"COMPANY BENEFIT ARRANGEMENTS." Each Company Benefit Arrangement has been
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Company Benefit Arrangement, and each such Company
Benefit Arrangement that is an "employee pension benefit plan" as defined in
Section 3(2) of ERISA which is intended to qualify under Section 401(a) of the
Code has received a favorable determination letter that such plan satisfied the
requirements of the Internal Revenue Code of 1986, as amended (the "CODE") (a
copy of which letter(s), if any, have been provided to Parent and its counsel).
The Company has provided to Parent or its counsel a correct copy and description
of each Company Benefit Arrangement. The Company has never been a participant in
any "prohibited transaction", within the meaning of Section 406 of ERISA with
respect to any employee pension benefit plan (as defined in Section 3(2) of
ERISA) which the Company sponsors as employer or in which Company participates
as an employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA), or
which could result in an excise tax under the Code. All contributions due from
the Company or any of its Subsidiaries as of the Balance Sheet Date with respect
to any of the Company Benefit Arrangements have been made or have been accrued
on the Balance Sheet and no further contributions will be due or will have
accrued thereunder as of the Closing Date other than amounts consistent with the
amounts paid or accrued in the periods reflected on the Company Financial
Statements.
(iv) The group health plans (as defined in Section 4980B(g) of the
Code) that benefit employees of the Company and its Subsidiaries are in
compliance, in all material respects, with the continuation coverage
requirements of Section 4980B of the Code as such requirements affect the
Company and its employees. As of the Closing Date, there will be
21
<PAGE> 22
no material outstanding, uncorrected violations under the Consolidation Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), with respect to any of
the Company Benefit Arrangements, covered employees, or qualified beneficiaries
that could result in a Material Adverse Effect on the Company, or in a Material
Adverse Effect on Parent after the Effective Time.
(v) No benefit payable or which may become payable by the Company
pursuant to any Company Benefit Arrangement or as a result of or arising under
this Agreement, the Company Ancillary Agreements or the Agreement of Merger will
constitute an "excess parachute payment" (as defined in Section 280G(b)(1) of
the Code) which is subject to the imposition of an excise tax under Section 4999
of the Code or which would not be deductible by reason of Section 280G of the
Code. Except as disclosed in Section 4.1(k) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is a party to any: (a) agreement
with any executive officer or other key employee thereof, (i) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company in the nature of the Offer or
the Merger or any of the other transactions contemplated by this Agreement or
any Company Ancillary Agreement or (ii) providing severance benefits or other
benefits after the termination of employment of such employee regardless of the
reason for such termination of employment; or (b) agreement or plan, including,
without limitation, any stock option plan, stock appreciation rights plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence or
consummation of the Offer or the Merger or any of the other transactions
contemplated by this Agreement or any Company Ancillary Agreement, or the value
of any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement or any Company Ancillary Agreement.
All outstanding Company Options will terminate at the Effective Time.
(vi) To the Company's knowledge, no employee, consultant or
independent contractor of the Company or any Subsidiary: (a) is in material
violation of any term or covenant of any employment contract, patent disclosure
agreement, noncompetition agreement or any other contract or agreement with, or
obligation to, any other party by virtue of such employee's, consultant's, or
independent contractor's being employed by, or performing services for, the
Company or such Subsidiary or using trade secrets or proprietary information of
others, or that would be likely to have a Material Adverse Effect; or (b) has
developed any technology, software or other copyrightable, patentable, or
otherwise proprietary work for the Company or any of its Subsidiaries that is
subject to any agreement under which such employee, consultant or independent
contractor has assigned or otherwise granted to any third party any rights
(including without limitation Intellectual Property Rights) in such technology,
software or other copyrightable, patentable or otherwise proprietary work. To
the Company's knowledge, the employment of any employee of the Company or any of
its Subsidiaries does not subject the Company or any such Subsidiary to any
liability to any third party.
(vii) Except as set forth in Section 4.1(l) of the Company
Disclosure Schedule, (a) the Company and its Subsidiaries are operating and have
operated the business in compliance in all material respects with all applicable
laws relating to the business respecting
22
<PAGE> 23
employment and employment practices; (b) no Governmental Entity has given the
Company or any of its Subsidiaries written notice regarding any pending charge,
audit, claim, complaint, investigation or review by or before any Governmental
Entity concerning or requesting in writing to explain any possible conflicts
with or violations of any such laws by the Company or such Subsidiary, nor, to
the knowledge of the Company, is any such investigation threatened or pending;
(c) the Company and its Subsidiaries are not delinquent in payments to any
employees for any material wages, salaries, commissions, bonuses or other
compensation for any services performed by them relating to the business or
amounts required to be reimbursed to such employees.
(m) Taxes.
(i) The Company and each of its Subsidiaries have timely filed
all federal, state, local and foreign tax returns required to be filed by it,
has timely paid all taxes required to be paid by it in respect of all periods
for which returns have been filed, has established an adequate accrual or
reserve for the payment of all taxes payable in respect of the periods
subsequent to the periods covered by the most recent applicable tax returns
(which accrual or reserve as of the Balance Sheet Date is fully reflected on the
Balance Sheet), has made all necessary estimated tax payments, and has no
material liability for taxes in excess of the amount so paid or accruals or
reserves so established. Except as disclosed in Section 4.1(m) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is
delinquent in the payment of any tax or in the filing of any tax returns, and no
deficiencies for any tax of the Company or any of its Subsidiaries have been
claimed or assessed (or, to the Company's knowledge, threatened or proposed)
against the Company or any of its Subsidiaries or any of their respective
officers, employees or agents in their capacity as such that remain outstanding.
Except as disclosed in Section 4.1(m) of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has received any notification
that any material issues have been raised by (and are currently pending before)
the Internal Revenue Service or any other taxing authority (including but not
limited to any sales or use tax authority) regarding the Company or any of its
Subsidiaries, and no tax return of the Company or any of its Subsidiaries has
been audited for any taxable period beginning on or after October 1, 1993 by the
Internal Revenue Service or any foreign, state or local taxing agency or
authority other than audits which have been completed and resolved without the
assessment of any material taxes or penalties against the Company or any of its
Subsidiaries. Except as disclosed in Section 4.1(m) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
agreement waiving or extending any statute of limitations with respect to any
taxes. No Liens have been filed against any assets of the Company or any of its
Subsidiaries with regard to any tax. The Company and its Subsidiaries have each
withheld with respect to each of its employees and independent contractors all
taxes, including but not limited to federal and state income taxes, FICA,
Medicare, FUTA and other taxes, required to be withheld, and paid (or will pay)
such withheld amounts to the appropriate tax authority within the time
prescribed by law.
(ii) The Company has made available to Parent true and complete
copies of all tax returns, including foreign, federal and state income or
franchise tax returns and
23
<PAGE> 24
state sales and use tax returns with respect to the Company or any of its
Subsidiaries or any of their respective assets or operations, for all periods
since (or beginning on) October 1, 1994.
(iii) For the purposes of this Section 4.1(m), (a) the terms
"TAX" and "TAXES" include all federal, state, local and foreign income,
alternative or add-on minimum income, gains, franchise, excise, property,
property transfer, sales, use, employment, license, payroll, ad valorem,
payroll, documentary, stamp, occupation, recording, value added or transfer
taxes, and other governmental charges, fees, customs duties, levies or
assessments of a nature similar to taxes (whether payable directly or by
withholding) and, with respect to any such taxes, any estimated tax, interest,
fines and penalties or additions to tax and interest on such fines, penalties
and additions to tax and (b) the term "RETURNS" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed with connection with, any taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(n) Compliance with Laws. The Company and each of its Subsidiaries
has complied, and is and will be in compliance, in all material respects with
all applicable federal, state, local or foreign laws, ordinances, regulations,
and rules, and all orders, writs, injunctions, awards, judgments, and decrees
applicable to it or to its assets, properties, and business. The Company and
each of its Subsidiaries of the Company holds all permits, licenses and
approvals from, and has made all filings with, government agencies and
authorities, that are necessary in connection with its present business
("GOVERNMENTAL PERMITS") and all such Governmental Permits are in full force and
effect, except where the failure to hold any such Governmental Permit or make
such filings has not had, and could not reasonably be expected to have, a
Material Adverse Effect on the Company. The Company is in compliance in all
material respects with the terms of such Governmental Permits. Neither the
Company nor any of its Subsidiaries has received any notice or other
communication from any Governmental Entity regarding (a) any actual or possible
violation of law or any Governmental Permit or any failure to comply with any
term or requirement of any Governmental Permit, or any investigation or audit
(or proposed investigation or audit relating thereto) or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Permit. Neither the Company nor any of its
Subsidiaries, nor any director, officer, agent or employee of the Company and/or
any of its Subsidiaries, has, for or on behalf of the Company or any of its
Subsidiaries, (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
(o) Certain Transactions and Agreements. Except as disclosed in
Section 4.1(o) of the Company Disclosure Schedule, to the knowledge of the
Company, (i) none of the officers or directors of the Company, nor any member of
their immediate families, is directly or indirectly a party to, or otherwise
interested in, any contract or informal arrangement with the Company or any of
its Subsidiaries that is or would be required to be disclosed in an annual
report on Form 10-K or in a proxy statement relating to a meeting of
stockholders at
24
<PAGE> 25
which directors were to be elected, except for normal compensation for services
as an officer or director thereof that have been disclosed in the 1997 10-K (or
the proxy statement incorporated by reference therein) and except for option
agreements related to Company Options granted to such persons and disclosed in
Section 4.1(c) of the Company Disclosure Schedule; and (ii) none of such
officers or directors or family members has any interest in any property, real
or personal, tangible or intangible (including but not limited to any the
Company IP Rights or any other Intellectual Property Rights) that is used in or
that pertains to the business of the Company, except for the normal rights of a
stockholder.
(p) Books and Records.
(i) The books, records and accounts of the Company and its
Subsidiaries (a) are in all material respects true, complete and correct, (b)
have been maintained in accordance with good business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and dispositions of the assets of the
Company and its Subsidiaries, and (d) accurately and fairly reflect the basis
for the Company Financial Statements.
(ii) The Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (a)
transactions are executed in accordance with management's general or specific
authorization; (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements and
(ii) to maintain accountability for assets and (c) the amount recorded for
assets on the books and records of the Company is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
(q) Insurance. During the two years prior to the Agreement Date, the
Company and its Subsidiaries have maintained, and now maintain, policies of
insurance and bonds of the type and in amounts that the Company reasonably
believes to be adequate for its business. Except as disclosed in Section 4.1(q)
of the Company Disclosure Schedule, there is no material claim pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and its
Subsidiaries are otherwise in compliance in all material respects with the terms
of such policies and bonds.
(r) Environmental Matters.
(i) The Company and its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws (as defined below),
which compliance includes the possession by the Company and its Subsidiaries of
all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. As of
the Agreement Date, neither the Company nor any of its Subsidiaries has received
any notice or other communication (in writing or otherwise) from a Governmental
Entity that alleges that the Company or any of its Subsidiaries is not in
25
<PAGE> 26
compliance with any Environmental Law. To the Company's Knowledge, no Materials
of Environmental Concern (as defined below) are located in, on or about, or in
the subsoil or groundwater of, any property owned, leased, occupied, operated,
or controlled by the Company or any Subsidiary or any improvements situated
thereon in violation of any Environmental Law.
(ii) For purposes of this Section 4.1(r): (i) "ENVIRONMENTAL
LAW" means any federal, state, local or foreign statute, law regulation or other
legal requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "MATERIAL OF ENVIRONMENTAL CONCERN" means
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health, reproduction or the
environment.
(s) Accounts Receivable. As of the Balance Sheet Date, and in each
case subject to any reserves set forth in the Balance Sheet, the accounts
receivable shown on the Balance Sheet represented bona fide claims against
debtors for sales and other charges, and were not subject to any right of offset
or to any discount except for normal cash and immaterial trade discounts.
(t) Stockholder Agreements. All of the directors and executive
officers of the Company have agreed in writing to tender their shares of Company
Common Stock in the Offer pursuant to Stockholder Agreements in the form
attached hereto as Exhibit C.
(u) State Takeover Statutes. The Board of Directors of the Company
has approved this Agreement, the Company Ancillary Agreements, the Offer and the
Merger and such approval is sufficient to render the provisions of Section 203
of the DGCL inapplicable to the Offer, the Merger and the transactions
contemplated by this Agreement and the Company Ancillary Agreements. To the
Company's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to this Agreement, the Company Ancillary
Agreements, the Offer or the Merger, or any of the transactions contemplated by
this Agreement and the Company Ancillary Agreements. The Company is not subject
to any provision of the California General Corporation Law by operation of
Section 2115 thereof.
(v) Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, nor to any fee that is
contingent on closing of the transactions contemplated hereby or that is based
on a percentage of the transaction value, in connection with the transactions
contemplated by this Agreement and the Company Ancillary Agreements based upon
arrangements made by or on behalf of the Company, other than the fees payable to
Broadview Associates LLC and Software Syndicate, Inc. upon the Effective Time,
the amounts
26
<PAGE> 27
of which are set forth on Section 4.1(v) of the Company Disclosure Schedule,
which will be paid by the Company.
(w) Opinion of Financial Advisor. The Company has received the
opinion of Broadview Associates LLC, dated the Agreement Date, to the effect
that, as of such date, the consideration to be received in the Offer and the
Merger by the Company's stockholders is fair to the Company's stockholders from
a financial point of view, and a signed copy of such opinion will promptly be
delivered to Parent.
(x) Contracts and Commitments. Section 4.1(x) of the Company
Disclosure Schedule sets forth a list of each of the following written or oral
contracts, agreements, commitments or other instruments to which the Company or
any of its Subsidiaries is a party or to which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound:
(i) any distributor, OEM (Original Equipment Manufacturer), VAR
(Value Added Reseller), sales representative or similar agreement under which
any third party is authorized to sell, sublicense, lease, distribute, market or
take orders for, any product or technology of the Company or any of its
Subsidiaries or marketed by the Company or any of its Subsidiaries, in each case
that is material or of which the Company has knowledge (other than non-exclusive
agreements that are terminable by the Company on not more than thirty (30) days
notice without cost or liability);
(ii) any joint venture or partnership contract or agreement or
other agreement which has involved or is reasonably expected to involve a
sharing of profits or losses with any other party;
(iii) any agreement of which the Company has knowledge with any
independent contractor or consultant involved in the development of the
Company's CleanSweep product or ProComm product (or any material feature or
component thereof or any material Company IP Rights or Company Intellectual
Property incorporated, embodied or used therein), by or for the Company or any
of its Subsidiaries;
(iv) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a leasing transaction of a
type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(v) any lease or other agreement under which the Company or any
of its Subsidiaries is lessee of or holds or operates any items of tangible
personal property or real property owned by any third party and under which
payments to such third party exceed $100,000 per annum;
(vi) any agreement or arrangement for the sale or disposition of
any assets, properties, services or rights by the Company or any of its
Subsidiaries having a value in
27
<PAGE> 28
excess of $100,000, other than in the ordinary course of the Company's business
consistent with its past practices;
(vii) any agreement that restricts or prohibits the Company or
any of its Subsidiaries from freely engaging in any aspect of its business, from
participating or competing in any line of business or that restricts the Company
or any of its Subsidiaries from engaging in any business in any geographic area
or grants any exclusive licenses to any Intellectual Property Rights or which,
to the Company's knowledge, grants most favored customer pricing;
(viii) any Company IP Rights Agreements (as defined in Section
4.1(i));
(ix) any agreement relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any shares of capital
stock or other securities of the Company or any options, warrants or other
rights to purchase or otherwise acquire any such shares of stock, other
securities or options, warrants or other rights therefor;
(x) any employment or severance agreement required to be
disclosed in Section 4.1(k) of the Company Disclosure Schedule, and any
agreement or plan, including, without limitation, any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of the Offer, the Merger, the execution of License Agreement or
any of the other transactions contemplated by this Agreement or any Company
Ancillary Agreement or the value of any of the benefits of which will be
calculated on the basis of the Offer, the Merger, the License Agreement or any
of the other transactions contemplated by this Agreement;
(xi) any contract with or commitment to any labor union; or
(xii) any contract or arrangement under which the Company or any
of its Subsidiaries has made any commitment to develop any new technology, to
deliver any software currently under development or to enhance or customize any
software (other than agreements to deliver updates or upgrades on terms and
conditions described in Section 4.1(x) of the Company Disclosure Schedule);
A copy of each agreement or document required by this Section to be listed on
Section 4.1(x) of the Company Disclosure Schedule (such agreements and documents
being hereinafter collectively referred to as the "COMPANY MATERIAL AGREEMENTS")
has been provided to Parent.
(y) No Default. Except as disclosed in Section 4.1(y) of the
Company Disclosure Schedule, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) does or will,
or would reasonably be expected to, (i) represent, constitute or result in a
violation or breach by the Company or any of its Subsidiaries or, to the
Company's knowledge, any other party, of any of the provisions of any Company
Material Agreement, or (ii) give any third party (A) the right to declare a
default or exercise any remedy under any Company Material Agreement, (B) the
right to a rebate, chargeback, damages or penalty, or material increase in rent
or other payments, under any Company Material Agreement,
28
<PAGE> 29
(C) the right to accelerate the maturity or performance of any obligation of the
Company or any of its Subsidiaries under any Company Material Agreement, or (D)
the right to cancel, terminate or modify any Company Material Agreement, except
in each such case for violations, breaches, defaults, acceleration rights,
termination rights and other rights that in the aggregate have not had, and
could not reasonably be expected to have, a Material Adverse Effect on the
Company. Since September 30, 1997 and prior to the Agreement Date, neither the
Company nor any Subsidiary of the Company has received any communication or
notice from any other party to any Company Material Agreement regarding any
actual or claimed material violation or material breach of, or default under,
such Company Material Agreement or communication or notice by such party of
problems of a material nature with the Company's products, services or
performance under such Company Material Agreement or its desire to amend,
relinquish, terminate or not renew any such Company Material Agreement, in each
case which would have a Material Adverse Effect.
(z) Title to Properties.
(i) The Company and each of its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all its material
properties and assets except for such as are no longer used or useful in the
conduct of its businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive covenants and
similar encumbrances or impediments that individually or in the aggregate would
not materially interfere with its ability to conduct its business as currently
conducted. All such material properties and assets, other than properties and
assets in which the Company or any of its Subsidiaries has leasehold interests,
are free and clear of all Liens, except for (a) Liens that individually or in
the aggregate would not materially interfere with the ability of the Company and
its Subsidiaries to conduct business as currently conducted and (b) Liens
disclosed in the Company SEC Documents or the Company Disclosure Schedule.
(ii) The Company and each of its Subsidiaries has complied in
all material respects with the terms of all material leases to which it is a
party and under which it is in occupancy, and all such leases are in full force
and effect. The Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all such material leases.
(aa) Board Approval. The Board of Directors of the Company has
unanimously and without qualification (i) authorized and approved this
Agreement, all Company Ancillary Agreements, the Offer and the Merger, (ii)
recommended that the Company's stockholders tender their shares in the Offer,
and (iii) determined that such agreements, the Offer and the Merger are fair to
and in the best interests of the Company's stockholders and are on terms that
are fair to such stockholders.
(ab) No Existing Discussions. Neither the Company, nor any director
or officer of the Company, nor any other person acting on behalf of the Company,
is engaged, directly or indirectly, in any discussions or negotiations with any
third party relating to any takeover proposal (as defined in Section 5.2).
29
<PAGE> 30
(ac) Preferred Share Rights Agreement. The Company's Board of
Directors has duly authorized and approved an amendment as provided in this
Section 4.1(ac) (THE "RIGHTS AMENDMENT") to that certain Preferred Share Rights
Agreement between the Company and American Stock Transfer & Trust (the "RIGHTS
AGENT") dated as of August 11, 1992, as amended (the "RIGHTS AGREEMENT") to: (i)
exclude Parent and Sub and their respective Affiliates and Associates (as such
terms are defined under the Rights Agreement) from the definition of "Acquiring
Person" in the Rights Agreement, with respect to the beneficial ownership of
shares of the Company Common Stock which Parent, Sub and/or any of their
respective Affiliates and Associates have hereby obtained the right to acquire,
or will acquire, as a result of the transactions contemplated by this Agreement
or any of the Company Ancillary Agreements, including but not limited to the
Offer or the Merger, or any other agreement or transaction involving Parent, Sub
and/or any of their respective Affiliates and Associates that has been approved
by the Board of Directors of the Company prior to such acquisition, (ii) provide
that no Distribution Date (as such term is defined under the Rights Agreement)
shall result from the Offer, including without limitation, in connection with
any announcement of the Offer, the commencement of the Offer, the acquisition by
Parent of any amount of Company Common Stock or Company Preferred Stock pursuant
to the Offer, or the consummation of the Merger, and (iii) provide for the
expiration of the Rights Agreement upon the Effective Time. The Rights Amendment
has been duly executed and delivered by the Company and the Rights Agent, and is
in full force and effect. The Company's Board of Directors has determined that
the terms of the Offer and of the Merger as well as the transactions
contemplated hereby and thereby meets the criteria specified in the Rights
Agreement for a Permitted Offer (as such term is defined under the Rights
Agreement).
4.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent and
Sub is duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed individually
or in the aggregate would not have a material adverse effect on Parent.
(b) Authority. Parent and Sub have all the requisite corporate power
and authority to enter into this Agreement and the Parent Ancillary Agreements
and to consummate the transactions contemplated by this Agreement and the Parent
Ancillary Agreements. The execution and delivery of this Agreement and the
Parent Ancillary Agreements by the Parent and Sub and the consummation by the
Parent and Sub of the transactions contemplated by hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Parent and
Sub. This Agreement and the Parent Ancillary Agreements have been duly executed
and delivered by the Parent and the Sub and constitute valid and binding
obligations of the Parent and the Sub (as applicable), enforceable against the
Parent and the Sub (as applicable) in
30
<PAGE> 31
accordance with their terms (except as enforcement hereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and similar laws, both state
and federal, affecting the enforcement of creditors' rights or remedies in
general as from time to time in effect or (ii) the exercise by courts of equity
powers).
(c) Noncontravention. The execution and delivery of this Agreement
and the Parent Ancillary Agreements do not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the provisions
of hereof and thereof will not, conflict with or result in a violation of or
default (with or without notice or lapse of time or both) under (i) the
certificate of incorporation or by-laws of Parent or Sub, (ii) any instrument,
agreement or contract to which Parent or Sub is a party or by which either of
them is bound that has been or is required to have been, filed by the Parent
with the SEC as an exhibit (whether incorporated by reference of filed
separately) to the Parent's annual report on Form 10-K for its fiscal year ended
April 3, 1998 or in any other document filed by Parent with the SEC under the
1993 Act or the Exchange Act after April 3, 1998 and prior to the Agreement Date
(the "PARENT SEC DOCUMENTS"), or (iii) any governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Sub or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a Material Adverse Effect on
Parent or Sub, (y) materially impair the ability of Parent or Sub to perform its
obligations under this Agreement and the Parent Ancillary Agreements or (z)
prevent the consummation of any of the transactions contemplated by this
Agreement and the Parent Ancillary Agreements. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or Sub in connection with its
execution and delivery of this Agreement and the Parent Ancillary Agreements or
the consummation of the transactions contemplated by hereby and thereby, except
for (1) the filing of a pre-merger notification and report form by the Company
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"),
(2) the filing with the SEC and the National Association of Securities Dealers,
Inc. of (A) the Schedule 14D-1 and (B) such reports under Section 13(a) and
16(a) of the Exchange Act of the Exchange Act as may be required in connection
with this Agreement and the Parent Ancillary Agreements and the transactions
contemplated hereby and thereby and (3) the filing of the Certificate of Merger
with the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business.
(d) Information Supplied. None of (i) the Offer Documents or (ii)
the information supplied or to be supplied by Parent or Sub specifically for
inclusion or incorporation by reference in the Schedule 14D-9, the Information
Statement or the Proxy Statement will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the date the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or
31
<PAGE> 32
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Offer Documents will comply as to
form in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder, except that no representation or
warranty is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the Company
in writing specifically for inclusion or incorporation by reference therein.
(e) Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement and the Parent Ancillary Agreements based upon arrangements made
by or on behalf of Parent or Sub other than Donaldson, Lufkin & Jenrette
Incorporated, the fees and expenses of which will be paid by Parent.
(f) Financing. Parent has funds sufficient to consummate the Offer
and the Merger on the terms contemplated by this Agreement and the Company
Ancillary Agreements, and at the expiration of the Offer and the Effective Time,
Parent and Sub will have available funds sufficient to acquire to perform their
respective obligations under this Agreement and the Parent Ancillary Agreements,
including without limitation payment in full for all shares of Company Common
Stock validly tendered in the Offer and all shares of Company Common Stock and
Company Preferred Stock outstanding at the Effective Time.
(g) Litigation. As of the Agreement Date, there is no suit, action,
arbitration, proceeding, claim or investigation pending or threatened against
the Parent or Sub, nor is their any reasonable basis therefor, that individually
or in the aggregate could reasonably be expected to (i) except as disclosed in
the Parent SEC Documents, have a Material Adverse Effect on the Parent, (ii)
challenge or seek to enjoin or seek damages with respect to the Parent's or
Sub's entering into and performing this Agreement and the Parent Ancillary
Agreements or impair the ability of the Parent or Sub to perform their
respective obligations under this Agreement and the Parent Ancillary Agreements
or (iii) prevent the consummation of any of the transactions contemplated by
this Agreement and the Company Ancillary Agreements, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Parent or Sub having, or which is reasonably likely to
have, any effect referred to in the foregoing clause (i), (ii) or (iii) above.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Business. The Company shall, and shall cause its
Subsidiaries to, carry on its and their respective businesses in the ordinary
course of business consistent with its past practices and use all reasonable
efforts to preserve intact their current business organizations, to keep
available the services of their current officers and employees and to preserve
relationships with distributors, licensors, contractors, customers, suppliers,
lenders, employees and others having business dealings with any of them. Without
limiting the generality of the foregoing, except as may be expressly permitted
by other provisions of this
32
<PAGE> 33
Agreement and the Company Ancillary Agreements, or as may be agreed to in
writing by Parent, the Company shall not, and shall not permit any of its
Subsidiaries to:
(i) either (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned Subsidiary of
the Company to its parent, in the case of less than wholly owned Subsidiaries,
as required by agreements existing on the Agreement Date, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its or of any Subsidiary's capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities (other
than (x) the issuance of the Company Common Stock upon the exercise of Company
Options and warrants outstanding on the Agreement Date and disclosed in the
Company Disclosure Schedule, in accordance with their present terms), and (y)
the issuance of Company Common Stock upon the conversion of Convertible Notes or
Series C Preferred Stock);
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (y) any assets that
individually or in the aggregate are material to the Company and its
Subsidiaries taken as a whole;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
(including Intellectual Property Rights), except for (a) sales, leases, or
encumbrances of immaterial or obsolete properties or assets, and non-exclusive
licenses of Intellectual Property Rights, in each case in the ordinary course of
business consistent with past practices and (b) sales or dispositions of assets,
or subleases of facilities, specifically described in Section 5.1 of the Company
Disclosure Schedule.
(vi) transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to any Company IP
Rights or Company Intellectual Property, other than non-exclusive licenses in
the ordinary course of business, or assign or grant any exclusive license to any
Intellectual Property Rights;
(vii) incur any indebtedness for borrowed money or draw down on
any credit facility or arrangement or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or
33
<PAGE> 34
any of its Subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the economic
effect of any of the foregoing (other than borrowings of not more than $2.0
million in any calendar month (not to exceed $3.0 million in the aggregate
outstanding at any time after the Agreement Date);
(viii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or Subsidiary of the
Company;
(ix) make or agree to make any new capital expenditure or
expenditures which individually is in excess of $100,000 or which in the
aggregate are in excess of $200,000;
(x) make any material Tax election or settle or compromise any
income or franchise Tax liability;
(xi) pay, discharge, settle or satisfy any claims (accrued,
asserted or unasserted, contingent or otherwise) for an amount greater than
$100,000, except discharges or payments of claims existing on the Balance Sheet
Date in an amount not in excess of the amount shown or reserved therefor on the
Balance Sheet;
(xii) enter into, amend, modify or terminate any agreement,
transaction, commitment or other right or obligation that, if in effect on the
Agreement Date, would be a Company Material Agreement, or that by its terms
requires or contemplates a current and/or future financial commitment, expense
or obligation on the part of the Company or any of its Subsidiaries involving in
excess of $100,000, other than in the ordinary course of business consistent
with past practices, or waive, release or assign any material rights or claims
thereunder, other than discounting of accounts receivable to obtain prompt
collection;
(xiii) terminate or lay off any material numbers of employees,
other than for cause consistent with past practice and Company policy;
(xiv) adopt or amend in any material respect any employee
benefit or employee stock purchase or employee option plan, or enter into any
employment contract, pay any special bonus or special remuneration to any
director or employee, or increase the salaries, wage rates or other compensation
payable to its officers or employees other than in the ordinary course of
business consistent with past practices, or commit or agree to do any of the
foregoing, or otherwise alter or commit to any compensation, benefit or
severance or change of control arrangement for or with any officer or employee
of the Company except compensation increases, severance payments or bonuses
specifically disclosed in Section 5.1 of the Company Disclosure Schedule.
(xv) grant or provide any severance or termination pay to any
officer or employee except payments that (x) are in amounts consistent with the
Company's policies and past practices and are made pursuant to written plans or
agreements outstanding, or policies existing, on the Agreement Date that are
disclosed in the Company Disclosure Schedule, or
34
<PAGE> 35
(y) are made pursuant to arrangements, and in amounts, specifically disclosed in
Section 5.1 of the Company Disclosure Schedule;
(xvi) voluntarily take actions to liquidate or dissolve the
Company or to take advantage of bankruptcy or other creditor protection laws;
(xvii) institute any litigation or other proceeding other than
in connection with a breach of this Agreement or any of the Parent Ancillary
Agreements by Parent or Sub;
(xviii) take any action that would cause or constitute a breach
of any representation or warranty made by the Company in this Agreement or any
of the Company Ancillary Agreements; or
(xix) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.2 No Solicitation.
(a) From and after the Agreement Date until the earlier of the
Effective Time or termination of this Agreement in accordance with its terms,
the Company shall not, nor shall it permit any of its Subsidiaries to, nor shall
it authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or any of
its Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any takeover proposal (as defined below), (ii) participate in
any discussions or negotiations with, or furnish any information to, or provide
access to the Company's properties, books and records to, or enter into any
agreement with to, any person or group (other than Parent) in connection with
any takeover proposal or (iii) take any other action to facilitate any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any takeover proposal. The Company, its Subsidiaries, officers,
directors, employees, investment bankers, attorneys and other agents and
representatives will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted previously regarding a
takeover proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer or director of the Company or any investment banker or attorney of the
Company or any of its Subsidiaries, shall be deemed to be a breach of this
Section 5.2(a) by the Company. In addition, subject to the other provisions of
this Section 5.2(a), from and after the Agreement Date until the earlier of the
Effective Time and termination of this Agreement pursuant to its terms, the
Company and its Subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any takeover proposal
made by any person, entity or group (other than Parent); provided, however, that
nothing herein shall prohibit the Company's Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act. For
purposes of this Agreement, "TAKEOVER PROPOSAL" means any (x) proposal for a
merger or other business combination involving the Company or any of its
Subsidiaries (y) proposal, offer or tender offer to acquire (including without
limitation by license) in any manner, directly or
35
<PAGE> 36
indirectly, an equity interest in, not less than 35% of the outstanding voting
securities of the Company or any of its Subsidiaries, or (z) proposal to acquire
assets representing not less than 25% of the annual revenues of the Company or
any of its Subsidiaries in the fiscal year ending September 30, 1998 or to
obtain a license to the Company's ProComm or CleanSweep product or to any
Company IP Right or Company Intellectual Property that is incorporated, embodied
or used therein and that is material to such product (except as permitted by
Section 5.1), in each case in clauses (x), (y) or (z) of this subsection, other
than the transactions contemplated by this Agreement and the Company Ancillary
Agreements.
(b) Notwithstanding any other provision of this Agreement, prior to
the Effective Time, the Company may, to the extent the Board of Directors of the
Company determines, in good faith, after consultation with outside legal
counsel, that the Board's fiduciary duties under applicable law require it to do
so, participate in discussions or negotiations with, and, subject to the
requirements of Section 5.02(c) paragraph (c), below, furnish information to any
person, entity or group after such person, entity or group has delivered to the
Company an unsolicited bona fide takeover proposal which the Board of Directors
of the Company in its good faith reasonable judgment determines, (i) after
consultation with its independent financial advisors, would result in a
transaction more favorable to the stockholders of the Company from a financial
point of view than the Offer and the Merger and (ii) after reasonable inquiry by
the Company that the party making such takeover proposal is financially capable
of consummating such takeover proposal (a "SUPERIOR PROPOSAL"). In addition,
notwithstanding any other provision of this Agreement, in connection with a
possible takeover proposal, the Company may refer any third party to this
Section 5.2 or make a copy of this Section 5.2 available to any third party. In
the event the Company receives a Superior Proposal, nothing contained in this
Agreement (but subject to the terms of this Section 5.2(b)) will prevent the
Board of Directors of the Company from recommending such Superior Proposal to
its stockholders, if the Board determines, in good faith, after consultation
with outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board of Directors of the Company may
withdraw, modify or refrain from making its recommendation of the Offer,
provided, however, that the Company shall not recommend to its stockholders a
Superior Proposal for a period of not less than 48 hours after Parent's receipt
of a copy of such Superior Proposal (or a description of the significant terms
and conditions thereof, if such Superior Proposal is not in writing).
(c) Notwithstanding anything to the contrary in this Section 5.2,
the Company will not provide any non-public information to a third party unless
(x) the Company provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement (as defined
in Section 6.2) and (y) such non-public information has been previously
delivered to the Parent or will simultaneously be furnished to Parent.
(d) In addition to the obligations of the Company set forth in
paragraph 5.2(b) above, the Company shall promptly advise Parent orally and in
writing of any request for information or of any takeover proposal, or any
inquiry with respect to, or which could reasonably be expected to lead to, any
takeover proposal, the material terms and conditions of
36
<PAGE> 37
such request, takeover proposal or inquiry, and the identity of the person
making any such takeover proposal or inquiry. The Company will keep Parent
informed of the status and material terms of any such request, takeover proposal
or inquiry.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Stockholder Approval; Preparation of Proxy Statement.
(a) If Company Stockholder Approval is required by law, the Company
will, at Parent's request, as soon as practicable following the consummation of
the Offer, duly call, give notice of, convene and hold a meeting of its
stockholders (the "STOCKHOLDERS MEETING") for the purpose of obtaining the
Company Stockholder Approval. If able to do so, Parent shall cause the Company
to comply with its obligations under this Section 6.1(a) and Section 6.1(b).
Subject to the provisions of Section 5.2(b), the Company will, through its Board
of Directors, recommend to its stockholders that the Company Stockholder
Approval be given. Notwithstanding the foregoing, if Sub or any other subsidiary
of Parent shall acquire at least 90% of the outstanding shares of the Company
Common Stock, the parties shall, at the request of Parent, take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a Stockholders Meeting in
accordance with Section 253 of the DGCL. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 6.1(a) shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to the Company of any
takeover proposal or (ii) the withdrawal or modification by the Board of
Directors of the Company of its approval or recommendation of the Offer, this
Agreement, any of the Company Ancillary Agreements or the Merger, except that
such obligations shall terminate if this Agreement is terminated.
(b) If the Company Stockholder Approval is required by law, the
Company will, at Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary Proxy Statement with the
SEC and will use all reasonable efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff. The Company will notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Stockholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will promptly prepare and mail to its stockholders such
an amendment or supplement. The Company will not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects.
37
<PAGE> 38
(c) Parent agrees to cause all shares of the Company Common Stock
purchased pursuant to the Offer and all other shares of the Company Common Stock
owned by Sub or any other subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
6.2 Access to Information; Confidentiality. The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisers and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish or make available promptly
to Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Except as required by
law, Parent will hold, and will cause its officers, employees, accountants,
counsel, financial advisers and other representatives and affiliates to hold,
any confidential information in accordance with the Mutual Non-Disclosure
Agreement between Parent and the Company (THE "CONFIDENTIALITY AGREEMENT").
6.3 All Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and the Company Ancillary Agreements, each of the parties agrees to
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to use all reasonable efforts to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in an expeditious manner, the Offer,
the Merger and the other transactions contemplated by this Agreement and the
Company Ancillary Agreements, including (i) the obtaining of all necessary
actions or non actions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, including but not
limited to those set forth in Section 4.1(e) of the Company Disclosure Schedule,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or any of the Company Ancillary
Agreements or the consummation of any of the transactions contemplated by this
Agreement and the Company Ancillary Agreements, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and fully
to carry out the purposes of, this Agreement and the Company Ancillary
Agreements. In connection with and without limiting the foregoing, the Company
and its Board of Directors shall (A) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, this Agreement, any Company Ancillary Agreement or any
of the other transactions contemplated hereby or thereby and (B) if any state
takeover statute or similar statute or regulation becomes applicable to the
Offer, the Merger, this Agreement, any Company Ancillary Agreement or any other
38
<PAGE> 39
transaction contemplated hereby or thereby, take all action within its power and
authority necessary to ensure that the Offer, the Merger, each Company Ancillary
Agreement and the other transactions contemplated by hereby and thereby may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Company Ancillary Agreements and otherwise to minimize the
effect of such statute or regulation on the Offer, the Merger and the other
transactions contemplated hereby and thereby. Notwithstanding anything to the
contrary set forth in this Section 6.3(a), the Board of Directors of the Company
shall not be prohibited from taking any action consistent with Section 5.2(a) or
5.2(b), subject to Parent's rights set forth in Section 5.2(b) and in Section
5.2(c).
(b) As soon as may be reasonably practicable, the Company and Parent
each shall file with the United States Federal Trade Commission (the "FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ")
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties. The Company and Parent
each shall promptly (a) supply the other with any information which may be
required in order to effectuate such filings and (b) supply any additional
information which reasonably may be required by the FTC, the DOJ or the
competition or merger control authorities of any other jurisdiction and which
the parties may reasonably deem appropriate.
(c) The Company shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company, of (i) any material breach of any
representation or warranty made by it in this Agreement or any Company Ancillary
Agreement (in the case of the Company) or in this Agreement or any Parent
Ancillary Agreement (in the case of Parent) or (ii) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or under any Company
Ancillary Agreement (in the case of the Company) or in this Agreement or any
Parent Ancillary Agreement (in the case of Parent); provided, however, that no
such notification shall affect the representations, warranties, covenants, or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement, the Company Ancillary Agreements and the Parent Ancillary
Agreements.
(d) In the event that the Company or, following consummation of the
Offer, the Parent, shall determine to effect a reduction or cessation of
operations or workforce, or to terminate the employment of any employees, of the
Company or any Subsidiary thereof, the Company shall (when and if requested by
Parent, and not before the consummation of the Offer, in the case of such a
determination by Parent) perform and take all acts that may be required to
comply with the applicable provisions of the Worker Adjustment and Retraining
Act (the "WARN ACT"), and, in the case of such a determination by Parent, shall
give notice in such form, at such time, and to such employees as may be
reasonably requested by Parent in connection therewith.
6.4 Post Merger Employment Benefits. Employees of the Company who become
employed by Parent or any controlled subsidiary thereof after the Effective Time
will, at Parent's
39
<PAGE> 40
election, either to the extent permitted under the terms of such Company Benefit
Arrangements continue to be eligible to participate in Company Benefit
Arrangements, if and for so long as continued, or become eligible to participate
in the same standard employee benefit plans as are generally available to
similarly situated employees of Parent. Upon the request of the Parent,
following the consummation of the Offer, the Company shall (and shall cause its
Subsidiaries to), effective immediately prior to the Effective Time, terminate
such of its Company Benefit Arrangements as may be specified by Parent, provided
that following the Effective Time, the affected employees of the Company and
such Subsidiaries will be eligible to participate in the same standard employee
benefit plans as are generally available to similarly situated employees of
Parent, and such employee's time served with the Company or any Subsidiary
thereof shall be credited to such employee for purposes of determining such
employee's eligibility or level of benefits under the terms of Parent's employee
benefit plans.
6.5 Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time, the Parent will fulfill and
honor and will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of the Company pursuant to its certificate of
incorporation, its bylaws and any indemnification agreements between the Company
and its directors and officers in their capacity as such (the "INDEMNIFIED
PARTIES") existing prior to the date hereof. From and after the Effective Time,
such obligations shall be the joint and several obligations of Parent and the
Surviving Corporation and, by executing this Agreement, Parent hereby assumes
such obligations. The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification and
elimination of liability for monetary damages set forth in the Certificate of
Incorporation and Bylaws of the Company, which provisions will not be amended,
repealed or otherwise modified from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of the Company
or its Subsidiaries, unless such modification is required by law.
(b) Parent will cause to be maintained for a period of not less than
three years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O INSURANCE")
for all persons who are directors and officers of the Company on the Agreement
Date (and to the extent covered by the D&O Insurance as of the Agreement Date,
persons who were directors and officers of the Company prior to the Agreement
Date), in their capacity as such, so long as the annual premium therefor would
not be in excess of 150% of the last annual premium paid prior to the Agreement
Date (the "MAXIMUM PREMIUM") and, to the extent the annual premium would exceed
the Maximum Premium, Parent will cause to be maintained for such period the
maximum amount of such D&O Insurance that can readily be procured for the
Maximum Premium. If the existing D&O Insurance expires, is terminated or
canceled during such two year period, Parent will use all reasonable efforts to
cause to be obtained as much D&O Insurance as can be obtained for the remainder
of such period for an annualized premium not in excess of the Maximum Premium,
on terms and conditions no less advantageous than the existing D&O insurance. In
lieu of maintaining the Company's
40
<PAGE> 41
current D&O insurance, Parent may elect to add the directors and officers of the
Company on the Agreement Date (and to the extent covered by the D&O Insurance as
of the Agreement Date, persons who were directors and officers of the Company
prior to the Agreement Date) to its own insurance policy, provided that such
election does not diminish the rights provided to such persons under the
Company's existing D&O Insurance.
(c) This Section 6.5 will survive any termination of this Agreement
and the consummation of the Merger at the Effective Time is intended to benefit
the Company, the Surviving Corporation and the persons who are or were directors
or officers of the Company on or prior to the Effective Time, and will be
binding on all successors and assigns of the Parent or the Surviving
Corporation.
(d) In the event that Parent or the Surviving Corporation or any of
their successors or assigns consolidates with or merges into any other Person
and shall not be the continuing or surviving corporations or entities of such
consolidation or merger, then and in each such case, proper provisions shall be
made so that the successors and assigns of the Parent or the Surviving
Corporation shall assume the obligations of the Parent or the Surviving
Corporation, as the case may be, set forth in this Section 6.5.
(e) The provisions of this Section 6.5 are intended to be for the
benefit of, and shall be enforceable by, each indemnified party and such party's
heirs and representatives.
6.6 Directors.
(a) Effective upon the acceptance for payment by Sub of any shares
of Company Common Stock, Parent shall be entitled to designate the number of
members, rounded up to the next whole number, on the Company's Board of
Directors that equals the product of (i) the total number of members of the
Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section 6.6) and (ii) the percentage that the number
of shares of Company Common Stock accepted for payment by Purchaser bears to the
total number of shares of Company Common Stock outstanding, and the Company
shall take all action necessary to cause Parent's designees to be elected or
appointed to the Company's Board of Directors, including, without limitation,
increasing the number of directors, and seeking and accepting resignations of
incumbent directors. At such times, the Company will use all reasonable efforts
to cause individuals designated by Parent to constitute the same percentage as
such individuals represent on the Company's Board of Directors or each committee
of the Board (other than any committee of the Board established to take action
under this Agreement), and, if requested by Parent, each board of directors of
each Subsidiary and each committee of each such board. Notwithstanding the
foregoing, until such time as Parent acquires a majority of such outstanding
shares of Company Common Stock on a fully-diluted basis (determined as set forth
in Exhibit A to this Agreement), the Company shall use all reasonable efforts to
ensure that all of the members of the Board of Directors and such boards and
committees as of the date hereof who are not employees of the Company shall
remain members of the Board of Directors and such boards and committees.
41
<PAGE> 42
(b) The Company's obligations to appoint designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 6.6 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 6.6.
Parent will supply to the Company in writing and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
6.7 Fees and Expenses.
(a) Except as provided below in this Section 6.7, all fees and
expenses incurred in connection with the Offer, the Merger, this Agreement, the
Company Ancillary Agreements and the transactions contemplated hereby and
thereby shall be paid by the party incurring such fees or expenses, whether or
not the Offer or the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same or next day
funds to Parent, $2 million (the "COMPANY FEE") (i) if this Agreement is
terminated pursuant to Section 8.1(b)(i) as a result of the failure of the
condition set forth in paragraph (d) of Exhibit A to this Agreement, or pursuant
to Section 8.1(c) or Section 8.1(d), or (ii) if this Agreement is terminated by
Parent pursuant to Section 8.1(f), or pursuant to Section 8.1(b)(i) as a result
of the failure of the condition set forth in paragraph (g) of Exhibit A to this
Agreement, in each case in this clause (ii) where the breach or failure to
perform or comply that permits such termination results from, or represents, a
Willful Breach of Section 5.2(a), (b) or (c) of this Agreement. The Company Fee
may be applied by the Company dollar for dollar to reduce any royalty
obligations of Parent to the Company pursuant to the License Agreement (and
shall not be payable to the extent that the Company Fee exceeds the amount of
such royalties required to be paid over the term of the License Agreement),
except that if, pursuant to the terms of the License Agreement, Parent would not
be required at any time after the date of termination of this Agreement to pay
any royalties, the Company Fee shall be payable in cash on demand by Parent.
(c) Payment of the amounts described in this Section 6.7 and the
exercise by Parent of its rights under the License Agreement shall constitute
the sole remedy of Parent for a Willful Breach of Section 5.2(a), (b) or (c) of
this Agreement.
6.8 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review, comment upon and concur with, any
press release or other public statements with respect to the transactions
contemplated by this Agreement and the Company Ancillary Agreements, including
the Offer and the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national market system. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement and the Company Ancillary Agreements shall be in the form heretofore
agreed to by the parties.
42
<PAGE> 43
6.9 Rights Agreement. As soon as possible, and in no event later
than two business days after the Agreement Date, the Company shall file a
Current Report Form 8-K to reflect the Rights Amendment, and the Company shall
take all additional action necessary to effect the changes in the Rights
Agreement to provide for the exclusions therefrom set forth in Section 4.1(ac)
hereof. After the effectiveness of the Rights Amendment until the Effective
Time, or until this Agreement is terminated, the Company shall not (i) redeem
the Rights, (ii) exchange the Rights, (iii) terminate the Rights Agreement or
(iv) further amend the Rights Agreement, in each case without the prior written
consent of Parent.
6.10 Technology License Agreement. Concurrently with the execution of
this Agreement, the Company and Parent shall enter into the License Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Effective Time of the following
conditions:
(a) Company Stockholder Approval. If required by applicable law, the
Company Stockholder Approval shall have been obtained.
(b) Consummation of the Offer. Sub shall have purchased Shares
pursuant to the Offer.
(c) No Injunctions or Restraints. No statute, rule, regulation,
executive order, decree, injunction, judgment or other order or ruling issued by
any court or other Governmental Entity or other legal restraint or prohibition
shall be in effect which would (i) make the acquisition or holding by Parent or
its affiliates of Company Common Stock or Common Stock of the Surviving
Corporation illegal or otherwise prevent the consummation of the Merger, (ii)
prohibit Parent's or Sub's ownership or operation of, or compel Parent or Sub to
dispose of or hold separate, all or a material portion of the business or assets
of Parent and its Subsidiaries taken as a whole, or the Company and its
Subsidiaries taken as a whole (iii) compel Parent, Sub or the Company to dispose
of or hold separate all or a material portion of the business or assets of
Parent and its Subsidiaries taken as a whole or the Company and its Subsidiaries
taken as a whole, (iv) impose material limitations on the ability of Parent or
Sub or their affiliates effectively to exercise full ownership and financial
benefits of the Surviving Corporation or impose any material condition to this
Agreement, any of the Company Ancillary Agreements or the Merger which would be
materially adverse to Parent.
43
<PAGE> 44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the stockholders of the Company (provided,
however, that if Shares are purchased by Sub pursuant to the Offer, Parent may
not in any event terminate this Agreement):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (w) as the result of the failure of any of the conditions
set forth in Exhibit A to this Agreement, Sub shall have failed to commence the
Offer in the time required by this Agreement, (x) as a result of the failure of
any of the conditions set forth in Exhibit A to this Agreement the Offer shall
have terminated or expired in accordance with its terms (as extended, if Sub so
elects or as may be required pursuant to Section 1.1(a)) without Sub having
accepted for payment any shares of Company Common Stock pursuant to the Offer
or (y) Sub shall not have accepted for payment any shares of Company Common
Stock pursuant to the Offer by December 31, 1998 as a result of the failure of
any of the conditions set forth in Exhibit A to this Agreement; provided,
however, that the right to terminate this Agreement pursuant to clauses (w), (x)
or (y) above of this Section 8.1(b)(i) shall not be available to any party whose
failure to perform in any material respect any of its obligations under this
Agreement results in the failure of any such condition or if the failure of such
condition results from facts or circumstances that constitute a material breach
of a representation or warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, shares of
the Company Common Stock pursuant to the Offer or the Merger and such order,
decree or ruling or other action shall have become final and nonappealable;
(c) by the Company, if prior to the purchase of any shares of
Company Common Stock by Sub pursuant to the Offer, the Company shall have
received any Superior Proposal;
(d) by Parent in the event that (i) the Board of Directors of the
Company or any committee thereof shall have failed to recommend the Offer, the
Merger or this Agreement, including any failure to include such recommendation
in the Schedule 14D-9, or shall have so resolved, (ii) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified (including
without limitation by amendment of the Company's Schedule 14D-9) in a manner
adverse to Parent or Sub its approval or recommendation of the Offer, the Merger
or this Agreement and the Company Ancillary Agreements, shall have approved or
recommended any takeover proposal, shall have authorized the redemption or
amendment of the
44
<PAGE> 45
Rights Agreement after the Company has received a takeover proposal (other than
the Rights Amendment in accordance with Section 6.9 of this Agreement) or shall
have resolved to do any of the foregoing (provided that a statement that states
that a takeover proposal is under consideration by the Company's board of
directors or management and states that the Company will, at a future date, take
a position with respect to such takeover proposal, without making any adverse
statements with respect to the Offer, shall not be deemed to constitute such a
withdrawal, modification, approval or recommendation), or (iii) the Company
shall have entered into any letter of intent, acquisition agreement or similar
agreement with respect to any Superior Proposal in accordance with Section
5.2(b) of this Agreement or the Board of Directors or any committee thereof
shall have resolved to do so;
(e) by Parent in the event that (i) any person entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act) other than Parent and Sub
acquires beneficial ownership of 35% or more of the outstanding shares of Common
Stock of the Company; or (ii) the Board of Directors of the Company or any
committee thereof upon a request to reaffirm the Company's approval or
recommendation of the Offer, the Merger or this Agreement and the Company
Ancillary Agreements, shall have failed to do so within three (3) business days
after such request is made or shall have so resolved;
(f) by Parent if (i) any of the representations and warranties of
the Company set forth in Section 4.1 shall not be true and correct in any manner
that either (A) represents or results from a Willful Breach or (B) has or
represents a Material Adverse Effect or (ii) the Company has committed a breach
of any of the Company's covenants under Article 5 and Article 6 of this
Agreement, which breach either (A) represents or results from a Willful Breach
or (B) has a Material Adverse Effect, and has not cured such material breach
within thirty (30) days after the Parent has given the Company written notice of
the breach and its intention to terminate this Agreement pursuant to this
Section 8.1(f); and
(g) by the Company if Sub shall not have accepted for payment any
shares of Company Common Stock pursuant to the Offer on or prior to December 31,
1998 and (i) any of the representations and warranties of Parent set forth in
Section 4.2 hereof shall not be true and correct in any manner that has or
represents a material adverse effect on the Parent or on the exercise by the
Company of its rights under this Agreement or the License Agreement; or (ii)
Parent has committed a material breach of any of Parent's covenants under this
Agreement, which breach has a Material Adverse Effect or materially adversely
affects the Company's exercise of its rights under this Agreement or the License
Agreement and has not cured such material breach within thirty (30) days after
the Company has given the Parent written notice of the material breach and its
intention to terminate this Agreement pursuant to this Section 8.1(g).
8.2 Effect of Termination. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Sub or the Company, other than pursuant to the last sentence
of Section 6.2, Section 6.7, this Section 8.2 and Article IX, other than
liability for damages incurred in the event of a breach by a party of any of
45
<PAGE> 46
its representations, warranties, covenants or agreements set forth in this
Agreement or any of the Company Ancillary Agreements except as provided in
Section 6.7(c).
8.3 Amendment. This Agreement may be amended by the parties at any time
before or after obtaining the Company Stockholder Approval (if the Company
Stockholder Approval shall be required by law), subject to Section 8.5;
provided, however, that after any such approval, there shall not be made any
amendment that by law requires further approval by such stockholders without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
8.3, waive compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
8.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors; provided, however, that in the event that Sub's designees
are appointed or elected to the Board of Directors of the Company as provided in
Section 6.7, after the acceptance for payment of shares of the Company Common
Stock pursuant to the Offer and prior to the Effective Time, the affirmative
vote of a majority of the members of the Company's Board of Directors (if any)
who were members of the Company's Board of Directors on the Agreement Date shall
be required by the Company to (i) amend or terminate this Agreement by the
Company, (ii) exercise or waive any of the Company's rights or remedies under
this Agreement or (iii) extend the time for performance of Parent's and Sub's
respective obligations under this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time or, in the case of
the Company, shall survive the acceptance for payment of, and payment for,
shares of the Company Common Stock by Sub pursuant to the Offer. This Section
9.1 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
46
<PAGE> 47
9.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(A) if to Parent or Sub, to
Symantec Corporation
10201 Torre Ave.
Cupertino, CA 95014
Attention: General Counsel
with copies to its counsel:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Fax: (415) 494-1417
Attention: Gordon K. Davidson, Esq.
(b) if to the Company, to
Quarterdeck Corporation
13160 Mindanao Way
Marina del Rey, CA 90292
Attention: Chief Executive Officer
with copies to its counsel:
Bradley D. Schwartz, Esq.
Schwartz & Associates
333 South Grand Avenue, #3950
Los Angeles, CA 90071
9.3 Definitions. For purposes of this Agreement:
(a) an "AFFILIATE" of any person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "COMPANY ANCILLARY AGREEMENTS" means, collectively, the
Certificate of Merger and the License Agreement.
(c) "COMPANY OPTIONS" means any option to purchase Company Common
Stock granted under the Company's 1990 Directors Stock Option Plan, the
Company's Amended and Restated 1990 Stock Plan or the Company's 1996 Acquisition
Stock Option Plan, and any
47
<PAGE> 48
other option to purchase Company Common Stock disclosed in Section 4.1(c) of the
Company Disclosure Schedule not granted under any such plan.
(d) "EXECUTIVE OFFICERS" of the Company means any one of the
following persons: King R. Lee, Frank Greico, John Strosahl, Cheri Kaplan-Smith,
Suzanne Dickson and Gadi Navon, for so long as they may serve, and if any of
such persons shall cease to serve in their current capacity with the Company,
then such persons' successor
(d) "KNOWLEDGE" of a party means, with respect to a matter, the
actual knowledge of the executive officers and directors of such party.
(e) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any
change or effect that (i) materially adversely affects, or is highly likely to
materially adversely affect, the ability of the Company and its Subsidiaries to
market and license either its ProComm product or its CleanSweep product (or
both), or to use any Company IP Right or Company Intellectual Property that is
incorporated, embodied or used therein and that is material to such product or
the ownership by the Company and its Subsidiaries of any such Company IP Right
or Company Intellectual Property, (ii) materially adversely affects, or is
highly likely to materially adversely affect, the exercise by Parent of its
material rights under this Agreement or the License Agreement or (iii)
represents or results in, or is highly likely to result in, a liability
(contingent or otherwise), cost or expense of more than $3.0 million, or the
reduction of the fair value of any assets by more than $3.0 million (in each
case after giving effect to the availability of payments under any insurance
policy); provided, however, that none of the following shall be deemed, by
itself, to constitute a Material Adverse Change or be taken into account in
determining whether there has been or would be a Material Adverse Effect as a
result of this clause (iii): (A) any adverse change, event or effect that is
demonstrated by the Company to be caused by conditions affecting the United
States economy generally or the economy of any nation or region in which the
Company or any of its Subsidiaries conducts business that is material to the
business of the Company and its Subsidiaries, taken as a whole, (B) any adverse
change, event or effect that is demonstrated by the Company to be caused by
conditions generally affecting the utility software industry and (C) any adverse
change, event or effect that is demonstrated by the Company to be caused by the
announcement or pendency of the Offer or the Merger or the execution of this
Agreement or the License Agreement.
(f) "MERGER CONSIDERATION" means the consideration in money paid by
the Parent, in the applicable case, on account of each share of Company Common
Stock, or each share of Company Preferred Stock or each option in the Merger in
accordance with Section 3.1 of this Agreement.
(g) "PARENT ANCILLARY AGREEMENTS" means the Certificate of Merger
and the License Agreement.
(h) "PERSON" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity;
48
<PAGE> 49
(i) a "SUBSIDIARY" of any person means a corporation, partnership or
other entity in which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other individuals
performing similar functions for such corporation, partnership or other entity
are directly or indirectly owned by such person;
(j) "SUPERIOR PROPOSAL" has the meaning assigned thereto in Section
5.2(b);
(k) "TAKEOVER PROPOSAL" has the meaning assigned thereto in Section
5.2(a); and
(l) "WILLFUL BREACH" by the Company means (1) the failure of
a representation or warranty of such party in this Agreement to be true and
correct in all material respects as a result of any fact or condition of which
any executive officer or director of such party had actual knowledge as of the
Agreement Date, or (2) a material breach or failure to perform in any material
respect any obligation or to comply in any material respect with any agreement
or covenant to be performed or complied with by it pursuant to this Agreement,
where both (A) performance of such obligation, or compliance with such agreement
or covenant was not impossible (taking into consideration the financial and
other resources of the breaching or non-performing party) and (B) (i) in the
case of a breach that can not readily be cured by the breaching party within 30
days after written notice of such breach, the action or inaction constituting
such breach was taken by or at the request of, or with the express permission
of, any executive officer or director of the breaching party, and (ii) in the
case of a breach that can readily be cured by the breaching party within 30 days
after written notice of such breach, such period shall expire without the cure
of such breach .
9.4 Interpretation. When a reference is made in this Agreement to an
Article, a Section, Exhibit or Schedule, such reference shall be to an Article
or a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
only for reference purposes and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "thereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. References to a person
are also to its permitted successors and assigns.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
the Confidentiality Agreement constitute the entire agreement, and supersede all
prior agreements
49
<PAGE> 50
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and except for the provisions of Sections 6.4
and 6.5, are not intended to confer upon any person other than the parties and
the Company's stockholders any rights or remedies hereunder.
9.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
9.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub and Parent of any of its
obligations under this Agreement. This Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
9.9 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, or seek without the agreement of the
other parties hereto to change the venue of such action or to obtain dismissal
thereof on ground of forum non conveniens or similar doctrines and (c) agrees
that it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than a Federal or
state court sitting in the State of Delaware.
50
<PAGE> 51
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PARENT: SYMANTEC CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SUB: OAK ACQUISITION CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE COMPANY: QUARTERDECK CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
***AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE***
51
<PAGE> 52
EXHIBIT A
Offer
Notwithstanding any other term of the Offer or this Agreement, Sub shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to Sub's obligation to pay for or return tendered shares of the Company Common
Stock after the termination or withdrawal of the Offer), to accept for payment
or pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered shares, and may
terminate the Offer as to any shares not then paid for unless (i) there shall
have been validly tendered and not withdrawn prior to the expiration of the
Offer that number of shares of the Company Common Stock which would, upon
consummation of the Offer, then represent at least a majority of the Fully
Diluted Shares (the "MINIMUM TENDER CONDITION") and (ii) any waiting period
under the HSR Act applicable to the purchase of shares of the Company Common
Stock pursuant to the Offer shall have expired or been terminated. The term
"FULLY DILUTED SHARES" means all outstanding securities entitled generally to
vote in the election of directors of the Company on a fully diluted basis, after
giving effect to the exercise or conversion of all options, rights and
securities exercisable or convertible into such voting securities, including all
Company Options (whether or not then vested or exercisable), but only to the
extent that any such options, rights or securities are exercisable or
convertible into such voting securities at a per share price not in excess of
the Offer Price. Furthermore, notwithstanding any other term of the Offer or
this Agreement, Sub shall not be required to commence the Offer or to accept for
payment or, subject as aforesaid, to pay for any shares of the Company Common
Stock not theretofore accepted for payment or paid for, and may terminate or
amend the Offer, if, at any time after the Agreement Date and before the time of
acceptance of such shares for payment or the payment therefor, any of the
following events shall occur (or shall be determined by Parent in good faith to
have occurred):
(a) there shall be pending any suit, action or proceeding brought by
or on behalf of any Governmental Entity (or the staff of the Federal Trade
Commission or the staff of the Antitrust Division of the Department of Justice
shall have recommended the commencement of such), any shareholder of Company or
any other person or party directly or indirectly (i) challenging the acquisition
by Parent or Sub of any shares of the Company Common Stock, seeking to restrain
or prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by this Agreement, or
alleging, (on grounds that Sub reasonably and in good faith determines are
reasonably likely to result in financial exposure to the Company in excess of
available insurance coverage and/or proceeds), that any such acquisition or
other transaction relates to, involves or constitutes a violation by the Company
or its directors of federal securities law or applicable corporate statutes or
principles, (ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective Subsidiaries of a material portion of
the business or assets of the Company and its Subsidiaries, taken as a whole, or
Parent and its Subsidiaries, taken as a whole, or to compel the Company or
Parent to dispose of or hold separate any material portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, or Parent and its
Subsidiaries, taken
52
<PAGE> 53
as a whole, as a result of the Offer or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose material limitations on
the ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any shares of the Company Common Stock accepted for payment
pursuant to the Offer including without limitation the right to vote the Company
Common Stock accepted for payment by it on all matters properly presented to the
stockholders of the Company, (iv) seeking to prohibit Parent or any of its
Subsidiaries from effectively managing or controlling in any material respect
the business or operations of the Company and its Subsidiaries taken as a whole,
(v) which is reasonably likely to result in a Material Adverse Effect or (vi)
seeking to impose a material condition to the Offer, the Merger or this
Agreement which would be materially adverse to Parent; provided that in the case
of any such suit, action or proceeding by any person other than a Governmental
Entity, such suit, action or proceeding could reasonably be expected to result
in a Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any Governmental
Entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result in any of the consequences referred to in clauses (i) through (vi) of
paragraph (a) above;
(c) there shall have occurred since June 30, 1998 any Material
Adverse Change;
(d) either (i) the Board of Directors of the Company or any
committee thereof shall have failed to recommend the Offer, the Merger or this
Agreement, including any failure to include such recommendation in the Schedule
14D-9, or shall have so resolved; or (ii) the Board of Directors of the Company
or any committee thereof shall have withdrawn or modified (including without
limitation by amendment of the Company's Schedule 14D-9) in a manner adverse to
Parent or Sub its approval or recommendation of the Offer, the Merger or this
Agreement and the Company Ancillary Agreements, shall have approved or
recommended any takeover proposal (provided that a statement that states that a
takeover proposal is under consideration by the Company's board of directors or
management and states that the Company will, at a future date, take a position
with respect to such takeover proposal, without making any adverse statements
with respect to the Offer, shall not be deemed to constitute such a withdrawal,
modification, approval or recommendation); or shall have authorized the
redemption or amendment of the Rights Agreement after the Company has received
any takeover proposal (other than the Rights Amendment in accordance with
Section 6.9 of this Agreement) or shall have resolved to do any of the
foregoing;
(e) either (i) any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) other than Parent and Sub acquired beneficial
ownership of 35% or more of the outstanding Shares; or (ii) the Board of
Directors of the Company or any committee thereof upon a request to reaffirm the
Company's approval or recommendation of the Offer, the Merger or this Agreement,
shall have failed to do so within three business days after such request is made
or shall have so resolved;
53
<PAGE> 54
(f) any of the representations and warranties of the Company set
forth in Section 4.1 shall not be true and correct in all material respects
(without regard to any qualification therein as to the Company's knowledge) as a
result of any facts or circumstances that have a Material Adverse Effect;
(g) the Company shall have breached or failed to perform in any
material respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by it
pursuant to this Agreement and the same shall have a Material Adverse Effect;
(h) this Agreement shall have been terminated in accordance with its
terms; or
(i) any voluntary, involuntary or ancillary petition in bankruptcy
shall have been instituted under Title 11 to the United States Code with respect
to the Company as a debtor or alleged debtor and not dismissed;
which, in the reasonable good faith judgment of Sub or Parent, in any such case,
and regardless of the circumstances giving rise to any such condition (other
than any action or inaction by Parent or any of its Subsidiaries which
constitutes a breach of this Agreement), makes it inadvisable to proceed with
such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and Parent and
their respective affiliates and may be asserted by Sub or Parent regardless of
the circumstances giving rise to such condition (other than any action or
inaction by Parent or any of its Subsidiaries which constitutes a breach of this
Agreement) or may be waived (except for the Minimum Tender Condition, which can
only be waived with the consent of the Company) by Sub and Parent in whole or in
part at any time and from time to time in their sole discretion. The failure by
Parent, Sub or any other affiliate of Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time prior to the expiration of the Offer.
54
<PAGE> 1
EXHIBIT 99.2
FOR IMMEDIATE RELEASE
FINAL - FOR APPROVAL
<TABLE>
<S> <C>
QUARTERDECK MEDIA CONTACTS: SYMANTEC MEDIA CONTACTS:
King R. Lee Amy Savage
(310) 309-4264 (408) 725-2702
[email protected]
Frank Greico
(310) 309-4232 Eric DeRitis
(650) 596-5800
[email protected]
INVESTOR RELATIONS CONTACT:
Shelley Wilson
(408) 446-8891
[email protected]
</TABLE>
SYMANTEC TO ACQUIRE QUARTERDECK
CUPERTINO, CALIF. - OCTOBER 15, 1998 - Symantec Corporation (Nasdaq: SYMC), the
world leader in utility software for business and personal computing, today
announced it has signed a definitive merger agreement to acquire Quarterdeck
Corporation (Nasdaq: QDEK). Under the terms of the agreement, Symantec will
commence a cash tender offer for all outstanding shares of Quarterdeck common
stock at a net price of $0.52 per share. The purchase price is approximately $65
million, including the assumption of Quarterdeck's outstanding debt. The Boards
of Directors of both companies have approved this transaction.
Completion of the tender offer is subject to certain conditions, including the
tender of a majority of the Quarterdeck shares, receipt of necessary government
approvals and the expiration of applicable waiting periods under the
Hart-Scott-Rodino Act. Quarterdeck's revenue for the 12
-more-
<PAGE> 2
Symantec to Acquire Quarterdeck
Page 2 of 3
months ended June 1998 was approximately $57 million. Symantec expects the
tender offer to be completed by the end of November 1998, and expects the
transaction to be non-dilutive.
Quarterdeck is a recognized technology leader in the software utilities and
communications markets. Symantec's acquisition of Quarterdeck will provide
leading edge technologies to complement Symantec's suite of software utilities,
remote productivity solutions, and Java development tools.
"This deal will allow us to serve our customers best with Symantec's strong
market and channel presence," said King R. Lee, interim president of
Quarterdeck. "With Symantec's competitive positioning, strong geographic
presence and market leadership, Quarterdeck's leading technologies can be
leveraged and offered on a world-class level. We believe our shareholders
achieve the best value with this deal."
"Quarterdeck is an industry pioneer that has developed many market-leading
technologies," said Gordon Eubanks, Symantec President and CEO. "We expect to
further increase our technical leadership in desktop and enterprise utilities by
integrating Quarterdeck's technology with ours, and continuing to deliver
superior products to customers under the Norton brand."
ABOUT QUARTERDECK
Quarterdeck Corporation, incorporated in 1982, is a global leader in the
development and marketing of PC helpware - software designed to prevent and
solve PC performance problems. Quarterdeck's product line addresses storage
management, system conflict resolution, virus protection, system updating, and
enhanced access to networked information and communications resources. Further
information about Quarterdeck can be found at http://www.quarterdeck.com/.
- -more -
<PAGE> 3
Symantec to Acquire Quarterdeck
Page 3 of 3
ABOUT SYMANTEC
Symantec is the world leader in utility software for business and personal
computing. Symantec products and solutions help make users productive and keep
their computers safe and reliable anywhere and anytime. Symantec offers a broad
range of solutions and is acclaimed as a leader in both customer satisfaction
and product brand recognition. Symantec is traded on Nasdaq under the symbol
SYMC. More information on the company and its products can be obtained at
http://www.symantec.com.
FORWARD LOOKING STATEMENT
This press release contains forward-looking statements. There are certain
important factors that could cause Symantec and/or Quarterdeck's future
development efforts to differ materially from those anticipated by some of the
statements made above. Among these are the anticipation of the growth of certain
market segments, the positioning of each company's products in those segments,
the competitive environment in the software industry, dependence on other
products, changes to operating systems and product strategy by vendors of
operating systems, and the importance of new Symantec and/or Quarterdeck
products. Additional information concerning those and other factors is contained
in the "Risk Factors" section of the each company's respective annual report on
Form 10-K and their quarterly reports on Form 10-Q for the most recent quarter.
# # #
NOTE TO EDITORS: If you would like additional information on Symantec
Corporation and its products, please view the Symantec Press Center at Error!
Bookmark not defined. on Symantec's Web site.
<PAGE> 1
EXHIBIT 99.3
LICENSE AGREEMENT
This License Agreement (the "Agreement") is entered into as of October 15,
1998 (the "Effective Date") by and between Symantec Corporation, a Delaware
corporation, Symantec Limited, an Ireland corporation (collectively,
"Symantec"), and Quarterdeck Corporation, a Delaware corporation
("Quarterdeck").
RECITALS
Quarterdeck is the creator and owner of, or otherwise has the right to
license, the product known as CleanSweep, as described in more detail in Exhibit
A (the "Quarterdeck Software"). Symantec and Quarterdeck have entered into an
Agreement and Plan of Merger (the "Merger Agreement") that contemplates the
acquisition of Quarterdeck by Symantec. Symantec wishes to license the
Quarterdeck Software for distribution as a stand-alone product and as part of a
suite of other products. In connection with the Merger Agreement, Quarterdeck
has agreed to grant such licenses, subject to the terms and conditions set forth
below.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" means, as to any legal entity, any other legal entity that is
directly or indirectly controlling, controlled by, or under common control with,
such legal entity. In this context, control means ownership of 100% of the
voting stock or the equivalent.
"AGREEMENT" shall have the meaning ascribed thereto in the first paragraph
to this Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or federal or
California state holiday.
"CONSUMMATION" means the purchase of Shares pursuant to the Offer (as those
terms are defined in the Merger Agreement) in accordance with the terms of the
Merger Agreement.
"DELIVERABLES" shall mean the items relating to the Quarterdeck Software
described in Exhibit B.
"DERIVATIVE WORK" shall mean any modification, translation, port,
adaptation, modification, extension, improvement, compilation, abridgment or
other form in which the Quarterdeck Software may be recast, transformed or
adapted for use on computer systems, including, but not limited to, any form
which would infringe any copyright to the Quarterdeck Software.
<PAGE> 2
"EFFECTIVE DATE" shall have the meaning ascribed thereto in the
introductory paragraph to this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" means all of Quarterdeck's intellectual
property rights worldwide arising under statutory or common law, and whether or
not perfected, including, without limitation, all rights relating to patents,
copyrights, trade secrets and any rights analogous thereto.
"LICENSES" shall mean the licenses granted in Section 2 below.
"NET REVENUE" means Symantec's actual gross revenues (invoiced amounts, net
of actual returns) from marketing, distribution or other revenue-generating use
of the Quarterdeck Licensed Products. No royalties will be earned on sales, use,
excise and similar taxes, currency exchange fees, and shipping costs (including,
but not limited to, insurance and transportation costs and duties) to the extent
such amounts are invoiced separately. If the Quarterdeck Licensed Products are
distributed with other titles in a package for a single price, which other
titles are distributed by Symantec stand-alone through the retail channel, the
Net Revenue attributable to the Quarterdeck Licensed Products will be determined
by prorating the revenues from the sale or license of the package according to
the distribution prices to Ingram Micro for the separate works contained in the
package. Notwithstanding the foregoing, any Symantec product other than Norton
Utilities, Norton Antivirus, Crashguard, Norton Web Services, pcANYWHERE, Norton
Mobil Essentials or Winfax (and follow-on versions of such products) will not be
considered for purposes of prorating the revenues from the sale or license of
any such package unless it is the first or second top selling title in its
category. Further, the Licensed Quarterdeck Product shall be deemed to be sold,
licensed or otherwise distributed as part of a bundle with another product(s) if
it is sold, licensed or otherwise distributed for a discounted price (or a zero
price), conditioned in whole or part on the customer's purchase, license or
other acquisition of such other product(s). Amounts received by Symantec as
deposits or advances will not be deemed to be revenue until shipment or other
revenue-generating use of the Quarterdeck Licensed Products to the party making
the deposits or advances have been made against such deposits or advances or
Symantec recognizes such amounts as revenue on any other basis. For purposes of
calculating Royalties, revenues in foreign currencies will be deemed converted
into United States Dollars at the average monthly exchange rates used generally
by Symantec in its financial statements.
"ROYALTIES" shall mean the royalties payable with respect to distribution
of the Quarterdeck Licensed Products, as described in Section 4.1 below.
"QUARTERDECK DEVELOPMENT LICENSE" means the license granted in Section 2.2.
"QUARTERDECK DISTRIBUTION LICENSE" shall have the meaning described in
Section 2.1 below.
"QUARTERDECK LICENSED PRODUCTS" shall mean binary executable versions of
the Quarterdeck Software and Derivative Works of the Quarterdeck Software that
Symantec may create if it receives the Source Code for the Quarterdeck Software
from the escrow agent referenced in Section 7.
2
<PAGE> 3
"QUARTERDECK LICENSES" shall mean the Quarterdeck Distribution License and
the Quarterdeck Development License.
"QUARTERDECK SOFTWARE" shall have the meaning described in the recitals
above and Exhibit A to this Agreement.
"QUARTERDECK TRADEMARKS" shall mean the "CleanSweep" mark and such other
related marks owned by Quarterdeck as the parties may agree.
"SOURCE CODE" shall mean the human readable form of computer software,
including any corresponding comments and annotations.
"UPDATES" shall mean bug fixes, modifications, variations, or enhancements
made to a product without a significant change in the functionality of the
product, the packaging (other than to indicate a change in the version number to
the right of the decimal point), or the version number to the left of the
decimal point.
"UPGRADES" shall mean new releases and versions which include significant
changes to functionality, new packaging or a change in the version number to the
left of the decimal point.
2. GRANT OF RIGHTS.
2.1 DISTRIBUTION LICENSE FOR QUARTERDECK LICENSED PRODUCTS. Subject to the
provisions of this Agreement, Quarterdeck hereby grants to Symantec a
nonexclusive, world-wide, non-transferable, license under all Quarterdeck
Intellectual Property Rights to use, copy, distribute, display and perform the
Quarterdeck Licensed Products during the term of such license specified in
Section 6, except that no right is granted to distribute Japanese language
versions of the Quarterdeck Licensed Products in Japan except to the extent that
Symantec may do so without giving rise to a violation of any of the rights
granted to Marubeni Corporation under the agreement between Marubeni Corporation
and Quarterdeck dated September 29, 1997, and except for any other distribution
arrangement to which Symantec secures Marubeni Corporation's written consent
(the "Quarterdeck Distribution License"). Symantec may sublicense the
Quarterdeck Licensed Products by permitting bona fide distributors and resellers
to sell end-user licenses to Quarterdeck Licensed Products, by permitting
duplication and distribution of the Quarterdeck Licensed Products by OEMs, and
by permitting end-users to duplicate the Quarterdeck Licensed Products in
connection with site licenses and similar transactions provided that such
transactions are consistent with Symantec's normal business practices Symantec
will be responsible for manufacturing all Quarterdeck Licensed Products
distributed by it pursuant to this Agreement. Notwithstanding the foregoing,
Symantec will not enter into site licenses, OEM agreements or other arrangements
or agreements that provide for unlimited numbers of seats of the Quarterdeck
Licensed Products to be distributed or used for a single price or otherwise
allow any third party to create copies of the Quarterdeck Products without
reporting the number of copies made, distributed and used to Symantec. Symantec
will be entitled to modify the documentation for the Quarterdeck Licensed
Products and distribute such modified documentation with the Quarterdeck
Licensed Products, provided that Symantec will retain all Quarterdeck copyright,
trademark and similar notices in such documentation. The
3
<PAGE> 4
Quarterdeck Licensed Products will be distributed by Symantec or its OEMs with
an end-user license in substantially the form of the license set forth in
Exhibit C or such other form of license that provides substantially the same
protections to Quarterdeck.
2.2 DEVELOPMENT LICENSE FOR QUARTERDECK SOFTWARE. Subject to the
provisions of this Agreement, Quarterdeck hereby grants to Symantec a
nonexclusive, world-wide, non-transferable, license under all Quarterdeck
Intellectual Property Rights to use, copy, and create Derivative Works during
the term of this Agreement from the materials and information provided to
Symantec pursuant to Section 5.3 or from any Source Code of the Quarterdeck
Software (the Quarterdeck Source Code) that Symantec may obtain from the escrow
established pursuant to Section 7 solely for the purpose of developing,
localizing, compiling to binary form and supporting Derivative Works of the
Quarterdeck Software. Symantec may not distribute, sublicense or make available
to any third party the materials provided to Symantec pursuant to Section 5.3,
the Quarterdeck Source Code, or the Source Code for Derivative Works of the
Quarterdeck Source Code.
2.3 LICENSES TO AFFILIATES. Symantec's Affiliates shall have the benefit
of the Quarterdeck Licenses, provided that any such Affiliate shall also be
bound by the applicable obligations, limitations and covenants set forth in this
Agreement.
2.4 NO OTHER LICENSES. Neither party grants any other licenses or rights,
except as specifically set forth above. Without limiting the foregoing, Symantec
acknowledges that (i) it is not authorized and agrees not to decompile,
disassemble or otherwise reverse engineer the Quarterdeck Software unless and
until Symantec rightfully receives the Source Code therefor from the escrow
seferenced in Section 7, and (ii) it is granted no right to use or refer to
"CleanSweep" or any other Ouarterdeck trademark, trade name, trade dress or
other designation. Further, Symantec agrees not to advertise the expected
availabilily of the Quarterdeck Licensed Product from Symantec, except that
Symantec may disclose its intentions to incorporate the Quarterdeck Licensed
Product into its Norton Systemworks products after Consummation in response to
customer and media inquiries, may make disclosures that have been approved by
Quarterdeck and may also disclose the terms of this Agreement only in the manner
and to the extent required by applicable law.
3. DELIVERABLES. Promptly upon completion thereof, Quarterdeck will
deliver to Symantec the Object Code Deliverables relating to the enhancements of
the Quarterdeck Software created pursuant to Section 5.3. Quarterdeck shall
subsequently deliver each revision to such enhancements promptly after
completion thereof. Quarterdeck shall deposit the Source Code Deliverables for
the current version of the Quarterdeck Software with the escrow agent referenced
in Section 7 upon the establishment of such escrow and shall thereafter deposit
the Source Code Deliverables relating to enhancements of the Quarterdeck
Software created pursuant to Section 5.3 promptly after the creation thereof so
long as this Agreement and such escrow remain in force.
4
<PAGE> 5
4. PAYMENTS.
4.1 ROYALTIES. Symantec shall pay to Quarterdeck Royalties equal to 8% of
Net Revenue from the distribution or other revenue producing exploitation of
Quarterdeck Licensed Products, provided that the Royalty rate shall be 6% if the
Quarterdeck Distribution License commences because Quarterdeck is obligated to
pay a Company Fee (as defined in the Merger Agreement) as a result of a Willful
Breach (as defined in the Merger Agreement) of Section 5.2(a), (b) or (c) of the
Merger Agreement, and provided further that for copies of the Quarterdeck
Licensed Products the royalty per seat shall not be less than: (i) $1.25 in the
case of stand-alone sales of the Quarterdecks Software, (ii) $0.75 in the case
of bundles of the Quarterdeck software as part of Norton Systemworks and (iii)
$0.20 for OEM transactions (the number of seats in any transaction being equal
to the total number of users authorized to use the Quarterdeck Licensed Products
under such transaction) provided however, all such OEM transactions will allow
the Quarterdeck Licensed Products to be distributed only as part of a bundle
with other products that are marketed stand-alone in the retail channel, where
the Quarterdeck Licensed Products comprise less than 35% of the value of the
bundle as a whole (based on the retail prices of the components of the bundle
sold separately) and acquiring the Quarterdeck Software is not a primary reason
that customers typically acquire the bundle. No Royalties will be payable with
respect to copies of the Quarterdeck Licensed Products that are used internally
by Symantec or its Affiliates for non-revenue generating activities.
4.2 REPORTS AND ACCOUNTING. Royalties payable pursuant to this Section
shall be calculated and paid, on a quarterly basis, not more than 30 days after
the last day of the fiscal quarter in which the Net Revenue giving rise to such
Royalties are recognized by Symantec. Symantec shall deliver to Quarterdeck,
along with its payment of Royalties due for each quarter, a written report
showing, in detail, its calculation of Royalties payable with respect to such
quarter. At Quarterdeck's request, Symantec will also provide to Quarterdeck a
report of the number of Not-For-Resale copies distributed by Symantec for the
quarter. Symantec shall maintain such books and records as are necessary to
properly calculate the amounts of Royalties to be paid pursuant to this
Agreement. An independent certified public accountant selected by Quarterdeck
from any major accounting firm may, upon reasonable notice and during normal
business hours, but no more often than once each year, inspect the records of
Symantec. Any information revealed in such inspection shall be kept confidential
and not disclosed to anyone, except to the extent necessary to identify to
Quarterdeck, Symantec or any factfinder in any action instituted to enforce the
terms of this Agreement, any inaccuracy which may be found in the amount of
Royalties due to Quarterdeck. Quarterdeck shall bear the cost of any such audit,
except that if the audit reveals shortfall in payment of Royalties of 5% or
more, but not less than $10,000, Symantec shall pay for the reasonable cost of
such audit, and Quarterdeck may thereafter conduct a follow up audit at any time
at Symantec's expense. Symantec's determination of the payments due Quarterdeck
under this Agreement will be deemed conclusive unless, within 24 months from the
termination of the Agreement, Quarterdeck notifies Symantec in writing of any
error in such payments.
5. SUPPORT.
5.1. TECHNICAL SUPPORT. Symantec will be responsible for answering the
questions of and supporting the needs of its own customers. Quarterdeck will
provide Symantec with
5
<PAGE> 6
reasonable support by telephone and/or electronic mail, to answer Symantec's
questions and to assist Symantec in supporting Symantec's customers with respect
to the Quarterdeck Software. Quarterdeck will also provide Symantec, and its
customers, with support in person on a time and materials basis at Quarterdeck's
then standard published rates therefor.
5.2. TRAINING. Quarterdeck will make available at Symantec's facilities in
Santa Monica, California, on a mutually agreed date no later than November 15,
1998, qualified members of its staff to provide training of employees of
Symantec relating to the Quarterdeck Software, in sufficient detail as to
provide Symantec's technical support, marketing and sales people with sufficient
knowledge to permit proper marketing and distribution of the Quarterdeck
Software. The training contemplated by this Section shall not exceed a total of
sixteen (16) hours.
5.3 CUSTOMIZATION. Within one business day after the Effective Date,
Quarterdeck shall provide Symantec or a third party engaged by Symantec and
acceptable to Quarterdeck such information as Symantec shall reasonably require
to (i) modify graphical elements of the user interface (such as icons or splash
screens) of the Quarterdeck Licensed Product (but not modify the structure or
sequences associated with such user interface), (ii) reasonably integrate the
Quarterdeck Licensed Product with the Symantec products included in Symantec's
Norton SystemWorks bundle with respect to installation, automatic updating,
changing all of the registry keys to place them under the Symantec software
registry key and on-line registration, as well as by making changes to the About
Box and to graphical elements (bit maps) of the user interface as provided in
clause (i) above, and (iii) translate the Quarterdeck Licensed Product into
foreign languages. Additionally, commencing upon the Effective Date, a
reasonable number of Symantec's personnel or a third party engaged by Symantec
and acceptable to Quarterdeck may be resident at Quarterdeck's facility and work
with Quarterdeck personnel to integrate the Quarterdeck Licensed Product with
Symantec's Norton SystemWorks products as provided above. To the extent that
Quarterdeck's personnel are unable or unwilling to timely make the changes
required hereunder, such Symantec personnel will be given reasonable access to
those parts of the Source Code, if any, for the Quarterdeck Licensed Products
required for the sole purpose of creating the modifications authorized by this
Section 5.3. Promptly after completion of such modifications, Quarterdeck will
compile a version or versions of such modified Quarterdeck Licensed Products and
provide the executable form of such modified Quarterdeck Licensed Products to
Symantec for testing. Quarterdeck will use commercially reasonable efforts to
make or, at its option, will allow Symantec to make such corrections as are
required to repair errors in such modified Quarterdeck Licensed Products that
were introduced by any of the work done pursuant to this Section 5.3 and will
promptly provide such corrected versions of the Quarterdeck Licensed Products
upon completion to Symantec for further testing. This process will be repeated
until Symantec is reasonably satisfied with the work performed pursuant to this
Section 5.3. Quarterdeck shall establish and notify Symantec of rules for
Symantec's personnel intended to ensure that such personnel do not receive
sensitive or confidential information of Quarterdeck. Within two days after the
Effective Date, Quarterdeck shall provide Symantec with the entire help system,
the related FrameMaker files and those things necessary to incorporate the
foregoing into Symantec's products. Provided that Symantec's personnel abide in
all respects by such rules and that Symantec does not breach its obligations to
complete Consummation and
6
<PAGE> 7
acquire Quarterdeck under the Merger Agreement, Quarterdeck covenants not to sue
Symantec for misappropriation of trade secret information based solely on
Symantec's use of information obtained by such personnel while at Quarterdeck's
facility pursuant to this Section 5.3. In addition to the changes described
above, Quarterdeck will, subject to Section 11, make such changes as are
required to substitute Symantec's trademarks for Quarterdeck's trademarks, trade
names or trade dress from the Quarterdeck Products. The parties understand and
agree that Symantec is granted no right to distribute or otherwise exploit any
of the software, materials or information provided to it under this Section 5.3
unless and until the Quarterdeck Distribution License commences.
6. TERM AND TERMINATION.
6.1 TERM. The Quarterdeck Development License will commence upon the
Effective Date. The Quarterdeck Distribution License will commence upon the
earliest to occur of (i) Consummation or (ii) an event giving rise to an
obligation on the part of Quarterdeck to pay a Company Fee (as defined in the
Merger Agreement). If the Merger Agreement terminates before the Consummation
for any reason other than the occurrence of such an event, then Symantec shall
neither have nor exercise any rights under the Quarterdeck Licenses, and this
Agreement shall immediately terminate upon such termination of the Merger
Agreement.
6.2 TERMINATION OF THE LICENSE FOR BREACH. The term of this Agreement
shall begin on the Effective Date and will terminate immediately if after the
Consummation, Symantec fails to close the Merger (as defined in the Merger
Agreement) in accordance with the terms of the Merger Agreement or if the Merger
has not occurred by January 31, 1999 and the Merger Agreement has not been
terminated as a result of an event giving rise to an obligation on the part of
Quarterdeck to pay a Company Fee. The term of this Agreement will terminate 30
days after the receipt by either party of written notice that it is in material
breach of any terms of this Agreement, unless such party cures such breach
within such 30-day period. For purposes of this Agreement, a material breach
will be a breach or series or pattern or breaches that lead to loss or damage of
no less than $350,000 in the aggregate to the non-breaching party. Any such
notice shall provide, in reasonable detail, a description of the alleged breach
and the requested cure of that breach. Provided however, that if Symantec
disputes the right of Quarterdeck to terminate this Agreement for the reasons
specified in such notice and notifies Quarterdeck thereof promptly after
receiving the notice of breach, then the parties agree that the licenses granted
to Symantec hereunder shall continue to remain in full force and effect until
Symantec is found to have committed and not timely cured a material breach under
the dispute resolution process provided for in Section 6.4.
6.3 POST TERMINATION RIGHTS. Any termination of this Agreement shall not
affect the rights of any distributor, dealer, reseller or end-user that has
received the Quarterdeck Licensed Products from a party in accordance with the
terms of this Agreement prior to its termination, provided that after notice of
termination of this Agreement, Symantec shall not have the right to distribute
quantities of the Quarterdeck Licensed Products that are disproportionate to the
quantities distributed prior to that time. Upon termination of this Agreement,
Symantec will return to Quarterdeck all of the Quarterdeck Source Code, if any,
in its possession or control, and
7
<PAGE> 8
Symantec shall immediately cease any sale, license or other distribution of
Quarterdeck Licensed Products. Further, notwithstanding the foregoing, if such
termination was after Consummation and Symantec fails to close the Merger in
accordance with the terms of the Merger Agreement or if the Merger has not
occurred by January 31, 1999, then the rights of distributors, dealers and
resellers to distribute the Quarterdeck Products shall immediately terminate..
The provisions of this Agreement that, by their sense and context, are intended
to survive termination of this Agreement (including without limitation all
obligations of confidentiality) shall survive termination and remain fully
enforceable thereafter.
6.4 DISPUTE RESOLUTION PROCEDURE. If an alleged breach is not cured to the
non-breaching party's satisfaction, or if the breaching party disputes the
allegation of breach, the determination of whether a breach occurred and whether
the breach was cured will be resolved by a single arbitrator in Los Angeles,
California, in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA") then in
force. Such arbitrator shall be an attorney with substantial experience
representing retail software companies. The arbitration shall be governed by the
United States Arbitration Act, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof.
Notwithstanding the Expedited Procedures of the Commercial Arbitration Rules of
the AAA, the parties agree that the AAA shall appoint the arbitrator without the
parties submitting lists of requested arbitrators. In addition, the arbitrator
shall be instructed to complete any hearings and render his or her award within
thirty (30) days after his or her appointment or as soon thereafter as is
reasonably possible consistent with providing each party a meaningful
opportunity to conduct such discovery as is reasonably necessary and otherwise
prepare and present its arguments. The arbitrator shall grant such orders and
impose such sanctions as are reasonably required to conform to the foregoing
schedule.
7. SOURCE CODE ESCROW. Upon the execution of this Agreement Symantec and
Quarterdeck shall enter into an agreement with an escrow in the form attached as
Exhibit D hereto pursuant to which such escrow agent shall hold a copy of the
Source Code Deliverables for the Quarterdeck Software. The escrow agreement
shall require the escrow agent to release such Source Code Deliverables to
Symantec upon commencement of the Quarterdeck Distribution License. Symantec
shall pay the fees of the escrow agent. Prior to the execution hereof,
Quarterdeck has delivered the Source Code Deliverables described on Exhibit B to
the escrow agent.
8. REPRESENTATIONS AND WARRANTIES; LIMITATIONS
8.1 REPRESENTATIONS AND WARRANTIES OF QUARTERDECK. Quarterdeck hereby
represents and warrants that:
(a) Quarterdeck has authorized the person who has signed this
Agreement for Quarterdeck to execute and deliver this Agreement to Symantec on
behalf of Quarterdeck, and Quarterdeck has the full power and authority to enter
into this Agreement and grant the rights and fulfill the obligations set forth
herein, provided that nothing in this Section 8.1(a) is intended or should be
construed to grant any representation or warranty regarding non-infringement of
any
8
<PAGE> 9
third party intellectual property right by the Quarterdeck Software or any use,
distribution or other exploitation thereof;
(b) Quarterdeck has not previously granted and will not grant any
rights in the Quarterdeck Software to any third party that conflict with the
rights granted to Symantec herein, provided that Symantec acknowledges that
Quarterdeck has granted to a third party certain exclusive right to distribute
Japanese language versions of the Quarterdeck Licensed Products in Japan and has
granted such other rights with respect to the Quarterdeck Software as are
disclosed in the Merger Agreement or the schedules, exhibits or other
attachments thereto; and
(c) Quarterdeck warrants that, the Quarterdeck Software does not
violate the, copyrights, trade secret rights, or other similar proprietary or
contractual rights of any third party, and Quarterdeck has not received any
claim to that effect. Symantec acknowledges and understands that Quarterdeck has
not performed any patent search or otherwise undertaken to determine whether the
Quarterdeck Software infringes any patent.
8.2 REPRESENTATIONS AND WARRANTIES OF SYMANTEC. Symantec hereby represents
and warrants that it has authorized the person who has signed this Agreement for
Symantec to execute and deliver this Agreement to Quarterdeck on behalf of
Symantec, and Symantec has the full power and authority to enter into this
Agreement and fulfill the obligations set forth herein.
8.3 GENERAL DISCLAIMER. EXCEPT AS SPECIFIED IN THIS AGREEMENT ALL EXPRESS
OR IMPLIED REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT, ARE
HEREBY DISCLAIMED.
9. LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT (INCLUDING LOSS OF PROFITS, USE, DATA, OR OTHER
ECONOMIC ADVANTAGE), NO MATTER WHAT THEORY OF LIABILITY, EVEN IF THE REMEDIES
PROVIDED FOR IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE AND EVEN IF
EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR PROBABILITY OF SUCH DAMAGES.
Nothing herein shall preclude a party from seeking equitable remedies in an
appropriate case. Except for the indemnity provisions of Section 10 and the
confidentiality provisions in Section 12(a), (i) the liability of Quarterdeck
under this Agreement shall be limited to the amounts paid to it by Symantec
hereunder during the one year period ending upon accrual of such liability, and
Symantec's liability shall be limited to the same amount, except that Symantec's
obligation to make the payments described in this Agreement shall be in addition
to such amount. FURTHER, THE EXCLUSIONS OF DAMAGES AND LIMITATIONS OF LIABILITY
STATED ABOVE SHALL REMAIN IN EFFECT, EVEN IF THE EXCLUSIVE REMEDIES PROVIDED FOR
IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE. Nothing in this Section 9
shall in any way limit any right or remedy available to either party for any
infringement or misappropriation of such party's copyrights, patents,
trademarks, trade secrets, or other intellectual property rights.
9
<PAGE> 10
10. INDEMNIFICATION.
10.1 BY QUARTERDECK. Quarterdeck shall, at its expense and Symantec's
request, defend any claim brought against Symantec and Symantec's affiliates,
directors, officers, employees, agents and independent contractors, (a) that the
Quarterdeck Software infringes any United States copyrights or trade secrets; or
(b) which, if true, would constitute a breach of a warranty by Quarterdeck in
Section 8.1, and Quarterdeck will pay any damages awarded by a court of
competent jurisdiction in a final, unappealable judgment for such claim or any
amount owing in settlement of such claim, provided that Symantec tenders sole
control of the defense and settlement of such claim to Quarterdeck and
reasonably cooperates in the defense thereof.
10.2 BY SYMANTEC. Symantec shall, at its expense and Quarterdeck's request,
defend any claim brought against Quarterdeck and Quarterdeck's affiliates,
directors, officers, employees, agents and independent contractors, based on any
allegation that Symantec's business practices with respect to the Software are
unlawful or unethical, on allegations of Symantec's negligence, recklessness,
willful misconduct, on allegations by Marubeni Corporation that Symantec's
distribution of Japanese language versions of the Quarterdeck Products violated
Marubeni Corporation's rights under the agreement between Quarterdeck and
Marubeni dated September 29, 1997, or on allegations that, if true, would
constitute a breach of this Agreement, and Symantec will pay any damages awarded
by a court of competent jurisdiction in a final, unappealable judgment for such
claim or any amount owing in settlement of such claim, provided that Symantec
tenders sole control of the defense and settlement of such claim to Quarterdeck
and reasonably cooperates in the defense thereof.
11. PROTECTION OF RIGHTS. As an express condition of this Agreement, each party
will apply to any works created, copied or distributed under the Licenses
applicable copyright and other proprietary rights notices sufficient to protect
each party's rights in such works. Each party will retain the ownership to its
trademarks and tradenames and, except as expressly provided in this Agreement,
neither party will have any right to use the trademarks or tradenames of the
other party.
12. GENERAL.
(a) CONFIDENTIALITY. Each party acknowledges that in the course of the
relationship contemplated by this Agreement it will receive information which is
confidential and proprietary to the other. Each party agrees not to use such
information except in performance of this Agreement and not to disclose such
information to third parties. Such confidential and proprietary information
includes, without limitation, the parties' current and future business plans,
and other information which is stamped or marked as confidential by such party
and any other information disclosed by such party if, within 30 days of
disclosure, whether orally or by way of written documents, such party identifies
by written notice to the other the confidential nature of such information.
Without limiting the foregoing, any Source Code shall be deemed confidential
information regardless of whether so marked or identified. The foregoing
restrictions will not apply to information that (a) has been independently
developed other than pursuant to this Agreement and without reference to the
disclosing party's information, (b) has
10
<PAGE> 11
become publicly known through no wrongful act of the party wishing to make use
of such information, (c) has been rightfully received from a third party
authorized to make such disclosure without restriction, (d) has been approved
for release in writing, or (e) is required to be disclosed by law, provided that
the party required to make such disclosure shall be required to make reasonable
efforts, consistent with applicable law, to limit the scope and nature of such
required disclosure.
(b) EQUITABLE RELIEF. Each party acknowledges that any breach of its
obligations under this Agreement with respect to the proprietary rights or
confidential information of the other will cause the other irreparable injury
for which there are inadequate remedies at law, and that the injured party will
be entitled to equitable relief with respect to any such breach in addition to
all other remedies provided by this Agreement or available at law.
(c) GOVERNING LAW. This Agreement will be governed and interpreted in
accordance with the laws of the State of California, except for that body of law
pertaining to conflicts of law. Venue for any legal action shall be proper in
the state and federal courts of California, and Symantec and Quarterdeck each
expressly consent to venue and jurisdiction therein.
(d) RELATIONSHIP OF PARTIES. Quarterdeck's relationship with Symantec
during the term of this Agreement will be that of an independent contractor.
Neither party will have, and neither party will represent that it has, any
power, right or authority to bind the other party, or to assume or create any
obligation or responsibility, express or implied, on behalf of the other party
or in the other party's name, except as herein expressly provided. Nothing
stated in this Agreement shall be construed as constituting Quarterdeck and
Symantec as partners or as creating the relationships of employer/employee,
franchiser/franchisee, or principal/agent between the parties; provided that
nothing herein shall limit the parties respective rights and obligations under
the Merger Agreement.
(e) ATTORNEYS' FEES. In the event that any legal action is required
in order to enforce or interpret any of the provisions of this Agreement, the
prevailing party in such action shall recover all reasonable costs and expenses,
including attorney's fees, incurred in connection therewith.
(f) WAIVER. The failure of either party to enforce any provision of
this Agreement shall not be deemed a waiver of that or any other provision of
this Agreement.
(g) HEADINGS; INTERPRETATION. The headings of the Sections of this
Agreement are for convenience only and will not be of any effect in construing
the meanings of the Sections. Because both parties have participated in the
drafting of this Agreement, there shall be no presumption that the terms of the
Agreement should be interpreted against the drafting party.
(h) SEVERABILITY. If any of the provisions of this Agreement are
found or deemed by a court of competent jurisdiction to be invalid or
unenforceable, they shall be severable from the remainder of the Agreement and
shall not cause the invalidity or unenforceability of the Agreement.
11
<PAGE> 12
(i) NOTICES. Notices to either party shall be in writing and shall be
deemed delivered when served in person or three Business Days after being
deposited in the United States mail, first-class certified mail, postage
prepaid, return receipt requested, or one Business Day after being dispatched by
a nationally recognized one-day express courier service addressed as follows:
if to Symantec, to Symantec Corporation
10201 Torre Ave.
Cupertino, CA 95014
Attention: General Counsel
if to Quarterdeck, to
Quarterdeck Corporation
13160 Mindanao Way
Marina del Rey, CA 90292
Attention: Chief Executive Officer with a copy to Quarterdeck's General Counsel
at the same address and to Quarterdeck's outside counsel:
Schwartz and Associates
333 South Grand Avenue, Suite 3950
Los Angeles, California 90071
Attention: Brad Schwartz
(j) ENTIRE AGREEMENT. This Agreement (and, to the extent referenced
herein, the Merger Agreement) constitutes the entire agreement between the
parties pertaining to the subject matter hereof, and supersedes in their
entirety any and all written or oral agreements previously existing between the
parties with respect to such subject matter (provided that this Agreement shall
not supercede the Merger Agreement or any agreement ancillary or entered into
pursuant thereto). Any modifications of this Agreement must be in writing and
signed by duly authorized officers of each party hereto.
(k) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed an original, and
all of which together shall constitute one and the same instrument.
12
<PAGE> 13
(l) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and, except as otherwise provided herein, their
respective legal successors and permitted assigns, provided however that neither
party shall assign, voluntarily or involuntarily or by operation of law, or
otherwise, any part of this Agreement unless in connection with such party's
assignment to an entity which it then controls, is under the control of, or is
under common control with or in connection with a transfer of substantially all
assets of such party, or with the prior written consent of the other party.
Notwithstanding the foregoing, Quarterdeck may assign this Agreement, including
without limitation all of Quarterdeck's rights, remedies, obligations and duties
of performance, in connection with a sale or assignment of the Intellectual
Property Rights in the Quarterdeck Licensed Products.
The parties have executed this Agreement on the Effective Date.
SYMANTEC CORPORATION QUARTERDECK CORPORATION
By: By:
------------------------------ ------------------------------
Printed Name: Printed Name:
-------------------- -------------------
Title: Title:
-------------------------- --------------------------
SYMANTEC LIMITED
By:
------------------------------
Printed Name:
-------------------
Title:
--------------------------
<PAGE> 14
EXHIBIT A
QUARTERDECK SOFTWARE
Quarterdeck Software means (a) the product distributed by Quarterdeck under the
name "CleanSweep," and (b) any updates, upgrades or other revisions to
CleanSweep.
<PAGE> 15
EXHIBIT B
DELIVERABLES
The Source Code Deliverables with respect to Quarterdeck Software shall include
the following:
Copies of machine-readable Source Code for the then current versions of the
Quarterdeck Software.
Copies of system build instructions such that Symantec can rebuild the
Quarterdeck Software from the Source Code provided.
Copies of existing Quarterdeck technical documentation for those
maintaining and supporting the Quarterdeck Software.
Copies of any tools written by Quarterdeck for the development of the
Quarterdeck Software and the instructions for their operation.
Copies of existing testing materials developed by Quarterdeck for the
Quarterdeck Software.
User manual source files
Any technical specs, design docs, etc. that exist for the code
Test cases, tools and plans, including DBCS and Hi-ASCII cases/plans -any
in-house localization tools written for the product
Bug database and top known issues (i.e, were they planning any inlines to
fix bugs causing major support issues?)
Any techsupport documents or databases
List of scripts and script-creation documentation
The Object Code Deliverables for the Quarterdeck Software shall include the
following:
Electronic masters for all associated end-user documentation for the
Software.
Golden master disks of the binary executable form of the then current
version of the Quarterdeck Software, electronic masters for all associated
end-user documentation for the Quarterdeck Software, and copies of all
available technical support and customer support materials, provided that
Quarterdeck shall have no obligation to identify or disclose any
information regarding its customers.
<PAGE> 16
EXHIBIT C
END USER LICENSE
SYMANTEC END-USER LICENSE
NOTICE: SYMANTEC LICENSES THE ENCLOSED SOFTWARE TO YOU ONLY UPON THE CONDITION
THAT YOU ACCEPT ALL OF THE TERMS CONTAINED IN THIS LICENSE AGREEMENT. PLEASE
READ THE TERMS CAREFULLY BEFORE OPENING THIS PACKAGE, AS OPENING THE PACKAGE
WILL INDICATE YOUR ASSENT TO THEM. IF YOU DO NOT AGREE TO THESE TERMS, THEN
SYMANTEC IS UNWILLING TO LICENSE THE SOFTWARE TO YOU, IN WHICH EVENT YOU SHOULD
RETURN THE FULL PRODUCT WITH PROOF OF PURCHASE TO THE DEALER FROM WHOM IT WAS
ACQUIRED WITHIN SIXTY DAYS OF PURCHASE, AND YOUR MONEY WILL BE REFUNDED.
LICENSE AND WARRANTY:
The software which accompanies this license (the "Software") is the property of
Symantec or its licensors and is protected by copyright law. While Symantec
continues to own the Software, you will have certain rights to use the Software
after your acceptance of this license. Except as may be modified by a license
addendum which accompanies this license, your rights and obligations with
respect to the use of this Software are as follows:
o You may:
(i) use one copy of the Software on a single computer;
(ii) make one copy of the Software for archival purposes, or copy the software
onto the hard disk of your computer and retain the original for archival
purposes;
(iii) use the Software on a network, provided that you have a licensed copy of
the Software for each computer that can access the Software over that network;
(iv) after written notice to Symantec, transfer the Software on a permanent
basis to another person or entity, provided that you retain no copies of the
Software and the transferee agrees to the terms of this agreement; and
(v) if a single person uses the computer on which the Software is installed at
least 80% of the time, then after returning the completed product registration
card which accompanies the Software, that person may also use the Software on a
single home computer.
o You may not:
<PAGE> 17
(i) copy the documentation which accompanies the Software;
(ii) sublicense, rent or lease any portion of the Software;
(iii) reverse engineer, decompile, disassemble, modify, translate, make any
attempt to discover the source code of the Software, or create derivative works
from the Software; or
(iv) use a previous version of the Software after you have received an upgraded
version as a replacement of the prior version. Upon upgrading the Software, all
copies of the prior version must be destroyed.
o Sixty Day Customer Satisfaction Guarantee:
If you are the original licensee of this copy of the Software and are
dissatisfied with it for any reason, you may return the complete product,
together with your receipt, to Symantec or an authorized dealer, postage
prepaid, for a full refund at any time during the sixty day period following the
delivery to you of the Software.
o Limited Warranty:
Symantec warrants that the media on which the Software is distributed will be
free from defects for a period of sixty (60) days from the date of delivery of
the Software to you. Your sole remedy in the event of a breach of this warranty
will be that Symantec will, at its option, replace any defective media returned
to Symantec within the warranty period or refund the money you paid for the
Software. Symantec does not warrant that the Software will meet your
requirements or that operation of the Software will be uninterrupted or that the
Software will be error-free.
THE ABOVE WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. THIS WARRANTY GIVES YOU
SPECIFIC LEGAL RIGHTS. YOU MAY HAVE OTHER RIGHTS, WHICH VARY FROM STATE TO
STATE.
o Disclaimer of Damages:
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS ESSENTIAL
PURPOSE, IN NO EVENT WILL SYMANTEC OR ITS LICENSORS BE LIABLE TO YOU FOR ANY
SPECIAL, CONSEQUENTIAL, INDIRECT OR SIMILAR DAMAGES, INCLUDING ANY LOST PROFITS
OR LOST DATA ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF
SYMANTEC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
SOME STATES DO NOT ALLOW THE LIMITATION OR EXCLUSION OF LIABILITY
2
<PAGE> 18
FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU.
IN NO CASE SHALL THE LIABILITY OF SYMANTEC OR ITS LICENSORS EXCEED THE
PURCHASE PRICE FOR THE SOFTWARE. The disclaimers and limitations set forth above
will apply regardless of whether you accept the Software.
o U.S. Government Restricted Rights:
RESTRICTED RIGHTS LEGEND. Use, duplication, or disclosure by the Government is
subject to restrictions as set forth in subparagraph (c) (1) (ii) of the Rights
in Technical Data and Computer Software clause at DFARS 252.227-7013 or
subparagraphs (c) (1) and (2) of the Commercial Computer Software-Restricted
Rights clause at 48 CFR 52.227-19, as applicable, Symantec Corporation,
[Address].
o General:
This Agreement will be governed by the laws of the State of California. This
Agreement may only be modified by a license addendum which accompanies this
license or by a written document which has been signed by both you and Symantec.
Should you have any questions concerning this Agreement, or if you desire to
contact Symantec for any reason, please write: Symantec Customer Sales and
Service, [address.]
3
<PAGE> 19
EXHIBIT D
FORM OF SOURCE CODE ESCROW AGREEMENT
ESCROW AGREEMENT
Account Number:
This Escrow Agreement (this "Agreement") is effective October 15, 1998 (the
"Effective Date") by and among Data Securities International, Inc., a Delaware
corporation with offices at 425 California Street, Suite 1450, San Francisco,
California 94104 ("Escrow Agent"), Quarterdeck Corporation, a Delaware
corporation with principal offices at 13160 Mindanao Way, Marina del Rey,
California 90292 ("Quarterdeck") and Symantec Corporation, a Delaware
corporation with principal offices at 10201 Torre Avenue, Cupertino, California
95014 ("Symantec").
Recitals
This Agreement is entered into in furtherance of the provisions and
objectives of that certain Agreement and Plan of Merger (the "Merger Agreement")
among Quarterdeck, Symantec, and McGuire Acquisition Corporation, dated October
15, 1998 , and a License Agreement (the "License Agreement") between Symantec
and Quarterdeck. The License Agreement provides that under certain conditions
Symantec shall have the right to receive a license to the Quarterdeck Software,
as defined in Exhibit A, and that Quarterdeck shall place in escrow the
Deliverables identified in Exhibit B.
Agreement
For valuable consideration, the parties agree as follows:
1. Deposit. Quarterdeck has heretofore deposited with Escrow Agent the
Source Code Deliverables (as defined in the License Agreement) (the "Deposit").
Symantec has verified that the initial Deposit includes the appropriate
Deliverables. If there are changes to the Quarterdeck Software that are released
to the public, Quarterdeck shall keep the Deposit current by adding or
substituting materials within two business days after such changes are released
to the public. Upon any such additional or replacement Deposit, Escrow Agent
will, if requested by Symantec, build the binary version of the Quarterdeck
Software from the materials included in the Deposit and deliver the resulting
executable program to Symantec. Symantec may then verify that the Deposit is
complete by comparing the executable program delivered by the Escrow Agent to
the then current
4
<PAGE> 20
version of the Quarterdeck Software.
2. Retention of Replaced Deposit. Escrow Agent will retain any replaced
Deposit (including any replacement of a portion of the Deposit) unless Escrow
Agent has been instructed by Symantec within 10 business days of notice from
Escrow Agent to destroy it. Retention of the replaced Deposit may result in an
additional fee, as specified in Escrow Agent's fee schedule, to be paid by
Symantec.
3. Verification and Delivery of Deposit to Escrow Agent. Risk of loss or
damage during shipment of the Deposit or any replacement Deposit to Quarterdeck
or Escrow Agent shall rest with Quarterdeck. Accordingly, Escrow Agent shall
follow any instructions provided by Quarterdeck regarding transport or shipment
of the Deposit. The Deposit shall be packaged for storage as reasonably
determined by Escrow Agent and accompanied by a cover sheet identifying the
contents as indicated in Exhibit A. Escrow Agent shall give written notice to
Symantec of any replacement Deposit or other addition or substitution of
materials in the Deposit within three business days after such replacement
Deposit.
4. Obligations of Escrow Agent. Escrow Agent shall safekeep the Deposit
in a security vault and exercise the same high standard of care to protect the
Deposit which Escrow Agent would use to protect items of this nature which
Escrow Agent might own, but in no event less than that standard of care
customary in the industry.
5. Term of Agreement. This Agreement shall have an initial term of six
months, renewable upon receipt by Escrow Agent of the specified renewal fee. If
Escrow Agent does not receive the renewal fee by the expiration date, Escrow
Agent shall give notice to Symantec. If the fee is not received from Symantec
within thirty days of such notice, this Agreement shall expire. Upon expiration
of this Agreement, Escrow Agent will return the Deposit to Quarterdeck. All
obligations of Escrow Agent under this Agreement shall terminate thereafter,
except for those obligations set forth in Section 9 below. In no event shall
this Agreement be renewed after expiration or termination of the Merger
Agreement or the License Agreement.
6. Delivery of Deposit to Symantec. If Symantec notifies Escrow Agent of
the occurrence of a release condition as defined in Exhibit C, Escrow Agent
shall immediately notify Quarterdeck in writing and provide Quarterdeck with a
copy of the notice from Symantec. Quarterdeck shall have ten business days from
the date of receipt of such written notice from Escrow Agent to notify Escrow
Agent, with a copy to Symantec, that the release condition has not occurred.
Failing such timely notice from Quarterdeck, Escrow Agent shall release the
Deposit to Symantec. Upon release of the deposit, Symantec shall have the
license to use the Deposit as set forth in the License Agreement (the
"Development License"). However, if Escrow Agent receives timely notice from
Quarterdeck, Escrow Agent shall not release the Deposit but shall instead notify
the parties that there is a dispute, and subject to Section 5, Escrow Agent will
continue to hold the Deposit until such dispute is resolved.
5
<PAGE> 21
Symantec shall in no event use the Deposit except to the extent
permitted under the Development License. Further, Symantec shall not disclose
the Deposit or any part thereof to any person or entity, except that, after
rightful receipt of the Deposit hereunder, Symantec may disclose the Deposit to
its employees who require access to the Deposit to allow Symantec to exercise
its rights under the Development License, provided that such employees have
first agreed in writing to refrain from disclosing the Deposit except as
permitted under this Agreement. Symantec shall protect the Deposit using the
same standard of care it uses to protect its own most valuable source code, but
in no event less care than is prudent and customary under the circumstances.
Symantec's obligations under this paragraph shall survive any termination or
expiration of this Agreement.
7. Dispute Resolution Process. Escrow Agent shall first notify
Quarterdeck and Symantec in writing of contrary instructions from Symantec and
Quarterdeck for release of the Deposit (the "Dispute Notice"). Within five
business days after the Dispute Notice is sent by Escrow Agent, Symantec and
Quarterdeck shall each appoint a referee, and the referees so appointed shall
jointly appoint a third referee (the "Neutral Referee"). Quarterdeck and
Symantec shall each notify the other parties of its referee's identity within
such five-day period.
Within ten business days after the Dispute Notice, Symantec and
Quarterdeck shall use their respective best efforts to cause the referees to
meet at a mutually acceptable location and to hear testimony and other evidence
that Quarterdeck and Symantec may wish to present with respect to the dispute.
The meetings shall proceed with all referees present, and shall be conducted
from 9:30 a.m. to 5:00 p.m. on no more than three consecutive business days .
Symantec shall present up to one day of evidence followed by up to one day of
presentation from Quarterdeck, followed by a final day reserved for rebuttal by
each party, concluding with Quarterdeck's rebuttal. Quarterdeck, Symantec and
Escrow Agent agree that the evidence presented at the hearings which is
designated as confidential shall not be disclosed to other third parties except
as required by law. Within two business days after the close of the
presentations, the referees shall resolve the dispute by majority vote. Any
refusal to vote by one of the referees appointed by a party shall be deemed an
abstention by that referee. If the there is no majority vote and the Neutral
Referee refuses to vote, then the referees appointed by the parties shall
appoint a replacement Neutral Referee as soon as possible, and the process
described in this paragraph shall be repeated.
This dispute resolution process shall be the exclusive means for
resolving disputes to which it applies, and the decision of the referees shall
be final, conclusive and enforceable by a court of competent jurisdiction. All
costs of the referees shall be borne by the unsuccessful party.
8. Joint Instructions. Symantec and Quarterdeck may, by joint written
instruction to Escrow Agent, authorize the delivery of the Deposit to the party
named in the instruction; provided that Escrow Agent shall not comply with any
such instructions unless it notifies
6
<PAGE> 22
Quarterdeck of such instructions and Escrow Agent's intention to release the
Deposit to Symantec and Quarterdeck confirms such instructions in writing.
Escrow Agent shall in any event wait not less than five business days after
sending such notice before releasing the Deposit, even if it earlier receives
such confirmation.
9. Use and Nondisclosure. Except as provided in this Agreement, Escrow
Agent shall not copy, disclose or make any use whatsoever of the Deposit. Escrow
Agent shall not disclose or make use of any confidential information provided to
Escrow Agent by Quarterdeck in connection with this Agreement without the prior
written consent of Quarterdeck. Escrow Agent shall not disclose or make use of
any confidential information provided to Escrow Agent by Symantec in connection
with this Agreement without the prior written consent of Symantec. These
obligations shall continue indefinitely notwithstanding termination of this
Agreement.
10. Records and Audit Rights. Escrow Agent shall keep complete written
records of the activities undertaken and materials prepared pursuant to this
Agreement. Upon reasonable notice to Escrow Agent during the term of this
Agreement, each of Quarterdeck and Symantec shall be entitled at reasonable
times during normal business hours at Escrow Agent's facilities to inspect the
records of Escrow Agent with respect to this Agreement.
11. Designated Representative. Quarterdeck, Symantec and Escrow Agent
shall each designate an authorized individual to receive notices and otherwise
act on behalf of each such party in connection with this Agreement. Failing
designation, notices shall be sent to the signatories to this Agreement.
12. Notices. All notices in connection with this Agreement shall be in
writing given to the parties at their respective addresses shown above (or such
other address as may be designated by a party in writing to the other parties)
by being personally delivered, sent by overnight, pre-paid air freight, or sent
by registered or certified mail, return receipt requested, and shall be
effective upon receipt if personally delivered, upon two business days after
deposit if sent by air freight, or upon five business days after deposit if sent
with the U.S. Postal Service.
13. Fees. All fees shall be due in full within thirty (30) days of the
date of Escrow Agent's invoice. Symantec shall pay the fees due. Fees shall be
those specified in Escrow Agent's schedule of fees in effect for the term of
this Agreement plus applicable taxes. Escrow Agent shall notify Symantec at
least ninety days prior to expiration of the term (or any renewal term) of this
Agreement of any scheduled increase of the fees payable for succeeding renewal
terms.
14. Authenticity. Subject to Section 8, Escrow Agent may act in reliance
upon any instruction, instrument or signature believed to be genuine and may
assume that it has been duly authorized.
15. Indemnification. Escrow Agent shall be responsible to perform its
7
<PAGE> 23
obligations under this Agreement and to act in a reasonable and prudent manner
with regard to this escrow arrangement. Provided Escrow Agent has acted in the
manner stated in the preceding sentence, Symantec and Quarterdeck each agree to
indemnify, defend and hold harmless Escrow Agent from any and all claims,
actions, damages, arbitration fees and expenses, costs, attorney's fees and
other liabilities incurred by Escrow Agent relating in any way to this escrow
arrangement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
17. Complete Agreement. This Agreement, including the Exhibits,
constitutes the entire agreement between the parties concerning the subject
matter and shall supersede all previous communications, representations,
understandings, and agreements, either oral or written, between the parties.
Without limiting the generality of the foregoing sentence, this Agreement shall
specifically supplant and replace the Interim Escrow Agreement among the parties
dated as of October 13, 1998 (the "Interim Agreement"). The parties acknowledge
and agree that the Interim Agreement shall terminate as of the date hereof, and
that the deposit under the Interim Agreement shall hereafter be governed by this
Agreement.
18. Severability. If any provision of this Agreement is held by any court
to be invalid or unenforceable, then that provision will be severed from this
Agreement and the remaining provisions shall continue in force.
19. Exhibits. The following Exhibit is made a part of this Agreement by
this reference:
Exhibit A: Quarterdeck Software
Exhibit B: Deliverables
Exhibit C: Release Conditions
QUARTERDECK CORPORATION SYMANTEC CORPORATION
- ---------------------------- ----------------------------
By: By:
Its: Its:
8
<PAGE> 24
DATA SECURITIES INTERNATIONAL, INC.
- ----------------------------
By:
Its:
9
<PAGE> 25
EXHIBIT A
QUARTERDECK SOFTWARE
Quarterdeck Software means (a) the product distributed by Quarterdeck under the
name "CleanSweep," and (b) any updates or upgrades to CleanSweep.
<PAGE> 26
EXHIBIT B
DELIVERABLES
The Deliverables with respect to Quarterdeck Software shall include the
following:
Copies of machine-readable Source Code for the then current versions of the
Quarterdeck Software.
Copies of system build instructions such that Symantec can rebuild the
Quarterdeck Software from the Source Code provided.
Copies of existing Quarterdeck technical documentation for those
maintaining and supporting the Quarterdeck Software.
Copies of any tools written by Quarterdeck for the development of the
Quarterdeck Software and the instructions for their operation.
Copies of existing testing materials developed by Quarterdeck for the
Quarterdeck Software.
Electronic masters for all associated end-user documentation for the
Software.
Any technical specs, design docs, etc. that exist for the code
Test cases, tools and plans, including DBCS and Hi-ASCII cases/plans -any
in-house localization tools written for the product
Bug database and top known issues (i.e, were they planning any inlines to
fix bugs causing major support issues?)
Any techsupport documents or databases
List of scripts and script-creation documentation
BINARY EXECUTABLES
Golden master disks of the binary executable form of the then current
version of the Quarterdeck Software, electronic masters for all associated
end-user documentation for the Quarterdeck Software, and copies of all
available technical support and customer support materials.
<PAGE> 27
EXHIBIT C
RELEASE CONDITIONS
Any of the following shall be deemed to be a Release Condition:
1) Consummation (as that term is defined in the License Agreement) in
accordance with the terms of the License Agreement.
2) The occurrence of an event giving rise to an obligation on the part of
Quarterdeck to pay a Company Fee (as that term is defined in the Merger
Agreement) in accordance with the terms of the Merger Agreement
<PAGE> 1
EXHIBIT 99.4
SECOND AMENDMENT TO RIGHTS AGREEMENT
This Second Amendment to Rights Agreement (this "Amendment"),
dated as of October 15, 1998, by and between Quarterdeck Corporation, a Delaware
corporation (the "Company"), and American Stock Transfer & Trust Company (the
"Successor Rights Agent"), is an amendment to that certain Rights Agreement,
dated as of August 11, 1992 (as amended, the "Rights Agreement"), made by and
between the Company and Bank of America National Trust and Savings Association
(the "Original Rights Agent"). Capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to them in the Rights Agreement.
WHEREAS, the Company and the Original Rights Agent were
parties to that certain Rights Agreement;
WHEREAS, the Original Rights Agent resigned as Rights Agent
and, pursuant to the Amendment to Rights Agreement, dated as of November 7,
1996, by and between the Company and the Successor Rights Agent, the Successor
Rights Agent was appointed to replace the Original Rights Agent as Rights Agent
under the Rights Agreement;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the
Company may, prior to the Distribution Date, without the approval of the holders
of the Company's Common Stock, $.001 par value per share (the "Common Stock"),
amend or supplement the Rights Agreement;
WHEREAS, on October 14, 1998, the Company's Board of Directors
acted to amend the Rights Agreement as set forth in Section 1 below;
WHEREAS, Section 27 of the Rights Agreement provides that
after such Board action, the Company shall give notice of such amendment to the
Successor Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at their addresses as they appear on the
registry of the Transfer Agent for the Common Stock;
WHEREAS, Section 27 also provides that upon delivery of a
certificate from an appropriate officer of the Company that states that the
proposed amendment to the Rights Agreement is in compliance with Section 27 (the
"Officer's Certificate"), the Successor Rights Agent shall execute an amendment
to the Rights Agreement reflecting such amendment; and
WHEREAS, the Officer's Certificate has been delivered by the
Company to the Successor Rights Agent;
NOW, THEREFORE, in consideration of the premises and of the
covenants herein contained, the parties hereto agree as follows:
<PAGE> 2
1. AMENDMENT TO RIGHTS AGREEMENT. A Section 35 shall be added
to the Rights Agreement, which Section shall read as follows:
"Section 35. Symantec Tender Offer. Notwithstanding anything
in this Agreement to the contrary, the acquisition of Common Shares (an
"Acquisition") by Symantec Corporation, a Delaware corporation ("Symantec"), any
wholly-owned subsidiary of Symantec or any Affiliate or Associate of Symantec
solely as a result of the transactions relating to and contemplated by that
certain Agreement and Plan of Merger (the "Merger Agreement"), dated as of
October 15, 1998, by and between the Company, Symantec and Quarterdeck
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Symantec ("Acquisition Sub"), including, without limitation, the proposed tender
offer by Acquisition (the "Tender Offer") for all of the issued and outstanding
Common Shares of the Company and the proposed subsequent merger (the "Merger")
of Symantec or Acquisition Sub with and into the Company, or of the Company with
and into Symantec or Acquisition Sub, shall not result in Symantec, Acquisition
Sub, or any of their respective Affiliates or Associates being deemed an
Acquiring Person for purposes of this Agreement. In addition, neither the Tender
Offer (including, without limitation, the announcement and commencement of the
Tender Offer and the acquisition of Common Shares or Preferred Shares pursuant
to the Tender Offer) nor the proposed subsequent Merger shall result in a
Distribution Date, as defined herein. The Tender Offer shall constitute a
Permitted Offer for purposes of this Agreement and no provision hereof shall
operate to make the Rights exercisable as a result of such Tender Offer. In the
event of the consummation of the Merger, this Agreement shall terminate
immediately at such time as a certificate of merger evidencing the Merger is
filed with the Secretary of State of the State of Delaware."
2. STATUS OF RIGHTS AGREEMENT. Except as otherwise amended,
modified or supplemented by this Amendment, the Rights Agreement shall continue
in full force and effect.
3. COUNTERPARTS. This Amendment may be executed
simultaneously, in two counterparts, each of which shall be deemed an original,
but both of which together shall constitute one and the same instrument.
4. APPLICABLE LAW. This Amendment shall be construed and
enforced in accordance with the laws of the State of Delaware.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
QUARTERDECK CORPORATION
------------------------------
By: Frank R. Greico
Its: Acting Chief Financial Officer
AMERICAN STOCK TRANSFER & TRUST
------------------------------
By:
Its:
3
<PAGE> 4
QUARTERDECK CORPORATION
OFFICER'S CERTIFICATE
The undersigned, Frank R. Greico, hereby certifies, pursuant to Section 27 of
the Rights Agreement, dated as of August 11, 1992 (as amended, the "Rights
Agreement"), made by and between Quarterdeck Corporation, a Delaware corporation
(the "Company") and American Stock Transfer & Trust Company (the "Successor
Rights Agent"), as successor to Bank of America National Trust and Savings
Association (the "Original Rights Agent"), that:
1. He is the duly elected, qualified and acting Chief Financial
Officer of the Company, and as such, has access to the
Company's corporate records and is familiar with the matters
therein contained and herein certified;
2. The second amendment to the Rights Agreement, effected by
action of the Board of Directors of the Company on October 15,
1998 pursuant to a resolution in the form attached hereto as
Exhibit A, is in compliance with the terms of Section 27 of
the Rights Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate as
of October 15, 1998.
----------------------------
Frank R. Greico
Acting Chief Financial Officer
<PAGE> 5
Quarterdeck Corporation
13160 Mindanao Way, Third Floor
Marina del Rey, California 90292
(310) 309-3700
October 15, 1998
All Holders of Quarterdeck Corporation Preferred Share Purchase Rights
Re: Rights Agreement, dated as of August 11, 1992 (as amended, the
"Rights Agreement"), made by and between Quarterdeck
Corporation, a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company (the "Successor Rights
Agent"), as successor to Bank of America National Trust and
Savings Association (the "Original Rights Agent")
To Holders of Quarterdeck Corporation Preferred Share Purchase Rights:
Reference is made to the Rights Agreement, dated as of August
11, 1992 (as amended, the "Rights Agreement"), made by and between Quarterdeck
Corporation, a Delaware corporation (the "Company"), and American Stock Transfer
& Trust Company (the "Successor Rights Agent"), as successor to Bank of America
National Trust and Savings Association (the "Original Rights Agent"). Pursuant
to Section 27 of the Rights Agreement, the Board of Directors of the Company
(the "Board") may, prior to the Distribution Date (as defined in the Rights
Agreement), supplement or amend the Rights Agreement without the approval of any
holders of the Company's Common Stock, $.001 par value per share (the "Common
Stock"). On October 14, 1998, the Board amended the Rights Agreement as
described in Exhibit A attached hereto. Pursuant to Section 27 of the Rights
Agreement, the Company hereby notifies you of such amendment.
Very truly yours,
QUARTERDECK CORPORATION
<PAGE> 1
EXHIBIT 99.5
QUARTERDECK PRESS RELEASE
PRESS RELEASE ANNOUNCEMENT
CONTACTS:
King Lee
Quarterdeck Corporation
October 16, 1998 310-309-3221
[email protected]
FOR IMMEDIATE RELEASE
Frank Greico
Quarterdeck Corporation
310-309-4232
[email protected]
QUARTERDECK ANNOUNCES NASDAQ LISTING STATUS AND SYMANTEC TENDER OFFER
MARINA DEL REY, Calif. -- October 16, 1998 -- Quarterdeck Corporation (OTC:
QDEK) today announced that after the close of market on October 15, 1998, it
received notification of Nasdaq's decision to delist the Company's shares from
the Nasdaq Stock Market effective October 15, 1998 as a result of the failure of
the Company to meet certain listing requirements. The Company had previously
announced that it had been notified by Nasdaq that it was scheduled for
delisting pending the outcome of a hearing that was held in August before the
Nasdaq Listing Qualifications Panel. Shares of the Company's common stock are
expected to be eligible for trading on the OTC Bulletin Board.
The Company also announced yesterday that Symantec (Nasdaq: SYMC) will commence
a cash tender offer early next week for all outstanding shares of Quarterdeck
common stock at the net price of $0.52 per share pursuant to the terms of a
definitive merger agreement between the Company and Symantec. The purchase price
is approximately $65 million including the assumption of Quarterdeck's
outstanding debt. The Board of Directors of both companies has approved this
transaction. Completion of the tender offer is subject to certain conditions,
including the tender of a majority of the Quarterdeck shares, receipt of
necessary government approvals and the expiration of applicable waiting periods
under the Hart-Scott-Rodino Act.
ABOUT QUARTERDECK
Quarterdeck Corporation is a global leader in the development and marketing of
PC helpware -- software designed to prevent and solve PC performance problems,
especially those encountered in networked -- Internet and intranet --
environments. The Company's goal is to make personal computing trouble-free for
users and network administrators alike, while reducing the need for live
technical support. Quarterdeck's current product line, which addresses storage
management, system conflict resolution, virus protection, system updating, and
enhanced access to networked information and communications resources, is
marketed to both end-users and businesses via retail distribution, corporate
resellers and OEMs, direct marketing channels, and the Internet. Quarterdeck's
products are available in more than 14,000 outlets throughout the United States
and Canada, as well as in over 29 countries worldwide. Incorporated in 1982,
Quarterdeck's worldwide headquarters are in Marina del Rey, California, with its
European operations based in Dublin, Ireland.
Further information may be obtained by calling 800-354-3222 toll-free or
573-443-3282, by accessing Quarterdeck's Web site at
http://www.quarterdeck.com/, or by sending e-mail requests to
[email protected].
# # #
NOTE TO EDITORS: If you would like more information on Quarterdeck Corporation
and its products, please view the Quarterdeck Press Center at
http://www.quarterdeck.com/qdeck/press.
Quarterdeck is a registered trademark of Quarterdeck Corporation. All other
brands and products referenced herein are the trademarks or registered
trademarks of their respective holders.
