<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement [_] Confidential, for use of the
Commission only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
Quarterdeck Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.001 per share
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
38,135,807*
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$0.52 per share of Common Stock*
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$19,830,619*
--------------------------------------------------------------------------
(5) Total fee paid:
$3,966.13*
--------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$9,614.27*
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 14D-1
--------------------------------------------------------------------------
(3) Filing Party:
Symantec Corporation
--------------------------------------------------------------------------
(4) Date Filed:
October 19, 1998
--------------------------------------------------------------------------
* The aggregate number of securities represents the total number of shares of
Common Stock outstanding and the number of shares of Common Stock issuable upon
exercise of options for a price of less than $0.52 and upon conversion of shares
of Series C Convertible Preferred Stock for which holders of the Company's
Common Stock shall receive the proposed cash payment upon the Merger. The unit
price is based on the cash payment to be made to the holders of the Company's
Common Stock, options and Series C Convertible Preferred Stock. The aggregate
value of the transaction equals the $0.52 share price multiplied by the
aggregate number of securities. Based upon such value, the fee due upon the
filing of the preliminary information statement is $3,966.13, which amount is
completely offset by the $9,614.27 fee previously paid in connection with the
filing of the Schedule 14D-1 by Symantec Corporation in connection with the
first step of the transaction of which the merger that is the subject of this
information statement is a part.
<PAGE>
[LOGO OF QUARTERDECK CORPORATION]
QUARTERDECK CORPORATION
13160 MINDANAO WAY
MARINA DEL REY, CALIFORNIA 90292
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 29, 1999
----------------
To the Stockholders of
Quarterdeck Corporation:
We will hold a Special Meeting of our stockholders on March 29, 1999 at
8:00 a.m. (local time) at the principal executive offices of Symantec
Corporation at 10201 Torre Avenue, Cupertino, California 95014. At this
Special Meeting, you will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, between the Company, Oak
Acquisition Corporation, and Symantec Corporation. The merger agreement
provides for the merger of Oak with and into the Company. As a result of the
merger, the Company will become a direct or indirect wholly owned subsidiary
of Symantec and each issued and outstanding share of the Company's common
stock (other than any shares owned by the Company or by any subsidiary of the
Company, or owned by Oak, Symantec or any other subsidiary of Symantec and any
shares which are held by stockholders who have not voted in favor of the
merger or consented thereto in writing and who shall have demanded appraisal
for such shares in accordance with Delaware law) shall be automatically
converted into the right to receive $0.52, in cash, without interest. The
merger and the merger agreement are more fully described in the attached
Information Statement which forms a part of this notice. In addition, at the
Special Meeting we will transact such other business as may properly come
before the meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
On October 15, 1998, the Board of Directors of the Company determined that
the merger agreement and the transactions contemplated thereby, including the
tender offer (as discussed below) and the merger, are advisable, fair to and
in the best interests of the stockholders of the Company, and approved the
merger agreement and the transactions contemplated thereby, including the
tender offer and the merger.
The merger is the second step of a two-step transaction pursuant to which
Symantec, as the owner of all of the capital stock of Oak, will acquire the
entire equity interest in the Company for an aggregate purchase price of
approximately $65 million in cash (including the assumption of approximately
$17 million in net debt). The first step was a tender offer for the
outstanding shares at $0.52 per share net to the seller in cash. Oak acquired
58,227,311 shares upon the consummation of the tender offer on November 17,
1998, representing approximately 65% of the issued and outstanding shares on
such date.
As a result of the consummation of the tender offer, Purchaser has the right
to vote a sufficient number of outstanding shares at the Special Meeting to
approve and adopt the merger agreement without the affirmative vote of any
other holder of shares, thereby assuring such approval and adoption. Pursuant
to the merger agreement, Oak is obligated to vote the shares owned by it in
favor of approving and adopting the merger agreement. THE COMPANY CURRENTLY
ANTICIPATES THAT THE MERGER WILL BE CONSUMMATED ON MARCH 29, 1999, OR AS
PROMPTLY AS PRACTICABLE THEREAFTER.
<PAGE>
Under Delaware law, holders of shares who do not vote to approve the merger
agreement and who otherwise strictly comply with applicable requirements of
Section 262 of the General Corporation Law of the State of Delaware may dissent
from the merger and demand payment in cash from the Company of the fair value
of their shares. This notice constitutes notice of appraisal rights to holders
of shares pursuant to Section 262. Holders of shares who wish to assert
appraisal rights, if available, should comply with the procedures set forth in
Section 262 (a copy of which is attached as Annex II to the enclosed
Information Statement). Appraisal rights under Section 262 are also discussed
in the Information Statement under the heading "Appraisal Rights."
By Order of the Board of Directors,
/s/ Derek Witte
Derek Witte
Secretary
February 26, 1999
Marina del Rey, California
2
<PAGE>
SUPPLEMENT TO INFORMATION STATEMENT DATED FEBRUARY 26, 1999
A complaint was filed on February 24, 1999 in the Court of Chancery of the State
of Delaware, County of New Castle, by William Skeen, a purported Quarterdeck
stockholder, against Quarterdeck Corporation, Symantec Corporation, Oak
Acquisition Corporation (a wholly-owned subsidiary of Symantec) and current and
former directors of Quarterdeck. The complaint alleges, among other things,
breach of fiduciary duty and unfair dealing in connection with the planned
merger of Oak with and into Quarterdeck and claims that when Quarterdeck's
directors approved the merger, they had a financial conflict of interest as a
result of a September 1998 grant of stock options to them. The complaint also
alleges breach of fiduciary duty and unfair dealing by Symantec, and certain of
its officers who became directors of Quarterdeck, in connection with certain
conduct by Symantec following the consummation of Symantec's tender offer for
Quarterdeck's outstanding common stock, including the agreement by Symantec and
Quarterdeck to extend the termination date of the non-exclusive license granted
by Quarterdeck to Symantec to Quarterdeck's CleanSweep product from January 31,
1999 to March 31, 1999. In addition, the complaint alleges that Quarterdeck's
failure to obtain the approval of its stockholders in connection with its
initial grant of the CleanSweep license violated a provision of Delaware law
that requires stockholder approval of a sale, lease or exchange of all or
substantially all of a corporation's assets. Finally, the complaint alleges that
Quarterdeck's Schedule 14D-9 relating to the tender offer contained materially
misleading and coercive public disclosures regarding the likelihood and impact
of the delisting of Quarterdeck's common stock by Nasdaq.
The plaintiff seeks to enjoin the merger and also seeks damages in an
unspecified amount and other relief. The suit was brought by William Skeen on
behalf of all persons who were stockholders during the relevant period and seeks
certification of a class action. While Quarterdeck and Symantec believe these
claims are without merit, there can be no assurances as to the actual outcome of
this matter or its effect on the timing or consummation of the merger.
Dated: February 26, 1999
<PAGE>
QUARTERDECK CORPORATION
13160 MINDANAO WAY
MARINA DEL REY, CALIFORNIA 90292
----------------
INFORMATION STATEMENT
----------------
FEBRUARY 26, 1999
This Information Statement is being furnished by the Board of Directors
(hereinafter the "Board" or "Board of Directors") of Quarterdeck Corporation,
a Delaware corporation (the "Company"), to the holders of the outstanding
shares of common stock, par value $0.001 per share (the "Shares"), of the
Company, in connection with the proposed merger (the "Merger") of Oak
Acquisition Corporation, a Delaware corporation ("Purchaser"), with and into
the Company pursuant to an Agreement and Plan of Merger, dated as of
October 15, 1998 (the "Merger Agreement"), by and among the Company,
Purchaser, and Symantec Corporation, a Delaware corporation ("Parent" or
"Symantec"), a copy of which is attached hereto as Annex I. As a result of the
Merger, the Company will become a direct or indirect wholly owned subsidiary
of Parent and each issued and outstanding Share (other than any Shares owned
by the Company or by any subsidiary of the Company, or owned by Purchaser,
Parent or any other subsidiary of Parent and any Shares which are held by
stockholders who have not voted in favor of the Merger or consented thereto in
writing and who shall have demanded appraisal for such Shares in accordance
with Delaware law) shall be automatically converted into the right to receive
$0.52, in cash, without interest.
The Merger is the second step of a two-step transaction pursuant to which
Parent, as the owner of all of the capital stock of Purchaser, will acquire
the entire equity interest in the Company for an aggregate purchase price of
approximately $65 million in cash (including the assumption of approximately
$17 million in net debt). The first step was a tender offer for the
outstanding Shares at $0.52 per Share net to the seller in cash (the "Offer").
Purchaser acquired 58,227,311 Shares upon the consummation of the Offer on
November 17, 1998, representing approximately 65% of the issued and
outstanding Shares on such date.
Upon the Merger, each holder of outstanding options that have an exercise
price of less than $0.52 shall be entitled to receive an amount in cash equal
to the product of the difference between $0.52 per Share and the exercise
price of such option multiplied by the number of Shares issuable upon exercise
of such option immediately prior to the Merger.
This Information Statement accompanies a Notice of Special Meeting of
Stockholders (the "Special Meeting") of the Company to be held on March 29,
1999, at which time the Company's stockholders will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement and such other
business as may properly come before the meeting.
As a result of the consummation of Offer, Purchaser has the right to vote a
sufficient number of outstanding Shares at the Special Meeting to approve and
adopt the Merger Agreement without the affirmative vote of any other holder of
Shares, thereby assuring such approval and adoption. Pursuant to the Merger
Agreement, Purchaser is obligated to vote the Shares owned by it in favor of
approving and adopting the Merger Agreement. THE COMPANY CURRENTLY ANTICIPATES
THAT THE MERGER WILL BE CONSUMMATED ON MARCH 29, 1999, OR AS PROMPTLY AS
PRACTICABLE THEREAFTER.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This Information Statement is first being mailed to stockholders on or about
February 26, 1999.
This Information Statement is dated February 26, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Summary................................................................. 1
Market Prices and Dividends............................................. 6
General; Special Meeting of Stockholders; Required Vote................. 6
Payment for Shares...................................................... 7
Appraisal Rights........................................................ 8
The Merger.............................................................. 10
Certain Federal Income Tax Consequences of the Merger................... 23
Regulatory Matters...................................................... 24
The Merger Agreement.................................................... 24
The License Agreement................................................... 29
Series C Convertible Preferred Stock.................................... 29
Selected Financial Data................................................. 31
Source and Amount of Funds.............................................. 33
Principal Stockholders and Stock Ownership of Management................ 34
Incorporation of Certain Documents by Reference......................... 35
Available Information................................................... 35
Annex I -- Agreement and Plan of Merger................................. I-1
Annex II -- Section 262 of the General Corporation Law of the State of
Delaware............................................................... II-1
Annex III -- Opinion of Broadview International LLC..................... III-1
</TABLE>
i
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Information Statement. Reference is made to the more detailed information
contained, or incorporated by reference, in this Information Statement and the
Annexes hereto. Unless otherwise defined herein, capitalized terms used in this
summary have the respective meanings ascribed to them elsewhere in this
Information Statement.
STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THIS INFORMATION STATEMENT AND
THE ANNEXES HERETO IN THEIR ENTIRETY. WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
The Companies
The Company. The Company develops and markets software products that help
personal computer users manage information and communications. The Company
markets its products worldwide through retail distribution, corporate
resellers, original equipment manufacturers, direct marketing, and the
Internet, focusing in particular on customers in "low support" environments,
such as small offices/home offices, small businesses and work groups, and
remote/mobile users. The Company's principal executive offices are located at
13160 Mindanao Way, Marina del Rey, California 90292. The telephone number of
the Company at such offices is (310) 309-3700.
Purchaser. The Purchaser is a newly incorporated Delaware corporation
organized in connection with the Offer and Merger and a direct wholly-owned
subsidiary of Parent. To date the Purchaser has not conducted any business
other than in connection with the Offer and the Merger. The principal executive
offices of the Purchaser are located at 10201 Torre Avenue, Cupertino,
California 95014-2132. The telephone number of Purchaser at such offices is
(408) 253-9600.
Parent. Parent is a leading producer of utility software for business and
personal computing. Parent's business strategy is to satisfy customer needs by
developing and marketing products across multiple operating platforms
(currently those of Microsoft Corporation and Apple Computer, Inc.) that enable
customers to increase productivity and help to assure the reliability, security
and performance of computers. The principal executive offices of Parent are
located at 10201 Torre Avenue, Cupertino, California 95014-2132. The telephone
number of Parent at such offices is (408) 253-9600.
Each of the Company and Parent is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), and
in accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities of the Commission as
set forth under "Available Information" below.
General
This Information Statement is being furnished in connection with the proposed
Merger of Purchaser into the Company pursuant to the Merger Agreement. As a
result of the Merger, the Company will become a direct or indirect wholly owned
subsidiary of Parent and each issued and outstanding Share (other than any
Shares owned by the Company or by any subsidiary of the Company, or owned by
Purchaser, Parent or any other subsidiary of Parent and any Shares which are
held by stockholders who have not voted in favor of the Merger or consented
thereto in writing and who shall have demanded appraisal for such Shares in
accordance with Delaware law) will be converted into the right to receive $0.52
in cash, without interest.
1
<PAGE>
The Merger is the second step of a two-step transaction pursuant to which
Parent, as the owner of all of the capital stock of Purchaser, will acquire the
entire equity interest in the Company for an aggregate purchase price of $65
million in cash (including the assumption of approximately $17 million in net
debt). The first step was the Offer. Purchaser acquired 58,227,311 Shares upon
the consummation of the Offer on November 17, 1998, representing approximately
65% of the issued and outstanding Shares on such date.
Pursuant to the Merger Agreement, and effective upon the consummation of the
Offer, two of the five members of the Board of Directors of the Company
resigned as directors, the size of the Board was increased to seven members,
and four persons designated by Parent were appointed as members of such Board
of Directors to fill vacancies on the Board by the remaining directors, all in
accordance with the Company's Certificate of Incorporation and Bylaws, both as
amended.
Special Meeting of Stockholders; Required Vote
A Special Meeting of Stockholders will be held on March 29, 1999, at 8:00
a.m. (local time) at the principal executive offices of Symantec at 10201 Torre
Avenue, Cupertino, California 95014. At the Special Meeting, stockholders will
be asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement and such other proposals as may be properly brought before the
Special Meeting.
Under Delaware law and the Company's certificate of incorporation, the
affirmative vote of a majority of the issued and outstanding Shares is required
to approve and adopt the Merger Agreement at the Special Meeting. Only holders
of record of Shares at the close of business on February 16, 1999 (the "Record
Date") are entitled to notice of and to vote at the Special Meeting. At such
date there were 89,760,799 Shares outstanding, each of which will be entitled
to one vote on each matter to be acted upon or which may properly come before
the Special Meeting.
As a result of the Offer, Purchaser was the holder of record of 58,227,311
Shares on the Record Date, constituting approximately 65% of the 89,760,799
Shares issued and outstanding on the Record Date. Pursuant to the terms of the
Merger Agreement, Purchaser is obligated to vote all such Shares in favor of
approving and adopting the Merger Agreement. Under Delaware law and the
Company's certificate of incorporation, the affirmative vote of the Shares
owned by Purchaser is sufficient to approve and adopt the Merger Agreement
without the affirmative vote of any other holder of Shares, thereby assuring
such approval and adoption.
Payment of Shares
Upon consummation of the Merger, the Company will make available to State
Street Bank and Trust Company, as paying agent (the "Paying Agent") for the
holders of record of Shares, as needed, the aggregate amount of cash to be paid
in respect of the Shares converted into the right to receive $0.52 per Share,
in cash, without interest pursuant to the Merger. Holders of record should use
the Letter of Transmittal to be provided under separate cover to effect the
surrender of certificates evidencing Shares in exchange for $0.52 per Share, in
cash, without interest. All certificates so surrendered will be cancelled. Upon
consummation of the Merger and surrender of a certificate evidencing Shares,
together with a duly executed Letter of Transmittal, the holder thereof will
receive. Any cash held by the Paying Agent that remains unclaimed by
stockholders for six months after the effective time of the Merger will be
returned to the Company, as the surviving corporation (the "Surviving
Corporation") in the Merger, upon demand and thereafter stockholders may look
only to the Company for payment thereof.
A Letter of Transmittal will be sent to all stockholders of the Company under
separate cover. The Letter of Transmittal will advise such holder of the
procedures for surrendering to the Paying Agent certificates evidencing Shares
in exchange for $0.52 per Share, in cash, without interest. See "Payment for
Shares."
2
<PAGE>
Appraisal Rights
Under Delaware law, holders of Shares who do not vote to approve the Merger
each of whom otherwise strictly comply with applicable requirements of the
General Corporation Law of the State of Delaware may dissent from the Merger
and demand payment in cash from the Company of the fair value of their Shares.
See "Appraisal Rights."
The Merger
Background of the Merger. For a description of the events leading up to the
approval of the Merger Agreement by the Board of Directors of the Company, see
"The Merger--Background of the Offer and the Merger."
Recommendation of the Company's Board of Directors; The Company's Reasons for
the Merger. On October 15, 1998, the Board of Directors of the Company
determined that the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, are advisable, fair to and in the best
interests of the stockholders of the Company, and approved the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger.
The Company's Board of Directors' decision to approve the Merger Agreement
and the Merger was, among other things, based upon its analysis of the
Company's current financial condition including its significant need to raise
additional capital, the nature and strength of competing companies and the
opinion of its financial advisor that the consideration to be received by the
stockholders in the Offer and the Merger is fair to such stockholders from a
financial point of view. See "The Merger--Recommendation of the Company's Board
of Directors; The Company's Reasons for the Merger."
Parent's Reasons for the Merger. The purpose for the Merger is for Parent to
acquire all Shares not purchased pursuant to the Offer. Parent acquired control
of, and a majority of the entire equity interest in, the Company, and upon
consummation of the Merger, the Company will become a direct or indirect wholly
owned subsidiary of Parent. See "The Merger--Parent's Reasons for the Merger."
Opinion of Financial Advisor. Broadview International LLC ("Broadview"), the
Company's financial advisor, has delivered to the Company its written opinion
to the effect that, as of October 15, 1998, the date of the Merger Agreement,
and subject to the various assumptions and limitations stated therein, the cash
consideration to be received by the stockholders of the Company pursuant to the
Offer and the Merger is fair to such stockholders from a financial point of
view. Broadview was not requested to, and has not, updated its opinion. The
complete opinion of Broadview which sets forth the assumptions made, matters
considered and limits of its review, is attached to this Information Statement
as Annex III and should be read in its entirety. See "The Merger--Opinion of
Financial Advisor."
Interests of Certain Persons in the Merger. Certain existing and former
members of the Company's management and the Company's Board of Directors (as
well as employees of the Company) have interests in the Merger other than as
stockholders relating to, among other things, (i) the acceleration of the
exercisability of outstanding options to purchase Shares and, in certain cases,
the exchange of outstanding options for a cash payment and (ii) the terms of
the Company's severance plan for eligible officers, providing for cash payments
and other benefits upon termination of employment. See "The Merger--Interests
of Certain Persons in the Merger."
Accounting Treatment of the Merger. The Merger will be accounted for under
the purchase method of accounting whereby the purchase price will be allocated
based on the fair value of the assets acquired and the liabilities assumed by
Parent. See "The Merger--Accounting Treatment of the Merger."
3
<PAGE>
Purpose of the Merger. The purpose of the Merger is to enable Parent, through
Purchaser, to acquire the remaining equity interest in the Company not
currently owned by Purchaser.
Conditions to the Merger. The Merger is subject to the approval of the
Company's stockholders and to the condition that no legal restraint or
prohibition shall be in effect which would prevent the consummation of the
Merger or have certain other specified adverse consequences. The Company is not
currently aware of the existence of any such restraint or prohibition. Assuming
the satisfaction of such conditions, it is expected that the Merger will be
consummated on March 29, 1999, or as promptly as practicable thereafter. See
"The Merger Agreement--Conditions to the Merger."
Federal Income Tax Consequences of the Merger. The receipt of cash pursuant
to the Merger Agreement or the exercise of appraisal rights will be a taxable
transaction for federal income tax purposes. See "The Merger--Certain Federal
Income Tax Consequences of the Merger." Stockholders are urged to consult their
own tax advisors as to the particular tax consequences of the Merger to them,
including the applicability and the effect of federal, state, local, foreign
and other tax laws.
Regulatory Matters. The parties received early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), on November 3, 1998. The Company filed a notification
under Section 5 of the Mergers and Take-overs (Control) Act of 1978, as amended
(the "Mergers Act") with the Minister for Enterprise, Trade and Employment of
Ireland. The notification described the transaction and requested the Minister
to state in writing that he either (i) believes the Mergers Act does not apply
to the transaction; or (ii) does not propose to make an order restricting the
transaction under Section 9 of the Mergers Act. On November 13, 1998, the
parties received notice from the Minister indicating that the Mergers Act does
not apply to the transaction. No further action of the Company is required with
respect to compliance with the Mergers Act. The Company is not aware of any
other federal, state or foreign regulatory requirements that remain to be
complied with in order to consummate the Merger. See "The Merger--Regulatory
Matters."
4
<PAGE>
SELECTED FINANCIAL INFORMATION OF THE COMPANY
Set forth below is certain selected consolidated financial data with respect
to the Company, excerpted or derived from the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1998 as amended on Form 10-K/A, as
well as the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998, each as filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Exchange Act. Certain items in the
consolidated financial statements of fiscal 1995 and 1994 have been
reclassified to conform to the 1997 presentation. More comprehensive financial
information is included in such reports and other documents filed by the
Company with the Commission. Such reports and other documents are available for
inspection, and copies thereof are obtainable in the manner set forth below
under "Available Information" below. All amounts shown are in thousands, except
per share data.
<TABLE>
<CAPTION>
Year ended September 30, Three months ended December 31,
------------------------------------------------ -----------------------------------
1998 1997 1996 1995 1994 1998 1997
-------- -------- -------- -------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Net revenues............ $ 50,861 $ 83,787 $133,100 $117,606 $ 84,715 $ 5,769 $20,626
Cost of revenues........ 14,587 21,271 49,600 34,884 27,403 2,859 4,709
-------- -------- -------- -------- -------- -------- -------
Gross margin......... 36,274 62,516 83,500 82,722 57,312 2,910 15,917
Operating expenses:
Research and
development........... 16,640 16,419 21,314 14,286 7,520 1,167 4,681
Sales and marketing.... 30,566 29,305 66,355 30,624 27,107 3,214 8,378
General and
administrative........ 9,923 17,227 32,128 20,704 20,908 2,209 2,807
Acquisition,
restructuring and
other charges......... 2,583 11,713 37,789 7,409 12,863 8,946 (51)
Litigation
settlement............ -- 1,905 -- -- 615 -- --
-------- -------- -------- -------- -------- -------- -------
Total operating
expenses............ 59,712 76,569 157,586 73,023 69,013 15,356 15,815
Operating income
(loss)................. (23,438) (14,053) (74,086) 9,699 (11,701) (12,446) 102
Other income
(expense), net...... 1,264 (2,143) 38 (38) (271) 222 (498)
Interest income
(expense), net......... (952) (2,072) (105) 1,922 1,365 735 267
-------- -------- -------- -------- -------- -------- -------
Income (loss) before
income taxes........... (23,126) (18,268) (74,153) 11,583 (10,607) (13,403) $ 332
Provision (benefit) for
income Taxes........... 39 130 806 331 (5,982) -- 16
-------- -------- -------- -------- -------- -------- -------
Net income (loss)....... $(23,165) $(18,398) $(74,959) $ 11,252 $ (4,625) $(13,403) $ 316
======== ======== ======== ======== ======== ======== =======
Net income (loss) per
share:
Primary................ $ (0.45) $ (0.43) $ (2.15) $ 0.32 $ (0.15) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
Fully diluted.......... $ (0.45) $ (0.43) $ (2.15) $ 0.31 $ (0.15) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
Shares used to compute
net income (loss) per
share:
Primary................ 51,609 43,168 34,894 35,557 31,825 84,002 43,363
======== ======== ======== ======== ======== ======== =======
Fully diluted.......... 51,609 43,168 34,894 36,499 31,825 84,002 67,628
======== ======== ======== ======== ======== ======== =======
Additional unaudited pro
forma data:/1
Income (loss) before
income Taxes.......... $(23,126) $(18,268) $(74,153) $ 11,583 $(10,607) $(13,403) 332
Pro forma income
taxes................. 39 130 806 3,406 576 -- 16
-------- -------- -------- -------- -------- -------- -------
Pro forma net income
(loss).............. $(23,165) $(18,398) $(74,959) $ 8,177 $(11,183) $(13,403) 316
======== ======== ======== ======== ======== ======== =======
Pro forma income (loss)
per share:
Primary................ $ (0.45) $ (0.43) $ (2.15) $ 0.23 $ (0.35) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
Fully diluted.......... $ (0.45) $ (0.43) $ (2.15) $ 0.22 $ (0.35) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
<CAPTION>
As of September 30, As of December 31,
------------------------------------------------ -----------------------------------
1998 1997 1996 1995 1994 1998 1997
-------- -------- -------- -------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital /
(deficiency)........... $ 1,955 $ 6,917 $ (4,684) $ 29,490 $ 29,147 $ (7,980) 17,863
Total assets............ 19,525 55,881 76,781 76,699 62,471 10,861 52,036
Long-term obligations... 25,022 25,114 25,108 164 701 25,022 25,089
Stockholders' equity.... (17,933) 1,173 4,425 44,270 36,606 (29,600) 4,110
Other Data:
Book Value Per Share.... -- -- -- -- -- $ (0.33) --
</TABLE>
- -------
/1 On June 30, 1995, the Company completed the acquisition of Landmark Research
International Corporation ("Landmark"). The acquisition was treated as a
pooling of interests and accordingly, the information presented above was
restated to reflect this transaction. Prior to June 30, 1995, Landmark
elected to be taxed as an S corporation whereby the income tax effects of
Landmark's activities accrued directly to its shareholders. Landmark's S
corporation election terminated on June 30, 1995, at the time of the
acquisition. On March 28, 1996, the Company completed the acquisition of
Datastorm Technologies, Inc. ("Datastorm"). The acquisition was treated as a
pooling of interests and accordingly, the information presented above was
restated to reflect this transaction. Prior to being acquired by the
Company, Datastorm elected to be taxed as an S corporation whereby the
income tax effects of Datastorm's activities accrued directly to the
shareholders. Datastorm's S corporation election terminated at the time of
acquisition. The pro forma information reflects the estimated tax expense as
if Landmark and Datastorm were C corporations for all of the periods
presented.
5
<PAGE>
MARKET PRICES AND DIVIDENDS
Until October 15, 1998, the Shares were listed and principally traded on the
Nasdaq National Market under the symbol "QDEK" and the Shares are now traded
on the OTC Bulletin Board. The following table sets forth, for the quarters
indicated, the high and low sales prices per Share on the Nasdaq National
Market through October 15, 1998 and on the OTC Bulletin Board for periods
ending thereafter:
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
Fiscal Year ended September 30, 1997:
First Quarter............................................ $7 1/4 $3 15/16
Second Quarter........................................... 6 5/16 2
Third Quarter............................................ 3 9/16 2 1/8
Fourth Quarter........................................... 3 11/16 2 3/8
Fiscal Year ended September 30, 1998:
First Quarter............................................ $3 1/8 $1 3/16
Second Quarter........................................... 2 25/32 1 9/16
Third Quarter............................................ 3 5/8
Fourth Quarter........................................... 1 1/32 1/4
Fiscal Year ending September 30, 1999
First Quarter............................................ $ 22/32 $ 9/32
Second Quarter (through February 12, 1999)............... $ 33/64 $ 13/32
</TABLE>
On October 15, 1998, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share as reported on the Nasdaq National
Market was $0.4375. On October 16, 1998, the last full trading day prior to
the commencement of the Offer, the closing price per Share as reported on the
OTC Bulletin Board was $0.4375. On February 12, 1999, the closing price per
Share as reported on the OTC Bulletin Board was $0.507.
The Company has never declared or paid cash dividends on the Shares. The
Merger Agreement provides that, except as may agreed to in writing by Parent,
the Company may not declare, set aside or pay any dividends on or make any
other distributions in respect of any of its capital stock.
GENERAL; SPECIAL MEETING OF STOCKHOLDERS; REQUIRED VOTE
This Information Statement is being furnished by the Company in connection
with the proposed Merger of Purchaser into the Company pursuant to the Merger
Agreement. As a result of the Merger, the Company will become a direct or
indirect wholly owned subsidiary of Parent and each issued and outstanding
Share (other than any Shares owned by the Company or by any subsidiary of the
Company, or owned by Purchaser, Parent or any other subsidiary of Parent and
any Shares which are held by stockholders who have not voted in favor of the
Merger or consented thereto in writing and who shall have demanded appraisal
for such Shares in accordance with Delaware law) shall be automatically
converted into, and exchanged for, the right to receive $0.52, in cash,
without interest.
The Merger is the second step of a two-step transaction pursuant to which
Parent, as the owner of all of the capital stock of Purchaser, will acquire
the entire equity interest in the Company for an aggregate purchase price of
approximately $65 million in cash (including the assumption of approximately
$17 million in net debt). The first step was the Offer. Purchaser acquired
58,227,311 Shares upon the consummation of the Offer on November 17, 1998,
representing approximately 65% of the issued and outstanding Shares on such
date.
Pursuant to the Merger Agreement, and effective upon the consummation of the
Offer, two of the five members of the Board of Directors of the Company
resigned as directors, the size of the Board was increased to seven members,
and four persons designated by Parent were appointed as members of such Board
of Directors to fill vacancies on the Board by the remaining directors, all in
accordance with the Company's Certificate of Incorporation and Bylaws, both as
amended.
6
<PAGE>
The Special Meeting will be held on March 29, 1999, at 8:00 a.m. (local
time) at the principal executive offices of Symantec at 10201 Torre Avenue,
Cupertino, California 95014. At the Special Meeting, stockholders will be
asked to consider and vote upon a proposal to approve and adopt the Merger
Agreement and such other proposals as may be properly brought before the
Special Meeting. Representatives of the Company's accountants are not expected
to be present at the Special Meeting.
Under Delaware law and the Company's certificate of incorporation, the
affirmative vote of a majority of the issued and outstanding Shares is
required to approve and adopt the Merger Agreement at the Special Meeting.
Only holders of record of Shares at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting. At such date
there were 89,760,799 Shares outstanding, each of which will be entitled to
one vote on each matter to be acted upon or which may properly come before the
Special Meeting.
As a result of the Offer, Purchaser was the holder of record of 58,227,311
Shares on the Record Date, constituting approximately 65% of the 89,760,799
Shares outstanding on the Record Date. Pursuant to the terms of the Merger
Agreement, Purchaser is obligated to vote all such Shares in favor of
approving and adopting the Merger Agreement. Under Delaware law and the
Company's certificate of incorporation, the affirmative vote of such Shares
will be sufficient to approve and adopt the Merger Agreement without the
affirmative vote of any other holder of Shares, thereby assuring such approval
and adoption. THE COMPANY CURRENTLY ANTICIPATES THAT THE MERGER WILL BE
CONSUMMATED ON MARCH 29, 1999, OR AS PROMPTLY AS PRACTICABLE THEREAFTER.
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware in accordance with the
General Corporation Law of the State of Delaware. As used in this Information
Statement, "Effective Time" means the effective time of the Merger under the
General Corporation Law of the State of Delaware.
PAYMENT FOR SHARES
General. Upon consummation of the Merger, Parent will make available to the
Paying Agent for the holders of record of Shares, as needed after the
Effective Time, the aggregate amount of cash to be paid in respect of the
portions of Shares converted into cash pursuant to the Merger. Holders of
record should use a Letter of Transmittal to effect the surrender of
certificates evidencing Shares in exchange for $0.52 per Share, in cash,
without interest. All certificates so surrendered will be cancelled. Upon
consummation of the Merger and surrender of certificates evidencing Shares,
together with a duly executed Letter of Transmittal, the holder of record
thereof will receive in exchange for each Share surrendered $0.52, in cash,
without interest. Any cash held by the Paying Agent that remains unclaimed by
stockholders for six months after the Effective Time will be returned to the
Surviving Corporation upon demand and thereafter stockholders may look only to
the Surviving Corporation for payment thereof.
Letter of Transmittal. A Letter of Transmittal will be sent to all
stockholders of record of the Company as of the Effective Time under separate
cover. The Letter of Transmittal will advise such holders of the procedures
for surrendering to the Paying Agent certificates evidencing Shares in
exchange for cash.
Valid Surrender of Shares. For Shares to be validly surrendered pursuant to
the Merger, a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
must be received by the Paying Agent, at one of its addresses set forth in the
Letter of Transmittal and either (i) certificates representing Shares must be
received by the Paying Agent or (ii) such Shares must be delivered by book-
entry transfer.
Book-Entry Transfer. The Paying Agent will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Merger. Any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of
7
<PAGE>
Shares by causing the Book-Entry Transfer Facility to transfer such Shares
into the Paying Agent's account at the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedure for such
transfer.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder (which term includes any participant in the Book-Entry Transfer
Facility's systems whose name appears on a security position listing as the
owner of the Shares) of Shares delivered therewith and such registered holder
has not completed either the box entitled "Special Delivery Instructions" or
the box entitled "Special Payment Instructions" on the Letter of Transmittal
or (ii) if such Shares are delivered for the account of a financial
institution (including most commercial banks, savings and loan associations
and brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program (an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. If certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to a
person other than the registered holder of the certificates surrendered, the
delivered certificates must be endorsed or accompanied by appropriate stock
powers, signed exactly as the name or names of the registered holders appear
on the certificates, with the signatures on the certificates or stock powers
guaranteed as described above.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE STOCKHOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE PAYING AGENT.
IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
Backup Federal Income Tax Withholding. Under the federal income tax laws,
unless an exception applies under the applicable rules and regulations, the
Paying Agent will be required to withhold 31% of the amount of any payments
made to stockholders pursuant to the Merger. To prevent such backup federal
income tax withholding with respect to the $0.52 per Share, in cash, without
interest payable to a stockholder, such stockholder must generally provide the
Paying Agent with such stockholder's correct taxpayer identification number
and certify that such stockholder is not subject to backup federal income tax
withholding by completing the substitute Form W-9 included in the Letter of
Transmittal. If the stockholder is a nonresident alien or foreign entity not
subject to backup withholding, such stockholder must give the Paying Agent a
completed Form W-8 Certificate of Foreign Status prior to the receipt of any
payments.
APPRAISAL RIGHTS
Stockholders of the Company are entitled to appraisal rights under Section
262 of the General Corporation Law of the State of Delaware ("Section 262") as
to Shares owned by them. Set forth below is a summary description of Section
262. Section 262 is reprinted in its entirety as Annex II to this Information
Statement. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the Shares as to which appraisal
rights are asserted. A person having a beneficial interest in Shares that are
held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
FOR MORE DETAIL REGARDING APPRAISAL RIGHTS, SEE ANNEX II. THIS SUMMARY AND
ANNEX II SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES TO EXERCISE
STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO
BECAUSE FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH HEREIN AND
THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
8
<PAGE>
In accordance with Section 262, any stockholder may, before the vote at the
Special Meeting upon the proposal to approve and adopt the Merger Agreement,
demand in writing from the Company the appraisal of the fair value of such
stockholder's Shares. Such demand must reasonably inform the Company of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of such stockholder's Shares. In order to be entitled to
appraisal rights with respect to any Shares, a stockholder must be the record
holder of such Shares on the date of such demand, must continuously hold such
Shares through the Effective Time, must properly demand an appraisal as
described in this paragraph and the following paragraphs, and must not vote in
favor of the proposal to approve and adopt the Merger Agreement. Any
stockholder (other than a record owner who is acting as a nominee holder for
different beneficial owners) seeking to exercise appraisal rights for a
portion, but not all, of such stockholder's Shares should consult with legal
counsel before taking any such action. The Company believes that Delaware law
has not clearly addressed the ability of such a stockholder to exercise
appraisal rights with respect to a portion, but not all, of such stockholder's
Shares. Should a stockholder (other than a record owner who is acting as a
nominee holder for different beneficial owners) seek to exercise appraisal
rights with respect to a portion, but not all, of such stockholder's Shares,
the Company presently intends to assert that by doing so such stockholder has
waived such stockholder's appraisal rights. Stockholders should be aware that
a Delaware court may find that such stockholder has so waived such
stockholder's appraisal rights. A stockholder who elects to exercise appraisal
rights must mail or deliver such stockholder's written demand to the President
of the Company at 13160 Mindanao Way, Marina del Rey, California 90292. A vote
against the Merger or a failure to vote for the Merger would not by itself
constitute sufficient notice of a stockholder's election to exercise appraisal
rights.
A demand for appraisal must be executed by or for the stockholder of record,
fully and correctly, as such stockholder's name appears on the certificate or
certificates representing his Shares. If the Shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian, or custodian, such demand
must be executed by the fiduciary. If the Shares are owned of record by more
than one person, as in a joint tenancy or tenancy in common, such demand must
be executed by all joint owners. An authorized agent, including an agent for
two or more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner.
A record owner, such as a broker, who holds Shares as a nominee for others,
may exercise appraisal rights with respect to the Shares held for all or less
than all beneficial owners of Shares as to which such person is the record
owner. In such case, the written demand must set forth the number of Shares
covered by such demand. Where the number of Shares is not expressly stated,
the demand will be presumed to cover all Shares outstanding in the name of
such record owner. Beneficial owners who are not record owners and who intend
to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights.
Within 120 days after the Effective Time, either the Surviving Corporation
or any stockholder who has complied with the required conditions of Section
262 may file a petition in the Delaware Court of Chancery (the "Delaware
Chancery Court") demanding a determination of the fair value of the Shares of
the dissenting stockholders. If a petition for an appraisal is timely filed,
after a hearing on such petition, the Delaware Chancery Court will determine
which stockholders are entitled to appraisal rights and will appraise the
Shares formerly owned by such stockholders, determining the fair value of such
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining such
fair value, the Delaware Chancery Court is to take into account all relevant
factors.
Stockholders considering seeking appraisal should note that the "fair value"
of their Shares determined under Section 262 could be more than, the same as
or less than $0.52 per Share, and that opinions of investment banking firms as
to fairness, from a financial point of view, are not opinions as to fair value
under Section 262. The cost of the appraisal proceeding may be determined by
the Delaware Chancery Court and taxed against the parties as the Delaware
Chancery Court deems equitable in the circumstances. Upon application of a
dissenting
9
<PAGE>
stockholder, the Delaware Chancery Court may order that all or a portion of
the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including without limitation, reasonable attorneys' fees
and the fees and expenses of experts, be charged pro rata against the value of
all Shares entitled to appraisal.
From and after the Effective Time, no stockholder who has duly demanded
appraisal in compliance with Section 262 will be entitled to vote for any
purpose the Shares subject to such demand or to receive payment of dividends
or other distributions on such Shares, except for dividends or distributions
payable to stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any stockholder shall
have the right to withdraw such stockholder's demand for appraisal and to
accept the terms offered in the Merger Agreement; after this period, a
stockholder may withdraw such stockholder's demand for appraisal only with the
consent of the Surviving Corporation. If no petition for appraisal is filed
with the Delaware Chancery Court within 120 days after the Effective Time,
stockholders' rights to appraisal shall cease, and all stockholders who had
previously demanded appraisal shall thereafter be entitled to receive the
$0.52 per Share, in cash, without interest thereon, upon valid surrender of
the certificates that formerly represented their Shares. Inasmuch as the
Company has no obligation to file such a petition, and has no present
intention to do so, any stockholder who desires such a petition to be filed is
advised to file it on a timely basis. However, no petition timely filed in the
Delaware Chancery Court demanding appraisal shall be dismissed as to any
stockholder without the approval of the Delaware Chancery Court, and such
approval may be conditioned upon such terms as the Delaware Chancery Court
deems just.
THE MERGER
Background of the Offer and the Merger
Set forth below is a description of the background of the Offer and the
Merger, including a brief description of the material contacts between Parent
and its affiliates and the Company and its affiliates regarding the
transactions described herein. Until the consummation of the Offer, the Board
of Directors of the Company consisted of the following individuals: Frank W.T.
LaHaye, King R. Lee, William H. Lane III, Dr. Howard L. Morgan and Joyce
Wrenn.
In early 1997, the Company's Board of Directors resolved to undertake a
search for strategic alternatives to the Company's then current strategy. The
Company's Board of Directors decided to retain an investment banker to explore
the capital needs of the Company and the strategic alternatives available to
the Company, including an expansion into additional product lines, a
partnering of the Company with third parties, and a sale of particular product
lines or of the entire Company.
On or about May 22, 1997, Broadview presented to the Company's Board of
Directors its analysis of the strategic alternatives available to the Company.
In light of this presentation, the Company engaged Broadview on June 19, 1997
to advise the Company with respect to opportunities involving partnering with
third parties or the sale of either all of the Company or of particular
product lines.
In late September 1997 and the following months, the Company issued
approximately $29 million of its Series C Convertible Preferred Stock and
related warrants. The Company used the net proceeds of this sale for working
capital and to redeem all $10 million of its outstanding Series B Preferred
Stock.
During the period from June 1997 to March 1998, Broadview conducted
extensive interviews with senior management, engaged in customary due
diligence procedures, analyzed valuation parameters, explored new product
opportunities and product line sales and developed a list of potential
acquirors for the Company. Broadview and the Company's Board of Directors
discussed and explored these possibilities in numerous meetings. Broadview and
the Company contacted several parties to explore partnering relationships
and/or the sale of the entire Company. As of March 1998, no party had
expressed serious interest in partnering with or acquiring the Company and the
Company terminated its engagement of Broadview.
10
<PAGE>
In April 1998, however, a publicly traded company contacted the Company and
expressed interest in entering into a partnering relationship with the
Company. The parties held preliminary discussions until June 1998 when the
potential partner was acquired by a third party.
On June 3, 1998, the Company was notified by the Nasdaq National Market
("Nasdaq") of the possible delisting of the Common Stock due to the failure of
the Common Stock to satisfy Nasdaq's continued listing requirements.
In June 1998, the Company's Board of Directors continued to discuss the
Company's need for capital and the status of possible strategic alternatives.
On June 24, 1998, the Company signed an engagement letter with TikSoft LLC
(which letter was subsequently assigned to Software Syndicate, Inc. ("SSI")),
pursuant to which SSI agreed to assist the Company with respect to
opportunities involving four potential acquirors where the Company believed
SSI had a relationship with one or more members of senior management or of the
Board of Directors. SSI's role with respect to each of the four companies
(including Parent) was primarily to utilize its relationships to initiate
discussions between one or more of such companies and the Company. SSI
assisted in initiating discussions between Parent and the Company, but did not
become involved in the negotiation of the Merger Agreement.
In June 1998, the Company determined that additional cost-cutting measures,
including layoffs, were needed in order to manage cash flow. In late June
1998, the Company laid off 70 employees. On July 6, 1998, Curtis Hessler
resigned as the Chief Executive Officer of the Company and King R. Lee was
appointed Interim Chief Executive Officer and President.
In July 1998, SSI introduced the Company to another publicly traded company
interested in a merger. The parties held several meetings, conducted mutual
standard due diligence, interviewed senior management at the respective
companies and entered into a confidentiality agreement regarding the matter.
The preliminary discussions focused on a stock for stock merger. The parties
ultimately terminated these discussions in September 1998 without any
agreement regarding a transaction. The other party suffered a significant drop
in the price of its stock after announcing lower than expected earnings, which
made it reluctant to continue to pursue a stock for stock merger. In addition,
after preliminary diligence certain members of the Company's management had
some reservations as to whether a stock transaction with this party would be
in the best interests of the Company's stockholders, primarily as a result of
the other party's own need for additional capital.
By letter dated July 13, 1998, Nasdaq advised the Company that it was not
convinced the Company could satisfy Nasdaq's continued listing requirements.
At the Company's request, an oral hearing on the matter was scheduled for late
August. In connection with its preparation for such oral hearing, and to
assist the Company in its exploration of its strategic alternatives, the
Company again retained Broadview as its financial advisor on August 4, 1998.
On August 10, 1998, Broadview discussed with the Company a list of
approximately 20 potential partners or acquirors, including Parent. Over the
next few weeks, Broadview and SSI contacted several parties, including Parent,
none of whom expressed interest in acquiring the Company at that time. In mid
to late August, Broadview and SSI again contacted Parent and discussed the
Company generally, as well as the existence of potentially significant net
operating losses of the Company that could be advantageous to a potential
buyer. As of June 30, 1998, Quarterdeck had approximately $93 million in
estimated federal net operating loss carryforwards (the use of which is
subject to various restrictions and limitations under applicable current tax
regulations). Symantec anticipates future utilization of approximately $60
million of the Company's federal net operating loss carryforwards. The
remaining federal net operating loss carryforwards of approximately $33
million are expected to expire due to the "change of ownership" rules under
Section 382 of the Internal Revenue Code and thus are not expected to by
utilized by Parent. At that point, Parent expressed interest in a transaction
with the Company to SSI and Broadview. Broadview contacted Gordon E. Eubanks,
Jr., the Chief Executive Officer of Parent, with additional information about
the Company. Representatives of Broadview and Parent held several telephone
calls and discussed possible transaction alternatives through the end of
August.
On August 27, 1998, the Company had a hearing with Nasdaq regarding the
potential delisting of the Company's Common Stock.
11
<PAGE>
On September 11, 1998, Enrique T. Salem, Chief Technical Officer of Parent,
contacted Suzanne Dickson, Vice President of Product Management of the
Company, to discuss the possibility of the Company entering into a technology
licensing agreement with Parent with respect to the Company's CleanSweep
uninstaller product. On September 13, 1998, the Company replied that it was
not interested in licensing its CleanSweep product and instead proposed a
license of its RemoveIt uninstaller product, which also has some of the
capabilities of the Norton Uninstall Deluxe product. On September 18, 1998,
Parent and the Company entered into a license agreement under which the
Company granted to Parent a nonexclusive license to distribute the Company's
RemoveIt uninstaller. Pursuant to such license agreement, Parent agreed to pay
the Company royalties equal to 8% of net revenue from the distribution of
RemoveIt, provided that the royalty per unit shall not be less than $1.00 per
copy. Parent also agreed to pay to the Company, upon full delivery of
RemoveIt, the sum of $500,000 as a non-refundable advance against royalties.
The initial term of this license agreement continues until September 30, 2000;
Parent may elect to extend the term for an additional one-year period. Either
party may terminate the license agreement upon 30 days prior written notice if
the other party is in material breach of any terms of the license agreement,
provided that such breach is not cured within such 30-day period. The Company
may terminate the license agreement upon 30 days notice in the event that
Parent distributes another product that provides substantially the same
functionality as RemoveIt.
In mid-September 1998, Broadview reported to the Company's Board of
Directors that Parent had proposed that the transaction take the form of an
acquisition of the Company's assets. On September 15, 1998, representatives of
Parent and the Company met at the Company's offices to discuss the Company's
financial performance and condition, and Parent and the Company entered into a
Confidentiality Agreement, pursuant to which Parent was furnished with certain
financial and business information concerning the Company. Over the next few
weeks, discussions between Parent and the Company continued in which Broadview
represented the Company in framing possible transaction alternatives.
Also in mid-September, the Company and Broadview met and held preliminary
discussions with an investment group proposing a recapitalization and
acquisition of the Company as part of an industry segment consolidation. The
discussions were terminated with no expression of interest by such party after
the parties determined they would be unlikely to obtain financing.
On September 17, 1998, the Company's Board of Directors met to discuss the
status of negotiations between Parent and the Company. On September 18, 1998,
representatives of Parent notified the Company of the Parent's interest in
commencing due diligence investigations of the Company. In response to this
call, the Company organized diligence materials and prepared them for review
by Parent and its legal and financial advisors. Two senior executives of
Parent met with representatives of the Company at the Company's offices on
Monday, September 21, 1998.
On September 23, 1998, the Company's Board of Directors met. Representatives
of Broadview informed the Company's Board of Directors about their discussions
with Parent's representatives earlier that day. During these discussions,
Parent had indicated its willingness to proceed with a tender offer and
subsequent merger, with the grant by the Company of a nonexclusive license
agreement for the Company's CleanSweep product. The Company's Board of
Directors discussed the framework of Parent's proposals concerning a possible
transaction. The Company's Board of Directors indicated that a substantial
risk would be involved if the Company granted Parent a license to the
CleanSweep product and the proposed tender offer and merger did not close. The
Company's Board of Directors also discussed the possibility of selling the
CleanSweep product line on a stand-alone basis. The Company's Board of
Directors instructed Broadview and its management team to resist the granting
of the CleanSweep license if at all possible and also to explore selling the
CleanSweep product line on a stand-alone basis. The Board's resistance to
granting the CleanSweep license was based in part on its belief that if a
CleanSweep license was granted to Parent (depending on when it became
effective and on what terms) it might make the acquisition of the Company as a
whole less attractive to Parent and to other potential bidders.
During the period from September 24, 1998 through the end of September, the
Company's Board of Directors held several meetings in which representatives of
Broadview, the Company's legal counsel and the
12
<PAGE>
Company's management team participated. The principal terms of the proposed
transaction were reviewed and discussed. The Company's Board of Directors also
discussed the possibility of any other acquirors or partners becoming
available, and representatives of Broadview advised the Company's Board of
Directors that no other potential investors and acquirors had expressed
interest in the Company. The Company's Board of Directors instructed
management to continue negotiating and attempt to avoid granting the license
of CleanSweep (and/or to delay the time that Parent would have the right to
distribute the CleanSweep product under the License Agreement), and to address
the additional concerns raised by the Company's Board of Directors. During
this time period, the Company's Board of Directors received a memorandum from
its counsel outlining its fiduciary duties in the context of a potential
change of control. Also during this period, the Company and Parent decided
that they would not be able to agree on the price or terms of a sale of the
CleanSweep product line on a stand-alone basis.
From early October to October 15, 1998, representatives of the Company,
Broadview and the Company's legal counsel held discussions with
representatives of Parent and Parent's legal counsel to negotiate various
aspects of, and the definitive agreements related to, the acquisition
proposal. In addition, from time to time during such period, Parent's legal
counsel, accountants and representatives of Parent conducted legal, financial
and technical reviews of the Company.
On October 3, 1998, after receiving a preliminary indication of price from
Parent, the Company's Board of Directors authorized the Company's management
to enter into a Non-disclosure Agreement, under which the Company agreed not
to solicit takeover proposals from third parties through the close of business
on October 13, 1998, which period was subsequently extended through the close
of business on October 16, 1998. During the first week of October 1998, the
Company's Board of Directors held several meetings regarding the status of the
negotiations. Also during this period, the Company's Board of Directors and
its representatives continued to negotiate with Parent about the terms of the
transaction, including the license of CleanSweep. Parent insisted that the
license was an integral part of the transaction and that the transaction could
not be consummated without it.
On October 7, 1998, the Company's Board of Directors held a meeting during
which the Company's legal counsel reviewed for the Company's Board of
Directors (i) its fiduciary duties in the context of a sale of the Company and
(ii) the status of negotiations of the terms of the proposed transaction.
Counsel for the Company explained the Board's fiduciary duties in the context
of granting the license of CleanSweep requested by Parent. Representatives of
Broadview summarized the proposed transaction with a review of the Company's
financial performance, management projections, and recent stock price
performance, and discussed a draft analysis of premiums paid in comparable
public company transactions. The Company's management also reviewed for the
Company's Board of Directors the Company's financial and operating history,
discussions relating to the unsuccessful search by Broadview and SSI for
additional potential partners or acquirors, discussions regarding the
potential delisting of the Common Stock by Nasdaq, the nature and strength of
competing companies, industry developments and comparable transactions. The
Company's Board of Directors discussed the continuing need for financing. The
Company's Board of Directors then discussed the open issues related to
Parent's acquisition proposal and directed management to continue negotiations
with Parent.
From October 7 through October 15, 1998, representatives of the Company's
management and the Company's Board of Directors continued to negotiate the
transaction with Parent. During such negotiations, the terms of the
transaction, including the terms upon which the license of CleanSweep would
become effective, were discussed and agreed upon, and discussions on valuation
occurred.
On October 15, 1998, the Company's Board of Directors held a meeting to
review and discuss Parent's proposed acquisition of the Company. At this
meeting, the Company's legal counsel gave a presentation to the Board on the
terms of the Merger Agreement and related documents, the structure of the
Offer and the Merger, the terms of the License Agreement and the Board's
fiduciary duties to stockholders. The Company's Board of Directors also
received an opinion from Broadview to the effect that, as of such date, the
consideration to be received by the holders of Shares pursuant to the Offer
and the Merger as contemplated in the Merger Agreement was fair from a
financial point of view to such holders. In delivering its opinion, Broadview
presented a variety
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of considerations, both qualitative and quantitative. These included
discussions on the rationale for the Merger, comparisons to other public
companies and relevant mergers and acquisitions and other analyses Broadview
deemed appropriate. For more detail regarding Broadview's opinion, see
"Opinion of Financial Advisor" below. The Company's Board members discussed
the terms of the proposed acquisition with its advisors and among themselves.
Following this discussion, the Company's Board of Directors unanimously (a)
determined that the Merger Agreement, the License Agreement (described and
defined below) and the transactions contemplated thereby, including each of
the Offer and the Merger, are advisable, fair to and in the best interests of
the holders of the Shares, (b) approved and adopted the Merger Agreement and
the transactions contemplated thereby, and (c) resolved to recommend that the
stockholders of the Company accept the Offer, tender their shares of Common
Stock pursuant to the Offer and approve and adopt the Merger Agreement and
approve the transactions contemplated thereby.
At approximately 1:00 p.m., Pacific Standard Time on October 15, 1998,
Parent and the Company executed the Merger Agreement and the License Agreement
and, simultaneously, the directors and executive officers of the Company
executed the Stockholder Agreements. After the close of trading on October 15,
1998, the Company and Parent issued a press release announcing the execution
of the Merger Agreement and the License Agreement. Shortly thereafter, the
Company received notification from Nasdaq by fax that the Common Stock had
been delisted, effective at the close of trading on October 15, 1998, for
failure to satisfy certain continued listing requirements.
Recommendation of the Company's Board of Directors; the Company's Reasons for
the Merger
The Company's Board of Directors' decision to approve the Merger Agreement
and the Merger was, among other things, based upon its analysis of the
Company's current weak financial condition including its significant need to
raise additional capital and the difficulty in obtaining such financing and
the strength of competing companies, both of which led the Board to conclude
it would be difficult for the Company to be successful as a stand alone
entity, and the opinion of its financial advisor that the consideration to be
received by the stockholders in the Offer and the Merger is fair to such
stockholders from a financial point of view.
In approving the Merger Agreement and the transactions contemplated thereby,
and recommending that all stockholders tender their Shares pursuant to the
Offer, the Company's Board of Directors considered a number of factors,
including:
(1) Broadview's presentations to the Company's Board of Directors and its
opinion to the effect that, as of the date of its opinion and based upon
and subject to certain matters stated therein, the $0.52 per Share cash
consideration to be received by the holders of Shares pursuant to the Offer
and the Merger was fair to the stockholders of the Company, from a
financial point of view (the "Fairness Opinion"), which was an important
factor in the Board's determination that the $0.52 price per Share was fair
to the stockholders of the Company. The full text of Broadview's written
Fairness Opinion is attached as Annex III to this Information Statement.
STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
(2) that the $0.52 per share tender offer price represents a premium of
10.9%, 28.0% and 95.5% over the closing price of the Common Stock on
October 14, 1998 (one day prior to the announcement of the Merger
Agreement), September 17, 1998 (20 days prior to such announcement) and
September 2, 1998 (30 days prior to such announcement), respectively;
(3) the declining price of the Shares on Nasdaq over the last two years,
and the fact that the price of the Common Stock would adversely impact the
ability of the Company to make acquisitions using its Common Stock or to
successfully raise additional equity capital which the Board determined
would significantly impair the ability of the Company to compete as an
independent company;
(4) the Company's difficulty in competing effectively with companies
having significantly greater financial and marketing resources than the
Company, especially given that (i) the industry segments in
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which certain of the Company's leading products compete were entering a
period of predicted decline, (ii) the anticipated industry shift to "suite
products," which bundle a number of utility products into one package,
would likely adversely impact revenues from the Company's products, the
majority of which are individual utility products and (iii) the fact that
the Company does not currently possess the ability to obtain or develop the
additional products necessary to compete in the "suite" market environment;
(5) the significant need for the Company to raise additional capital to
support research and development activities that would be necessary to
rebuild revenues in light of the market factors noted above and the
Company's Board of Director's belief, which was based on the advice of
Company management and Broadview, that the Company's ability to raise
capital would be impaired by the financial condition of the Company,
including the terms of its outstanding debt and Series C Convertible
Preferred Stock, and the condition of the capital markets generally;
(6) the potential adverse impact of the pending delisting of the Shares
by Nasdaq of the price of the Shares and the Company's ability to raise
capital and therefore compete as an independent company;
(7) the Company's Board of Director's view that a superior offer was
unlikely to arise, which view was based upon presentations by management
and Broadview, the lack of additional potential financing sources or merger
candidates despite the inquiries made by Broadview (and to a lesser extent
SSI) over an extended period of time, and the fact that the discussions
that had been held between the Company and several other parties over the
last year had ultimately proven unsuccessful which led the Board to
conclude that a continued search for a potential buyer would not result in
a superior offer and would result in a loss of the transaction with Parent;
(8) the Company's lack of success in negotiating with Parent a sale of
CleanSweep on a stand-alone basis or a sale of the Company which did not
include a license for CleanSweep;
(9) the fact that the terms of the License Agreement and the conditions
under which Parent's license to CleanSweep would come into effect were
heavily negotiated by representatives of the Company when it became clear
that Parent would not enter into a transaction that did not include the
License Agreement. In particular, the Board of Directors of the Company
considered it significant that Parent's right to distribute the CleanSweep
product (which the Company believed would have a material adverse impact on
the Company's revenues) would only become effective upon the consummation
of the Offer (and under certain circumstances relating to the Company's
acceptance of a superior offer) as opposed to the execution of the Merger
Agreement when consummation of the transaction was subject to several
contingencies and greater uncertainty;
(10) the provisions of the Merger Agreement allowing the Company to
respond to certain unsolicited inquiries concerning an acquisition of the
Company, and the provisions which permit the Company to terminate the
Merger Agreement upon payment to Parent of a $2 million break-up fee,
(which would be credited against royalties payable by Parent to the Company
under the License Agreement). In particular, although the Board of
Directors believed it was unlikely that a superior offer was likely to
arise, the Company still had the ability to respond to unsolicited
inquiries and, under certain circumstances, pursue a superior transaction;
and
(11) the fact that Parent's and Purchaser's obligations under the Offer
were not subject to any financing condition, and the fact that Parent has
the financial condition and ability to cause Purchaser to meet its
obligations under the Merger Agreement which led the Board to conclude that
there was greater certainty that the transaction would be consummated than
if there was a financing contingency.
The foregoing discussion of the information and factors considered and given
weight by the Company's Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the Merger Agreement and the Offer, the Company's Board of Directors did
not find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the Board may have given different weights to
different factors.
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In light of all of the factors set forth above, the Company's Board
unanimously (a) determined that the Merger Agreement, the License Agreement
and the transactions contemplated thereby, including each of the Offer and the
Merger, are advisable, fair to and in the best interests of the holders of the
Shares, (b) approved and adopted the Merger Agreement and the transactions
contemplated thereby, and (c) resolved to recommend that the stockholders of
the Company accept the Offer, tender their shares of Common Stock pursuant to
the Offer and approve and adopt the Merger Agreement and approve the
transactions contemplated thereby.
On October 19, 1998, Purchaser commenced the Offer. Purchaser offered to
purchase all of the outstanding Shares at a price of $0.52 per Share, in cash,
without interest, subject to reduction for any applicable federal backup or
other withholding taxes, upon the terms and subject to the conditions set
forth in the Offer to Purchase on Schedule 14D-1 filed with the Commission on
October 19, 1998 and in the related Letter of Transmittal. See "Available
Information." The Offer was conditioned upon, among other things, (i) there
being validly tendered and not withdrawn prior to the expiration of the Offer
that number of Shares that constituted at least a majority of the then
outstanding Shares on a fully diluted basis and (ii) the expiration or
termination of all waiting periods imposed by the HSR Act. Each member of the
Company's Board of Directors and its executive officers entered into
stockholder agreements with Parent whereby they agreed to tender all Shares
beneficially owned by them.
The Offer expired at 12:00 New York City time, on November 16, 1998.
Following the expiration of the Offer, Purchaser accepted for payment
58,091,948 Shares (approximately 65% of the issued and outstanding Shares on
such date) validly tendered and not withdrawn pursuant to the Offer, which
number gives effect to the failure of a number of Shares to be delivered in
accordance with guaranteed delivery procedures. On November 17, 1998, the
resignations of two of five existing directors of the Company became
effective, the size of the Board was increased to seven members and four
persons designated by Purchaser were elected to the Board of Directors to fill
vacancies on the Board by the remaining directors, all in accordance with the
Company's Certificate of Incorporation and Bylaws, both as amended.
Parent's Reasons for the Merger
The purpose for the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer. As a result of the Offer, Parent acquired control of,
and a majority of the entire equity interest in, the Company. Upon
consummation of the Merger, the Company will become a direct wholly owned
subsidiary of Parent. Parent has indicated that it regards the acquisition of
the Company as an opportunity to strengthen its position as a leader in
utility and communication software for networked personal computers. Parent
has indicated that it anticipates that the acquisition will provide a
strategic opportunity to complement Parent's existing products. In particular,
Parent has indicated that it intends to market the Company's CleanSweep
uninstaller product as part of Parent's Norton family of products. Parent has
indicated that it intends as soon as practicable to commence integrating
certain development, marketing, sales, administrative and purchasing functions
of Parent and the Company, and closing the Company's offices, in order to
reduce expenses and achieve other financial and operational synergies. In
furtherance of such goals, following completion of the Offer, the Company
notified approximately 80 employees of their termination and on November 18,
1998, accepted the resignation of King R. Lee as Interim President.
Opinion of Financial Advisor
On or about May 22, 1997, Broadview presented to the Company's Board of
Directors its analysis of the strategic alternatives available to the Company.
In light of this presentation, the Company engaged Broadview on June 19, 1997
to advise the Company with respect to opportunities involving partnering with
third parties or the sale of either all of the Company or of particular
product lines. Broadview focuses on providing merger and acquisition advisory
services to information technology ("IT") companies. In this capacity,
Broadview is continually engaging in valuing such businesses and Broadview
maintains an extensive database of IT mergers and acquisitions for comparative
purposes.
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Pursuant to a letter agreement, dated August 4, 1998, the Company was
required to pay Broadview, upon delivery of the Fairness Opinion, a fee,
payable in cash, of $325,000, which amount will be credited against any
compensation otherwise payable by the Company to Broadview upon the
consummation of a sale of the Company. Upon consummation of a sale of the
Company, including a sale pursuant to the transactions contemplated by the
Merger Agreement, the Company has agreed to pay Broadview a fee, payable in
cash on closing, of $500,000 plus 1% of all consideration in excess of $20
million received by the Company and/or its stockholders, which amount is net
of the fee paid in connection with the delivery of the Fairness Opinion and
net of $50,000 in fees and payments previously paid to Broadview. In addition
to the foregoing compensation, the Company has agreed to indemnify Broadview
against certain liabilities and expenses arising out of the engagement and the
transactions in connection therewith, including certain liabilities under the
federal securities laws. The Company's engagement of Broadview is an exclusive
engagement, except with respect to the efforts of SSI noted above. SSI did not
participate in the rendering of the Fairness Opinion. Other than this
engagement, the Company has not had any other material relationship with
Broadview.
In rendering Broadview's opinion, Broadview has, among other things:
1. reviewed the terms of the Agreement and Plan of Merger and the
associated exhibits thereto in the form of the draft dated October 15, 1998
furnished to Broadview by Fenwick & West on October 15, 1998 (which, for
the purposes of the Fairness Opinion, Broadview has assumed, with the
Company's permission, to be identical in all material respects to the
agreement to be executed);
2. reviewed the Company's annual report and Form 10-K for the fiscal year
ended September 30, 1997, including the audited financial statements
included therein, and the Company's Form 10-Q for the quarterly period
ended June 30, 1998, including the unaudited financial statements included
therein;
3. reviewed certain internal financial and operating information,
including certain projections for the fiscal year ending September 30,
1999, relating to the Company prepared by the Company's management;
4. participated in discussions with the Company's management concerning
the operations, business strategy, financial performance and prospects for
the Company;
5. discussed with the Company's management its view of the strategic
rationale for the Merger;
6. reviewed the recent reported closing prices and trading activity for
the Company's Common Stock;
7. compared certain aspects of the financial performance of the Company
with public companies Broadview deemed comparable;
8. analyzed available information, both public and private, concerning
other mergers and acquisitions Broadview believes to be comparable in whole
or in part to the Merger;
9. reviewed Symantec's annual report and Form 10-K for the fiscal year
ended March 31, 1998, including the audited financial statements included
therein, and Symantec's quarterly report on Form 10-Q for the quarterly
period ended June 30, 1998, including the unaudited financial information
included therein;
10. discussed with Symantec management its view of the strategic
rationale for the Merger;
11. reviewed recent equity analyst reports covering Symantec;
12. assisted in negotiations and discussions related to the Merger among
the Company, Symantec and their financial and legal advisors;
13. conducted other financial studies, analyses and investigations as
Broadview deemed appropriate for purposes of the Fairness Opinion.
In rendering the Fairness Opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information (including without limitation the representations and warranties
contained in the Merger Agreement) that was publicly available or furnished by
the Company or Symantec. Broadview assumed that those projections prepared and
provided by the management of the Company
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were reasonably prepared and reflected the best available estimates and good
faith judgments as to the future performance of the Company. Broadview did not
make nor obtain an independent appraisal or valuation of any of the Company's
assets. With regard to any analyses relating to valuations of comparable
public companies, the share prices used were for the close of trading on
October 14, 1998, the last trading day before the Company's Board met to give
final consideration to the proposed Merger.
The following is a summary explanation of the various sources of information
and valuation methodologies employed by Broadview in conjunction with
rendering the Fairness Opinion regarding the proposed Merger. Broadview
employed a number of methodologies and sources of information, both
qualitative and quantitative, to determine the fairness of the cash
consideration to be received by the Company's stockholders from a financial
point of view. These included, but were not limited to, analyses of other
comparable public companies and comparable transactions and are outlined
below.
Public Company Comparables Analysis. Total Market Capitalization/Revenue
("TMC/R") and Price/Earnings ("P/E") multiples indicate the value public
markets place on companies in a particular market segment. A number of
companies are comparable to the Company based on business model, market focus,
products offered and financial characteristics. The Company had Trailing
Twelve Month ("TTM") Revenue of $57 million and Revenue Growth of (35.1%).
Broadview reviewed fifteen public company comparables in the systems software
and personal productivity software industry with trailing twelve-month
revenues of less than $100 million and with revenue growth under 25% from a
financial point of view including each company's: TTM Revenue; TTM Revenue
Growth; TTM EBIT Margin; Projected 9/30/99 EPS; Equity Market Capitalization;
TTM P/E ratio; TTM TMC/EBIT ratio; TTM TMC/R ratio; and Price/Projected
9/30/99 EPS ratio ("Projected 9/30/99 P/E"). The public company comparables
were selected from the Broadview Barometer, a proprietary database of
publicly-traded IT companies maintained by Broadview and broken down by
industry segment. In order of descending TTM TMC/R, the public company
comparables consist of: (i) Novadigm, Inc.; (ii) Objective Systems
Integrators; (iii) Worldtalk Communications Group; (iv) Smith Micro Software,
Inc.; (v) Stac, Inc.; (vi) On Technology Corp.; (vii) Banyan Systems, Inc.;
(viii) Artisoft, Inc.; (ix) Phoenix Technologies Ltd.; (x) SystemSoft Corp.;
(xi) NetManage, Inc.; (xii) Datawatch Corp.; (xiii) FullTime Software, Inc.;
(xiv) Inference Corp.; and (xv) ISOCOR. These comparables have a TTM P/E ratio
range of 6.21 to 15.31 with a median of 10.76; TTM TMC/EBIT ratio range of
1.82 to 7.53 with a median of 4.68; TTM TMC/R ratio range of (0.14) to 2.34
with a median of 0.41; and Projected 1999 P/E ratio range of 3.28 to 17.74
with a median of 9.13.
While the per share valuation ranges implied by the TTM P/E multiples and
the TTM TMC/EBIT multiples are not meaningful due to the Company's historical
losses the analyses illustrate how the Company's income statement compares to
those of the comparable set and were included to provide a complete
perspective on the Company's financial position. The Company's equity value
per share range implied by the TTM TMC/R multiples is ($0.273) to $1.287 with
a median implied value of $0.063. The Company's equity value per share range
implied by the Projected 1999 P/E multiples is $0.116 to $0.629 with a median
implied value of $0.324.
Transaction Comparables Analysis. Valuation statistics from transaction
comparables indicate the Adjusted Price/Revenue ("P/R") and Equity
Price/Pretax Income ("Price/Pretax") multiples acquirers have paid for
comparable companies in a particular market segment. The proposed total
consideration was $65 million for the Merger. Broadview reviewed sixteen
comparable merger and acquisition ("M&A") transactions from January 1, 1996
through the present involving sellers in the systems software and personal
productivity software industries with total consideration between $20 million
and $150 million. Transactions were selected from Broadview's proprietary
database of published and confidential M&A transactions in the IT industry. In
order of descending P/R multiple, the transactions used are the acquisition
of: (i) Confidential by Confidential; (ii) Award Software International Inc.
by Phoenix Technologies Ltd.; (iii) Diagsoft, Inc. by Sykes Enterprises, Inc.;
(iv) Datatools, Inc. by BMC Software, Inc.; (v) Cybermedia, Inc. by Network
Associates, Inc.; (vi) TGV Software, Inc. by Cisco Systems, Inc.; (vii)
Learning Co., Inc. (Softkey Software Products--Canadian Tax Software Business)
by Wolters Kluwer NV (CCH, Inc.); (viii) 4-Sight Ltd. By Wam!Net, Inc.;
(ix) Datastorm Technologies, Inc. by Quarterdeck Corp.; (x) Firefox
Communications, Inc. by FTP Software, Inc.; (xi) Vertisoft Systems, Inc. by
Quarterdeck Corp.; (xii) FTP Software, Inc. by Netmanage, Inc.; (xiii) MAXM
Systems Corp.
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by Boole & Babbage, Inc.; (xiv) Netsoft by Netmanage, Inc.; (xv) Software
Publishing Corp. by Allegro New Media, Inc.; and (xvi) Novell, Inc.
(Wordperfect, QuattroPro, Perfect Office suite) by Corel Corp. The P/R
multiples of the sixteen transactions range from 0.29 to 5.77 with a median of
1.91. The Price/Pretax multiples of the sixteen transactions range from 7.26
to 72.56 with a median of 19.85.
The Company's equity value per share range implied by the P/R multiples is
($0.004) to $3.448 with a median implied value of $1.009. The per share
valuation range implied by the Price/Pretax multiples is not meaningful due to
the Company's losses at the pretax level.
Transaction Premiums Paid Analysis. Premiums paid in comparable public
seller transactions indicate the amount of consideration acquirers are willing
to pay above the seller's equity market capitalization. In this analysis, the
value of consideration paid in transactions involving stock is computed using
the buyer's stock price immediately prior to announcement (closing price as
quoted on the appropriate exchange the day prior to announcement), while the
seller's equity market capitalization is measured one day prior, twenty
trading days prior and thirty trading days prior to announcement. Broadview
reviewed thirty-one comparable M&A transactions involving North American
software vendors from January 1, 1997 to the present with total consideration
between $20 million and $150 million. Transactions were selected from
Broadview's proprietary database of published and confidential M&A
transactions in the IT industry. In order of descending premium paid to
seller's equity market capitalization 30 trading days prior to announce date,
the software transactions used were the acquisition of: (i) Consilium, Inc. by
Applied Materials, Inc.; (ii) Cusa Technologies by Fiserv, Inc.; (iii)
Accugraph Corp. by Architel Systems Corp.; (iv) Globalink, Inc. by Lernout &
Hauspie Speech Products NV; (v) National Health Enhancement Systems, Inc. by
HBO & Company; (vi) Technology Modeling Associates, Inc. by Avant! Corp.;
(vii) Interactive Group by Dataworks Corp.; (viii) Questech, Inc. by CACI
International; (ix) TeleBackup Systems, Inc. by VERITAS Software Corp.; (x)
Award Software International, Inc. by Phoenix Technologies Ltd.; (xi)
Cybermedia, Inc. by Network Associates, Inc.; (xii) Medicus Systems by
QuadraMed Corp.; (xiii) The Forefront Group by CBT Group plc; (xiv) Visigenic
Software, Inc. by Borland International, Inc.; (xv) Andyne Computing Ltd. by
Hummingbird Communications Ltd.; (xvi) Maxis, Inc. by Electronic Arts, Inc.;
(xvii) Innovative Technologies Systems, Inc. by Peregrine Systems, Inc.;
(xviii) Learmonth & Burchett Management Systems, Inc. by PLATINUM technology,
Inc.; (xix) Kurzweil Applied Intelligence, Inc. by Lernout & Hauspie Speech
Products NV; (xx) Intime Systems International by Aris Corp.; (xxi) PHAMIS,
Inc. by IDX Systems Corp.; (xxii) IQ Software Corp. by Information Advantage
Software, Inc.; (xxiii) Internet Communications Corp. by Rocky Mountain
Internet, Inc.; (xxiv) Red Brick Systems, Inc. by Informix Corp.; (xxv)
DataWorks Corp. by Platinum Software Corp.; (xxvi) Fractal Design Corp. by
MetaTools, Inc.; (xxvii) Compurad, Inc. by Lumisys, Inc.; (xxviii) Simulation
Sciences, Inc. by Siebe plc; (xxix) Orcad, Inc. by Summit Design; (xxx) FTP
Software, Inc. by NetManage, Inc.; and (xxxi) Fulcrum Technologies, Inc. by PC
DOCS Group International, Inc. Based upon Broadview's analysis of premiums
paid in comparable software transactions, Broadview found that premiums or
(discounts) paid to the sellers' equity market capitalizations 30 trading days
prior to announcement ranged from (29.3%) to 178.9% with a median of 40.6%.
The premiums paid to the sellers' equity market capitalization 20 days prior
to announcement ranged from (24.0%) to 129.6% with a median of 31.7%. The
premiums paid to the sellers' equity market capitalization one day prior to
announcement ranged from (6.0%) to 169.2% with a median of 23.0%.
The Company's equity value per share range implied by the premiums paid to
the share price 30 days prior to announcement is $0.188 to $0.742 with a
median implied value of $0.374. The Company's equity value per share range
implied by the premiums paid to the share price 20 days prior to announce is
$0.309 to $0.933 with a median implied value of $0.535. The Company's equity
value per share range implied by the premiums paid to the share price one day
prior to announce is $0.441 to $1.262 with a median implied value of $0.577.
Stock Performance Analysis. Broadview examined weekly historical volume and
trading prices for the Company's Common Stock from October 3, 1997 through
October 14, 1998. This allows comparison of the consideration to be received
by the Company's stockholders to the Company's trading history.
Present Value of Projected Share Price Analysis. Broadview calculated the
present value of the potential future price of shares of the Company's Common
Stock on a standalone basis using management's internal
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estimates for the fiscal year ending September 30, 1999 discounted to today at
discount rates from 15.0% to 30.0%. The potential future share price is based
upon extrapolation of current market conditions and financial expectations
into a future period. The cash consideration to be received by the Company's
stockholders is then compared to the discounted potential value of the
standalone company. The potential future share price based on September 30,
1999 financial results is calculated based upon an estimated fiscal year 1999
EPS (estimated using management's internal estimates) and assumes TTM P/E
ratios between 6.0x and 22.0x, in line with public company comparables.
Based on the analysis using the discount rate calculated using CAPM and the
median capital-structure adjusted beta, Broadview calculated present values of
the Company's potential future share prices ranging from $0.159 to $0.584 with
a median of $0.286.
Consideration of the Discounted Cash Flows Valuation Methodology. While
discounted cash flow is a commonly used valuation methodology, Broadview did
not employ such an analysis for the purposes of the Fairness Opinion.
Discounted cash flow analysis is most appropriate for companies which exhibit
relatively steady or somewhat predictable streams of future cash flow. Given
the uncertainty in estimating both the future cash flows and a sustainable
long-term growth rate for the Company, Broadview considered a discounted cash
flow analysis inappropriate for valuing the Company.
The Company's Board selected Broadview as its financial advisor on the basis
of Broadview's reputation and experience in the Information Technology sector
and the software industry in particular, as well as Broadview's historical
relationship with the Company. Pursuant to the terms of an engagement letter
between the Company and Broadview, the fees payable by the Company to
Broadview upon completion of the Merger are based upon the consideration to be
received by the Company's stockholders pursuant to the Merger. Broadview will
be reimbursed by the Company for certain of its expenses incurred in
connection with its engagement. The terms of the fee arrangement with
Broadview, which the Company and Broadview believe are customary in
transactions of this nature, were negotiated at arms' length between the
Company and Broadview, and the Company's Board was aware of the nature of the
fee arrangement, including the fact that a significant portion of the fees
payable to Broadview is contingent upon completion of the Merger.
The above summary of the presentations by Broadview to the Company's Board
does not purport to be a complete description of such presentations or of all
the advice rendered by Broadview. Broadview believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses, without considering all analyses, could create an
incomplete view of the process underlying the analyses set forth in
Broadview's presentations to the Company's Board and in the Fairness Opinion.
The Fairness Opinion is necessarily based upon market, economic, financial and
other conditions as they existed and could be evaluated as of the date of the
Fairness Opinion. In performing its analyses, Broadview made numerous
assumptions with respect to software industry performance and general economic
conditions, many of which are beyond the control of the Company or Symantec.
The analyses performed by Broadview are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses.
In its capacity as an advisor to the Company, Broadview engaged in price
negotiations with Parent and its investment banker within certain parameters
determined by the Company's Board of Directors. The Company also engaged in
direct price negotiations with Parent. In addition, Broadview assisted the
Company and its counsel in negotiating some of the other material terms of the
Merger Agreement and the License Agreement.
At the meeting of the Company's Board on October 15, 1998, Broadview
rendered its oral opinion, that was confirmed in writing in the Fairness
Opinion on the same date, that, as of such date, based upon and subject to the
various considerations set forth in the Fairness Opinion, the cash
consideration to be received by the holders of Shares in the Offer and the
Merger is fair from a financial point of view to such holders. Broadview has
consented to the inclusion of the Fairness Opinion as Annex III to this
Information Statement.
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THE FULL TEXT OF THE FAIRNESS OPINION, WHICH SETS FORTH, AMONG OTHER THINGS,
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND LIMITATIONS ON
THE SCOPE OF THE REVIEW UNDERTAKEN BY BROADVIEW IN RENDERING THE BROADVIEW
OPINION, IS ATTACHED AS ANNEX III HERETO AND IS INCORPORATED HEREIN BY
REFERENCE. THE COMPANY'S STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
BROADVIEW OPINION CAREFULLY AND IN ITS ENTIRETY. THE FAIRNESS OPINION
ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF
SHARES AS OF THE DATE OF THE FAIRNESS OPINION OF THE CASH CONSIDERATION TO BE
RECEIVED BY SUCH HOLDERS IN THE OFFER AND THE MERGER, AND DOES NOT CONSTITUTE
A RECOMMENDATION TO THE STOCKHOLDERS OF THE COMPANY AS TO WHETHER OR NOT TO
TENDER SHARES OF THE COMPANY'S COMMON STOCK PURSUANT TO THE OFFER OR AS TO HOW
SUCH HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
Interests of Certain Persons in the Merger
Certain members of the Company's management and the Company's Board of
Directors (as well as other employees of the Company) have certain interests
in the Merger that are described below that are in addition to
their interests as stockholders generally. The Company's Board of Directors
took these interests into account in approving and adopting the Merger
Agreement and the transactions contemplated thereby.
Pursuant to the Merger Agreement, the Company gave written notice to each
holder of an outstanding option to purchase Shares (an "Option") stating that
such Option will terminate at the Effective Time and that all outstanding
Options, whether or not vested, will be exercisable until the Effective Time.
All Options that are outstanding immediately prior to the Effective Time will
be terminated and canceled at the Effective Time and the holders of cancelled
Options having an exercise price that is less than $0.52 per Share will be
entitled to receive an amount in cash equal to product of (i) the difference
between $0.52 per Share and the exercise price of such Option, multiplied by
(ii) the number of Shares issuable upon exercise of such Option immediately
prior to the Effective Time. As of October 15, 1998 (the date the Merger
Agreement was entered into), the directors and executive officers of the
Company as a group held Options to purchase 1,500,000 Shares for which the
exercise price was less than $0.52.
Severance Plan. The Company maintains a Severance Plan (the "Severance
Plan"), amended and restated as of June 25, 1998, for the Company's Vice-
Presidents (and non-management level directors). In accordance with the
Severance Plan, if a Vice-President is terminated, he or she shall receive six
months base salary. The Company expects that most or all of the executive
officers of the Company will be terminated in connection with the Merger and
as a result, will be entitled to the benefits under the Severance Plan. The
Company estimates the aggregate amount of such severance payments to be
approximately $611,437.
Indemnification. Pursuant to the Merger Agreement, Parent has agreed to
fulfill and honor and cause the Surviving Corporation to fulfill and honor in
all respects the obligations of the Company pursuant to its Certificate of
Incorporation, by-laws and any indemnification agreements between the Company
and its directors and officers in their capacity as such existing prior to the
date of the Merger Agreement. From and after the Effective Time, such
obligations will be the joint and several obligations of Parent and the
Surviving Corporation, and Parent has assumed such obligations. The
Certificate of Incorporation and by-laws of the Surviving Corporation will
contain provisions with respect to indemnification and elimination of
liability for monetary damages set forth in the Certificate of Incorporation
and by-laws 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 of the individuals who, immediately prior to the Effective
Time, were directors, officers, employees or agents of the Company or its
subsidiaries, unless required by law.
Insurance. In accordance with the Merger Agreement, for at least three years
from the Effective Time, Parent has agreed to maintain in effect 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 for
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those persons who are directors and officers as of the date of the Merger
Agreement (and, to the extent covered by the existing policy, persons who were
directors or officers prior to the date of the Merger Agreement) in their
capacity as such, so long as the annual premium would not be in excess of 150%
of the last annual premium paid prior to the date of the Merger Agreement (the
"Maximum Premium") and, to the extent the annual premium would exceed the
Maximum Premium, Parent will cause to be maintained the maximum amount of
insurance that can be procured for the Maximum Premium. If the existing
insurance expires, is terminated or is canceled during such three year period,
Parent will use all reasonable efforts to cause to be obtained as much
insurance as can be obtained for the remainder of the period for an annualized
premium not in excess of the amount indicated above, on terms and conditions
no less advantageous than the existing insurance. In lieu of maintaining the
Company's current insurance, Parent may elect to add the directors and
officers of the Company on the date of the Merger Agreement to its own
insurance policy, provided that such election does not diminish the rights
provided to such persons under the Company's existing insurance.
Accounting Treatment of the Merger
The Merger will be accounted for by Parent under the purchase method of
accounting whereby the purchase price will be allocated based on the fair
value of the assets acquired and the liabilities assumed by Parent.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion, subject to the limitations set forth herein,
describes the material federal income tax consequences of the Merger to
holders of Shares who hold their Shares as capital assets and exchange their
Shares for cash pursuant to the Merger (including any cash amounts received by
dissenting stockholders pursuant to the exercise of appraisal rights). The tax
consequences to a specific stockholder may vary depending upon such
stockholder's particular tax situation, and the discussion set forth below may
not apply to certain categories of holders of Shares subject to special
treatment under the Internal Revenue Code of 1986, as amended (the "Code"),
such as foreign stockholders, securities dealers, broker-dealers, insurance
companies, financial institutions, tax-exempt entities and stockholders who
acquired their Shares pursuant to an exercise of an employee stock option or
otherwise as compensation or who hold restricted stock. The discussion is
based on the Code as in effect on the date of this Information Statement, as
well as the rules and regulations thereunder, existing administrative
interpretations and court decisions currently in effect, all of which are
subject to change, retroactively or prospectively, and to possible differing
interpretations and does not address state, local or foreign tax laws.
The receipt of cash for Shares in the Merger will be a taxable transaction
for federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. In general, a stockholder will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash received in exchange for the Shares surrendered in
the Merger and such stockholder's adjusted tax basis in such Shares. Assuming
the Shares constitute capital assets in the hands of the stockholder, such
gain or loss will be capital gain or loss. If, at the time of the Merger, the
Shares surrendered in the Merger have been held for more than one year, such
gain or loss will be a long-term capital gain or loss. Under current law,
long-term capital gains of individuals are, under certain circumstances, taxed
at lower rates than items of ordinary income.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
sells Shares may be subject to a 31% backup withholding unless the stockholder
provides its Taxpayer Identification Number, or unless an exemption applies.
If backup withholding applies to a stockholder, the Paying Agent is required
to withhold 31% from payments to such stockholder. Backup withholding is not
an additional tax. Rather, the amount of the backup withholding can be
credited against the federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a refund can be
obtained by the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, INCLUDING
STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK
OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES AND FOREIGN CORPORATIONS, OR STOCKHOLDERS WHO
HOLD RESTRICTED STOCK.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER AND THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX,
AND STATE, LOCAL AND FOREIGN TAX LAWS.
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REGULATORY MATTERS
The parties received early termination of the waiting period under the HSR
Act on November 3, 1998. The Company filed a notification under Section 5 of
the Mergers and Take-overs (Control) Act of 1978, as amended (the "Mergers
Act") with the Minister for Enterprise, Trade and Employment of Ireland. The
notification described the transaction and requested the Minister to state in
writing that he either (i) believes the Mergers Act does not apply to the
transaction; or (ii) does not propose to make an order restricting the
transaction under Section 9 of the Mergers Act. On November 13, 1998, the
parties received notice from the Minister indicating that the Mergers Act does
not apply to the transaction. No further action of the Company is required
with respect to compliance with the Mergers Act. The Company is not aware of
any other federal, state or foreign regulatory requirements that remain to be
complied with in order to consummate the Merger.
The Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice frequently scrutinize the legality under the U.S.
antitrust laws of transactions such as Purchaser's acquisition of the Company.
At any time, the FTC or the Antitrust Division could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking the
divestiture of Shares acquired by Purchaser or the divestiture of substantial
assets of Parent or its subsidiaries, or the Company or its subsidiaries.
Private parties and state attorneys general may also bring legal action under
certain circumstances. There can be no assurance that a challenge to the
Merger on antitrust grounds will not be made or, if such a challenge is made,
what the result would be.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached as Annex I to this Information Statement and is
incorporated herein by reference. For more detail regarding the terms and
conditions of the Merger Agreement, see the full text of the Merger Agreement.
Capitalized terms not otherwise defined in the following description of the
Merger Agreement have the respective meanings ascribed to them in the Merger
Agreement.
The Merger Agreement provides that upon the terms and subject to the
conditions in the Merger Agreement and in accordance with Delaware Law, at the
Effective Time, Purchaser will be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Purchaser will cease
and the Company will continue as the Surviving Corporation (the "Surviving
Corporation"). Upon consummation of the Merger, each issued and outstanding
Share (other than any Shares owned by the Company or by any subsidiary of the
Company, or owned by Purchaser, Symantec or any other subsidiary of Symantec
and any Shares which are held by stockholders who have not voted in favor of
the Merger or consented thereto in writing and who shall have demanded
appraisal for such Shares in accordance with Delaware Law) shall be
automatically converted into the right to receive $0.52, in cash, without
interest.
Pursuant to the Merger Agreement, each share of capital stock of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, par value $0.001 per share, of the
Surviving Corporation, which will thereby become a wholly owned subsidiary of
Symantec.
The Merger Agreement provides that the directors and officers of Purchaser
immediately prior to the Effective Time will be the initial directors and
officers of the Surviving Corporation. The Merger Agreement further provides
that the Certificate of Incorporation and by-laws of Purchaser as in effect at
the Effective Time shall be the Certificate of Incorporation and by-laws of
the Surviving Corporation.
In the Merger Agreement, the Company agreed to carry on its businesses and
those of its subsidiaries in the ordinary course of business consistent with
past practices and to 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. The Merger Agreement
provides that, except as expressly
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permitted by the other provisions of the Merger Agreement and the Ancillary
Agreements, or as may be agreed to in writing by Symantec, neither the Company
nor any subsidiary will:
(i) declare or pay dividends or other distributions on the Company's
stock, or purchase or otherwise acquire any shares of its stock;
(ii) issue, sell or pledge any shares of stock or 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 upon exercise of certain outstanding options or warrants or
conversion of the Convertible Notes or Company Preferred Stock);
(iii) amend its Certificate of Incorporation, or by-laws;
(iv) acquire any business or any material assets;
(v) dispose of any assets (including intellectual property) except for
sales, leases or encumbrances of immaterial or obsolete assets;
(vi) grant any liens or mortgages;
(vii) transfer or license any rights to any of the Company's intellectual
property, other than nonexclusive licenses in the ordinary course of
business;
(viii) borrow any money (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 date of the Merger Agreement), or
guarantee any debt of any person;
(ix) make any loans or investments, other than to the Company or any
subsidiary of the Company:
(x) make any new material capital expenditures;
(xi) make any material tax election or settle any income or franchise tax
liability;
(xii) pay or settle any claims for an amount greater than $100,000;
(xiii) enter into, modify or terminate any material agreement, other than
in the ordinary course of business consistent with past practices, or waive
or assign any material rights or claims thereunder, other than discounting
of accounts receivable to obtain prompt collection;
(xiv) terminate or lay off any material numbers of employees, other than
for cause consistent with past practice and Company policy;
(xv) adopt, alter or commit to any compensation, benefit or severance or
change of control arrangement, enter into any employment contract, pay any
special bonus or increase the compensation of its employees other than in
the ordinary course of business consistent with past practices;
(xvi) grant or provide any severance or termination pay except payments
that are in amounts consistent with the Company's policies and past
practices, that are made pursuant to written plans or agreements
outstanding or policies existing on the date of the Merger Agreement;
(xvii) voluntarily take actions to liquidate or dissolve the Company or
to take advantage of bankruptcy or other creditor protection laws;
(xviii) take any action that would cause a breach of any of the Company's
representations or warranties in the Merger Agreement or any Ancillary
Agreement; or
(xix) authorize or commit or agree to take, any of the foregoing actions.
In the Merger Agreement, the Company agreed to afford Symantec and its
employees, accountants, counsel, financial advisors and other representatives,
reasonable access to all of its properties, books, contracts, personnel and
records and to furnish or make available to Symantec such information
concerning its business, properties and personnel as Symantec may reasonably
request.
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The Company has agreed that it shall not directly or indirectly (i) solicit,
initiate or encourage the submission of any "takeover proposals" (as defined
below), (ii) participate in any discussions or negotiations with, or furnish
any information to any person or group (other than Symantec) 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. Under the Merger Agreement, a
"takeover proposal" means any proposal for a merger or other business
combination involving the Company or any of its subsidiaries, any proposal,
offer or tender offer to acquire not less than 35% of the outstanding voting
securities of the Company, or any 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 ended September 30, 1998 or to obtain a license to the
Company's ProComm or CleanSweep products or to any of the Company's
intellectual property that is used therein and that is material to such
product, other than the transactions contemplated by the Merger Agreement or
the Ancillary Agreements. The Company has also agreed to immediately cease any
existing activities or discussions with any parties regarding a takeover
proposal. The Company agreed to promptly advise Symantec 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 such request, takeover proposal or inquiry,
and the identity of the person making any such takeover proposal or inquiry.
The Company has also agreed to keep Symantec informed of the status and
material terms of any such request, takeover proposal or inquiry.
Notwithstanding the foregoing, the Merger Agreement provides that the
Company may, to the extent the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that the Board of
Director's fiduciary duty under applicable law requires it to do so,
participate in discussions or negotiations, or furnish information, in
response to a "Superior Proposal." A Superior Proposal is defined in the
Merger Agreement as an unsolicited bona fide takeover proposal which the
Company's Board of Directors in its good faith reasonable judgment determines,
after consultation with its independent financial advisors, would result in a
transaction more favorable to the Company's stockholders from a financial
point of view than the Offer and the Merger and determines after reasonable
inquiry that the party making such takeover proposal is financially capable of
consummating such takeover proposal. If the Company receives a Superior
Proposal, the Company's Board of Directors is permitted to recommend the
Superior Proposal to the Company's stockholders, subject to the payment of a
break-up fee discussed below, 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.
The Company has given written notice to each holder of a Company Option
whether or not vested, will be exercisable allowing it to be exercised in full
until the Effective Time. All Company Options that are not so exercised, and
remain outstanding immediately prior to the Effective Time, will be terminated
and canceled at the Effective Time. The holders of cancelled Options having an
exercise price that is less than $.52 per share, will be entitled to receive
an amount in cash equal to the product of the difference between $.52 and the
exercise price of such Option, multiplied by the number of Shares issuable
upon exercise of such Option immediately prior to the Effective Time.
The Company has entered into an agreement with The Northwestern Mutual Life
Insurance Company, the holder of the Convertible Notes providing that,
immediately after the Effective Time, the Surviving Corporation shall be
entitled to repay the Convertible Notes in their original principal amount of
$25 million and accrued interest without premium. The Merger Agreement
provides that the Surviving Corporation will repay the Convertible Notes in
full within five business days after consummation of the Merger. The
Convertible Notes are convertible into an aggregate of approximately 1.18
million Shares at a conversion price of $21.18 per Share.
Symantec has agreed to fulfill (and cause the Surviving Corporation to
fulfill) obligations of the Company to indemnify its directors and officers
for liabilities existing prior to the date of the Merger Agreement. The
Certificate of Incorporation and by-laws of the Surviving Corporation will
contain provisions with respect to indemnification and elimination of
liability for monetary damages of the Company's directors and officers that
are similar to those set forth in the Certificate of Incorporation and by-laws
of the Company, Symantec has agreed not to amend or repeal these provisions,
subject to certain exceptions.
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Symantec has agreed that for at least three years from the Effective Time,
it shall maintain in effect the Company's current directors' and officers'
insurance policy to the extent that it covers events occurring prior to the
Effective Time, so long as the annual premium would not be in excess of 150%
of the last annual premium paid prior to the date of the Merger Agreement (the
"Maximum Premium") and, to the extent the annual premium would exceed the
Maximum Premium, Symantec will cause to be maintained the maximum amount of
insurance that can be procured for the Maximum Premium. In lieu of maintaining
the Company's current insurance, Symantec may elect to add the directors and
officers of the Company to its own insurance policy, if this election does not
diminish the rights provided to such persons under the Company's existing
insurance.
The Merger Agreement requires each of the parties to use all reasonable
efforts to take all actions necessary, proper or advisable to consummate and
make effective, in an expeditious manner, the Offer, the Merger and the
transactions contemplated by the Merger Agreement and the Ancillary
Agreements. Among other things, the Merger Agreement specifies the following
actions:
(i) obtaining all necessary governmental actions and approvals and making
all necessary governmental registrations and filings;
(ii) obtaining all necessary consents, approvals and waivers from third
parties,
(iii) defending any lawsuits or other legal proceedings challenging the
Merger Agreement or any Ancillary Agreement or the consummation of any of
the transactions contemplated thereby; and
(v) executing any additional instruments necessary to consummate the
transactions contemplated by, and fully to carry out the purposes of, the
Merger Agreement and the Ancillary Agreements.
The Company and Symantec are obligated to give prompt notice to the other
party of any material breach of any representation or warranty made by it in
the Merger Agreement or any Ancillary Agreement. Further, such parties are
obligated to give prompt notice of the failure to comply with or satisfy in
any material respect any covenant, condition or agreement under the Merger
Agreement or any Ancillary Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to its organization, and capital structure,
the absence of certain changes concerning the Company's business, litigation,
employee benefit plans, taxes, compliance with laws, environmental matters,
intellectual property, and material contracts.
Conditions to the Merger. Under the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the approval of
the Company's stockholders and the condition that no legal restraint or
prohibition shall be in effect which would (a) prevent the consummation of the
Merger, (b) prohibit Symantec's or Purchaser's ownership or operation of, or
compel Symantec or Purchaser to dispose of or hold separate, all or a material
portion of the business or assets of Symantec or the Company, (c) compel
Symantec, Purchaser or the Company to dispose of or hold separate all or a
material portion of the business or assets of Symantec or the Company, (d)
impose material limitations on the ability of Symantec or Purchaser or their
affiliates effectively to exercise full ownership and financial benefits of
the Surviving Corporation, or (e) impose any material condition to the Merger
Agreement, any Ancillary Agreements or the Merger which would be materially
adverse to Symantec. The Company is not currently aware of the existence of
any such restraint or prohibition.
Termination; Fees and Expenses. The Merger Agreement contained provisions
allowing its termination by Symantec under certain circumstances prior to the
consummation of the Offer. Since the Offer has been consummated, the Merger
Agreement may not be terminated by Symantec. It may be terminated at any time
prior to the Effective Time by mutual written consent of Symantec and the
Company. In addition, it may be terminated by the Company if any governmental
entity has issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the payment for
the Shares pursuant to the Merger and such order, decree or ruling or other
action has become final and nonappealable.
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Prior to the consummation of the Offer, Symantec would have been entitled to
terminate the Merger Agreement if, among other things:
(i) Symantec did not purchase any shares in the Offer by December 31,
1998 because a condition to the Offer was not satisfied;
(ii) the Company's Board of Directors withdrew its recommendation of the
Offer or the Merger, or recommended a competing takeover proposal;
(iii) the Company entered into an agreement with respect to a competing
takeover proposal;
(iv) any other person acquired 35% or more of the outstanding Shares; or
(v) there had been certain material breaches of the Company's
representations and warranties or covenants, in the Merger Agreement.
Also, prior to the consummation of the Offer, the Company would have been
entitled to terminate the Merger Agreement if, among other things:
(i) Symantec did not purchase any shares in the Offer by December 31,
1998 because a condition to the Offer was not satisfied;
(ii) the Company received a Superior Proposal; or
(iii) there had been certain material breaches of Symantec's
representations and warranties, or covenants, in the Merger Agreement.
The Merger Agreement provides that if the Merger Agreement was terminated
prior to the consummation of the Offer under certain circumstances, the
Company would have been obligated to pay $2.0 million (the "Break-up Fee") to
Symantec. The Break-Up Fee would have been payable if the Merger Agreement was
terminated (i) by Symantec as a result of certain conditions relating to the
continued recommendation of the Offer and the Merger by the Company's Board of
Directors, and the absence of any recommendation of any competing takeover
proposal; (ii) by Symantec as a result of a willful breach by the Company of
its agreement not to solicit a competing takeover proposal; or (iii) by the
Company after receiving a Superior Proposal. Instead of paying the Break-Up
Fee in cash, the Company would have been entitled to apply it dollar for
dollar to reduce the amount of any royalties that Symantec would have become
obligated to pay under the License Agreement described below. In the event
that the Break-Up Fee then exceeded the amount of such royalties, no further
cash payment of the Break-Up Fee would have been required. In each case in
which a Break-Up Fee became payable (or applied to reduce Symantec's
royalties), its payment (or application to reduce royalties), together with
the exercise by Symantec of its rights under the License Agreement would have
been Symantec's sole remedy against the Company.
Post Merger Employment Benefits. Employees of the Company who become
employed by Symantec or any controlled subsidiary thereof after the Effective
Time will either, at Symantec's election, to the extent permitted under the
terms of the Company's employee benefit plans, continue to be eligible to
participate in such plans, 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 Symantec employees.
Rights Agreement. The Company has entered into an amendment to the Rights
Agreement to (i) exclude Symantec and the Purchaser and their respective
Affiliates and Associates (as such terms are defined in the Rights Agreement)
from the definition of "Acquiring Person" therein, with respect to the
beneficial ownership of the Shares which Symantec or Purchaser acquired, or
will acquire, as a result of the Offer and Merger; (ii) provide that no
Distribution Date (as such term is defined in the Rights Agreement) shall
result from the Offer; and (iii) provide for the expiration of the Rights
Agreement upon the Effective Time.
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THE LICENSE AGREEMENT
The following is a summary of the License Agreement, dated as of October 15,
1998, by and among Parent, Purchaser and the Company (the "License
Agreement"). For more detail regarding the License Agreement, see the full
text of the License Agreement, a copy of which has been filed with the
Commission as an exhibit to the Company's Schedule 14D-9 relating to the
offer. See "Available Information."
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into the License Agreement. In the License Agreement, the
Company granted to Symantec, a non-exclusive license (the "Distribution
License") to use, copy, distribute, display and perform all of the Company's
CleanSweep(TM) product and related technology (the "Licensed Product") and a
nonexclusive license (the "Development License") under all of the Company's
intellectual property rights to use, copy and create derivative works during
the term of the License Agreement from the source code of the Licensed Product
or materials and information provided by the Company relating thereto. In
consideration of this grant, Symantec has agreed to pay the Company royalties
equal to 8% of net revenue from the distribution or other revenue producing
exploitation of the Licensed Product. The royalty rate would have been reduced
to 6% if the Company became obligated to pay a Break-up Fee as a result of a
willfull breach of its agreement not to solicit a competing takeover proposal.
The License Agreement further provided that, for copies of the Licensed
Products, the royalty per seat shall not be less than $1.25 for stand-alone
sales of the Licensed Product, $0.75 for bundles of the Licensed Product as
part of Symantec's Norton Systemworks product suite and $0.20 for original
equipment manufacturer transactions. The Development License commenced on
October 15, 1998 and the Distribution License commenced on November 17, 1998.
Upon execution of the License Agreement, the Company deposited in escrow the
source code for its CleanSweep product and related technology which was
released to Symantec upon commencement of the Distribution License. The
License Agreement terminates immediately if Symantec fails to close the Merger
in accordance with the Merger Agreement. In addition, the License Agreement
would have terminated if the Merger has not occurred by January 31, 1999 and
the Company has not been obligated to pay the Break-up Fee. In January 1999,
this provision was amended to extend the date by which the Merger must occur
to March 31, 1999. The License Agreement also terminates for a material breach
of any term of the License Agreement that is not cured within thirty days. The
obligations of the Company and Symantec to consummate the Merger will not be
affected by any termination of the License Agreement.
SERIES C CONVERTIBLE PREFERRED STOCK
The Company initially issued 29,000 shares of Series C Preferred Stock (and
warrants to purchase an additional 2,900 shares of Series C Preferred Stock)
to approximately thirty accredited investors between September 30, 1997 and
November 4, 1997. To the Company's knowledge, none of the investors are
affiliated with either the Company or Parent or any of their officers,
directors or principal stockholders. As of the closing of the Offer on
November 17, 1998, all shares of Series C Preferred Stock had been converted.
The Series C Preferred Stock originally had a floating conversion price equal
to 101% of the average of the three lowest daily trading prices for the 22
consecutive trading days immediately preceding the date of conversion. After
negotiating the terms thereof over a period of several weeks, the Company
entered into separate agreements, each dated October 9, 1998, with each of the
holders of the Company's Series C Preferred Stock and warrants. Pursuant to
the agreements, the holders of the Series C Preferred Stock agreed not to
convert any such shares at a conversion price of less than $0.2650 (the "Floor
Price") for a period of six months after October 9, 1998. In addition, during
the first sixty calendar days following such date, upon conversion of any
shares of the Series C Preferred Stock in accordance with their terms, the
Company agreed to issue shares of Common Stock at a fixed conversion price of
$0.2650 notwithstanding the actual conversion price then in effect.
Pursuant to the October 9, 1998 agreements, during the six months following
October 9, 1998, the Company had the right to repurchase all of the shares of
Series C Preferred Stock owned by the holders thereof at a price equal to 110%
of the original purchase price. The Company could have exercised this
repurchase right upon 10 days notice (which may have been by press release),
during which time period the holders of the Series C
29
<PAGE>
Preferred Stock remained entitled to convert such shares into shares of Common
Stock. The holders of the Series C Preferred Stock also agreed that upon a
"sales event" (as defined below), the Company may have, at its option,
repurchased the shares of Series C Preferred Stock at a price equal to 110% of
the original price or required such holders to convert their shares of Series
C Preferred Stock into shares of Common Stock, or to effect a combination of
the foregoing. A "sales event" means the sale of all or substantially all of
the assets of the Company, a consolidation or merger of the Company in which
the stockholders of the Company immediately prior to such event do not retain
a majority of the voting power of the surviving corporation or the sale of
more than 50% of the stock of the Company. The Company did not have such
repurchase rights under the terms of the original agreements with the holders
of the Series C Preferred Stock.
Under the October 9, 1998 agreements, the Company agreed to issue additional
shares of Common Stock (or, at the Company's election, cash) to each holder of
the Series C Preferred Stock, up to an amount equal to 5% of the original
purchase price of such shares of Series C Preferred Stock, but only to the
extent that such holder did not realize at least a 50% gross aggregate return
upon resale of the shares of Common Stock received upon the conversion of such
shares of Series C Preferred Stock. No such additional shares or cash was
issued.
30
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is certain selected consolidated financial data with respect
to the Company, excerpted or derived from the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1998 as amended on Form 10-K/A,
as well as the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998, each as filed with the Commission pursuant to the Exchange
Act. Certain items in the consolidated financial statements of fiscal 1995 and
1994 have been reclassified to conform to the 1997 presentation. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission. Such reports and other
documents are available for inspection, and copies thereof are obtainable in
the manner set forth below under "Available Information" below. All amounts
shown are in thousands, except per share data.
<TABLE>
<CAPTION>
Year ended September 30, Three months ended December 31,
------------------------------------------------ -----------------------------------
1998 1997 1996 1995 1994 1998 1997
-------- -------- -------- -------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Net revenues............ $ 50,861 $ 83,787 $133,100 $117,606 $ 84,715 $ 5,769 $20,626
Cost of revenues........ 14,587 21,271 49,600 34,884 27,403 2,859 4,709
-------- -------- -------- -------- -------- -------- -------
Gross margin......... 36,274 62,516 83,500 82,722 57,312 2,910 15,917
Operating expenses:
Research and
development........... 16,640 16,419 21,314 14,286 7,520 1,167 4,681
Sales and marketing.... 30,566 29,305 66,355 30,624 27,107 3,214 8,378
General and
administrative........ 9,923 17,227 32,128 20,704 20,908 2,209 2,807
Acquisition,
restructuring and
other charges......... 2,583 11,713 37,789 7,409 12,863 8,946 (51)
Litigation
settlement............ -- 1,905 -- -- 615 -- --
-------- -------- -------- -------- -------- -------- -------
Total operating
expenses............ 59,712 76,569 157,586 73,023 69,013 15,356 15,815
Operating income
(loss)................. (23,438) (14,053) (74,086) 9,699 (11,701) (12,446) 102
Other income
(expense), net...... 1,264 (2,143) 38 (38) (271) 222 (498)
Interest income
(expense), net......... (952) (2,072) (105) 1,922 1,365 735 267
-------- -------- -------- -------- -------- -------- -------
Income (loss) before
income taxes........... (23,126) (18,268) (74,153) 11,583 (10,607) (13,403) $ 332
Provision (benefit) for
income Taxes........... 39 130 806 331 (5,982) -- 16
-------- -------- -------- -------- -------- -------- -------
Net income (loss)....... $(23,165) $(18,398) $(74,959) $ 11,252 $ (4,625) $(13,403) $ 316
======== ======== ======== ======== ======== ======== =======
Net income (loss) per
share:
Primary................ $ (0.45) $ (0.43) $ (2.15) $ 0.32 $ (0.15) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
Fully diluted.......... $ (0.45) $ (0.43) $ (2.15) $ 0.31 $ (0.15) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
Shares used to compute
net income (loss) per
share:
Primary................ 51,609 43,168 34,894 35,557 31,825 84,002 43,363
======== ======== ======== ======== ======== ======== =======
Fully diluted.......... 51,609 43,168 34,894 36,499 31,825 84,002 67,628
======== ======== ======== ======== ======== ======== =======
Additional unaudited pro
forma data:/1
Income (loss) before
income Taxes.......... $(23,126) $(18,268) $(74,153) $ 11,583 $(10,607) $(13,403) 332
Pro forma income
taxes................. 39 130 806 3,406 576 -- 16
-------- -------- -------- -------- -------- -------- -------
Pro forma net income
(loss).............. $(23,165) $(18,398) $(74,959) $ 8,177 $(11,183) $(13,403) 316
======== ======== ======== ======== ======== ======== =======
Pro forma income (loss)
per share:
Primary................ $ (0.45) $ (0.43) $ (2.15) $ 0.23 $ (0.35) $ (0.16) $ 0.01
-------- -------- -------- -------- -------- -------- -------
Fully diluted.......... $ (0.45) $ (0.43) $ (2.15) $ 0.22 $ (0.35) $ (0.16) $ 0.01
======== ======== ======== ======== ======== ======== =======
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
As of September 30, As of December 31,
----------------------------------------- -----------------------
1998 1997 1996 1995 1994 1998 1997
-------- ------ ------- ------- ------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital /
(deficiency)........... $ 1,955 $6,917 $(4,684) $29,490 $29,147 $ (7,980) 17,863
Total assets............ 19,525 55,881 76,781 76,699 62,471 10,861 52,036
Long-term obligations... 25,022 25,114 25,108 164 701 25,022 25,089
Stockholders' equity.... (17,933) 1,173 4,425 44,270 36,606 (29,600) 4,110
Other Data:
Book Value Per Share.... -- -- -- -- -- $ (0.33) --
</TABLE>
- --------
/1 On June 30, 1995, the Company completed the acquisition of Landmark
Research International Corporation ("Landmark"). The acquisition was
treated as a pooling of interests and accordingly, the information
presented above was restated to reflect this transaction. Prior to June 30,
1995, Landmark elected to be taxed as an S corporation whereby the income
tax effects of Landmark's activities accrued directly to its shareholders.
Landmark's S corporation election terminated on June 30, 1995, at the time
of the acquisition. On March 28, 1996, the Company completed the
acquisition of Datastorm Technologies, Inc. ("Datastorm"). The acquisition
was treated as a pooling of interests and accordingly, the information
presented above was restated to reflect this transaction. Prior to being
acquired by the Company, Datastorm elected to be taxed as an S corporation
whereby the income tax effects of Datastorm's activities accrued directly
to the shareholders. Datastorm's S corporation election terminated at the
time of acquisition. The pro forma information reflects the estimated tax
expense as if Landmark and Datastorm were C corporations for all of the
periods presented.
Certain Company Estimates. During the course of discussions between Parent
and the Company that led to execution of the Merger Agreement, the Company
provided Parent with certain preliminary estimates of the Company's future
performance that are not available to the public. The information provided
included summary preliminary estimates of the Company's income statement for
the quarter ending September 30, 1998 and for each of the four quarters
thereafter during the Company's 1999 fiscal year (from October 1, 1998 through
September 30, 1999). These preliminary estimates forecast net revenues of
$11.2 million for the quarter ending on September 30, 1998 (compared to $8.0
million for the prior quarter) with net revenues then generally rising over
the next four quarters to $12.3 million for the last of the four quarters.
These preliminary estimates forecast that gross profit would grow from $8.3
million to $9.4 million per quarter over the five-quarter period, with total
operating expenses remaining relatively constant (ranging from $7.9 million to
$8.1 million). Therefore, total operating income was preliminarily estimated
to rise over the five-quarter period from $230,000 (before interest expense
and taxes) for the quarter ending September 30, 1998 to $1.3 million for the
quarter ending September 30, 1999. The foregoing preliminary estimates
constitute forward-looking statements subject to material risks and
uncertainties that could cause actual results to differ substantially from
those estimated, such as the Company's ability to retain market share in an
environment of increasing competition, the ability to improve its products and
introduce new products on a timely basis, the ability to retain employees and
customers and other business and competitive factors, as well as the effects
on the Company's business of the Offer and the Merger.
The Company does not as a matter of course make public any estimates as to
future performance or earnings, and the preliminary estimates set forth above
are included in this Information Statement only because the information was
made available to Parent and Purchaser by the Company. The Company has
informed Parent that the preliminary estimates were not prepared with a view
to public disclosure or compliance with the published guidelines of the
Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding estimates or forecasts. The Company has
also informed Parent that its internal financial estimates (upon which the
preliminary estimates provided to Parent were based in part) are, in general,
prepared solely for internal use and capital budgeting and other management
decision-making purposes, are subjective in many respects and thus susceptible
to various interpretations and periodic revision based on actual experience
and business developments. Projected information of this type is based on
estimates and assumptions that are inherently subject to significant economic
and competitive uncertainties and contingencies, all of which
32
<PAGE>
are difficult to predict and many of which are beyond the control of the
Company, Purchaser or Parent or their respective financial advisors. Many of
the assumptions upon which the estimates were based, none of which were
approved by Parent or Purchaser, are dependent upon economic forecasting (both
general and specific to the Company's business), which is inherently uncertain
and subjective.
The inclusion of the foregoing preliminary estimates should not be regarded
as an indication that the Company, Purchaser, Parent or any other person who
received such information considers them accurate predictions of future
events, and neither Purchaser nor Parent has relied on these estimates or
given them significant weight in assessing the value of the Shares or
evaluating the business or prospects of the Company.
SOURCE AND AMOUNT OF FUNDS
The amount payable by Purchaser to acquire all Shares outstanding as of
October 15, 1998, and all Shares issuable upon exercise of all warrants for
the purchase of the Company's Preferred Stock and conversion of all such stock
to the Company's Common Stock, plus amounts payable with respect to Options,
totals approximately $48 million. Purchaser will obtain all such funds from
Parent through a capital contribution or loan, which Parent will provide from
its working capital. Neither the Offer nor the Merger is contingent upon
obtaining financing. At September 30, 1998, Parent had cash and cash
equivalents of $175.4 million and working capital (total current assets minus
total current liabilities) of approximately $122.7 million.
33
<PAGE>
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of February 1, 1999 for (i) each person known
to the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each director of the Company, (iii) the Chief Executive
Officer of the Company and the other four most highly compensated executive
officers of the Company whose total annual compensation for the year ended
September 30, 1998 exceeded $100,000, and (iv) all current directors and
executive officers of the Company as a group. Except for Oak Acquisition
Corporation, Mr. Salem, Mr. Eubanks, and Mr. Witte whose address is 10201
Torre Avenue, Cupertino, California 95014, the address of each such person is
that of the Company, 13160 Mindanao Way, Marina del Rey, California 90292.
<TABLE>
<CAPTION>
Number of Percent of
Shares of Shares of
Common Common
Name Stock Stock(1)
---- ---------- ----------
<S> <C> <C>
Oak Acquisition Corporation(2).......................... 58,227,311 64.8%
Enrique T. Salem........................................ -- --
Gordon Eubanks, Jr. .................................... -- --
Derek Witte............................................. -- --
Frank W.T. LaHaye(3).................................... 262,500 *
Howard Morgan(4)........................................ 86,500 *
King R. Lee(5).......................................... 387,500 *
Curtis A. Hessler(6).................................... 1,500,000 1.6%
Frank R. Greico(7)...................................... 55,208 *
Joseph Fusco............................................ -- --
Mark Epstein............................................ -- --
John Strosahl(8)........................................ 231,575 *
All directors and executive officers as a group (7
persons)(9)............................................ 791,708 *
</TABLE>
- --------
* Less than one percent
(1) Percent Ownership is based on 89,760,799 shares of Common Stock
outstanding as of February 1, 1999. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Following the commencement of
the tender offer by Symantec, on November 4, 1998, all outstanding options
became fully vested and as a result, all shares subject to options are
currently exercisable and are deemed to be outstanding and to be
beneficially owned by the person holding such options or warrants for the
purpose of computing the percentage ownership of such person but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Oak Acquisition Corporation is a wholly owned subsidiary of Symantec
Corporation. Accordingly, Symantec Corporation is deemed to beneficially
own the shares of Common Stock owned by Oak Acquisition Corporation.
(3) Includes 262,500 shares that may be purchased by Mr. LaHaye upon the
exercise of options that are currently exercisable.
(4) Includes 62,500 shares that may be purchased by Dr. Morgan upon the
exercise of options that are currently exercisable, and includes 24,000
shares of Common Stock held in trust for Dr. Morgan's children with
respect to which Dr. Morgan disclaims beneficial ownership.
(5) Includes 387,500 shares that may be purchased by Mr. Lee upon the exercise
of options that are currently exercisable.
(6) Includes 1,500,000 shares that may be purchased by Mr. Hessler upon the
exercise of options that are currently exercisable.
34
<PAGE>
(7) Includes 55,208 shares that may be purchased by Mr. Greico upon the
exercise of options that are currently exercisable.
(8) Includes 231,575 shares which may be purchased by Mr. Strosahl upon the
exercise of options that are currently exercisable.
(9) Includes 767,708 shares which may be purchased upon the exercise of
options granted to the directors and executive officers as a group, which
are currently exercisable.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference herein the following documents filed
with the Commission pursuant to the Exchange Act:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 as amended on Form 10-K/A;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1998.
3. The Company's Current Reports on Form 8-K dated October 19, 1998, October
20, 1998 and November 17, 1998.
Copies of the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 as amended on Form 10-K/A and the Quarterly Report on form
10-Q for the quarter ended December 31, 1998 are being furnished to
stockholders along with the Information Statement.
THIS INFORMATION STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS INFORMATION STATEMENT IS DELIVERED, ON WRITTEN
OR ORAL REQUEST TO QUARTERDECK CORPORATION, 13160 MINDANAO WAY, MARINA DEL
REY, CALIFORNIA 90292 (TELEPHONE NUMBER (310) 309-3700), ATTENTION: DEREK
WITTE, SECRETARY OF THE COMPANY.
AVAILABLE INFORMATION
Both Parent and the Company are subject to the information filing
requirements of the Exchange Act and in accordance therewith files reports,
proxy and information statements and other information with the Commission.
The Tender Offer Statement on Schedule 14D-1 filed by Purchaser and the
Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company,
each in connection with the Offer, and the respective exhibits thereto, as
well as such reports, proxy and information statements and other information
filed by Parent and the Company with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10007 and at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2551. Copies of such material can
also be obtained from the principal office of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission also maintains an internet website at http://www.sec.gov that
contains reports, proxy statements and other information.
35
<PAGE>
ANNEX I
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;
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:
I-1
<PAGE>
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 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.
I-2
<PAGE>
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 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.
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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 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.
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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, 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.
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(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).
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).
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(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, 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 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.
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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 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
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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 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
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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 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.
(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
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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 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
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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;
(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
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<PAGE>
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 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 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
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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, 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
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<PAGE>
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 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.
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<PAGE>
(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 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 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
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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 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
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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 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
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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 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.
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(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 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;
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(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 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, (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
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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).
(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).
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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 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
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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
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 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
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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 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;
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(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 (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 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
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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 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
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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.
(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
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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 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 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
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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 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.
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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.
(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
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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.
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.
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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 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
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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 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.
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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.
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 other option to purchase Company Common Stock disclosed
in Section 4.1(c) of the Company Disclosure Schedule not granted under any
such plan.
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(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;
(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
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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 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
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(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.
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***
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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 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
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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;
(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.
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ANNEX II
SECTION 262 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
SECTION 262--Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to sec. 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263
or sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to sec.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders
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entitled to receive either notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after
the effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the date next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period of delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 349, L.
'96, eff. 7-1-96).
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ANNEX III
FAIRNESS OPINION OF BROADVIEW INTERNATIONAL LLC
CONFIDENTIAL
Board of Directors
Quarterdeck Corporation
13160 Mindanao Way
Marina del Rey, CA 90292-9705
Dear Members of the Board:
We understand that Symantec Corporation ("Symantec" or the "Parent"), Oak
Acquisition Corporation, a wholly owned subsidiary of Parent ("Sub"), and
Quarterdeck Corporation ("Quarterdeck" or the "Company") propose to enter into
an Agreement and Plan of Merger (the "Agreement") pursuant to which, Parent
proposes to cause Sub to make a tender offer (the "Offer") to purchase all the
issued and outstanding shares of Common Stock of the Company (the "Company
Common Stock"), at a price per share of not less than $0.52 (the "Offer
Price") and, subsequently merge with and into the Company (the "Merger"), with
each share of Quarterdeck Common Stock not tendered pursuant to the offer
being converted into the right to receive the Offer Price. Quarterdeck's
obligations under the Convertible Notes (as defined in the Agreement) will be
assumed by the surviving corporation in the Merger. The terms and conditions
of the above described Merger are more fully detailed in the Agreement.
For purposes of this opinion, we have relied on management's assumption and
expectation that all issued and outstanding shares of Company Preferred Stock
(as defined in the Agreement) and Company warrants will be converted into
16,030,189 shares of Quarterdeck Common Stock upon commencement of the offer.
You have requested our opinion as to whether the Offer Price is fair, from a
financial point of view, to Quarterdeck shareholders.
Broadview International LLC focuses on providing merger and acquisition
advisory services to information technology ("IT") companies. In this
capacity, we are continually engaged in valuing such businesses, and we
maintain an extensive database of IT mergers and acquisitions for comparative
purposes. We are currently acting as financial advisor to the Quarterdeck
Board of Directors and will receive a fee from Quarterdeck upon the successful
conclusion of the Merger.
In rendering our opinion, we have, among other things:
1.) reviewed the terms of the Agreement and Plan of Merger and the
associated exhibits thereto in the form of the draft dated October 15, 1998
furnished to us by Fenwick & West on October 15, 1998 (which, for the
purposes of this opinion, we have assumed, with your permission, to be
identical in all material respects to the agreement to be executed);
2.) reviewed Quarterdeck's annual report and Form 10-K for the fiscal
year ended September 30, 1997, including the audited financial statements
included therein, and Quarterdeck's Form 10-Q for the quarterly period
ended June 30, 1998, including the unaudited financial statements included
therein;
3.) reviewed certain internal financial and operating information,
including certain projections for the fiscal year ending September 30,
1999, relating to Quarterdeck prepared by Quarterdeck management;
4.) participated in discussions with Quarterdeck management concerning
the operations, business strategy, financial performance and prospects for
Quarterdeck;
5.) discussed with Quarterdeck management its view of the strategic
rationale for the Merger;
6.) reviewed the recent reported closing prices and trading activity for
Quarterdeck Common Stock;
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7.) compared certain aspects of the financial performance of Quarterdeck
with public companies we deemed comparable;
8.) analyzed available information, both public and private, concerning
other mergers and acquisitions we believe to be comparable in whole or in
part to the Merger;
9.) reviewed Symantec's annual report and Form 10-K for the fiscal year
ended March 31, 1998, including the audited financial statements included
therein, and Symantec's quarterly report on Form 10-Q for the quarterly
period ended June 30, 1998, including the unaudited financial information
included therein;
10.) discussed with Symantec management its view of the strategic
rationale for the Merger;
11.) reviewed recent equity analyst reports covering Symantec;
12.) assisted in negotiations and discussions related to the Merger among
Quarterdeck, Symantec and their financial and legal advisors;
13.) conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Quarterdeck
or Symantec. With respect to the financial projections examined by us, we have
assumed that they were reasonably prepared and reflected the best available
estimates and good faith judgment of the management of Quarterdeck as to the
future performance of Quarterdeck. We have neither made nor obtained an
independent appraisal or valuation of any of Quarterdeck's assets.
Based upon and subject to the foregoing, we are of the opinion that the
Offer Price to be paid in the Merger is fair, from a financial point of view,
to Quarterdeck shareholders.
For purposes of this Opinion, we have assumed that neither Quarterdeck nor
Symantec is currently involved in any material transaction other than the
Merger and those activities undertaken in the ordinary course of conducting
their respective businesses. Our opinion is necessarily based upon market,
economic, financial and other conditions as they exist and can be evaluated as
of the date of this opinion, and any change in such conditions may impact this
opinion.
This opinion speaks only as of the date hereof and may be relied upon only
by the Board of Directors of Quarterdeck in connection with its consideration
of the Merger and does not constitute a recommendation to any Quarterdeck
shareholder as to whether such shareholder should tender his shares or as to
how such shareholder should vote on the Merger. This opinion may not be
published or referred to, in whole or part, without our prior written
permission, which shall not be unreasonably withheld. Broadview hereby
consents to references to, and the inclusion of this opinion in its entirety
in the tender offer documents and proxy statement, if any, to be distributed
to Quarterdeck shareholders in connection with the tender offer and the
Merger, respectively.
Sincerely,
LOGO
BROADVIEW INTERNATIONAL LLC
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