<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SYMANTEC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
Delrina Common Shares
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
25,468,165
------------------------------------------------------------------------
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):
$16.6875(1)
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$425,000,000
------------------------------------------------------------------------
5) Total fee paid:
$85,000
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.(2)
/ / 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:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
- --------------------------
(1) Calculated based on the average of the high and low prices of Delrina Common
Shares on the Nasdaq National Market on August 14, 1995.
(2) Fee calculated on the basis set forth above was paid in connection with the
filing of the preliminary proxy statement on August 18, 1995.
<PAGE>
[LOGO]
10201 TORRE AVENUE
CUPERTINO, CALIFORNIA 95014-2132
------------------------
OCTOBER 17, 1995
------------------------
Dear Stockholder:
The Annual Meeting of Stockholders (the "Meeting") of Symantec Corporation
("Symantec") will be held at the Garden Court Hotel, Palo Alto, California, on
November 20, 1995 at 9:00 a.m. (Pacific time).
At the Meeting, you will be asked to consider and vote upon two proposals
relating to a combination between Symantec and Delrina Corporation ("Delrina"):
(a) a proposal to approve the Combination Agreement between Symantec and Delrina
and the transactions contemplated thereby, including the issuance of shares of
Symantec Common Stock as contemplated by the Combination Agreement; and (b) a
proposal to amend Symantec's Certificate of Incorporation to increase by
30,000,000 (from 70,000,000 to 100,000,000) the number of shares of Symantec
Common Stock, par value $0.01 per share, authorized for issuance and to create a
new class of stock, designated Special Voting Stock, par value $1.00 per share,
and to authorize one share for issuance thereunder. Upon consummation of the
combination transaction, Delrina will become a subsidiary of Symantec and
Delrina shareholders will receive Exchangeable Shares of Delrina in exchange for
their Delrina Common Shares at the rate of 0.61 of an Exchangeable Share for
each Delrina Common Share. These Exchangeable Shares will be exchangeable on a
one-for-one basis for shares of Symantec Common Stock at any time at the option
of the holder. The share of Special Voting Stock will be issued to a trustee
under a Voting and Exchange Trust Agreement and will entitle the trustee to the
number of votes equal to the number of Exchangeable Shares outstanding from time
to time. By furnishing instructions to the trustee, holders of Exchangeable
Shares will be able to exercise the same voting rights with respect to Symantec
as they will have after exchange of their Exchangeable Shares for Symantec
Common Stock. Each outstanding option to purchase one Delrina Common Share will
be converted into an option to purchase 0.61 of a share of Symantec Common
Stock. If the requisite approvals are received, the combination transaction is
expected to be consummated on or about November 22, 1995.
All directors and officers of Symantec will remain in their current
positions following the transaction. Two current members of the Delrina Board of
Directors will join the Symantec Board of Directors and the current Chairman and
Chief Executive Officer of Delrina will become an executive officer of Symantec.
After careful consideration, your Board of Directors has unanimously
approved the Combination Agreement and the transactions provided for therein and
has concluded that they are in the best interests of Symantec and its
stockholders. Your Board of Directors unanimously recommends a vote in favor of
the combination proposals.
At the Meeting, you also will be asked to elect six directors to Symantec's
Board of Directors, each to hold office until his successor is elected and
qualified or until his earlier resignation or removal and to vote upon (a) a
proposal to amend Symantec's 1989 Employee Stock Purchase Plan (the "Stock
Purchase Plan") to increase by 500,000 shares (from 1,500,000 to 2,000,000) the
number of shares of Symantec Common Stock reserved for issuance thereunder; (b)
a proposal to amend Symantec's 1988 Employees Stock Option Plan (the "Stock
Option Plan") to increase by 1,000,000 shares (from 12,700,000 to 13,700,000)
the number of shares of Symantec Common Stock reserved for issuance thereunder;
and (c) to ratify the selection of Ernst & Young LLP as Symantec's independent
auditors for the current fiscal year. Your Board of Directors unanimously
recommends that you vote for the six nominees for director and in favor of the
proposals to amend the Stock Purchase Plan and Stock Option Plan and to ratify
the selection of independent auditors.
In the material accompanying this letter, you will find a Notice of Annual
Meeting of Stockholders, a Joint Proxy Statement relating to the actions to be
taken by Symantec stockholders at the Meeting (as well as the actions to be
taken by the Delrina shareholders at the Delrina annual and special meeting) and
a proxy. The Joint Proxy Statement more fully describes the proposed combination
transaction and includes information about Symantec and Delrina and about the
additional matters for consideration at the Meeting.
All stockholders are cordially invited to attend the Meeting in person.
However, whether or not you plan to attend the Meeting, please complete, sign,
date and return your proxy in the enclosed envelope. If you attend the Meeting,
you may vote in person if you wish, even though you have previously returned
your proxy. It is important that your shares be represented and voted at the
Meeting.
Sincerely,
Gordon E. Eubanks, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[LOGO]
10201 TORRE AVENUE
CUPERTINO, CALIFORNIA 95014
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
To our Stockholders:
The annual meeting of stockholders of Symantec Corporation, a Delaware
corporation ("Symantec"), will be held at 9:00 a.m. (Pacific time) on November
20, 1995, at The Garden Court Hotel, Palo Alto, California, for the following
purposes:
COMBINATION PROPOSALS
1. To consider and act upon a proposal to approve the Combination Agreement
dated as of July 5, 1995 between Symantec and Delrina Corporation and the
transactions contemplated thereby, including the issuance of shares of Symantec
Common Stock as contemplated by such Combination Agreement.
2. To consider and act upon a proposal to amend Symantec's Certificate of
Incorporation to (a) increase by 30,000,000 (from 70,000,000 to 100,000,000) the
number of shares of Symantec Common Stock, par value $0.01 per share, authorized
for issuance; and (b) create a new class of stock, designated Special Voting
Stock, par value $1.00 per share, and to authorize one share for issuance
thereunder.
ANNUAL MEETING PROPOSALS
3. To elect six directors to Symantec's Board of Directors, each to hold
office until his successor is elected and qualified or until his earlier
resignation or removal.
4. To consider and act upon a proposal to amend Symantec's 1989 Employee
Stock Purchase Plan to increase by 500,000 shares (from 1,500,000 to 2,000,000)
the number of shares of Symantec Common Stock reserved for issuance thereunder.
5. To consider and act upon a proposal to amend Symantec's 1988 Employees
Stock Option Plan to increase by 1,000,000 shares (from 12,700,000 to
13,700,000) the number of shares of Symantec Common Stock reserved for issuance
thereunder.
6. To consider and act upon a proposal to ratify the selection of Ernst &
Young LLP as Symantec's independent auditors for the current fiscal year.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Joint Proxy
Statement that accompanies this Notice.
Only stockholders of record as of October 4, 1995 are entitled to notice of
and will be entitled to vote at this meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Derek P. Witte
VICE PRESIDENT AND GENERAL COUNSEL
Cupertino, California
October 17, 1995
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, YOU ARE URGED TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
YOUR PROXY CAN BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
[LOGO]
500-2 PARK CENTRE
TORONTO, ONTARIO M3C 1W3
October 17, 1995
Dear Delrina Shareholder:
We are pleased to invite you to attend an important meeting of shareholders,
to be held in conjunction with the annual meeting of shareholders on November
20, 1995 at 9:00 a.m. (Toronto time) at the Four Seasons Inn on the Park,
Toronto, Ontario. Because of the importance of the business of this meeting, we
would like as many of you as possible either to attend in person, or to be
represented by sending in your proxies.
The business of the meeting includes consideration of and voting on an
arrangement which, effectively, will lead to a combination of Delrina
Corporation ("Delrina") and Symantec Corporation ("Symantec").
The details of the proposed transaction are included in the attached Joint
Proxy Statement. Also included is the form of proxy. For Canadian shareholders
the Letter of Transmittal is included, and for U.S. shareholders, the Letter of
Transmittal will be delivered under separate cover. Please review the Joint
Proxy Statement carefully -- it has been prepared to help you make an informed
investment decision. The Joint Proxy Statement also includes Delrina's audited
financial statements for the fiscal year ended June 30, 1995 and Delrina
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Delrina will not be preparing a separate annual report this year.
If the proposed transaction is completed, Delrina shareholders will exchange
each of their Delrina Common Shares for 0.61 of an Exchangeable Share (a
newly-created class of shares) of Delrina. Each Exchangeable Share may itself be
exchanged for one share of Symantec Common Stock. Each Exchangeable Share will
entitle its holder to receive dividends economically equivalent to any dividends
paid on Symantec Common Stock and will carry the right to vote at meetings of
the stockholders of Symantec. Holding Exchangeable Shares rather than Symantec
Common Stock may appeal to Delrina's shareholders for certain United States and
Canadian tax reasons, which are described in the Joint Proxy Statement.
After considering many different factors (which are reviewed in detail in
the Joint Proxy Statement), your Board of Directors has unanimously recommended
that you vote in favour of the resolution concerning the Plan of Arrangement and
the combination of Symantec and Delrina.
We hope that you will be able to attend the meeting. Whether or not you are
able to attend, it is still important that you be represented at the meeting. We
urge you to complete the enclosed form of proxy and return it, not later than
the time specified in the Notice of Annual and Special Meeting of Shareholders,
in the postage-paid envelope provided. Regardless of the number of shares you
own, your vote is important.
Yours very truly,
Your Board of Directors
Dennis Bennie
CHAIRMAN
<PAGE>
[LOGO]
------------------
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
---------------------
NOTICE IS HEREBY GIVEN that an annual and special meeting (the "Delrina
Shareholders Meeting") of the shareholders of Delrina Corporation ("Delrina")
will be held at 9:00 a.m. (Toronto time) on November 20, 1995 at the Four
Seasons Inn on the Park, Toronto, Ontario for the following purposes:
1. To consider, pursuant to an order (the "Interim Order") of the
Ontario Court of Justice (General Division) dated October 6, 1995, and, if
deemed advisable, to pass, with or without variation, a special resolution
(the "Arrangement Resolution") to approve an arrangement (the "Arrangement")
under section 182 of the BUSINESS CORPORATIONS ACT (Ontario) (the "OBCA"),
all as more particularly described in the accompanying Joint Management
Information Circular and Proxy Statement (the "Joint Proxy Statement").
2. To receive the financial statements of Delrina for the year ended
June 30, 1995 and the report of the independent auditors thereon.
3. To elect directors for the ensuing year.
4. To appoint Price Waterhouse as independent auditors of Delrina and
to authorize the directors to fix their remuneration.
5. To transact such further or other business as may properly come
before the Delrina Shareholders Meeting or any adjournment or adjournments
thereof.
Specific details of the matters to be put before the Delrina Shareholders
Meeting are set out in the Joint Proxy Statement, which forms part of this
Notice. The full text of the Arrangement Resolution is attached as Annex A to
the Joint Proxy Statement.
Pursuant to the Interim Order, a copy of which is attached as Annex C to the
Joint Proxy Statement, holders of Delrina Common Shares have been granted the
right to dissent in respect of the Arrangement. If the Arrangement becomes
effective, a dissenting shareholder will be entitled to be paid the fair value
of the Delrina Common Shares held by such shareholder if the Secretary of
Delrina or the Chairman of the Delrina Shareholders Meeting shall have received
from such dissenting shareholder at or before the Delrina Shareholders Meeting a
written objection to the Arrangement Resolution and the dissenting shareholder
shall have otherwise complied with the provisions of section 185 of the OBCA.
The dissent right is described in the accompanying Joint Proxy Statement and the
full text of section 185 of the OBCA is attached as Annex J to the Joint Proxy
Statement. FAILURE TO STRICTLY COMPLY WITH THE REQUIREMENTS SET OUT IN SECTION
185 OF THE OBCA MAY RESULT IN THE LOSS OF ANY RIGHT OF DISSENT.
Each person who is a holder of record of Delrina Common Shares at the close
of business on October 4, 1995 (the "Delrina Record Date") is entitled to notice
of, and to attend and vote at, the Delrina Shareholders Meeting and any
adjournment or postponement thereof, provided that to the extent a person has
transferred any Delrina Common Shares after the Delrina Record Date and the
transferee of such shares establishes that such transferee owns such shares and
demands not later than November 10, 1995 to be included in the list of
shareholders eligible to vote at the Delrina Shareholders Meeting, such
transferee will be entitled to vote such shares at the Delrina Shareholders
Meeting.
DATED at Toronto, Ontario, October 17, 1995.
By Order of the Delrina Board of
Directors
Michael Cooperman
SECRETARY
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE DELRINA SHAREHOLDERS MEETING.
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. TO BE EFFECTIVE, PROXIES MUST BE RECEIVED BY
THE R-M TRUST COMPANY, 393 UNIVERSITY AVENUE, 5TH FLOOR, TORONTO, ONTARIO M5C
1E6 NOT LATER THAN 5:00 P.M. (TORONTO TIME) ON NOVEMBER 17, 1995, OR, IF THE
DELRINA SHAREHOLDERS MEETING IS ADJOURNED, NOT LATER THAN 24 HOURS (EXCLUDING
SATURDAYS, SUNDAYS AND HOLIDAYS) BEFORE THE TIME OF THE DELRINA SHAREHOLDERS
MEETING, OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
<PAGE>
ONTARIO COURT OF JUSTICE
(GENERAL DIVISION)
COMMERCIAL LIST
IN THE MATTER OF THE BUSINESS CORPORATIONS ACT, R.S.O. 1990,
CHAPTER B.16, SECTION 182
and
IN THE MATTER OF A PROPOSED ARRANGEMENT INVOLVING
DELRINA CORPORATION AND ITS SHAREHOLDERS
------------------------
NOTICE OF APPLICATION
---------------------
TO: ALL HOLDERS OF COMMON SHARES OF DELRINA CORPORATION
THIS APPLICATION will come on for a hearing before a judge presiding over
the Commercial List on November 21, 1995, at 10:00 a.m. or as soon after that
time as the Application may be heard at 145 Queen Street West, Toronto, Ontario.
IF YOU WISH TO OPPOSE THIS APPLICATION, you or an Ontario lawyer acting for
you must forthwith prepare a notice of appearance in Form 38C prescribed by the
Rules of Civil Procedure, serve it on the applicant's lawyers and file it, with
proof of service, in this court office, and you and your lawyer(s) must appear
at the hearing.
IF YOU WISH TO PRESENT AFFIDAVIT OR OTHER DOCUMENTARY EVIDENCE TO THE COURT
OR TO EXAMINE OR CROSS-EXAMINE WITNESSES ON THE APPLICATION, you or your
lawyer(s) must, in addition to serving your notice of appearance, serve a copy
of the evidence on the applicant's lawyers and file it, with proof of service,
in the court office where the application is to be heard as soon as possible,
but not later than 2:00 p.m. on the day before the hearing.
IF YOU FAIL TO APPEAR AT THIS HEARING, JUDGMENT MAY BE GIVEN IN YOUR ABSENCE
WITHOUT FURTHER NOTICE TO YOU.
If you wish to oppose this Application but are unable to pay legal fees,
legal aid may be available to you by contacting a local Legal Aid Office.
Date: October 4, 1995 Issued by: /s/ BELINDA
BURNETT
-------------------------
Local Registrar
Address of court office:
145 Queen Street West
Toronto, Ontario M5H 2N9
<PAGE>
TO: ALL HOLDERS OF COMMON SHARES OF DELRINA CORPORATION
AND TO: THE DIRECTOR UNDER THE BUSINESS CORPORATIONS ACT (ONTARIO)
APPLICATION
1. Delrina Corporation ("Delrina") seeks an order approving the Arrangement
involving Delrina and its shareholders proposed by Delrina and described in
the Joint Management Information Circular and Proxy Statement to be dated on
or about October 17, 1995 and mailed to holders of common shares of Delrina.
2. The grounds for the Application are:
(i) section 182 of the BUSINESS CORPORATIONS ACT (Ontario);
(ii) Rule 14.05(2) of the RULES OF CIVIL PROCEDURE (Ontario); and
(iii) such further and other grounds as counsel may advise and this
Honourable Court may permit.
3. If made, the order will constitute the basis for an exemption under the
United States SECURITIES ACT OF 1933, as amended, with respect to securities
to be issued under the Arrangement.
4. The following documentary evidence will be used at the hearing of the
Application:
(i) the Affidavit of Dennis Bennie, to be sworn, and the exhibits thereto;
and
(ii) such further and other material as counsel may advise and this
Honourable Court may permit.
5. The Notice of Application will be sent to all holders of common shares of
Delrina at their addresses as they appear on the books of Delrina at the
close of business on the day immediately preceding the day on which notice
of the annual and special meeting of Delrina shareholders to approve the
Arrangement is sent to such shareholders including, pursuant to Rules
17.02(n) and 17.02(o), those shareholders whose addresses, as they appear on
the books of Delrina, are outside Ontario.
Date of Issue: October 4, 1995 Osler, Hoskin & Harcourt
Barristers and Solicitors
P.O. Box 50, 66th Floor
1 First Canadian Place
Toronto, Ontario
M5X 1B8
D. Aleck Dadson
(416) 862-6689
Tristan Mallett
(416) 862-6689
(416) 862-6666 (Facsimile)
Solicitors for Delrina Corporation
<PAGE>
[SYMANTEC LOGO] [DELRINA LOGO]
JOINT MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT
This Joint Proxy Statement is being furnished to holders of Common Shares of
Delrina Corporation, an Ontario corporation ("Delrina"), in connection with the
solicitation of proxies by the Delrina Board of Directors for use at the annual
and special meeting of Delrina shareholders (the "Delrina Shareholders Meeting")
to be held at 9:00 a.m. (Toronto time) on November 20, 1995 at the Four Seasons
Inn on the Park, Toronto, Ontario, and any adjournment or postponement thereof.
This Joint Proxy Statement is also being furnished to holders of common
stock, par value US $0.01 per share, of Symantec Corporation, a Delaware
corporation ("Symantec"), in connection with the solicitation of proxies by the
Board of Directors of Symantec for use at the annual meeting of Symantec
stockholders (the "Symantec Stockholders Meeting") to be held at 9:00 a.m.
(Pacific time) on November 20, 1995 at the Garden Court Hotel, Palo Alto,
California, and any adjournment or postponement thereof.
This Joint Proxy Statement and the accompanying forms of proxy are first
being mailed to shareholders of Delrina and stockholders of Symantec on or about
October 17, 1995.
All information in this Joint Proxy Statement relating to Delrina has been
supplied by Delrina, and all information relating to Symantec has been supplied
by Symantec. Certain capitalized terms used in this Joint Proxy Statement
without definition have the meanings ascribed thereto in the Glossary of Terms.
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO APPROVAL OF THE
PROPOSALS AND AN INVESTMENT IN THE SECURITIES REFERRED TO HEREIN.
------------------------
No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Joint Proxy Statement does not constitute an offer to
sell, or a solicitation of an offer to purchase, any securities, or the
solicitation of a proxy, by any person in any jurisdiction in which such an
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such an offer or solicitation of an offer or proxy
solicitation. Neither delivery of this Joint Proxy Statement nor any
distribution of the securities referred to in this Joint Proxy Statement shall,
under any circumstances, create an implication that there has been no change in
the information set forth herein since the date of this Joint Proxy Statement.
------------------------
THE SECURITIES TO BE ISSUED IN THE TRANSACTION HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS JOINT PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................................................................................... 1
RISK FACTORS............................................................................................... 7
COMPARATIVE MARKET PRICE DATA.............................................................................. 13
COMPARATIVE PER SHARE DATA................................................................................. 13
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA........................................ 15
Delrina.................................................................................................. 16
Symantec................................................................................................. 17
PRO FORMA FINANCIAL INFORMATION............................................................................ 18
THE MEETINGS -- GENERAL PROXY INFORMATION.................................................................. 22
Symantec................................................................................................. 22
Delrina.................................................................................................. 23
THE TRANSACTION............................................................................................ 25
Background to the Combination Agreement.................................................................. 25
Reasons for the Transaction.............................................................................. 27
Board Recommendations.................................................................................... 29
Opinions of Financial Advisors........................................................................... 29
Interests of Certain Persons in the Transaction.......................................................... 39
Transaction Mechanics and Description of Exchangeable Shares............................................. 39
The Combination Agreement................................................................................ 42
Other Agreements......................................................................................... 45
Court Approval of the Arrangement and Completion of the Transaction...................................... 47
Anticipated Accounting Treatment......................................................................... 48
Procedures for Exchange of Share Certificates by Delrina Shareholders.................................... 48
Stock Exchange Listings.................................................................................. 49
Eligibility for Investment in Canada..................................................................... 49
Regulatory Matters....................................................................................... 49
Resale of Exchangeable Shares and Symantec Common Stock Received in the Transaction...................... 49
THE COMPANIES AFTER THE TRANSACTION........................................................................ 51
The Combination -- General............................................................................... 51
Management............................................................................................... 51
Plans and Proposals...................................................................................... 52
Principal Holders of Securities.......................................................................... 53
Symantec Share Capital................................................................................... 53
Delrina Share Capital.................................................................................... 54
Support Agreement........................................................................................ 56
Voting and Exchange Trust Agreement...................................................................... 57
Delivery of Symantec Common Stock........................................................................ 58
Call Rights.............................................................................................. 59
Auditors................................................................................................. 59
Transfer Agents and Registrars........................................................................... 60
INCOME TAX CONSIDERATIONS TO DELRINA SHAREHOLDERS.......................................................... 60
Canadian Federal Income Tax Considerations to Delrina Shareholders....................................... 60
United States Federal Income Tax Considerations to Delrina Shareholders.................................. 65
Shareholders Not Resident in or Citizens of the United States............................................ 70
DELRINA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 71
Overview................................................................................................. 71
Results of Operations.................................................................................... 72
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION CONCERNING DELRINA............................................................................. 78
Business................................................................................................. 78
Properties............................................................................................... 90
Legal Proceedings........................................................................................ 90
Directors and Management................................................................................. 92
Executive Compensation................................................................................... 93
Indebtedness of Directors and Officers of Delrina........................................................ 96
Interests of Management of Delrina and Others in Certain Transactions.................................... 96
Principal Holders of Voting Securities................................................................... 97
Share Capital Matters.................................................................................... 97
Auditor; Transfer Agent and Registrar.................................................................... 98
Statement of Corporate Governance Practices.............................................................. 98
SYMANTEC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 100
Overview................................................................................................. 100
Results of Operations.................................................................................... 101
Liquidity and Capital Resources.......................................................................... 111
INFORMATION CONCERNING SYMANTEC............................................................................ 113
Business................................................................................................. 113
Properties............................................................................................... 124
Legal Proceedings........................................................................................ 124
Directors and Management................................................................................. 126
Description of Capital Stock............................................................................. 129
Security Ownership of Certain Beneficial Owners and Management........................................... 130
Compensation of Executive Officers....................................................................... 131
REPORT OF THE COMPENSATION COMMITTEE AND BOARD ON EXECUTIVE COMPENSATION................................... 134
Company Stock Price Performance.......................................................................... 138
Certain Transactions..................................................................................... 139
COMPARISON OF STOCKHOLDER RIGHTS........................................................................... 141
Vote Required for Extraordinary Transactions............................................................. 141
Amendment to Governing Documents......................................................................... 141
Dissenters' Rights....................................................................................... 142
Oppression Remedy........................................................................................ 142
Derivative Action........................................................................................ 143
Shareholder Consent in Lieu of Meeting................................................................... 143
Director Qualifications.................................................................................. 143
Fiduciary Duties of Directors............................................................................ 144
Indemnification of Officers and Directors................................................................ 144
Director Liability....................................................................................... 145
Anti-Takeover Provisions and Interested Stockholder Transactions......................................... 145
DISSENTING SHAREHOLDERS' RIGHTS............................................................................ 146
Delrina.................................................................................................. 146
Symantec................................................................................................. 148
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL MATTERS FOR CONSIDERATION OF SYMANTEC STOCKHOLDERS.............................................. 148
Proposal No. 2 -- Approval of Amendment to Certificate of Incorporation.................................. 148
Proposal No. 3 -- Election of Directors.................................................................. 149
Proposal No. 4 -- Approval of Amendment to 1989 Employee Stock Purchase Plan............................. 150
Proposal No. 5 -- Approval of Amendment to 1988 Employees Stock Option Plan.............................. 155
Proposal No. 6 -- Ratification of Selection of Independent Auditors...................................... 161
Compliance under Section 16(a) of the Exchange Act....................................................... 161
Stockholder Proposals.................................................................................... 161
Other Business........................................................................................... 161
Disclaimer Regarding Incorporation by Reference of the Report of the Compensation Committee and the Stock
Price Performance Graph................................................................................. 162
ADDITIONAL MATTERS FOR CONSIDERATION OF DELRINA SHAREHOLDERS............................................... 162
Election of Directors.................................................................................... 162
Appointment of Auditors.................................................................................. 162
LEGAL MATTERS.............................................................................................. 163
EXPERTS.................................................................................................... 163
AVAILABLE INFORMATION...................................................................................... 163
APPROVAL OF PROXY STATEMENT BY DELRINA BOARD OF DIRECTORS.................................................. 164
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>
<TABLE>
<S> <C>
ANNEX A -- Form of the Arrangement Resolution
ANNEX B -- Combination Agreement
ANNEX C -- Interim Order
ANNEX D -- Plan of Arrangement and Exchangeable Share Provisions
ANNEX E -- Form of Support Agreement
ANNEX F -- Form of Voting and Exchange Trust Agreement
ANNEX G -- Restated Certificate of Incorporation of Symantec
ANNEX H -- Donaldson, Lufkin & Jenrette Fairness Opinion
ANNEX I -- Broadview Associates Fairness Opinion
ANNEX J -- Section 185 of the OBCA
ANNEX K -- Symantec's 1989 Employee Stock Option Plan
ANNEX L -- Symantec's 1988 Employees Stock Purchase Plan
</TABLE>
iii
<PAGE>
GLOSSARY OF TERMS
Unless the context otherwise requires, the following terms shall have the
following meanings when used in this Joint Proxy Statement (including the
summary). These defined terms are not used in the consolidated financial
statements attached hereto.
"ACQUISITION PROPOSAL" means a proposal, offer or other action as described
in "THE TRANSACTION -- The Combination Agreement -- Representations and
Covenants" relating to the possible acquisition of Delrina or any of its
subsidiaries or any material portion of its or their capital stock or
assets.
"ARRANGEMENT" means the proposed arrangement of Delrina under section 182 of
the OBCA pursuant to the Plan of Arrangement.
"ARRANGEMENT RESOLUTION" means the special resolution of Delrina
shareholders concerning the Arrangement in the form set out in Annex A to
this Joint Proxy Statement.
"AUTOMATIC REDEMPTION DATE" means the seventh anniversary of the effective
date of the Arrangement or such earlier or later time as described in "THE
TRANSACTION -- Transaction Mechanics and Description of Exchangeable Shares
-- Exchange and Call Right."
"AUTOMATIC EXCHANGE RIGHTS" means the rights granted to the Trustee for the
benefit of the holders of the Exchangeable Shares pursuant to the Voting and
Exchange Trust Agreement to automatically exchange the Exchangeable Shares
for shares of Symantec Common Stock upon a Liquidation Event.
"BROADVIEW" means Broadview Associates, L.P., financial advisor to Delrina.
"CALL RIGHTS" means the Liquidation Call Right, the Redemption Call Right
and the Retraction Call Right, collectively.
"CANADIAN DOLLAR EQUIVALENT" means the product obtained by multiplying the
U.S. dollar amount by the noon spot exchange rate on such date for U.S.
dollars expressed in Canadian dollars as reported by the Bank of Canada.
"CANADIAN GAAP" means generally accepted accounting principles in Canada.
"CANADIAN TAX ACT" means the Income Tax Act (Canada).
"CIC" means the proxy solicitation firm, Corporate Investor Communications,
Inc.
"CLASS A PREFERRED SHARES" means the Class A Preferred Shares of Delrina.
"CLOSING" means the execution and delivery of the documents required to
effectuate the transactions contemplated by the Combination Agreement and
the closing of the transactions contemplated by the Combination Agreement.
"CLOSING DATE" means November 22, 1995, or such other date as may be
determined by Symantec and Delrina.
"COMBINATION AGREEMENT" means the Combination Agreement by and between
Delrina and Symantec dated as of July 5, 1995, a copy of which is attached
hereto as Annex B.
"COMPETITION ACT" means the Competition Act (Canada).
"COURT" means the Ontario Court of Justice (General Division).
"DELRINA" means Delrina Corporation, an Ontario corporation.
"DELRINA AFFILIATE" means each affiliate (as such term is defined pursuant
to Rule 145 under the Securities Act) of Delrina, namely, Messrs. Dennis
Bennie, Mark Skapinker, Albert Amato, Michael Cooperman, Louis Ryan, George
Clute, Ashok Rao and Peter Farlinger.
iv
<PAGE>
"DELRINA AFFILIATES AGREEMENTS" means the affiliate agreements executed by
each Delrina Affiliate and agreed and accepted by Symantec and Delrina.
"DELRINA ARTICLES" means the Delrina articles of incorporation as proposed
to be amended in connection with the Arrangement.
"DELRINA BYLAWS" means Delrina's bylaws, as amended from time to time.
"DELRINA COMMON SHARES" means the common shares of Delrina.
"DELRINA INSOLVENCY EVENT" means any insolvency or bankruptcy proceeding
instituted by or against Delrina, including any such proceeding under the
COMPANIES' CREDITORS ARRANGEMENT ACT (Canada) and the BANKRUPTCY AND
INSOLVENCY ACT (Canada), the admission in writing by Delrina of its
inability to pay its debts generally as they become due and the inability of
Delrina, as a result of solvency requirements of applicable law, to redeem
any Exchangeable Shares tendered for retraction.
"DELRINA OPTIONS" means all outstanding options to purchase Delrina Common
Shares, including all outstanding options granted under the Delrina Option
Plans.
"DELRINA OPTION PLANS" means the Delrina 1994 Stock Option Plan, established
as of January 1, 1994 and the Delrina Stock Option Plan, effective as of
October 28, 1993.
"DELRINA PRINCIPAL SHAREHOLDER" means each of Dennis Bennie, Mark Skapinker
and Albert Amato (collectively, the "Delrina Principal Shareholders").
"DELRINA RECORD DATE" means October 4, 1995.
"DELRINA SHAREHOLDERS MEETING" means the annual and special meeting of
shareholders of Delrina to be held with respect to, among other things, the
approval by Delrina's shareholders of the Arrangement, the election of
directors and the appointment of independent auditors.
"DGCL" means the Delaware General Corporation Law, as amended.
"DISSENT NOTICE" means a written objection to the Arrangement sent by a
Delrina shareholder to Delrina in accordance with "DISSENTING SHAREHOLDERS'
RIGHTS."
"DLJ" means Donaldson, Lufkin & Jenrette Securities Corporation, financial
advisor to Symantec.
"EFFECTIVE DATE" means the date shown on the certificate of arrangement
issued by the Director under the OBCA giving effect to the Arrangement.
"EFFECTIVE TIME" means 12:01 a.m. (Toronto time) on the Effective Date.
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE RATIO" means 1:0.61, such that each Delrina Common Share is
exchanged for 0.61 of an Exchangeable Share.
"EXCHANGE RIGHTS" means the Automatic Exchange Rights and the optional
exchange right granted to the Trustee for the use and benefit of the holders
of the Exchangeable Shares pursuant to the Voting and Exchange Trust
Agreement to require Symantec to exchange Exchangeable Shares for shares of
Symantec Common Stock upon the occurrence of an Insolvency Event.
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares, which are attached to
the Plan of Arrangement.
"EXCHANGEABLE SHARES" means the exchangeable shares of Delrina having the
rights, privileges, restrictions and conditions set forth in the
Exchangeable Share Provisions.
"FINAL ORDER" means the final order of the Court approving the Arrangement.
v
<PAGE>
"FTC" means the Federal Trade Commission and all successors thereto.
"HSR ACT" means the United States Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INTERIM ORDER" means the interim order of the Court dated October 6, 1995,
a copy of which is attached hereto as Annex C.
"JOINT PROXY STATEMENT" means this joint management information circular and
proxy statement relating to the Delrina Shareholders Meeting and the
Symantec Stockholders Meeting.
"LETTER OF TRANSMITTAL" means the letter delivered to holders of Delrina
Common Shares, which when duly completed and returned with a certificate for
Delrina Common Shares will enable such shareholder to exchange such
certificate for Exchangeable Shares.
"LIQUIDATION CALL RIGHT" means the right of Symantec, in the event of a
proposed liquidation, dissolution or winding-up of Delrina, to purchase all
of the outstanding Exchangeable Shares from the holders thereof on the
effective date of any such liquidation, dissolution or winding-up in
exchange for shares of Symantec Common Stock pursuant to the Plan of
Arrangement.
"1993 DIRECTORS PLAN" means Symantec's 1993 Directors Stock Option Plan.
"NNM" means The Nasdaq National Market.
"OBCA" means the Business Corporations Act (Ontario).
"PLAN OF ARRANGEMENT" means the plan of arrangement proposed under section
182 of the OBCA substantially in the form attached hereto as Annex D, as
amended, modified or supplemented from time to time in accordance with its
terms.
"REDEMPTION CALL RIGHT" means the right of Symantec to purchase all of the
outstanding Exchangeable Shares from the holders thereof on the date fixed
for redemption thereof in exchange for shares of Symantec Common Stock
pursuant to the Plan of Arrangement.
"RETRACTION CALL RIGHT" means the overriding right of Symantec, in the event
of a proposed retraction of Exchangeable Shares by a holder thereof, to
purchase from such holder on the Retraction Date the Exchangeable Shares
tendered for redemption in exchange for shares of Symantec Common Stock
pursuant to the Plan of Arrangement.
"RETRACTION DATE" means a date, determined by a holder of Exchangeable
Shares, on which such holder can effect a retraction of such Exchangeable
Shares as further set out in the Exchangeable Share Provisions and described
in "THE TRANSACTION -- Transaction Mechanics and Description of Exchangeable
Shares -- Exchange and Call Right."
"RETRACTION REQUEST" means a duly executed statement prepared by a holder of
Exchangeable Shares in the form of Schedule A to the Exchangeable Share
Provisions, or in such other form as may be acceptable to Delrina.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the United States Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"STOCK OPTION PLAN" means Symantec's 1988 Employees Stock Option Plan.
"STOCK PURCHASE PLAN" means Symantec's 1989 Employee Stock Purchase Plan.
"SUPPORT AGREEMENT" means the Support Agreement to be entered into among
Delrina and Symantec, substantially in the form of Annex E hereto.
"SYMANTEC" means Symantec Corporation, a Delaware corporation, and its
successors.
vi
<PAGE>
"SYMANTEC AFFILIATE" means each affiliate (as such term is defined pursuant
to Rule 145 under the Securities Act) of Symantec, namely, Messrs. Gordon
Eubanks, Robert Dykes, John Laing, Eugene Wang, Ted Schlein, Derek Witte,
Howard Bain, Mark Bailey, Carl Carman, Charles Boesenberg, Walter Bregman,
Robert Miller and Leslie Vadasz and Ms. Ellen Taylor.
"SYMANTEC AFFILIATES AGREEMENTS" means the affiliate agreements executed by
each Symantec Affiliate and agreed and accepted by Symantec and Delrina.
"SYMANTEC BYLAWS" means Symantec's bylaws, as amended from time to time.
"SYMANTEC CERTIFICATE" means the Symantec certificate of incorporation as
proposed to be amended in connection with the Arrangement.
"SYMANTEC COMMON STOCK" means the common stock, par value US$0.01 per share,
of Symantec.
"SYMANTEC LIQUIDATION EVENT" means (i) any determination by Symantec's Board
of Directors to institute voluntary liquidation, dissolution, or winding-up
proceedings with respect to Symantec or to effect any other distribution of
assets of Symantec among its stockholders for the purpose of winding up its
affairs; or (ii) immediately upon the earlier of (A) receipt by Symantec of
notice of, and (B) Symantec becoming aware of any threatened or instituted
claim, suit or proceedings with respect to the involuntary liquidation,
dissolution or winding-up of Symantec or to effect any other distribution of
assets of Symantec among its stockholders for the purpose of winding up its
affairs.
"SYMANTEC OPTION" means an option to purchase shares of Symantec Common
Stock.
"SYMANTEC RECORD DATE" means October 4, 1995.
"SYMANTEC STOCKHOLDERS MEETING" means the meeting of stockholders of
Symantec to be held with respect to, among other things, approval by
Symantec's stockholders of the Combination Agreement and the transactions
contemplated thereby.
"TRANSACTION" means the transactions contemplated by the Combination
Agreement and by the Plan of Arrangement whereby, among other consequences,
Symantec would become the sole shareholder of Delrina Common Shares.
"TRUSTEE" means The R-M Trust Company, or any successor thereto, pursuant to
the Voting and Exchange Trust Agreement.
"TSE" means The Toronto Stock Exchange.
"U.S. CODE" means the United States Internal Revenue Code of 1986, as
amended.
"U.S. GAAP" means generally accepted accounting principles in the United
States.
"VOTING AND EXCHANGE TRUST AGREEMENT" means the voting and exchange trust
agreement to be entered into among Delrina, Symantec and the Trustee,
substantially in the form of Annex F hereto.
"VOTING RIGHTS" means the rights of the holders of Exchangeable Shares to
direct the voting of the Symantec Voting Share in accordance with the Voting
and Exchange Trust Agreement.
"VOTING SHARE" means the one share of Symantec Special Voting Stock, par
value US$1.00 per share, to be issued by Symantec and deposited with the
Trustee pursuant to the Voting and Exchange Trust Agreement.
vii
<PAGE>
REPORTING CURRENCIES AND ACCOUNTING PRINCIPLES
The financial statements of, and the summaries of financial information
concerning, Delrina contained in this Joint Proxy Statement are reported in
Canadian dollars and have been prepared in accordance with Canadian GAAP, which
differ in certain material respects from U.S. GAAP. See Note 12 of Notes to
Delrina Consolidated Financial Statements, which presents a reconciliation of
such financial statements from Canadian GAAP to U.S. GAAP.
The financial statements and the pro forma financial statements of, and the
summaries of historical and pro forma financial information concerning, Symantec
contained in this Joint Proxy Statement are reported in U.S. dollars and have
been prepared in accordance with U.S. GAAP.
EXCHANGE RATE OF CANADIAN AND U.S. DOLLARS
In this Joint Proxy Statement, dollar amounts are expressed either in U.S.
dollars ("US$") or in Canadian dollars ("C$").
The following table sets forth, for each period indicated, the high and low
exchange rates for one Canadian dollar expressed in U.S. dollars, the average of
such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based upon the noon buying rate in New
York City for cable transfers in Canadian dollars, as certified for customs
purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate"):
<TABLE>
<CAPTION>
TWELVE-MONTH PERIOD ENDED JUNE
30,
---------------------------------
1991 1992 1993 1994 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
High.................................... .8837 .8926 .8453 .7851 .7457
Low..................................... .8512 .8290 .7761 .7166 .7023
Average................................. .8654 .8585 .7991 .7440 .7269
Period End.............................. .8754 .8353 .7798 .7233 .7279
</TABLE>
On October 10, 1995, the exchange rate for one Canadian dollar expressed in
U.S. dollars based on the Noon Buying Rate was .7486.
The following table sets forth, for each period indicated, the high and low
exchange rates for one U.S. dollar expressed in Canadian dollars, the average of
such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based upon the noon spot rate of the
Bank of Canada (the "Noon Spot Rate"):
<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED
TWELVE-MONTH PERIOD ENDED MARCH 31, JUNE 30,
-------------------------------------- ------------
1991 1992 1993 1994 1995 1995
------ ------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
High..................... 1.1922 1.2002 1.2885 1.3838 1.4238 1.3998
Low...................... 1.1316 1.1200 1.1799 1.2562 1.3410 1.3520
Average.................. 1.1614 1.1522 1.2334 1.3176 1.3815 1.3678
Period End............... 1.1595 1.1902 1.2573 1.3838 1.3993 1.3738
</TABLE>
On October 10, 1995, the Noon Spot Rate was one U.S. dollar equals 1.3355
Canadian dollars.
viii
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS JOINT PROXY STATEMENT. IT IS NOT, AND IS NOT INTENDED TO BE, COMPLETE IN
ITSELF. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY,
THE MORE DETAILED INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT, WHICH
DELRINA SHAREHOLDERS AND SYMANTEC STOCKHOLDERS ARE ENCOURAGED TO REVIEW. UNLESS
OTHERWISE INDICATED, CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED IN THE
GLOSSARY OF TERMS OR ELSEWHERE IN THIS JOINT PROXY STATEMENT. ALL REFERENCES TO
DOLLAR AMOUNTS HEREIN ARE IN U.S. DOLLARS (US$) OR CANADIAN DOLLARS (C$).
THE COMPANIES
Symantec...................... Symantec was founded in 1982 and develops,
markets and supports a diversified line of
application and system software products
designed to enhance individual and work group
productivity as well as manage networked
computing environments. Symantec's product
groups include advanced utilities, security
utilities, network/communications utilities,
contact management, development tools, project
management and client-server technology.
Symantec's principal executive offices are
located at 10201 Torre Avenue, Cupertino,
California 95014-2132 (telephone number (408)
253-9600). See "INFORMATION CONCERNING
SYMANTEC."
Delrina....................... Delrina was founded in 1988 and designs,
develops, markets and supports software products
and services in the fax and data communications,
electronic forms and consumer software markets.
Delrina's principal executive offices are
located at 500-2 Park Centre, Toronto, Ontario
M3C 1W3 (telephone number (416) 441-3676). See
"INFORMATION CONCERNING DELRINA."
THE STOCKHOLDERS MEETINGS
Time, Date and Place.......... The Symantec Stockholders Meeting will be held
on November 20, 1995, at 9:00 a.m. (Pacific
time) at the Garden Court Hotel, Palo Alto,
California.
The Delrina Shareholders Meeting will be held on
November 20, 1995, at 9:00 a.m. (Toronto time)
at the Four Seasons Inn on the Park, Toronto,
Ontario. See "THE MEETINGS -- GENERAL PROXY
INFORMATION."
Record Dates, Shares Entitled
to Vote...................... Holders of record of Symantec Common Stock on
October 4, 1995 (the "Symantec Record Date") are
entitled to notice of and to vote at the
Symantec Stockholders Meeting. At the close of
business on the Symantec Record Date there were
outstanding and entitled to vote 39,318,165
shares of Symantec Common Stock, each of which
will be entitled to one vote on each matter to
be acted upon.
Holders of record of Delrina Common Shares on
October 4, 1995 (the "Delrina Record Date") are
entitled to notice of and to vote at the Delrina
Shareholders Meeting. At the close of business
on the Delrina Record Date there were
outstanding and entitled to vote 22,425,430
Delrina Common Shares, each of which will be
entitled to one vote on each matter to be acted
upon. See "THE MEETINGS -- GENERAL PROXY INFOR-
MATION."
<PAGE>
<TABLE>
<S> <C>
Matters to be Considered at
the Meetings................. At the Symantec Stockholders Meeting, the
Symantec stockholders will consider and vote
upon proposals to: (i) approve the Combination
Agreement and the transactions contemplated
thereby; (ii) approve an amendment to Symantec's
Certificate of Incorporation to increase the
number of authorized shares of Symantec Common
Stock and to create a class of Special Voting
Stock consisting of the Voting Share; (iii)
elect six directors to Symantec's Board of
Directors; (iv) approve an amendment to the
Stock Purchase Plan to increase the number of
shares reserved for issuance thereunder; (v)
approve an amendment to the Stock Option Plan to
increase the number of shares reserved for
issuance thereunder; and (vi) ratify the
Symantec Board of Directors' selection of Ernst
& Young LLP as Symantec's independent auditors.
At the Delrina Shareholders Meeting, the Delrina
shareholders will consider and vote upon the
following: (i) a special resolution to approve
the Arrangement; (ii) the election of seven
directors to Delrina's Board of Directors, each
to hold office until his/her successor is
elected and qualified or until his/her
resignation or removal; (iii) a proposal to
appoint Price Waterhouse, Chartered Accountants
as Delrina's independent auditors for the
current fiscal year and to authorize the
directors to fix their remuneration; and (iv)
such further or other business as may properly
come before the Delrina Shareholders Meeting or
any adjournment or postponement thereof. See
"THE MEETINGS -- GENERAL PROXY INFORMATION."
Votes Required................ Approval of the Combination Agreement and the
issuance of Symantec Common Stock as
contemplated thereby, approval of the amendments
to the Stock Purchase Plan and the Stock Option
Plan and ratification of the selection of
independent auditors will each require the
affirmative vote of the holders of a majority of
the shares of Symantec Common Stock present (in
person or by proxy) and entitled to vote at the
Symantec Stockholders Meeting at which a quorum
of at least a majority of the Symantec Common
Stock issued, outstanding and entitled to vote,
is present. Election of members of Symantec's
Board of Directors will require approval of a
plurality of the votes of the shares present (in
person or by proxy) at the Symantec Stockholders
Meeting that are entitled to vote in the
election of directors. Approval of the
amendments to Symantec's Certificate of
Incorporation will require the affirmative vote
of the holders of a majority of the outstanding
shares of Symantec Common Stock. Each of ten
Symantec Affiliates who in the aggregate hold
202,927 shares of Symantec Common Stock (less
than 1% of the outstanding Symantec Common
Stock), has agreed to vote all shares of
Symantec Common Stock held by such Symantec
Affiliate in favor of the Combination
Agreement."
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
The Arrangement Resolution must be approved by
the affirmative vote of not less than sixty-six
and two-thirds percent (66 2/3%) of the votes
cast by the holders of Delrina Common Shares
present (in person or by proxy) and entitled to
vote at the Delrina Shareholders Meeting at
which a quorum of thirty-three percent (33%) of
the Delrina Common Shares outstanding and
entitled to vote is present (in person or by
proxy). Each Delrina Affiliate has agreed to
vote all Delrina Common Shares held by such
Delrina Affiliate in favor of the Arrangement.
The Delrina Affiliates hold in the aggregate
2,632,501 Delrina Common Shares (approximately
11.7% of the outstanding Delrina Common Shares).
The appointment of Price Waterhouse, Chartered
Accountants as independent auditors of Delrina
must be approved by the affirmative vote of a
majority of the votes cast by the holders of
Delrina Common Shares present (in person or by
proxy) and entitled to vote at the Delrina
Shareholders Meeting. Members of the Delrina
Board of Directors will be elected by a
plurality of the votes cast by the holders of
Delrina Common Shares present (in person or by
proxy) and entitled to vote at the Delrina
Shareholders Meeting. See "THE MEETINGS --
GENERAL PROXY INFORMATION."
Recommendations of Boards of
Directors.................... The Board of Directors of Symantec believes that
the terms of the Transaction are fair to the
stockholders of Symantec and unanimously
recommends that stockholders of Symantec vote to
approve the Combination Agreement and the
transactions contemplated thereby, including the
issuance of shares of Symantec Common Stock upon
exchange of the Exchangeable Shares as
contemplated by the Combination Agreement. The
Board of Directors of Symantec also recommends a
vote for each of the other proposals to be voted
on at the Symantec Stockholders Meeting and for
each of the nominees for director.
The Delrina Board of Directors believes that the
terms of the Transaction are fair to the
shareholders of Delrina and unanimously
recommends that shareholders of Delrina vote to
approve the Arrangement. The Delrina Board of
Directors also recommends a vote for each of the
nominees for director and for appointment of
Price Waterhouse as independent auditors. See
"THE TRANSACTION -- Board Recommendations."
</TABLE>
THE TRANSACTION
Transaction Mechanics......... Under the terms of the Arrangement, each Delrina
Common Share will be exchanged for 0.61 of a
share of a new class of Exchangeable Shares of
Delrina. Holders of Delrina Common
3
<PAGE>
Shares will be entitled to exchange such shares
for Exchangeable Shares upon completing and
returning a Letter of Transmittal.
Holders of the Exchangeable Shares will be
entitled at any time following the Effective
Time to require Delrina to redeem such
Exchangeable Shares by issuing an equivalent
number of shares of Symantec Common Stock.
However, Delrina must deliver all such requests
to Symantec, whereupon Symantec has the right to
deliver (instead of Delrina) an equivalent
number of shares of Symantec Common Stock. On
the seventh anniversary of the Effective Time,
Symantec has the right to purchase all
then-outstanding Exchangeable Shares by delivery
of an equivalent number of shares of Symantec
Common Stock. Symantec and Delrina will enter
into certain ancillary agreements to ensure that
holders of Exchangeable Shares will have voting,
dividend and liquidation rights substantially
equivalent to those of holders of Symantec
Common Stock. See "THE TRANSACTION --
Transaction Mechanics and Description of
Exchangeable Shares."
Reasons for the Transaction... Symantec and Delrina believe that the
combination will allow the two companies to
combine their individual resources to enhance
their ability to compete in, and profit from,
the rapidly growing communications market and to
provide more attractive solutions to
enterprise-oriented customers. The combined
company is expected to benefit from more
effectively utilizing the individual companies'
respective strengths, including Symantec's
corporate sales force, international marketing
and distribution systems and remote computing
products, and Delrina's expertise in developing
communications, fax and electronic forms
products as well as other synergies between
their complementary product lines. See "THE
TRANSACTION -- Reasons for the Transaction."
Opinions of Financial
Advisors..................... DLJ has rendered an opinion to the Board of
Directors of Symantec that the Exchange Ratio is
fair to Symantec's stockholders from a financial
point of view.
Broadview has rendered an opinion to the Delrina
Board of Directors that the Exchange Ratio is
fair to Delrina's shareholders from a financial
point of view. See "THE TRANSACTION -- Opinions
of Financial Advisors."
Effective Time of the
Transaction.................. It is anticipated that the Transaction will
become effective after the requisite
shareholder, court and regulatory approvals have
been obtained and are final and all other
conditions to the Transaction have been
satisfied or waived. It is presently anticipated
that the Transaction will become effective on or
about November 22, 1995. See "THE TRANSACTION --
Transaction Mechanics and Description of Ex-
changeable Shares."
4
<PAGE>
<TABLE>
<S> <C>
Conditions to the
Transaction.................. The obligations of Delrina and Symantec to
consummate the Transaction are subject to the
satisfaction of certain conditions, including
obtaining requisite shareholder, court and
regulatory approvals. See "THE TRANSACTION --
The Combination Agreement."
Certain Federal Income Tax
Consequences................. The Transaction has been structured with the
intent that it be tax deferred to most Delrina
shareholders in Canada and the United States.
However, such shareholders will generally only
be able to obtain tax deferral for as long as
they hold the Exchangeable Shares, and will,
except in certain limited situations, generally
recognize a gain or loss upon the exchange of
their Exchangeable Shares for shares of Symantec
Common Stock. There are other conditions and
limitations on qualifying for tax deferral. See
"INCOME TAX CONSIDERATIONS TO DELRINA
SHAREHOLDERS." DELRINA SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS. The receipt of tax
opinions as to the tax deferred nature of the
Transaction is a condition to Delrina's
obligation to consummate the Transaction. Al-
though this condition may be waived by Delrina,
Delrina does not intend to proceed with the
Transaction if it does not receive the tax
opinions.
</TABLE>
CERTAIN RELATED AGREEMENTS
Symantec Affiliates
Agreements................... Symantec and Delrina have entered into
agreements with each of the Symantec Affiliates,
pursuant to which: (i) ten of the Symantec
Affiliates who hold Symantec Common Stock agreed
with Delrina to vote their shares of Symantec
Common Stock in favor of approval of the
Combination Agreement and against approval of
any proposal made in opposition to or in
competition with consummation of the Transaction
and (ii) all of the Symantec Affiliates agreed
that they will not sell or otherwise dispose of
any shares of Symantec Common Stock or Symantec
Options in the 30-day period immediately
preceding the Effective Time or from and after
the Effective Time until such time as Symantec
shall have publicly released a press release
summarizing its first quarterly financial state-
ments that include at least thirty days of the
combined operating results of Delrina and
Symantec. See "THE TRANSACTION -- Other
Agreements -- Affiliates Agreements."
Delrina Affiliates
Agreements................... Symantec and Delrina have entered into
agreements with each of the Delrina Affiliates,
pursuant to which such persons have agreed: (i)
to vote their Delrina Common Shares in favor of
approval of the Arrangement and against approval
of any proposal made in opposition to or in
competition with consummation of the
Arrangement; and (ii) that they will not sell or
otherwise dispose of the Exchangeable Shares
that they will receive pursuant to the
Arrangement, shares of Symantec Common Stock
issuable upon exchange of the Exchangeable
Shares, Symantec Options, shares of Symantec
Common Stock acquired thereby, any securities
paid as a
5
<PAGE>
<TABLE>
<S> <C>
dividend thereon, or with respect thereto or
issued or delivered in exchange or substitution
therefor, or any Delrina Common Shares or
Delrina Options in the 30-day period im-
mediately preceding the Effective Time and from
and after the Effective Time until Symantec
shall have publicly released a press release
summarizing its first quarterly financial
statements that include at least thirty days of
the combined operating results of Delrina and
Symantec. See "THE TRANSACTION -- Other
Agreements -- Affiliates Agreements."
Stock Option Agreements....... Symantec has entered into agreements with each
of Dennis Bennie, Mark Skapinker and Albert
Amato (collectively, the "Delrina Principal
Shareholders"), who in the aggregate own
approximately 10.4% of the Delrina Common
Shares, pursuant to which such Delrina Principal
Shareholders have each granted to Symantec an
option to purchase up to 50% of the Delrina
Common Shares held by them, exercisable upon the
occurrence of certain triggering events,
including a tender offer for at least 30% of the
outstanding Delrina Common Shares, the
announcement by Delrina of a merger with, sale
of substantially all its assets to or issuance
of securities representing at least 5% of its
voting power to a third party other than
Symantec and the acquisition by a third party
other than Symantec of at least 30% of the
outstanding Delrina Common Shares. See "THE
TRANSACTION -- Other Agreements -- Stock Option
Agreements."
Interests of Certain
Persons...................... Symantec has entered into an Employment and
Noncompetition Agreement with each of Dennis
Bennie (the Chairman and Chief Executive Officer
of Delrina), Mark Skapinker (the President of
Delrina), and Albert Amato (the Executive Vice
President and Chief Technology Officer of
Delrina) for employment commencing at the
Effective Date. Messrs. Skapinker and Bennie
also will be appointed to Symantec's Board of
Directors effective at the Effective Time.
Pursuant to the Combination Agreement, Symantec
also has agreed to maintain all rights to
indemnification existing at the time of
execution of the Combination Agreement in favor
of the employees, agents, directors or officers
of Delrina in effect for a period of at least
six years from the Effective Time. See "THE
TRANSACTION -- Interests of Certain Persons in
the Transaction."
</TABLE>
6
<PAGE>
RISK FACTORS
The following risk factors should be considered by Delrina shareholders and
Symantec stockholders in evaluating whether to approve the Transaction. Some of
these risk factors relate directly to the Transaction while others are present
in Symantec's and/or Delrina's general business environment independent of the
Transaction. These risk factors should be considered in conjunction with the
other information included in this Joint Proxy Statement.
COMPETITIVE ENVIRONMENT
The PC software industry in which Symantec and Delrina compete is extremely
competitive and characterized by frequent and rapid changes in technology and
customer preferences. Symantec and Delrina compete with other software vendors
for access to distribution channels, retail shelf space and the attention of
customers. Competition is generally based on product features and functionality,
ease of use, quality of customer support, timeliness of product upgrades, and
price, among others. As the market for the software products of Symantec and
Delrina continues to develop and other software vendors expand their product
lines to include products that compete with those of Symantec and Delrina,
competition may intensify. Similarly, as Symantec, Delrina or the combined
company acquires or enters markets for new products that are competitive with
those of other software vendors, it may also encounter new competition. For
instance, Symantec is a recent entrant into the enterprise software market and
therefore expects to compete with companies with which it has not competed
before. There can be no assurance that Symantec's enterprise products will be
successful or gain market acceptance. In addition, Symantec, Delrina or the
combined company may encounter competition from other technologies. For
instance, the communication software technologies of Symantec and Delrina may
encounter competition from other technologies, such as electronic mail. A number
of competitors and potential competitors of Symantec and Delrina possess
significantly greater financial, technical, marketing and sales and other
resources than either of them or than will be possessed by the combined company.
Microsoft Corporation's ("Microsoft") Windows 95 operating system ("Windows
95") includes basic utilities, general communications and basic fax functions.
There can be no assurance that this will not adversely affect sales of similar
products of either Symantec, Delrina or the combined company. In the event that
Microsoft were to determine to include enhanced versions of such software in
future operating systems or to sell such software on a stand-alone basis, sales
of Symantec, Delrina or the combined company could be materially adversely
affected.
See "INFORMATION CONCERNING DELRINA -- Business -- Competition" and
"INFORMATION CONCERNING SYMANTEC -- Business -- Competition."
DEPENDENCE ON WINDOWS; WINDOWS 95
Although Symantec and Delrina have developed versions of products which
operate on platforms other than Microsoft's DOS and Windows operating systems
("Windows"), both derive most of their sales from versions of products designed
to operate on PCs utilizing the Windows operating environment. Symantec and
Delrina expect that the Windows-based versions of their products will continue
to dominate sales in the near term. Both companies have devoted substantial
efforts to the development of software products that are designed to operate on
Windows 95. Should Windows 95 or Symantec's or Delrina's products not achieve
timely market acceptance, or should Symantec or Delrina be unable to
successfully or timely develop and market products that operate under Windows
95, Symantec's and Delrina's future revenues could be adversely affected.
Symantec began shipping certain Windows 95 products in August 1995 and plans
to ship additional Windows 95 products as and when they are developed. An
unexpected delay in the release of Symantec's additional Windows 95 products
could have an adverse effect on Symantec. Delrina expects that its WinFax 7.0
for Windows 95 product will have been shipped to retail channels by November 15,
1995. Delrina does not expect to have shipped Windows 95-compatible versions of
its other software products prior to November 15, 1995. The delay in the release
date of WinFax 7.0 has
7
<PAGE>
had an adverse effect on Delrina's revenues for the fiscal quarter ended
September 30, 1995, but, assuming the current expected release date is met,
Delrina expects that revenues will increase during the fiscal quarter ending
December 31, 1995. However, an unexpected delay in the release of WinFax 7.0, or
delays in the release of Windows 95-compatible versions of Delrina's other
software products, could have an adverse effect on Delrina's revenues for the
fiscal quarter ending December 31, 1995. If the delays were to be significant,
the effect could be material.
Uncertainty about the adoption rate of Windows 95 and Symantec's and
Delrina's Windows 95 products may affect securities analysts' ability to
forecast revenues of Symantec, Delrina or the combined company. As a result,
there is an increased risk that revenues and profits will not be in line with
analysts' expectations. It is also possible that other operating systems will
gain market acceptance, which would require Symantec, Delrina or the combined
company to develop new products to function under such operating systems. The
ability to develop such new products and their success in the marketplace cannot
be assured.
See "INFORMATION CONCERNING DELRINA -- Business" and "INFORMATION CONCERNING
SYMANTEC -- Business."
LOSSES
Delrina incurred net losses of C$6.3 million for the quarter ended June 30,
1995. These losses were a result of a decrease in demand for Delrina's Windows
3.1-compatible products in anticipation of its Windows 95-compatible products,
which are expected to ship in the second quarter of fiscal 1996, as well as
increased expenses incurred in marketing and product development in anticipation
of the launch of Delrina's Windows 95-compatible products. Delrina cannot yet
determine its revenue and losses for the fiscal quarter ended September 30,
1995. However, based on the limited information currently available to Delrina,
Delrina anticipates that revenue for the September 30, 1995 quarter will be
significantly less (by at least 20%, although the reduction could be
substantially greater) than revenue for the June 30, 1995 quarter principally
because Delrina did not ship its Windows 95 products in the September quarter.
As Delrina has continued to invest heavily in the development of products
designed specifically for Windows 95, it does not expect expenses in the
September quarter to be lower than those incurred in the June quarter.
Accordingly, Delrina expects that it will incur a net loss in the September 30,
1995 fiscal quarter which will be substantially greater than the net loss
incurred in the June 30, 1995 fiscal quarter. Delrina may incur significant
losses in the future, whether or not the Transaction is consummated. See "--
Dependence on Windows; Windows 95."
DEPENDENCE ON DISTRIBUTORS; CONCENTRATION OF AND ACCESS TO DISTRIBUTION CHANNELS
Sales to a relatively small number of distributors account for a substantial
percentage of the respective revenues of Symantec and Delrina. Ingram Micro D
and Merisel accounted for approximately 33% of Symantec's net revenues in the
fiscal year ended March 31, 1995. See "SYMANTEC MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Net Revenues."
Sales to these same two distributors accounted for approximately 33% of
Delrina's net revenues in the fiscal year ended June 30, 1995. See "DELRINA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Net Revenues." It is likely that sales through distributors will
continue to constitute a significant portion of the combined company's sales.
Agreements with distributors are generally nonexclusive and may be terminated by
either party without cause. Such distributors are not and will not be within the
control of Symantec, Delrina or the combined company, are not obligated to
purchase products and may also represent other vendors' product lines. There can
be no assurance that these distributors will continue their current
relationships with Symantec or Delrina or with the combined company on the same
basis, or that they will not give higher priority to the sale of other products,
which could include products of competitors. Additionally, certain distributors
and resellers have experienced financial difficulties in the past. There can be
no assurance that distributors that account for significant sales of Symantec,
Delrina or the combined company will not experience financial difficulties in
the future. Any such problems could lead to reduced sales and could adversely
8
<PAGE>
affect operating results of Symantec, Delrina or the combined company. There can
be no assurance that any of Symantec and Delrina or the combined company will be
able to continue to obtain adequate distribution channels for all of its
products in the future.
The channels of distribution in the software industry have experienced
increasing concentration during the past several years, particularly with
respect to personal computer software chain stores and software distributors.
With the increasing concentration in the channels of distribution and the high
percentage of sales of Symantec and Delrina accounted for by distributors,
customers may have substantial strength in negotiating favorable terms of sale,
including price discounts and product return policies. Symantec's and Delrina's
customers have tended to make the great majority of their purchases at the end
of the fiscal quarter, in part to negotiate lower prices and more favorable
terms. This end-of-period buying pattern, especially in an environment where
there are competitive products, increases the risk that expected sales will not
be realized or will occur at lower prices or on terms less favorable to
Symantec, Delrina or the combined company.
See "INFORMATION CONCERNING DELRINA -- Business -- Competition" and
"INFORMATION CONCERNING SYMANTEC -- Business -- Competition."
IMPORTANCE OF NEW PRODUCTS
Software companies must continue to develop, market and support, or acquire
new products or upgrade existing products on a timely basis to sustain revenues
and profitable operations. One factor contributing to the short life span of
personal computer software has been rapid technological change. Companies must
continue to create or acquire innovative new products reflecting technological
changes in hardware and software, and translate current products into newly
accepted hardware and software formats, in order to gain and maintain a viable
market for their products. Personal computer hardware, in particular, is
steadily advancing in power and functionality, expanding the market for
increasingly complex and flexible software products. This has also resulted in
longer periods necessary for research and development of new products and a
greater degree of unpredictability in the time necessary to develop products. It
is expected that this trend will continue and may become more pronounced in the
future. If any of Symantec and Delrina or the combined company is unable to
develop or acquire new products and gain market acceptance, and as revenues
decrease from products reaching the end of their natural life cycle, the results
of operations will be adversely affected. In addition, Symantec and Delrina have
in the past experienced, and there can be no assurance that they will not again
in the future experience, delays in the development of their products. Such
delays have had, and if experienced in the future could have, a material adverse
effect on Symantec and Delrina. Such delays have also resulted, and if
experienced in the future could result, in a loss of competitiveness of
Symantec's products and Delrina's products. See "INFORMATION CONCERNING DELRINA
- -- Business" and "INFORMATION CONCERNING SYMANTEC -- Business."
INTERNATIONAL OPERATIONS
Historically, Symantec and, to a lesser extent, Delrina, have derived a
significant percentage of their respective revenues from sales outside of North
America. Revenues from international sales, including Canada, accounted for 33%,
35% and 46% of Symantec's net revenues in fiscal 1994, fiscal 1995 and the first
three months of fiscal 1996, respectively. Sales outside North America accounted
for 10% and 20% of Delrina's net revenues in fiscal 1994 and fiscal 1995,
respectively. These revenues are subject to the risks normally associated with
international operations, including currency conversion risks, limitations
(including taxes) on the repatriation of earnings, slower and more difficult
accounts receivable collection, greater difficulty and expense in administering
business abroad, complications in complying with foreign laws and the necessity
of obtaining requisite export licenses, which on occasion may be delayed or
difficult to obtain. In addition, while U.S. and Canadian copyright law,
international conventions and international treaties may provide meaningful
protection against unauthorized duplication of software, the laws of some
foreign jurisdictions may not protect proprietary rights to the same extent as
the laws of the United States or Canada. Software piracy has been, and can be
expected to be, a persistent problem for the "shrink-wrap" software industry,
and these problems are particularly acute
9
<PAGE>
in certain international markets such as South America, the Middle East, the
Pacific Rim and the Far East. To date, it is difficult to estimate revenue
losses resulting from unauthorized copying of software products. See
"INFORMATION CONCERNING DELRINA -- Business -- Marketing, Sales and
Distribution", "INFORMATION CONCERNING SYMANTEC -- Business -- Distribution,
Sales and Support" and "SYMANTEC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
VARIATIONS IN OPERATING RESULTS
A variety of factors may cause period-to-period fluctuations in each of
Symantec's, Delrina's and the combined company's operating results, including
integration of operations resulting from acquisitions of companies, products or
technologies, revenues and expenses related to the introduction of new products
or new versions of existing products, changes in selling prices, delays in
purchases in anticipation of upgrades to existing products or introduction of
new products (of either Symantec, Delrina or third parties), currency
fluctuations, dealer and distributor order patterns, general economic trends or
a slowdown of personal computer sales and seasonality. Historical operating
results of each of Symantec and Delrina or the combined pro forma results set
forth in this Joint Proxy Statement cannot be relied upon as indicative of
future performance of the combined company. See "DELRINA MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS", "SYMANTEC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "PRO FORMA FINANCIAL INFORMATION," and "SELECTED FINANCIAL AND
OPERATING DATA."
VOLATILITY OF STOCK PRICE
The market price of the Symantec Common Stock, the Delrina Common Shares or
Symantec Common Stock following the combination may be highly volatile. Factors
such as announcements of technological innovations or new products by Symantec,
Delrina, the combined company or their respective competitors, as well as market
conditions in the computer software or hardware industries and changes in
earnings estimates by analysts may have a significant impact on the market price
of the shares of such companies. Furthermore, stock markets have from time to
time experienced extreme price and volume fluctuations, particularly in the high
technology sector, that may be unrelated to the operating performance of
particular companies. These broad market and industry specific fluctuations may
adversely affect the market price of the shares of Symantec, Delrina or the
combined company regardless of operating performance. See "INFORMATION
CONCERNING SYMANTEC -- Company Stock Price Performance."
COSTS OF THE TRANSACTION
Symantec and Delrina estimate that costs of the Transaction will be between
US$10 million and US$12 million. These transaction costs principally include
fees for legal, accounting and financial advisory services. Further related
costs, estimated to be between US$15 million and US$18 million, are likely to be
incurred in connection with combining the operations of the respective
companies. These other related costs principally include expenses related to the
combination of the companies, including the elimination of duplicative and
excess facilities and personnel.
UNCERTAIN BENEFITS OF THE TRANSACTION; RISKS OF INTEGRATION
In evaluating the terms of the Transaction, Symantec and Delrina each
analyzed their respective businesses and made certain assumptions concerning
their respective future operations and operations of the combined company. One
principal assumption was that through consolidation and restructuring of
operations, the Transaction would produce a combined company with operating
results better than those historically experienced or presently expected to be
experienced in the future by either company in the absence of the Transaction.
There can be no assurance, however, that these benefits will be achieved or that
the results of the combined operations will be improved. These anticipated
benefits of the Transaction will not be achieved unless the companies are
successfully
10
<PAGE>
combined in a timely manner. The process of combining the organizations could
cause the interruption of, or a loss of momentum in, the activities of any or
all of the companies' businesses, which could have an adverse effect on their
combined operations. See "THE COMPANIES AFTER THE TRANSACTION -- Plans and
Proposals."
MANAGEMENT AND PERSONNEL CHANGES
As a result of the Transaction, the composition of Symantec's management
will be changed. Specifically, Symantec's Board of Directors will be comprised
of eight members, six of whom are current Symantec directors and two of whom are
current Delrina directors. In addition, the current Chairman and Chief Executive
Officer of Delrina will become an executive officer of Symantec. Symantec and
Delrina believe that the success of the combined company will depend to a
significant degree on other key personnel and will depend substantially on its
ability to continue to attract and retain highly-skilled technical, marketing
and management personnel, who are in great demand. The loss of key Symantec and
Delrina personnel might adversely affect the combined company's future results
if the combined company could not attract suitable replacements. See "THE
COMPANIES AFTER THE TRANSACTION -- Management."
ACQUISITIONS
Symantec has acquired a number of companies in the past and may make
additional acquisitions both prior to and after the Closing. Acquisitions
involve a number of special risks, including the diversion of management's
attention to assimilation of the operations and personnel of the acquired
companies, the loss of key employees and the difficulty of presenting a unified
corporate image. Symantec has lost certain employees of acquired companies whom
it desired to retain, and, in some cases, the assimilation of the operations of
acquired companies took longer than initially had been anticipated by Symantec.
In addition, because the employees of acquired companies have frequently
remained in their existing, geographically diverse facilities, Symantec has not
realized certain economies of scale that might otherwise have been achieved.
There can be no assurance that these same problems will not confront Symantec in
the context of the combination with Delrina and in connection with any future
acquisitions undertaken by it. See "INFORMATION CONCERNING SYMANTEC -- Business"
and "SYMANTEC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
PROPRIETARY RIGHTS; EXISTING AND POTENTIAL LITIGATION
Symantec and Delrina regard their software as proprietary and attempt to
protect it with copyrights, trademarks, patents, trade secret laws and
restrictions on disclosure and transferring title. Despite these precautions, it
may be possible for unauthorized third parties to copy aspects of these products
or to obtain and use information that Symantec or Delrina regard as proprietary.
Existing copyright and patent laws afford only limited practical protection. In
addition, the laws of some foreign countries do not protect proprietary rights
to the same extent as do the laws of the United States and Canada. As the number
of software products in the industry increases and the functionality of these
products further overlaps, Symantec and Delrina believe that software developers
will become increasingly subject to infringement claims. This risk is
potentially greater for vendors, such as Symantec and Delrina, that obtain
certain of their products through publishing agreements or acquisitions, since
they have less direct control over the development of those products. Although
such claims may ultimately prove to be without merit, they can be time consuming
and expensive to defend. Moreover, there has been an increase in the number of
patents issued in the United States and Canada relating to computer software,
and, accordingly, the risk of patent infringements in the industry can be
expected to increase resulting in a potential for an increase in patent
infringement claims. See "INFORMATION CONCERNING DELRINA -- Legal Proceedings"
and "INFORMATION CONCERNING SYMANTEC -- Legal Proceedings."
LITIGATION INVOLVING SYMANTEC AND BORLAND
Symantec and its President and Chief Executive Officer, Gordon E. Eubanks,
Jr. and its Executive Vice President, Eugene Wang, are defendants in a civil
lawsuit involving Borland International Inc. ("Borland"). The complaint of
Borland alleges misappropriation of trade secrets, unfair competition,
11
<PAGE>
inducing breach of contract, interference with prospective economic advantage
and unjust enrichment. In related criminal proceedings, indictments were filed
against Messrs. Eubanks and Wang relating to the misappropriation of trade
secrets and unauthorized access to a computer system. The civil case is not
being actively prosecuted at this time and the parties to the criminal
proceeding intend to file a petition for review of the matter with the
appropriate appellate court. Symantec believes that both the civil complaint and
the criminal charges have no merit. However, if either the civil or criminal
proceedings were determined adversely to Symantec or such executive officers,
such determination could have an adverse effect on Symantec and the market value
of the Symantec Common Stock. See "INFORMATION CONCERNING SYMANTEC -- Legal
Proceedings."
POSSIBLE ISSUANCES OF PREFERRED STOCK
Symantec's Certificate of Incorporation authorizes 1,000,000 shares of
Preferred Stock, par value US$0.01 per share. Although this authorization was
approved by the stockholders of Symantec, shares of the Symantec Preferred Stock
may be issued in the future without further stockholder approval and upon such
terms and conditions, and having such rights, privileges and preferences, as the
Board of Directors of Symantec may determine. The rights of the holders of
Symantec Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any shares of Symantec Preferred Stock that may be
issued in the future. The issuance of the Symantec Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of Symantec. Symantec has no present
plans to issue shares of its Preferred Stock. See "THE COMPANIES AFTER THE
TRANSACTION -- Symantec Share Capital."
DELRINA'S DEPENDENCE ON SINGLE PRODUCT FAMILY
Delrina has historically derived a significant portion of its sales from its
fax and data communications products. For the 1994 and 1995 fiscal years, such
products accounted for 75% and 74%, respectively, of Delrina's net revenues.
Delrina expects that sales of its fax and data communications products will
continue to represent a significant portion of its sales in the near future.
Declines in the market for such products, whether as a result of new competitive
products, price competition, technological changes or other factors could have a
material adverse effect on Delrina's operating results. A significant portion of
Delrina's long-term growth depends on the timely and successful completion and
introduction of new products and upgrades to its existing fax and data
communications products. There can be no assurance that upgrades or new products
can be introduced nor any assurance regarding the amount of any sales or
revenues from any such new products or upgrades. See "DELRINA MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Net
Revenues."
UNITED STATES GOVERNMENT BUSINESS
In 1991, Delrina began shipping its forms software to U.S. government
agencies and departments as an approved supplier. Since that time, sales to U.S.
government agencies and departments have increased and for the year ended June
30, 1995, sales of Delrina's products (principally forms products) to U.S.
government agencies and departments accounted for approximately 10% of Delrina's
total sales. Delrina's U.S. government contracts are subject to special risks,
such as delays in funding, termination for the convenience of the purchaser; and
reduction or modification in the event of changes in government policies or as
the result of budgetary constraints, political changes or other factors that are
not under the control of Delrina. The loss of or a material decrease in its
sales to U.S. government agencies and departments could have a material adverse
effect on Delrina's results of operations. See "INFORMATION CONCERNING DELRINA
- -- Business -- U.S. Government Sales."
12
<PAGE>
COMPARATIVE MARKET PRICE DATA
The following table sets forth the high and low sales prices of Delrina
Common Shares, traded under the symbol DC, on The Toronto Stock Exchange (the
"TSE") and, traded under the symbol DENAF, on the Nasdaq National Market (the
"NNM") since February 16, 1994, and of Symantec Common Stock, traded under the
symbol SYMC, on the NNM, for the periods indicated. The quotations are as
reported in published financial sources.
<TABLE>
<CAPTION>
DELRINA SYMANTEC
------------------------------------------ --------------------
HIGH LOW HIGH LOW
-------------------- -------------------- --------- ---------
TSE NNM TSE NNM NNM NNM
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Calendar Quarter -- 1992
First Quarter.............. C$4.75 -- C$3.25 -- US$51.00 US$40.00
Second Quarter............. 3.84 -- 2.75 -- 47.50 34.63
Third Quarter.............. 3.55 -- 2.75 -- 40.00 9.63
Fourth Quarter............. 5.50 -- 2.89 -- 14.75 5.88
Calendar Quarter -- 1993
First Quarter.............. 9.50 -- 4.80 -- 14.00 9.25
Second Quarter............. 12.50 -- 7.75 -- 18.63 12.38
Third Quarter.............. 14.75 -- 11.13 -- 20.50 10.88
Fourth Quarter............. 29.63 -- 13.38 -- 20.38 15.25
Calendar Quarter -- 1994
First Quarter.............. 31.25 US$22.63 24.00 US$17.63 18.38 13.38
Second Quarter............. 29.38 21.25 15.50 11.63 16.88 9.88
Third Quarter.............. 20.88 15.25 14.63 10.88 16.13 10.50
Fourth Quarter............. 20.88 15.50 14.13 10.38 19.00 14.63
Calendar Quarter -- 1995
First Quarter.............. 25.25 18.00 17.25 12.25 24.50 16.13
Second Quarter............. 0.00 14.38 14.63 10.84 30.00 20.13
Third Quarter.............. 25.60 19.00 18.00 14.38 33.25 23.00
</TABLE>
On the last full trading day prior to the joint public announcement by
Delrina and Symantec of a definitive agreement with respect to the Transaction
(July 3, 1995 with respect to the NNM, and July 4, 1995 with respect to the
TSE), the last reported sales price on the TSE of Delrina Common Shares was
C$21.25, and the last reported sales price on the NNM was US$13.63. The last
reported sales price of Symantec Common Stock on the NNM on July 3, 1995 was
US$28.25. On September 30, 1995, the last reported sales price per share of
Delrina Common Shares on the TSE and the NNM was C$22.60 and US$16.75,
respectively, and the last reported sales price of Symantec Common Stock was
US$30.00.
Neither Delrina nor Symantec currently pays dividends. Neither Delrina nor
Symantec anticipates the declaration of cash dividends prior to the Effective
Time.
On September 30, 1995, there were 22,382,097 Delrina Common Shares
outstanding held of record by 188 shareholders and 39,315,019 shares of Symantec
Common Stock outstanding held of record by 787 shareholders.
COMPARATIVE PER SHARE DATA
The following tables set forth certain historical per share data of Symantec
and Delrina and combined per share data on an unaudited pro forma basis after
giving effect to the Transaction. This data should be read in conjunction with
the selected historical financial data, the unaudited pro forma combined
financial statements and the separate historical financial statements of
Symantec and Delrina and the notes thereto or the notes included elsewhere in
this Joint Proxy Statement. The
13
<PAGE>
unaudited pro forma combined financial data are not necessarily indicative of
the operating results that would have been achieved had the Transaction been in
effect as of the beginning of the periods presented and should not be construed
as representative of future operations.
DELRINA -- HISTORICAL -- CANADIAN GAAP (C$)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) per share -- basic.................................................. $ 0.42 $ 0.82 $ (0.57)
Net income (loss) per share -- fully diluted.......................................... 0.38 0.76 (0.57)
Book Value per Common Share........................................................... 4.59
</TABLE>
DELRINA -- HISTORICAL -- U.S. GAAP (C$)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss) per share -- primary................................................ $ 0.31 $ 0.84 $ (0.57)
Net income (loss) per share -- fully diluted.......................................... 0.28 0.77 (0.57)
Book Value per Common Share........................................................... 4.49
</TABLE>
SYMANTEC -- HISTORICAL -- U.S. GAAP (US$)(1)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1994 1993
THREE MONTHS --------- --------- ---------
ENDED JUNE 30,
1995
---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss) per share -- primary................................ $ 0.29 $ 0.77 $ (1.69) $ (1.22)
Net income (loss) per share -- fully diluted.......................... 0.28 0.71 (1.69) (1.22)
Book Value per Common Share........................................... 3.60
</TABLE>
PRO FORMA COMBINED -- UNAUDITED -- U.S. GAAP (US$)(1)(3)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED MARCH 31,
ENDED JUNE 30, -------------------------------
1995 1995 1994 1993
--------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) per share -- primary................................ $ 0.13 $ 0.65 $ (0.96) $ (1.09)
Net income (loss) per share -- fully diluted.......................... 0.12 0.61 (0.96) (1.09)
Book Value per Common Share........................................... 3.66
</TABLE>
EQUIVALENT PRO FORMA COMBINED PER DELRINA SHARE -- UNAUDITED -- U.S. GAAP
(US$)(1)(2)(3)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED MARCH 31,
ENDED JUNE 30, -------------------------------
1995 1995 1994 1993
--------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) per share -- primary................................ $ 0.08 $ 0.40 $ (0.59) $ (0.66)
Net income (loss) per share -- fully diluted.......................... 0.07 0.37 (0.59) (0.66)
Book Value per Common Share........................................... 2.23
</TABLE>
- ------------------------
(1) For the purposes of the pro forma combined financial data, Symantec's
statement of operations data for the fiscal years ended March 31, 1995, 1994
and 1993 have been combined with Delrina's statement of operations data for
the three years ended June 30, 1995. The pro forma combined statement of
operations data for the three months ended June 30, 1995 includes the
results of operations of Symantec and Delrina for the three months ended
June 30, 1995. The pro forma combined balance sheet data as of June 30, 1995
includes the balance sheet information of Symantec and Delrina as of June
30, 1995.
(2) The Delrina equivalent pro forma combined per share amounts are calculated
by multiplying the Symantec pro forma combined per share amounts by the
Exchange Ratio of 0.61 shares of Symantec Common Stock for each Delrina
Common Share.
14
<PAGE>
(3) Symantec expects to incur charges to operations currently estimated to be
between US$25.0 million and US$30.0 million in the quarter ending December
31, 1995, the quarter in which the Merger is expected to be consummated.
These costs are primarily related to professional services, employee
severances, the elimination of duplicative and excess facilities and other
merger related costs. An estimated charge at the midpoint of the above
range, after effecting for estimated tax benefits, of US$21.2 million is
reflected in the Pro Forma Combined Condensed Balance Sheet (and therefore
reflected in the pro forma combined and pro forma combined equivalent book
value per share above) but has not been included in the Pro Forma Combined
Condensed Statements of Operations (and therefore not included in the pro
forma combined net income (loss) per share or pro forma equivalent combined
net income (loss) per share above). The future cash requirements related to
these charges are estimated to be in the range of US$20 million to US$25
million. These ranges are preliminary estimates only and are therefore
subject to change.
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following tables set forth selected historical financial data for the
last five fiscal years for Delrina and Symantec, and for the three-month periods
ended June 30, 1994 and 1995 for Symantec. The selected historical financial
data for Delrina for the five fiscal years ended June 30, 1995 have been derived
from Delrina's consolidated financial statements, which statements have been
audited by Price Waterhouse, Chartered Accountants, whose report on certain of
such financial statements is included herein. The selected historical financial
data for Symantec for the five fiscal years ended March 31, 1995 have been
derived from Symantec's consolidated financial statements, which statements have
been audited by Ernst & Young LLP, independent auditors, whose report on certain
of such financial statements is included herein. The selected historical
financial data for Symantec for the three-month periods ended June 30, 1994 and
1995, have been derived from unaudited consolidated financial statements of
Symantec, and include, in the opinion of management of Symantec, all adjustments
necessary to present fairly the results for such periods. This selected
historical financial data should be read in conjunction with the separate
consolidated financial statements and notes thereto of Delrina and Symantec,
which are included elsewhere in this Joint Proxy Statement. See "Index to
Delrina Financial Statements" and "Index to Symantec Financial Statements."
In connection with these financial statements, Delrina's accounting policies
do not differ materially from U.S. GAAP except that (1) U.S. GAAP requires the
inclusion of dilutive common stock equivalents when calculating earnings per
share, while Canadian GAAP does not include common stock equivalents in the
basic earnings per share calculation, (2) under U.S. GAAP, costs related to the
issuance of shares are recorded as a reduction of share capital, rather than a
reduction from retained earnings, (3) under U.S. GAAP, amortization of deferred
development costs is calculated using the greater of the ratio that current
revenue bears to the total of current and anticipated future revenues or the
straight line method; whereas under Canadian GAAP, the straight line method is
generally employed, (4) under U.S. GAAP, technology-in-process acquired in a
business combination is expensed, rather than capitalized, and (5) U.S. GAAP
requires under SFAS 109 that the liability method is used in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on tax carry-forwards and the differences between financial
reporting and the tax basis of assets and liabilities. Under Canadian GAAP,
deferred taxes are provided based on differences between amounts included in the
income statement and amounts included in the income tax return. The provision is
set up using tax rates applicable in the year of set up and is not changed even
though tax rates change.
Additionally, the Delrina historical financial data under U.S. GAAP has been
adjusted to conform with Symantec's financial policies and presentation.
Adjustments have been made to conform Delrina's method of accounting for tax
credits (the deferral method) to Symantec's method (the flow-through method).
Furthermore, certain Delrina historical financial statement line items have been
reclassified to conform with Symantec's presentation.
15
<PAGE>
DELRINA
The following selected historical consolidated financial data of Delrina set
forth below is qualified in its entirety by and should be read in conjunction
with the more detailed consolidated financial statements and related notes
included elsewhere herein. Delrina has never paid dividends on its stock.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
CANADIAN GAAP
Sales..................................... C$132,925 C$101,113 C$47,938 C$18,485 C$11,694
Income (loss) from operations............. 10,470 25,899 (7,298) (2,654) (1,846)
Net income (loss)......................... 9,160 16,818 (9,711) (2,002) (1,750)
Earnings (loss) per share
Basic................................... 0.42 0.82 (0.57) (0.14) (0.16)
Fully diluted........................... 0.38 0.76 (0.57) N/A N/A
Weighted average shares outstanding
Basic................................... 22,017 20,459 17,201 14,543 11,265
Fully diluted........................... 24,260 22,260 17,201 N/A N/A
U.S. GAAP
Sales..................................... C$132,925 C$101,113 C$47,938
Income (loss) from operations............. 8,281 25,899 (7,298)
Net income (loss)......................... 6,739 17,148 (9,711)
Earnings (loss) per share
Primary................................. C$ 0.31 C$ 0.84 C$ (0.57)
Fully diluted........................... C$ 0.28 C$ 0.77 C$ (0.57)
Weighted average shares outstanding
Primary................................. 22,017 20,459 17,201
Fully diluted........................... 24,260 22,260 17,201
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
CANADIAN GAAP
Working capital........................... C$ 68,560 C$ 73,259 C$19,747 C$11,549 C$12,870
Total assets.............................. 123,042 106,525 38,029 19,747 20,094
Shareholders' equity...................... 102,562 89,250 28,057 15,789 17,568
Redeemable convertible series A preference
shares................................... -- -- -- -- 1,923
U.S. GAAP
Working capital........................... C$ 72,065 C$ 77,006 C$19,747
Total assets.............................. 124,358 110,272 38,029
Long-term obligations, less current
portion.................................. -- -- 1,287
Stockholders' equity...................... 100,141 89,580 28,057
</TABLE>
16
<PAGE>
SYMANTEC
The following selected historical consolidated financial data of Symantec
set forth below is qualified in its entirety by and should be read in
conjunction with the more detailed consolidated financial statements and related
notes included elsewhere herein. During fiscal 1995, Symantec acquired Intec
Systems Corporation ("Intec"), Central Point Software, Inc. ("Central Point")
and SLR Systems, Inc. ("SLR") in transactions accounted for as poolings of
interest. All financial information has been restated to reflect the combined
operations of Symantec and Central Point. Prior year amounts have not been
restated for Intec and SLR as their results of operations were not material to
Symantec's consolidated financial statements. Symantec has never paid cash
dividends on its stock with the exception of distributions to stockholders of
acquired Subchapter S companies.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
---------------------- --------------------------------------------------------------------
1995 1994 1995 1994 1993 1992 1991
---------- ---------- ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................... US$ 90,109 US$ 83,113 US$ 334,867 US$ 328,299 US$ 344,626 US$ 365,711 US$ 236,604
Acquisition, restructuring and
other expenses................ (71) 9,545 9,545 56,094 12,773 9,822 6,500
Operating income (loss)........ 13,474 1,605 37,131 (62,519) (53,996) 40,429 35,454
Net income (loss).............. 11,700 1,047 28,500 (56,967) (39,095) 26,261 24,642
Distributions to stockholders
of acquired companies......... -- -- -- -- 162 1,986 3,622
Net income (loss) per share --
primary....................... US$0.29 US$0.03 US$0.77 US$(1.69) US$(1.22) US$0.79 US$0.80
Net income (loss) per share --
fully diluted................. US$0.28 US$0.03 US$0.71 US$(1.69) US$(1.22) US$0.78 US$0.78
Shares used to compute net
income (loss) per share --
primary....................... 40,603 35,941 37,383 33,790 32,131 33,371 30,980
Shares used to compute net
income (loss) per share --
fully diluted................. 42,381 35,941 41,693 33,790 32,131 33,561 31,628
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, --------------------------------------------------------------------
1995 1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. US$109,970 US$ 95,044 US$ 49,581 US$ 85,139 US$ 74,370 US$ 41,448
Total assets................ 224,765 221,315 188,792 230,894 213,493 137,783
Long-term obligations, less
current portion............ 15,293 25,408 25,966 27,148 4,866 5,824
Stockholders' equity........ 138,849 111,322 64,054 116,643 131,050 78,490
</TABLE>
17
<PAGE>
PRO FORMA FINANCIAL INFORMATION
SYMANTEC CORPORATION AND DELRINA CORPORATION
PRO FORMA COMBINED BALANCE SHEET -- UNAUDITED
ASSETS
<TABLE>
<CAPTION>
SYMANTEC DELRINA
CORPORATION CORPORATION PRO FORMA PRO FORMA
JUNE 30, 1995 JUNE 30, 1995 ADJUSTMENTS COMBINED
-------------- ------------- ------------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets:
Cash and short-term investments............ US$ 113,725 US$ 26,607 US$ -- US$ 140,332
Trade accounts receivable.................. 49,525 27,275 -- 76,800
Inventories................................ 3,313 5,256 -- 8,569
Deferred income taxes...................... 8,172 (905) 2,835(5) 16,402
6,300(7)
Other...................................... 5,858 5,280 (3,227)(5) 7,911
-------------- ------------- ------------------ --------------
Total current assets..................... 180,593 63,513 5,908 250,014
Equipment and leasehold improvements......... 31,703 10,499 (2,250)(7) 39,952
Purchased intangibles........................ 7,684 2,848 -- 10,532
Other........................................ 4,785 10,968 881(5) 16,634
-------------- ------------- ------------------ --------------
US$ 224,765 US$ 87,828 US$ 4,539 US$ 317,132
-------------- ------------- ------------------ --------------
-------------- ------------- ------------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... US$ 16,225 US$ 9,538 US$ -- US$ 25,763
Accrued compensation and benefits.......... 10,840 1,135 -- 11,975
Other accrued expenses..................... 40,208 4,092 25,250(7) 69,550
Income taxes payable....................... 2,886 -- -- 2,886
Current portion of long-term obligations... 464 -- -- 464
-------------- ------------- ------------------ --------------
Total current liabilities................ 70,623 14,765 25,250 110,638
Convertible subordinated debentures.......... 15,000 -- -- 15,000
Long-term obligations........................ 293 -- -- 293
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock................ -- -- --
Common stock............................... 386 71,484 (71,347)(5) 523
Capital in excess of par value............. 193,772 -- 71,347(5) 265,119
Notes receivable from stockholders......... (144) -- -- (144)
Cumulative translation adjustment.......... (3,401) (2,842) -- (6,243)
Retained earnings (accumulated deficit).... (51,764) 4,421 489(5) (68,054)
(21,200)(7)
-------------- ------------- ------------------ --------------
Total stockholders' equity............... 138,849 73,063 (20,711) 191,201
-------------- ------------- ------------------ --------------
US$ 224,765 US$ 87,828 US$ 4,539 US$ 317,132
-------------- ------------- ------------------ --------------
-------------- ------------- ------------------ --------------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
18
<PAGE>
SYMANTEC CORPORATION AND DELRINA CORPORATION
PRO FORMA COMBINED STATEMENTS OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED MARCH 31,
ENDED JUNE 30, ----------------------------------------------
1995 1995 1994 1993
-------------- -------------- -------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues................................... US$ 109,865 US$ 431,268 US$ 403,206 US$ 382,911
Cost of revenues............................... 22,218 90,935 102,018 116,884
-------------- -------------- -------------- --------------
Gross margin................................. 87,647 340,333 301,188 266,027
Operating expenses:
Research and development..................... 20,073 70,706 68,110 72,092
Sales and marketing.......................... 52,211 190,439 189,962 193,576
General and administrative................... 9,077 29,357 34,312 36,315
Acquisitions, restructuring and other
expenses.................................... (71) 9,545 56,094 23,836
-------------- -------------- -------------- --------------
Total operating expenses................... 81,290 300,047 348,478 325,819
-------------- -------------- -------------- --------------
Operating income (loss)........................ 6,357 40,286 (47,290) (59,792)
Interest income................................ 2,263 5,648 2,436 2,209
Interest expense............................... (439) (2,419) (2,517) (1,389)
Other income (expense), net.................... (1,465) 1,041 1,697 (1,780)
-------------- -------------- -------------- --------------
Income (loss) before income taxes.............. 6,716 44,556 (45,674) (60,752)
Provision (benefit) for income taxes........... (150) 11,147 (1,253) (14,448)
-------------- -------------- -------------- --------------
Net income (loss).............................. US$ 6,866 US$ 33,409 US$ (44,421) US$ (46,304)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income (loss) per share -- primary......... US$ 0.13 US$ 0.65 US$ (0.96) US$ (1.09)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income (loss) per share -- fully diluted... US$ 0.12 US$ 0.61 US$ (0.96) US$ (1.09)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Shares used to compute net income (loss) per
share -- primary.............................. 54,487 52,181 46,270 42,624
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Shares used to compute net income (loss) per
share -- fully diluted........................ 56,296 56,491 46,270 42,624
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
19
<PAGE>
SYMANTEC CORPORATION AND DELRINA CORPORATION
NOTES TO PRO FORMA COMBINED BALANCE SHEET AND
COMBINED STATEMENTS OF OPERATIONS
1. The unaudited pro forma combined statements of operations were prepared as
if the companies were combined as of the beginning of the periods presented.
2. The unaudited pro forma combined financial statements should be read in
conjunction with audited financial statements of Symantec as of and for the
year ended March 31, 1995, the unaudited financial statements of Symantec as
of and for the three month period ended June 30, 1995 and the audited
financial statements of Delrina as of and for the year ended June 30, 1995
all included herein.
3. Due to differing year ends of Symantec and Delrina, financial information
for dissimilar fiscal year ends has been combined. Delrina's fiscal years
ended June 30, 1995, 1994 and 1993 have been combined with Symantec's fiscal
years ended March 31, 1995, 1994 and 1993, respectively. Delrina's results
for the quarter ended June 30, 1995 will therefore be included in the
combined statements of operations for both fiscal 1995 and 1996 and,
accordingly, Delrina's net loss for the quarter ended June 30, 1995, will be
credited to stockholders' equity.
4. The unaudited pro forma combined statements of operations are not
necessarily indicative of operating results that would have been achieved
had the Transaction been consummated at the beginning of the periods
presented and should not be construed as representative of future
operations.
5. Adjustments have been made to reflect the exchange of Delrina Common Shares
into Symantec Common Stock. In addition, under U.S. GAAP, research and
development tax credits can either be reflected in net income over the
productive life of the related property (the deferral method) or treated as
a reduction of income taxes in the year in which the credit arises (the
flow-through method). A conforming adjustment in the pro forma financial
statements has been made to conform Delrina's method of accounting for tax
credits (the deferral method) to Symantec's method (the flow-through
method).
6. Delrina's historical financial statements were prepared under Canadian GAAP.
These unaudited pro forma combined financial statements contain certain
adjustments to conform Delrina's financial statements as of June 30, 1995
and for the three years then ended with U.S. GAAP:
(1) U.S. GAAP requires the inclusion of dilutive common stock equivalents
when calculating earnings per share, while Canadian GAAP does not
include common stock equivalents in the basic earnings per share
calculation.
(2) Under U.S. GAAP, costs related to the issuance of shares are recorded as
a reduction of share capital, rather than a reduction from retained
earnings.
(3) Under U.S. GAAP, amortization of deferred development costs is
calculated using the greater of the ratio that current revenue bears to
the total of current and anticipated future revenue or the straight line
method, whereas under Canadian GAAP the straight line method is
generally employed.
(4) Under U.S. GAAP, technology-in-process acquired in a business
combination is expensed rather than capitalized.
(5) U.S. GAAP requires under SFAS 109 that the liability method is used in
accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on tax carry-forwards and the
differences between financial reporting and the tax basis of assets and
liabilities. Under Canadian GAAP, deferred taxes are provided based on
differences
20
<PAGE>
between amounts included in the income statement and amounts included in
the income tax return. The provision is set up using tax rates
applicable in the year of set up and is not changed even though tax
rates change.
The following tables reconcile Delrina's reported net income (loss) and
earnings (loss) per share in U.S. dollars to that included in the Pro Forma
Combined Statements of Operations.
RECONCILIATION OF DELRINA'S NET INCOME (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Delrina Net Income (Loss) -- Canadian GAAP (US$)...................... $ 6,573 $ 12,456 $ (7,755)
Canadian GAAP to U.S. GAAP reconciling items:
Purchased-in-process research and development....................... (1,123) -- --
Amortization of capitalized software development costs.............. (461) -- --
Adjustments related to liability method of accounting for income
taxes.............................................................. (177) 244 --
Conforming adjustments:
Deferral versus flow-through method of accounting for income
taxes.............................................................. 97 (154) 546
--------- --------- ---------
Delrina Net Income (Loss) included in Pro Forma Combined Condensed
Statements of Operations -- U.S. GAAP (US$).......................... $ 4,909 $ 12,546 $ (7,209)
--------- --------- ---------
--------- --------- ---------
</TABLE>
RECONCILIATION OF DELRINA'S EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Delrina Earnings (Loss) Per Share -- Canadian GAAP (US$)..................... $ 0.30 0.61 (0.46)
Canadian GAAP to U.S. GAAP reconciling items:
Purchased-in-process research and development.............................. (0.05) -- --
Amortization of capitalized software development costs..................... (0.02) -- --
Adjustments related to liability method of accounting for income taxes..... (0.01) 0.01 --
Dilutive common stock equivalents in EPS calculation....................... (0.03) -- --
Conforming adjustments:
Deferral versus flow-through method of accounting for income taxes......... -- (0.01) 0.03
Effect of Exchange Ratio of 0.61............................................. 0.14 0.39 (0.26)
--------- --------- ---------
Delrina Earnings (Loss) Per Share included in Pro Forma Combined Condensed
Statements of Operations -- U.S. GAAP (US$)............................... $ 0.33 1.00 (0.69)
--------- --------- ---------
--------- --------- ---------
</TABLE>
7. Symantec expects to incur charges to operations currently estimated to be
between US$25.0 million and US$30.0 million in the quarter ending December
31, 1995, the quarter in which the Transaction is expected to be
consummated. These costs are primarily related to professional services,
employee severances, the elimination of duplicative and excess facilities
and other merger related costs. An estimated charge at the midpoint of the
above range, after effecting for estimated tax benefits, of US$21.2 million
is reflected in the Pro Forma Combined Balance Sheet but has not been
reflected in the Pro Forma Combined Statements of Operations. This range is
a preliminary estimate only, and is therefore subject to change.
8. Certain amounts have been reclassified to conform to the pro forma
presentation.
21
<PAGE>
THE MEETINGS -- GENERAL PROXY INFORMATION
SYMANTEC
SOLICITATION AND VOTING OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors of
Symantec for use at the Symantec Stockholders Meeting, to be held at the Garden
Court Hotel, Palo Alto, California, on November 20, 1995 at 9:00 a.m. (Pacific
time). Only holders of record of Symantec Common Stock at the close of business
on October 4, 1995 will be entitled to vote at the Symantec Stockholders
Meeting. At the close of business on that date, there were 39,318,165 shares of
Symantec Common Stock outstanding and entitled to vote. A majority, or
19,659,083, of these shares, present in person or by proxy, will constitute a
quorum for the transaction of business. Abstentions and broker non-votes will be
considered to be represented for purposes of a quorum. This Joint Proxy
Statement and the accompanying form of proxy were first mailed to Symantec
stockholders on or about October 17, 1995.
REVOCABILITY OF PROXY
A stockholder who has given a proxy may revoke it at any time before it is
exercised at the Symantec Stockholders Meeting, by (1) delivering to the
Secretary of Symantec (by any means, including facsimile) a written notice
stating that the proxy is revoked, (2) signing and so delivering a proxy bearing
a later date or (3) attending the Symantec Stockholders Meeting and voting in
person (although attendance at the Symantec Stockholders Meeting will not, by
itself, revoke a proxy). Please note, however, that if a stockholder's shares
are held of record by a broker, bank, or other nominee and that stockholder
wishes to vote at the Symantec Stockholders Meeting, the stockholder must bring
to the Symantec Stockholders Meeting a letter from the broker, bank or other
nominee confirming the stockholder's beneficial ownership of the shares to be
voted.
EXPENSES OF PROXY SOLICITATION
The expenses of soliciting proxies to be voted at the Symantec Stockholders
Meeting will be paid by Symantec. Following the original mailing of the proxies
and other soliciting materials, Symantec and/or its agents also may solicit
proxies by mail, telephone, telegraph or in person. Symantec has retained a
proxy solicitation firm, Corporate Investor Communications, Inc. ("CIC"), to aid
it in the solicitation process. Symantec will pay that firm a fee equal to
US$5,500 plus a variable amount based on US$3.50 per stockholder contacted by
CIC, plus expenses. Following the original mailing of the proxies and other
soliciting materials, Symantec will request brokers, custodians, nominees and
other record holders of Symantec Common Stock to forward copies of the proxy and
other soliciting materials to persons for whom they hold shares of Symantec
Common Stock and to request authority for the exercise of proxies. In such
cases, Symantec, upon the request of the record holders, will reimburse such
holders for their reasonable expenses.
VOTING RIGHTS
Holders of Symantec Common Stock are entitled to one vote for each share
held as of the Symantec Record Date. Delaware law does not require, and
Symantec's Certificate of Incorporation does not provide for, cumulative voting.
Directors will be elected by a plurality of the votes of the shares present in
person or represented by proxy at the Symantec Stockholders Meeting and entitled
to vote in the election of directors. With regard to the election of directors,
votes that are withheld will be excluded from the vote and will have no effect.
Approval of the amendments to Symantec's Certificate of Incorporation requires
the affirmative vote of the holders of a majority of the outstanding shares of
Symantec Common Stock (regardless of the number of shares actually voting,
either in person or by proxy, at the Symantec Stockholders Meeting). Each of the
remaining proposals requires the affirmative vote of a majority of the shares
eligible to vote and voting, either in person or by proxy, on the proposal at
the Symantec Stockholders Meeting.
Symantec will count abstentions in tabulations of votes cast, and an
abstention, therefore, will have the same effect as a vote against a proposal.
Under Delaware case law, broker non-votes are counted for purposes of
determining whether a quorum is present at the meeting but are not counted
22
<PAGE>
for purposes of determining whether a proposal has been approved. Thus, a broker
non-vote will have the same effect as a negative vote with regard to the
proposal to amend Symantec's Certificate of Incorporation. Broker non-votes will
not count as shares voting "for" or "against" with respect to the other
proposals and will not be considered as shares entitled to vote on the proposals
for purposes of determining whether such proposals have been approved.
REQUIRED VOTES TO APPROVE THE TRANSACTION AND VOTING INTENTIONS OF CERTAIN
STOCKHOLDERS
As indicated above, the issuance of Symantec Common Stock from time to time
upon the exchange of the Exchangeable Shares must be approved by the affirmative
vote of a majority of the shares of Symantec Common Stock present or represented
by proxy at the Symantec Stockholders Meeting at which a quorum of at least a
majority of the Symantec Common Stock issued, outstanding and entitled to vote
is present.
Each of ten Symantec Affiliates who hold Symantec Common Stock (collectively
holding an aggregate of 202,927 (less than 1%) of the outstanding Symantec
Common Stock) has agreed with Delrina, in his or her capacity as a stockholder
of Symantec, to vote all shares of Symantec Common Stock held by such Symantec
Affiliate in favor of the approval of the Combination Agreement and the
Transaction.
DELRINA
SOLICITATION AND VOTING OF PROXIES
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF MANAGEMENT OF DELRINA FOR
USE AT THE DELRINA SHAREHOLDERS MEETING. The solicitation of proxies will be
primarily by mail but proxies may also be solicited personally or by telephone
by regular employees of Delrina without special compensation or by such agents
as Delrina may appoint. See "-- Agents for Solicitation of Proxies." The cost of
solicitation will be borne by Delrina. Delrina may also pay brokers or nominees
holding Delrina Common Shares in their names or in the names of their principals
for their reasonable expenses in sending solicitation material to their
principals.
Only holders of record of Delrina Common Shares at the close of business on
the Delrina Record Date will be entitled to vote at the Delrina Shareholders
Meeting, subject to the provisions of the OBCA regarding transfers of Delrina
Common Shares after the Delrina Record Date. See the "Notice of Annual and
Special Meeting of Delrina Shareholders" accompanying this Joint Proxy
Statement. At the close of business on the Delrina Record Date, there were
22,425,430 Delrina Common Shares outstanding. Thirty-three percent (33%) of
these shares present (in person or by proxy) will constitute a quorum for the
transaction of business at the Delrina Shareholders Meeting or any adjournment
or postponement thereof.
To be effective, proxies must be received by The R-M Trust Company, 393
University Avenue, 5th Floor, Toronto, Ontario M5C 1E6 not later than 5:00 p.m.
(Toronto time) on November 17, 1995, or, if the Delrina Shareholders Meeting is
adjourned, not later than 24 hours (excluding Saturdays, Sundays and holidays)
before the time of the Delrina Shareholders Meeting or any adjournment or
postponement thereof.
APPOINTMENT OF PROXY AND DISCRETIONARY AUTHORITY
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER OF DELRINA), OTHER THAN PERSONS DESIGNATED IN THE FORM OF PROXY
ACCOMPANYING THIS JOINT PROXY STATEMENT, AS NOMINEE TO ATTEND AND ACT FOR AND ON
BEHALF OF SUCH SHAREHOLDER AT THE DELRINA SHAREHOLDERS MEETING AND MAY EXERCISE
SUCH RIGHT BY INSERTING THE NAME OF SUCH PERSON IN THE BLANK SPACE PROVIDED ON
THE FORM OF PROXY.
The form of proxy accompanying this Joint Proxy Statement confers
discretionary authority upon the proxy nominees with respect to amendments or
variations to the matters identified in the accompanying notice of the Delrina
Shareholders Meeting and other matters which may properly come before the
Delrina Shareholders Meeting.
23
<PAGE>
The shares represented by proxies at the Delrina Shareholders Meeting will
be voted in accordance with the instructions of the shareholder on any ballot
that may be called for and, where the person whose proxy is solicited specifies
a choice with respect to any matter to be voted upon, his or her shares shall be
voted in accordance with the specifications so made.
If a shareholder appoints a person designated by management in the form of
proxy as nominee and does not direct the management nominee to vote either for
or against the matter or matters with respect to which an opportunity to specify
how the shares registered in the name of such shareholder shall be voted, the
proxy shall be voted FOR such matter or matters and for the election of the
directors proposed in this Joint Proxy Statement.
Management knows of no matters to come before the Delrina Shareholders
Meeting other than the matters referred to in the accompanying notice of the
Delrina Shareholders Meeting. However, if any other matters which are not now
known to management should properly come before the Delrina Shareholders
Meeting, the shares represented by proxies in favour of management nominees will
be voted on such matters in accordance with the best judgment of the proxy
nominee.
REVOCATION OF PROXIES
Proxies given by shareholders for use at the Delrina Shareholders Meeting
may be revoked at any time prior to their use. A shareholder giving a proxy may
revoke the proxy (i) by instrument in writing executed by the shareholder or by
his or her attorney authorized in writing, or, if the shareholder is a
corporation, under its corporate seal by an officer or attorney thereof duly
authorized indicating the capacity under which such officer or attorney is
signing, and deposited either at the registered office of Delrina (as set forth
in this Joint Proxy Statement) at any time up to and including 5:00 p.m.
(Toronto time) on the last business day preceding the day of the Delrina
Shareholders Meeting, or any adjournment or postponement thereof, or with the
chairman of the Delrina Shareholders Meeting on the day of such meeting or
adjournment or postponement thereof, (ii) by a duly executed proxy bearing a
later date or time than the date or time of the proxy being revoked, (iii) by
voting in person at the Delrina Shareholders Meeting (although attendance at the
Delrina Shareholders Meeting will not in and of itself constitute a revocation
of a proxy), or (iv) in any other manner permitted by law.
AGENTS FOR SOLICITATION OF PROXIES
In connection with the Delrina Shareholders Meeting, Delrina has retained
the services of First Marathon Securities Limited ("First Marathon"), a Canadian
investment dealer, to solicit proxies from Delrina shareholders in Canada and
the United States, on behalf of management. Delrina will compensate First
Marathon for such services, including reimbursement for reasonable out-of-pocket
expenses, including legal costs, and will indemnify First Marathon in respect of
certain liabilities which may be incurred by First Marathon in performing its
services. Such compensation is not expected to exceed C$100,000.
VOTING RIGHTS, REQUIRED VOTES AND VOTING INTENTIONS OF CERTAIN SHAREHOLDERS
Holders of Delrina Common Shares are entitled to one vote for each share
held. The Arrangement Resolution must be approved by the affirmative vote of not
less than 66 2/3% of the votes cast by the holders of Delrina Common Shares
present (in person or by proxy) and entitled to vote at the Delrina Shareholders
Meeting. The appointment of Price Waterhouse, Chartered Accountants, as
independent auditors of Delrina must be approved by the affirmative vote of a
majority of the votes cast by the holders of Delrina Common Shares present (in
person or by proxy) and entitled to vote at the Delrina Shareholders Meeting.
Members of the Delrina Board of Directors will be elected by a plurality of the
votes cast by the holders of Delrina Common Shares present (in person or by
proxy) and entitled to vote at the Delrina Shareholders Meeting. The OBCA does
not require, and the Delrina Articles do not provide for, cumulative voting in
respect of the election of directors.
24
<PAGE>
Each Delrina Affiliate (collectively holding an aggregate of 2,632,501
(approximately 11.7%) of the outstanding Delrina Common Shares) has agreed, in
such Delrina Affiliate's capacity as a Delrina shareholder, to vote all Delrina
Common Shares held by such Delrina Affiliate in favor of the approval of the
Arrangement.
THE TRANSACTION
BACKGROUND TO THE COMBINATION AGREEMENT
In March 1995, Mark Bailey (Symantec's Vice President-Business Development)
spoke with Charles Federman of Broadview who suggested that Symantec might be
interested in meeting with representatives from Delrina to discuss business
opportunities, including a possible combination of Symantec and Delrina. Mr.
Federman arranged for the meeting, which took place on April 10, 1995 in
Toronto. Gordon Eubanks (President and CEO of Symantec) and Mr. Bailey met with
Dennis Bennie (CEO and Chairman of the Board of Delrina), Mark Skapinker
(President of Delrina), Albert Amato (Chief Technology Officer of Delrina) and
representatives of Broadview to discuss the respective businesses of Delrina and
Symantec and the potential for a combination of the two companies. Mr. Bailey
arranged a meeting with Thomas Greig of DLJ on April 12, 1995 to discuss the
possibility of DLJ acting as Symantec's financial advisor with respect to a
possible business combination with Delrina. On April 20, 1995, Messrs. Eubanks,
Bailey, Federman, Bennie, and Amato met in California to continue discussions
concerning the general parameters of a potential combination. The parties
determined that it would be worthwhile to exchange further information and enter
into a mutual non-disclosure agreement. Symantec held a Board of Directors
meeting on April 21, 1995 at which Mr. Bailey presented the prospect of a
business combination with Delrina. On April 25, 1995, Messrs. Amato, Skapinker
and Eubanks met in Atlanta while attending a convention. The parties considered
and discussed integration of Delrina's products with those of Symantec. On April
27, 1995, a mutual non-disclosure agreement was executed on behalf of Delrina
and Symantec. On the same day, members of senior management of Delrina and
Symantec and representatives of Broadview held a conference call during which
the exchange of information for due diligence purposes among the companies and
their respective agents was discussed.
Delrina's Board of Directors met on May 2, 1995 to discuss the potential
business combination and approved further discussions with Symantec. On May 4,
1995, Messrs. Bennie and Eubanks met in Washington D.C. to discuss possible
parameters of a potential business combination. Messrs. Eubanks, Bailey, Bennie,
Skapinker, Amato and representatives of Broadview held a meeting in Toronto on
May 19, 1995 concerning Delrina's and Symantec's respective organizations and
product strategies and also considered the procedure necessary for pursuing a
potential combination.
In May and June 1995, Delrina and Broadview identified and contacted a small
number of other parties that might be interested and capable of entering into a
strategic transaction with Delrina. These initial discussions between
representatives of Broadview or Delrina and such other companies included
preliminary discussions to determine whether further interaction or discussion
between the parties could be productive.
On May 26, 1995, Symantec's Board of Directors met, reviewed the progress
toward consummating the proposed transaction and approved taking additional
steps in furtherance of the proposed transaction. On May 27, 1995, Messrs.
Eubanks and Bennie discussed on the telephone issues concerning the valuation of
Delrina Common Shares. A conference call was conducted on May 30, 1995 among
Messrs. Eubanks, Bennie, Bailey, representatives of Broadview and DLJ and their
respective counsel to outline the due diligence process and transaction issues.
A draft of the proposed Combination Agreement was circulated to the working
group on June 3, 1995.
During June 6, 1995 and June 7, 1995 in Toronto, Michael Cooperman
(Delrina's Chief Financial Officer) and other senior management of Delrina,
Delrina's outside legal counsel and representatives
25
<PAGE>
of Broadview met with Howard Bain (Symantec's Treasurer and Vice President of
Finance), other senior management of Symantec and representatives of DLJ to
conduct financial due diligence on Delrina.
On June 11, 1995, Symantec's Board of Directors and legal counsel met to
discuss the status of the proposed Transaction. At the Symantec Board meeting,
Messrs. Eubanks, Bailey and Robert Dykes (Symantec's CFO and Executive Vice
President-Worldwide Operations) led a discussion of the potential combination
with Delrina. On June 12, 1995 and June 13, 1995 Symantec's and Delrina's legal
counsel held telephonic meetings to discuss securities and tax law issues
relating to a potential combination; at the same time Messrs. Eubanks, Bailey
and representatives of DLJ and Broadview held various telephone conversations
regarding the establishment of a proposed exchange ratio.
On June 13, 1995 and June 14, 1995, Messrs. Amato, Skapinker, Bailey and
others from Symantec met in California to further discuss possible strategies
for integrating Delrina's products with Symantec's products. During June 14,
1995 through June 15, 1995, Mr. Cooperman, other representatives of Delrina and
a representative of Broadview met with Messrs. Dykes, Bain, Myers and other
representatives of Symantec in Cupertino, California to conduct financial due
diligence of Symantec. On June 18, 1995 and June 19, 1995, Messrs. Eubanks,
Dykes, Bennie, and representatives from Broadview and DLJ met in New York City
to further discuss certain business parameters of the proposed combination. In
June 1995, legal counsel for Symantec and Delrina began preliminary negotiations
relating to the proposed Combination Agreement. Throughout June and early July,
telephone conferences among representatives of Symantec and its legal counsel
and Delrina and its legal counsel were held to discuss the draft Combination
Agreement and related documents. In addition, from mid-June through July 5,
1995, members of senior management of Symantec and Delrina and their respective
financial and legal advisors continued their respective business, legal and
financial due diligence.
On June 22, 1995, the Symantec Board of Directors held a meeting at which
Messrs. Eubanks, Dykes, Bailey and a representative of DLJ led a discussion
concerning the potential business combination with Delrina. On the same day, the
Delrina Board of Directors met in Toronto (with some members participating by
conference telephone) to receive reports from (i) Broadview concerning its
preliminary valuation analysis, (ii) Delrina's legal counsel concerning
preliminary results of the due diligence investigation, and (iii) Broadview and
management of Delrina concerning the status of discussions with other companies.
Broadview and management reported that while certain of the companies that had
shown interest in Delrina, none were in a position to engage in serious
negotiations at that time. The Delrina Board of Directors instructed Broadview
to pursue further discussions with some of the companies and report back at the
next meeting. The Delrina Board of Directors also instructed counsel to
investigate further the status of the litigation between Borland and Symantec,
and the associated criminal proceedings. (See "INFORMATION CONCERNING SYMANTEC
- -- Legal Proceedings.")
On June 25, 1995, Messrs. Bennie and Eubanks discussed the expected results
for Delrina's fourth quarter ending June 30, 1995. Mr. Bennie indicated that
Delrina would likely show a loss for the quarter. A video conference call was
conducted on June 29, 1995 including Messrs. Eubanks and Bennie for the purpose
of discussing Delrina's products under development. From June 30, 1995 through
July 2, 1995, Messrs. Eubanks, Bennie and representatives of DLJ and Broadview
held telephonic conversations regarding the establishment of the exchange ratio.
During the period from June 30, 1995 to July 4, 1995, Messrs. Amato, Bailey, and
other representatives of Symantec discussed the integration of products for the
combined company.
On July 4, 1995, the Delrina Board of Directors held a telephonic meeting in
order to discuss the status of the transaction, the status of ongoing litigation
and the continuing due diligence investigations by Symantec and Delrina. At the
Delrina Board meeting, representatives of Broadview reported that discussions
concerning a strategic transaction with other companies were not likely to yield
results in the near future, if at all. Delrina's outside legal counsel also
reported on the results of its
26
<PAGE>
analysis of the Borland litigation. On July 3, 1995 and July 4, 1995, Messrs.
Eubanks, Bennie and representatives of Broadview and DLJ held further telephone
discussions regarding the exchange ratio.
On July 5, 1995, Symantec and Delrina reached a preliminary agreement on the
terms of the Combination Agreement, including the Exchange Ratio. On the same
day, Symantec's Board of Directors and the Delrina Board of Directors each met
with their respective legal and financial advisors and approved the Transaction.
After the conclusion of the meetings of the respective Boards of Directors,
representatives of Delrina and Symantec met to finalize and execute the
Combination Agreement.
REASONS FOR THE TRANSACTION
JOINT REASONS FOR THE TRANSACTION
Symantec and Delrina believe that the combination of the two companies will
allow them to combine their individual resources to enhance their ability to
compete in, and profit from, the rapidly growing communications market and to
provide more attractive solutions to enterprise-oriented software customers. The
combined company is expected to benefit from more effectively utilizing each
company's respective strengths, including Symantec's corporate sales force,
international marketing resources, distribution channels and remote computing
products, and Delrina's expertise in developing communications, fax and
electronic forms products. The combined company is also expected to benefit from
synergies between Symantec's and Delrina's complementary product lines.
SYMANTEC'S REASONS FOR THE TRANSACTION AND ISSUANCE OF SYMANTEC COMMON STOCK
The Board of Directors of Symantec has reviewed the proposed Transaction and
has concluded that the Transaction is fair to and in the best interests of
Symantec and its stockholders and has unanimously approved the Combination
Agreement, the other transactions contemplated by the Combination Agreement and
the Symantec Certificate. The Symantec Board of Directors recommends that
Symantec stockholders vote FOR approval of the Combination Agreement, the
transactions contemplated thereby and the Symantec Certificate.
Based on the evaluation of the Board of Directors of Symantec, which was
conducted with the assistance of outside financial and legal advisors, the Board
of Directors of Symantec believes that the Transaction is in the best interests
of Symantec and its stockholders. The Board weighed a variety of factors in
reaching its decision. It gave special attention to the following factors: the
Board's belief that the Transaction (i) provides Symantec with an expanded
mobile communications portfolio with leading products that are synergistic and
complementary with Symantec's existing business focus in mobile communications
and utilities; (ii) enhances Symantec's ability to serve both traditional
desktop computer users and larger enterprise-oriented customers; and (iii) will
allow the combined company to more effectively capitalize on Windows 95 upgrade
opportunities as a result of Symantec's and Delrina's complementary product
lines and Symantec's strong distribution, sales and marketing resources. The
Board further believes that the complementary nature of the companies in
numerous distribution and geographic areas and the larger size of the combined
company will enable it to compete more effectively than Symantec could compete
alone within the North American and international markets. In particular, the
Symantec Board believes that the combined company should (i) be able to offer a
broader product line than Symantec alone; (ii) have enhanced bargaining strength
in dealing with its suppliers, customers, distributors and software licensors
and in negotiating future acquisitions; (iii) benefit from the sharing of each
company's technological knowledge; and (iv) be able to reallocate its resources
to areas with greater revenue growth potential as a result of reductions in
personnel costs, facility costs and other costs associated with the
consolidation of administration and operations, as well as through the
combination of the sales and research and development operations. See "THE
COMPANIES AFTER THE TRANSACTION -- Plans and Proposals."
27
<PAGE>
In addition to the foregoing, in reaching its conclusion to enter into the
Combination Agreement, the Board of Directors of Symantec considered the
following material factors:
(a) Symantec's and Delrina's respective businesses, assets, technology,
management, competitive position and prospects and current conditions and
trends in the markets and industries in which they operate;
(b) Symantec's prospects as an independent entity in an industry
undergoing consolidation among its competitors;
(c) the financial condition, results of operations and businesses of
Symantec and Delrina before and after giving effect to the Transaction;
(d) current market conditions and historical market prices, volatility
and trading information with respect to the Symantec Common Stock and the
Delrina Common Shares;
(e) the market value of the Symantec Common Stock and the Delrina Common
Shares and Symantec's and Delrina's per share reported earnings (loss)
before interest and taxes and certain other measures;
(f) a comparison of selected acquisition transactions within the
computer software industry (see "-- Opinions of Financial Advisors");
(g) the terms of the Combination Agreement, including the parties'
mutual representations, warranties and covenants, and the conditions to
their respective obligations, including the accounting for the Transaction
as a pooling of interests under U.S. GAAP; and
(h) the oral advice and opinion of DLJ rendered to the Board of
Directors of Symantec as to the financial aspects of the Transaction.
In considering the proposed Transaction, the Board of Directors of Symantec
recognized that there were certain risks associated with the Transaction,
including the risk that the potential benefits set forth above may not be
realized or that there may be higher than expected costs associated with
realizing such benefits and the factors set forth in this Joint Proxy Statement
under "RISK FACTORS."
The Board of Directors of Symantec did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in making its determination.
DELRINA'S REASONS FOR THE TRANSACTION
The Delrina Board of Directors has determined that the terms of the
Combination Agreement and the transactions contemplated thereby are fair and in
the best interests of Delrina and its shareholders. Accordingly, the Delrina
Board of Directors has approved the Transaction and unanimously recommends to
Delrina shareholders that they vote FOR the Arrangement Resolution. The Delrina
Board of Directors based its approval of the Transaction on its determination
that the Exchange Ratio is fair to Delrina and to Delrina shareholders and upon
a number of other factors, including the following:
(i) the combined company can achieve substantial savings in sales,
marketing, international and administrative areas through reductions in
personnel, facilities and other costs, which should enable the combined
company to reallocate resources and compete more effectively;
(ii) there is very little overlap between the products of Delrina and
Symantec, and the broader product line of the combined company should enable
it to achieve a stronger brand awareness in the mobile computing market;
(iii) Symantec has a highly experienced management team with an
established record of continued growth and managing the successful
integration of acquired companies;
28
<PAGE>
(iv) the combination of Delrina with Symantec will result in a company
with greater financial, technological and human resources to develop new
generations of products;
(v) the Exchange Ratio represents a premium of approximately 26% over
the average of the closing market prices of Delrina Common Shares for the
thirty trading days prior to the execution of the Combination Agreement; and
(vi) after consummation of the Transaction, the Symantec Common Stock
will have a significantly larger market float and greater liquidity than the
Delrina Common Shares.
The Delrina Board of Directors also considered the following information in
concluding that the Arrangement and the Exchange Ratio are fair to Delrina and
its shareholders:
(i) its knowledge of the business, operations, property, assets,
financial condition, operating results and prospects of Delrina and
Symantec;
(ii) current industry, economic and market conditions and trends and its
informed expectations of the future of the industry in which Delrina
operates;
(iii) its review of the litigation between Symantec and Borland and the
associated criminal proceedings;
(iv) the opinion of Broadview as to the fairness of the Exchange Ratio to
Delrina shareholders;
(v) the terms of the Combination Agreement;
(vi) the structure and accounting and tax treatment of the Transaction;
(vii) the respective corporate cultures and strategies of Delrina and
Symantec; and
(viii) Delrina's alternatives, including the fact that its approaches to
other companies had not yielded any other party willing to engage in serious
discussions in a timely manner.
In considering the proposed Transaction, the Delrina Board of Directors
recognized that there were certain risks associated with the Transaction,
including the risk that the potential benefits set forth above may not be
realized or that there may be higher than expected costs associated with
realizing such benefits and the factors set forth in this Joint Proxy Statement
under "RISK FACTORS."
In view of the variety of factors considered in connection with its
evaluation of the Transaction, the Delrina Board of Directors did not find it
practicable to and did not quantify or otherwise assign relative strengths to
the specific factors considered in reaching its determination.
BOARD RECOMMENDATIONS
THE SYMANTEC BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS FAIR TO AND
IN THE BEST INTERESTS OF SYMANTEC AND ITS STOCKHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE COMBINATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
THE DELRINA BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS FAIR TO AND
IN THE BEST INTERESTS OF DELRINA AND ITS SHAREHOLDERS AND THEREFORE UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE ARRANGEMENT.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF DLJ
In its role as financial advisor to Symantec, DLJ was asked by Symantec to
render its opinion to the Symantec Board of Directors as to the fairness, from a
financial point of view, to Symantec and its stockholders of the consideration
to be paid by Symantec to the shareholders of Delrina pursuant to the
Combination Agreement. On July 5, 1995, DLJ delivered its oral opinion, which
was subsequently delivered in writing (the "DLJ Opinion"), to the Symantec Board
of Directors.
29
<PAGE>
A copy of the DLJ Opinion is attached hereto as Annex H. The Symantec
stockholders are urged to read the DLJ opinion in its entirety for assumptions
made, procedures followed, other matters considered and limits of the review by
DLJ. The summary of the opinion of DLJ set forth in this Joint Proxy Statement
is qualified in its entirety by reference to the full text of such opinion. The
DLJ Opinion was prepared for the Symantec Board of Directors and is directed
only to the fairness to Symantec and the holders of Symantec Common Stock as of
July 5, 1995 from a financial point of view, of the consideration to be paid by
Symantec pursuant to the Combination Agreement and does not constitute a
recommendation to any stockholder as to how to vote at the Symantec Stockholders
Meeting.
The DLJ Opinion does not constitute an opinion as to the price at any time
at which Symantec Common Stock will trade. No restrictions or limitations were
imposed by the Symantec Board of Directors upon DLJ with respect to the
investigations made or the procedures followed by DLJ in rendering its opinion.
In arriving at its opinion, DLJ reviewed the Combination Agreement. DLJ also
reviewed financial and other information that was publicly available or
furnished to it by Symantec and Delrina, including information provided during
discussions with their respective managements, consolidated financial statements
and other information of Symantec and Delrina. Included in the information
provided during discussions with respective managements were certain financial
projections of Symantec and Delrina for the period beginning June 30, 1995 and
ending March 31, 1997 prepared by the management of Symantec. In addition, DLJ
(i) reviewed prices and premiums paid in certain other selected business
combinations in the software industry and examined premiums paid in a broad
group of high technology companies; (ii) compared certain financial and
securities data of Symantec and Delrina with such data of selected companies
whose securities are traded in public markets; (iii) reviewed the historical
stock prices and trading volumes of Symantec Common Stock and Delrina Common
Shares; (iv) analyzed the pro forma financial impact of the Transaction on
Symantec; and (v) compared the relative contribution of both Symantec's and
Delrina's revenues, gross profits, earnings before interest and taxes ("EBIT"),
and net income and other measures to the combined company with the relative
ownership of the combined company upon giving effect to the Transaction. DLJ
also discussed the past and current operations, financial condition and
prospects of Symantec and Delrina with the respective managements of Symantec
and Delrina and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to it from public sources, that was provided to DLJ by Symantec,
Delrina or their respective representatives, or that was otherwise reviewed by
DLJ. In particular, DLJ relied upon the estimates of the management of Symantec
of the operating synergies achievable as a result of the Transaction and upon
the discussion of such synergies with the management of Symantec and Delrina.
With regard to such synergies, Symantec management identified certain areas
where it expects to achieve significant synergies. Symantec management expressed
an expectation of completing a program that would result in the achievement of
these synergies by June 30, 1996. In the estimation of these synergies,
restructuring and acquisition expenses were not included, as these are
considered to be one-time events. The anticipated synergies were material to
DLJ's analysis of the fairness of the Transaction. DLJ performed sensitivity
analyses to assess the impact of varying levels of operating synergies. DLJ,
based upon projections provided by Symantec, estimated Transaction-related
reductions in the combined entity's operating expenses of 3.8% to 5.1%. These
reductions were estimated to be partially realized as early as the December 1995
quarter and fully realized by the September 1996 quarter. Symantec assumed
synergies in the expense categories of costs of sales, product development,
marketing, sales, administration, operations, information systems and technology
support. With respect to the financial projections supplied to DLJ by Symantec,
DLJ assumed that they were reasonably prepared and reflected the best currently
available estimates and judgments of the management of Symantec as to the future
operating and financial performance of Symantec and Delrina. DLJ did not assume
any responsibility for making and did not
30
<PAGE>
make any independent evaluation of Delrina's assets or liabilities or any
independent verification of any of the information reviewed by DLJ. DLJ relied
as to all legal matters on advice of counsel to Symantec.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on July 5, 1995, the date of the DLJ Opinion
and on the information made available to DLJ as of such date and on the review
and analyses conducted by DLJ as of such date. It should be understood that,
although subsequent developments may have affected or may hereafter affect its
opinion, DLJ was not requested to and does not have any obligation to update,
revise or reaffirm the DLJ Opinion.
The following is a summary of the material factors considered and principal
financial analyses performed by DLJ to arrive at the DLJ Opinion. DLJ performed
certain procedures, including each of the financial analyses described below,
and reviewed with the management of Symantec the assumptions on which such
analyses were based and other factors, including the current and projected
financial results of Symantec and Delrina.
TRANSACTION ANALYSIS. DLJ reviewed publicly available information for 56
selected transactions involving a range of computer software companies in the
period from 1987 to the present (the "Computer Software Transactions"). These
transactions did not constitute the complete list of software transactions which
have occurred in such period. Only transactions involving software companies
deemed relevant by DLJ were reviewed.
DLJ reviewed the consideration paid in such transactions in terms of the
price paid for the common stock ("Equity Purchase Price") plus total debt less
cash and equivalents ("Total Transaction Value") of such transactions as a
multiple of revenues, earnings before interest, taxes, depreciation and
amortization ("EBITDA") and EBIT for the latest reported twelve months ("LTM")
prior to the announcement of such transactions. Additionally, DLJ reviewed the
consideration paid in such transactions in terms of the Equity Purchase Price of
such transactions as a multiple of net income for the twelve months prior to the
announcement of such transactions and as a multiple of book value of equity.
For the Computer Software Transactions, the analysis of Total Transaction
Value to (i) LTM revenues, (ii) EBITDA and (iii) EBIT and the Equity Purchase
Price to (iv) LTM net income and (v) book value of equity indicated high, mean
and low values of these transactions of (i) 16.6x, 2.8x and 0.5x, (ii) 47.4x,
17.6x and 0.6x, (iii) 44.3x, 21.3x and 0.6x, (iv) 47.1x, 29.5x and 11.4x, and
(v) 27.4x, 8.2x and 1.5x, respectively, compared to the implied multiples for
Delrina at the time of the announcement of the transaction (based upon a 30 day
average closing stock price of Symantec and an exchange ratio of 0.61) of 3.6x,
14.0x, 19.0x, 32.6x and 4.9x, respectively.
DLJ also determined the percentage premium of the offer prices (represented
by the purchase price per share in cash transactions and the stock price of the
constituent securities times the exchange ratio in the case of stock-for-stock
mergers) over the trading prices one day, one week and one month prior to the
announcement date of selected software transactions involving the following
high-technology companies: (i) Platinum Technology, Inc. and Trinzic
Corporation; (ii) VMARK Software and Easel Corporation; (iii) Adobe Systems Inc.
and Frame Technology Corp.; (iv) International Business Machines Corporation and
Lotus Development Corp.; (v) Computer Associates International Inc. and Legent
Corp.; (vi) Sybase Inc. and Powersoft Corp.; (vii) Microsoft and Intuit Inc.
(not completed); (viii) SynOptics Communications, Inc. and Wellfleet
Communications, Inc.; (ix) Computer Associates International Inc. and The Ask
Group, Inc.; (x) HBO and Company and Serving Software; (xi) Adobe Systems Inc.
and Aldus Corporation; (xii) Rational Software Corporation and Verdix
Corporation; (xiii) H&R Block Inc. and MECA Software Inc.; (xiv) Intuit Inc. and
Chipsoft Inc.; (xv) Policy Management Systems Corp. and Cybertek Corp.; (xvi)
Sterling Software, Inc. and Systems Center Inc.; (xvii) Legent Corporation and
Goal Systems International Inc.; (xviii) Cadence Design Systems, Inc. and Valid
Logic Systems, Inc.; (xix) Computer Associates International Inc. and Pansophic
Systems Inc.; (xx) Computer Associates International
31
<PAGE>
Inc. and On-Line Software International Inc.; (xxi) Borland International, Inc.
and Ashton-Tate Corporation; (xxii) Sage Software, Inc. and Index Technology
Corp.; (xxiii) Lotus Development Corp. and Samna Corporation; (xxiv) ASK
Computer Systems Inc. and Ingres Corporation; (xxv) Dun and Bradstreet Corp. and
Management Science Consultants of America, Inc.; (xxvi) SunGard Data Systems,
Inc. and Dyatron Corporation; (xxvii) Computer Associates International Inc. and
Cullinet Software, Inc.; (xxviii) Novell Inc. and Excelan Inc.; (xxix) Cadnetix
Corporation and HHB Systems Inc.; (xxx) VM Software Inc. and The Systems Center
Inc.; (xxxi) Jupiter Acquisition Corp. and Software AG Systems, Inc.; (xxxii)
Informix Corp. and Innovative Software Inc.; (xxxiii) ASK Computer Systems Inc.
and NCA Corporation; and (xxxiv) Computer Associates International Inc. and
UCCEL Corporation. This subset of the 56 companies mentioned above was used
because the target companies in the subset were publicly traded. The excluded
transactions had target companies where were privately held at the time of their
acquisition and therefore no premium to the then-prevailing public stock price
could be calculated.(1) The high and average premiums for such selected software
transactions for (i) one day, (ii) one week and (iii) one month were (i) 102.6%
and 39.1%, (ii) 111.8% and 44.6%, and (iii) 116.7% and 54.2%, respectively. (Low
premiums were not meaningful for any period.) For the proposed transaction, DLJ
derived premiums based on the implied stock price for Delrina by multiplying the
30 day average closing stock price of Symantec times an exchange ratio of 0.61
and dividing that quantity by Delrina's 30 day average closing stock price one
day, one week and one month prior to the announcement. The implied stock price
premiums were 26.4%, 28.6% and 24.7%, respectively.
No company or transaction used in the analysis described above was directly
comparable to Symantec, Delrina or the proposed Transaction. Accordingly, an
analysis of the results of the foregoing was not simply mathematical nor
necessarily precise; rather, it involved complex considerations and judgments
concerning differences in financial and operating characteristics of companies
and other factors that could affect public trading values.
ANALYSIS OF CERTAIN PUBLICLY TRADED COMPANIES. To provide contextual data
and comparative market information, DLJ compared selected historical share price
and operating and financial ratios for Delrina to the corresponding data and
ratios of the following companies whose securities are publicly traded: (i)
Artisoft, Inc.; (ii) Cheyenne Software, Inc.; (iii) McAfee Associates Inc.; (iv)
Novell, Inc.; (v) Softkey International Inc.; (vi) Wall Data, Inc.; and (vii)
Symantec. DLJ selected these companies based on their industry focus in the
software and systems industry.
Such analysis included, among other things, the ratios of the market
capitalization of the common stock plus long-term debt less cash ("Enterprise
Value") to LTM revenues, EBITDA and EBIT as well as the ratios of the current
stock price to LTM earnings per share ("EPS") and calendar year 1995 and 1996
estimated EPS (as estimated by research analysts and compiled by Institutional
Brokers Estimating Service and First Call (Thomson Financial Services Inc.)).
- ------------------------
1 The other 22 transactions were as follows: (i) Sterling Software, Inc. and
KnowledgeWare Inc.; (ii) Compuware Corp. and Uniface Holding; (iii)
Electronic Arts Inc. and Origin Systems, Inc.; (iv) Easel Corporation and
Enfin Software Corp.; (v) Sybase, Inc. and Gain Technology Inc.;
(vi) Frame Technology Corporation and Datalogics, Inc.; (vii) WordStar
International Inc. and ZSoft Corporation; (viii) AICorp, Inc. and Aion
Corp.; (ix) Systems & Computer Tech Corp. and Information Associates (a
subsidiary of Dun & Bradstreet); (x) Microsoft Corporation and Fox Software,
Inc.; (xi) LEGENT Corporation and Spectrum Concepts Inc.; (xii) Compuware
Corp. and XA Systems Corp.; (xiii) Novell Inc. and Digital Research Inc.;
(xiv) Symantec Corporation and Peter Norton Computing Inc.; (xv) Systems
Center, Inc. and Software Developments International; (xvi) Goal Systems
International Inc. and MVS Software, Inc.; (xvii) Goal Systems International
Inc. and Essential Software, Inc.; (xviii) LEGENT Corporation and Business
Software Tech.; (xix) VM Software Inc. and The Systems Center, Inc.; (xx)
ECAD Inc. and SDA Systems, Inc.; (xxi) Borland International Inc. and Ansa
Corporation; and (xxii) Management Science America and Conserv Corporation.
32
<PAGE>
Although DLJ used these companies for comparison purposes, none of such
companies is identical to Delrina. Such analysis indicated that the high, mean
and low values of Enterprise Value as a multiple of (i) LTM revenues, (ii)
EBITDA and (iii) EBIT were (i) 7.8x, 3.6x and 0.8x, (ii) 18.0x, 14.9x and 3.8x,
and (iii) 21.0x, 18.1x and 4.5x, respectively, as compared to the implied
multiples for Delrina at the time of the announcement of the transaction of
3.6x, 14.0x and 19.0x, respectively. The high, mean and low values of the
then-current stock price as a multiple of (i) LTM EPS and estimated calendar
(ii) 1995 and (iii) 1996 EPS indicated by the analysis were (i) 43.4x, 29.7x and
10.7x, (ii) 26.7x, 22.8x and 14.4x, and (iii) 28.6x, 18.1x and 9.0x,
respectively. These compared to the implied multiples for Delrina at the time of
the announcement of the transaction of 32.6x and Not Meaningful ("NM") (due to
projected negative net income in calendar 1995), and 25.6x, respectively. DLJ
calculated the estimated EPS for Delrina based on projections provided to DLJ by
Symantec.
STOCK TRADING HISTORY. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both Symantec Common Stock and Delrina Common Shares from June
1, 1994 to the last full trading day prior to the announcement of the
Transaction. The average, high and low closing prices of Symantec Common Stock,
Delrina Common Shares and their relative relationship during the above-mentioned
period were US$18.15, US$29.50, US$10.06 and US$13.49, US$17.75, US$10.88 and
0.790, 1.242 and 0.432, respectively.
PRO FORMA MERGER ANALYSIS. DLJ analyzed certain pro forma financial effects
resulting from the Transaction. In conducting this analysis, DLJ relied upon
certain assumptions described above and financial projections provided by the
management of Symantec. Such analysis indicated, among other things, that EPS
for the pro forma combined company would be dilutive to EPS for Symantec by
$0.03 when not taking into account potential synergies as estimated by the
management of Symantec, and accretive to EPS for Symantec by $0.21 when
including such synergies in the pro forma combination analysis for the fiscal
year ending March 31, 1997. The results of the pro forma combination analysis
are not necessarily indicative of future operating results or financial
position.
CONTRIBUTION ANALYSIS. DLJ analyzed Symantec's and Delrina's relative
contribution to the combined company with respect to revenues, gross profit,
EBIT, net income, book value and total assets. Such analysis was considered in
both absolute dollar terms and on a percentage basis and was made (i) for the
twelve months ended March 31, 1995 based on Delrina and Symantec reported
financial results; (ii) for the two annual periods ending March 31, 1996 and
March 31, 1997 for Delrina and Symantec; as estimated by Symantec's management
both with and without potential synergies. Delrina shareholders, as a result of
the proposed transaction, will have an approximate interest of 26% in the pro
forma combined entity assuming exercise of all Symantec and Delrina stock
options. Such contribution analysis indicated that for the last twelve months
ending March 31, 1995 Delrina would have contributed to revenues, gross profit,
EBIT, net income, book value and total assets 23.0%, 21.7%, 28.2%, 25.4%, 39.4%,
and 29.9%, respectively. For the fiscal year ending March 31, 1996 Delrina is
projected to contribute to revenues, gross profit, EBIT, and net income,
excluding potential synergies, 19.8%, 18.0%, NM (losses projected), and NM
(losses projected), respectively and including potential synergies, 19.8%,
18.2%, NM (losses projected), and NM (losses projected). For the fiscal year
ending March 31, 1997 Delrina is projected to contribute to revenues, gross
profit, EBIT, and net income, excluding potential synergies, 26.2%, 23.8%,
22.8%, and 23.2%, respectively, and including potential synergies, 26.2%, 24.6%,
37.6%, and 37.0%, respectively. The results of these contribution analyses are
not necessarily indicative of the contributions that the respective businesses
may have in the future.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily suited to summary
description. The preparation of a fairness opinion does not involve a
mathematical evaluation or weighing of the results of the individual analyses
performed, but requires DLJ to exercise its professional judgment -- based on
its experience and expertise -- in considering a wide variety of analyses taken
as a
33
<PAGE>
whole. Each of the analyses conducted by DLJ was carried out in order to provide
a different perspective on the transaction and add to the total mix of
information available. DLJ did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an
opinion as to fairness. Rather, in reaching its conclusion, DLJ considered the
results of the analyses in light of each other and ultimately reached its
opinion based on the results of all analyses taken as a whole. DLJ did not place
particular reliance or weight on any individual analysis, but instead concluded
that its analyses, taken as a whole, supported its determination. Accordingly,
notwithstanding the separate factors summarized above, DLJ believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses and
factors, may create an incomplete view of the evaluation process underlying its
opinion. In performing its analyses, DLJ made numerous assumptions with respect
to industry performances, business and economic conditions and other matters.
The analyses performed by DLJ are not necessary indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses.
The Symantec Board of Directors selected DLJ as its financial advisor
because it is a nationally recognized investment banking firm that has
substantial experience in transactions similar to the Transaction and is
familiar with Symantec, its businesses and the computer software industry.
Pursuant to the terms of an engagement letter dated June 5, 1995, Symantec paid
DLJ US$550,000 for its services to date, including the DLJ Opinion, and agreed
to pay DLJ an additional US$2,200,000 upon consummation of the Transaction.
Symantec also agreed to reimburse DLJ promptly for all out-of-pocket expenses
(including the reasonable fees and out-of-pocket expenses of counsel) incurred
by DLJ in connection with its engagement, and to indemnify DLJ and certain
related persons against certain liabilities in connection with its engagement,
including liabilities under the U.S. federal securities laws. The terms of the
fee arrangement with DLJ, which DLJ and Symantec believe are customary in
transactions of this nature, were negotiated at arms' length between Symantec
and DLJ, and the Symantec Board of Directors was aware of such arrangement,
including the fact that a significant portion of the aggregate fee payable to
DLJ is contingent upon consummation of the Transaction.
In the ordinary course of business, DLJ may actively trade the securities of
both Symantec and Delrina for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. On June 23, 1989, DLJ participated as a managing underwriter in
the initial public offering of the Symantec Common Stock and received usual and
customary underwriter's compensation. Since Symantec's initial public offering,
DLJ has advised Symantec in connection with a private placement of securities
and four merger transactions. In all of these transactions, DLJ received usual
and customary fees which were negotiated at arms' length between Symantec and
DLJ. DLJ is a wholly-owned subsidiary of The Equitable Life Companies
Incorporated of the United States. DLJ, as part of its investment banking
services, is regularly engaged in the valuation of businesses and securities in
connection with mergers, acquisitions, underwritings, sales and distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes.
OPINION OF BROADVIEW
At the meeting of the Delrina Board of Directors on July 5, 1995, Broadview
rendered its written opinion (the "Broadview Opinion") that, as of such date,
based upon the various considerations set forth in the Broadview Opinion, the
Exchange Ratio was fair from a financial point of view to the Delrina
shareholders.
The full text of the Broadview Opinion, which sets forth assumptions made,
matters considered, and limitations on the review undertaken, is attached as
Annex I to this Joint Proxy Statement. Delrina shareholders are urged to read
the Broadview Opinion carefully and in its entirety. The Broadview Opinion
addresses only the fairness of the Exchange Ratio from a financial point of view
and does not constitute a recommendation to any shareholder of Delrina as to how
such shareholder
34
<PAGE>
should vote at the Delrina Shareholders Meeting. In addition, Broadview will
receive a fee from Delrina contingent upon successful conclusion of the
Transaction. The summary of the Broadview Opinion set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of such
opinion.
In rendering its opinion, Broadview, among other actions: (i) reviewed the
terms of the Combination Agreement and the exhibits to the Combination
Agreement; (ii) reviewed the audited financial statements of Delrina for its
fiscal years ended June 30, 1993 and 1994 and the unaudited financial statements
of Delrina for the nine months ended March 31, 1995 including the Delrina Third
Quarter Interim Report for such period; (iii) reviewed certain internal
historical financial and operating data concerning Delrina prepared by Delrina's
management; (iv) analyzed certain financial projections for Delrina provided by
Delrina's management; (v) participated in discussions with Delrina's management
concerning the operations, business strategy, financial performance and
prospects for Delrina; (vi) discussed with Delrina's management the financial
outlook for its fiscal quarters ending June 30, 1995 and September 30, 1995;
(vii) discussed with Delrina's management its view of the strategic rationale
for the Transaction; (viii) reviewed the reported closing prices and trading
activity for Delrina Common Shares; (ix) compared certain aspects of the
financial performance of Delrina and the price of Delrina Common Shares with
other public companies deemed comparable; (x) analyzed available information,
both public and private, concerning other mergers and acquisitions believed to
be comparable in whole or in part to the Transaction; (xi) reviewed the audited
financial statements of Symantec for its fiscal years ended March 31, 1993, 1994
and 1995; (xii) reviewed certain internal historical financial and operating
data concerning Symantec prepared by Symantec's management; (xiii) reviewed the
reported closing prices and trading activity for Symantec Common Stock; (xiv)
compared certain aspects of the financial performance of Symantec and the price
of Symantec Common Stock with other public companies deemed comparable; (xv)
analyzed the anticipated effect of the Transaction on the future financial
performance of the consolidated entity; (xvi) participated in negotiations and
discussions related to the transaction among Delrina, Symantec and their
financial and legal advisors; and (xvii) conducted other financial studies,
analyses and investigations as deemed appropriate for purposes of the Broadview
Opinion.
In rendering the Broadview Opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information that was publicly available or furnished by Delrina or Symantec. All
analyses relying on future projections of Delrina utilized forecasts developed
by Delrina's management, which Broadview assumed were reasonably prepared and
reflected the best available estimates and good faith judgments of the
management of Delrina as to the future performance of Delrina. Broadview did not
make or obtain an independent appraisal or valuation of any of Delrina's or
Symantec'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 July 3, 1995, the last full trading day in the United States before the
Delrina Board of Directors met to give final consideration to the proposed
transaction.
The following is a summary explanation of the various sources of information
and valuation methodologies employed by Broadview in conjunction with rendering
the Broadview Opinion regarding the proposed transaction.
TRANSACTION COMPARABLES ANALYSIS. Valuation statistics from transaction
comparables indicate the Price/last twelve months Revenue ("P/R") and Price/last
twelve months Pretax earnings ("P/Pretax") multiples that acquirers have paid
for comparable companies in a particular market segment. Broadview reviewed 16
merger and acquisition ("M&A") transaction comparables from 1993 through the
present which involved sellers sharing many characteristics with Delrina
including revenue size range, products offered, business model and management
structure. Transactions were selected from Broadview's proprietary database of
published and confidential M&A transactions in the Information Technology ("IT")
industry. These transactions represent eight public sellers and eight private
sellers in the personal productivity software segment of the IT industry. In
reverse
35
<PAGE>
chronological order, the public seller transactions analyzed were the
acquisition of (i) Lotus Development Corp. by International Business Machines
Corporation; (ii) Alias Research Inc. by Silicon Graphics Inc.; (iii) Software
Toolworks Inc. by Pearson Plc; (iv) Aldus Corp. by Adobe Systems Inc.; (v)
SOFTIMAGE Inc. by Microsoft; (vi) MECA Software Inc. by H&R Block Inc.; (vii)
Chipsoft Inc. by Intuit Inc.; and (viii) Spinnaker Software Corporation by
Softkey International Inc. In reverse chronological order, the private seller
transactions analyzed were the acquisition of (i) MECA Software Inc. by Bank of
America & Nationsbank Corp.; (ii) Calera Recognition by Caere Corp.; (iii)
Parsons Technology by Intuit Inc.; (iv) Central Point Software by Symantec; (v)
WordPerfect Corporation by Novell Inc.; (vi) P.C. Software by Automatic Data
Processing; (vii) Fifth Generation Systems, Inc. by Symantec; and (viii) Contact
Software International by Symantec.
The high, median and low P/R ratio of the public seller transactions were
5.35, 3.40 and 1.26, respectively. The high, median and low P/Pretax were not
meaningful, 26.0 and 16.54, respectively. The high, median and low P/R ratio for
all 16 transactions were 5.35, 2.23 and 0.68, respectively. In all cases where
the range from high to low was broad, Broadview ensured that the median was
meaningful to the analysis by confirming that there was significant clustering
of ratios around the median.
The per-share valuations for Delrina implied by the median P/R ratio for all
comparables and for the public comparables were US$11.51 and US$16.74,
respectively. The per-share valuations implied by the P/Pretax multiple using
the Delrina's last twelve months pretax earnings ending March 31, 1995 and June
30, 1995 (estimated) were US$27.22 and US$13.18, respectively. This substantial
difference in price stemmed from Delrina management's estimate of a significant
loss for the quarter ended June 30, 1995.
PUBLIC COMPANY COMPARABLES ANALYSIS. Total Market Capitalization/Revenue
("TMC/R") and Price/Earnings ("P/E") and Projected P/E ("Proj. P/E") multiples
indicate the value the public market places on companies in a particular market
segment. Although there are a limited number of public company "pure plays" in
the markets in which Delrina competes, several companies are comparable to
Delrina based on revenue size range, products offered, business model,
management structure and market position. Broadview reviewed ten comparable
public companies from a financial point of view including each company's: Last
Twelve Months ("LTM") Revenue; Growth in LTM Revenue; LTM Pretax Margin; LTM Net
Margin; LTM Primary EPS; P/E ratio; projected 1995 and 1996 calendar year
("CYE") Earnings Per Share ("EPS") based upon the mean security analyst
estimates of future earnings performance as reported by Zack's Investment
Research; Price/Projected 1995 and 1996 EPS; mean projected five-year EPS growth
rate; Price/Projected 1995 earnings adjusted for relative projected growth;
Equity Market Capitalization; Total Market Capitalization (i.e., equity market
capitalization adjusted for net debt) ("TMC") and TMC/LTM Revenue ratio. In
alphabetical order, the public company comparables were: Adobe Systems Inc.,
Caere Corp., Corel Corp., Intuit Inc., Jetform Corp., Lotus Development
Corporation, Softkey International Inc., SPSS Inc., Symantec and Wall Data Inc.
These comparables had a high, median and low LTM P/E ratio of 78.0, 26.1 and
10.6, respectively; a high, median and low Price/Projected CYE 1995 EPS of 57.4,
24.2 and 11.2, respectively; a high, median and low Price/Projected CYE 1996 EPS
ratio of 43.2, 19.2 and 7.3, respectively; a high, median and low
Growth-Adjusted 1995 P/E ratio of 75.6, 47.3 and 12.6, respectively; and a high,
median and low TMC/R ratio of 6.95, 3.45 and 0.88, respectively. In all cases
where the range from high to low was broad, Broadview ensured that the median
was meaningful to the analysis by confirming that there was significant
clustering of ratios around the median.
The TMC/R valuation analysis placed a per-share value of US$16.95 on
Delrina. The LTM P/E valuation analysis placed a per-share value of US$17.75 and
US$8.61 on Delrina based on EPS for the LTM ended March 31 and June 30, 1995,
respectively. The Price/Projected CYE 1995 EPS analysis and the growth-adjusted
1995 P/E analysis could not be used to generate implied per-share prices for
Delrina given that the management forecasts indicated a loss for the 1995
calendar year. The Price/ Projected CYE 1996 EPS analysis placed a per-share
value of US$22.82 on Delrina.
36
<PAGE>
EVALUATION OF SYMANTEC EQUITY. Given that the proposed Transaction is a
pooling transaction in which the consideration to be received by Delrina
shareholders is Symantec Common Stock, Broadview performed an analysis of the
value of Symantec's stock by comparing its current valuation in the public
market to eight public companies Broadview deemed comparable to Symantec. Those
companies were: Adobe Systems Inc., Caere Corp., Cheyenne Software Inc.,
Delrina, Jetform Corp., McAfee Associates Inc., Stac Electronics Inc. and Wall
Data Inc. These comparables had a high, median and low LTM P/E ratio of 38.3,
31.5 and 10.6, respectively; a high, median and low Price/Projected CYE 1995 EPS
ratio of 52.5, 23.0 and 11.2, respectively; a high, median and low
Price/Projected CYE 1996 EPS ratio of 32.4, 15.5 and 7.3, respectively; and a
high, median and low TMC/R ratio of 8.12, 4.92 and 0.88, respectively.
Comparing the median multiples of Symantec's peer group with Symantec's
respective multiples based on Symantec's July 3, 1995 share price of US$28.25
and the median Wall Street analysts' estimate of Symantec's future earnings
performance, Broadview concluded that Symantec Common Stock was not currently
overvalued. Broadview did not undertake further analysis of the value of
Symantec's Common Stock based on Symantec's internal projections of its future
performance as such projections were not made available to Broadview.
PRO FORMA POOLING MODEL ANALYSIS. Broadview conducted a detailed PRO FORMA
merger analysis to calculate the EPS accretion/dilution of the PRO FORMA
combined entity taking into consideration various financial effects expected to
result from completion of the Transaction. This analysis relied upon certain
financial and operating assumptions provided by Delrina's management and on
publicly available data regarding Symantec. It also included cost savings
assumptions developed jointly by Delrina's and Symantec's management and revenue
enhancement assumptions developed by Delrina's management. Broadview and Delrina
estimated Transaction-related reductions in Delrina's standalone operating
expenses of 0% to 11.7%. These reductions were estimated to be partially
realized as early as the December 1995 quarter and fully realized in the June
1996 quarter. Broadview and Delrina assumed synergies in the expense categories
of cost of sales, advertising, cooperative marketing, trade shows, promotions,
technical support, customer support, facilities, depreciation and other general
and administrative expenses. Broadview considered acquisition expense estimates
developed with Delrina's management. As these one-time charges do not materially
influence critical or perceived value, they were not factored into the final
valuation. The synergies Broadview assumed were material to this analysis. Based
on management's "Base Case" forecast, PRO FORMA pooling analysis indicated EPS
accretion (dilution) for the quarters ended December 1995 and March 1996 and the
fiscal years ending March 31, 1996, 1997 and 1998 of (20.4)%, 14.2%, (31.3)%,
28.2% and 33.8%, respectively.
FORECASTED SHARE PRICE ANALYSIS. The future share price analysis examines
the discounted present value of forecasted share prices for Delrina on a
stand-alone basis as compared to the portion of a share in the PRO FORMA
combined company to be exchanged for each Delrina share. Based upon Delrina
management's forecasted EPS and the median LTM P/E of Delrina's public company
comparables of 26.1, Delrina's stand-alone implied future share price at the end
of the fiscal years ending June 30, 1996, 1997 and 1998 was US$12.53, US$35.49
and US$45.15, respectively. The same analysis applied to the forecasted EPS of
the PRO FORMA combined entity (based on Delrina management's "Base Case"
forecast, estimates of potential synergies, publicly available information about
Symantec, and applying the median LTM P/E multiple of the superset of the
Delrina and Symantec peer groups of 27.8 to the combined entity) yielded implied
future share prices for the combined entity at the end of the fiscal years
ending March 31, 1996, 1997 and 1998 of US$22.83, US$53.46 and US$67.10,
respectively. Using a discount rate of 15.6% (derived from the Capital Asset
Pricing Model), the present value of Delrina's projected share price was
US$10.83, US$26.54 and US$29.20, respectively. Applying the same discount rate,
the present value of 61% of the PRO FORMA combined entity's projected share
price was US$12.49, US$25.29 and US$27.45, respectively.
STOCK PERFORMANCE ANALYSIS. For comparative purposes, Broadview examined
the historical volume and trading prices for Delrina Common Shares and Symantec
Common Stock. Broadview
37
<PAGE>
examined the relative relationships between: (i) Symantec and Delrina actual
stock prices from June 30, 1989 (Symantec's initial public offering) to June 30,
1995; (ii) Symantec and Delrina 30-day trading averages from May 1, 1995 to July
3, 1995; (iii) closing prices of Delrina, Symantec and the S&P 500 index from
June 30, 1989 to July 3, 1995 (Delrina and Symantec share price indexed to 100
beginning on June 30, 1989); (iv) historical closing prices of Delrina, Symantec
and a market weighted index of the ten public software companies viewed as
comparable to Delrina (Delrina and Symantec share price indexed to 100 beginning
on June 30, 1989); and (v) Delrina and Symantec total share volume from June 30,
1989 to June 30, 1995.
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 where the acquirer used stock as the
acquisition currency was computed using the buyer's stock price immediately
prior to announcement. In all cases, the price of the selling company used for
purposes of calculating the premium paid was the seller's share price 30 trading
days prior to announcement. Broadview reviewed 17 transactions of public
software companies from January 1, 1993 to the present. In reverse chronological
order, the transactions used were the acquisition of (i) Frame Technology Inc.
by Adobe Systems Inc.; (ii) Lotus Development Corp. by International Business
Machines Corporation; (iii) Legent Corporation by Computer Associates
International, Inc.; (iv) Trinzic Corporation by Platinum technology inc.; (v)
Alias Research Inc. by Silicon Graphics Inc.; (vi) Wavefront Technologies Inc.
by Silicon Graphics Inc.; (vii) Powersoft Corp. by Sybase Inc.; (viii) Intuit
Inc. by Microsoft (not completed); (ix) KnowledgeWare, Inc. by Sterling Software
Inc.; (x) The Ask Group Inc. by Computer Associates International, Inc.; (xi)
PDA Engineering by Macneal-Schwendler Corp.; (xii) Software Toolworks Inc. by
Pearson Plc; (xiii) Aldus Corp. by Adobe Systems Inc.; (xiv) SOFTIMAGE Inc. by
Microsoft; (xv) Chipsoft Inc. by Intuit Inc.; (xvi) Cybertek Corp. by Policy
Management Systems Corp.; and (xvii) Systems Center Inc. by Sterling Software
Inc.
Based upon Broadview's analysis of premiums paid in comparable transactions,
Broadview found that premiums paid to seller's share price ranged from 21.0% to
103.2% with a median premium of 55.9%. Broadview observed that while the median
premium exceeded the proposed Transaction's premium of 39% (calculated based on
Symantec's July 3 closing price and the price of Delrina Common Shares 30
trading days prior to the announcement of the combination), the security analyst
estimates for Delrina's performance for the fiscal quarter ending June 30, 1995
were significantly above management's recently revised internal estimates.
The Delrina Board of Directors selected Broadview as its financial advisor
on the basis of Broadview's reputation and experience in the information
technology sector and the computer software industry in particular, as well as
Broadview's historical relationship with Delrina. Pursuant to the terms of an
engagement letter between Delrina and Broadview, the fees payable by Delrina to
Broadview upon completion of the Transaction are calculated as 3% of the first
US$10,000,000 of consideration received by Delrina's shareholders, 1% of the
next US$90,000,000 and 0.75% of any additional consideration received, including
contingent consideration. Broadview will be reimbursed by Delrina for certain of
its expenses incurred in connection with its engagement. The terms of the fee
arrangement with Broadview, which Delrina and Broadview believe are customary in
transactions of this nature, were negotiated at arms' length between Delrina and
Broadview, and the Delrina Board of Directors 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 Transaction.
The above summary of the presentations by Broadview to Delrina's Board of
Directors 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 Delrina Board of Directors and in the Broadview Opinion. In
performing its analyses, Broadview made
38
<PAGE>
numerous assumptions with respect to software industry performance and general
economic conditions, many of which are beyond the control of Symantec or
Delrina. 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.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
In considering the recommendation of the Delrina Board of Directors with
respect to the Transaction, shareholders of Delrina should be aware that certain
officers and directors of Delrina have interests in the Transaction, including
those referred to below, that presented them with potential conflicts of
interest. The Delrina Board of Directors was aware of these potential conflicts
and considered them along with the other matters described in "-- Reasons for
the Transaction -- Delrina Reasons for the Transaction" and "-- Board
Recommendations."
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Symantec and Dennis Bennie, Chairman and Chief Executive Officer of Delrina,
have entered into an Employment and Noncompetition Agreement whereby Symantec
has agreed to employ Mr. Bennie commencing on the Effective Date. Under this
agreement, Mr. Bennie will serve as an Executive Vice President responsible for
communications products, will receive an annual base salary of at least
C$356,400, will participate in Symantec's management bonus program which
provides for a bonus based on a target amount of 40% of base salary and will
receive benefits similar to those provided by Symantec to other senior
management. Under this agreement, Mr. Bennie has also agreed that for a period
of two years (one year if Symantec terminates his employment without cause) from
the Effective Time and for so long thereafter as he remains employed by
Symantec, Mr. Bennie will not in the United States or Canada (i) own, manage,
operate, sell, control or participate in a business that sells software
substantially similar to or competitive with Delrina's fax, communications or
forms software products, (ii) develop such software for certain named
competitors of Symantec or (iii) hire or solicit Delrina or Symantec employees.
Symantec may terminate Mr. Bennie's employment upon providing such notice or
severance as is reasonable under Ontario law.
Symantec has also entered into an Employment and Noncompetition Agreement
with each of Mark Skapinker, President of Delrina and Albert Amato, Executive
Vice President and Chief Technology Officer of Delrina with terms substantially
similar to those of Mr. Bennie's agreement, except that each of these
individuals will serve as a Vice President responsible for communications
products, will receive an annual base salary of at least C$270,000 and will be
eligible for a bonus based on a target amount of 25% of base salary pursuant to
Symantec's management bonus program.
APPOINTMENTS TO SYMANTEC BOARD OF DIRECTORS
Effective upon the Effective Date, Dennis Bennie and Mark Skapinker will be
appointed to the Symantec Board of Directors. Pursuant to the Combination
Agreement, Symantec also has agreed to nominate Messrs. Bennie and Skapinker and
solicit proxies for their re-election to the Symantec Board of Directors at the
Symantec annual stockholders meeting to be held following the fiscal year ending
March 31, 1996.
INDEMNIFICATION OF DELRINA OFFICERS AND DIRECTORS
The Combination Agreement provides that all rights to indemnification for
Delrina employees, agents, directors and officers will survive the Arrangement
and remain in full force and effect for at least six years from the Effective
Time. Symantec has also agreed to maintain Delrina's directors' and officers'
liability insurance for at least six years after the Effective Time and to enter
into indemnity agreements, to take effect at the Effective Time, with Messrs.
Bennie and Skapinker and with each person appointed to serve as an executive
officer of Delrina immediately after the Effective Time.
TRANSACTION MECHANICS AND DESCRIPTION OF EXCHANGEABLE SHARES
The following description is qualified in its entirety by reference to the
full text of the Combination Agreement, which is attached as Annex B to this
Joint Proxy Statement, and is incorporated herein by reference.
39
<PAGE>
THE ARRANGEMENT
Pursuant to the terms of the Plan of Arrangement, at the Effective Time,
Delrina will undergo a reorganization of capital whereby:
(a) Delrina will amend its articles of incorporation to (i) delete the
Delrina preference shares from the authorized share capital, (ii) replace
the rights, privileges, restrictions and conditions attaching to the Delrina
Common Shares with those set forth in Appendix A to the Plan of Arrangement
and (iii) authorize an unlimited number of Exchangeable Shares and one Class
A Preferred Share;
(b) Delrina will issue one Class A Preferred Share to Symantec in
exchange for one share of Symantec Common Stock;
(c) each existing Delrina Common Share (other than Delrina Common Shares
held by holders who have properly exercised their rights of dissent and are
ultimately entitled to be paid fair value for their shares) will be
exchanged for 0.61 of an Exchangeable Share; and
(d) the one Class A Preferred Share held by Symantec will be exchanged
for one Delrina Common Share.
As a result, immediately following the Effective Time, Delrina's outstanding
capital stock will consist of one Delrina Common Share held by Symantec and the
Exchangeable Shares held by the former holders of Delrina Common Shares.
As noted above, at the Effective Time, each Delrina Common Share will
automatically be exchanged for 0.61 of an Exchangeable Share. Enclosed with
copies of this Joint Proxy Statement delivered to the registered holders of
Delrina Common Shares is the Letter of Transmittal, which when duly completed
and returned together with a certificate for Delrina Common Shares, will enable
the holder to exchange such Delrina Common Shares for the number of Exchangeable
Shares to which such holder is entitled. See "-- Procedures for Exchange of
Share Certificates by Delrina Shareholders."
The Exchangeable Shares are subject to adjustment or modification in the
event of a stock split or other changes to the capital structure of Symantec so
as to maintain the initial one-to-one relationship between the Exchangeable
Shares and Symantec Common Stock.
EXCHANGE AND CALL RIGHT
Holders of the Exchangeable Shares will be entitled at any time following
the Effective Time to retract (i.e. require Delrina to redeem) any or all such
Exchangeable Shares owned by them and to receive an equivalent number of shares
of Symantec Common Stock plus an additional amount equivalent to all declared
and unpaid dividends on such Exchangeable Shares. Holders of the Exchangeable
Shares may effect such retraction by presenting a certificate or certificates to
Delrina or its transfer agent representing the number of Exchangeable Shares the
holder desires to retract, together with a duly executed statement in the form
of Schedule A to the Exchangeable Share Provisions or in such other form as may
be acceptable to Delrina (the "Retraction Request") specifying the number of
Exchangeable Shares the holder wishes to retract and the date upon which the
holder desires to receive the Symantec Common Stock, which must be between five
and ten business days after the request is received by Delrina (the "Retraction
Date"), and such other documents as may be required to effect the retraction of
the Exchangeable Shares.
Upon receipt of the Exchangeable Shares, the Retraction Request and other
required documentation from the holder thereof, Delrina must immediately notify
Symantec of such Retraction Request. Symantec will thereafter have two business
days in which to exercise its Retraction Call Right to purchase all of the
Exchangeable Shares submitted by the holder thereof by the delivery of an
equivalent number of shares of Symantec Common Stock plus an additional amount
equivalent to the full amount of all declared and unpaid dividends on the
Exchangeable Shares to the transfer agent for delivery to such holder on the
Retraction Date. In the event Symantec determines not to exercise its
40
<PAGE>
Retraction Call Right and provided that the Retraction Request is not revoked in
accordance with the Exchangeable Share Provisions, Delrina is obligated to
deliver to the holder the number of shares of Symantec Common Stock equal to the
number of Exchangeable Shares submitted by the holder for retraction and payment
of an additional amount equivalent to the full amount of all declared and unpaid
dividends on such Exchangeable Shares by the Retraction Date.
Subject to applicable law and the Redemption Call Rights of Symantec
described below, seven years after the Effective Time or such later date as
specified by the Delrina Board of Directors or such earlier date as specified by
the Delrina Board of Directors if there are fewer than 500,000 Exchangeable
Shares outstanding (other than Exchangeable Shares held by Symantec and entities
controlled by Symantec and subject to adjustments to such number of shares to
reflect permitted changes to Exchangeable Shares) (the "Automatic Redemption
Date"), Delrina must redeem all but not less than all of the then outstanding
Exchangeable Shares in exchange for an equal number of shares of Symantec Common
Stock, plus an additional amount equivalent to the full amount of all declared
and unpaid dividends on such Exchangeable Shares. Notwithstanding any proposed
redemption of the Exchangeable Shares by Delrina, Symantec will have the
overriding right to purchase unilaterally on the Automatic Redemption Date all
but not less than all of the outstanding Exchangeable Shares in exchange for one
share of Symantec Common Stock for each such Exchangeable Share, plus an
additional amount equivalent to the full amount of all declared and unpaid
dividends on such Exchangeable Share. Delrina shall, at least 60 days before the
Automatic Redemption Date, provide the registered holders of Exchangeable Shares
with written notice of the proposed redemption of the Exchangeable Shares by
Delrina. For a more detailed description of the Exchange Rights and the Call
Rights in connection with the Exchangeable Shares see "THE COMPANIES AFTER THE
TRANSACTION -- Delrina Share Capital -- Exchangeable Shares of Delrina," "--
Voting and Exchange Trust Agreement -- Exchange Rights" and "-- Call Rights."
VOTING, DIVIDEND AND LIQUIDATION RIGHTS OF HOLDERS OF EXCHANGEABLE SHARES
On the Effective Date, Symantec, Delrina and The R-M Trust Company will
enter into the Voting and Exchange Trust Agreement in the form attached hereto
as Annex F. Pursuant to the terms of the Voting and Exchange Trust Agreement,
Symantec will on the Effective Date deposit with the Trustee the Voting Share,
which will entitle the Trustee to a number of votes equal to the number of
Exchangeable Shares outstanding from time to time that are not held by Symantec
or entities controlled by Symantec. With respect to any matter as to which
holders of shares of Symantec Common Stock are entitled to vote, each holder of
an Exchangeable Share will have the right to instruct the Trustee as to the
manner of voting for one of the votes comprising the Voting Share for each
Exchangeable Share owned by such holder.
Upon the occurrence of a Delrina Insolvency Event, holders of the
Exchangeable Shares will have preferential rights to receive from Delrina one
share of Symantec Common Stock for each Exchangeable Share they hold, plus an
additional amount equivalent to the full amount of any declared and unpaid
dividends on each such Exchangeable Share. In the event of a proposed Delrina
Insolvency Event, Symantec will have the right to purchase all of the
outstanding Exchangeable Shares from the holders thereof at the effective time
of any such liquidation, dissolution, or winding up in exchange for one share of
Symantec Common Stock for each such Exchangeable Share, plus an additional
amount equivalent to the full amount of all declared and unpaid dividends on
such Exchangeable Share.
Upon the occurrence of a Symantec Liquidation Event, in order for the
holders of the Exchangeable Shares to participate on a pro rata basis with the
holders of Symantec Common Stock, each holder of Exchangeable Shares will
automatically receive in exchange therefor an equivalent number of shares of
Symantec Common Stock, plus an additional amount equivalent to the full amount
of any declared and unpaid dividends on such Exchangeable Shares. For a more
detailed description of the Exchange Rights and the Call Rights in connection
with the Exchangeable Shares see "THE COMPANIES AFTER THE TRANSACTION -- Delrina
Share Capital -- Exchangeable Shares" and "-- Voting and Exchange Trust
Agreement."
41
<PAGE>
SUPPORT AGREEMENT
On the Effective Date, Symantec and Delrina will enter into a support
agreement (the "Support Agreement") in the form attached hereto as Annex E,
whereby Symantec will make certain covenants to Delrina regarding the
Exchangeable Shares. In the Support Agreement Symantec will covenant as follows:
(i) Symantec will not declare or pay dividends on the Symantec Common Stock
unless Delrina is able to and simultaneously pays an equivalent dividend on the
Exchangeable Shares; (ii) Symantec will cause Delrina to declare and pay an
equivalent dividend on the Exchangeable Shares simultaneously with Symantec's
declaration and payment of dividends on the Symantec Common Stock; (iii)
Symantec will advise Delrina in advance of the declaration of any dividend on
the Symantec Common Stock and ensure that the declaration date, record date and
payment date for dividends on the Exchangeable Shares are the same as that for
the Symantec Common Stock; (iv) Symantec will take all actions and do all
necessary things to ensure that Delrina is able to pay to the holders of the
Exchangeable Shares the equivalent number of shares of Symantec Common Stock in
the event of a liquidation, dissolution or winding-up of Delrina, a Retraction
Request by a holder of Exchangeable Shares, or a redemption of Exchangeable
Shares by Delrina; and (v) Symantec will not vote or otherwise take any action
or omit to take any action causing the liquidation, dissolution or winding-up of
Delrina.
In order for Symantec to perform in accordance with the Support Agreement,
Delrina must notify Symantec of the occurrence of certain events, such as the
liquidation, dissolution or winding-up of Delrina, and Delrina's receipt of a
Retraction Request from a holder of Exchangeable Shares. See "THE COMPANIES
AFTER THE TRANSACTION -- Support Agreement."
SYMANTEC'S RESTATED CERTIFICATE OF INCORPORATION
Symantec's Restated Certificate of Incorporation, to be filed with the
Secretary of State of the State of Delaware on the Effective Date, incorporates
the terms of the proposed amendment, which increases the number of shares of
Symantec Common Stock authorized for issuance from 70,000,000 to 100,000,000,
creates a new class of stock, designated Special Voting Stock, and authorizes
the issuance of the Voting Share. The Restated Certificate of Incorporation
restates all other terms of Symantec's Certificate of Incorporation, including
the rights, preferences and privileges attaching to the Symantec Common Stock
and the Special Voting Stock. See "ADDITIONAL MATTERS FOR CONSIDERATION OF
SYMANTEC STOCKHOLDERS -- Proposal No. 2 -- Approval of Amendment to Certificate
of Incorporation."
DELRINA OPTIONS
At the Effective Time, Symantec will issue to each holder of a Delrina
Option in exchange for such Delrina Option, Symantec Options as follows: each
Delrina Option will be exchanged for a Symantec Option exercisable for a number
of whole shares of Symantec Common Stock equal to the number of Delrina Common
Shares subject to the Delrina Option at the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares, at an
exercise price per share of Symantec Common Stock equal to the exercise price
per share of such Delrina Option immediately prior to the Effective Time divided
by the Exchange Ratio. Symantec will cause the Symantec Common Stock issuable
upon exercise of the Symantec Options to be registered on Form S-8 promulgated
by the SEC, and will use its best efforts to maintain the effectiveness of such
registration statement for so long as such options remain outstanding.
THE COMBINATION AGREEMENT
REPRESENTATIONS AND COVENANTS
The Combination Agreement contains certain customary representations and
warranties of each of Delrina and Symantec relating to, among other things,
their respective organization, capital structures, qualification, operations,
financial condition, intellectual property rights, compliance with necessary
regulatory or governmental authorities and other matters, including their
authority to
42
<PAGE>
enter into the Combination Agreement and to consummate the Transaction. Pursuant
to the Combination Agreement, each party has covenanted that, until the earlier
of the termination of the Combination Agreement or the Effective Time, it will
maintain its business, it will not take certain actions outside the ordinary
course without the other's consent and it will use its best efforts to
consummate the Transaction. The parties have also agreed to advise each other of
material changes and to provide the other with interim financial information.
Further, the parties have agreed to apply for and use their best efforts to
obtain all regulatory and other consents and approvals, and option and affiliate
agreements, required for the consummation of the transactions contemplated by
the Combination Agreement, to use their best efforts to effect the transactions
contemplated by the Combination Agreement, including the preparation and mailing
of this Joint Proxy Statement, and to provide the other party and their
respective counsel with such information as they may reasonably request.
Symantec additionally agreed (i) that all rights to indemnification for
employees, agents, directors and officers of Delrina will survive the
Arrangement and remain in full force and effect for at least six years from the
Effective Time, (ii) to maintain all directors' and officers' liability
insurance obtained by Delrina, and (iii) to enter into certain indemnity
agreements. See "-- Interests of Certain Persons in the Transaction --
Indemnification of Delrina Officers and Directors." During the twelve month
period following the Effective Date, Symantec has further agreed to provide to
persons who were employees of Delrina prior to the Effective Date and remain
employees of Symantec during that period, either benefits under Symantec's
employee benefit plans or benefits substantially similar to the employee
benefits offered by Delrina prior to the Effective Time. Symantec also agreed to
list the Symantec Common Stock issued upon exchange of the Exchangeable Shares
on the NNM, to cause the Exchangeable Shares to be listed on the TSE or other
Canadian securities exchange on the Effective Date and to cause Delrina to
continue its historic business or to use a significant portion of Delrina's
business assets in a business.
The Combination Agreement also provides that until the earlier of the
Effective Time or the termination of the Combination Agreement, Delrina and its
subsidiaries will not (and they will use their best efforts to ensure that none
of their officers, directors, employees, agents, representatives or affiliates)
directly or indirectly: (i) solicit, initiate or engage in discussions or
negotiations with any person, encourage submission of any inquiries, proposals
or offers by or take any other action intended or designed to facilitate the
efforts of any person, other than Symantec, relating to the possible acquisition
of Delrina or any of its subsidiaries or any material portion of its or their
capital stock or assets by any person other than Symantec (an "Acquisition
Proposal"); (ii) provide non-public information with respect to Delrina or any
of its subsidiaries or afford access to the properties, books or records of
Delrina or its subsidiaries to any person other than Symantec in connection with
a possible Acquisition Proposal; (iii) make or authorize any statement,
recommendation or solicitation in support of any possible Acquisition Proposal
by any person other than Symantec; or (iv) enter into an agreement providing for
a possible Acquisition Proposal. Notwithstanding the foregoing, prior to the
Delrina Shareholders Meeting, Delrina and its directors are not prohibited from
engaging in discussions or negotiations with a party concerning an unsolicited
Acquisition Proposal, providing non-public information with respect to Delrina
or any of its subsidiaries that has been provided to Symantec, or making any
statement or recommendation in support of an Acquisition Proposal, in each case
if Delrina's directors determine in good faith, based upon advice of outside
legal counsel, that such actions are required in the exercise of the Delrina
Board of Directors' fiduciary duties under applicable law and Delrina first
notifies Symantec of such determination and provides Symantec with a copy of any
Acquisition Proposal (or other written communication concerning a possible
Acquisition Proposal) and copies of all documents containing or referring to
non-public information of Delrina supplied to a third party. Delrina has agreed
to promptly communicate to Symantec the specific terms of any offer or proposal
to enter negotiations relating to an Acquisition Proposal that it may receive
and the identity of the person making such offer or proposal.
43
<PAGE>
CONDITIONS TO CLOSING
The Combination Agreement provides that the respective obligations of each
party to complete the Transaction are subject to a number of conditions,
including the following material conditions: (a) the Arrangement shall have been
approved and adopted by the required vote of the holders of Delrina Common
Shares; (b) the issuance of Symantec Common Stock upon the exchange of the
Exchangeable Shares contemplated by the Combination Agreement shall have been
approved by the holders of Symantec Common Stock; (c) all consents, including
the Final Order, that are legally required for the consummation of the
Transaction and the transactions contemplated by the Combination Agreement shall
have occurred, been filed or been obtained; (d) no order, decree or ruling or
statute, rule, regulation or order shall be threatened, enacted, entered or
enforced by any governmental agency that prohibits or renders illegal the
consummation of the Transaction; (e) there shall be no temporary restraining
order, preliminary injunction, permanent injunction or other order preventing
the consummation of the Transaction issued by any Canadian or U.S. federal,
provincial or state court remaining in effect, nor shall any proceeding seeking
any of the foregoing be pending; (f) the representations and warranties of the
parties shall be true and correct in all material respects as of the Effective
Time as though made at and as of the Effective Time; (g) the parties shall have
performed in all material respects all agreements and covenants to be performed
by them under the Combination Agreement; (h) there shall not have been any event
or change that has an effect on either of the parties that is materially adverse
to such party's condition (financial or otherwise), properties, assets,
liabilities, businesses, operations, results of operations or prospects (not
including effects resulting from changes in general economic conditions or
conditions generally affecting the personal computer application software
industry or a decline in Delrina's consolidated gross sales revenues for the
quarter ending September 30, 1995 to the extent such decline is reasonably
attributable to Delrina's failure to ship the WinFax for Windows 95 product and
compatible products prior to September 30, 1995) ("Material Adverse Effect");
(i) the parties shall have received legal opinions dated as of the Closing Date
as to matters customary to transactions of the type contemplated by the
Combination Agreement; (j) the parties shall have received a letter from Ernst &
Young LLP to the effect that the Transaction will qualify for pooling of
interests accounting treatment under U.S. GAAP; (k) Dennis Bennie and Mark
Skapinker shall have been appointed to the Symantec Board of Directors (a
condition precedent to Delrina's obligations only); (l) holders of no more than
3.5% of the Delrina Common Shares shall have notified Delrina of their intention
to dissent from the Arrangement and the transactions contemplated thereby (a
condition precedent to Symantec's obligations only); (m) Delrina shall have
received tax opinions dated as of the Closing Date as to certain United States
and Canadian tax consequences of the Transaction (a condition precedent to
Delrina's obligations only) and (n) Delrina shall have made, on or before
November 15, 1995, the first customer shipment in commercial volumes to retail
sales channels of its WinFax for Windows 95 product in conformance with
Delrina's customary quality standards and procedures for the release of new
products (a condition precedent to Symantec's obligations only).
TERMINATION
The Combination Agreement may be terminated by mutual agreement of the
parties at any time prior to the Effective Time. Also, either party may
terminate the Combination Agreement prior to the Effective Time if: (i) there
has been a material breach of any representation, warranty, covenant or
agreement contained in the Combination Agreement on the part of the other party,
and such breach has not been cured within 15 business days after notice thereof;
(ii) all conditions for closing the Transaction have not been satisfied or
waived by November 30, 1995 (other than as a result of a breach by the
terminating party, or in the case of termination by Delrina, other than as a
result of a breach by certain Delrina Shareholders of the Delrina Affiliate
Agreements or Stock Option Agreements, or in the case of either party, other
than as a result of a breach by its affiliates of the Affiliate Agreements);
(iii) any required approval of the shareholders of Delrina or the stockholders
of Symantec shall not have been obtained; or (iv) the conditions to either
party's obligations to close shall have become impossible to satisfy or if any
permanent injunction or other order of a court or other competent authority
preventing the Transaction shall have become final or non-appealable.
44
<PAGE>
The Combination Agreement may be terminated by Symantec if: (i) the Delrina
Board of Directors exercises its right to engage in discussions or negotiations
with or furnish information to a third party in connection with an Acquisition
Proposal or makes any recommendation to the Delrina shareholders against the
Arrangement or in support of an Acquisition Proposal (an "Acquisition Proposal
Termination"); or (ii) the Symantec Board of Directors determines, in good
faith, based on the advice of outside legal counsel, that it is required by its
fiduciary duties to recommend to the Symantec stockholders that they vote
against the issuance of Symantec Common Stock issuable upon exchange of the
Exchangeable Shares and in favor of an alternative transaction (a) in which a
third party is to acquire Symantec and which requires that Symantec terminate
the Combination Agreement as a condition of the consummation of such transaction
or (b) which the Board of Directors states to the Symantec stockholders prior to
the Symantec Stockholders Meeting is mutually exclusive with respect to the
Arrangement, provided that the consideration for such transaction is in excess
of US$150 million (each an "Inconsistent Transaction" and the termination of the
Combination Agreement under such circumstances an "Inconsistent Transaction
Termination"). The Combination Agreement may be terminated by Delrina if the
Delrina Board of Directors determines, in good faith, based on the advice of
outside legal counsel, that it is required by its fiduciary duties to recommend
to the Delrina shareholders that they vote against the Arrangement and approve
instead an Acquisition Proposal that the Delrina Board of Directors has
determined, based on the advice of outside financial advisors, is financially
more favorable to the Delrina shareholders than the Arrangement and is the
subject of a firm written offer from a third party that is capable of
consummating such Acquisition Proposal (a "Superior Proposal Termination").
In the event the Combination Agreement is terminated (a) by either party as
a result of the failure of Delrina's shareholders to approve the Arrangement;
(b) by Symantec pursuant to an Acquisition Proposal Termination; or (c) by
Delrina pursuant to a Superior Proposal Termination, then Delrina shall promptly
pay to Symantec a fee of US$12 million. If the Combination Agreement is so
terminated, and Delrina enters into an agreement regarding an Acquisition
Proposal or consummates an Acquisition Proposal before the later of July 5, 1996
or six months after the date of such termination, Delrina shall, within two
business days after the consummation of any such Acquisition Proposal, pay to
Symantec the additional sum of US$8 million. Symantec is not entitled to receive
any such payment if it is in breach of the Combination Agreement or its
stockholders have disapproved the issuance of Common Stock issuable upon
exchange of the Exchangeable Shares.
In the event the Combination Agreement is terminated (a) by either party as
a result of the failure of Symantec's stockholders to approve the issuance of
Symantec Common Stock issuable upon the exchange of the Exchangeable Shares; or
(b) by Symantec pursuant to an Inconsistent Transaction Termination, then
Symantec shall promptly pay to Delrina a fee of US$12 million. If Symantec
terminates the Combination Agreement pursuant to an Inconsistent Transaction
Termination and Symantec consummates such an Inconsistent Transaction before the
later of July 5, 1996 or six months after the date of such termination, Symantec
shall, within two business days after the consummation of any such Inconsistent
Transaction, pay to Delrina the additional sum of US$8 million. Delrina is not
entitled to receive any such payment if it is in breach of the Combination
Agreement or its shareholders have disapproved the Arrangement.
Upon any termination of the Combination Agreement resulting in a payment by
Delrina to Symantec, or by Symantec to Delrina, under the circumstances
described above, such payment shall be the exclusive remedy of the terminating
party.
OTHER AGREEMENTS
AFFILIATES AGREEMENTS
Delrina and Symantec have entered into agreements (the "Delrina Affiliates
Agreements") with each of the Delrina Affiliates, pursuant to which such persons
have agreed to vote their Delrina Common Shares in favor of approval of the
Combination Agreement and the Transaction and against
45
<PAGE>
approval of any proposal made in opposition to or in competition with
consummation of the Arrange-
ment. The Delrina Affiliates have also agreed that they will not, directly or
indirectly, encourage any offer from any person concerning the possible
disposition of all or any portion of Delrina's business, assets, or capital
stock by merger, sale or other means in contravention of the Combination
Agreement. Each Delrina Affiliate has further agreed that he will not
participate in any proxy solicitation for the purpose of opposing or competing
with the consummation of the Arrangement, initiate a Delrina shareholder vote or
action by consent of Delrina's shareholders in opposition to or in competition
with the consummation of the Arrangement; or become a member of a "group" (as
defined in Section 13(d) of the Exchange Act) for the purpose of opposing or
competing with the consummation of the Arrangement. Each Delrina Affiliate has
agreed that he will not sell, transfer, encumber or otherwise dispose of any
Delrina Common Shares, Delrina Options, Exchangeable Shares, Symantec Common
Stock exchangeable therefor, Symantec Options, Symantec Common Stock acquired
thereby, or any securities that may be paid as a dividend thereon, or with
respect thereto in the thirty day period preceding the Effective Time and after
the Effective Time until Symantec shall have publicly released a press release
summarizing its first quarterly financial statements that include at least
thirty days of combined operating results of Symantec and Delrina.
In addition, the Delrina Affiliates have agreed that they will not sell,
pledge or otherwise dispose of any Exchangeable Shares or Symantec Common Stock
received for the Exchangeable Shares, Symantec Options, Symantec Common Stock
acquired thereby or any securities paid as a dividend thereon or with respect
thereto unless: (a) such transaction is permitted pursuant to the provisions of
Rule 145(d) under the Securities Act; (b) with respect to a sale of Exchangeable
Shares in the United States, counsel representing the Delrina Affiliate shall
have advised Symantec in a written opinion letter reasonably satisfactory to
Symantec and to Symantec's counsel, and upon which Symantec and its counsel may
rely, that no registration under the Securities Act would be required in
connection with the proposed sale in the United States; (c) an authorized
representative of the SEC shall have rendered written advice to the Delrina
Affiliate to the effect that the SEC would take no action or that the staff of
the SEC would not recommend that the SEC take action, with respect to the
proposed sale; or (d) a registration statement on Form S-3 under the Securities
Act covering the transaction shall have been filed with the SEC and made
effective under the Securities Act.
Delrina and Symantec have also entered into agreements (the "Symantec
Affiliates Agreements") with each of the Symantec Affiliates, pursuant to which
ten such persons (all Symantec Affiliates except Messrs. Derek Witte, Ted
Schlein and Mark Bailey and Ms. Ellen Taylor) have agreed with Delrina to vote
their Symantec Common Stock in favor of approval of the Combination Agreement
and against approval of any proposal made in opposition to or in competition
with consummation of the Arrangement. These ten Symantec Affiliates have also
agreed that they will not, directly or indirectly, encourage any offer from any
person concerning the possible disposition of all or any portion of Symantec's
business, assets or capital stock by merger, sale or other means in
contravention of the Combination Agreement. Each such Symantec Affiliate has
further agreed that he or she will not participate in any proxy solicitation for
the purpose of opposing or competing with the consummation of the Arrangement,
initiate a Symantec stockholder vote in opposition to or in competition with the
consummation of the Arrangement, or become a member of a "group" (as defined in
Section 13(d) of the Exchange Act) for the purpose of opposing or competing with
the consummation of the Arrangement. Only ten of the Symantec Affiliates agreed
to such provisions with Delrina because Rule 14a-2(b)(2) promulgated under the
Exchange Act requires that a solicitation made by someone other than a
registrant to no more than ten stockholders is not subject to the proxy rules.
All of the Symantec Affiliates have agreed that they will not sell or otherwise
dispose of any Symantec securities for thirty days prior to the Effective Time
and until such time after the Effective Time as Symantec shall have publicly
released a press release summarizing its first quarterly financial statements
that include at least thirty days of combined operating results of Symantec and
Delrina.
46
<PAGE>
STOCK OPTION AGREEMENTS
Symantec has entered into agreements (the "Stock Option Agreements") with
each of Messrs. Bennie, Skapinker and Amato (each a "Delrina Principal
Shareholder"), owning in the aggregate 2,327,945 Delrina Common Shares,
representing approximately 10.4% of the outstanding Delrina Common Shares,
pursuant to which each such person has granted an option to Symantec to purchase
up to 50% of the Delrina Common Shares held by such person as of the date of the
Stock Option Agreement and up to 50% of any Delrina Common Shares thereafter
acquired at a purchase price of US$17.00 per share. Symantec may exercise these
options (in whole or part) if any of the following occurs: (i) any person (other
than Symantec or any of its subsidiaries) shall have commenced, or shall have
filed a registration statement under the Securities Act with respect to, a
tender offer or exchange offer to purchase any Delrina Common Shares such that,
upon consummation of such offer, such person would own or control 30% or more of
the then outstanding Delrina Common Shares; (ii) Delrina or any of its
subsidiaries shall have authorized, recommended, proposed, or publicly announced
an intention to authorize, recommend, or propose, or entered into, an agreement
with any person (other than Symantec or any subsidiary of Symantec) to (A)
effect a merger, consolidation, or similar transaction involving Delrina or any
of its subsidiaries, (B) sell, lease, or otherwise dispose of any material
portion of the consolidated assets of Delrina or its subsidiaries, or (C) issue,
sell, or otherwise dispose of (including by way of merger, consolidation, share
exchange, or any similar transaction) securities (or options, rights, or
warrants to purchase, or securities convertible into, such securities)
representing 5% or more of the voting power of Delrina or any of its
subsidiaries; (iii) any person (other than Symantec or any subsidiary of
Symantec) shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act) or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 30% or more of the then outstanding Delrina Common Shares; (iv)
the holders of Delrina Common Shares shall not have approved the Arrangement at
the Delrina Shareholders Meeting or such meeting shall have been canceled, in
each case after any person (other than Symantec or any subsidiary of Symantec)
shall have publicly announced a proposal, or publicly disclosed an intention to
make a proposal, to engage in any transaction described in clauses (i), (ii), or
(iii) above; (v) the Delrina Board of Directors shall have withdrawn or modified
in a manner materially adverse to Symantec the recommendation of the Delrina
Board of Directors referred to in the Combination Agreement that the holders of
the Delrina Common Shares approve the Arrangement; (vi) Delrina shall have
terminated the Combination Agreement pursuant to a Superior Proposal
Termination; or (vii) the Delrina Principal Shareholder shall have breached any
of his obligations under the Stock Option Agreement or the Affiliate Agreement
executed by such person.
COURT APPROVAL OF THE ARRANGEMENT AND COMPLETION OF THE TRANSACTION
An arrangement of a corporation under the OBCA requires approval by both the
Court and the shareholders of the subject corporation. Prior to the mailing of
this Joint Proxy Statement, Delrina obtained the Interim Order providing for the
calling and holding of the Delrina Shareholders Meeting and other procedural
matters. A copy of the Interim Order is attached hereto as Annex C. The Notice
of Application for the Final Order appears at the front of this Joint Proxy
Statement.
Subject to the approval of the Arrangement by the Delrina shareholders at
the Delrina Shareholders Meeting, the hearing in respect of the Final Order is
scheduled to take place on November 21, 1995 at 10:00 a.m. (Toronto time) in the
Court at 145 Queen Street West, Toronto, Ontario. All Delrina shareholders who
wish to participate or be represented or to present evidence or arguments at
that hearing must serve and file a notice of appearance as set out in the Notice
of Application for the Final Order and satisfy any other requirements. At the
hearing of the Application in respect of the Final Order, the Court will
consider, among other things, the fairness and reasonableness of the
Arrangement. The Court may approve the Arrangement as proposed or as amended in
any manner the Court may direct, subject to compliance with such terms and
conditions, if any, as the Court deems fit.
47
<PAGE>
Assuming the Final Order is granted and the other conditions to the
Combination Agreement are satisfied or waived, it is anticipated that the
following will occur substantially simultaneously: Articles of Arrangement will
be filed with the Director under the OBCA to give effect to the Arrangement, the
Support Agreement and the Voting and Exchange Trust Agreement will be executed
and delivered, and the various other documents necessary to consummate the
transactions contemplated under the Combination Agreement will be executed and
delivered.
Subject to the foregoing, it is presently anticipated that the Effective
Time will occur on or about November 22, 1995.
ANTICIPATED ACCOUNTING TREATMENT
The Arrangement is anticipated to be accounted for using the pooling of
interests method of accounting under U.S. GAAP. Under the pooling of interests
method of accounting, the assets, liabilities and shareholders' equity and the
operating results of Delrina and Symantec will be carried forward by Symantec at
their recorded amounts. No recognition of goodwill in the combination is
required of either Symantec or Delrina.
Delrina and Symantec have entered into affiliates agreements with each
Delrina Affiliate and Symantec Affiliate. See "-- Other Agreements -- Affiliates
Agreements." Such agreements relate to the ability of Symantec to account for
the Transaction as a pooling of interests under U.S. GAAP.
PROCEDURES FOR EXCHANGE OF SHARE CERTIFICATES BY DELRINA SHAREHOLDERS
Enclosed with copies of this Joint Proxy Statement delivered to the
registered Canadian holders of Delrina Common Shares is a Letter of Transmittal
which, when duly completed and returned together with a certificate for Delrina
Common Shares, shall enable each Delrina shareholder to exchange such Delrina
Common Shares for that number of Exchangeable Shares equal to the number of
Delrina Common Shares held by such shareholder multiplied by the Exchange Ratio.
U.S. holders of Delrina Common Shares will receive a Letter of Transmittal in a
separate mailing. See "Transaction Mechanics and Description of Exchangeable
Shares."
No certificates representing fractional Exchangeable Shares will be issued.
In lieu of fractional Exchangeable Shares, each holder of a Delrina Common Share
who would otherwise be entitled to receive a fraction of an Exchangeable Share
shall be paid by Delrina an amount of cash (rounded to the nearest whole cent)
equal to the Canadian Dollar Equivalent product of (i) such fraction, multiplied
by (ii) the average closing price of the Symantec Common Stock on the NNM for
the ten trading days ended on the last trading date prior to the Effective Time.
Any use of the mails to transmit a certificate for Delrina Common Shares and
a related Letter of Transmittal is at the risk of the Delrina shareholder. If
these documents are mailed, it is recommended that registered mail, with return
receipt requested, properly insured, be used.
If the Arrangement proceeds and the Transaction is completed, certificates
representing the appropriate number of Exchangeable Shares issuable to a former
holder of Delrina Common Shares who has complied with the procedures set out
above, together with a check in the amount, if any, payable in lieu of
fractional Exchangeable Shares will, as soon as practicable after the later of
the Effective Date and the date of receipt of a certificate for Delrina Common
Shares and a related Letter of Transmittal, be (a) forwarded to the holder at
the address specified in the Letter of Transmittal by first class mail or (b)
made available at the offices of The R-M Trust Company for pick-up by the
holder, if requested by the holder in the Letter of Transmittal.
If the Arrangement does not proceed, all certificates representing Delrina
Common Shares transmitted with a related Letter of Transmittal will be returned
to Delrina shareholders.
Where a certificate for Delrina Common Shares has been destroyed, lost or
mislaid, the registered holder of that certificate should immediately contact
The R-M Trust Company regarding the issuance of a replacement certificate upon
the holder satisfying such requirements as may be imposed by Delrina in
connection with issuance of the replacement certificate.
48
<PAGE>
STOCK EXCHANGE LISTINGS
EXCHANGEABLE SHARES
The TSE has accepted notice of the proposed Arrangement and has
conditionally approved the listing and posting for trading of the Exchangeable
Shares on the Effective Date. There is no current intention to list the
Exchangeable Shares on any other stock exchange in Canada or the United States.
SYMANTEC COMMON STOCK
The Nasdaq Stock Market has received notice for the listing of the
additional shares of Symantec Common Stock issuable from time to time in
exchange for the Exchangeable Shares. There is no current intention to list the
Symantec Common Stock on any other stock exchange in Canada or the United
States.
ELIGIBILITY FOR INVESTMENT IN CANADA
EXCHANGEABLE SHARES
The Exchangeable Shares, provided they are listed on a prescribed stock
exchange in Canada (which currently includes the TSE): (a) will not be foreign
property under the Canadian Tax Act for trusts governed by registered pension
plans, registered retirement savings plans, registered retirement income funds
and deferred profit sharing plans or for certain other tax-exempt persons; and
(b) will be qualified investments under the Canadian Tax Act for trusts governed
by registered retirement savings plans, registered retirement income funds and
deferred profit sharing plans. Delrina has applied for listing of the
Exchangeable Shares on the TSE and Symantec has indicated that it intends to use
its best efforts to cause Delrina to maintain such listing. In certain other
circumstances, the Exchangeable Shares will be qualified investments even if the
shares are not listed.
VOTING RIGHTS AND EXCHANGE RIGHTS
The Voting Rights and the Exchange Rights will not be qualified investments
and will be foreign property under the Canadian Tax Act. However, as indicated
under "INCOME TAX CONSIDERATIONS TO DELRINA SHAREHOLDERS -- Canadian Federal
Income Tax Considerations to Delrina Shareholders -- Shareholders Resident in
Canada," Delrina is of the view that the fair market value of these rights is
nominal.
SYMANTEC COMMON STOCK
The Symantec Common Stock will be a qualified investment under the Canadian
Tax Act for trusts governed by registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans provided such shares
remain listed on the NNM or another prescribed stock exchange. The Symantec
Common Stock will be foreign property under the Canadian Tax Act.
REGULATORY MATTERS
The Transaction is subject to the premerger filing requirements of the HSR
Act, and on July 13, 1995, Symantec and Delrina made premerger filings under the
HSR Act with the Federal Trade Commission ("FTC") and the Antitrust Division of
the Department of Justice. On August 7, 1995, the FTC notified Symantec and
Delrina that their respective requests for early termination of the waiting
period under the HSR Act had been granted and that the waiting period had been
terminated.
RESALE OF EXCHANGEABLE SHARES AND SYMANTEC COMMON STOCK RECEIVED IN THE
TRANSACTION
UNITED STATES
The issuance of Exchangeable Shares to holders of Delrina Common Shares will
not be registered under the Securities Act. Such shares will be issued in
reliance upon the exemption available pursuant to Section 3(a)(10) of the
Securities Act. Section 3(a)(10) exempts securities issued in exchange for one
or more outstanding securities from the general requirement of registration
where the terms and conditions of the issuance and exchange of such securities
have been approved by any court of competent jurisdiction, after a hearing upon
the fairness of the terms and conditions of the issuance and exchange at which
all persons to whom such securities will be issued have the right to appear. The
49
<PAGE>
Court is authorized to conduct a hearing to determine the fairness of the terms
and conditions of the Arrangement, including the proposed issuance of securities
in exchange for other outstanding securities. The Court entered the Interim
Order on October 6, 1995 and subject to the approval of the Arrangement by the
Delrina shareholders, a hearing on the fairness of the Arrangement will be held
on November 21, 1995 by the Court. See "-- Court Approval of the Arrangement and
Completion of the Transaction." Symantec and Delrina believe that the issuance
by Delrina of the Exchangeable Shares in exchange for the Delrina Common Shares
is exempt under Section 3(a)(10) and that they will receive a letter from the
SEC confirming that the staff of the SEC will not recommend any enforcement
action to the SEC if Delrina issues the Exchangeable Shares in exchange for the
Delrina Common Shares in reliance upon such exemption.
The Exchangeable Shares will be freely transferable under U.S. federal
securities laws, except that Exchangeable Shares received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
Delrina prior to the Transaction may be resold by them only in transactions
permitted by the resale provisions of Rule 145(d)(1), (2), or (3) promulgated
under the Securities Act or as otherwise permitted under the Securities Act.
Rule 145(d)(1) generally provides that "affiliates" of either Delrina or
Symantec may not sell securities of Symantec received in the Arrangement unless
pursuant to an effective registration statement or unless pursuant to the
volume, current public information, manner of sale and timing limitations of
Rule 144. These limitations generally require that any sales made by an
affiliate in any three-month period not exceed the greater of 1% of the
outstanding shares of Symantec or the average weekly trading volume over the
four calendar weeks preceding the placement of the sell order and that such
sales be made in unsolicited, open market "brokers transactions." Rules
145(d)(2) and (3) generally provide that the foregoing limitations lapse for
non-affiliates of Symantec after a period of two or three years, respectively,
depending upon whether certain currently available information continues to be
available with respect to Symantec. Persons who may be deemed to be affiliates
of an issuer generally include individuals or entities that control, are
controlled by, or are under common control with, such issuer and may include
certain officers and directors of such issuer as well as principal shareholders
of such issuer.
Delrina and Symantec have entered into affiliates agreements with each of
the Delrina Affiliates restricting such persons in connection with the
requirements for pooling of interests accounting treatment (see "-- Anticipated
Accounting Treatment") and restricting the sale, pledge, or other disposal of
Exchangeable Shares, Symantec Options, Symantec Common Stock acquired thereby or
any securities paid as a dividend thereon or with respect thereto. See "-- Other
Agreements -- Affiliates Agreements."
The issuance of shares of Symantec Common Stock from time to time in
exchange for the Exchangeable Shares will be registered under the Securities
Act. As a result of such registration, the shares of Symantec Common Stock
issued from time to time in exchange for the Exchangeable Shares will be freely
transferable under U.S. federal securities laws, except that shares of Symantec
Common Stock received by persons who are deemed to be "affiliates" of Symantec
may be resold by them only in transactions in compliance with the current public
information, volume, manner of sale and notice limitations of Rule 144.
CANADA
Symantec and Delrina have applied for rulings or orders of certain
provincial securities regulatory authorities in Canada to permit the issuance to
Delrina shareholders of the Exchangeable Shares and to permit resale of the
Exchangeable Shares in such provinces without restriction by a shareholder other
than a "control person," provided that no unusual effort is made to prepare the
market for any such resale or to create a demand for the securities which are
the subject of any such resale and no extraordinary commission or consideration
is paid in respect thereof. Applicable Canadian securities legislation provides
a rebuttable presumption that a person or company is a control person in
relation to an issuer where the person or company alone or in combination with
others holds more than 20% of the outstanding voting securities of the issuer.
Upon completion of the Arrangement,
50
<PAGE>
Delrina will continue to be a reporting issuer in Ontario. Delrina has also
applied for certain exemptions from statutory financial and other reporting
requirements in Ontario on the condition that Symantec files with the Ontario
Securities Commission copies of certain of its reports filed with the SEC and
that holders of Exchangeable Shares receive certain materials that are sent to
holders of Symantec Common Stock.
Symantec and Delrina have also applied for rulings or orders of certain
provincial securities regulatory authorities in Canada to permit the issuance of
Symantec Common Stock to holders of Exchangeable Shares, and to permit the
resale of Symantec Common Stock by such holders without the requirement of
filing a prospectus.
THE COMPANIES AFTER THE TRANSACTION
THE COMBINATION -- GENERAL
Upon completion of the Transaction, the parent company of the combined
entity will be Symantec Corporation, it will continue to be a corporation
governed by the DGCL and its principal executive office will continue to be
located at 10201 Torre Avenue, Cupertino, California 95014-2132 (telephone
number (408) 253-9600). Symantec will own all of the voting securities of
Delrina. After the Effective Time, Delrina will continue to be a corporation
governed by the OBCA, and its registered office will continue to be located at
500-2 Park Center, Toronto, Ontario M3C 1W3 (telephone number (416) 441-3676).
MANAGEMENT
DIRECTORS AND OFFICERS
Pursuant to the Combination Agreement, effective upon completion of the
Transaction, Symantec's Board of Directors will be increased to eight members,
six of whom are current directors of Symantec and two of whom are current
directors of Delrina.
The following persons are expected to serve as directors and/or executive
officers of Symantec following the Effective Time.
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------------- ------------------------------------------------------------
<S> <C>
Gordon E. Eubanks, Jr. President, Chief Executive Officer, and Director
Robert R. B. Dykes Executive Vice President, Worldwide Operations and Chief
Financial Officer
Dennis Bennie Executive Vice President and Director
John C. Laing Executive Vice President, Worldwide Sales
Eugene Wang Executive Vice President, Applications and Development Tools
Mark Bailey Senior Vice President -- Business Development
Ted Schlein Vice President, Enterprise Solutions
Derek Witte Vice President and General Counsel
Carl D. Carman Chairman of the Board and Director
Charles M. Boesenberg Director
Walter W. Bregman Director
Robert S. Miller Director
Mark Skapinker Director
Leslie L. Vadasz Director
</TABLE>
Management of Delrina will be selected by Symantec in its sole discretion
following the Transaction.
51
<PAGE>
Further information concerning the individuals listed above may be found
under the headings "INFORMATION CONCERNING DELRINA -- Directors and Management"
and "INFORMATION CONCERNING SYMANTEC -- Directors and Management."
COMMITTEES OF THE SYMANTEC BOARD OF DIRECTORS
Symantec's Compensation Committee consists of Carl D. Carman and Leslie L.
Vadasz. Symantec's Audit Committee consists of Walter W. Bregman and Robert S.
Miller. Symantec currently has no plans to alter the composition of these
committees.
PLANS AND PROPOSALS
The proposed business and marketing strategy of the combined company is not
expected to make any significant changes in the way that the combined company
approaches the various segments of the software market addressed by the combined
company's products, but rather to utilize the strengths of each company's
existing marketing efforts. The combined marketing strategy is expected to
include the use of major distributors and traditional resellers, as well as a
corporate sales force and a network of value-added resellers. The combined
company will also continue to pursue original equipment manufacturer ("OEM")
contracts with computer systems and components manufacturers.
After the Transaction, it is expected that Delrina's corporate headquarters
and Symantec's Canadian sales operations will be combined in a single facility
in Toronto. Similarly, it is expected that Delrina's facilities in San Jose,
California will be consolidated with nearby Symantec facilities, but the exact
nature of that consolidation has not been finalized. Symantec expects to
significantly curtail or eliminate Delrina's administrative activities by
providing most of the administrative functions for Delrina. It is also expected
that each company's international operations would be combined into a single
organization, with most Delrina facilities being closed and European technical
support and headquarters functions being relocated from London, England to
Leiden, Holland. The number of people employed by Delrina will likely decrease
from approximately 760 to approximately 550 as a result of the Transaction;
although it is also expected that some additional positions will be added at a
later time as the combined company makes further investments in research and
development efforts.
Following the Transaction, Mark Skapinker and Dennis Bennie will become
members of Symantec's Board of Directors. It is also expected that Mr. Bennie
will become an Executive Vice President of Symantec, with managerial
responsibility for the combined company's communications, forms, consumer and
services products. It is expected that Messrs. Skapinker and Amato will continue
to report to Mr. Bennie.
Following the Transaction, it is expected that certain changes will be made
to restructure the combined company's product groups to attempt to make them
operate more efficiently and capitalize on product synergies. Symantec's
pcANYWHERE product group is expected to remain in its current location in New
York, and work with Delrina's communications products group as a single
communications products group to be managed by Mr. Bennie.
It is expected that Symantec will maintain its current customer support and
technical support operations located in Eugene, Oregon as well as Delrina's
customer support and technical support operations located in Toronto. Both of
these operations and the combined operation in Lieden, Holland is expected to be
managed by Dana Siebert, Symantec's Vice President, Support and Services.
It is expected that the sales organizations of the combined company will be
managed by John Laing, Symantec's Executive Vice President, Worldwide Sales, and
that the marketing organizations will be managed by Steve Dewitt, Symantec's
Vice President, Marketing. It is expected that marketing development and
management positions will be centralized in Symantec's Cupertino, California
facilities as part of the combined company's core marketing organization.
It is anticipated that the consolidation and restructuring referred to above
will result in cost savings in the existing operations of Delrina. This is not
likely to result in overall savings to the
52
<PAGE>
combined company as such cost savings would be reallocated to areas which will
support the company's overall growth. It is expected that general and
administrative, marketing and desktop sales expenses will decrease, but will be
offset by increased expenses for research and development, enterprise sales and
technical support. This reallocation of resources is expected to occur over the
first two quarters following completion of the Transaction. No assurance can be
given that the companies will be able to effect the consolidations and
restructurings in this fashion or that such reallocation will be achieved or
will be achieved in a reasonable time frame. Actual results will depend upon the
specific restructuring steps undertaken by Symantec's Board of Directors in its
discretion, exercised after the Effective Time and in the circumstances then
existing. In addition, notwithstanding that such reallocation may be achieved,
there can be no assurance that such restructuring steps will not also result in
a decrease in revenues and profits or that any such reallocations will
ultimately result in revenue growth or profits for the combined company. Revenue
and profits are also dependent upon numerous conditions, some of which are
beyond the control of the combined company, including technological changes,
consumer and business acceptance of Windows 95, pricing trends and competition.
See "RISK FACTORS -- Uncertain Benefits of the Transaction; Risks of
Integration."
PRINCIPAL HOLDERS OF SECURITIES
Had the Transaction been consummated on September 30, 1995, no proposed
director or executive officer of Delrina would beneficially own more than 5% of
the Symantec Common Stock. Had the Transaction occurred on September 30, 1995,
no director or officer of Symantec would beneficially own more than 5% of the
Symantec Common Stock.
To the knowledge of Symantec and its directors and officers, other than as
disclosed in the security ownership table of certain beneficial owners and
management of Symantec, there are no persons who, had the Transaction occurred
on September 30, 1995, would beneficially own, directly or indirectly, or
exercise control or direction over, in excess of 5% of the Symantec Common
Stock. See "INFORMATION CONCERNING SYMANTEC -- Security Ownership of Certain
Beneficial Owners and Management." With respect to Delrina, to its knowledge and
to the knowledge of its directors and officers, there are no persons who, had
the Transaction occurred on September 30, 1995, would beneficially own, directly
or indirectly, or exercise control or direction over, in excess of 5% of the
Symantec Common Stock.
See "INFORMATION CONCERNING DELRINA -- Principal Holders of Voting
Securities" and "-- Directors and Management" and "INFORMATION CONCERNING
SYMANTEC -- Security Ownership of Certain Beneficial Owners and Management" for
information with respect to securities of Delrina and Symantec currently owned
by certain directors and officers.
SYMANTEC SHARE CAPITAL
In the event of the consummation of the Transaction, the share capital of
the resulting combined company will be as described below.
The Symantec Restated Certificate of Incorporation currently authorizes
70,000,000 shares of Symantec Common Stock and 1,000,000 shares of Symantec
Preferred Stock. If the proposal amending the Certificate of Incorporation is
approved at the Symantec Stockholders Meeting, the Symantec Certificate will
authorize 100,000,000 shares of Symantec Common Stock, 1,000,000 shares of
Symantec Preferred Stock and one share of Special Voting Stock.
SYMANTEC COMMON STOCK
Shares of Symantec Common Stock have a par value of US$0.01 per share. The
holders of Symantec Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Cumulative voting for
the election of directors is not authorized by Symantec's Restated Certificate
of Incorporation. The holders of Symantec Common Stock are entitled to receive
such dividends as may be declared by the Symantec Board of Directors out of
funds legally available therefor and are entitled upon any liquidation,
dissolution or winding-up of Symantec
53
<PAGE>
to receive rateably the net assets of Symantec available for distribution. No
pre-emptive rights, conversion rights, redemption rights or sinking fund
provisions are applicable to the Symantec Common Stock, and there are no
dividends in arrears on defaults.
SYMANTEC PREFERRED STOCK
Shares of Symantec Preferred Stock have a par value of US$0.01 per share.
One million shares of Preferred Stock are authorized, and no shares are issued
and outstanding. The Symantec Board of Directors is authorized to provide for
the issuance of shares of Preferred Stock in one or more series, and to
establish from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof.
SYMANTEC SPECIAL VOTING STOCK
A single share of Symantec Special Voting Stock will be authorized for
issuance and a single share will be outstanding having a par value of US$1.00
per share. Except as otherwise required by law or the Symantec Restated
Certificate of Incorporation, the Voting Share will possess a number of votes
equal to the number of outstanding Exchangeable Shares from time to time not
owned by Symantec or any entity controlled by Symantec for the election of
directors and on all other matters submitted to a vote of stockholders of
Symantec. The holders of Symantec Common Stock and the holder of the Voting
Share will vote together as a single class on all matters, except as may be
required by applicable law. In the event of any liquidation, dissolution or
winding-up of Symantec, the holder of the Voting Share will not be entitled to
receive any assets of Symantec available for distribution to its stockholders.
The holder of the Voting Share will not be entitled to receive dividends.
Pursuant to the Combination Agreement, the Voting Share will be issued to the
Trustee appointed under the Voting and Exchange Trust Agreement. See "-- Voting
and Exchange Trust Agreement." At such time as the Voting Share has no votes
attached to it because there are no Exchangeable Shares outstanding not owned by
Symantec or an entity controlled by Symantec, and there are no shares of stock,
debt, options or other agreements of Delrina that could give rise to the
issuance of any Exchangeable Shares to any person (other than Symantec or an
entity controlled by Symantec), the Voting Share will be cancelled.
DELRINA SHARE CAPITAL
In the event of the consummation of the Transaction, the share capital of
Delrina after the Effective Time will have the rights and preferences summarized
below. Such summary is qualified in its entirety by reference to the Plan of
Arrangement and the Exchangeable Share Provisions, which are attached as Annex D
hereto.
DELRINA COMMON SHARES
The holders of Delrina Common Shares are entitled to receive notice of and
to attend all meetings of the shareholders of Delrina and are entitled to one
vote for each share held of record on all matters submitted to a vote of holders
of Delrina Common Shares. The holders of Delrina Common Shares are entitled to
receive such dividends as may be declared by the Delrina Board of Directors out
of funds legally available therefor and there are no dividends in arrears or
defaults. Holders of Delrina Common Shares are entitled upon any liquidation,
dissolution or winding-up of Delrina, subject to the prior rights of the holders
of the Exchangeable Shares and the Class A Preferred Shares and to any other
shares ranking senior to the Delrina Common Shares, to receive the remaining
property and assets of Delrina rateably with the holders of the Delrina Common
Shares.
CLASS A PREFERRED SHARES OF DELRINA
Except where required by applicable law, the Class A Preferred Shares of
Delrina will not be entitled to receive notice of or to attend meetings of the
shareholders of Delrina and will not be entitled to vote at any meeting of
shareholders of Delrina. Subject to the prior rights of the holders of any
shares ranking senior to the Class A Preferred Shares with respect to priority
in the payment of dividends, the holders of Class A Preferred Shares will be
entitled to receive dividends as and when
54
<PAGE>
declared by the Delrina Board of Directors as cumulative dividends in the amount
of C$1.00 per share per annum on December 31 in arrears. Subject to the prior
rights of the holders of any shares ranking senior to the Class A Preferred
Shares with respect to priority in the distribution of assets upon dissolution,
liquidation or winding-up, the holders of the Class A Preferred Shares will be
entitled to receive the stated capital in respect of the Class A Preferred
Shares and dividends remaining unpaid, including all cumulative dividends,
whether or not declared. After payment to the holders of the Class A Preferred
Shares of such amounts, such holders shall not be entitled to share in any
further distribution of the assets of Delrina.
EXCHANGEABLE SHARES OF DELRINA
RANKING. The Exchangeable Shares will rank junior to the Class A Preferred
Shares, and will rank prior to the Delrina Common Shares and any other shares
ranking junior to the Exchangeable Shares with respect to the payment of
dividends and the distribution of assets in the event of liquidation,
dissolution or winding-up of Delrina.
DIVIDENDS. Holders of Exchangeable Shares will be entitled to receive
dividends equivalent to dividends paid from time to time by Symantec on shares
of Symantec Common Stock. The declaration date, record date and payment date for
dividends on the Exchangeable Shares will be the same as that for the
corresponding dividends on the Symantec Common Stock.
CERTAIN RESTRICTIONS. Without the approval of the holders of the
Exchangeable Shares, Delrina will not:
(a) pay any dividend on the Delrina Common Shares, or any other shares
ranking junior to the Exchangeable Shares, other than stock dividends
payable in Delrina Common Shares or any such other shares ranking junior to
the Exchangeable Shares, as the case may be;
(b) redeem, purchase or make any capital distribution in respect of
Delrina Common Shares or any other shares ranking junior to the Exchangeable
Shares;
(c) redeem or purchase any other shares of Delrina ranking equally with
the Exchangeable Shares with respect to the payment of dividends or on any
liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of Delrina ranking
equally with, or superior to, the Exchangeable Shares other than by stock
dividends to the holders of the Exchangeable Shares or as contemplated in
the Support Agreement.
The restrictions in (a), (b) and (c) above will not apply at any time when
the dividends on the outstanding Exchangeable Shares corresponding to dividends
declared on the Symantec Common Stock have been declared and paid in full.
LIQUIDATION. In the event of the liquidation, dissolution or winding-up of
Delrina, a holder of Exchangeable Shares will be entitled to receive for each
Exchangeable Share an amount to be satisfied by issuance of one share of
Symantec Common Stock, together with a cash amount equivalent to the full amount
of all unpaid dividends on the Exchangeable Share. See "-- Voting and Exchange
Trust Agreement -- Exchange Rights."
RETRACTION OF EXCHANGEABLE SHARES BY HOLDERS. A holder of Exchangeable
Shares will be entitled at any time to require Delrina to redeem any or all of
the Exchangeable Shares held by such holder for a retraction price per share to
be satisfied by issuance of a share of Symantec Common Stock plus an additional
amount equivalent to the full amount of all unpaid dividends thereon, which
shall be delivered to the retracting holder on the retraction date specified by
the holder (which shall not be less than five nor more than ten business days
after the date on which Delrina receives the retraction request from the
holder).
If, as a result of solvency provisions of applicable law, Delrina is not
permitted to redeem all Exchangeable Shares tendered by a retracting holder,
Delrina will redeem only those Exchangeable Shares tendered by the holder
(rounded to the next lower multiple of 100 shares) as would not be contrary
55
<PAGE>
to such provisions of applicable law. The holder of any Exchangeable Shares not
redeemed by Delrina will be deemed to have required Symantec to purchase such
unretracted shares in exchange for Symantec Common Stock on the retraction date
pursuant to the optional Exchange Right. See "-- Voting and Exchange Trust
Agreement -- Exchange Right."
REDEMPTION OF EXCHANGEABLE SHARES. On the seventh anniversary of the
effective date of the Arrangement or such later date as specified by the Delrina
Board of Directors or such earlier date as specified by the Delrina Board of
Directors, if at any time there are less than 500,000 Exchangeable Shares
outstanding (other than Exchangeable Shares held by Symantec and entities
controlled by Symantec and subject to necessary adjustments to such number of
shares to reflect permitted changes to Exchangeable Shares) (the "Automatic
Redemption Date"), Delrina will redeem all but not less than all of the then
outstanding Exchangeable Shares for a redemption price per share equal to a
share of Symantec Common Stock plus an additional amount equivalent to the full
amount of all unpaid dividends thereon. Delrina shall, at least 60 days' prior
to the Automatic Redemption Date, provide the registered holders of the
Exchangeable Shares with written notice of the proposed redemption of the
Exchangeable Shares by Delrina.
VOTING RIGHTS. Except as required by applicable law, the holders of the
Exchangeable Shares shall not be entitled as such to receive notice of or attend
any meeting of the shareholders of Delrina or to vote at any such meeting.
AMENDMENT AND APPROVAL. The rights, privileges, restrictions and conditions
attaching to the Exchangeable Shares may be changed only with the approval of
the holders thereof. Any such approval or any other approval or consent to be
given by the holders of the Exchangeable Shares will be sufficiently given if
given in accordance with applicable law and subject to a minimum requirement
that such approval or consent be evidenced by a resolution passed by not less
than two-thirds of the votes cast thereon (other than shares beneficially owned
by Symantec or entities controlled by Symantec) at a meeting of the holders of
Exchangeable Shares duly called and held at which holders of at least 50% of the
then outstanding Exchangeable Shares are present or represented by proxy. In the
event that no such quorum is present at such meeting within one-half hour after
the time appointed therefor, then the meeting will be adjourned to such place
and time (not less than 10 days later) as may be determined at the original
meeting and the holders of Exchangeable Shares present or represented by proxy
at the adjourned meeting will constitute a quorum thereat and may transact the
business for which the meeting was originally called. At the adjourned meeting,
a resolution passed by the affirmative vote of not less than two-thirds of the
votes cast thereon will constitute the approval or consent of the holders of the
Exchangeable Shares.
ACTIONS BY DELRINA UNDER SUPPORT AGREEMENT. Under the Exchangeable Share
Provisions, Delrina will agree to take all such actions and do all such things
as are necessary or advisable to perform and comply with its obligations under,
and to ensure the performance and compliance by Symantec with its obligations
under, the Support Agreement.
SUPPORT AGREEMENT
The following is a summary description of the material provisions of the
Support Agreement and is qualified in its entirety by reference to the full text
of the Support Agreement, which appears as Annex E hereto.
Under the Support Agreement, Symantec will agree that: (i) it will not
declare or pay dividends on the Symantec Common Stock unless Delrina is able to
and simultaneously pays an equivalent dividend on the Exchangeable Shares; (ii)
it will cause Delrina to declare and pay an equivalent dividend on the
Exchangeable Shares simultaneously with Symantec's declaration and payment of
dividends on the Symantec Common Stock; (iii) it will advise Delrina in advance
of the declaration of any dividend on the Symantec Common Stock and ensure that
the declaration date, record date and payment date for dividends on the
Exchangeable Shares are the same as that for the Symantec Common Stock; (iv) it
will take all actions and do all things necessary to ensure that Delrina is able
to
56
<PAGE>
pay to the holders of the Exchangeable Shares the equivalent number of shares of
Symantec Common Stock in the event of a liquidation, dissolution or winding-up
of Delrina, a retraction request by a holder of Exchangeable Shares, or a
redemption of Exchangeable Shares by Delrina; and (v) it will not vote or
otherwise take any action or omit to take any action causing the liquidation,
dissolution or winding-up of Delrina.
The Support Agreement also provides that, without the prior approval of
Delrina and the holders of the Exchangeable Shares, Symantec will not distribute
additional shares of Symantec Common Stock or rights to subscribe therefor or
other property or assets to all or substantially all holders of shares of
Symantec Common Stock, nor change the Symantec Common Stock nor effect any
tender offer, share exchange offer, issuer bid, take-over bid or similar
transaction affecting the Symantec Common Stock, unless the same or an
economically equivalent distribution on or change to the Exchangeable Shares (or
in the rights of the holders thereof) is made simultaneously. The Delrina Board
of Directors is conclusively empowered to determine in good faith and in its
sole discretion whether any corresponding distribution on or change to the
Exchangeable Shares is the same as or economically equivalent to any proposed
distribution on or change to the Symantec Common Stock.
Symantec has agreed that so long as there remain outstanding any
Exchangeable Shares not owned by Symantec or any entity controlled by Symantec,
Symantec will remain the beneficial owner, directly or indirectly, of all
outstanding shares of Delrina other than the Exchangeable Shares.
With the exception of administrative changes for the purpose of adding
covenants for the protection of the holders of the Exchangeable Shares, making
certain necessary amendments or curing ambiguities or clerical errors (in each
case provided that the Board of Directors of each of Symantec and Delrina is of
the opinion that such amendments are not prejudicial to the interests of the
holders of the Exchangeable Shares), the Support Agreement may not be amended
without the approval of the holders of the Exchangeable Shares.
Under the Support Agreement, Symantec has agreed not to exercise any voting
rights attached to the Exchangeable Shares owned by it or any entity controlled
by it on any matter considered at meetings of holders of Exchangeable Shares
(including any approval sought from such holders in respect of matters arising
under the Support Agreement).
VOTING AND EXCHANGE TRUST AGREEMENT
The following is a summary description of the material provisions of the
Voting and Exchange Trust Agreement and is qualified in its entirety by
reference to the full text of the Voting and Exchange Trust Agreement which
appears as Annex F hereto. Under the terms of the Voting and Exchange Trust
Agreement, Symantec will issue and grant to the Trustee the Voting Rights and
the Exchange Rights.
VOTING RIGHTS
Under the Voting and Exchange Trust Agreement, Symantec will issue the
Voting Share to the Trustee for the benefit of the holders (other than Symantec
and entities controlled by Symantec) of the Exchangeable Shares. The Voting
Share will carry a number of votes, exercisable at any meeting at which Symantec
stockholders are entitled to vote, equal to the number of outstanding
Exchangeable Shares (other than shares held by Symantec and entities controlled
by Symantec). With respect to any written consent sought from the Symantec
stockholders, the Voting Share will be exercisable in the same manner as set
forth above.
Each holder of an Exchangeable Share on the record date for any meeting at
which Symantec stockholders are entitled to vote will be entitled to instruct
the Trustee to exercise one of the votes attached to the Voting Share for such
Exchangeable Share. The Trustee will exercise each vote attached to the Voting
Share only as directed by the relevant holder and, in the absence of
instructions from a holder as to voting, will not exercise such votes. A holder
may, upon instructing the Trustee, obtain a proxy from the Trustee entitling the
holder to vote directly at the relevant meeting the votes attached to the Voting
Share to which the holder is entitled.
57
<PAGE>
The Trustee will send to the holders of the Exchangeable Shares the notice
of each meeting at which the Symantec stockholders are entitled to vote,
together with the related meeting materials and a statement as to the manner in
which the holder may instruct the Trustee to exercise the votes attaching to the
Voting Share, at the same time as Symantec sends such notice and materials to
the Symantec stockholders. The Trustee will also send to the holders copies of
all information statements, interim and annual financial statements, reports and
other materials sent by Symantec to the Symantec stockholders at the same time
as such materials are sent to the Symantec stockholders. To the extent such
materials are provided to the Trustee by Symantec, the Trustee will also send to
the holders all materials sent by third parties to Symantec stockholders,
including dissident proxy circulars and tender and exchange offer circulars, as
soon as possible after such materials are first sent to Symantec stockholders.
All rights of a holder of Exchangeable Shares to exercise votes attached to
the Voting Share will cease upon the exchange of all of such holder's
Exchangeable Shares for shares of Symantec Common Stock.
EXCHANGE RIGHTS
Under the Voting and Exchange Trust Agreement, Symantec will grant the
Exchange Rights to the Trustee for the benefit of the holders of the
Exchangeable Shares.
OPTIONAL EXCHANGE RIGHT. Upon the occurrence and during the continuance of
a Delrina Insolvency Event, a holder of Exchangeable Shares will be entitled to
instruct the Trustee to exercise the optional Exchange Right with respect to any
or all of the Exchangeable Shares held by such holder, thereby requiring
Symantec to purchase such Exchangeable Shares from the holder. Immediately upon
the occurrence of a Delrina Insolvency Event or any event which may, with the
passage of time or the giving of notice, become a Delrina Insolvency Event,
Delrina and Symantec will give written notice thereof to the Trustee. As soon as
practicable thereafter, the Trustee will then notify each holder of Exchangeable
Shares of such event or potential event and will advise the holder of its rights
with respect to the optional Exchange Right.
The purchase price payable by Symantec for each Exchangeable Share to be
purchased under the optional Exchange Right will be satisfied by issuance of one
share of Symantec Common Stock plus an additional amount equivalent to the full
amount of all dividends declared and unpaid on the Exchangeable Share.
If, as a result of solvency provisions of applicable law, Delrina is unable
to redeem all of the Exchangeable Shares tendered for retraction by a holder in
accordance with the Exchangeable Share Provisions, the holder will be deemed to
have exercised the optional Exchange Right with respect to the unredeemed
Exchangeable Shares and Symantec will be required to purchase such shares from
the holder in the manner set forth above.
AUTOMATIC EXCHANGE RIGHT. In the event of a Symantec Liquidation Event,
Symantec will be required to purchase each outstanding Exchangeable Share by
exchanging one share of Symantec Common Stock for each such Exchangeable Share,
plus an additional amount equivalent to the full amount of all declared and
unpaid dividends on the Exchangeable Shares.
DELIVERY OF SYMANTEC COMMON STOCK
Symantec will ensure that all shares of Symantec Common Stock to be
delivered by it under the Support Agreement or on the exercise of the Exchange
Rights under the Voting and Exchange Trust Agreement are duly registered,
qualified or approved under applicable Canadian and United States securities
laws, if required so that such shares may be freely traded by the holders
thereof (other than any restriction on transfer by reason of a holder being a
"control person" of Symantec for purposes of Canadian law or an "affiliate" of
Symantec for purposes of United States law). In addition, Symantec will take all
actions necessary to cause all such shares of Symantec Common Stock to be listed
or quoted for trading on all stock exchanges or quotation systems on which
outstanding shares of Symantec Common Stock are then listed or quoted for
trading.
58
<PAGE>
CALL RIGHTS
The following description of the Call Rights is qualified in its entirety by
reference to the full text of the Plan of Arrangement and the Exchangeable Share
Provisions, which appears as Annex D hereto.
In the circumstances described below, Symantec will have certain overriding
rights to purchase Exchangeable Shares from holders thereof for a purchase price
per share equal to one share of Symantec Common Stock, plus an amount equivalent
to the full amount of all declared and unpaid dividends on the Exchangeable
Shares. Different Canadian federal income tax consequences to a holder of
Exchangeable Shares may arise depending upon whether the Call Rights are
exercised by Symantec or whether the relevant Exchangeable Shares are redeemed
by Delrina pursuant to the Exchangeable Share Provisions in the absence of the
exercise by Symantec of the Call Rights. See "INCOME TAX CONSIDERATIONS TO
DELRINA SHAREHOLDERS."
RETRACTION CALL RIGHT
Pursuant to the Exchangeable Share Provisions, a holder requesting Delrina
to redeem the Exchangeable Shares will be deemed to offer to sell such shares to
Symantec, and Symantec will have an overriding Retraction Call Right to purchase
all but not less than all of the Exchangeable Shares that the holder has
requested Delrina to redeem in exchange for one share of Symantec Common Stock.
At the time of a Retraction Request by a holder of Exchangeable Shares,
Delrina will immediately notify Symantec. Symantec must then advise Delrina
within two business days as to whether Symantec will exercise the Retraction
Call Right. If Symantec does not so advise Delrina within such two business day
period, Delrina will notify the holder as soon as possible thereafter that
Symantec will not exercise the Retraction Call Right. A holder may revoke his or
her Retraction Request, at any time prior to the close of business on the
business day preceding the Retraction Date, in which case the holder's
Exchangeable Shares will neither be purchased by Symantec nor redeemed by
Delrina. If the holder does not revoke his or her Retraction Request, on the
Retraction Date the Exchangeable Shares that the holder has requested Delrina to
redeem will be purchased by Symantec or redeemed by Delrina, as the case may be,
in each case at a purchase price per share equal to one share of Symantec Common
Stock plus an additional amount equivalent to the full amount of all declared
and unpaid dividends on the Exchangeable Shares.
LIQUIDATION CALL RIGHT
Pursuant to the Plan of Arrangement, Symantec will be granted an overriding
Liquidation Call Right, in the event of and notwithstanding a proposed Delrina
Insolvency Event, to purchase all but not less than all of the Exchangeable
Shares then outstanding in exchange for Symantec Common Stock and, upon the
exercise by Symantec of the Liquidation Call Right, the holders thereof will be
obligated to sell such shares to Symantec. The purchase by Symantec of all of
the outstanding Exchangeable Shares upon the exercise of the Liquidation Call
Right will occur on the effective date of the voluntary or involuntary
liquidation, dissolution or winding-up of Delrina.
REDEMPTION CALL RIGHT
Pursuant to the Plan of Arrangement, Symantec will be granted an overriding
Redemption Call Right, notwithstanding the proposed automatic redemption of the
Exchangeable Shares by Delrina pursuant to the Exchangeable Share Provisions, to
purchase on an Automatic Redemption Date all but not less than all of the
Exchangeable Shares then outstanding in exchange for Symantec Common Stock and,
upon the exercise by Symantec of the Redemption Call Right, the holders thereof
will be obligated to sell such shares to Symantec.
AUDITORS
In the event that the proposal requesting ratification of Ernst & Young LLP
as Symantec's independent auditors is approved, Ernst & Young LLP will be the
independent auditors of all of Symantec and its subsidiaries, including Delrina,
after the Effective Time.
59
<PAGE>
TRANSFER AGENTS AND REGISTRARS
The R-M Trust Company at its office in Toronto will be the transfer agent
and registrar for Delrina. First National Bank of Boston at its office in
Boston, Massachusetts will be the transfer agent and registrar for Symantec.
INCOME TAX CONSIDERATIONS TO DELRINA SHAREHOLDERS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS TO DELRINA SHAREHOLDERS
In the opinion of Osler, Hoskin & Harcourt, counsel for Delrina, the
following is a summary of the principal Canadian federal income tax
considerations generally applicable to Delrina shareholders who, for purposes of
the Canadian Tax Act, hold their Delrina Common Shares and will hold their
Exchangeable Shares and shares of Symantec Common Stock as capital property and
deal at arm's length with Delrina and Symantec. This summary does not apply to a
holder with respect to whom Symantec is a foreign affiliate within the meaning
of the Canadian Tax Act.
Certain recent amendments to the Canadian Tax Act (the "mark-to-market
rules") relating to financial institutions (including certain financial
institutions, registered securities dealers and corporations controlled by one
or more of the foregoing) will deem such financial institutions not to hold
their Delrina Common Shares, Exchangeable Shares and shares of Symantec Common
Stock as capital property for purposes of the Canadian Tax Act. Shareholders
that are financial institutions should consult their own tax advisors to
determine the tax consequences to them of the application of the mark-to-market
rules. In addition, all shareholders should consult their own tax advisors as to
whether, as a matter of fact, they hold their Delrina Common Shares and will
hold their Exchangeable Shares and shares of Symantec Common Stock as capital
property for purposes of the Canadian Tax Act.
This summary is based on the current provisions of the Canadian Tax Act, the
Regulations thereunder, the current provisions of the Canada-United States
Income Tax Convention (the "Tax Treaty"), the third Protocol amending the Tax
Treaty signed March 17, 1995 and not yet in force (the "Protocol") and counsel's
understanding of the current administrative practices of Revenue Canada,
Customs, Excise and Taxation ("Revenue Canada"). This summary takes into account
the amendments to the Canadian Tax Act and Regulations publicly announced by the
Minister of Finance prior to the date hereof (the "Proposed Amendments") and
assumes that all such Proposed Amendments will be enacted in their present form,
subject to counsel's understanding of certain modifications thereto confirmed by
the Department of Finance. However, no assurances can be given that the Proposed
Amendments will be enacted in the form proposed, or at all.
Except for the foregoing, this summary does not take into account or
anticipate any changes in law, whether by legislative, administrative or
judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ from the Canadian federal income tax considerations described herein.
WHILE THIS SUMMARY IS INTENDED TO ADDRESS ALL PRINCIPAL CANADIAN FEDERAL
INCOME TAX CONSIDERATIONS, IT IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO
BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX ADVICE TO ANY
PARTICULAR DELRINA SHAREHOLDER. THEREFORE, SUCH HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES. NO ADVANCE INCOME
TAX RULING HAS BEEN OBTAINED FROM REVENUE CANADA TO CONFIRM THE TAX CONSEQUENCES
OF ANY OF THE TRANSACTIONS DESCRIBED HEREIN.
For purposes of the Canadian Tax Act, all amounts relating to the
acquisition, holding or disposition of shares of Symantec Common Stock,
including dividends, adjusted cost base and proceeds of disposition must be
converted into Canadian dollars based on the prevailing United States dollar
exchange rate at the time such amounts arise.
60
<PAGE>
SHAREHOLDERS RESIDENT IN CANADA
The following portion of the summary is applicable to Delrina shareholders
who, for purposes of the Canadian Tax Act, are resident or deemed to be resident
in Canada.
EXCHANGE OF DELRINA COMMON SHARES FOR EXCHANGEABLE SHARES. So long as, at
the Effective Time, the aggregate adjusted cost base of a holder's Delrina
Common Shares exceeds the sum of (i) the amount of any cash received in respect
of a fractional Exchangeable Share and (ii) the fair market value of the Voting
Rights and Exchange Rights under the Voting and Exchange Trust Agreement
acquired by such holder in connection with the exchange and net of any
reasonable costs of disposition, such holder will not realize a capital gain for
purposes of the Canadian Tax Act on the exchange. To the extent that such sum,
net of any reasonable costs of disposition, exceeds the aggregate adjusted cost
base of such holder's Delrina Common Shares, such holder will realize a capital
gain for purposes of the Canadian Tax Act. The taxation of capital gains is
described below in respect of a redemption or exchange of Exchangeable Shares.
On the exchange, a shareholder will be deemed to have acquired
(i) Exchangeable Shares for a cost equal to the amount, if any, by which
the adjusted cost base to such holder of the Delrina Common Shares exceeds
the sum of (i) the fair market value of the Voting Rights and Exchange
Rights in respect of the shareholder's Exchangeable Shares and (ii) any cash
received by the holder in lieu of a fractional Exchangeable Share; and
(ii) the Voting Rights and Exchange Rights in respect of the
shareholder's Exchangeable Shares for a cost equal to their fair market
value.
For these purposes, a holder of Delrina Common Shares will be required to
determine the fair market value of the Voting Rights and Exchange Rights on a
reasonable basis for purposes of the Canadian Tax Act. Delrina is of the view
and has advised counsel that the Voting Rights and Exchange Rights have only
nominal value. Therefore, a holder of Delrina Common Shares should not realize a
capital gain on the exchange of Delrina Common Shares for Exchangeable Shares.
Such determination of value is not binding on Revenue Canada and counsel can
express no opinion on matters of factual determination such as this.
CALL RIGHTS. Delrina is of the view and has advised counsel that no amount
should be allocated to the Call Rights. In particular, Delrina is of the view
that the Liquidation Call Right, the Redemption Call Right and the Retraction
Call Right have nominal value. On this basis, no shareholder should realize a
gain at the time that any of such rights are granted to Symantec. Such
determinations of value are not binding on Revenue Canada and counsel can
express no opinion on matters of factual determination such as this.
DIVIDENDS
EXCHANGEABLE SHARES. In the case of a shareholder who is an individual,
dividends received or deemed to be received on the Exchangeable Shares will be
included in computing the shareholder's income, and will be subject to the
gross-up and dividend tax credit rules normally applicable to taxable dividends
received from taxable Canadian corporations.
The Exchangeable Shares will be "taxable preferred shares" and "short-term
preferred shares" for purposes of the Canadian Tax Act. Accordingly, Delrina
will be subject to a 66 2/3% tax under Part VI.1 of the Canadian Tax Act on
dividends paid or deemed to be paid on the Exchangeable Shares. Dividends
received or deemed to be received on the Exchangeable Shares will not be subject
to the 10% tax under Part IV.1 of the Canadian Tax Act applicable to certain
corporations.
If Symantec or any person with whom Symantec does not deal at arm's length
is a "specified financial institution" under the Canadian Tax Act at a point in
time that a dividend is paid on an Exchangeable Share, then, subject to the
exemption described below, dividends received or deemed to be received by a
shareholder that is a corporation will not be deductible in computing taxable
income but will be fully includable in taxable income under Part I of the
Canadian Tax Act. Such dividend will
61
<PAGE>
not be subject to tax under Part IV of the Canadian Tax Act. A corporation will
generally be a specified financial institution for these purposes if it is a
bank, a trust company, a credit union, an insurance corporation or a corporation
whose principal business is the lending of money to persons with whom the
corporation is dealing at arm's length or the purchasing of debt obligations
issued by such persons or a combination thereof, and corporations controlled by
or related to such entities. Symantec has informed counsel that it is of the
view that neither it nor any person with whom it does not deal at arm's length
is a specified financial institution at the current time but there can be no
assurances that this status will not change prior to any dividend which is
received or deemed to be received by a corporate shareholder.
This denial of the dividend deduction for a corporate shareholder will not
in any event apply if at the time a dividend is received or deemed to be
received, the Exchangeable Shares are listed on a prescribed stock exchange
(which currently includes the TSE), Symantec controls Delrina, and the recipient
(together with persons with whom the recipient does not deal at arm's length or
any partnership or trust of which the recipient or person is a member or
beneficiary, respectively) does not receive dividends on more than 10% of the
issued and outstanding Exchangeable Shares.
Subject to the foregoing, in the case of a shareholder that is a
corporation, other than a "specified financial institution" as defined in the
Canadian Tax Act, dividends received or deemed to be received on the
Exchangeable Shares will normally be deductible in computing its taxable income.
In the case of a shareholder that is a specified financial institution, such
a dividend will be deductible in computing its taxable income only if either:
(i) the specified financial institution did not acquire the Exchangeable
Shares in the ordinary course of the business carried on by such
institution; or
(ii) at the time of the receipt of the dividend by the specified
financial institution, the Exchangeable Shares are listed on a prescribed
stock exchange in Canada (which currently includes the TSE) and the
specified financial institution, either alone or together with persons with
whom it does not deal at arm's length, does not receive (or is not deemed to
receive) dividends in respect of more than 10% of the issued and outstanding
Exchangeable Shares.
A shareholder that is a "private corporation" (as defined in the Canadian
Tax Act) or any other corporation resident in Canada and controlled or deemed to
be controlled by or for the benefit of an individual or a related group of
individuals may be liable under Part IV of the Canadian Tax Act to pay a
refundable tax of 33 1/3% on dividends received or deemed to be received on the
Exchangeable Shares to the extent that such dividends are deductible in
computing the shareholder's taxable income.
REDEMPTION OR EXCHANGE OF EXCHANGEABLE SHARES. On the redemption (including
a retraction) of an Exchangeable Share by Delrina, the holder of an Exchangeable
Share will be deemed to have received a dividend equal to the amount, if any, by
which the redemption proceeds (the fair market value at the time of the
redemption of the share of Symantec Common Stock received by the shareholder
from Delrina on the redemption plus the amount, if any, of all accrued but
unpaid dividends on the Exchangeable Share) exceeds the paid-up capital at that
time of the Exchangeable Share so redeemed. The amount of any such deemed
dividend will be subject to the tax treatment accorded to dividends described
above. On the redemption, the holder of an Exchangeable Share will also be
considered to have disposed of the Exchangeable Share, but the amount of such
deemed dividend will be excluded in computing the shareholder's proceeds of
disposition for purposes of computing any capital gain or capital loss arising
on the disposition of the Exchangeable Share. In the case of a shareholder that
is a corporation, in some circumstances the amount of any such deemed dividend
may be treated as proceeds of disposition and not as a dividend.
On the exchange of an Exchangeable Share by the holder thereof with Symantec
for a share of Symantec Common Stock, the holder will in general realize a
capital gain (or a capital loss) equal to the amount by which the proceeds of
disposition of the Exchangeable Share, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to the holder of
the Exchangeable
62
<PAGE>
Share. For these purposes, the proceeds of disposition will be the fair market
value of a share of Symantec Common Stock at the time of exchange plus the
amount of all accrued but unpaid dividends on the Exchangeable Share received by
the holder as part of the exchange consideration.
Three-quarters of any such capital gain (the "taxable capital gain") will be
included in the shareholder's income for the year of disposition. Three-quarters
of any capital loss so realized (the "allowable capital loss") may be deducted
by the holder against taxable capital gains for the year of disposition. Any
excess of allowable capital losses over taxable capital gains of the shareholder
for the year of disposition may be carried back up to three taxation years or
forward indefinitely and deducted against net taxable capital gains in those
other years.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation" (as defined in the Canadian Tax Act)
may be liable to pay an additional refundable tax of 6-2/3% on its "aggregate
investment income" for the year, which is defined to include an amount in
respect of taxable capital gains (but not dividends or deemed dividends
deductible in computing taxable income). This new tax will apply to taxation
years that end after June 1995 and will be pro-rated for taxation years that
begin before July 1995 and end after June 1995.
If the holder of an Exchangeable Share is a corporation, the amount of any
capital loss arising from a disposition or deemed disposition of an Exchangeable
Share may be reduced by the amount of dividends received or deemed to have been
received by it on such share or on the Delrina Common Shares previously owned by
such holder, to the extent and under circumstances prescribed by the Canadian
Tax Act. Similar rules may apply where a corporation is a member of a
partnership or a beneficiary of a trust that owns Exchangeable Shares or where a
trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns Exchangeable
Shares.
The cost base of a share of Symantec Common Stock received on the
retraction, redemption or exchange of an Exchangeable Share will be equal to the
fair market value of the share of Symantec Common Stock at the time of such
event.
Because of the existence of the Retraction Call Right, a holder exercising
the right of retraction in respect of an Exchangeable Share cannot control
whether such holder will receive a share of Symantec Common Stock by way of
redemption of the Exchangeable Share by Delrina or by way of purchase of the
Exchangeable Share by Symantec. As described above, the Canadian federal income
tax consequences of a redemption differ from those of a purchase. However a
holder who exercises the right of retraction will be notified if the Retraction
Call Right will not be exercised by Symantec, and if such holder does not wish
to proceed, such holder may cancel the notice of retraction and retain such
holder's Exchangeable Share.
SYMANTEC COMMON STOCK. Dividends on Symantec Common Stock will be included
in the recipient's income for the purposes of the Canadian Tax Act. Such
dividends received by an individual shareholder will not be subject to the
gross-up and dividend tax credit rules in the Canadian Tax Act. A corporation
which is a shareholder will include such dividends in computing its income and
generally will not be entitled to deduct the amount of such dividends in
computing its taxable income. United States non-resident withholding tax on such
dividends will be eligible for foreign tax credit or deduction treatment where
applicable under the Canadian Tax Act.
DISPOSITION OF SYMANTEC COMMON STOCK
A disposition or deemed disposition of a share of Symantec Common Stock by a
holder will generally result in a capital gain (or capital loss) equal to the
amount by which the proceeds of disposition, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to the holder of
the share of Symantec Common Stock.
63
<PAGE>
ELIGIBILITY FOR INVESTMENT
FOREIGN PROPERTY. Provided they are listed on a prescribed stock exchange
in Canada (which currently includes the TSE), the Exchangeable Shares will not
be foreign property under the Canadian Tax Act for trusts governed by registered
pension plans, registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans or for certain other tax-exempt persons.
The Voting Rights and Exchange Rights will be foreign property under the
Canadian Tax Act. However, as indicated above, Delrina is of the view that the
fair market value of these rights is nominal. Symantec Common Stock will be
foreign property under the Canadian Tax Act.
QUALIFIED INVESTMENTS. Provided they are listed on a prescribed stock
exchange in Canada (which currently includes the TSE), the Exchangeable Shares
will be a qualified investment under the Canadian Tax Act for trusts governed by
registered retirement savings plans, registered retirement income funds and
deferred profit sharing plans. (In certain other circumstances, such shares may
also be qualified investments.) Symantec Common Stock will be a qualified
investment under the Canadian Tax Act for such plans provided such shares remain
listed on the NNM (or are listed on certain other stock exchanges). The Voting
Rights and Exchange Rights will not be qualified investments under the Canadian
Tax Act. However, as indicated above, Delrina is of the view that the fair
market value of these rights is nominal.
DISSENTING SHAREHOLDERS
Holders of Delrina Common Shares are permitted to dissent from the
Arrangement in the manner set out in section 185 of the OBCA. A dissenting
Delrina shareholder will be entitled, in the event the Arrangement becomes
effective, to be paid by Delrina the fair value of the Delrina Common Shares
held by such holder determined as of the appropriate date. See "DISSENTING
SHAREHOLDERS' RIGHTS." Such shareholder will be considered to have realized a
deemed dividend and capital gain (or capital loss) based on redemption proceeds
equal to such fair value, computed as generally described above in the case of a
redemption (including a retraction) of an Exchangeable Share by Delrina for a
share of Symantec Common Stock under "Redemption or Exchange of Exchangeable
Shares." Dissenting Delrina shareholders should consult their own tax advisors
in respect of the treatment of such deemed dividends. Additional income tax
considerations may be relevant to dissenting Delrina shareholders who fail to
perfect or withdraw their claims pursuant to the right of dissent.
SHAREHOLDERS NOT RESIDENT IN CANADA
The following portion of the summary is applicable to holders of Delrina
Common Shares who, for purposes of the Canadian Tax Act, have not been and will
not be resident or deemed to be resident in Canada at any time while they have
held Delrina Common Shares or will hold Exchangeable Shares or shares of
Symantec Common Stock and to whom such shares are not taxable Canadian property
and in the case of a non-resident of Canada who carries on an insurance business
in Canada and elsewhere, the shares are not effectively connected with its
Canadian insurance business.
Generally, Delrina Common Shares and Exchangeable Shares and shares of
Symantec Common Stock will not be taxable Canadian property provided that such
shares are listed on a prescribed stock exchange (which currently include the
TSE and NNM), the holder does not use or hold, and is not deemed to use or hold,
the Delrina Common Shares, the Exchangeable Shares or the shares of Symantec
Common Stock, as applicable, in connection with carrying on a business in Canada
and the holder, persons with whom such holder does not deal at arm's length, or
the holder and such persons, has not owned (or had under option) 25% or more of
the issued shares of any class or series of the capital stock of Delrina or
Symantec at any time within five years preceding the date in question. In the
case of Symantec, even if the holder exceeds the 25% threshold with respect to
shares of Symantec Common Stock referred to in the preceding sentence, the
shares of Symantec Common Stock may not be taxable Canadian property; such
holders should consult their own tax advisors to determine whether their shares
of Symantec Common Stock constitute taxable Canadian property. Delrina has
applied for the listing of the Exchangeable Shares on the TSE and Symantec has
indicated that it intends to use its best efforts to cause Delrina to maintain
such listing.
64
<PAGE>
A holder of Delrina Common Shares will not be subject to tax under the
Canadian Tax Act on the exchange of Delrina Common Shares for Exchangeable
Shares, on the exchange of an Exchangeable Share for a share of Symantec Common
Stock, except to the extent the exchange gives rise to a deemed dividend
(discussed below), or on the sale or other disposition of an Exchangeable Share
or a share of Symantec Common Stock.
Dividends paid on the Exchangeable Shares are subject to non-resident
withholding tax under the Canadian Tax Act at the rate of 25%, although such
rate may be reduced under the provisions of an applicable income tax treaty. For
example, under the Tax Treaty, the rate is generally reduced to 15% in respect
of dividends paid to a person who is the beneficial owner and who is resident in
the United States for purposes of the Tax Treaty.
A holder whose Exchangeable Shares are redeemed (either under Delrina's
redemption right or pursuant to the holder's retraction rights) will be deemed
to receive a dividend as described above, which deemed dividend will be subject
to withholding tax as described in the preceding paragraph.
Holders of Delrina Common Shares are permitted to dissent from the
Arrangement in the manner set out in section 185 of the OBCA. A dissenting
Delrina shareholder will be entitled, in the event the Arrangement becomes
effective, to be paid by Delrina the fair value of the Delrina Common Shares
held by such holder determined as of the appropriate date. See "DISSENTING
SHAREHOLDERS' RIGHTS." Such shareholder will be considered to have realized a
deemed dividend and capital gain (or capital loss) based on redemption proceeds
equal to such fair value, computed as generally described above in the case of a
redemption (including a retraction) of an Exchangeable Share by Delrina for a
share of Symantec Common Stock under "Redemption or Exchange of Exchangeable
Shares." Deemed dividends will be subject to withholding tax as described above.
Any capital gain realized by a dissenting Delrina shareholder will not be taxed
under the Canadian Tax Act if the Delrina Common Shares in respect of which the
right of dissent is exercised are not taxable Canadian property, as described
above. Additional income tax considerations may be relevant to dissenting
Delrina shareholders who fail to perfect or withdraw their claims pursuant to
the right of dissent.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS TO DELRINA SHAREHOLDERS
In the opinion of Skadden, Arps, Slate, Meagher & Flom, United States
counsel to Delrina ("U.S. Counsel"), the following is a summary of the material
United States federal income tax considerations generally applicable to Delrina
shareholders that are "United States persons" as defined for United States
federal income tax purposes and that hold Delrina Common Shares as capital
assets ("United States Holders"), arising from and relating to the Arrangement,
including the receipt and ownership of Exchangeable Shares and Symantec Common
Stock. For United States federal income tax purposes, "United States persons"
are United States citizens or residents, corporations or partnerships organized
under the laws of the United States or any state thereof, and any estate or
trust subject to United States federal income tax on its income regardless of
source.
This summary is based on United States federal tax law in effect as of the
date of this Joint Proxy Statement. No statutory, judicial, or administrative
authority exists which directly addresses certain of the United States federal
income tax consequences of the issuance and ownership of instruments and rights
comparable to the Exchangeable Shares, the Voting Rights, the Exchange Rights
and the Call Rights. Consequently (as discussed more fully below), some aspects
of the United States federal income tax treatment of the Arrangement, including
the receipt and ownership of Exchangeable Shares and the exchange of
Exchangeable Shares for shares of Symantec Common Stock, are not certain. No
advance income tax ruling has been sought or obtained from the United States
Internal Revenue Service ("IRS") regarding the tax consequences of any of the
transactions described herein.
This summary does not address aspects of United States taxation other than
United States federal income taxation, nor does it address all aspects of United
States federal income taxation that may be applicable to particular United
States Holders, including, without limitation, holders of Delrina Common Shares
acquired as a result of the exercise of employee stock options. In addition,
65
<PAGE>
this summary does not address the United States state or local tax consequences
or the foreign tax consequences of the Arrangement or the receipt and ownership
of the Exchangeable Shares or shares of Symantec Common Stock.
UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE UNITED STATES FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES AND THE FOREIGN
TAX CONSEQUENCES OF THE ARRANGEMENT, INCLUDING THE RECEIPT AND OWNERSHIP OF
EXCHANGEABLE SHARES, VOTING RIGHTS, EXCHANGE RIGHTS AND SHARES OF SYMANTEC
COMMON STOCK.
CHARACTERIZATION OF THE ARRANGEMENT FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES
It is a condition to the obligation of Delrina to consummate the Arrangement
that Delrina shall have received an opinion from U.S. Counsel, in form and
substance reasonably satisfactory to Delrina, substantially to the effect that,
although not free from doubt, the Arrangement should qualify as a
"reorganization" within the meaning of Section 368(a) of the U.S. Code. There
is, however, no direct authority addressing the proper treatment of the
Arrangement for United States federal income tax purposes and therefore the
conclusions contained in such opinion are subject to significant uncertainty.
Accordingly, there can be no assurance that the IRS would not challenge the
status of the Arrangement as a reorganization or that, if challenged, a court
would not agree with the IRS. Regardless of whether the Arrangement qualifies as
a "reorganization" within the meaning of Section 368(a) of the U.S. Code,
Delrina will recognize no gain or loss for United States federal income tax
purposes as a result of the Arrangement.
RECEIPT OF EXCHANGEABLE SHARES
All Delrina shareholders will initially receive Exchangeable Shares, Voting
Rights and Exchange Rights (and will convey certain of the Call Rights) pursuant
to the Combination Agreement and the Plan of Arrangement. Although the matter is
not free from doubt, upon receipt of Exchangeable Shares upon conversion of
Delrina Common Shares, a United States Holder generally should not recognize
gain or loss, except as otherwise provided herein. The tax basis of the
Exchangeable Shares received by a United States Holder generally should be equal
to the tax basis of the Delrina Common Shares converted pursuant to the
Arrangement reduced by the tax basis allocated to (i) fractional share interests
for which cash is received and (ii) Delrina Common Shares, if any, deemed to
have been exchanged for the Voting Rights and Exchange Rights (as discussed
below). The holding period of Exchangeable Shares in the hands of a United
States Holder should include the holding period of the Delrina Common Shares
converted pursuant to the Arrangement.
Assuming that the United States Holders of Delrina Common Shares receiving
Exchangeable Shares pursuant to the Arrangement will otherwise be entitled to
nonrecognition treatment, any such holder will nevertheless recognize gain or
loss equal to the difference, if any, between the amount of cash received in
lieu of a fractional share interest and the tax basis of the Delrina Common
Shares allocated to the holder's fractional share interest. Such gain or loss
will constitute capital gain or loss and will be long-term capital gain or loss
if the fractional share interest exchanged has been held for more than one year
at the time cash is received in lieu thereof.
Delrina believes that the Voting Rights and Exchange Rights received and any
Call Rights deemed to be conveyed by Delrina shareholders pursuant to the
Combination Agreement and the Arrangement will have only nominal value and,
therefore, that their receipt or conveyance, as the case may be, will not result
in any material United States federal income tax consequences. Further, the
exchange of certain of the Call Rights for the Voting Rights and Exchange Rights
may not be taxable to United States Holders because United States Holders and
Symantec may be deemed to have granted purchase options to each other, which
grants would not generally be treated as taxable events for United States
federal income tax purposes. It is possible, however, that the IRS could take
the position that the Voting Rights, Exchange Rights and Call Rights have
greater than nominal value and that the transfer or receipt of such rights is
taxable. In such event, the receipt of the Voting Rights and Exchange Rights and
the conveyance of certain of the Call Rights could generate taxable gain or
loss.
66
<PAGE>
Such gain or loss would generally be capital gain or loss, unless the IRS were
to assert that the Voting Rights, Exchange Rights or any other rights, such as
the rights beneficially enjoyed by United States Holders under the Support
Agreement, were transferred to the United States Holder by Delrina, and not by
Symantec, in redemption of a portion of the United States Holder's Delrina
Common Shares.
If the IRS successfully asserts that the Voting Rights and Exchange Rights
have greater than nominal value and such rights are deemed to have been
transferred by Delrina rather than Symantec in redemption of Delrina Common
Shares, a United States Holder would recognize dividend income equal to the
value of such rights to the extent of the accumulated earnings and profits of
Delrina (as determined under United States federal income tax principles) unless
such deemed redemption is either "not essentially equivalent to a dividend" or
"substantially disproportionate" (as such terms are defined in Section 302(b) of
the U.S. Code). If the deemed redemption is "substantially disproportionate" or
"not essentially equivalent to a dividend," any gain recognized by a United
States holder would be capital gain. Holders should consult their tax advisors
with respect to the potential tax consequences of the receipt of the Voting
Rights and Exchange Rights pursuant to the Arrangement.
REQUIREMENT OF NOTICE FILING
Any United States Holder that receives the Exchangeable Shares in exchange
for Delrina Common Shares will be required to file a notice with the IRS on or
before the last date for filing a United States federal income tax return for
the holder's taxable year in which the Arrangement occurs. The notice must
contain certain information specifically enumerated in Section 7.367(b)-1 of the
United States Treasury regulations, and United States Holders are advised to
consult their tax advisors for assistance in preparing such notice.
If a United States Holder required to give notice as described above fails
to give such notice, and if the United States Holder further fails to establish
reasonable cause for the failure, then the Commissioner of the IRS (the
"Commissioner") will be required to determine, based on all the facts and
circumstances, whether the conversion of Delrina Common Shares into Exchangeable
Shares is eligible for nonrecognition treatment. In making this determination,
the Commissioner may conclude (i) that the conversion is eligible for
nonrecognition treatment, despite such noncompliance, (ii) that the conversion
is eligible for nonrecognition treatment, provided that certain other conditions
imposed by the United States Treasury regulations are satisfied, or (iii) that
the conversion is not eligible for nonrecognition treatment and that any gain
recognized will be taken into account for purposes of increasing the tax basis
of the Exchangeable Shares received pursuant to the Combination Agreement and
the Arrangement. Nevertheless, the failure of any one United States Holder to
satisfy the foregoing notice requirements should not bar other United States
Holders that do satisfy such requirements from receiving nonrecognition
treatment with respect to the conversion of their Delrina Common Shares into
Exchangeable Shares pursuant to the Arrangement.
EXCHANGE OF EXCHANGEABLE SHARES
It is anticipated that (subject to certain exceptions described below) a
United States Holder that exercises such holder's rights to exchange the
Exchangeable Shares for shares of Symantec Common Stock generally will recognize
gain or loss on the receipt of the shares of Symantec Common Stock in exchange
for such Exchangeable Shares. Such gain or loss will be equal to the difference
between the fair market value of the shares of Symantec Common Stock at the time
of the exchange and the United States Holder's tax basis in the Exchangeable
Shares exchanged therefor. The gain or loss will be capital gain or loss, except
that, with respect to any declared but unpaid dividends on the Exchangeable
Shares, ordinary income may be recognized by the holder thereof. Capital gain or
loss will be long-term capital gain or loss if the Exchangeable Shares (together
with the pre-conversion Delrina Common Shares) have been held for more than one
year at the time of the exchange. The United States Holder will take as such
holder's tax basis in the shares of Symantec Common Stock the fair market value
of the shares of Symantec Common Stock at the time of the exchange. The holding
period of the shares of Symantec Common Stock received by the United States
Holder in the exchange will begin on the day after the United States Holder
receives the shares of Symantec Common Stock.
67
<PAGE>
In view of the likelihood of the recognition of gain or loss upon the
exchange of Exchangeable Shares for shares of Symantec Common Stock, United
States Holders may wish to consider delaying such exchange until such time as
they intend to dispose of the shares of Symantec Common Stock receivable in
exchange for their Exchangeable Shares or (as discussed below) until such time
that Symantec owns at least 80 percent of all the then issued and outstanding
Exchangeable Shares.
Under certain limited circumstances, the exchange by a United States Holder
of Exchangeable Shares for shares of Symantec Common Stock may be characterized
as a tax-free exchange. First, an exchange of Exchangeable Shares for shares of
Symantec Common Stock may be characterized as a tax-free exchange if, at the
time of such exchange, (i) at least 80 percent of the then outstanding
Exchangeable Shares are held by Symantec and (ii) in such exchange, Symantec,
rather than Delrina, acquires the Exchangeable Shares in exchange for shares of
Symantec Common Stock pursuant to the exercise of its Call Rights. In addition,
a United States Holder that receives shares of Symantec Common Stock from
Symantec upon the exercise by Symantec of the Redemption Call Right or the
Liquidation Call Right generally should be entitled to nonrecognition treatment
with respect to the exchange. In either case, the exchange would not be tax free
unless certain other requirements are satisfied, which, in turn, will depend
upon facts and circumstances existing at the time of the exchange and cannot be
accurately predicted as of the date of this Joint Proxy Statement. If such
exchange did qualify as a tax-free exchange, a United States Holder would take
as such holder's tax basis in the shares of Symantec Common Stock such holder's
tax basis in the Exchangeable Shares exchanged therefor. The holding period of
the shares of Symantec Common Stock received by a United States Holder should
include the holding period of the Exchangeable Shares exchanged therefor, which,
in turn, should include the holding period of the Delrina Common Shares
converted pursuant to the Combination Agreement and the Plan of Arrangement,
provided that such Delrina Common Shares and Exchangeable Shares have been held
as capital assets immediately prior to the Arrangement and the subsequent
exchange, respectively.
For United States federal income tax purposes, gain realized on the exchange
of Exchangeable Shares for shares of Symantec Common Stock generally will be
treated as United States source gain, except that, under the terms of the Tax
Treaty, such gain may be treated as sourced in Canada. Any Canadian tax imposed
on the exchange will be available as a credit against United States federal
income taxes, subject to applicable limitations. A United States Holder that is
ineligible for a foreign tax credit with respect to any Canadian tax paid may be
entitled to a deduction therefor in computing United States taxable income.
DISTRIBUTIONS ON THE EXCHANGEABLE SHARES
A United States Holder of Exchangeable Shares generally will be required to
include in gross income as ordinary income dividends paid on the Exchangeable
Shares to the extent paid out of the earnings and profits of Delrina, as
determined under United States federal income tax principles. Such dividends
generally will be treated as foreign source passive income for foreign tax
credit limitation purposes. Under the current Tax Treaty, such distributions
will be subject to Canadian withholding tax at a maximum rate of 15 percent.
Subject to certain limitations of United States federal income tax law, a United
States Holder should generally be entitled to either a credit against such
holder's United States federal income tax liability or a deduction in computing
United States taxable income for Canadian income taxes withheld from
distributions with respect to the Exchangeable Shares.
DISSENTERS
A United States Holder who exercises such holder's right to dissent from the
Arrangement will recognize gain or loss on the exchange of such holder's Delrina
Common Shares for cash in an amount equal to the difference between the amount
of cash received and such holder's basis in the Delrina Common Shares. Such gain
or loss will be capital gain or loss if the Delrina Common Shares were held
68
<PAGE>
as capital assets at the time of the Effective Time of the Arrangement and will
be long-term capital gain or loss if the Delrina Common Shares have been held
for more than one year at the time of the Arrangement.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
For United States federal income tax purposes, Delrina generally will be
classified as a passive foreign investment company (a "PFIC") for any taxable
year during which either (i) 75 percent or more of its gross income is passive
income (as defined for United States federal income tax purposes) or (ii) on
average for such taxable year, 50 percent or more of its assets (by value)
produce or are held for the production of passive income. For purposes of
applying the foregoing tests, the assets and gross income of Delrina's
significant subsidiaries will be attributed to Delrina.
While there can be no assurance with respect to the classification of
Delrina as a PFIC, Delrina believes that it did not constitute a PFIC during its
taxable years ending prior to consummation of the Arrangement. Currently,
Delrina and Symantec intend to endeavor to cause Delrina to avoid PFIC status in
the future, although there can be no assurance that they will be able to do so
or that their intent will not change. Moreover, in connection with the
transactions contemplated herein, U.S. Counsel will not be rendering an opinion
with regard to Delrina's status as a PFIC.
For purposes of applying the 50 percent asset test following the
Arrangement, Delrina's assets must be measured by their adjusted tax bases (as
calculated in order to compute earnings and profits for United States federal
income tax purposes) instead of by value, subject to certain adjustments. As a
result, it is possible that Delrina will be a PFIC for taxable years ending
after the Arrangement even though less than 50 percent of Delrina's assets
(measured by the fair market value of such assets) do not constitute passive
assets. After the Arrangement, Delrina intends to monitor its status regularly,
and promptly following the end of each taxable year Delrina will notify United
States Holders of Exchangeable Shares if it believes that Delrina was a PFIC for
that taxable year.
Although the matter is not free from doubt, if Delrina were a PFIC at any
time during a particular United States Holder's holding period for its Delrina
Common Shares, and the United States Holder had not made an election to treat
Delrina as a qualified electing fund (a "QEF") under Section 1295 of the U.S.
Code (a "QEF Election"), then the IRS might take the position that such United
States Holder is required to recognize gain upon the conversion of its Delrina
Common Shares into Exchangeable Shares. In the event that gain recognition were
so required, the amount of such gain would be equal to the excess of the fair
market value of the Delrina Common Shares over their adjusted tax bases.
Further, in such event, any exchange of Exchangeable Shares for shares of
Symantec Common Stock would be taxable under the rules described below.
If Delrina is a PFIC following the Arrangement during a United States
Holder's holding period for such holder's Exchangeable Shares, and the United
States Holder does not make a QEF Election, then (i) the United States Holder
would be required to allocate income recognized upon receiving certain excess
dividends with respect to, and gain recognized upon the disposition of, such
United States Holder's Exchangeable Shares (including upon the exchange of
Exchangeable Shares for shares of Symantec Common Stock) ratably over the United
States Holder's holding period for such Exchangeable Shares, (ii) the amount
allocated to each year other than (x) the year of the excess dividend payment or
disposition of the Exchangeable Shares or (y) any year prior to the beginning of
the first taxable year of Delrina for which it was a PFIC, would be subject to
tax at the highest rate applicable to individuals or corporations, as the case
may be, for the taxable year to which such income is allocated, and an interest
charge would be imposed upon the resulting tax attributable to each such year
(which charge would accrue from the due date of the return for the taxable year
to which such tax was allocated), and (iii) gain recognized upon the disposition
of the Exchangeable Shares would be taxable as ordinary income.
If a United States Holder makes a QEF Election, then the United States
Holder generally will be currently taxable on such holder's pro rata share of
Delrina's ordinary earnings and net capital gains
69
<PAGE>
(at ordinary income and capital gains rates respectively) for each taxable year
of Delrina in which Delrina is classified as a PFIC, even if no dividend
distributions are received by such United States Holder, unless such United
States Holder makes an election to defer such taxes. If Delrina believes that it
was a PFIC for a taxable year, it will provide United States Holders of
Exchangeable Shares with information sufficient to allow such holders to make a
QEF Election and report and pay any current or deferred taxes due with respect
to their pro rata shares of Delrina's ordinary earnings and profits and net
capital gains for such taxable year. United States Holders should consult their
tax advisors concerning the merits and mechanics of making a QEF Election and
other relevant tax considerations if Delrina is a PFIC for any taxable year.
The foregoing summary of the possible application of the PFIC rules to
Delrina and the United States Holders of Delrina Common Shares is only a summary
of certain material aspects of those rules. Because the United States federal
tax consequences to a United States Holder of Delrina Common Shares under the
PFIC provisions are significant, United States Holders of Delrina Common Shares
are urged to discuss those consequences with their tax advisors.
SHAREHOLDERS NOT RESIDENT IN OR CITIZENS OF THE UNITED STATES
The following summary is applicable to holders of Delrina Common Shares that
are not United States Holders ("non-United States Holders").
A non-United States Holder generally will not be subject to United States
federal income tax on gain (if any) recognized on the receipt of the
Exchangeable Shares, on the sale or exchange of the Exchangeable Shares, or on
the receipt or sale of shares of Symantec Common Stock unless such gain is
effectively connected with a United States trade or business or, in the case of
gains recognized by an individual, such individual is present in the United
States for 183 days or more and has a "tax home" (as defined in the U.S. Code)
during the taxable year.
Dividends received by a non-United States Holder with respect to the
Exchangeable Shares should not be subject to United States withholding tax, and
Delrina and Symantec do not intend that Delrina or Symantec will withhold any
amounts in respect of such tax from such dividends. There is some possibility,
however, that the IRS may assert that United States withholding tax is payable
with respect to dividends paid on the Exchangeable Shares to non-United States
Holders. In such case, holders of Exchangeable Shares could be subject to United
States withholding tax at a rate of 30 percent, which rate may be reduced by an
applicable income tax treaty in effect between the United States and the
non-United States Holder's country of residence (15 percent on dividends paid to
residents of Canada under the Tax Treaty).
Dividends received by a non-United States Holder with respect to the
Symantec Common Stock generally will be subject to United States withholding tax
at a rate of 30 percent, which rate may be subject to reduction by an applicable
income tax treaty (15 percent on dividends paid to residents of Canada under the
Tax Treaty).
70
<PAGE>
DELRINA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Delrina designs, develops, markets and supports software products and
services in the fax and data communications, electronic forms, and consumer
software markets. Founded in 1988, Delrina operates from headquarters in
Toronto, Ontario, Canada. Delrina also has offices in the United States, the
United Kingdom, France, Germany and Barbados. Delrina's business strategy is to
establish technical and market leadership in niche markets with mass market
appeal.
Results for fiscal 1995 reflect a period when Delrina grew in sales volume,
product offerings and total employment. During the year Delrina invested in
building the infrastructure to take advantage of the launch of Windows 95,
including hiring and training the necessary people. As a result, operating
expenses increased considerably. In addition, the anticipated launch of Windows
95 has caused customers to delay software purchases. Delrina believes that these
factors had an adverse effect on its results of operations for the year.
In October 1994, Delrina acquired Boston-based AudioFile, Inc. (now known as
Delrina (Boston) Corporation), a producer of PC voice/telephony technology, best
known for its product "Talkworks"-TM-. Subsequent to the acquisition, Delrina
has initiated substantial development efforts focused on integrating the
Audiofile technology into Delrina's communication products. The purchase price
consisted of approximately C$2.0 million in cash.
In March 1995, Delrina acquired all of the outstanding shares of
Toronto-based CRS Online, Inc. ("CRS"), Canada's largest bulletin board operator
with a subscriber base of approximately 10,000 people. CRS recently began to
offer Internet access to its customers and is planning to add features to
enhance its services. The purchase price of approximately C$1.8 million was
satisfied by the issuance of 94,500 Delrina Common Shares.
In May 1995, Delrina acquired a minority equity interest in Ex Machina, Inc.
("Ex Machina") of New York City, a producer of PC-based wireless messaging and
paging software, for C$2.8 million. Delrina believes that wireless technology
will become a strategic component in some of its future products. Delrina has
also entered into a licensing agreement with Ex Machina to bundle or incorporate
Ex Machina's WinPage, Notify or Reach Me products lines into Delrina's
communications products.
Delrina cannot yet determine its revenue and losses for the fiscal quarter
ended September 30, 1995. However, based on the limited information currently
available to Delrina, Delrina anticipates that revenue for the September 30,
1995 quarter will be significantly less (by at least 20%, although the reduction
could be substantially greater) than revenue for the June 30, 1995 quarter
principally because Delrina did not ship its Windows 95 products in the
September quarter. As Delrina has continued to invest heavily in the development
of products designed specifically for Windows 95, it does not expect expenses in
the September quarter to be lower than those incurred in the June quarter.
Accordingly, Delrina expects that it will incur a net loss in the September 30,
1995 fiscal quarter which will be substantially greater than the net loss
incurred in the June 30, 1995 fiscal quarter.
71
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal periods indicated, the
percentages which selected income statement items bear to net revenues.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenue
Sales................................................................ 100.0% 100.0% 100.0%
Cost of sales.......................................................... 25.2 25.1 29.5
Gross margin........................................................... 74.8 74.9 70.5
Research and development............................................... 10.5 6.7 4.7
Sales and marketing.................................................... 44.3 33.2 38.3
Administrative and general............................................. 12.9 12.2 13.6
Foreign exchange (gain) loss........................................... (0.8) (2.8) 0.3
Interest income........................................................ 2.4 1.3 1.4
Purchased research and development..................................... -- -- 28.9
Provision for income taxes............................................. 3.4 10.3 6.4
Net income (loss)...................................................... 6.9 16.6 (20.3)
</TABLE>
SALES
Delrina operates in a single industry segment: the development and sale of
computer software products. Sales consists of gross sales to distributors,
original equipment manufacturers ("OEMs"), large retailers, corporate accounts
and individuals via telephone and direct marketing, less an allowance for
returns.
Sales increased to C$132.9 million in fiscal 1995 from C$101.1 million in
fiscal 1994 and C$53.2 million in 1993, representing annual increases of 31% and
111%, respectively. Sales have continued to grow primarily due to increased
aggregate unit sales as opposed to price increases. Sales growth in fiscal 1995
was driven by growth in fax and communications software products such as WinFax
Pro 4.0, Delrina Communications Suite 2.1 and WinFax Pro for Networks. Sales of
such products represented approximately 74% of sales in fiscal 1995, as compared
to 75% in fiscal 1994. Electronic forms software represented 20% of sales in
fiscal 1995, as compared to 18% in fiscal 1994, with the increase resulting from
the introduction of FormFlow 1.1 and PerForm for Windows. Sales of other
products and services represented 6% of net sales in fiscal 1995 as compared to
7% in fiscal 1994.
In fiscal 1994, sales of fax and communications software rose to 75% of
aggregate sales from 63% in the prior year primarily as a result of the
introduction of WinFax Pro 4.0. Sales of forms software also rose but declined
as a percentage of aggregate sales from 31% in fiscal 1993 to 18% in fiscal
1994, as a result of this significant rise in sales of fax and communications
software. Sales from other products also grew, constituting 7% of 1994 net sales
as compared to 6% of 1993 net sales. Delrina expects that fax and communications
software will continue to represent a substantial majority of aggregate sales
for fiscal 1996 with the introduction of new products for Windows 95.
International sales (outside Canada and the United States) have grown from
approximately 3% of sales in fiscal 1993 to 10% in fiscal 1994 and 20% of sales
in fiscal 1995. This has resulted primarily from the introduction of localized
versions of many of Delrina's products and the expansion of operations in
Europe. Delrina believes international sales will continue to increase, and may
increase as a percentage of sales, as Delrina's initiates new geographic
diversification initiatives. When compared to fiscal 1994, the weaker Canadian
dollar relative to other currencies is estimated to have increased fiscal 1995
net revenues by approximately C$5.0 million dollars. Similarly, the weaker
Canadian dollar positively affected fiscal 1994 net revenues by approximately
C$6.0 million compared to fiscal 1993.
72
<PAGE>
Delrina is devoting substantial efforts to the development of software
products that are specifically designed to operate on Windows 95. Windows 95
seeks to deliver a more robust and stable operating environment for PC users and
independent software developers, especially with respect to communications
software. Microsoft has incorporated certain basic fax functions in Windows 95
that may or may not affect the demand for Delrina's fax and communications
products. Should market acceptance not be achieved by Windows 95, or should
Delrina be unable to successfully, or in a timely manner ship products that
function under Windows 95, or should its products not be perceived as containing
sufficient additional functionality over that contained in Windows 95, Delrina's
future revenues would be adversely affected. Delrina expects that its WinFax 7.0
for Windows 95 product will have been shipped to retail channels by November 15,
1995. Delrina does not expect to have shipped Windows 95-compatible versions of
its other software products prior to November 15, 1995. The delay in the release
date of WinFax 7.0 has had an adverse effect on Delrina's revenues for the
fiscal quarter ended September 30, 1995, but, assuming the current expected
release date is met, Delrina expects that revenues will increase during the
fiscal quarter ending December 31, 1995. However, an unexpected delay in the
release of WinFax 7.0, or delays in the release of Windows 95-compatible
versions of Delrina's other software products, could have an adverse effect on
Delrina's revenues for the fiscal quarter ending December 31, 1995. If the
delays were to be significant, the effect could be material.
In response to growing demand for enhanced communications services, Delrina
began offering Fax Broadcast and Fax MailBox services during the 1994 fiscal
year. Delrina believes that these enhanced fax services may create an additional
revenue stream. As a recent entrant in the communications services market,
Delrina has neither been a major supplier in this market nor has it previously
competed with companies already in these businesses. The communications services
market is characterized by lower gross margins than the fax and communications
software market, and is characterized by intense competition, rapid
technological changes, pricing volatility and low customer loyalty. Accordingly,
there is uncertainty regarding customer acceptance of Delrina's services.
In fiscal 1995, Delrina introduced Echo Lake 1.0 to its portfolio of
consumer software titles. Echo Lake is a family album which allows users to
utilize the multi-media capabilities of their PC to record their personal and
family stories. The consumer software market is characterized by lower gross
margins than the fax and communications software market, and is characterized by
intense competition, rapid technological changes and pricing volatility and
alternative selling programs. Accordingly, while there have been a number of
favorable reports by industry analysts, there is uncertainty regarding customer
acceptance of this product.
The markets in which Delrina operates are highly competitive and subject to
rapid changes in technology. The strategic directions of major PC hardware
manufacturers and operating environment developers are also subject to change.
Delrina competes with other software vendors for access to distribution
channels, retail shelf space and the attention of customers. During fiscal 1994
Delrina adopted the strategy of bundling several products and/or services into a
suite package. Delrina believes that bundling several "best-of-breed" software
products, at an attractive price, will produce increased sales and brand
loyalty. However, the bundling of fax and communications software products by
Delrina may encourage competitors to bundle some or all of their products and
offer them at a reduced price. These actions may result in increased price
competition.
Delrina's quarterly operating results have fluctuated as a result of a
number of factors, including overall trends in the economy, new product
announcements and introductions by Delrina and its competitors, pricing,
distributor ordering patterns, consumer buying patterns, product returns and
reserves, expansion of Delrina's international operations, marketing
expenditures, research and development expenditures and exchange rate
fluctuations. Products are generally shipped as orders are received and,
accordingly, Delrina has historically operated with little backlog. Sales in any
quarter are therefore dependent on orders booked and shipped in that quarter,
and any decline in orders would have an impact on results in that quarter. In
addition, a substantial portion of quarterly orders are received and booked in
the third month of the quarter. As a result, Delrina may not learn of a sales
shortfall until late in the fiscal quarter, which could result in an immediate
and adverse effect
73
<PAGE>
on the trading price of Delrina Common Shares Delrina's business also has
certain seasonal elements, with government sales occurring primarily in the
first fiscal quarter and stronger consumer software sales occurring in the
Christmas holiday season. Quarterly results in the future may be influenced by
these or other factors, including possible delays in the shipment of new
products and, accordingly, there may be significant variations in Delrina's
quarterly operating results. Due to these factors Delrina's future earnings may
be subject to significant volatility, particularly on a quarterly basis.
Delrina estimates and maintains reserves for product returns. Product
returns occur when Delrina introduces upgrades, new versions and discontinues
products. In addition, competitive factors require Delrina to offer rights of
return for products that distributors or retail stores are unable to sell.
Delrina has set its reserves for returns in accordance with historical
experience. Setting reserves involves making judgments about future competitive
conditions and product life cycles. Those judgments involve evaluating
information that often is unclear or in conflict. There can be no assurance that
historical experience will be an accurate guide for future levels of product
returns.
Approximately 23% and 10% or a total of 33% of Delrina's revenues in fiscal
1995 were from sales to two large distributors. These customers tend to make the
great majority of their purchases at the end of each fiscal quarter, in part
because they are able or believe they are able to negotiate lower prices and
more favorable terms. This end-of-quarter buying pattern means that forecasts of
quarterly financial results are particularly vulnerable to the risk that they
will not be achieved, either because expected sales do not occur or because they
occur at lower prices or on less favorable terms to Delrina. Delrina's
distributors also carry the products of Delrina's competitors, many of whom have
greater financial resources than Delrina. These customers have limited capital
to invest in inventory and their decisions to purchase products and to allocate
critical shelf space, is partly a function of pricing, terms and special
promotions offered by Delrina and its competitors.
COST OF SALES AND GROSS MARGIN
Cost of sales includes manufacturing expenses, the purchase and duplication
of diskettes and CD-ROM's, production of technical manuals and associated
materials, freight, provisions for obsolete inventory, plus, in most cases,
royalties paid to third party software developers for the use of certain
software technologies. Cost of sales amounted to approximately 25% of net sales
in fiscal 1995 compared to 25% and 30% of net sales in fiscal 1994 and 1993
respectively. Gross margin improvements from fiscal 1993 to 1994 were primarily
achieved through ongoing production cost control efforts. Production cost
controls were achieved primarily in the areas of duplication, assembly,
packaging and shipping.
The PC business software market has been subject to rapid changes that can
be expected to continue. Future technology or market changes, including the
release and market acceptance of Windows 95, may cause certain products to
become obsolete more quickly than expected. This may result in an increase in
required inventory reserves and, therefore, reduced gross margins and net
income. In addition, as part of the software creation process, modifications may
have to be made to shipping versions of Delrina's products. This may result in
significant inventory rework costs.
In future periods, changes in technology, sales mix and competition,
including the release and acceptance of Windows 95, may affect Delrina's gross
margins as a percentage of net sales. Sales mix affects costs since certain
sales require the shipment of prepackaged disks and documentation, while others
require either minimal disks and documentation, or make the customer responsible
for all reproduction expenses.
RESEARCH AND DEVELOPMENT
Research and development costs consist principally of personnel, facility
and equipment costs required to conduct Delrina's development projects and
contracted development efforts. Delrina capitalizes its internal software
development costs in accordance with Canadian GAAP. During fiscal 1995, research
and development expenditures increased to C$13.9 million from C$6.8 million in
fiscal 1994, or an increase of 104%. As a percentage of sales, research and
development expenses rose from
74
<PAGE>
6.7% to 10.5%. The increase is attributable to an increase in the number and
scope of development projects undertaken, including localization of products for
foreign markets and new product development in anticipation of the launch of
Windows 95. Research and development expenses increased from C$2.2 million in
fiscal 1993 to C$6.8 million in fiscal 1994, or an increase of 204%. As a
percentage of sales, research and development expenses rose from 4.7% to 6.7%,
reflecting continued development of new products.
The market for Delrina's products is characterized by continuing
technological change. Management believes that continued investment and support
of research and development efforts must remain a priority in order to remain
competitive and to maintain sales growth. Accordingly, Delrina anticipates that
research and development expenses will increase in fiscal 1996 in order to
complete products scheduled for release, as well as to translate and localize
foreign-language versions of products and to develop new products. Additionally,
Delrina intends to continue recruiting experienced software developers while at
the same time considering the acquisition of complementary software businesses
and technologies.
While Delrina believes its research and development expenditures will result
in successful product introductions, including products being developed for
Windows 95, the uncertain outcome of software development projects means that
increased research and development efforts will not necessarily result in
successful product introductions due to technical difficulties, market
conditions, competitive products and other factors.
SALES AND MARKETING
Sales and marketing expenses include salaries, sales commissions, travel
expenses and facility costs for Delrina's marketing, sales, technical support
and customer support personnel. Programs aimed at increasing sales, such as
advertising, trade shows and promotional programs designed for specific sales
channels are also included. Sales and marketing expenses increased to C$58.9
million in fiscal 1995 from C$33.6 million in fiscal 1994 and C$18.4 million in
fiscal 1993. On an annual basis these expenses increased as a percentage of
sales to 44% in fiscal 1995 from 33% and 38% in 1994 and 1993 respectively.
The increase in sales and marketing expenses in fiscal 1995 is primarily
attributable to the promotion of new products and versions, increased headcount
associated with Delrina's expansion in Europe, the expansion of Delrina's sales
and marketing force and an increase in corporate marketing activities. The
decline in sales and marketing expenses as a percentage of sales from fiscal
1993 to fiscal 1994 is primarily due to the rapid increase in sales in fiscal
1994.
Delrina believes substantial sales and marketing efforts are essential to
achieve revenue growth and to maintain and enhance its competitive position.
Accordingly, with the continued introduction of new and upgraded products as
well as the expansion of its international operations, Delrina expects the
expenses associated with these efforts to increase in dollar amount and to
continue to constitute its most significant operating expense.
ADMINISTRATIVE AND GENERAL
Administrative and general expenses include the financial, information
systems, human resources, legal and administrative operations of Delrina.
Administrative and general expenses increased to C$17.1 million in fiscal 1995
from C$12.2 million in 1994 and C$6.5 million in 1993. On an annual basis, these
expenses expressed as a percentage of sales have remained relatively steady at
13% in fiscal 1995 and 12% and 14% in 1994 and 1993 respectively. Increased
spending on administrative and general expenses has been primarily attributable
to the hiring of additional personnel, increased communication costs and the
implementation of systems associated with supporting the overall company
infrastructure.
PURCHASED RESEARCH AND DEVELOPMENT
In October 1992, Delrina acquired Amaze, Inc., a developer of content
publishing software. A significant portion of the purchase price was allocated
to purchased research and development,
75
<PAGE>
resulting in a charge of C$9.7 million to Delrina's operations in 1993. This
charge is not deductible for income tax purposes. Under Canadian GAAP at that
time, the portion of the purchase price allocated to purchased research and
development was expensed in August 1994. In August 1994, Canadian GAAP was
amended to require that such technology in process be capitalized and amortized.
Accordingly, the purchased research and development components of the
acquisitions made by Delrina in fiscal 1995 were capitalized.
In June 1993, Delrina successfully concluded the acquisition of certain
strategic software technologies for a purchase price of C$4.4 million which have
been incorporated into versions of Delrina's existing products. As the acquired
technologies did not meet with Delrina's criteria for capitalization, C$4.2
million of the purchase price was allocated to purchased research and
development and charged to operations during fiscal 1993.
FOREIGN EXCHANGE
Delrina conducts business in many countries and transacts sales and incurs
expenses in a variety of foreign currencies. The foreign exchange gain/loss
costs are primarily due to the fluctuations that arise on the revaluation of
assets and liabilities held in foreign currencies to Canadian dollars at the
balance sheet date.
Approximately 94% of sales in 1995, 93% of sales in 1994 and 90% of sales in
1993 were derived from sales denominated in foreign currencies. During fiscal
1995, the Canadian dollar fluctuated significantly as against other currencies.
These fluctuations resulted in a net overall foreign exchange gain of C$1.0
million for fiscal 1995. The relatively weak Canadian dollar during fiscal 1994
resulted in a substantial exchange gain of C$2.8 million compared to a loss of
C$0.2 million in fiscal 1993. The effect of currency fluctuations versus the
Canadian dollar are partly offset to the extent that expenses of Delrina are
incurred and paid for in foreign currencies. These balances mitigate a portion
of Delrina's exposure to foreign currency adjustments by substantially
offsetting assets denominated in foreign currencies with liabilities denominated
in the same currency. This acts as a natural hedge in diminishing Delrina's
transaction exposure.
In order to facilitate more meaningful comparison of Delrina's results with
comparable software companies, effective July 1, 1995, Delrina changed its
reporting currency from Canadian to U.S. dollars. As substantially all of
Delrina's sales, assets and liabilities are in U.S. dollars, Delrina expects
that foreign exchange fluctuations in future periods will not be as significant.
There can be no assurance that these strategies will be effective or that
transaction losses can be minimized or forecasted accurately. Delrina does not
hedge either its translation risk or its economic risk. Thus, fluctuations in
exchange rates could affect Delrina's consolidated results of operations and
financial condition in any particular financial period.
INTEREST INCOME
Interest income consists of income earned on cash and marketable securities
balances held throughout the year. Interest income increased to C$3.2 million in
fiscal 1995, compared with C$1.3 million and C$0.6 million in fiscal 1994 and
1993 respectively. Interest income increased from prior years due to rising
interest rates and higher average cash balances.
INCOME TAXES
Delrina's effective tax rate continued to vary from the statutory tax rate
of 44%. An analysis of the difference between the Canadian statutory and the
effective income tax rate is presented in Note 5 to the Delrina Consolidated
Financial Statements. Delrina has available material Investment Tax Credits
("ITCs"). These ITCs are used to reduce current and future federal taxes
payable. Delrina expects that under current tax laws, it will continue to
generate additional tax allowances and credits directly related to Delrina's
ongoing research and development efforts.
76
<PAGE>
LEGAL PROCEEDINGS
Delrina is involved in various litigation incidental to its business. An
adverse result in any of such litigation could have a material adverse impact on
Delrina. See Note 11 to the Delrina Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Working capital, which consists principally of cash and short-term
investments and accounts receivable, was C$68.7 million at June 30, 1995,
compared to C$73.3 million at June 30, 1994. Cash and short-term investments
decreased C$25.9 million to C$36.6 million at June 30, 1995, primarily as a
result of the investing activities described below. A substantial portion of
Delrina's cash and short-term investments is invested in high grade discount
commercial paper. Delrina has no long term debt and at present has no
commitments or agreements which will require that long term debt be incurred.
Accounts receivable increased by C$15.1 million to C$36.1 million in fiscal
1995, primarily due to the increasing product revenues. Days sales outstanding
increased to 105 days at June 30, 1995, up from 53 days at June 30, 1994. The
high days sales outstanding resulted primarily from the granting to many of
Delrina's distributors extended payment terms in order to allow them to
effectively market Delrina's products and to retain shelf space. Bad debts
written off totaled approximately C$0.2 million in fiscal 1995 and C$0.5 million
in fiscal 1994. Delrina's credit department constantly monitors the financial
stability of all its distributors and takes the appropriate actions to collect
accounts receivable from those with deteriorating financial positions.
The main sources of cash outflow in fiscal 1995 were cash used for investing
activities, including C$10.0 million used to purchase property and equipment,
C$6.4 million used to acquire complementary software technologies, the
investment of C$8.7 million in capitalized software and the use of C$1.1 million
in operations. This decrease in cash was offset by the cash provided by the
exercise of employee and other stock options of C$2.2 million. Delrina
anticipates that capital expenditures for computer and office equipment for
fiscal 1996 will continue to grow as computer systems are upgraded to take
advantage of new technologies and to support Windows 95. As technology changes
rapidly in the computer software industry, Delrina cannot predict what
expenditures for technology acquisitions it will make in future fiscal periods.
Delrina thus cannot assess how much of its cash reserves it is planning to spend
on technology acquisitions in future periods.
The two primary sources of cash flow in fiscal 1994 were C$13.4 million of
cash generated by operations and C$40.2 million in net proceeds from the
issuance of 1.5 million common shares by way of a public offering in February
1994. This increase was partially offset by cash used for investing activities,
including C$6.4 million to purchase property and equipment, C$1.6 million to
acquire complementary software technologies and the investment of C$3.5 million
in research and development
Delrina's principal commitments at June 30, 1995 consisted of obligations
under operating leases and certain royalty agreements with minimum payment
clauses.
Delrina has a C$2.0 million bank line of credit with a Canadian chartered
bank, which may be used from time to time to facilitate short-term cash flow. At
June 30, 1995, there were no borrowings outstanding under this credit facility.
It is anticipated that significant expenses will be incurred by Delrina in
connection with the Transaction. See Note 13 to the Delrina Consolidated
Financial Statements. These expenses principally include fees for legal,
accounting and financial advisory services, as well as severance, relocation and
facilities costs related to the Transaction. These expenses will have a
significant adverse impact on Delrina's future profitability and financial
resources. Based on management's assumptions regarding future events, including
the successful closing of the Transaction, Delrina believes its financial
reserves and funds provided by ongoing operations will be sufficient to satisfy
its current anticipated cash requirements for fiscal 1996.
77
<PAGE>
INFORMATION CONCERNING DELRINA
BUSINESS
GENERAL
Delrina designs, develops, markets and supports software products and
services in the fax and data communications, electronic forms and consumer
software markets. Delrina's business strategy is to establish technical and
market leadership in niche markets with mass market appeal.
Delrina was formed by the June 28, 1985 amalgamation, under the OBCA, of
Carolian Systems International Inc. ("Carolian") and a wholly-owned subsidiary.
In July 1988, Carolian acquired a majority interest in Delrina Technology Inc.
and subsequently became its sole shareholder. In November 1989, Carolian changed
its name to Delrina Corporation.
Delrina's subsidiaries, all of which are directly or indirectly wholly
owned, and their respective jurisdictions of incorporation are as follows:
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION
- ---------------------------------------------------------- -----------------
<S> <C>
Delrina (Delaware) Corporation Delaware
Delrina (US) Corporation California
Delrina (Washington) Corporation Washington
Delrina (Seattle) Corporation Washington
Delrina (Boston) Corporation Massachusetts
Delrina (Canada) Corporation Ontario
CRS Online Ltd. Ontario
1087013 Ontario Limited Ontario
Delrina (Wyoming) Limited Liability Company Wyoming
Delrina (International) Corporation Barbados
Delrina (U.K.) Corporation Limited England
Delrina (Germany) GmbH Germany
Delrina (France) Corporation SARL France
</TABLE>
In 1988, Delrina introduced its first product in the PC forms software
market and in 1990 introduced its first product in the PC fax software market.
Delrina has updated and improved these products to meet the changing needs in
their respective markets and anticipates that it will continue to develop and
market products in these categories. Since the introduction of its first PC
software product in 1988, Delrina has shipped or licensed over ten million units
of PC software worldwide.
Delrina's major products can be used on all popular PCs and run on the
Windows graphical user interface ("GUI"). Certain of Delrina's products also
support DOS and Macintosh operating systems.
THE PC FAX SOFTWARE MARKET
Fax technology emerged during the 1980's as a simple, inexpensive method for
image based point-to-point document transmission and, as a result, faxing has
become ubiquitous in the business environment. As PCs and faxing have
proliferated, PCs have increasingly been used to transmit, receive and manage
fax transmissions. PC faxing enables users to transmit output to any fax machine
(including to any computer equipped with fax software and a fax modem), while
allowing PC users with a fax modem to receive and save faxes to disk.
The combination of PC fax software and declining hardware component costs
has resulted in fax modems being bundled with an increasing number of new
desktop and portable PCs. PC faxing has distinct advantages over the fax
machine, including greater convenience, document quality, confidentiality,
portability, ability to store and edit faxes in the computer and lower
operational and supply costs. The decline in price of fax modems and boards has
accelerated the growth of the installed base of fax-capable PCs. Fax products
designed for personal computer networks and wireless communications are expected
to facilitate further growth.
78
<PAGE>
THE PC DATA COMMUNICATIONS SOFTWARE MARKET
PCs and computer networks are becoming the focal point for gaining access to
and managing many kinds of communication services. An example of the convergence
of computers and telecommunications is the Internet, which was created by the
United States military as a backup national communications network and which
initially was primarily used by academics to share information. The Internet has
now become an increasingly important business tool that now links individuals in
more than 100 countries.
Delrina believes that facsimile transmission technology will be a key
element in computer/ telecommunications integration, particularly in the area of
messaging, and that data communications software including transmission, receipt
and management software and services, will become a critical factor in
delivering enhanced productivity for the extended electronic communication
network.
THE COMMUNICATIONS SERVICES MARKET
The desire of PC users to communicate data to a wide group of recipients,
the proliferation of electronic mail networks and the mobility of users have
laid the foundation for a new class of software driven communications services
accessible to PC users. These include fax broadcast, fax mailbox and related
ancillary services which provide greater efficiency and productivity than
traditional alternatives.
THE PC FORMS SOFTWARE MARKET
Businesses and other organizations worldwide generate billions of forms
annually, most of which are paper forms. Forms automation offers substantial
efficiencies and cost savings in capturing, storing and distributing information
by ensuring timely, accurate one-step data entry and retrieval. The PC based
forms processing market encompasses forms software products which are designed
to replace conventional means of producing and using pre-printed forms (i.e.
software for designing, filling-in and printing forms) and forms-based workflow
development tools which are designed to integrate electronic forms with
networks, electronic mail and enterprise-wide data bases to enhance business
workflows.
PC forms software automates the design, modification, storage, filling-in,
printing, communication and management of high quality business forms and data
on PCs. A high-end forms processing solution can serve users throughout the
various stages of forms automation, including forms design, print-on-demand,
electronic filing, data storage and retrieval and electronic transmission and
routing.
The rapid development of standards for PC graphical computing, networking
and databases continues to create increased interest in PC forms software. A
combination of the increasing replacement of mini and mainframe computers by PCs
and increased publication of software for business applications, client/server
development tools, databases and electronic mail systems are expected to
facilitate further growth.
CONSUMER SOFTWARE MARKET
The consumer software market has grown significantly over the past few years
as a result of several major trends. These trends include: the increasing
installed base of PCs in the home, the improved multimedia capabilities of PCs
and the increasing demand for a greater number of value-priced software
applications in order to take full advantage of these multimedia capabilities.
In addition, consumers are exposed to software purchase opportunities from a
wide variety of sources and with increased frequency.
Further, the convergence of the utility-orientation of the computer with the
information-delivery function of the computer has created new opportunities in
electronic content publishing. Delivery vehicles at the low end of the market
include theme-based screen savers and on the high-end include fully-functional,
self-contained delivery applications such as calendars, time managers, games,
education titles and personal newspaper applications.
79
<PAGE>
PRODUCTS AND SERVICES
Delrina's products and services are organized into five product groups: PC
fax software; data communications software; communications services; PC forms
software and consumer software. The following table summarizes Delrina's
principal products (both existing and to be shipped) by product group and the
operating systems on which they run:
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS OPERATING SYSTEM(S)
- ------------------------------------------------------------------------ ----------------------------
<S> <C>
PC FAX SOFTWARE
WinFax 7.0 for Windows 95 Windows 95
(not yet shipped)
Delrina NET SatisFAXtion Windows
WinFax PRO 4.0 Windows
WinFax Lite Windows
DosFax Lite MS-DOS
DosFax PRO 2.0 MS-DOS
Delrina FaxPRO 1.5 for Macintosh Macintosh
WinFax PRO for Networks Windows
DATA COMMUNICATIONS SOFTWARE
WinComm 7.0 for Windows 95 Windows 95
(not yet shipped)
CyberJack 7.0 for Windows 95 Windows 95
(not yet shipped)
WinComm PRO 7.0 for Windows 95 Windows 95
(not yet shipped)
WinComm PRO Windows
Delrina CommSuite 7.0 for Windows 95 Windows 95
(not yet shipped)
Delrina CommSuite for Networks Windows
Delrina Communications Suite Windows
COMMUNICATIONS SERVICES
Delrina Fax MailBox Service Windows
Delrina Fax Broadcast Service Windows
PC FORMS SOFTWARE
FormFlow Windows/Unix/MS-DOS
PerForm for Windows Windows
CONSUMER SOFTWARE
Echo Lake 1.0 Windows/Macintosh
Delrina Flintstones Screen Saver Windows/Macintosh
Delrina Far Side Screen Saver Windows/Macintosh
Delrina Intermission 4.0 Screen Saver Windows/Macintosh
Dilbert Screen Saver Windows/Macintosh
Delrina Opus 'n Bill Screen Saver (2 titles) Windows/Macintosh
</TABLE>
DELRINA'S PC FAX SOFTWARE
To date, Delrina has sold over ten million copies of its PC fax software
products and it believes it is the leader in the PC fax software market.
Delrina's fax software products have won over 30 industry awards, including the
1993 PC/COMPUTING Usability Award, the WINDOWS MAGAZINE Reader's Choice Award,
the Best Buy Award from PC TODAY in the United Kingdom and the WINner Award from
WINDOWS MAGAZINE in Germany.
80
<PAGE>
Delrina believes that its PC fax software products provide a combination of
distinguishing features including cost effectiveness, ease of use, extensive
compatibility with modems and PC operating systems, flexibility, customization
options and a wide variety of applications including phonebooks, document
management and optical character recognition.
Delrina has developed PC fax software products that optimize personal
productivity for different levels of PC fax usage. Delrina markets different
products for different types for users (e.g. LITE, PRO and Network versions) and
within each version there are varying degrees of functionality. For instance, a
novice using "PRO", can begin faxing almost immediately, while the product's
feature set is intended to satisfy the needs of more demanding users. In
addition, Delrina has introduced a network version of its fax software, allowing
multiple users access to the fax modem resources of a local area network ("LAN")
in a cost effective and controlled fashion. Delrina has also recently integrated
its fax software with an easy to use data communications package which allows a
user to run both fax and data communications applications at the same time.
Delrina intends to add varying degrees of voice capability to its products.
WinFax PRO 7.0, expected to be shipped in the second quarter of fiscal 1996,
is intended to allow users to send, receive and manage faxes in Windows 95.
WinFax Pro 7.0 is expected to provide true background faxing, which will allow
users to continue working on other applications while sending a fax, and
enhanced file compression, which will increase the speed at which faxes are
transmitted. Other features include "Delrina Pager" which is expected to allow a
computer to page a user to alert him or her of incoming voice and fax messages,
and "call identify" which will allow a user to view the incoming fax or phone
number on the user's computer screen before answering the phone. In order to use
the call identity feature of WinFax PRO 7.0, users must subscribe to their local
telephone company's service.
Delrina NET SatisFAXtion is a network fax product focused on the larger
corporate marketplace. While WinFax PRO for Networks focuses on the workgroup or
departmental level, Delrina NET SatisFAXtion is focused on the enterprise.
Delrina NET SatisFAXtion provides enterprise users with the same capabilities as
WinFax PRO for Networks. Requiring a dedicated fax server computer, NET
SatisFAXtion delivers security, auditing and detailed billing features required
in the enterprise environment.
WinFax PRO 4.0 marked a major upgrade in features and functionality to
Delrina's award winning fax software products. The added features and
enhancements include a new streamlined, drag-and-drop interface, a
"customizable" phone book and an enhanced viewer which enables users to "clean
up" faxes or quickly rotate any faxes that have been received upside down.
WinFax PRO 4.0 combines advanced faxing features such as functionality for
mobile users and integration with popular e-mail systems with relative ease and
usability. The fourth generation of WinFax also includes binary file transfer
and "Microsoft at Work" capability which enables users with a class 1 modem to
transmit not just images of documents, but the actual working files themselves.
Delrina attributes much of its sustained market growth and significant increases
in revenue to the introduction of WinFax PRO 4.0.
WinFax Lite and DosFax Lite are OEM versions of Delrina's retail fax
software products for Windows and DOS users, respectively, and have been bundled
by over 100 PC and fax modem manufacturers and software vendors. These products
offer basic fax functionality and can be upgraded to Delrina's full-featured
retail products.
DosFax PRO 2.0 is Delrina's DOS version of WinFax PRO. The product allows
users to send, receive and manage all fax activities while working in any DOS
application without interruption, offering easy to use Windows-like features in
the DOS environment.
Delrina FaxPRO 1.5 for Macintosh is Delrina's Macintosh version of WinFax
PRO. The product allows users to send, receive and manage all fax activities
while working in any Macintosh application without interruption. Delrina has
also developed Clear Fax for Macintosh users which provides superior image
quality output.
81
<PAGE>
WinFax PRO for Networks is Delrina's network version of WinFax PRO. While
LANs have become widespread in many organizations, Delrina believes that only a
small percentage of this installed base has a network fax system. WinFax PRO for
Networks is a cost-effective, flexible and "expandable" solution to provide
multi-user access to a network's fax modem resources in an efficient and
controlled fashion. WinFax PRO for Networks is designed to work with most
popular network operating systems including Novell NetWare, Novell NetWare Lite,
Artisoft LANtastic and Microsoft Windows for Workgroups, without the need for a
dedicated fax server. In addition, WinFax PRO for Networks offers comprehensive
support for the most common e-mail packages, enabling users to receive faxes
directly to their e-mail.
DELRINA'S DATA COMMUNICATIONS SOFTWARE
Delrina CommSuite 7.0, expected to be shipped in the second quarter of
fiscal 1996, combines Delrina WinFax PRO 7.0, Delrina Cyberjack 7.0 and Delrina
WinComm PRO 7.0 into one affordable suite. Specifically designed for Windows 95,
the suite should enable users to perform true multitasking and multithreading,
allowing them to send and receive faxes, voice mail, e-mail and pager messages
completely in the background. Other features include drag and drop interface,
easy-to-use help wizards, long filenames, MAP/TAPI support and UNIMODEM. Delrina
CommSuite 7.0 is compatible with Microsoft Exchange and enables users to send
and receive Internet e-mail. It is expected to provide voice and telephone
capabilities which enable a PC to perform as a full-featured answering machine
and advanced telephone. Finally, Delrina CommBar is expected to provide users
instant access to the status of all communications activities.
Delrina Cyberjack 7.0, expected to be shipped in the second quarter of
fiscal 1996, will allow users to access the Internet on Windows 95 with a single
point-and-click. Delrina Cyberjack 7.0 will include Internet e-mail and will
come with an updatable guidebook to assist users to quickly access information
through the Internet. Delrina Cyberjack 7.0 will allow a user to choose his or
her own Internet service provider or will choose a provider automatically.
Delrina WinComm PRO 7.0, expected to be shipped in the second quarter of
fiscal 1996, will allow users to connect to hundreds of bulletin board systems
and popular on-line services such as Compuserve. It will support the most
popular file transfer protocols, terminal emulations and modems. WinComm PRO 7.0
will include user definable columns and rows, support for sound and a graphical
interface format viewer to view files as they are downloaded. Other features are
expected to include virus detect, a host mode, a Backscroll Buffer, split screen
capability and a PKZIP manager to conserve valuable disk space.
WinComm PRO features predefined links to most popular on-line services
including MCI Mail, CompuServe, GEnie and AT&T Mail, and can be used to connect
to bulletin boards, mainframes and remote PCs. WinComm PRO incorporates a
powerful scripting language that allows users to completely customize and
automate communications sessions, and features an on-line virus detector which
checks for over 300 common viruses as files are downloaded.
Delrina Communications Suite is a retail product that includes both WinFax
PRO and WinComm PRO, integrating fax and data communications functionality.
Delrina Communications Suite allows both fax communications and data
communications software to address the same fax modem hardware without the
technical difficulties that normally occur when fax and communications software
are operated simultaneously.
Delrina CommSuite for Networks 2.1 is the network version of Delrina
Communications Suite and combines the network version of WinFax PRO with a
network version of WinComm PRO. This product allows network users to utilize the
same fax modem hardware for both network faxing and network data communications.
Delrina believes that CommSuite for Networks is the first product available in
the market with such capabilities.
82
<PAGE>
DELRINA'S COMMUNICATIONS SERVICES
Delrina Communications Services was established by Delrina in November 1993
in response to customer demand, project differentiation, the projected growth
and demand for enhanced communications services, the convergence of the PC and
telecommunications services industries and the opportunity to leverage Delrina's
installed base. Delrina's goal is to establish itself as a leading supplier of
enhanced communications services that will enable desktop and mobile users to
manage their fax, data and voice messages more easily and effectively.
Delrina Fax MailBox Service offers subscribers a "virtual" fax mailbox with
their own "800" number, eliminating the need to leave their PCs running all the
time or the need to maintain an additional phone line for their fax device in
order to always be able to receive a fax. Delrina Fax Mailbox Service receives
and stores faxes until the subscriber decides to retrieve them. Subscribers can
retrieve their faxes at any time directly into WinFax PRO 4.0 or higher, or by
simply dialing into their mailbox by phone and forwarding all their faxes to any
fax device. The Delrina Fax Mailbox Service allows users to retrieve faxes
directly to their computer without the use of WinFax PRO. The service also
includes a voice messaging capability and options for international access and
paging notification.
Delrina Fax Broadcast Service enables PC users to broadcast a fax message by
using any industry standard modem and WinFax PRO 4.0 or Delrina Communications
Suite software. Users can send a fax transmission to up to 500 recipients
virtually simultaneously with a single toll-free call from their PC. Control of
the distribution list is maintained on a real-time basis on the user's own PC,
and broadcast faxes retain their original layout, formatting and quality.
Delrina Fax Broadcast Service represents an efficient and cost-effective
alternative to traditional methods of distributing printed information such as
the postal service, courier, office fax machine or existing fax broadcast
services. Users can subscribe for the service on a pay-as-you-use basis with
billing made directly to a credit card or corporate account administered by
Delrina.
Bulletin Board Systems. In March 1995, Delrina acquired CRS Online Ltd.
(formerly Canada Remote Systems, "CRS"), Canada's largest bulletin board system
with approximately 10,000 subscribers. CRS recently began to offer Internet
access to its customers. Current features include a comprehensive host of
Internet services, such as PING, Finger, Gopher, FTP and Telnet. CRS is planning
to release a web browser and inter relay chat functionality to enhance its
bulletin board services. Delrina may dispose of the CRS assets but the effect of
such disposal of assets would not be material to Delrina's business.
DELRINA'S PC FORMS SOFTWARE
Delrina has become a leader in the forms processing market by offering forms
solutions for PCs and other hardware platforms ranging from simple forms design,
filling and printing to comprehensive forms-based workflow automation solutions.
With more than one million copies shipped to date, Delrina's forms software is
sold to a variety of government departments and agencies and commercial
organizations. Delrina's products have received numerous industry awards,
including "Recommended" from Windows Magazine in June 1995, "Government Best
Buy" from Federal Computer Week in March 1995, "World Class Award" from PC World
in July 1995, "Editor's Choice -- Forms" from PC Magazine in May 1994, "Editor's
Choice -- Workflow" from PC Magazine in June 1994 and "Best Forms Processing
Software" from Infoworld -- Electronic Forms Review in May 1994.
Delrina markets its forms software in two configurations, a Forms
Starter-Kit and Forms Filler. Organizations wishing to create, customize or
modify their forms electronically use the Starter-Kit for designing and testing
electronic forms on a computer. After the electronic form is distributed, it can
be filled in on-screen by anyone with a copy of Forms Filler. Delrina believes
this configuration will enhance penetration of its forms software into major
accounts because it delivers the appropriate functionality to meet the needs of
different users in the organization.
FormFlow is believed by Delrina to be the industry's most advanced PC-based
forms solution for building workflow automation solutions which integrate forms
design, database and electronic mail
83
<PAGE>
applications. FormFlow is a LAN based workflow automation product which works in
a heterogeneous enterprise environment supporting multi-vendor e-mail, operating
systems and databases. FormFlow is unique in using the binary file transfer
capabilities of WinFax PRO to enable users to send actual data files rather than
the traditional bitmap images normally associated with conventional faxing. As a
result, customers are currently able to create viable and affordable alternative
electronic communications solutions. The product supports leading network-based
e-mail systems including Microsoft Mail, Lotus cc:Mail and Notes and Banyan
eMail. FormFlow also comes with a tracking application to let users keep
up-to-date on the status of the forms routed across the network.
In addition, FormFlow comes with ready-to-use forms applications including
contact management, work order, customer lead tracking and personnel
information. FormFlow, now in its sixth release, includes an advanced macro
language called Intelligent Forms Language ("IFL") which enables users to
develop and customize workflow solutions and to automate forms routing based
upon established business rules and procedures. The product provides
comprehensive support for most PC database formats including dBASE, Paradox,
Clipper, ASCII, Oracle, Microsoft SQL Server, DB2 and OS/2 Data Manager and
enables users to access multiple databases at the same time. FormFlow provides
additional database connectivity to Lotus Notes, Oracle, Sybase and other
databases through an industry database standard known as ODBC (open database
connectivity).
FormFlow allows people with little or no programming experience to quickly
create sophisticated forms applications with conditional logic and deploy them
across their organization using their existing heterogeneous networks, e-mail
systems and databases. In 1994, FormFlow was awarded two PC MAGAZINE Editors'
Choice Awards for both the electronic forms and workflow automation software
categories.
PerForm for Windows is Delrina's first forms designer specifically for the
small office and home office market. It combines form design and fill-in
capability in one product. PerForm for Windows generates forms automatically in
response to questions posed by PerForm for Windows. As a result, forms design is
simple, allowing small business to produce professional-looking forms easily.
DELRINA'S CONSUMER SOFTWARE
Delrina's consumer software unit was created in October 1992 when Delrina
purchased Amaze, Inc. (now Delrina (Washington) Corporation) in order to take
advantage of the growing trend in content-based consumer software. In fiscal
1994, Delrina established a foothold in this emerging market, and has expanded
the product line to include multimedia applications.
Echo Lake 1.0 takes advantage of multimedia technology to enable users to
record their personal and family stories, complete with text, digitized photos,
voice and sound clips, video capture and other media. Stories can be printed in
a book format or copied to diskette as a read-only version that can be given to
others. Echo Lake also includes the Inspirator, which contains 2,500 historical,
trivia and interview-style questions, and Memory Starters, which assist users to
"fill in the blanks". The CD-ROM release of Echo Lake also contains a
significant amount of content, such as 250 historical photos, 250 clip art
images, 250 sound bites and 86 video clips of the 20th century that can be
incorporated into stories. Echo Lake is a place to create a personal multimedia
album. It takes advantage of multimedia technologies supporting a
photo-realistic and 3-D interface. It offers several ways in which users can
create accounts of their life experiences and prepare copies of their personal
"books" in print, or in electronic form to share with others on diskette or
through on-line services.
Delrina's Screen Savers offer Windows- and Macintosh-based imaging
capabilities, with various content-based screen saver displays. These products
take advantage of multimedia capabilities of PCs, including sound support.
Delrina's screen saver titles include Delrina Intermission, The Flintstones,
Gary Larson's The Far Side, Berkeley Breathed's Opus 'n Bill (2 titles) and
Scott Adams' Dilbert.
COMPETITION
The long-term success of any software product is based principally on
product features, performance, ease of use, reliability, hardware compatibility,
operating system compatibility, brand name
84
<PAGE>
recognition, product reputation, levels of advertising, pricing, merchandising
and training, quality of
customer support, timeliness of product upgrades, the lack of competing products
being introduced by competitors and the capability of the software developer to
introduce new complementary products.
Delrina competes with other software vendors for access to distribution
channels through OEMs or value-added resellers ("VARs"), retail shelf space and
the attention of customers at the retail level and in corporate and government
accounts. Delrina also competes with other software companies in its efforts to
acquire software technology developed by third parties. Delrina believes that,
in the future, competition in the industry will intensify as major software
companies expand their product lines.
In the past year pricing pressures have intensified in the PC software
applications market and Delrina believes that price competition, with its
attendant reduced profit margins, may become a more significant factor in the
future. Site and enterprisewide licensing (permitting large volume customers to
copy a program and its documentation for use within a particular site or within
an enterprise at discounted prices), discount pricing for large volume
distributors and retailers, product bundling promotions (whereby products of one
vendor are bundled with the products of one or more others at a price
significantly more attractive to the purchaser than buying each product
separately) and competitive upgrade programs are potential forms of price
competition that may become more prevalent. In addition, LAN versions of
products are generally priced lower per user than individual copies of the same
products. Delrina continues to review product pricing in response to market
conditions.
The PC software industry is dominated by Microsoft. Due to its market
dominance and the fact that it is the publisher of the most prevalent PC
operating platforms (DOS and Windows), and of the highly anticipated Windows 95
PC operating platform, Microsoft represents a competitive threat to all PC
software vendors, including Delrina. It has the technical and financial ability
to include, within DOS, Windows and Windows 95, applications which compete with
Delrina's products. Windows 95 includes basic PC fax capabilities. The inclusion
of enhanced fax, forms and/or enhanced communications applications in DOS,
Windows or Windows 95 or the sale of such applications on a standalone basis by
Microsoft could have a material adverse effect on Delrina's sales.
With respect to many of the markets in which Delrina competes, some of
Delrina's competitors have larger technical staffs, more established and larger
marketing and sales organizations, larger established customer bases and
significantly greater financial resources than Delrina. These advantages could
be used by such competitors to support relatively long-term discount pricing,
saturation marketing and marketing promotions in order to achieve market share.
PC FAX SOFTWARE. Delrina believes it is the PC fax software market leader
based on sales performance and industry awards received. The wide acceptance of
PC faxing among end users has encouraged a great number of product entries.
Delrina believes that there are at least 25 competing products available in the
market. Delrina's WinFax PRO 4.0 competes principally with products from Phoenix
Corp., Traveling Software Inc. and SofNet Inc.
It is Delrina's objective that Delrina WinFax PRO 7.0 for Windows 95 be the
first fully functional fax application to take full advantage of Windows 95.
WinFax PRO 7.0 has been specifically built to run under Windows 95, using many
of the technologies supported in Windows 95 such as MAPI, TAPI and OLE 2.0.
Microsoft's "Windows for Workgroups" and Windows 95 provide basic fax
functionality with capabilities comparable to WinFax Lite. Upgrades to Windows
95 may include capabilities similar to more advanced versions of WinFax.
Although Delrina believes that there are no clear leaders in the stand-alone
software-only fax software market for Macintosh, Delrina believes that Global
Village Inc. has a strong position in this segment of the fax software market
based on its sales of modems with which it bundles fax software products for
Macintosh.
85
<PAGE>
PC DATA COMMUNICATIONS SOFTWARE. Delrina believes that it is among the
leaders in the PC data communications software market based on sales
performance. As with PC fax software, the wide acceptance of data communications
software by end users has encouraged a large number of product entries. Delrina
believes that the products which principally compete with its products in this
market include DataStorm Inc.'s ProComm and DCA Inc.'s Crosstalk. Microsoft,
which has introduced low-level communications capabilities in its current
products, is also a competitor in the PC data communications software market.
Delrina believes that future upgrades of Windows or Windows 95 may include
enhanced data communications capabilities.
With the introduction of Cyberjack, Delrina will enter the highly
competitive and rapidly changing Internet products market. Delrina believes that
Cyberjack will principally compete with Netscape's Netscape Navigator,
Spry/Compuserve's Internet in a Box, NetManage's Internet Chameleon,
Quarterdeck's Internet Suite and Wollongong's Emissary, as well as Internet
access products offered by operating systems vendors IBM and Microsoft and
commercial information service providers Compuserve, America Online and Prodigy.
COMMUNICATIONS SERVICES. Delrina believes that it will continue to face
competition in the communications services market from both computer hardware
and software producers in addition to members of the on-line services and
telephone and telecommunications industries. Delrina believes that Microsoft may
enhance the communications services it currently provides in connection with its
software products.
PC FORMS SOFTWARE. While Delrina believes it is the PC forms software
market leader based on the sales performance and industry awards received in
respect of its PerForm and FormFlow software product lines, other companies have
introduced competing products. Delrina believes that its major competitors in
the PC forms and workflow software market include Word-Perfect Corporation
(Novell), Lotus Corporation, Microsoft and JetForm Corporation.
As the PC forms market evolves, it is increasingly attracting a mix of
technology-related companies. Companies such as Apple Computer, Microsoft,
Banyan and Reach, Inc. are introducing products that approach the use of forms
from the e-mail work flow perspective.
CONSUMER SOFTWARE. Delrina obtains a competitive advantage for its
content-based consumer products to the extent it obtains exclusive licenses for
the content used in such software products. Terms for such licenses range from
one to five years. Apart from content, competition between software vendors
currently focuses on the delivery vehicle (e.g. the screen saver, calendar or
diary). Delrina believes that the Opus'n Bill, Dilbert and Intermission screen
savers have developed strong customer recognition. Delrina believes that its
principal competitors in the consumer content software market are Berkeley
Systems Inc. and Individual Software, Inc.
Delrina may derive a competitive advantage in the multimedia market from its
introduction of Echo Lake. Other than associated software products like family
tree products, Delrina believes that no significant competition exists for Echo
Lake. Echo Lake is designed to capitalize on the home multimedia marketplace and
the trend for new applications in this market.
MARKETING, SALES AND DISTRIBUTION
Delrina's products are sold to and used by a broad customer base, including
businesses, educational institutions, government departments and individuals.
Delrina's marketing strategy targets five principal areas of product revenue:
(i) distribution to retail outlets through distributors; (ii) large
corporations; (iii) government agencies; (iv) OEMs, VARs and system integrators;
and (v) international sales (comprising all sales outside of North America).
In North America, Delrina's products are distributed to retail outlets
primarily by major independent distributors such as Merisel Inc. and Ingram
Micro Inc. Delrina employs a distribution sales team to work closely with its
distributor accounts on the management of orders, inventory levels, sell-through
to retailers, as well as promotions and marketing activities.
86
<PAGE>
Delrina has agreements with various OEMs whereby Delrina's products can be
bundled with the products of such manufacturers, or otherwise can be made
available to the manufacturers' customers. Delrina has signed OEM agreements
with numerous manufacturers who bundle Delrina's fax and/or content publishing
software with their products, including IBM, Compaq, AST Research and Intel.
Delrina has also established strategic marketing agreements with a number of
Fortune 500 companies, that resell and support Delrina's forms software,
including AT&T/GIS and General Electric Information Services.
Delrina maintains a comprehensive program to expand its base of third-party
consultants, such as developers, VARs, system integrators, LAN consultants,
forms designers and trainers, who are developing applications or providing
services with Delrina's software. This program provides a complimentary library
of software, training, priority technical support, comprehensive technical
information, developer forums, BETA program participation, and sales lead
generation and referrals.
Delrina also sells directly to corporate and government customers, with a
sales force of 109 at June 30, 1995. Direct sales have resulted in major sales
to international companies and government agencies.
Delrina employs telemarketing and direct mail programs to offer existing and
potential end users relatively low-cost enhancements to Delrina's products and
offers users of its products an on-line registration capability. Delrina
advertises regularly in selected computer user publications and periodically
introduces promotions and incentive offers, such as customer rebates and special
pricing for the purchase of upgrades. Delrina also participates at major
international trade shows, professional conferences and PC user group events to
reach its target markets.
Delrina opened its first sales office outside of North America near London,
England in 1990, which as of June 30, 1995 employed 52 full-time staff. In
January 1993, Delrina established a sales office near Paris, France, which as of
June 30, 1995 had 6 full-time staff, and Delrina established its third European
office in 1994 by opening an office near Munich, Germany, which had 19 full-time
staff as of June 30, 1995. These operations work with major local distributors
and resellers and undertake direct sales to large organizations in their
respective markets. Delrina's products are also sold through distributors in 29
other countries. Delrina has also established programs to "localize" products
for various foreign markets. By the end of fiscal 1995, Delrina had localized
more than ten new products in up to seven languages. These international sales
efforts have resulted in rising revenue from international sales. For the fiscal
year ended June 30, 1995, sales outside of North America accounted for
approximately 20% of Delrina's overall revenue, up from approximately 10% in
fiscal 1994.
U.S. GOVERNMENT SALES
Delrina also sells its forms software to various departments and agencies of
the U.S. federal government. From 1989 to 1995, Delrina was an approved
subconractor under a companion contract (the "Companion Contract") awarded by
the U.S. Department of Defense to Government Technology Services Inc. as prime
contractor. The Companion Contract served as the vehicle for Delrina to supply
forms software products, such as Delrina's PerForm, to over 400,000 users in the
U.S. government. The Companion Contract expired in September 1995. However,
Delrina is presently an approved subcontractor under the Sustaining Base
Information Systems ("SBIS") Contract awarded by the U.S. Army to Loral
Corporation as prime contractor. Delrina does not expect that the expiry of the
Companion Contract and its effective replacement (from the perspective of
Delrina's ability to sell its forms software to various departments and agencies
of the U.S. federal government) by the SBIS Contract to have a material effect
on Delrina's future operating results.
Delrina's PC forms software has been added to the General Sales
Administration ("GSA") schedule master order list. The products on the GSA list
are sold to the U.S. government through Delrina's distributors. In fiscal 1995,
sales to the U.S. government represented approximately 10% of Delrina's
revenues.
87
<PAGE>
Delrina has also installed an on-line electronic forms service in
Washington, D.C. to allow DoD users to share the electronic forms they have
developed using PerForm with other PerForm users in the U.S. government.
RESEARCH AND DEVELOPMENT
The software industry is characterized by frequent changes in technology and
user preferences. Accordingly, Delrina must be able to provide new software
products and modify and enhance existing products on a timely and continuing
basis to be competitive. To accomplish this objective, Delrina employs a
strategy of both internally developing software and, where appropriate,
acquiring technology that will, in most cases, be enhanced by Delrina. Delrina
believes that its ability to maintain technological competitiveness will depend
in large part upon its ability to successfully enhance its existing products,
develop new products and acquire complementary technologies and products in a
timely manner. In general, Delrina expects to release major revisions to its key
products approximately every 12 to 24 months.
Delrina uses an integrated approach to product development which includes
coordination of groups involved in marketing, research and development and
quality assurance. Among other projects, Delrina is currently integrating voice
capability with fax. Currently, WinFax Lite offers voice and fax capability. In
addition, new foreign language versions of Delrina's key products are under
development.
The introduction of new or enhanced products requires Delrina to manage the
transition from older, displaced products in order to minimize disruption in
customer ordering patterns, avoid excessive levels of older product inventories
and ensure that adequate supplies of new products can be delivered to meet
customer demand. Delrina manages the transition to the new versions by taking a
number of actions, including (1) notifying its distributors and other industry
participants of the upcoming version in advance of its release, (2) instituting
a limited return policy on existing versions following the launch of new
versions and (3) notifying its third party manufacturers of anticipated product
requirements. The length of Delrina's product development cycle has generally
been greater than Delrina originally expected. Although such delays have
undoubtedly had a material effect on Delrina's business, Delrina is not able to
quantify the magnitude of revenues that were deferred or lost as a result of any
particular delay, because Delrina is not able to predict the amount of revenues
that would have been obtained had the original development expectations been
met. Delays in product development, including products being developed for
Windows 95, are likely to occur in the future and could have a material adverse
effect on the amount and timing of future revenues.
Delrina is committed to devoting significant resources to research and
development activities. As of June 30, 1995, Delrina employed 247 people in its
research and development group. Internal research and development activities are
focused on the continued enhancement of forms and fax communications software
and consumer software, with increasing emphasis on other types of communications
software and services.
In fiscal 1994 and 1995, Delrina's research and development expenditures
totalled approximately C$6,806,000 and C$13,904,000, respectively.
CUSTOMER SERVICE AND TECHNICAL SUPPORT
Delrina believes that providing high quality technical support and customer
service are important elements of the value that it provides its users.
Delrina's technical support staff provides generally free unlimited support. In
addition, end users can receive responses to inquiries via fax through an
automated technical response system. A forum on the CompuServe Information
System (commonly referred to as a bulletin board) is maintained in addition to
Delrina's own electronic bulletin board service to provide users with a
mechanism to provide feedback as well as receive technical updates and notes.
Delrina has dedicated substantial resources to customer service and technical
support, including, at June 30, 1995, 181 full and part-time employees,
representing approximately 23% of its workforce.
88
<PAGE>
MATERIALS AND COMPONENTS
The principal materials and components used in Delrina's products include
computer diskettes, user manuals and marketing materials. Manufacturing involves
the duplication of computer media, user manuals and marketing materials,
assembly of components, spot testing of the product and final packaging.
Virtually all duplication, assembly and packaging of Delrina's products are
currently performed by several third party production companies in accordance
with Delrina's specifications. Delrina and such third party producers perform
documentation and quality analysis functions. Delrina believes there is an
adequate supply of, and source for, the raw materials used in its products and
that multiple sources are available for media duplication, manual printing and
final packaging.
Delrina's products are generally shipped as orders are received and
accordingly, Delrina has historically operated with only a small backlog of
orders and inventory.
LICENSES AND PRODUCT PROTECTION
Delrina relies on a combination of contract provisions, technical measures,
copyright and restricted access to its trade secrets to establish and protect
proprietary rights in its technology. As is customary in the industry, Delrina
licenses its software products to most end-user customers by way of a "shrink
wrap" license. The terms of this license permit the purchaser to use the product
on a single computer or the number of computers specified in the
package/documentation accompanying the license, and to make a back-up copy. The
purchaser is prohibited from providing the product or copies to additional
users. Shrink wrap licenses have been found to be unenforceable under laws of
certain jurisdictions. With certain large volume end users, Delrina has
negotiated specific end-user license agreements.
Delrina's software products are generally furnished to end users only in
object code form. Due to the nature of Delrina's business, Delrina believes that
the unauthorized copying of its object code by end users or competitors is not a
significant concern, but that access to its source code by a competitor might
enable the competitor to learn aspects of Delrina's technology. Accordingly,
Delrina restricts access to the source code for its software products. In those
limited cases where Delrina makes its source code available to third parties, it
does so only where the third party agrees to maintain the confidentiality of the
source code. In addition, while Delrina usually does not register any of its
copyrights, it generally includes copyright notices in its software. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use Delrina's products or technology without authorization. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. Delrina believes that, due to the rapid
pace of innovation within its industry, factors such as the technological
expertise and creative skills of its personnel are more important to
establishing and maintaining technological leadership than are the various legal
protections of its technology.
As the number of software products in the industry increases and the
functionality of these products further overlaps, Delrina believes that software
developers will become increasingly subject to infringement claims. This risk is
potentially greater for companies, such as Delrina, that obtain certain of their
products through publishing agreements or acquisitions, since they have less
direct control over the development of those products. Additionally, an
increasing number of software patents are being issued, some of which are very
broad in nature. This increases the risk that Delrina's products may be subject
to claims of patent infringement. Although such claims may ultimately prove to
be without merit, they can be time consuming and expensive to defend.
EMPLOYEES
As at June 30, 1995, Delrina had a total of approximately 760 full-time
employees, including 247 in research and development, 181 in customer service
and technical support, 174 in sales and marketing and 154 in administration and
operations. None of the employees is subject to a collective bargaining
agreement. Delrina believes that its employee relations are good. Most key
employees are
89
<PAGE>
shareholders in Delrina. Delrina has confidentiality agreements with all key
employees and contractors for non-disclosure and safeguarding source code,
knowledge and information regarding Delrina's business.
PROPERTIES
Delrina's principal locations, all of which are leased, are as follows:
<TABLE>
<CAPTION>
APPROXIMATE SIZE EXPIRATION OF
LOCATION PURPOSE (IN SQUARE FEET) LEASE(S)
- ------------------------------- ---------------------------------------- ---------------- ---------------
<S> <C> <C> <C>
CANADA
Toronto, Ontario Corporate Headquarters 90,000 1996 to 2004
Administration, marketing,
research and development
and support
UNITED STATES
San Jose, California Sales, support and administration 45,000 2000
Bellevue, Washington Sales, support and administration 8,000 1996
McLean, Virginia Sales, support and administration 4,000 1998
Boston, Massachusetts Sales, support and administration 4,500 1996
INTERNATIONAL
Borehamwood, Hertfordshire, Sales, support and administration 7,200 1999
England
Grunwald, Germany Sales, support and administration 3,000 1996
</TABLE>
LEGAL PROCEEDINGS
CAROLIAN. Delrina has been involved in ongoing litigation to combat
infringement of the intellectual property of a former division, Carolian, which
division was sold in March 1993. On February 12, 1993 the Ontario Court (General
Division) declined to grant a permanent injunction to Delrina, after having
previously granted a preliminary injunction. The defendants subsequently filed a
claim for damages allegedly resulting from the preliminary injunction granted in
favor of Delrina. The defendants allege damages of approximately C$6,000,000,
for lost revenues during the time in which the preliminary injunction was in
place. The defendants have not yet provided evidence of the basis for the
calculation of the amount of damages claimed, which, if awarded, would be
material. Delrina intends to appeal the decision of the court not to grant a
permanent injunction to Delrina and to contest the amount of damages, if any,
sustained by the defendants. A date has not yet been set for the hearing
regarding the defendant's claim for damages. This matter is in its early stages
and Delrina believes that it has meritorious defenses and intends to vigorously
defend all of the claims.
AUDIOFAX. On April 25, 1995, AudioFAX, Inc. ("AudioFAX") instituted a civil
action against Delrina, Delrina (Canada) Corporation ("Delrina Canada") and
Delrina (US) Corporation in the United States District Court for the Northern
District of Georgia. In its complaint, AudioFAX alleges that all three of the
defendants have infringed two United States patents and certain copyrights of
AudioFAX, that Delrina and Delrina Canada have infringed a Canadian patent of
AudioFAX and that Delrina Canada has breached a non-disclosure agreement and
misappropriated trade secrets of AudioFAX. The patents at issue appear to be
directed to certain enhanced facsimile services using a store and forward
facility. On June 14, 1995, the defendants filed (i) motions to dismiss the
Canadian patent infringement and copyright infringement claims, (ii) a motion
for a more definitive statement of the patent infringement claims and (iii) a
partial answer directed to the claims of breach of the non-disclosure agreement
and misappropriation of trade secrets. On June 28, 1995, AudioFAX filed
oppositions to the three motions. On July 17, 1995, Delrina served reply
memoranda in support of its motions to dismiss. On July 26, 1995, AudioFAX filed
a motion for leave to amend its complaint. The defendants have consented to the
filing of the amended complaint by AudioFAX and have agreed to withdraw their
motions to dismiss the copyright infringement claim and for a more definite
statement of the patent infringement claims. The parties have also agreed that
the defendants' answer to the
90
<PAGE>
copyright and patent infringement claims will be due 20 days after the
defendants' motion to dismiss the Canadian patent infringement claim is decided.
Both AudioFAX and the defendants have initiated discovery by serving document
requests and interrogatories. Additionally, Delrina has received a letter from
AudioFAX that an additional patent will be issued and that it intends to amend
its complaint to cover infringement claims relating to WinFax PRO at that time.
This matter is in its early stages and Delrina believes that it has meritorious
defenses and intends to vigorously defend all of the claims.
IBM. Delrina received a letter dated June 8, 1995, from International
Business Machines Corporation ("IBM") identifying twelve United States patents
of IBM and offering to grant Delrina a license under the patents. Delrina and
its outside patent counsel are reviewing the patents to determine the
appropriate response.
GREENTREE. During August 1995, Greentree Software Inc. ("Greentree")
instituted a civil action against a predecessor corporation to Delrina Canada in
the United States District Court for the Northern District of California. In its
complaint, Greentree claims unspecified damages for alleged misrepresentations
and negligent misrepresentations regarding the performance of Delrina's FormFlow
software, as well as breach of an oral agreement. Delrina believes that it has
meritorious defenses and intends to vigorously defend all of the claims.
Given the importance of intellectual property for a technology company, from
time to time, actions have been threatened or commenced against Delrina and
certain of its affiliates, alleging patent infringement, copyright infringement,
misuse of certain confidential information, breach of trust and unlawful
interference with the plaintiff's business relationships. The plaintiffs' claims
may include a request for an injunction which would, among other things, prevent
Delrina from marketing any or all of its primary products or services. In each
case Delrina retains counsel and vigorously contests the claim, and any request
for an injunction or damages. There is no such case at present, which Delrina,
after consultation with its litigation counsel, believes it will not be able to
successfully defend. However, in the event that in any such case the plaintiff
succeeded in obtaining an injunction or judgment against Delrina, the injunction
or judgment could, depending upon its terms, have a material adverse effect on
Delrina.
91
<PAGE>
DIRECTORS AND MANAGEMENT
The directors and executive officers of Delrina, as well as certain
information regarding each of them, including the number of Delrina Common
Shares beneficially owned or over which control or direction is exercised by
each of them as of September 30, 1995, is set out in the following table.
<TABLE>
<CAPTION>
NUMBER OF
DELRINA COMMON
NAME AND MUNICIPALITY OF RESIDENCE AGE POSITION SHARES HELD
- --------------------------------------- --- --------------------------------------- ----------------
<S> <C> <C> <C>
Dennis Bennie (1)(2) 42 Chairman of the Board of Directors and 1,024,115
North York, Ontario Chief Executive Officer
Mark Skapinker 41 President and Director 625,765
Toronto, Ontario
Albert Amato 37 Executive Vice President, Chief 678,065
Toronto, Ontario Technology Officer and Director
Michael Cooperman 44 Chief Financial Officer, 0
Thornhill, Ontario Secretary-Treasurer and Director
George H. Clute (1)(2) 46 Director 0
Issaquah, Washington
Peter M. Farlinger (1)(2) 56 Director 40,000
Desboro, Ontario
Ashok Rao (2) 46 Director 0
Mercer Island, Washington
Louis Ryan 39 Executive Vice President, World Sales 264,556
San Jose, California
<FN>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
</TABLE>
Mr. Bennie co-founded Delrina and has served as Chairman of the Board of
Directors and Chief Executive Officer since June 1988. He oversees all
international expansion and financial activities. Prior to joining Delrina, Mr.
Bennie co-founded and served as President of Ingram Software Ltd., one of
Canada's largest software distributors, from 1984 to 1988.
Mr. Skapinker co-founded Delrina and has served as President and a member of
the Board of Directors since November 1989. He oversees all corporate
development, marketing, market research/ product direction and communication
services. Prior to joining Delrina, he managed all product development efforts
at Batteries Included Inc. (a software publisher, subsequently acquired by
Electronic Arts, Inc.) from 1984 to 1987. From 1987 to 1989, he was an executive
officer of Schematix Computer Systems Inc.
Mr. Amato co-founded Delrina and has served as Executive Vice-President,
Chief Technology Officer and a member of the Board of Directors since November
1989. He is responsible for all product research and development activities.
Prior to joining Delrina, Mr. Amato was a development analyst at the IBM
Research Laboratory in Toronto from 1983 to 1987. From 1987 to 1989, he was an
executive officer of Schematix Computer Systems Inc.
Mr. Cooperman joined Delrina in April 1988 as acting Chief Financial Officer
and has served as a member of the Board of Directors since November 1989 and as
Secretary-Treasurer since October 1992. Mr. Cooperman directs all financial
management and regulatory activities. Prior to joining Delrina he was Vice
President of Finance at Ingram Software Ltd. from 1986 to 1988.
92
<PAGE>
Mr. Clute has served as a member of the Board of Directors since October
1992. Mr. Clute is a venture capitalist with over 20 years experience in the
financing and development of emerging growth companies. He is a founding general
partner of Rainier Venture Partners and Olympic Venture Partners, venture
capital funds based in the Pacific Northwest United States. Mr. Clute's
experience includes corporate finance and corporate banking positions with The
First National Bank of Chicago and Rainier National Bank. Mr. Clute also serves
on the board of directors of Logic Modelling, Inc.
Mr. Farlinger has served as a member of the Board of Directors since
September 1988. Mr. Farlinger is a private investor and has served as President
of the Urban Development Institutes of both Ontario and Canada.
Mr. Rao has served as a member of the Board of Directors since October 18,
1994. Mr. Rao is the Chief Executive Officer of Mid-Com Communications and has
served in such capacity since 1990.
Mr. Ryan co-founded Delrina and had served as Senior Vice-President, U.S.
Sales and Operations from November 1989 to January 1994 when he was appointed to
his current position. Mr. Ryan oversees all sales activities and programs. He
also manages Delrina's operations in San Jose, California. Prior to joining
Delrina, Mr. Ryan was Director of Sales for Borland International Inc., from
1985 to 1988 and was a co-founder and Vice President of Sales for Living
Videotext (subsequently acquired by Symantec) from 1983 to 1985.
EXECUTIVE COMPENSATION
COMPOSITION OF THE COMPENSATION COMMITTEE
During the fiscal year ended June 30, 1995, the Compensation Committee of
the Delrina Board of Directors was composed of Dennis Bennie, the Chairman and
Chief Executive Officer of Delrina, and George Clute, Peter Farlinger and Ashok
Rao, each of whom is an outside and unrelated director (See "-- Statement of
Corporate Governance Practices").
REPORT ON EXECUTIVE COMPENSATION
The overall goal of Delrina's compensation program is to ensure that
executive compensation is consistent with Delrina's business plans, strategies
and goals. The specific goals of the Compensation Committee are to ensure that
the necessary policies and processes are in place to ensure that management of
Delrina is fairly and competitively compensated. Individual executive
compensation includes base salary, bonus and stock option components. Each
component links pay with performance and reinforces specific job and
organization requirements. Compensation guidelines with respect to the three
components are established for employment positions based on job
responsibilities and an annual review of compensation practices for comparable
positions at comparable companies, including high technology companies of a
similar size and scope.
Base salary is recognition for discharging job responsibilities and reflects
the executive's performance over time. Individual salary adjustments take into
account performance contributions. Bonus awards recognize and reward
accomplishments in a given year measured against specific quantitative goals of
Delrina, including, in particular, earnings per share. Grants under the Delrina
Option Plans are intended to provide long-term rewards linked directly to the
performance of Delrina Common Shares. Delrina Options are granted based on the
level of executive responsibility and competitive compensation practices. The
grant of Delrina Options effectively integrates the long-term interests of
critical employees with those of Delrina's shareholders. The Delrina Option
Plans reinforce an ownership perspective and encourage the loyalty of key
executives.
The Compensation Committee is responsible for recommending to the Delrina
Board of Directors the compensation for Dennis Bennie, the Chairman and Chief
Executive Officer of Delrina. This is achieved by taking into account various
factors and criteria, including an annual evaluation of his performance against
predetermined goals and criteria. The Compensation Committee reviews and
93
<PAGE>
approves the compensation of the Chief Executive Officer without him being
present. The Compensation Committee also annually reviews with the Chief
Executive Officer the performance of Delrina's other executive officers, and the
relationship of their compensation to Delrina's performance.
Presented by the Compensation Committee: Dennis Bennie, George Clute, Peter
Farlinger and Ashok Rao.
COMPENSATION OF CERTAIN OFFICERS The following table sets out certain
information concerning compensation paid to the Chairman and Chief Executive
Officer of Delrina and the four other most highly-compensated executive officers
of Delrina (collectively, the "Named Executive Officers") for the three years
ended June 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION (1) COMPENSATION (2)
-------------------- ----------------
FISCAL SALARY BONUS DELRINA OPTIONS
NAME AND PRINCIPAL POSITION YEAR (C$) (C$) GRANTED
- ---------------------------------------------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Dennis Bennie 1995 210,000 0 50,000
Chairman and Chief Executive 1994 235,000 275,653 75,000
Officer and Director 1993 213,333 212,928 0
Mark Skapinker 1995 180,000 0 0
President and Director 1994 180,000 275,653 75,000
1993 181,250 212,928 0
Albert Amato 1995 180,000 0 0
Executive Vice President, Chief 1994 180,000 275,653 75,000
Technology Officer and Director 1993 181,250 212,928 0
Michael Cooperman 1995 135,000 0 0
Chief Financial Officer, Secretary- 1994 135,000 77,813 135,000
Treasurer and Director 1993 125,875 0 0
Louis Ryan 1995 178,841 194,845 115,000
Executive Vice President, World Sales 1994 175,500 259,500 75,000
1993 115,710 112,111 50,000
<FN>
- ------------------------
(1) No annual compensation which is required to be disclosed, other than salary
or bonus, was paid to any of the Named Executive Officers. The value of
perquisites and other benefits for each Named Executive Officer is less
than the lesser of C$50,000 and 10% of total annual salary and bonus of
such Named Executive Officer.
(2) Grants of Delrina Options were the only long-term compensation awards paid
to any of the Named Executive Officers. There were no LTIP payouts nor any
other compensation which is required to be disclosed.
</TABLE>
DELRINA OPTION GRANTS DURING THE FISCAL YEAR
The following table sets out certain information concerning Delrina Options
granted to the Named Executive Officers during the fiscal year ended June 30,
1995. No Delrina Options were granted during this period to Messrs. Skapinker,
Amato or Cooperman. All Delrina Options indicated in the table were granted
pursuant to the Delrina 1994 Stock Option Plan. All such Delrina Options
94
<PAGE>
have a term of five years, vested immediately upon granting and have an exercise
price determined with reference to the closing market price of Delrina Common
Shares on the business day preceding the date of grant.
<TABLE>
<CAPTION>
DELRINA PERCENTAGE OF
OPTIONS TOTAL OPTIONS EXERCISE MARKET VALUE OF
GRANTED GRANTED TO PRICE PER DELRINA COMMON
DURING EMPLOYEES DELRINA SHARES AT DATE DATE OF EXPIRATION OF
NAME PERIOD DURING PERIOD COMMON SHARE OF GRANT (C$) DELRINA OPTION
- ----------------- --------- --------------- ------------- ---------------- ----------------------
<S> <C> <C> <C> <C> <C>
Dennis Bennie 50,000 2.12% 17.625 881,250 August 19, 1999
Louis Ryan 115,000 4.89% 20.50 2,357,500 February 14, 2000
</TABLE>
DELRINA OPTION EXERCISES DURING THE FISCAL YEAR AND YEAR-END DELRINA OPTION
VALUES
The following table sets out certain information concerning option exercises
by Named Executive Officers during the fiscal year ended June 30, 1995 and
option values as of June 30, 1995. Value has been calculated as the difference
between the market value of the underlying Delrina Common Shares as of the date
of exercise or at June 30, 1995 and the exercise price.
<TABLE>
<CAPTION>
VALUE (IN C$) AT
JUNE 30, 1995
SECURITIES UNEXERCISED DELRINA OF UNEXERCISED
ACQUIRED OPTIONS AT JUNE 30, IN-THE-MONEY
DURING AGGREGATE 1995 DELRINA OPTIONS
NAME PERIOD VALUE (C$) (ALL EXERCISABLE) (ALL EXERCISABLE)
- ----------------------- --------- ----------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
Dennis Bennie 0 n/a 200,000 1,323,750
Mark Skapinker 0 n/a 150,000 1,267,500
Albert Amato 0 n/a 150,000 1,267,500
Michael Cooperman 0 n/a 110,000 48,750
Louis Ryan 115,000 1,982,300 190,000 131,250
</TABLE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return (assuming an
investment of C$100 on July 1, 1990, and assuming reinvestment of dividends) on
(i) the Delrina Common Shares on the TSE, (ii) the TSE 300 Index and (iii) the
TSE Technology Index for the period July 1, 1990 to June 30, 1995.
95
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG DELRINA CORPORATION, THE TSE 300 INDEX AND THE TSE TECHNOLOGY INDEX.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TSE TECHNOLOGY TSE 300 INDEX DELRINA CORPORATION
<S> <C> <C> <C>
6/90 100 100 100
6/91 121 102 238
6/92 133 103 190
6/93 164 124 808
6/94 161 128 1113
6/95 201 149 1210
</TABLE>
* Assumes $100 invested on June 30, 1990 in stock or index, including
reinvestment of dividends. Fiscal year ending June 30.
COMPENSATION OF DIRECTORS
During the fiscal year ended June 30, 1995, the directors of Delrina acting
in such capacity were paid cash compensation in an aggregate amount of C$6,000.
Outside directors are entitled to receive C$400 for each Delrina Board of
Directors, Audit Committee, Compensation Committee, or Delrina shareholders
meeting attended by them.
DIRECTORS' AND OFFICERS' INSURANCE
Delrina provides directors' and officers' liability insurance with a policy
limit of US$10,000,000 per occurrence, subject to a deductible of US$25,000 per
claim (excepting certain types of shareholder lawsuits, for which the deductible
is US$250,000 per claim). This coverage is part of Delrina's general third-party
liability risk insurance. The premium chargeable to Delrina in the fiscal year
ended June 30, 1995 in connection with directors' and officers' liability
insurance coverage is US$114,500, all of which was paid by Delrina. All of the
persons listed under "INFORMATION CONCERNING DELRINA -- Management of Delrina"
are insured under the directors' and officers' liability insurance policy.
INDEBTEDNESS OF DIRECTORS AND OFFICERS OF DELRINA
No director or senior officer of Delrina (or any "associate" (as defined in
the OBCA) of any such person) was indebted to Delrina or any of Delrina's
subsidiaries in any manner or amount which would be required to be disclosed
under the OBCA or the SECURITIES ACT (Ontario) during the fiscal year ended June
30, 1995.
INTERESTS OF MANAGEMENT OF DELRINA AND OTHERS IN CERTAIN TRANSACTIONS
No director or senior officer of Delrina (or any "associate" or "affiliate"
(as defined in the OBCA) of any such person) has had any material interest,
direct or indirect, in any transaction during the
96
<PAGE>
fiscal year ended June 30, 1995, or any proposed transaction, involving Delrina
that has materially affected or will materially affect Delrina or any of its
affiliates and which would be required to be disclosed under the OBCA or the
SECURITIES ACT (Ontario).
PRINCIPAL HOLDERS OF VOTING SECURITIES OF DELRINA
The Delrina Common Shares are the only class of outstanding voting
securities of Delrina. To the knowledge of the directors and officers of
Delrina, there are no persons or companies which beneficially own, or exercise
control or direction over, more than 10% of the outstanding Delrina Common
Shares.
SHARE CAPITAL MATTERS
Delrina is authorized to issue (i) an unlimited number of Delrina Common
Shares without par value and (ii) an unlimited number of Preference Shares
without par value, issuable in series.
The following is a summary of the material rights, privileges, restrictions
and conditions attached to the Delrina Common Shares and the Preference Shares.
DELRINA COMMON SHARES
The holders of Delrina Common Shares are entitled to receive notice of all
meetings of the shareholders of Delrina other than meetings of holders on
another class of shares, and to attend and vote thereat. The Delrina Common
Shares carry one vote per share. In the event of the dissolution of Delrina, the
holders of the Delrina Common Shares will be entitled to receive all of the
property of Delrina.
In connection with the Arrangement, the terms of the Delrina Common Shares
will be amended to provide that, in addition to existing rights, in the event of
the liquidation, dissolution or winding-up of Delrina or other distribution of
assets of Delrina for the purpose of winding up its affairs, the holders of the
Delrina Common Shares will be entitled to receive on a pro rata basis all of the
assets of Delrina remaining after payment of all Delrina's liabilities and the
return of capital in respect of the outstanding Preference Shares, if any,
subject to the prior satisfaction of all obligations relating to the
Exchangeable Shares. See "COMPANIES AFTER THE COMBINATION -- Delrina Share
Capital."
PREFERENCE SHARES
Preference Shares may be issued in series by the Delrina Board of Directors
pursuant to a resolution fixing the number of shares, designation, rights,
privileges, restrictions and conditions attaching to each series of Preference
Shares. The Preference Shares of each series shall rank PARI PASSU with the
Preference Shares of every other series, and shall rank prior to the Delrina
Common Shares and over any other shares of Delrina ranking junior to the
Preference Shares. Other than in certain prescribed circumstances, holders of
Preference Shares shall not be entitled to receive notice of, attend or vote at
any annual or special meeting of Delrina. In connection with the Arrangement,
the Preference Shares will be deleted from Delrina's authorized share capital.
See "THE TRANSACTION -- Transaction Mechanics and Description of Exchangeable
Shares -- The Arrangement."
PRIOR ISSUANCES OF SHARES
From July 1, 1994 to June 30, 1995, Delrina issued a total of 527,786
Delrina Common Shares for an aggregate consideration of C$4,151,211. 94,500 of
these shares were issued in connection with acquisitions completed by Delrina.
9,621 of these shares were issued pursuant to Delrina's Canadian and U.S.
employee share purchase plans. The balance were issued pursuant to the exercise
of options granted under the Delrina Option Plans, which are described further
below.
As of September 30, 1995, the only series of Preference Shares which has
been authorized by Delrina is the Convertible Retractable Redeemable Preference
Shares, Series A, of which 1,335,506 shares were previously authorized and
issued, all of which were converted into Delrina Common Shares on July 22, 1991.
As at September 30, 1995, 22,382,097 Delrina Common Shares and no Preference
Shares were issued and outstanding.
97
<PAGE>
EXERCISE OF EMPLOYEE STOCK OPTIONS
From July 1, 1994 to June 30, 1995, options to purchase 423,665 Delrina
Common Shares granted under the Delrina Option Plans were exercised at prices
between C$1.25 and C$18.00 per Delrina Common Share for aggregate proceeds to
Delrina of C$2,058,374.
DIVIDEND RECORD AND POLICY
Delrina has not declared any dividends on the Delrina Common Shares to date
and expects that future earnings will be retained to finance the growth of
Delrina's business.
TRADING HISTORY OF DELRINA COMMON SHARES
Delrina Common Shares are currently listed on the TSE under the symbol "DC"
and traded on the NNM under the symbol "DENAF". For information on the trading
history of the Delrina Common Shares, see "COMPARATIVE MARKET PRICE DATA."
AUDITORS, TRANSFER AGENT AND REGISTRAR
The independent auditors of Delrina are Price Waterhouse, Toronto. The
transfer agent and registrar for the Delrina Common Shares is The R-M Trust
Company, 393 University Avenue, 5th Floor, Toronto, Ontario M5C 2W9.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
MANDATE OF THE DELRINA BOARD OF DIRECTORS
The mandate of the Delrina Board of Directors is to manage the business and
affairs of Delrina with a view to enhancing shareholder value, including
ensuring the financial viability of the enterprise. The Delrina Board of
Directors, in discharging its duty of stewardship of Delrina, expressly assumes
responsibility for the following issues: (i) developing, reviewing and, where
prudent, modifying the corporate strategy of Delrina; (ii) identifying, and
developing a strategy to manage, the principal risks facing Delrina; (iii)
recruiting, training and succession planning for senior management; (iv)
ensuring timely and effective communication between Delrina and its shareholders
and other stakeholders; (v) ensuring the integrity of the internal control
systems and assessment processes for Delrina, its directors, management and
employees; and (vi) developing Delrina's approach to corporate governance issues
and establishing and implementing Delrina's corporate governance system.
BOARD COMPOSITION AND INDEPENDENCE
The Delrina Board of Directors currently consists of seven members, four of
whom are senior officers of Delrina and three of whom are outside directors that
the Delrina Board of Directors has determined are "unrelated directors," in that
they are independent of management and free of any interest (other than
interests arising from directors' fees or shareholdings in Delrina) or any
business or other relationship which could, or could reasonably be perceived to,
materially interfere with their ability to act in the best interests of Delrina.
Delrina knows of no shareholder of Delrina holding more than 10% of the
outstanding Delrina Common Shares.
The Delrina Board of Directors does not currently contain a majority of
unrelated directors, and the Chairman is currently an officer of Delrina. This
composition is reflective of the entrepreneurial nature of Delrina, the
relatively small size of its Board of Directors and the continuing influence of
Delrina's four founders, three of whom, including the Chairman, serve on the
Delrina Board of Directors. The Board believes that the value brought to the
enterprise and its shareholders by the service and contributions of the senior
management as directors fully justifies the current composition of the Delrina
Board of Directors.
The outside and unrelated directors will, in appropriate circumstances, meet
separately from the inside directors as an AD HOC subcommittee of the Delrina
Board of Directors. In addition, individual directors may, in appropriate
circumstances and subject to the approval of the Compensation Committee, engage
independent advisers at the expense of Delrina.
98
<PAGE>
BOARD COMMITTEES' RESPONSIBILITIES AND COMPOSITION
The Audit Committee's responsibilities include: (i) reviewing Delrina's
annual financial statements prior to the Delrina Board of Directors; (ii)
assessment of Delrina's accounting practices and policies; (iii) responsibility
for management reporting on internal control systems; and (iv) oversight of and
liaison with Delrina's internal and external auditors. The Audit Committee is
currently composed of three outside and unrelated directors and one inside
director.
The Compensation Committee's responsibilities include: (i) assessing the
effectiveness of the Delrina Board of Directors and the Board committees, as
well as assessing the individual directors; (ii) reviewing the adequacy and form
of compensation of the directors and senior management of Delrina; (iii)
proposing nominees for the Delrina Board of Directors to the full board; and
(iv) reporting on executive compensation in Delrina's public disclosure
documents. The Compensation Committee is currently composed of three outside and
unrelated directors and one inside director.
While neither the Audit Committee nor the Compensation Committee is
currently composed entirely of outside directors, the Delrina Board of Directors
believes that each of these committees functions independently by virtue of its
majority of outside and unrelated directors. Moreover, the Board of Directors
believes that a valuable purpose is served by including the Chief Executive
Officer, who is responsible for leading Delrina, on each of these committees.
The Delrina Board of Directors has not historically had and does not
currently have a separate nominating committee. Currently, the Compensation
Committee takes an active role in considering nominees for the Delrina Board of
Directors, but formal nominations are made by the Board. Each of these entities
carefully considers the expertise required of, and the qualifications and
experience brought by, a prospective new director prior to making any
nominations.
REVIEW OF CORPORATE GOVERNANCE ISSUES
Should the Transaction receive the approval of Delrina shareholders and the
Court and be completed, it is anticipated that all of the voting securities of
Delrina will be held by Symantec, which will have the right to elect the Delrina
Board of Directors. As a result, Delrina has not currently proposed or adopted
any further corporate governance initiatives. Should the Transaction not be
completed, as part of its mandate to develop Delrina's approach to corporate
governance issues, the Delrina Board of Directors will revisit matters relating
to Board and Board committee responsibilities, composition, recruiting and
orientation, procedures, activities and assessment which have an impact on
corporate governance issues, with special reference to the guidelines
recommended by The Toronto Stock Exchange Committee on Corporate Governance in
Canada and adopted by the TSE.
99
<PAGE>
SYMANTEC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Symantec develops, markets and supports a diversified line of application
and system software products designed to enhance individual and workgroup
productivity as well as manage networked computing environments. Founded in
1982, Symantec has offices in the United States, Canada, Australia, Japan and
Europe.
Due to a number of factors and risks, including the rapid change in hardware
and software technology, market conditions, seasonality in the retail software
market, the timing of product announcements, the release of new or enhanced
products, the introduction of competitive products by existing or new
competitors and the significant risks associated with acquisitions of companies,
technology and software product rights, historical results and percentage
relationships will not necessarily be indicative of the operating results of any
future period. The release of Windows 95 by Microsoft is a particularly
important event that increases the uncertainty and will likely increase the
volatility of Symantec's operating results over the next year.
Symantec's earnings and stock price have been and may continue to be subject
to significant volatility, particularly on a quarterly basis. Symantec has
previously experienced shortfalls in revenue and earnings from levels expected
by securities analysts, which had an immediate and significant adverse effect on
the trading price of Symantec's Common Stock. This may occur again in the
future. Additionally, as a growing percentage of Symantec's revenues are
generated from enterprise software products which are frequently sold through
site licenses and which often occur late in the quarter, Symantec may not learn
of revenue shortfalls until late in the fiscal quarter, which could result in an
even more immediate and adverse effect on the trading price of Symantec's Common
Stock.
Furthermore, Symantec participates in a highly dynamic industry, which often
results in significant volatility of Symantec's common stock price. In
particular, the impact of, and investors' assessment of the impact of,
Microsoft's new operating system on Symantec's business may result in a
significant increase in the volatility of Symantec's stock price during the
first year after the introduction of Windows 95.
During the last three fiscal years, Symantec has acquired the following
companies:
<TABLE>
<CAPTION>
SHARES OF SYMANTEC ACQUIRED COMPANY
COMMON STOCK STOCK OPTIONS
COMPANIES ACQUIRED DATE ACQUIRED ISSUED ASSUMED
- ------------------------------------------------------- ----------------------- ------------------ ----------------
<S> <C> <C> <C>
Intec Systems Corporation ("Intec").................... August 31, 1994 133,332 --
Central Point Software, Inc. ("Central Point")......... June 1, 1994 4,029,429 707,452
SLR Systems, Inc. ("SLR").............................. May 31, 1994 170,093 --
Fifth Generation Systems, Inc. ("Fifth Generation").... October 4, 1993 2,769,010 --
Contact Software International, Inc. ("Contact")....... June 2, 1993 2,404,019 232,589
Certus International Corporation ("Certus")............ November 30, 1992 368,141 32,619
MultiScope, Inc. ("MultiScope")........................ September 2, 1992 253,075 125,089
The Whitewater Group, Inc. ("Whitewater").............. September 2, 1992 69,740 9,644
</TABLE>
All of these acquisitions were accounted for as poolings of interest.
Accordingly, all financial information has been restated to reflect the combined
operations of these companies and Symantec with the exception of Intec, SLR,
MultiScope and Whitewater, which had results of operations that were not
material to Symantec's consolidated financial statements.
100
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth each item from the consolidated statements of
operations as a percentage of net revenues and the percentage change in the
total amount of each item for the periods indicated.
<TABLE>
<CAPTION>
PERIOD TO PERIOD PERCENTAGE
INCREASE (DECREASE)
------------------------------
THREE MONTHS ENDED JUNE 1995
QUARTER
JUNE 30, YEAR ENDED MARCH 31, COMPARED TO FISCAL 1995
---------------------- ---------------------------------- JUNE 1994 COMPARED TO
1995 1994 1995 1994 1993 QUARTER FISCAL 1994
----- ----- ----- ----- ----- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues.................... 100% 100% 100% 100% 100% 8% 2%
Cost of revenues................ 17 20 18 24 30 (10) (24)
--- --- --- --- ---
Gross margin................ 83 80 82 76 70 13 11
Operating Expenses:
Research and development...... 21 18 19 20 21 25 (2)
Sales and marketing........... 42 43 44 50 52 7 (11)
General and administrative.... 5 5 5 8 9 9 (33)
Acquisition, restructuring and
other non-recurring
expenses..................... -- 12 3 17 4 * (83)
--- --- --- --- ---
Total operating expenses.... 68 78 71 95 86 (5) (24)
--- --- --- --- ---
Operating income (loss)......... 15 2 11 (19) (16) 740 *
Interest income................. 2 1 1 1 -- 194 126
Interest expense................ (1) (1) (1) (1) -- (21) (4)
Other income (expense), net..... -- -- -- -- -- (71) *
--- --- --- --- ---
Income (loss) before income
taxes.......................... 16 2 11 (19) (16) 891 *
Provision (benefit) for income
taxes.......................... 3 1 2 (2) (5) 583 *
--- --- --- --- ---
Net income (loss)............... 13% 1% 9% (17)% (11)% 1,017% *
--- --- --- --- ---
--- --- --- --- ---
<CAPTION>
FISCAL 1994
COMPARED TO
FISCAL 1993
----------------
<S> <C>
Net revenues.................... (5)%
Cost of revenues................ (23)
Gross margin................ 3
Operating Expenses:
Research and development...... (10)
Sales and marketing........... (8)
General and administrative.... (19)
Acquisition, restructuring and
other non-recurring
expenses..................... 339
Total operating expenses.... 6
Operating income (loss)......... 16
Interest income................. (13)
Interest expense................ 81
Other income (expense), net..... (75)
Income (loss) before income
taxes..........................
Provision (benefit) for income
taxes.......................... (57)
Net income (loss)............... 46%
<FN>
- ------------------------------
* percentage change is not meaningful.
</TABLE>
NET REVENUES
Net revenues increased 8% from US$83.1 million in the quarter ended June 30,
1994 to US$90.1 million in the current year's comparable quarter principally due
to an increase in international revenues, secondarily, to an increase in site
license revenue, which was partially offset by a decrease in upgrade revenues
and to a lesser extent to a decrease in OEM product revenues. The increase in
site license revenues during the quarter ended June 30, 1995, is primarily due
to new enterprise products which are generally offered through site licenses.
The decrease in upgrade revenues is primarily due to Symantec's decision not to
upgrade several software products prior to the release of Windows 95.
Net revenues increased 2% from US$328.3 million in fiscal 1994 to US$334.9
million in fiscal 1995. The increase in fiscal 1995 net revenues from the prior
year was principally due to an increase in site license and distribution product
revenues which was partially offset by a decrease in upgrade and OEM product
revenues. The increase in site license revenues during fiscal 1995 was primarily
due to the release of several new enterprise products which are generally sold
through site licenses. The decrease in upgrade revenues is primarily due to
several products which were intentionally not upgraded in anticipation of the
release of Windows 95.
Net revenues decreased 5% from US$344.6 million in fiscal 1993 to US$328.3
million in fiscal 1994. The decrease in fiscal 1994 net revenues from the prior
year was principally due to the decrease in Central Point product revenues and
lower distribution and OEM revenues which was partially offset by increased
revenues from new product introductions, increased international revenues and
increased upgrade and site license revenues.
101
<PAGE>
In March 1994, due to the market's concerns regarding Central Point's
long-term viability and the announced acquisition of Central Point by Symantec,
Central Point was unable to reasonably estimate future product returns from its
distributors and resellers. In addition, there were high levels of inventory in
the distribution channel which had been shipped into the channel prior to the
acquisition. Central Point believed that there was a high risk of this inventory
being returned. In accordance with Statement of Financial Accounting Standards
No. 48, Central Point revenue and the related cost of revenue for fiscal 1994
for software shipments to Central Point's distributors and resellers was
deferred until sold by the distributors or resellers to the end user.
As a result, revenues relating to product inventory at Central Point's
distributors and resellers as of March 31, 1994 were deferred until sold by the
distributors or resellers to end users. This revenue and cost of revenue
deferral resulted in a decrease in domestic net revenues of approximately US$5.0
million and international net revenues of approximately US$10.0 million and an
increase in the fiscal 1994 loss before provision for income taxes of
approximately US$12.3 million. Since the acquisition, Symantec has analyzed
sell-through and product return information related to the Central Point
products to determine when such products were being sold through to end users
and Symantec believes that its marketing and sales programs were successful in
moving the deferred channel inventory through to end users. In the March 1995
quarter Symantec was able to assess the remaining Central Point product returns
in the domestic distribution channel and as a result recognized approximately
US$3.0 million of domestic net revenue previously deferred by Central Point. In
the June 1995 quarter, Symantec was able to assess the remaining Central Point
product returns in the international distribution channel and as a result
recognized approximately US$7.2 million of international net revenue and US$1.7
million of international cost of revenues previously deferred by Central Point.
Symantec's products include enterprise products which are frequently sold
through site licenses where a license for multiple workstations is sold to a
customer at a negotiated price, and desktop software products which are
generally sold through the distribution channel or directly to end-users.
Enterprise product revenues are typically comprised of lower volume, high dollar
site license transactions compared to desktop product revenues which are
typically comprised of higher volume, low dollar pre-packaged product
transactions. The prices of site licenses tend to vary based upon the individual
products purchased, the number of units licensed and the number of workstations
at the customer's site. There was no material impact to net revenues resulting
from changes in desktop product pricing in any of the periods presented.
Price competition is significant in the PC business software market and may
continue to increase and become even more significant in the future, resulting
in reduced profit margins. Should competitive pressures in the industry continue
to increase, Symantec may be required to reduce software prices and/or increase
its spending on sales, marketing and research and development as a percentage of
net revenues, resulting in lower profit margins. In addition, aggressive pricing
strategies of competitors in other software markets, some of whom have
significantly more financial resources than Symantec, may further cause Symantec
to reduce software prices and/or increase sales and marketing expenses on a
number of Symantec's products.
Net revenues from international sales increased from approximately US$29.6
million to US$41.2 million and represented 36% and 46% of total net revenues in
the quarters ended June 30, 1994 and 1995, respectively. The increase in
international sales is due primarily to the recognition of Central Point
international net revenues previously deferred as mentioned above and, to a
lesser degree, to increased sales of Symantec products in international markets.
Net revenues from international sales grew from approximately US$106.8 million
in fiscal 1993 to US$109.3 million in fiscal 1994 and to US$115.6 million in
fiscal 1995 and represented 31%, 33% and 35% of net revenues, respectively. The
increase in international sales from fiscal 1994 to fiscal 1995 is largely due
to the favorable impact of the change in foreign currency exchange rates during
fiscal 1995.
102
<PAGE>
During the June 1995 quarter, Symantec released The Norton Utilities for
Windows 95 Preview and The Norton pcANYWHERE Access Server v. 2.0. During fiscal
1995, Symantec released several new or upgraded enterprise products, including
The Norton Administrator for Networks v. 1.5, The Norton Enterprise Backup v.
1.0, The Norton pcANYWHERE Access Server v. 1.0, The Norton pcANYWHERE for
Windows v. 2.0, Symantec Enterprise Developer v. 2.0, The Norton AntiVirus for
Netware v. 2.0, ACT! Mobile Link for Windows v. 2.0, Symantec C++ v. 7.0 for
Windows, Time Line for Windows v. 6.1, NetControl v. 1.0 and Symantec AntiVirus
for Macintosh Administrator v. 4.0. Symantec also released a number of new or
upgraded desktop products during fiscal 1995, including More PC Tools for DOS
and Windows, Symantec AntiVirus for Macintosh v. 4.0, MacTools Pro v. 4.0, ACT!
v. 2.0 for Macintosh and ACT! v. 1.1 for the HP Palmtops, Disklock MAC v. 3.0
and The Norton Utilities for Macintosh v. 3.1.
Enhanced product releases typically result in net revenue increases during
the first three to six months following their introduction due to upgrade
purchases by existing users, usually at discounted prices, and initial inventory
purchases by Symantec's distributors. In addition, between the date Symantec
announces a new version or new product and the date of release, distributors,
dealers and end users often delay purchases, cancel orders or return products in
anticipation of the availability of the new version or new product.
Symantec's pattern of revenues and earnings may also be affected by a
phenomenon known as "channel fill." Channel fill occurs following the
introduction of a new product or a new version of a product as distributors buy
significant quantities of the new product or version in anticipation of sales of
such product or version. Following such purchases, the rate of distributors'
purchases often declines in a material amount, depending on the rates of
purchases by end users or "sell-through." The phenomenon of "channel fill" may
also occur in anticipation of price increases or in response to sales promotions
or incentives, some of which may be designed to encourage customers to
accelerate purchases that might otherwise occur in later periods. Channels may
also become filled simply because the distributors are unable to, or do not,
sell their inventories to retail distribution or end users as anticipated. If
sell-through does not occur at a sufficient rate, distributors will delay
purchases or cancel orders in later periods or return prior purchases in order
to reduce their inventories. Such order delays or cancellations can cause
material fluctuations in revenues from one quarter to the next. The impact is
somewhat mitigated by Symantec's deferral of revenue associated with inventories
estimated to be in excess of levels deemed appropriate in the domestic
distribution channel; however, net revenues may still be materially affected
favorably or adversely by the effects of channel fill. Channel fill did not have
a material impact on Symantec's revenues in the three months ended June 30, 1995
and 1994 or in fiscal 1995, 1994 or 1993 but may have a material impact in
future periods, especially in periods where a large number of new products are
introduced.
Symantec believes that many of its customers are moving toward an
enterprise-wide computing oriented environment where more desktop personal
computers will be interconnected into large local-area and wide-area networks
administered by corporate MIS departments. Symantec's entry into the enterprise
software market is relatively new and as a result, Symantec is beginning to
compete with companies with which it has not previously competed. As a result,
there is uncertainty regarding customer acceptance of Symantec's products as
Symantec has not been a major supplier in the enterprise market. These factors
increase the uncertainty of forecasting financial results. While Symantec
expects the market's shift toward enterprise products to continue, there can be
no assurance that Symantec's enterprise products will be successful or will gain
customer acceptance.
With the expansion to enterprise-wide computing systems markets, Symantec
believes that it must continue to develop relationships with and rely on systems
integrators and other third-party vendors that provide consulting and
integration services to customers and deliver products developed for this market
segment. Furthermore, the length of the sales cycle with respect to enterprise
products is longer and customers of enterprise products may take delivery of a
product subject to integration and acceptance by such customer. In addition, a
very high proportion of enterprise product
103
<PAGE>
sales are completed in the last few days of each quarter, in part because
customers are able, or believe that they are able, to negotiate lower prices and
more favorable terms. Each of these factors increase the risk that forecasts of
quarterly financial results will not be achieved.
Symantec's net revenues in the quarters ended June 30, 1995 and 1994 include
sales to two large distributors. Approximately 22% and 11% or a total of 33% of
Symantec's net revenues in fiscal 1995 were from sales to these two large
distributors. These customers tend to make the great majority of their purchases
at the end of the fiscal quarter, in part because they are able, or believe that
they are able, to negotiate lower prices and more favorable terms. This
end-of-period buying pattern means that forecasts of quarterly and annual
financial results are particularly vulnerable to the risk that they will not be
achieved, either because expected sales do not occur or because they occur at
lower prices or on less favorable terms to Symantec. Symantec's distribution
customers also carry the products of Symantec's competitors, some of which have
greater financial resources than Symantec. The distributors have limited capital
to invest in inventory and their decisions to purchase Symantec's products are
partly a function of pricing, terms and special promotions offered by Symantec
as well as by its competitors over which Symantec has no control and which it
cannot predict.
While Symantec's diverse product line has tended to lessen fluctuations in
quarterly net revenues, these fluctuations have occurred recently and are likely
to occur in the future. These fluctuations may be caused by a number of factors,
including the timing of announcements and releases of new or enhanced versions
of its products and product upgrades, the introduction of competitive products
by existing or new competitors, reduced demand for any given product, the
market's transition between operating systems, and the transition from a desktop
PC environment to an enterprise-wide environment and may cause significant
fluctuations in sales revenues and, accordingly, operating results.
Symantec is devoting substantial efforts to the development of software
products that are designed to operate on Windows 95. Microsoft may incorporate
advanced utilities, including telecommunications, facsimile and data recovery
utilities in future releases of Windows 95, that may decrease the demand for
certain of Symantec's products, including those currently under development.
Further, should Windows 95 not achieve market acceptance, or should Symantec be
unable to successfully or timely develop products that operate under Windows 95,
Symantec's future revenues and, accordingly, profitability would be immediately
and significantly adversely affected. In addition, as the timing of delivery and
adoption of many products is dependent on the adoption rate of Windows 95, which
Symantec and securities analysts are unable to predict, Symantec's and
securities analysts' ability to forecast Symantec's revenues is being adversely
impacted. For all of the preceding reasons, there is a heightened risk that
revenues and profits may not be in line with analysts' expectations in the
periods following the introduction of Windows 95.
In the quarter ending September 30, 1995, there is a substantial degree of
uncertainty regarding analysts' revenue forecasts. Net revenues could be
significantly less than expectations if market focus on Windows 95 by Symantec
employees, software distributors, channel sales personnel, and software
customers, generates a substantial adverse decline in the sales of products that
are not specifically designed for Windows 95. Symantec expects a major share of
its revenue in the September 1995 quarter may come from such products and so
their continued market strength is important to attaining anticipated revenue
levels. As Symantec has a limited experience base to estimate the sales of its
Windows 95 products under the volatile market conditions that were expected
after the new operating system was launched, including an unprecedented emphasis
on marketing and channel sales, Symantec believes it is therefore not able to
quantify the sales of its Windows 95 products with the degree of accuracy it
normally achieves. Actual sales could be substantially higher than, or lower
than, those included in analyst forecasts.
During the September 1995 quarter Symantec released several new products
which are designed to operate on Windows 95. Should acceptance of Windows 95 be
slower than expected, there would be a material and substantial adverse impact
on the revenues and profitability of Symantec.
104
<PAGE>
The length of Symantec's product development cycle has generally been
greater than Symantec originally expected. Although such delays have undoubtedly
had a material adverse effect on Symantec's business, Symantec is not able to
quantify the magnitude of revenues that were deferred or lost as a result of any
particular delay because Symantec is not able to predict the amount of revenues
that would have been obtained had the original development expectations been
met. Delays in product development, including products being developed for
Windows 95, are likely to occur in the future and could have a material adverse
effect on the amount and timing of future revenues. Due to the inherent
uncertainties of software development projects, Symantec does not generally
disclose or announce the specific expected shipment date of Symantec's product
introductions. In the event any such dates are disclosed or announced, they are
necessarily subject to delays for the reasons discussed above.
In addition, there can be no assurance that any products currently being
developed by Symantec, including products being developed for Windows 95, will
be technologically successful, that any resulting products will achieve market
acceptance or that Symantec's products will be effective in competing with
products either currently in the market or introduced in the future.
During fiscal 1993, Symantec believes that its' revenues were adversely
affected by an unexpected substantial price reduction in 486-based personal
computers that caused a shift in customer spending from software to personal
computer hardware. Symantec also believes that the shift was caused by the
introduction of Windows 3.1, which requires more computing capability and
computer memory. If the next class of personal computers, including those based
on Intel's Pentium or P6 microprocessor or Motorola's Power-PC, are also rapidly
reduced in price, there may be another unexpected shift in customer buying away
from software and Symantec's products. In addition, Windows 95 requires
significantly more computer memory than Windows 3.1 and if a shortage of
computer memory components were to occur, there could be an adverse effect on
the sales of computer hardware and software. Either of these events could result
in significantly reduced revenues and a material adverse effect on Symantec's
operating results. Symantec has noted that Pentium processors are being marketed
aggressively by Intel. The introduction of Windows 95 and a decline in the price
of Pentium processors could cause a shift in customer spending from software to
personal computer hardware and could adversely impact Symantec's net revenues.
Symantec estimates and maintains reserves for product returns. Increased
product returns occur when Symantec introduces product upgrades and new products
and discontinues certain software products. In addition, competitive factors
require Symantec to offer increased rights of return for products that
distributors or retail stores are unable to sell. Symantec has set its reserves
for returns in accordance with historical product return experience. Setting
reserves involves making significant judgments about future competitive
conditions and product life cycles. Those judgments involve evaluating
information that often is incomplete, unclear and in conflict. Symantec prepares
detailed analyses of historical return rate experiences in its estimation of
reserves for product returns. In addition to detailed historical return rates,
Symantec's estimation of return reserves takes into consideration upcoming
product upgrades, current market conditions, distributor and "superstore"
inventory balances and sell-through volume and any other known factors that may
impact anticipated product returns. Based upon returns experienced, Symantec's
estimates have been materially accurate. However, there can be no assurance that
historical experience will be an accurate guide for the future because the rate
of returns is primarily a function of the competitive state of the market in the
future and thus, in large part, is a function of the actions of Symantec's
competitors, which Symantec cannot accurately anticipate.
Symantec's product return reserve balances typically fluctuate from period
to period based upon the level and timing of product upgrade releases. Product
return reserve balances at June 30, 1995 were lower than reserve balances at
June 30, 1994. The decrease in the product return reserve balance is primarily
due to a reduction in upgrade revenues as a result of Symantec's decision not to
upgrade several software products prior to the release of the Windows 95
operating systems. Product return reserve balances at March 31, 1995 were lower
than reserve balances at March 31, 1994. This decrease
105
<PAGE>
was primarily due to Central Point product shipments which were previously
deferred and subsequently sold through to the end users. The level of actual
product returns and related product return reserves is largely a factor of the
level of product sell-in (gross revenue) from normal sales activity and the
replacement of obsolete quantities with the current version of Symantec's
product. As a result, gross revenues generally move in the same direction as
product returns. Changes in the levels of product returns and related product
return reserves are generally offset by changing levels of gross revenue and,
therefore, do not typically have a material impact on reported net revenues.
Symantec operates with relatively little backlog; therefore, if near-term
demand for Symantec's products weakens in a given quarter, there could be a
material adverse effect on revenues and on Symantec's operating results.
Symantec maintains a research and development facility in Santa Monica,
California that was damaged during the January 1994 earthquake in Southern
California. Much of Symantec's administration, sales and marketing,
manufacturing facilities and research and development efforts are located on the
west coast of the United States. Future earthquakes or other natural disasters
could cause a significant disruption to Symantec's operations and may cause
delays in product development that could adversely impact future revenues of
Symantec.
Also, Symantec's order entry department is located in Oregon, with shipments
being made from a warehouse in California. Order entry and shipping is similarly
separated in Europe. A disruption in communications between these facilities,
particularly at the end of a fiscal quarter would likely result in an unexpected
shortfall in revenues and could result in unexpected losses.
During the March 1994 quarter, Symantec introduced a new product support
program that provides a wide variety of free and fee-based technical support
services to its customers. Symantec provides its customers with free support via
electronic and automated services as well as 90 days complimentary free
telephone support for certain of Symantec's products. In addition, Symantec
offers both individual users and corporate customers a variety of fee-based
support options for certain of Symantec's products, designed to meet their
individual technical support requirements. Fee-based technical support services
did not generate significant revenues in the three months ended June 30, 1995
and 1994 or in the years ended March 31, 1995 and 1994 and are not expected to
generate material revenues in the near future.
GROSS MARGIN
Gross margin represents net revenues less cost of revenues. Cost of revenues
consists primarily of manufacturing expenses, manuals, packaging, royalties paid
to third parties under publishing contracts and amortization and write-off of
capitalized software. Amortization of capitalized software, including
amortization and the write-off of both purchased product rights and capitalized
software development expenses, totaled US$0.9 million and US$1.1 million for the
quarters ended June 30, 1995 and 1994, respectively, and totaled US$6.4 million,
US$17.8 million and US$17.5 million for fiscal 1995, 1994 and 1993,
respectively. The decrease in amortization and write-off of capitalized software
costs in fiscal 1995 over fiscal 1994 and 1993 is due to the write-off of
certain previously capitalized software costs by Central Point during fiscal
1994 and by Fifth Generation in fiscal 1993.
Gross margins increased to 83% of net revenues in the quarter ended June 30,
1995 from 80% in the quarter ended June 30, 1994. The increase in the gross
margin percentage was largely due to the growth in higher margin enterprise
products which are typically offered through site licenses and is also due to
Symantec's ability to manufacture Central Point products with a lower cost
structure than Central Point was able to prior to the merger. Symantec believes
that the gross margin percentage will remain near the current level unless there
is a significant change in Symantec's net revenues.
Gross margins increased to 82% of net revenues in fiscal 1995 from 76% and
70% in fiscal 1994 and 1993, respectively. The increase in the gross margin
percentage in fiscal 1995 compared to fiscal 1994 was largely due to the growth
in higher margin enterprise products which are typically sold through site
licenses and is also due to Symantec's ability to manufacture Central Point
products with
106
<PAGE>
a lower cost structure than Central Point was able to prior to the merger. In
addition, the decrease in amortization expense of capitalized software
contributed to the increase in the gross margin percentage in fiscal 1995. The
increase in the gross margin percentage in fiscal 1994 compared to fiscal 1993
was due to improvements in the gross margin percentage of Fifth Generation's
products and the gradual shift in Symantec's product mix from desktop products
toward higher margin enterprise products in fiscal 1994 which was partially
offset by the decline in Central Point's gross margin percentage due to its
software write-offs. This improvement in the gross margin percentage of Fifth
Generation's products was largely due to the absence of significant software
amortization and write-off of capitalized software by Fifth Generation during
fiscal 1993. Additionally, Symantec was able to produce the Fifth Generation
products with a lower cost structure than Fifth Generation was able to prior to
the merger. Symantec believes that the gross margin percentage will remain near
the current level unless there is a significant change in Symantec's net
revenues.
The microcomputer business software market has been subject to rapid changes
that can be expected to continue. Future technology or market changes, including
the release of Windows 95, may cause certain products to become obsolete more
quickly than expected and thus may result in capitalized software write-offs and
an increase in required inventory reserves and, therefore, reduced gross margins
and net income. In addition, the modifications to computer software, including
the correction of software bugs, may result in significant inventory rework
costs, including the cost of replacing inventory in the distribution channel.
On December 31, 1993, Symantec acquired certain technology for developing an
architecture and tools to build client-server applications from DataEase
International, Inc. in exchange for 391,456 shares of Symantec Common Stock and
cancellation of the principal and accrued interest on a US$1.0 million
outstanding note receivable. Symantec capitalized approximately US$7.7 million
of purchased product rights as a result of this transaction.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased 25% to US$18.6 million or 21% of
net revenues in the quarter ended June 30, 1995 from US$14.9 million or 18% of
net revenues in the quarter ended June 30, 1994. The increase in research and
development expenses is principally due to increased product development efforts
in the network/communication utility, security utility and contact management
product groups. Symantec has incurred significant research and development
expenses on various software products designed to operate on the Windows 95
operating system. Symantec believes increased research and development
expenditures will be necessary in order to remain competitive and expects future
research and development expenses to increase in dollar amount.
Research and development expenses decreased 2% to US$62.8 million or 19% of
net revenues in fiscal 1995 from US$64.1 million or 20% of net revenues in
fiscal 1994, and was US$71.1 million or 21% of net revenues in fiscal 1993. The
decrease in research and development expenses in fiscal 1995 is principally due
to the consolidation of product development efforts resulting from the
acquisition of Central Point. The decrease in research and development expenses
in fiscal 1994 was primarily due to lower spending on Symantec's security
utility product development efforts resulting from the consolidation of the
development efforts of Symantec and Fifth Generation and a US$2.0 million
decrease in spending relating to Central Point products.
Symantec believes increased research and development expenditures will be
necessary in order to remain competitive and expects research and development
expenses to increase in dollar amount.
Research and development expenditures are charged to operations as incurred.
Financial accounting rules requiring capitalization of certain internal software
development costs did not materially affect Symantec in the periods presented.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased 7% to US$38.4 million or 42% of net
revenues in the quarter ended June 30, 1995 from US$36.0 million or 43% of net
revenues in the prior year's
107
<PAGE>
comparable quarter. The increase in sales and marketing expenses was principally
due to an increase in marketing development expenses and commissions associated
with higher revenues and also an increase in sales and marketing expenses
associated with the expected release of Windows 95 products in August 1995.
Sales and marketing expenses decreased 11% to US$147.6 million or 44% of net
revenues in fiscal 1995 from US$165.1 million or 50% of net revenues in fiscal
1994. The decrease in fiscal 1995 was principally due to the elimination of
duplicative sales organizations as a result of the acquisition of Central Point.
Subsequent to the acquisition of Central Point by Symantec in fiscal 1995,
various duplicative sales organizations were eliminated as a result of the
combination of the companies. Sales and marketing expenses for fiscal 1994
decreased 8% over fiscal 1993 due to the elimination of duplicative sales
organizations as a result of the acquisitions of Fifth Generation and Contact
and the reduction of sales and marketing expenses incurred by Central Point.
Symantec believes substantial sales and marketing efforts are essential to
achieve revenue growth and to maintain and enhance Symantec's competitive
position. Accordingly, with the continued expansion of its international
operations, as well as the introduction of new and upgraded products, including
products currently being developed for Windows 95, Symantec expects the expenses
associated with these efforts to increase in dollar amount and to continue to
constitute its most significant operating expense. There can be no assurance
that these increased sales and marketing efforts will be successful. Symantec
believes that Symantec's sales and marketing expenses will increase
significantly in the September 1995 quarter to support the introduction of
Windows 95 products.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased 9% from US$4.4 million or 5%
of net revenues in the quarter ended June 30, 1994 to US$4.8 million or 5% of
net revenues in the quarter ended June 30, 1995. The increase in general and
administrative expenses was principally due to growth of Symantec's business and
increased headcount.
General and administrative expenses decreased 33% from US$25.2 million or 8%
of net revenues in fiscal 1994 to US$17.0 million or 5% of net revenues in
fiscal 1995. This decrease was principally due to benefits resulting from the
consolidation of the general and administrative functions of Symantec and
Central Point. Subsequent to the acquisition of Central Point by Symantec in
fiscal 1995, various duplicative general and administrative functions were
eliminated as a result of the combination of the companies. In addition, general
and administrative expenses decreased due to the settlement of two class action
lawsuits in fiscal 1994 resulting in a decrease in legal expenses during fiscal
1995.
General and administrative expenses decreased 19% from US$31.1 million or 9%
of net revenues in fiscal 1993 to US$25.2 million or 8% of net revenues in
fiscal 1994. This decrease was principally due to benefits resulting from the
consolidation of the general and administrative functions of Contact and Fifth
Generation at Symantec's corporate headquarters, which was partially offset by
increases in legal expenses associated with two class action lawsuits (See Note
10 of Notes to Symantec Consolidated Financial Statements).
Future growth of Symantec is expected to result in an increase in the dollar
amount of general and administrative spending from current levels.
ACQUISITION, RESTRUCTURING AND OTHER EXPENSES
ACQUISITION EXPENSES. In connection with the various acquisitions completed
in fiscal 1995, 1994 and 1993 (see Summary of Significant Accounting Policies
and Note 10 of Notes to Symantec's Financial Statements), significant
acquisition expenses were incurred. These acquisition expenses principally
included fees for legal, accounting and financial advisory services, the
write-off of duplicative capitalized technology, the modification of certain
development contracts and expenses related to
108
<PAGE>
the combination of the companies, including the elimination of duplicative and
excess facilities and personnel. These charges approximated US$9.5 million,
US$25.9 million and US$5.1 million in fiscal 1995, 1994 and 1993, respectively.
In connection with the acquisitions of Central Point and SLR, Symantec
recorded total acquisition charges of US$9.5 million in fiscal 1995. The charges
included US$3.2 million for legal, accounting and financial advisory services,
US$1.0 million for the write-off of duplicative product-related expenses and
modification of certain development contracts, US$0.9 million for the
elimination of duplicative and excess facilities, US$3.1 million for personnel
severance and outplacement expenses, and US$1.3 million for the consolidation
and discontinuance of certain operational activities and other
acquisition-related expenses.
During fiscal 1994, Central Point incurred US$16.0 million of expenses
related to the restucturing of its operations. In the quarter ended June 30,
1994, Symantec incurred US$9.0 million of expenses related to the acquisition of
Central Point. In the quarter ended June 30, 1995, Symantec recognized a
reduction in accrued acquisition and restructuring expenses of US$2.3 million as
actual costs incurred were less than costs previously accrued by the companies.
The combined company expects to incur total acquisition expenses of
approximately US$25 to US$30 million related to the combination of Delrina and
Symantec.
Symantec has completed a number of acquisitions and expects to acquire other
companies in the future. In addition to the significant business risks
associated with acquisitions, including the successful combination of the
companies in an efficient and timely manner, the coordination of research and
development and sales efforts, the retention of key personnel and the
integration of the acquired products, Symantec typically incurs significant
acquisition expenses for legal, accounting and financial advisory services, the
write-off of duplicative technology and other expenses related to the
combination of the companies. These expenses may have a significant adverse
impact on Symantec's future profitability and financial resources.
RESTRUCTURING EXPENSES. During fiscal 1994, Symantec implemented a plan to
consolidate and centralize certain operational activities (See Note 10 of Notes
to Symantec Consolidated Financial Statements). The plan was designed to reduce
operating expenses and enhance operational efficiencies by centralizing certain
order administration, technical support and customer service activities in
Eugene, Oregon. In fiscal 1994, Symantec recorded a charge of US$4.7 million,
which included US$1.1 million for the elimination of duplicative and excess
facility expenses, US$1.5 million for the relocation of Symantec's existing
operations and equipment, US$1.1 million for employee relocation expenses and
US$1.0 million for employee severance payments. Symantec's centralization has
been completed.
During fiscal 1994, Central Point incurred US$16.0 million of expenses
related to the restructuring of its operations in order to reduce its overall
cost structure and to redirect its software development and marketing efforts
away from the personal desktop computer market toward personal computer network
markets. The charge included US$6.2 million for employee severance, outplacement
and relocation expenses, US$5.6 million for the write-off of certain excess
fixed and intangible assets, US$1.8 million for lease abandonments and facility
relocation and US$2.4 million for the consolidation and discontinuance of
certain operational activities and other related expenses. This centralization
plan has been substantially completed.
During fiscal 1993, Symantec recorded a US$4.4 million charge for expenses
related to the restructuring of certain operational functions within Symantec.
The plan was designed to reduce operating expenses and reallocate resources from
DOS products to Windows and Development Tools products. This charge included
US$1.0 million for the elimination of excess facilities, US$0.4 million for the
relocation of certain employees and US$3.0 million for outplacement expenses and
severance payments associated with the reduction in staffing. This restructuring
has been completed.
109
<PAGE>
During fiscal 1993, Central Point incurred US$0.7 million of charges related
to the restructuring of its operations, including the sale of its manufacturing
operations, personnel relocation and severance, and the write-off of certain
property and equipment. This restructuring has been completed.
OTHER EXPENSES. During February 1995, Symantec announced a plan to
consolidate certain research and development activities. This plan is designed
to gain greater synergy between Symantec's Third Generation Language and Fourth
Generation Language development groups. As of the end of the June 1995 quarter
Symantec has incurred US$2.2 million of the relocation costs for moving
equipment and personnel. Symantec expects to incur remaining costs of US$1.8 to
US$2.8 million for the relocation of the remaining activities, equipment and
personnel from this consolidation. Symantec expects to complete this relocation
by December 1995 with the bulk of the remaining costs occurring in the September
1995 quarter.
During fiscal 1994, Symantec reached an agreement with the plaintiffs and
Symantec's insurance carriers to settle two securities class actions and a
related derivative lawsuit brought by stockholders of Symantec (See Note 10 of
Notes to Symantec Consolidated Financial Statements). The combined settlement
amount of the cases was US$19.0 million, approximately US$12.5 million of which
was paid by Symantec's insurance carriers. Symantec recorded a charge in fiscal
1994 of US$6.5 million, representing Symantec's portion of the settlement.
During fiscal 1993, Symantec recorded a US$2.6 million charge for estimated
total legal fees expected to be incurred in connection with the Borland civil
lawsuit and the related criminal prosecution (See Notes 10 and 11 of Notes to
Symantec Consolidated Financial Statements).
Symantec is involved in a number of other judicial and administrative
proceedings incidental to its business (See Note 11 of Notes to Symantec
Consolidated Financial Statements). Symantec intends to defend all of these
lawsuits vigorously and although an unfavorable outcome could occur in one or
more of the cases, the final resolution of these lawsuits, individually or in
the aggregate, is not expected to have a material adverse effect on the
financial position of Symantec. However, depending on the amount and timing of
an unfavorable resolution of these lawsuits, it is possible that Symantec's
future results of operations or cash flows could be materially adversely
effected in a particular period.
In fiscal 1994, Central Point purchased from unrelated parties certain
in-process software technologies for US$3.0 million which was immediately
expensed. (See Note 10 of Notes to Symantec Consolidated Financial Statements).
As of June 30, 1995, total accrued acquisition and restructuring expenses
were US$5.2 million and included US$1.0 million for the modification of certain
development contracts, US$1.3 million for the elimination of duplicative and
excess facilities and US$2.9 million for the consolidation and discontinuance of
certain operational activities and other acquisition related expenses. As of
March 31, 1995, total accrued acquisition and restructuring expenses for all
prior acquisitions and restructurings of Symantec were US$8.6 million and
included US$1.1 million for the modification of certain development contracts,
US$1.4 million for the elimination of duplicative and excess facilities, US$1.3
million for employee severance, outplacement and relocation expenses and US$4.8
million for the consolidation and discontinuance of certain operational
activities and other acquisition-related expenses.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE)
Interest income was US$1.6 million and US$0.6 million in the quarters ended
June 30, 1995 and 1994, respectively. The increase in interest income is due to
higher average invested cash balances and higher average interest rates on
invested cash. Interest expense was US$0.4 million and US$0.6 million in the
quarters ended June 30, 1995 and 1994, respectively. The decrease in interest
expenses is principally due to the conversion of US$10.0 million of convertible
subordinated debentures into 833,333 shares of Symantec common stock on April
26, 1995. Other expense was primarily comprised of foreign currency exchange
losses from fluctuations in foreign currency exchange rates.
110
<PAGE>
Interest income was US$3.3 million, US$1.5 million and US$1.7 million in
fiscal 1995, 1994 and 1993, respectively. The increase in interest income in
fiscal 1995 over fiscal 1994 is due to higher average invested cash balances and
higher average interest rates on invested cash. Interest expense was US$2.4
million, US$2.5 million and US$1.4 million in fiscal 1995, 1994 and 1993,
respectively. The increase in interest expenses in fiscal 1995 and 1994 over
fiscal 1993 is principally due to interest expense on convertible subordinated
debentures which were issued on April 2, 1993, which was partially offset by the
retirement of acquired company debt. On April 26, 1995, convertible subordinated
debentures totaling US$10.0 million were converted into 833,333 shares of
Symantec Common Stock. As a result, interest expense is expected to decrease in
fiscal 1996. Other expense was primarily comprised of foreign currency exchange
losses from fluctuations in currency exchange rates.
Symantec conducts business in various foreign currencies and is therefore
subject to the transaction exposures that arise from foreign exchange rate
movements between the dates that foreign currency transactions are recorded and
the date that they are settled. Symantec utilizes some natural hedging to
mitigate Symantec's transaction exposures and, effective December 31, 1993,
Symantec commenced hedging some residual transaction exposures through the use
of 30-day forward contracts. At June 30, 1995, there was a total of
approximately US$27.4 million of outstanding forward exchange contracts. The net
liability of forward contracts was approximately US$10.8 million at June 30,
1995. There have been no significant gains or losses to date with respect to
these activities. Gains or losses would occur on 30-day forward contracts held
by Symantec when changes in foreign currency exchange rates occur. These gains
and losses have been largely offset by the transaction gains and losses
resulting from foreign currency denominated cash, accounts receivable,
intercompany balances and trade payables. There can be no assurance that these
strategies will continue to be effective or that transaction gains or losses can
be minimized or forecasted accurately. Symantec does not hedge its translation
risk.
INCOME TAXES
The effective income tax provision for the three months ended June 30, 1995
was 20% which compared to an effective income tax provision of 29% in the prior
year's comparable period. The low provision rate for the three months ended June
30, 1995 was primarily attributable to unbenefitted prior year losses from
Central Point and certain foreign earnings taxed at lower rates. Symantec
expects its tax rate to return to 30-35% as these benefits are exhausted, and as
a result of the combination with Delrina.
Symantec's effective income tax rate for fiscal 1995 was 26%, which compared
to an effective income tax benefit rate of 11% in fiscal 1994 and 29% in fiscal
1993. The 1995 income tax rate of 26% is lower than the statutory rate primarily
due to the benefit of preacquisition losses of Central Point and certain foreign
earnings taxed at lower rates, which were partially offset by Central Point
acquisition costs that were not deductible for income tax purposes.
A net deferred tax asset of approximately US$9.9 million is reflected in the
financial statements. Approximately US$25 million of future U.S. taxable income
will be necessary to realize this net deferred tax asset. While there can be no
assurance that future income will be sufficient to realize this benefit,
management believes that this benefit will be realized in the near future based
on projected income from new and existing products. A valuation allowance of
US$28.9 million was provided in the financial statements. The valuation
allowance consists primarily of US$14.7 million for Central Point preacquisition
losses and US$11.1 million for non-benefited stock option deductions, the
benefit of which will be credited to equity when realized. The remaining portion
of the valuation allowance represents net operating loss carryforwards of
various acquired companies that are limited under the "change of ownership"
rules of U.S. Code Section 382.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased US$8.5 million from US$105.2
million at March 31, 1995 to US$113.7 million at June 30, 1995, largely due to
cash provided by operating activities, net proceeds from the sales of common
stock and the exercise of stock options which was partially offset by
111
<PAGE>
cash expenditures for capital equipment. Net cash provided by operating
activities was US$10.4 million and was comprised of Symantec's net income of
US$11.7 million and an increase in non-cash related expenses of US$6.6 million
which was partially offset by a decrease in net assets and liabilities of US$7.9
million.
Trade accounts receivable decreased US$4.5 million from US$54.0 million at
March 31, 1995 to US$49.5 million at June 30, 1995 primarily due to improved
cash collections. The large decline in other accrued expenses from US$51.8
million at March 31, 1995 to US$40.2 million at June 30, 1995 was principally
due to the recognition of international net revenues previously deferred by
Central Point.
Symantec has a US$10.0 million line of credit that expires in October 1995.
The line of credit is available for general corporate purposes and bears
interest at the banks' reference (prime) interest rate (9.0% at June 30, 1995),
the U.S. offshore rate plus 1.5%, a CD rate plus 1.5% or LIBOR plus 1.5%, at
Symantec's discretion. The line of credit requires bank approval for the payment
of cash dividends. Borrowings under this line are unsecured and are subject to
Symantec maintaining certain financial ratios and profits. At June 30, 1995,
there was approximately US$0.5 million of outstanding standby letters of credit
under this line of credit. There were no borrowings outstanding under this line
at June 30, 1995. Symantec was in compliance with the debt covenants at June 30,
1995. Company acquisitions in the future, including the pending acquisition of
Delrina, may cause Symantec to be in violation of the line of credit covenants;
however, Symantec believes that if the line of credit were canceled or amounts
were not available under the line, there would not be a material adverse impact
on the financial results, liquidity or capital resources of Symantec.
Symantec may utilize significant amounts of cash in connection with the
Transaction and the potential acquisition of additional companies and software
product rights in the future. Should Symantec sustain significant losses, there
can be no assurances that the bank line of credit, which is available through
October 1995, would remain available. Additionally, Symantec could be required
to reduce operating expenses, which could result in further product delays;
reassess acquisition opportunities, which could negatively impact Symantec's
growth objectives; and/or pursue further financing options. Symantec believes
existing cash and short-term investments will be sufficient to fund operations
for the next year.
112
<PAGE>
INFORMATION CONCERNING SYMANTEC
BUSINESS
GENERAL
Symantec develops, markets and supports a diversified line of application
and system software products designed to enhance individual and workgroup
productivity as well as manage networked computing environments. Approximately
80% of Symantec's net revenues are derived from products that operate on
Microsoft MS-DOS or Windows operating systems for IBM and IBM-compatible
personal computers. Symantec also offers products for use on the Apple Macintosh
and IBM OS/2 operating systems.
Symantec's predecessor, C&E Software, Inc., a California corporation, and
that predecessor's operating subsidiary, Symantec Corporation, a California
corporation, were formed in September 1983 and March 1982, respectively.
Symantec was incorporated in Delaware in April 1988 in connection with the
September 1988 reincorporation of Symantec's predecessor and its operating
subsidiary into a single Delaware corporation.
Since Symantec's initial public offering on June 23, 1989, Symantec has
completed acquisitions of the following companies:
<TABLE>
<CAPTION>
SOFTWARE OR ACTIVITY
COMPANIES ACQUIRED DATE ACQUIRED ACQUIRED
- ----------------------------------------------- ----------------------- --------------------------
<S> <C> <C>
Intec Systems Corporation August 31, 1994 Applications
Central Point Software, Inc. June 1, 1994 Utilities
SLR Systems, Inc. May 31, 1994 Development Tools
Fifth Generation Systems, Inc. October 4, 1993 Utilities
Contact Software International, Inc. June 2, 1993 Applications
Certus International Corporation November 30, 1992 Utilities
MultiScope, Inc. September 2, 1992 Development Tools
The Whitewater Group, Inc. September 2, 1992 Development Tools
Symantec (UK) Ltd. ("Symantec UK") April 3, 1992 Marketing Entity
Zortech Ltd. ("Zortech") August 31, 1991 Development Tools
Dynamic Microprocessor Associates, Inc. ("DMA") August 30, 1991 Utilities
Leonard Development Group Inc. ("Leonard") August 30, 1991 Applications
Peter Norton Computing, Incorporated ("Norton") August 31, 1990 Utilities
</TABLE>
All of these acquisitions were accounted for as poolings of interest.
Accordingly, all financial information has been restated to reflect the combined
operations of these companies and Symantec with the exception of Intec, SLR,
MultiScope and Whitewater, which had results of operations that were not
material to Symantec's consolidated financial statements.
Symantec's strategy is to develop and market products that are, or may
become, leaders in their respective categories, maintain a broad product line
across multiple platforms and develop and market a strong product offering for
the enterprise or networked computing environment. Symantec's early products
were primarily productivity applications, such as Q&A, a non-programmable
database, and Time Line, a sophisticated project management program. In 1989,
Symantec expanded its business into utility products, initially with Macintosh
utilities products, and then into DOS utilities in fiscal 1991 with the
acquisition of Norton, the developer of Norton Utilities and Norton Commander.
In fiscal 1992, Symantec acquired DMA, the developer of pcANYWHERE and in
113
<PAGE>
fiscal 1993, Symantec acquired Certus, the developer of Novi, an Anti-virus
product that was merged into The Norton AntiVirus. In fiscal 1992 and 1993,
Symantec acquired three development tools companies (Zortech, Whitewater and
MultiScope) and expanded its development tools business into the DOS and Windows
object-oriented programming markets. In fiscal 1994, Symantec continued this
expansion into the application development market with the acquisition of
certain technology for developing an architecture and tools to build
client-server applications from DataEase International, Inc. Also in fiscal
1994, Symantec added to its internal development of network utilities with the
acquisition of Fifth Generation, which had certain network utility products
under development. The acquisition of Contact in fiscal 1994 expanded Symantec's
product line with the addition of ACT!, a contact management product. The
acquisition of Central Point in fiscal 1995 added a number of desktop and
enterprise utility products to Symantec's product offerings, including Mac
Tools, PC Tools, XTree Gold and Central Point AntiVirus. Many of the products
acquired through the acquisition of Central Point were duplicative of products
marketed by Symantec prior to the acquisition. As a result, the comparison of
future Company revenues to historical revenues on a pooled basis may be
adversely impacted by the elimination of duplicative products.
Symantec believes that the prevailing trends in the software industry are
movements by companies to downsize from mainframes and minicomputers to
microcomputers; a continuation of the move to graphical user interfaces, as
demonstrated by the strong demand for Windows products; a move to networked
environments of microcomputers; and a move to object-oriented programming among
software developers. As a result, Symantec is currently expanding its
development of network management utilities and applications that support
network and workgroup computing and is continuing its development of
object-oriented programming tools.
While Symantec's diverse product line has tended to lessen fluctuations in
quarterly net revenues, such fluctuations have occurred recently and are likely
to occur in the future. These fluctuations may be caused by a number of factors,
including new product introductions and product upgrades, reduced demand for any
given product, the market's transition between operating systems, (including the
market's acceptance and transition to Windows 95 and a transition from a desktop
PC environment to an enterprise-wide networked environment).
Symantec has a 52/53-week fiscal accounting year. Accordingly, all
references as of and for the periods ended March 31, 1995, 1994 and 1993 reflect
amounts as of and for the periods ended March 31, 1995, April 1, 1994, and April
2, 1993, respectively.
114
<PAGE>
PRODUCTS AND SERVICES
Symantec's products, comprising both application software and system
software, are currently organized into seven product groups: advanced utilities,
security utilities, network/communications utilities, contact management,
development tools, project management/productivity applications and
client-server technology. The following table summarizes Symantec's principal
products by product group and the operating system(s) on which they run:
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS OPERATING SYSTEM(S)
- ---------------------------------------------------- --------------------------------------------------------------
<S> <C>
ADVANCED UTILITIES
The Norton Utilities Windows, MS-DOS, Macintosh
The Norton Utilities for Windows 95 Windows 95
The Norton Utilities Administrator Windows, MS-DOS
The Norton Navigator Windows 95
The Norton Commander MS-DOS
The Norton Desktop for Windows Windows
PC Tools Windows, MS-DOS
Mac Tools Macintosh, Power Macintosh
SuperDoubler Macintosh
Suitcase Macintosh
XTreeGold Windows, MS-DOS
SECURITY UTILITIES
The Norton AntiVirus MS-DOS, Windows
The Norton Anti Virus for Windows 95 Windows 95
The Norton AntiVirus for NetWare Windows, MS-DOS, Macintosh
Central Point Antivirus Windows, MS-DOS, Macintosh, OS/2
Symantec AntiVirus for Macintosh (SAM) Macintosh
Symantec AntiVirus for Macintosh (SAM) Macintosh
Administrator
The Norton Enterprise Backup Windows, MS-DOS
The Norton Backup Windows, MS-DOS
Fastback Plus-TM- Windows, MS-DOS, Macintosh
The Norton Disklock Windows, MS-DOS, Macintosh
NETWORK/COMMUNICATIONS UTILITIES
The Norton pcANYWHERE Windows, MS-DOS
The Norton pcANYWHERE Access Server OS/2
The Norton Administrator for Networks Windows
CONTACT MANAGEMENT
ACT! Windows, MS-DOS, Macintosh, Power Macintosh
ACT! Mobile Link Windows
DEVELOPMENT TOOLS
Symantec C++ Windows, MS-DOS, Windows 95, Macintosh, Power Macintosh
THINK C Macintosh
PROJECT MANAGEMENT/PRODUCTIVITY APPLICATIONS
TimeLine Windows, MS-DOS
Q&A Windows, MS-DOS
CLIENT-SERVER TECHNOLOGY
Symantec Enterprise Developer Windows
</TABLE>
115
<PAGE>
ADVANCED UTILITIES
The Norton Utilities/The Norton Utilities Administrator are a set of "tools"
with both MS-DOS and Windows components designed to address the system-level
operations of an IBM-compatible personal computer. The Norton Utilities product
provides disk and data recovery, security, performance optimization, system and
.ini-file monitoring and preventive maintenance functions. The Norton Utilities
can restore the structure of a disk and files under certain conditions and can
also provide for file de-fragmentation, system operation information, file
unerasing and other file, performance and operations improvements. The Norton
Utilities for Macintosh is similar to The Norton Utilities for MS-DOS. The
Norton Utilities Administrator is a network version of The Norton Utilities.
Norton Utilities for Windows 95 is a 32-bit utility that provides continuous
system protection and data recovery for Windows 95. Norton Utilities for Windows
95 is specifically designed to leverage Windows 95 architecture and deliver a
true 32-bit utilities solution. Norton Utilities for Windows 95 is an automated
and advanced set of data and system preparation, protection and recovery tools
for Windows 95.
Norton Navigator is a set of 32-bit file management tools and desktop
enhancements for Windows 95 to manage files and move around the new desktop in
Windows 95. Integrated with Windows 95, Norton Navigator is a natural extension
of the new operating system, designed to enhance speed, functionality and
operating convenience. By extending Windows 95's basic capabilities, Norton
Navigator lets users quickly find files and programs, and configure their
systems to improve productivity.
The Norton Commander is an MS-DOS shell designed to provide a
character-based graphical approach and mouse capability for MS-DOS operations
such as copy, move and delete. The Norton Commander includes an MCI mail
facility, file compression and Commander Link, a PC-to-PC file transfer
function. The Norton Commander includes a wide range of file viewers,
application launching functions and a customizable menuing facility.
The Norton Desktop for Windows/PC Tools for Windows gives the user easy
access and maneuverability within the Windows environment by integrating the
functionality of the Windows' Program Manager and File Manager. The Norton
Desktop for Windows enables the user to access a number of integrated tools
including Norton Backup, Norton AntiVirus, Deskedit, Unerase, Superfind, Norton
Disk Doctor, SmartErase, Sleeper, Batch Builder, Keyfinder and Icon Editor. From
the integrated file manager the user can also launch, copy, move, view and
delete a file or application by clicking and dragging icons on the desktop. PC
Tools for Windows includes CrashGuard, System Consultant, File Companions,
INI-Consultant, AutoSync, DiskFix and Optimizer.
SuperDoubler automatically and transparently increases hard disk space
through file compression. SuperDoubler includes accelerated background copying
and deleting for the Macintosh .
Suitcase is a resource management tool for the Macintosh operating system.
Suitcase helps organize and access font, DA, sound and FKEY resources.
XTreeGold is a full-featured file manager which includes full keystroke
capability in order to take advantage of its powerful shortcuts.
SECURITY UTILITIES
The Norton AntiVirus/The Norton AntiVirus for NetWare/Central Point
AntiVirus/Symantec AntiVirus for Macintosh ("SAM") are programs for the
protection, detection and elimination of computer viruses under the MS-DOS,
Windows, Macintosh and OS/2 operating systems. They provide virus protection,
detection and repair capability, recognize virus-like behavior and prevent most
known or unknown viruses from infecting a system. They detect viruses and
disinfect infected files and disks during normal computer use. They also detect
and disinfect floppy boot-track viruses, stealth and encrypted viruses and
remove active viruses from memory. Norton AntiVirus is also available for
Novell's operating system as an NetWare Loadable Module ("NLM") and is known as
The Norton AntiVirus for NetWare. The NLM can scan MS-DOS, Windows, and
Macintosh file types.
116
<PAGE>
Norton AntiVirus for Windows 95 is a full 32-bit virus protection product
specifically designed for Windows 95. Norton AntiVirus for Windows 95 supports
the Windows 95 interface, and is designed to prevent viruses with a unique,
comprehensive, multi-layered line of defense that combines scanning, virus
sensing, and inoculation. Operating unobtrusively in the background, Norton
AntiVirus for Windows 95 automatically and continuously scans the system.
Symantec AntiVirus for Macintosh (SAM) Administrator is an application which
provides centralized network distribution and maintenance of the Symantec
AntiVirus for Macintosh. Its configurable network installation and upgrade
capabilities enable administrators to ensure that all remote networked Macintosh
systems are completely protected.
The Norton Enterprise Backup is a WAN-based data management software tool
that reduces the administrative burden of data management with a
centrally-managed server and workstation product that can automatically and
dynamically use backup resources across multiple servers, LANs and WANs. Norton
Enterprise Backup will also redirect the backup process to other tape drives if
one drive becomes full or breaks. It is also easy to restore information or a
whole disk drive with Norton Enterprise Backup.
The Norton Backup and Fastback Plus are hard disk backup programs. The
Norton Backup and Fastback Plus provide automatic program installation and
configuration, point and shoot file selection and user-level options. Both
MS-DOS and Windows versions of both products are available. A Macintosh version
of Fastback is also available.
The Norton DiskLock protects PC and Macintosh computers from unwanted
intrusion. Disklock provides boot protection to prevent unauthorized users from
accessing a PC's hard disk drive. In addition to full disk access control, The
Norton DiskLock allows for basic password protection and selective locking to
secure individual files or folders in a shared environment. The Norton DiskLock
provides SpeedCrypt for especially sensitive data and is available in MS-DOS,
Windows and Macintosh versions.
The Norton Administrator for Networks is a single solution to reduce network
management costs substantially through the automation of key manually intensive
LAN administration tasks. Its key features include full integration of hardware
and software inventory, software distribution, license monitoring and metering
and the automation of costly LAN administration tasks. It supports all major
operating systems and provides the ability to add in Norton AntiVirus,
pcANYWHERE remote control technology, Norton Utilities Administrator and Norton
Disklock Administrator.
COMMUNICATIONS UTILITIES
The Norton pcANYWHERE offers reliable, fast and flexible PC-to-PC remote
computing via serial or modem connection. The Norton pcANYWHERE lets the user
remotely control one PC from the keyboard of another. The offsite remote PC,
laptop or PC terminal controls the operation of the distant host PC. The
software allows the user to run any MS-DOS or Windows application remotely,
transfer files and perform other data operations. In addition to allowing a user
to remotely run a distant PC, pcANYWHERE optionally allows users at the host
(distant) machine to view the operations being conducted from the remote site.
This makes pcANYWHERE ideal for support of users as a remote helpdesk function
for both problem solving and application training.
The Norton pcANYWHERE Access Server allows network administrators to
centrally manage multiple remote control sessions. The Norton pcANYWHERE Access
Server provides mobile users with simple, efficient and secure access to
networks.
CONTACT MANAGEMENT
ACT! is an easy-to-use contact database with a graphical activity schedule,
a full-featured word processor and a report generator. ACT! manages and
integrates a user's contacts, calendar and communication through the use of
integrated e-mail messaging.
117
<PAGE>
ACT! Mobile Link is an add-on product to ACT! for Windows. ACT! Mobile Link
automates communication between individuals in the office and mobile
professionals by providing the ability to remotely access and exchange contact
information. It supports data maintained centrally as well as using e-mail to
synchronize two or more users of the same database and calendar.
DEVELOPMENT TOOLS
Symantec C++ is a set of professional programming tools for C++ and provides
support for developing MS-DOS, Windows and Macintosh applications. The MS-DOS
and Windows version includes enhanced 32-bit development support, including
32-bit MFC on CD-ROM. It supports full template debugging and features a
hierarchical project management system with full dependency tracking. The
Macintosh version includes a new version of THINK Class Library (TLC 2.0), which
allows developers to write applications that are portable to PowerPC
microprocessor-based Macintoshes. Symantec C++ for Macintosh also includes
Bedrock exception-handling and THINK Inspector that allows quick debugging.
THINK C provides users with an integrated set of tools, including a C
compiler, to develop software in C for the Macintosh. The product consists of
five main components: a text editor that allows a programmer to enter and modify
text files of statements in human-readable C programming language (source code);
a compiler that translates files of statements in C source code into binary
instruction modules that a computer can execute (object code); a linker that
enables separate object code modules to be combined to form a complete program;
a source level debugger to support the testing of software while it is being
developed; and a project manager that automates the management of all of these
processes.
PROJECT MANAGEMENT/PRODUCTIVITY APPLICATIONS
Time Line is a SQL-based client-server solution that integrates
multi-project management with a business environment. It is a project
organizing, scheduling and resource allocation program. Time Line uses the
critical path method to determine project schedules, performs resource leveling
and lead/lag scheduling and presents information in PERT, Gantt and actual
versus planned formats.
Q&A is an easy-to-use, integrated database management and word processing
program with sophisticated report generation capabilities. Q&A also has a
natural language interface that allows the user to request reports from a
database using plain English sentences instead of database commands.
CLIENT-SERVER TECHNOLOGY
Symantec Enterprise Developer is the next generation of client-server
application development tools for creating complex distributed database
applications. Symantec Enterprise Developer utilizes a repository based,
business model driven development approach that allows a corporation to model
its business needs. Symantec Enterprise Developer's SCALE architecture leverages
these models to automate the application development process. Since business
needs are captured in a centralized model stored in a repository, they can
easily be maintained and modified as needed.
DISTRIBUTION, SALES AND SUPPORT
Symantec markets its products domestically and in major foreign markets,
primarily through independent software distributors and major retail chains.
DOMESTIC SALES
Symantec's sales strategy is to use a direct field sales force that works
with businesses to encourage them to adopt Symantec's products as corporate
standards. Symantec also employs a distribution sales group to work closely with
its major distributor and reseller accounts on the management of orders,
inventory level and sell-through to retailers, as well as promotions and selling
activities. Symantec's telemarketing sales group manages and supports major
dealer and corporate
118
<PAGE>
end user accounts. Symantec's sales personnel are located in major metropolitan
areas. At March 31, 1995, Symantec had approximately 110 people in its domestic
direct field sales and telemarketing groups.
With the expansion to enterprise-wide computing systems markets, Symantec
believes that it must develop relationships with customers, deliver products
developed for this market segment, continue to invest in its direct sales force
and expand its value-added reseller program.
Symantec maintains distribution relationships with a number of major
independent software distributors, including Ingram Micro D, Inc. ("Ingram Micro
D") and Merisel Americas, Inc. ("Merisel"). These distributors stock Symantec's
products in inventory for redistribution to independent dealers, consultants and
other resellers. Symantec also maintains relationships with many of the major
computer and software retailing organizations in the United States, including
Egghead Discount Software ("Egghead"), Corporate Software, Inc., Software
Spectrum, Inc. and PC Connection, Inc. Symantec markets to each of these retail
accounts either directly or through one of its authorized national distributors.
Like many other software companies, Symantec also sells product upgrades and
certain of its products directly to end users through direct mail campaigns. In
addition, Symantec has site licensed many of its products to corporate
customers.
Approximately 33% of Symantec's net revenues in the year ended March 31,
1995 was derived from Symantec's two largest accounts - Ingram Micro D and
Merisel. Ingram Micro D represented 22%, 17% and 15% of Symantec's net revenues
in fiscal 1995, 1994 and 1993, respectively. Merisel represented 11%, 13% and
13% of Symantec's net revenues in fiscal 1995, 1994 and 1993, respectively.
Symantec's return policy allows its distributors, subject to certain
limitations, to return purchased products in exchange for new products or for
credit towards future purchases. Individual end users may return products
through dealers and distributors within a reasonable period from the date of
purchase for a full refund, and retailers may return older versions of products.
Various distributors and resellers may have more liberal return policies that
may negatively impact the level of products which are returned to Symantec.
Product returns most frequently occur when Symantec introduces upgrades and new
versions of products or when distributors order too much product. In addition,
competitive factors often require Symantec to offer rights of return for
products that distributors or retail stores are unable to sell. Symantec has
experienced and may experience in the future, significant increases in product
returns above historical levels from customers of acquired companies after the
acquisition is completed.
Symantec prepares detailed analyses of historical return rate experiences in
its estimation of anticipated returns and maintains reserves for product
returns. In addition to detailed historical return rates, Symantec's estimation
of return reserves takes into consideration upcoming product upgrades, current
market conditions, customer inventory balances and any other known factors that
could impact anticipated returns. Based upon returns experienced, Symantec's
estimates have been materially accurate. The impact of actual returns net of
such provisions has not had a material effect on Symantec's liquidity as the
returns typically result in the issuance of credit towards future purchases as
opposed to cash payments to the distributors. Symantec's marketing activities
include advertising in trade, technical and business publications; cooperative
marketing with distributors, resellers and dealers; periodic direct mailings to
customers and prospective customers; and participation in trade and computer
shows. Additionally, Symantec typically offers two types of rebate programs,
volume incentive rebates and rebates to end users. Volume incentive rebates are
made available to Symantec's largest distributors and resellers whereby the
distributor or reseller earns a rebate as a pre-determined percentage of their
purchases of Symantec's products. Volume incentive rebates are accrued when
revenue is recorded. The amount of these rebates has been consistent for all
periods presented and has not had a material impact on Symantec's liquidity.
Symantec from time to time offers rebates to end users who purchase Symantec's
products. During fiscal 1995, Symantec offered rebates to end users who
purchased either pcANYWHERE or The Norton AntiVirus. End user
119
<PAGE>
rebates are accrued when revenue is recorded. These end user rebates have been
offered on a limited basis and have not been material to Symantec's results of
operations or liquidity in fiscal 1995, 1994 and 1993.
INTERNATIONAL SALES
International revenues represented approximately 35%, 33% and 31% of
Symantec's net revenues in fiscal 1995, 1994 and 1993, respectively. At March
31, 1995, Symantec had approximately 117 sales, marketing and related personnel
in its international sales organization.
Most of Symantec's revenues from Canada (which accounted for 3% of
Symantec's net revenues in fiscal 1995) are derived from sales by affiliates of
Symantec's major U.S. distributors. In other countries, Symantec sells its
products through authorized distributors. In some countries these distributors
are restricted to specified territories. Symantec typically adapts products for
local markets, including translating the documentation and software where
necessary, and prepares comprehensive marketing programs for each local market.
Symantec has established offices in Australia, Brazil, Canada, France,
Germany, Holland, Italy, Japan, Mexico, Russia, Sweden, Switzerland, Taiwan and
the United Kingdom. These local offices facilitate Symantec's marketing and
distribution in international markets. Symantec's international operations are
subject to certain risks common to foreign operations, such as government
regulations, import restrictions, currency fluctuations, repatriation
restrictions and, in certain jurisdictions, reduced protection for Symantec's
copyrights and trademarks. Information with respect to international operations
and export sales may be found in Note 12 of Notes to Symantec Consolidated
Financial Statements.
CUSTOMER SUPPORT
During the March 1994 quarter, Symantec introduced a new product support
program that provides a wide variety of free and fee-based technical support
services to its customers. Symantec provides its customers with free support via
electronic and automated services as well as 90 days complimentary free
telephone support for selected products. Symantec accrues the cost of providing
this free support at the time of product sale. In addition, Symantec offers both
individual users and corporate customers a variety of fee-based options designed
to meet their individual technical support requirements. Fee-based technical
support services did not generate material revenues in fiscal 1995 or 1994 and
are not expected to generate material revenues in the near future.
PRODUCT DEVELOPMENT AND ACQUISITIONS
Symantec uses a multiple products sourcing strategy that includes internal
development, acquisitions of product lines or companies and licensing from third
parties. Development of new products and enhancement of existing products are
typically performed by Symantec in individual product groups. Each group's
responsibilities include design, development, documentation and quality
assurance. Outside contractors are used for certain aspects of the product
development process.
Symantec uses strategic acquisitions, as necessary, to provide certain
technology and products for its overall product strategy. Symantec has completed
a number of acquisitions of companies and products and expects to acquire other
companies and products in the future. In addition to the significant business
risks associated with acquisitions, which include the successful combination of
the companies in an efficient and timely manner, the coordination of research
and development and sales efforts, the retention of key personnel and the
integration of the acquired products, Symantec frequently incurs significant
acquisition expenses for legal, accounting and financial advisory services and
other costs related to the combination of the companies. These costs have in the
past had and may, with respect to possible future acquisitions, have a
significant adverse impact on Symantec's profitability and financial resources.
There can be no assurance that any of Symantec's acquisitions will be
successfully assimilated into Symantec's operations. In addition, the comparison
of future Symantec revenues, expenses and profitability to historical revenues,
expenses and profitability on a pooled basis may be adversely impacted by the
elimination of duplicative products and operating activities.
120
<PAGE>
Symantec is devoting substantial efforts to the development of software
products that are designed to operate on Windows 95. Symantec is also devoting
substantial efforts to the development of products for networked operating
environments and network management. Due to the inherent uncertainties of
software development projects, there can be no assurance that products currently
being developed by Symantec, including products being developed for Windows 95,
will be technologically successful, that any resulting products will achieve
market acceptance or that Symantec will be effective in competing with products
currently in the market. There can also be no assurance that Symantec will elect
to develop software products for the operating environments that ultimately are
accepted by the marketplace, including Windows 95. Development for networked
operating environments is more complex than development for the desktop and
requires a higher level of research and development expenditures. As a
consequence of the complexity of developing products for networked operating
environments and operating systems using graphical user interfaces and
Symantec's emphasis on technical excellence, Symantec has experienced delays in
the development and delivery of its products and is likely to experience such
delays in the future. Any such delays could result in a loss of competitiveness
of Symantec's products and could adversely affect Symantec and its financial
results.
Symantec's total research and development expenses were approximately
US$62.8 million, US$64.1 million and US$71.1 million in fiscal 1995, 1994 and
1993, respectively. Research and development expenditures are charged to
operations as incurred. The decrease in research and development expenses in
fiscal 1995 is principally due to the consolidation of product development
efforts resulting from the acquisition of Central Point. Financial accounting
rules requiring capitalization of certain software development costs have not
materially affected Symantec.
Norton Commander, Norton Backup, Norton Enterprise Backup, Norton Dislock,
Fastback Plus-TM- and elements of certain other programs are licensed from
third-party developers.
COMPETITION
The microcomputer software market is intensely competitive and is subject to
rapid changes in technology and in the strategic direction of major
microcomputer hardware manufacturers and operating system providers. Symantec's
competitiveness depends on its ability to enhance its existing products and to
offer new products on a timely basis. Symantec has more limited resources than
certain of its competitors, and must restrict its product development efforts to
a relatively small number of projects. Further, Symantec has less experience in
the enterprise/network market than many of it competitors and fewer
relationships and less experience with systems integrators and other third-party
vendors that provide consulting and implementation services necessary to sell
many of these products.
Historically, much of Symantec's revenues were derived from products using
the MS-DOS operating system and its character-based interface, which has been
largely supplanted by the Windows operating environment. With the introduction
of Windows 95, Symantec's ability to generate revenue from many of its current
products will depend on its ability to develop new versions and enhancements of
those products in a timely manner for the Windows 95 operating system and/or
other operating systems that may gain market acceptance. Symantec has
experienced delays in the development and delivery of its products and may
experience such delays in the future, which would result in a loss of
competitiveness of Symantec's products and could adversely affect Symantec and
its financial results.
Operating system vendors such as Microsoft have added features to new
versions of their products that provide some of the same functionality
traditionally offered in Symantec's utilities products. Symantec believes this
trend may continue. Microsoft may incorporate advanced utilities in Windows 95
that may decrease the demand for certain of Symantec's products, including those
currently under development. While Symantec plans to continue to improve its
utilities products with a view toward providing enhanced functionality over what
may be provided in operating systems, there is no assurance that these efforts
will be successful or that such improved products will be accepted by software
users. Symantec will also attempt to work with operating system vendors in an
effort to
121
<PAGE>
make its utilities products compatible with those operating systems, yet
differentiate those utilities products from features included in the operating
systems. However, there is no assurance that these efforts will be successful.
Because of the breadth of its product line, Symantec competes with at least
one product from many of the major independent software vendors, including
Borland, Cheyenne Software, Inc. ("Cheyenne"), Claris Corporation, Computer
Associates International, Inc. ("Computer Associates"), Gupta Corporation
("Gupta"), Intel Corporation ("Intel"), Lotus Development Corporation ("Lotus"),
McAfee Associates, Inc. ("McAfee"), Microsoft, Novell, Inc. ("Novell") and
Software Publishing Corporation ("Software Publishing").
For example, The Norton Enterprise Backup competes with ARCserve from
Cheyenne, Network Archivist from Palindrome and Backup Exec from Arcada
Software, Inc. The Norton Administrator for Networks competes with Microsoft
System Management Server from Microsoft and LanDesk from Intel. Symantec
Enterprise Developer competes with PowerBuilder from Sybase, Inc. and SQL
Windows from Gupta. Norton Utilities and Norton Backup compete with operating
systems, such as Microsoft's MS-DOS, IBM's DOS and Novell's DR-DOS, which offer
file recovery, anti-virus and backup features as well as products from
independent utilities vendors. Norton AntiVirus and Central Point Antivirus
compete with Viruscan from McAfee. Symantec's The Norton pcANYWHERE competes
mainly with Laplink from Traveling Software, Carbon Copy from Microcom, Close Up
from Norton Lambert and NetRemote from McAfee. ACT! and 1st ACT! compete with
Lotus Organizer for Windows from Lotus, Maximizer from Modatech Systems, Inc.
and many other personal information managers produced by various software
developers. Symantec C++ competes with C++ compilers from Borland and Microsoft.
Norton Desktop for Windows and PC Tools for Windows compete with Dashboard from
Starfish Software. Time Line competes most directly with Microsoft Project from
Microsoft, SuperProject from Computer Associates and Harvard Project Manager
from Software Publishing. In addition, these and other Company products compete
less directly with a number of other products that offer levels of functionality
different from those offered by Symantec's products or that were designed for a
somewhat different group of end users.
Symantec also competes with microcomputer hardware manufacturers that
develop their own software products. Further, Symantec competes with other
microcomputer software companies for access to the channels of retail
distribution and for the attention of customers at the retail level and in
corporate accounts. Finally, Symantec competes with other software companies in
its efforts to acquire products or companies and to publish software developed
by third parties. Symantec believes that, in the next few years, competition in
the industry will intensify as most major software companies expand their
product lines into additional product categories. Some of Symantec's competitors
have substantially greater financial, marketing and technological resources than
Symantec.
Price competition is significant in the microcomputer business software
market and may continue to increase and become even more significant in the
future, resulting in reduced profit margins. Additionally, should competitive
pressures in the industry increase, Symantec may have to increase its spending
on sales and marketing as a percentage of revenues, resulting in lower profit
margins.
MANUFACTURING AND BACKLOG
Symantec's product development organization produces a set of master
diskettes and documentation for each product. Most of Symantec's domestic
manufacturing is performed by outside contractors under supervision of
Symantec's manufacturing organization. Purchasing of most raw materials and most
fulfillment of orders is done by Symantec personnel in Symantec's Sunnyvale,
California facility. The manufacturing steps that are subcontracted to outside
organizations include the duplication of diskettes and CD-ROM's, printing of
documentation materials and assembly of the final package. Symantec performs
diskette duplication and assembly of the final package in its Dublin, Ireland,
manufacturing facility for most products distributed outside of the United
States and Canada.
122
<PAGE>
Symantec is often able to acquire materials on a volume-discount basis and
has multiple sources of supply for certain materials. To date, Symantec has not
experienced any material difficulties or delays in production of its software
and related documentation and packaging. However, shortages may occur in the
future. For example, shortages of certain materials may occur when Microsoft
introduces new operating systems such as Windows 95.
Symantec normally ships products within one week after receiving an order.
Thus, Symantec does not consider backlog to be a significant indicator of future
performance.
PRODUCT PROTECTION
Symantec regards its software as proprietary and relies on a combination of
copyright, patents, trade secret and trademark laws, license agreements and
technical measures in an attempt to protect its rights. Despite these
precautions, it may be possible for unauthorized third parties to copy aspects
of Symantec's products or to obtain and use information that Symantec regards as
proprietary. All of Symantec's products are protected by copyright, and Symantec
has several patents and patent applications pending. However, existing patent
and copyright laws afford limited practical protection. In addition, the laws of
some foreign countries do not protect Symantec's proprietary rights in its
products to the same extent as do the laws of the United States. Symantec's
products are not copy protected.
As the number of software products in the industry increases and the
functionality of these products further overlaps, Symantec believes that
software developers will become increasingly subject to infringement claims.
This risk is potentially greater for companies, such as Symantec, that obtain
certain of their products through publishing agreements or acquisitions, since
they have less direct control over the development of those products.
Additionally, an increasing number of software patents are being issued, some of
which are very broad in nature. This increases the risk that Symantec's products
may be subject to claims of patent infringement. Although such claims may
ultimately prove to be without merit, they can be time consuming and expensive
to defend. Symantec is currently involved in several lawsuits involving trade
secret or patent disputes (See "-- Legal Proceedings").
EMPLOYEES
As of September 30, 1995, Symantec employed 1,700 people, including 823 in
sales, marketing and related staff activities, 540 in product development and
337 in management, manufacturing, administration and finance. None of the
employees is represented by a labor union and Symantec has experienced no work
stoppages. Symantec believes that its employee relations are good.
Competition in recruiting personnel in the software industry is intense.
Symantec believes that its future success will depend in part on its ability to
recruit and retain highly skilled management, marketing and technical personnel.
123
<PAGE>
PROPERTIES
Symantec's principal locations, all of which are leased, are as follows:
<TABLE>
<CAPTION>
APPROXIMATE SIZE EXPIRATION
LOCATION PURPOSE (IN SQUARE FEET) OF LEASE
- ------------------------------- ------------------------------------------------- ---------------- -----------
<S> <C> <C> <C>
DOMESTIC
Cupertino, California
Corporate Headquarters Administration, sales and marketing and research 87,000 1998
and development
Development Tools Development 42,000 2000
(2001 for
one floor)
Sunnyvale, California Manufacturing 78,000 1998
Santa Monica, California Research and development and marketing 81,000 2000
Santa Monica, California Research and development 31,000 2000
Novato, California Research and development and marketing 28,000 1996
Bedford, Massachusetts Research and development and marketing 13,000 1997
Eugene, Oregon Customer service and technical support 106,000 1999
Baton Rouge, Louisiana* Research and development and marketing 48,000 1995
Beaverton, Oregon Research and development and marketing 45,000 1997
Huntington, New York Research and development and marketing 24,000 2000
Richardson, Texas Research and development and marketing 4,000 1998
Shelton, Connecticut** Research and development and marketing 21,000 1998
St. Louis, Missouri Research and development 3,000 1996
INTERNATIONAL
Leiden, Holland Administration, sales and marketing 15,000 1997
Dublin, Ireland Manufacturing and translations 44,000 2026
</TABLE>
- ------------------------
* Symantec is currently in the process of closing this facility and has
entered into another lease for 3,000 square feet in Baton Rouge, Louisiana,
which expires in 1998.
** Symantec is currently planning to close this facility.
Symantec's principal administrative, sales and marketing facility as well as
certain research and development and support facilities are located in
Cupertino, California. Symantec leases a number of additional facilities for
marketing and research and development in the United States and for marketing in
Europe, Australia, Japan and Canada. Symantec believes its facilities are
adequate for its current needs and additional or substitute space will be
available as needed to accommodate any expansion of its operations.
LEGAL PROCEEDINGS
On May 19, 1995, Personal Computer Peripherals Corporation ("PCPC") filed a
lawsuit in the U.S. District Court for the District of Delaware against Symantec
and five other companies, alleging that the defendants' products for backing up
data on a computer network infringe a patent held by PCPC. The complaint seeks
unspecified damages and an injunction preventing the sale of infringing
products. Symantec believes that the complaint has no merit.
On December 30, 1994, Software Engineering Carmel ("Carmel") filed a lawsuit
in the U.S. District Court for the District of Oregon against Central Point, a
wholly-owned subsidiary of Symantec. Carmel developed and maintains the
anti-virus program distributed by Central Point. The complaint alleges that
Central Point breached its contract with Carmel by not fulfilling an implied
obligation under the contract to use its best efforts or, alternatively, its
reasonable efforts to market the anti-virus program developed by Carmel. The
complaint also alleges that Central Point violated
124
<PAGE>
the non-competition provision in its agreement, by selling a competing
anti-virus program, apparently based on Symantec's sale of its own anti-virus
product. The complaint seeks damages in the amount of US$6.75 million and a
release of Carmel from its obligation not to sell competing products. Symantec
believes the complaint has no merit.
On September 3, 1992, Borland filed a lawsuit in the Superior Court for
Santa Cruz County, California against Symantec, Gordon E. Eubanks, Jr.
(Symantec's President and Chief Executive Officer) and Eugene Wang (an Executive
Vice President of Symantec who is a former employee of Borland). The complaint,
as amended, alleges misappropriation of trade secrets, unfair competition,
inducing breach of contract, interference with prospective economic advantage
and unjust enrichment. Borland alleged that prior to joining Symantec, Mr. Wang
transmitted to Mr. Eubanks confidential information concerning Borland's product
and marketing plans. Borland claims damages in an unspecified amount. Symantec
has denied the allegations of Borland's complaint and contends that Borland has
suffered no damages from the alleged actions. Borland obtained a temporary
restraining order and a preliminary injunction prohibiting the defendants from
using, disseminating or destroying any Borland proprietary information or trade
secrets. Symantec filed a cross complaint against Borland alleging that Borland
had committed abuse of process and defamation in publishing statements that
Symantec had acted in contempt of a temporary restraining order. The case is not
being actively prosecuted at this time pending the outcome of the criminal
proceedings, discussed below. Symantec believes the claims have no merit.
On September 2, 1992, the Scotts Valley, California police department,
operating with search warrants for Borland proprietary and trade secret
information, searched Symantec's offices and the homes of Messrs. Eubanks and
Wang and removed documents and other materials. On February 26, 1993, criminal
indictments were filed against Messrs. Eubanks and Wang for allegedly violating
various California Penal Code Sections relating to the misappropriation of trade
secrets and unauthorized access to a computer system. On August 23, 1993, the
court recused the District Attorney's Office from prosecution of the action. On
October 5, 1993, the State Attorney General and the District Attorney's Office
filed a Notice of Appeal of the Order, and that appeal was argued on July 11,
1995. The decision recusing the District Attorney's office from prosecution of
the action was reversed on September 8, 1995. The defendants intend to petition
the appellate court for a review of the decision. Symantec believes the criminal
charges against Messrs. Eubanks and Wang have no merit.
On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a
wholly-owned subsidiary of Symantec, commenced an action against EKD Computer
Sales & Supplies Corporation ("EKD"), a former licensee of DMA and Thomas Green,
a principal of EKD, for copyright infringement, violations of the Lanham Act,
trademark infringement, misappropriation, deceptive acts and practices and
unfair competition and breach of contract. On July 14, 1992, the Suffolk County
sheriff's department conducted a search of EKD's premises and seized and
impounded thousands of infringing articles. On July 21, 1992, the court issued a
preliminary injunction against EKD and Mr. Green, enjoining them from
manufacturing, marketing, distributing, copying or purporting to license DMA's
pcANYWHERE III or using DMA's marks.
On July 20, 1992 and in a subsequent amendment, EKD and Mr. Green answered
Symantec's complaint denying all liability and asserting counterclaims against
Symantec and Lee Rautenberg, who was formerly President of DMA. In May 1993, EKD
and Mr. Green were granted permission to file a Second Amended Answer and
counterclaims that dropped every previously raised claim and now allege that DMA
obtained the temporary restraining order and preliminary injunction in bad faith
and that DMA, Symantec and Mr. Rautenberg breached certain license agreements
and violated certain federal and New York State antitrust laws. In February
1995, DMA was granted leave to file an Amended Complaint, which EKD subsequently
responded to by a Third Amended Answer and Counterclaims virtually identical to
EKD's Second Amended pleading. Symantec believes the charges made by EKD and Mr.
Green have no merit.
125
<PAGE>
Subsequent to the acquisition of DMA by Symantec, Peter Byer, a former sales
and marketing employee of DMA, filed a lawsuit in the Supreme Court of the State
of New York against DMA, Symantec and Lee Rautenberg. The lawsuit alleges that
Peter Byer was orally promised an 8% equity interest in DMA in connection with
his performance of services, that he was underpaid commissions under DMA's
commission plan, and that DMA was unjustly enriched because it paid Mr. Byer
less than the fair value of his services. The lawsuit seeks damages of at least
US$5.3 million. Symantec believes the charges have no merit. Furthermore, Mr.
Rautenberg and the other stockholders of DMA have an obligation to indemnify
Symantec for any liabilities resulting from this action.
Symantec is involved in other judicial and administrative proceedings
incidental to its business. Symantec intends to defend all of the aforementioned
pending lawsuits vigorously and although an adverse decisions (or settlements)
may occur in one or more of the cases, the final resolution of these lawsuits,
individually or in the aggregate, is not expected to have a material adverse
effect on the financial position of Symantec. However, depending on the amount
and timing of an unfavorable resolution of these lawsuits, it is possible that
Symantec's future results of operations or cash flows could be materially
adversely affected in a particular period.
DIRECTORS AND MANAGEMENT
The directors, executive officers and key employees of Symantec are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- -------------------------------------------------------
<S> <C> <C>
Gordon E. Eubanks, Jr. 48 President, Chief Executive Officer and Director
Robert R. B. Dykes 46 Executive Vice President, Worldwide Operations and
Chief Financial Officer
John C. Laing 45 Executive Vice President, Worldwide Sales
Eugene Wang 39 Executive Vice President, Applications and Development
Tools
Mark Bailey 36 Senior Vice President of Business Development
Ted Schlein 31 Vice President, Enterprise Solutions
Ellen W. Taylor 57 Vice President and General Manager, Peter Norton
Computing Group
Derek Witte 38 Vice President and General Counsel
Carl D. Carman (1) 59 Chairman of the Board and Director
Charles M. Boesenberg 47 Director
Walter W. Bregman (2) 61 Director
Robert S. Miller (1) 53 Director
Leslie L. Vadasz (2)(3) 58 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Served as member of the Audit Committee until September 1994.
Directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualified or until their earlier
resignation or removal. Executive officers are chosen by and serve at the
discretion of the Board of Directors. There is no family relationship between
any director or executive officer of Symantec and any other director or
executive officer of Symantec.
GORDON E. EUBANKS, JR. is the President and Chief Executive Officer of
Symantec. He has served as a director of Symantec since November 1983 and as the
President and Chief Executive Officer of Symantec since October 1986. Mr.
Eubanks also served as Symantec's Chairman of the Board from
126
<PAGE>
November 1983 to October 1986 and from November 1990 to January 1993.
Previously, Mr. Eubanks was Vice President of Digital Research Inc.'s commercial
systems division, where he was responsible for the development and marketing of
all system software products. He left Digital Research in September 1983. Mr.
Eubanks founded Compiler Systems, Inc. and authored its products: CBASIC, one of
the first successful languages on personal computers, and CB80, a compiled
version of CBASIC. Compiler Systems was acquired by Digital Research in August
of 1981. Mr. Eubanks received his Bachelor of Science degree in Electrical
Engineering from Oklahoma State University. He received his Masters degree in
Computer Science from Naval Postgraduate School in Monterey, California. Mr.
Eubanks was a commissioned officer in the United States Navy from 1970 to 1979
serving in the Nuclear Submarine Force. Mr. Eubanks is also a director of
NetFRAME Systems, Inc. and Truevision, Inc. He is a member of the IEEE and ACM.
On February 26, 1993, criminal indictments were filed against Mr. Eubanks
for allegedly violating various California Penal Code Sections relating to the
misappropriation of trade secrets and unauthorized access to a computer system.
Symantec believes that the charges have no merit.
ROBERT R. B. DYKES is Executive Vice President, Worldwide Operations and
Chief Financial Officer. Mr. Dykes joined Symantec in October 1988. From April
1984 to October 1988, Mr. Dykes was the Chief Financial Officer at Adept
Technology, Inc., a robotics firm, where he oversaw all financial procedures and
reporting and developed venture capital and funding strategies. From July 1983
to April 1984, Mr. Dykes was with Xebec, a publicly held Winchester disk drive
controller manufacturer, most recently as Chief Financial Officer. Prior to
Xebec, Mr. Dykes spent 12 years in various financial positions at Ford Motor
Company in New Zealand and Australia and with its Finance Staff in Dearborn,
Michigan, most recently as manager of the marketing budgets for the Ford and
Lincoln Mercury car divisions. Mr. Dykes holds a Bachelor of Commerce and
Administration degree from Victoria University in Wellington, New Zealand. Mr.
Dykes is on the board of directors of Flextronics International, Ltd. Mr. Dykes
is chairman of the CFO committee of the Software Publishers Association.
JOHN C. LAING is Executive Vice President, Worldwide Sales. Mr. Laing joined
Symantec in March 1989 as Vice President/Sales. Before joining Symantec, Mr.
Laing served as Regional Director for Apple Computer, Inc., a microcomputer
manufacturer, in the Midwest. In that position his responsibilities included
managing Apple's sales, marketing and support activities within Illinois,
Wisconsin and Northern Indiana. Prior to joining Apple in July 1986, Mr. Laing
served as Vice President and General Manager at ECZEL Corporation, a division of
Crown Zellerbach Corporation. Mr. Laing spent the majority of his earlier career
at Xerox Corporation, where he served in a variety of sales and sales management
positions over a ten-year period. Mr. Laing is a director of Macromedia, Inc., a
multimedia software developer, and the Software Publishers Association.
EUGENE WANG is Executive Vice President, Applications and Development Tools.
Mr. Wang joined Symantec in September 1992. From September 1988 to September
1992, Mr. Wang held a number of management positions at Borland International,
Inc. At the time of his departure from Borland, Mr. Wang was the vice president
and general manager of languages, and was responsible for the product management
and marketing of four product lines. From 1983 to September 1988, Mr. Wang
worked for Gold Hill Computers, Inc. During that time, Mr. Wang became the vice
president of marketing and a director. Mr. Wang holds a Bachelor of Science
degree in computer science from the University of California at Berkeley.
On February 26, 1993, criminal indictments were filed against Mr. Wang for
allegedly violating various California Penal Code Sections relating to the
misappropriation of trade secrets and unauthorized access to a computer system.
Symantec believes that the charges have no merit.
MARK BAILEY is Senior Vice President of Business Development at Symantec
Corporation. Mr. Bailey has led Symantec's mergers and acquisitions effort since
December 1989. Prior to that Mr. Bailey was an associate partner with one of the
early investors in Symantec, Kleiner Perkins
127
<PAGE>
Caufield & Byers. Before attending graduate school, Mr. Bailey worked at Hewlett
Packard. Mr. Bailey received a bachelor of science degree in electrical
engineering and computer science from Princeton University and an MBA from
Harvard University's Graduate School of Business Administration.
TED SCHLEIN is Vice President, Enterprise Solutions and is responsible for
overseeing the marketing and development of enterprise products, focusing on
network management and client/server front-end development tools and their
supporting technologies. Mr. Schlein has been an employee of Symantec since June
1986, and during that time has served in a variety of management positions,
including Vice President, Business Development, Vice President, European
Business Development and Vice President, Data Management Group. Mr. Schlein
holds a Bachelor of Science degree in Economics from the University of
Pennsylvania.
ELLEN W. TAYLOR is Vice President and General Manager, Desktop Utility
Products. Ms. Taylor joined Symantec in 1991 and is responsible for all
development activities pertaining to Symantec's utility products. From 1987
until joining Symantec, Ms. Taylor was vice president, product marketing at
Interleaf, Inc. Ms. Taylor also worked at Computer Associates from 1980 until
1987 as manager of several departments, including special projects, operating
systems support, quality assurance, documentation and product resources. Ms.
Taylor holds a Bachelor of Arts in psychology from San Diego State University
and an associates degree in computer science from Palomar College, San Marcos,
California. Ms. Taylor has tendered a resignation from her current position with
Symantec effective October 16, 1995.
DEREK WITTE is Vice President and General Counsel. Mr. Witte joined Symantec
in October 1990. From October 1987 until joining Symantec, Mr. Witte was
Associate General Counsel and later Director of Legal Services for Claris
Corporation, a software subsidiary of Apple. Between January and October 1987,
Mr. Witte was Assistant General Counsel at Worlds of Wonder, Inc. Previously Mr.
Witte practiced law with the San Francisco based law firms of Brobeck, Phleger &
Harrison and Heller Ehrman White and McAuliffe during the periods between 1981
and 1983 and 1983 and 1987, respectively. Mr. Witte holds a law degree and a
Bachelor of Arts degree in Economics from the University of California at
Berkeley. Mr. Witte has been a member of the California bar since 1981.
CARL D. CARMAN has been a director of Symantec since May 1984. Mr. Carman
was appointed as Symantec's Chairman of the Board in January 1993. Mr. Carman
first became a director of Symantec when he was elected to represent Masters
Fund, a venture capital firm, on the Board. Mr. Carman has been a partner in
Hill, Carman Ventures, a venture capital firm, since April 1989. Mr. Carman has
also been a partner in Masters Fund since October 1983. Prior to founding
Masters Fund in October 1983, he served from October 1979 to October 1983 as a
Vice President of Research and Development and then as Executive Vice President
of Technology at NBI, an office automation manufacturing company. Prior to that,
Mr. Carman was the Vice President of Engineering at Data General Corporation.
Mr. Carman holds a Bachelor of Science degree in Engineering from the University
of Kentucky.
CHARLES M. BOESENBERG has been a director of Symantec since June 16, 1994,
and provides certain consulting services to Symantec. Mr. Boesenberg is
currently the President and Chief Executive Officer of Ashtech, Inc., a position
that he assumed in January 1995. Mr. Boesenberg was an Executive Vice President
of Symantec from June 1, 1994, when Symantec acquired Central Point Software,
Inc. and continued in that capacity until December 1994. In February of 1992,
Mr. Boesenberg joined Central Point as its President and Chief Operating
Officer, and was elected as its Chief Executive Officer and Chairman in March
1992, and continued in those positions until the acquisition of Central Point by
Symantec. From February 1989 to June 1991, Mr. Boesenberg was the Executive Vice
President, Marketing of MIPS Computers Systems, Inc., a semiconductor and
computer systems company, and from July 1991 to January 1992, he was the
President of that company. From February 1987 to February 1991, Mr. Boesenberg
was the Senior Vice President of U.S. Sales and Marketing at Apple Computer. Mr.
Boesenberg holds a Bachelor of Science in mechanical engineering from Rose
Hulman Institute of Technology and an Master of Science in business
administration from Boston University. Mr. Boesenberg is also a director of AER
Energy Resources Inc. and Merix Corporation.
128
<PAGE>
WALTER W. BREGMAN has been a director of Symantec since his appointment by
the Board in October 1988. Mr. Bregman has been Chairman and co-CEO of S&B
Enterprises, a consulting firm, since March 1988, and since December 1992 has
been President and CEO of Golf Scientific, Inc., a company which produces and
sells golf instructional equipment. From July 1985 until June 1987, Mr. Bregman
was President and owner of the Cormorant Beach Club. During the period from
March 1979 through February 1985, Mr. Bregman was President, Playtex U.S.;
President, Playtex Products; President, International Playtex, Inc.; member of
the Board, Senior Vice President, Esmark; and Senior Vice President, Beatrice
Inc. He has also been Vice President of Marketing and Advertising of Gallo
Winery and President of NCK, Inc., an advertising agency in Europe. Mr. Bregman
holds a Bachelor of Arts in English from Harvard College. Mr. Bregman is also a
director and Chairman of the Board of RasterOps Corporation.
ROBERT S. MILLER has been a director of Symantec since his appointment by
the Board in September of 1994. Mr. Miller currently devotes substantially all
of his time to his duties as Chairman of the Board of Morrison-Knudsen
Corporation, and the remainder of his time to performing his duties as a
director of a number of other large corporations. From April 1992 until February
1993 he was a senior partner at James D. Wolfensohn, Inc., a New York investment
banking firm. From 1979 until March 1992, he was an executive of Chrysler
Corporation, where he served in various capacities, including as Vice Chairman
of the Board and Chief Financial Officer. Mr. Miller holds a Bachelor of Arts in
Economics from Stanford University, a law degree from Harvard Law School and a
Masters of Business Administration from Stanford University's Graduate School of
Business. In addition to serving as the Chairman of the Board of
Morrison-Knudsen Corporation, Mr. Miller is also a director of Fluke
Corporation, Federal Mogul Corporation, Pope & Talbot Inc. and Coleman Company.
LESLIE L. VADASZ has been a director of Symantec since his appointment by
the Board in June 1991. Mr. Vadasz is Senior Vice President of Intel Corporation
and has been an employee of Intel since it was founded in 1968. Mr. Vadasz has
held a variety of Engineering Management and General Management roles, and
currently is Director of Corporate Business Development of Intel. Mr. Vadasz
holds a Bachelor of Science in Electrical Engineering from McGill University and
is a fellow of the IEEE. Mr. Vadasz is also a director of Intel Corporation.
DESCRIPTION OF CAPITAL STOCK
See description of the capital stock of Symantec under "THE COMPANIES AFTER
THE TRANSACTION -- Symantec Share Capital."
129
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of September 30,
1995, or as otherwise specified, with respect to the beneficial ownership of
Symantec Common Stock by (i) each stockholder known by Symantec to be the
beneficial owner of more than 5% of Symantec Common Stock, (ii) each director of
Symantec, (iii) each executive officer of Symantec named in the Summary
Compensation Table (see "Compensation of Executive Officers" below), and (iv)
all current executive officers and directors of Symantec as a group.
<TABLE>
<CAPTION>
PRO FORMA BENEFICIAL
OWNERSHIP AFTER
AMOUNT AND NATURE OF TRANSACTION (2)
NAME AND ADDRESS BENEFICIAL PERCENT ------------------------
OF BENEFICIAL OWNER OWNERSHIP (1) OF CLASS # (%)
- --------------------------------------------------------- ---------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
FMR Corporation (3) ..................................... 4,352,720 11.1% 4,352,720 8.2%
82 Devonshire Street
Boston, MA 02109
Ardsley Advisory Partners (4) ........................... 2,689,000 6.8% 2,689,000 5.1%
646 Steamboat Road
Greenwich, CT 06830
Gordon E. Eubanks, Jr. (5)............................... 398,205 1.0% 398,205 *
John C. Laing (6)........................................ 189,616 * 189,616 *
Robert R.B. Dykes (7).................................... 86,504 * 86,504 *
Charles Boesenberg (8)................................... 85,533 * 85,533 *
Carl D. Carman (9)....................................... 101,250 * 101,250 *
Walter W. Bregman (10)................................... 74,750 * 74,750 *
Leslie L. Vadasz (11).................................... 79,750 * 79,750 *
Eugene Wang (12)......................................... 55,833 * 55,833 *
Robert S. Miller (13).................................... 24,000 * 24,000 *
Ellen Taylor (14)........................................ 6,489 * 6,489 *
All current Symantec executive officers and directors as
a group (13 persons) (17)............................... 1,302,612 3.2% 1,302,612 2.4%
</TABLE>
- ------------------------
* Less than 1%.
(1) The information above is based upon information supplied by officers and
directors, and, with respect to principal stockholders, Schedules 13G and
13D (if any) filed with the SEC. Unless otherwise indicated below, the
persons named in the table had sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable.
(2) Assumes a total of 13,615,636 Exchangeable Shares of Delrina will be issued
in the Transaction which will be exchanged for an equal number of shares of
Symantec Common Stock.
(3) Based on information provided by FMR Corporation to Symantec in a letter
dated July 29, 1995.
(4) Based on information as of September 30, 1995 provided by Ardsley Advisory
Partners to Symantec.
(5) Includes 275,000 shares subject to options exercisable within 60 days.
(6) Includes 174,291 shares subject to options exercisable within 60 days.
(7) Includes 32,500 shares subject to options exercisable within 60 days.
130
<PAGE>
(8) Represents 82,535 shares subject to options exercisable within 60 days.
(9) Represents 101,250 shares subject to options exercisable within 60 days.
(10) Represents 69,750 shares subject to options exercisable within 60 days.
(11) Includes 79,750 shares subject to options exercisable within 60 days.
(12) Includes 55,833 shares subject to options exercisable within 60 days.
(13) Includes 22,000 shares subject to options exercisable within 60 days.
(14) Includes 6,094 shares subject to options exercisable within 60 days.
(15) Includes 1,067,549 shares subject to options exercisable within 60 days,
including the options described in notes (5)-(14).
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation awarded, earned or paid for
services rendered in all capacities to Symantec and its subsidiaries during each
of the fiscal years ended on or about March 31, 1993, 1994 and 1995 to
Symantec's Chief Executive Officer and Symantec's four most highly compensated
executive officers other than the Chief Executive Officer who were serving as
executive officers at the end of the fiscal year ended March 31, 1995. This
information includes the dollar values of base salaries, bonus awards, the
number of stock options granted and certain other compensation, if any, whether
paid or deferred. Symantec does not grant stock appreciation rights and has no
other long term compensation benefits.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------ -------------
OTHER ANNUAL STOCK ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY(US$) BONUS(US$) COMPENSATION OPTIONS (#) COMPENSATION (US$)
- ----------------------------------- --------- ------------- ------------ -------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Eubanks 1995 350,000 187,842 1,940(3) 0 15,509(5)
President and Chief 1994 329,167 116,470 5,500(3) 200,000 16,671(5)
Executive Officer 1993 257,680 47,398 2,750(3) 0 20,827(5)
Robert R.B. Dykes 1995 296,667 109,514 3,249(3) 30,000 3,210(6)
EVP World-Wide 1994 270,833 81,516 9,898(3) 110,000 3,690(6)
Operations & CFO 1993 238,542 29,127 9,673(3) 0 1,688(6)
John C. Laing 1995 337,669 47,882 825(3) 23,000 29,390(7)
EVP World-Wide Sales 1994 338,711(1) 35,843 2,981(3) 20,000 30,669(7)
1993 335,684(1) 10,869 849(3) 190,000(4) 28,264(7)
Eugene Wang 1995 246,667 64,013 2,288(3) 20,000 4,920(8)
EVP Applications and 1994 240,000 55,301 0 0 6,590(8)
Development Tools 1993 140,000(2) 28,183 0 100,000 4,320(9)
Ellen Taylor 1995 195,417 71,801 3,050(3) 12,000 4,700(10)
VP and Gen. Mgr., 1994 154,042 58,459 0 37,000 5,203(10)
Peter Norton Group 1993 106,964 15,388 0 33,000 2,865(10)
</TABLE>
- ------------------------
(1) Includes commissions of US$151,186, US$142,044 and US$137,669,
respectively, for each of 1993, 1994 and 1995.
(2) Represents a partial year's salary for the fiscal year ending April 1, 1994
(employment began September 1, 1993).
(3) Automobile allowance.
131
<PAGE>
(4) Includes an original grant of an option to purchase 75,000 shares in April
1992 that was repriced in September 1992. The remaining shares represent
options granted prior to April 1992 that were repriced in September 1992.
(5) Includes US$19,139 of interest forgiven in 1993, US$13,880 of interest
forgiven in 1994 and US$12,361 of interest forgiven in 1995, US$1,688,
US$2,791 and US$3,148, respectively, of matching contributions to
Symantec's 401(k) plan in 1993, 1994 and 1995.
(6) Consists of US$1,688, US$3,690 and US$3,210, respectively of matching
contributions to Symantec's 401(k) plan in 1993, 1994 and 1995.
(7) Consists of US$26,331 of mortgage assistance in each of 1993, 1994 and
1995, and US$1,933, US$4,338 and US$3,059, respectively, of matching
contributions to Symantec's 401(k) plan in 1993, 1994 and 1995.
(8) Includes US$6,590 and US$4,920 of matching contributions to Symantec's
401(k) plan in 1994.
(9) Relocation assistance.
(10) Consists of US$2,865, US$5,203, and US$4,700, respectively, of matching
contributions to Symantec's 401(k) plan in 1993, 1994 and 1995.
OPTION GRANTS IN FISCAL 1995
The following table sets forth further information regarding individual
grants of options to purchase Symantec Common Stock during the fiscal year ended
March 31, 1995 to each of the executive officers named in the Summary
Compensation Table above. All grants were made pursuant to the Stock Option
Plan. In accordance with the rules of the SEC, the table sets forth the
hypothetical gains or "option spreads" that would exist for the options at the
end of their respective ten-year terms based on assumed annualized rates of
compound stock price appreciation of 5% and 10% from the dates the options were
granted to the end of the respective option terms. Actual gains, if any, on
option exercises are dependent on the future performance of Symantec's Common
Stock and overall market conditions. There can be no assurances that the
potential realizable values shown in this table will be achieved.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
--------------------------------------------------------- OF STOCK PRICE
# SHARES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM (3)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED (1) FISCAL YEAR (2) (US$/SHR) DATE 5% 10%
- ---------------------------- ----------- ------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gordon Eubanks.............. 0 0% N/A N/A 0 0
Robert Dykes................ 30,000 1.0 % $ 10.50 6/30/04 $ 198,101 $ 502,029
John Laing.................. 23,000 0.8 % $ 10.50 6/30/04 $ 151,878 $ 384,889
Eugene Wang................. 20,000 0.7 % $ 10.50 6/30/04 $ 132,067 $ 334,686
Ellen Taylor................ 12,000 0.4 % $ 17.6875 11/15/04 $ 133,483 $ 338,271
</TABLE>
- ------------------------
(1) Stock options are granted with an exercise price equal to the fair market
value of Symantec Common Stock on the date of grant. Options granted under
the Stock Option Plan generally become exercisable 25% after the first year
and ratably in monthly increments over the succeeding three years. Options
lapse after ten years or, if earlier, 90 days after termination of
employment.
(2) Symantec granted options on a total of 2,971,000 shares to employees and
consultants in fiscal 1995.
(3) The 5% and 10% assumed rates of annual compound stock price appreciation are
mandated by rules of the SEC and do not represent Symantec's estimate or
projection of future Symantec Common Stock prices.
132
<PAGE>
AGGREGATE OPTION EXERCISES IN FISCAL 1995 AND MARCH 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT MARCH 31, IN-THE-MONEY OPTIONS
1995 AT MARCH 31, 1995 (US$)(1)
SHARES ------------------------ --------------------------
ACQUIRED ON VALUE EXERCISABLE / EXERCISABLE /
NAME EXERCISE (#) REALIZED (US$) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- ------------ -------------- ------------------------ --------------------------
<S> <C> <C> <C> <C>
Gordon Eubanks............... -- -- 350,832/104,168 $ 4,955,149/$1,113,288
Robert Dykes................. -- -- 107,916/ 82,084 $ 943,977/$ 944,772
John Laing................... 15,000 $ 131,875 162,770/ 53,730 $ 2,718,191/$ 661,527
Eugene Wang.................. 25,000 $ 172,500 37,500/ 57,500 $ 466,412/$ 725,150
Ellen Taylor................. 8,888 $ 67,374 15,852/ 36,667 $ 123,933/$ 264,022
</TABLE>
- ------------------------
(1) The valuations shown above for unexercised in-the-money options are based on
the difference between the option exercise price and the fair market value
of the stock on March 31, 1995 (US$23.4375 per share). These values have not
been, and may never be, realized.
(2) The value realized for option exercises is the aggregate fair market value
of Symantec Common Stock on the date of exercise less the exercise price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In December 1991, Symantec entered into agreements with each of Robert R.B.
Dykes, its Executive Vice President, Worldwide Operations and Chief Financial
Officer, and John C. Laing, its Executive Vice President, Worldwide Sales
providing for certain benefits to such executives in the event their employment
is terminated without cause within one year after the occurrence of a merger,
consolidation or similar transaction that results in a change in control of
Symantec. "Change of control" includes (a) any consolidation or merger of
Symantec with or into any other corporation or corporations in which the
stockholders of Symantec immediately prior to the consolidation or merger do not
retain a majority of the voting power of the surviving corporation, (b) a change
in the majority of the Board resulting from any cash tender offer, exchange
offer, merger or other business combination, sale of assets or contested
election, or combination of the foregoing, or any sale of all or substantially
all of the assets of Symantec. If, within one year after a change in control,
Messrs. Dykes' or Laing's employment is terminated other than for cause or
disability, Messrs. Dykes and/or Laing, as the case may be, would be entitled to
receive severance pay equal to his base salary as of the date of such
termination in accordance with Symantec's normal payroll practices for a period
of one year, to have all unvested stock options become fully vested and
exercisable in accordance with their terms notwithstanding any vesting schedule
in such options to the contrary, and to have benefits provided to him as of the
date of such termination under Symantec's health, dental, life, disability and
other benefit plans continued for a period of one year. In addition, if any such
payments would be subject to the tax imposed by Section 4999 of the U.S. Code,
Messrs. Dykes and Laing would be entitled to receive additional amounts such
that the net amount of the payments and benefits, after deduction of taxes,
would be equal to the total aggregate original amount of the payments and
benefits payable.
On June 1, 1994, Symantec entered into an Employment and Consulting
Agreement with Charles M. Boesenberg (the "Employment Agreement") in connection
with the acquisition by Symantec of Central Point, which was subsequently
amended in December 1994. The Employment Agreement, as amended, provided for an
employment period which began June 1, 1994 and continued to December 31, 1994
(the "Initial Employment Period"), and a period during which Mr. Boesenberg
would act as a consultant to Symantec, beginning with the termination of his
employment and continuing until January 1, 1996 (the "Consulting Period"). Mr.
Boesenberg's base compensation during the Initial Employment Period was
US$235,000 per year; the base compensation during the Consulting Period is
US$360,000 per year. Mr. Boesenberg's compensation for the Consulting Period
reflects compensation that would otherwise have been payable to Mr. Boesenberg
under a pre-existing agreement with Central Point Software, Inc. due to the
change in control of Central Point that was effected by Symantec's acquisition
of Central Point. Under the Employment Agreement,
133
<PAGE>
Mr. Boesenberg waived all rights to receive compensation under that pre-existing
agreement. In addition to base compensation, the Employment Agreement provided
for Mr. Boesenberg to receive bonuses of US$31,250 per quarter in the Initial
Employment Period based on quarterly targets, and adjusted upward or downward
based on a formula relating to the revenue and expenses of Symantec's Central
Point business unit. Pursuant to the Employment Agreement Mr. Boesenberg
received an additional bonus of US$25,000 because Symantec's Central Point
business unit fully met its revenue goals for at least three quarters during the
Initial Employment Period. Bonuses paid under the Employment Agreement were in
lieu of bonuses that Mr. Boesenberg would otherwise have been eligible for under
Symantec's management bonus plan. Mr. Boesenberg also received an option to
purchase 50,000 shares of Symantec Common Stock, with an exercise price based on
the fair market value on the date of grant, which vested as to 33,333 shares
based upon the attainment of certain financial goals in each of the quarters
ending September 30, 1994 and December 30, 1994. The Employment Agreement also
provided that each outstanding option previously granted to Mr. Boesenberg by
Central Point was immediately exercisable for an additional number of shares
equal to that number of shares for which each such option would have become
exercisable during the two years after the date of the acquisition. The
exercisability of these additional shares reflects rights Mr. Boesenberg had
under a pre-existing agreement with Central Point due to the change in control
of Central Point that was effected by Symantec's acquisition of Central Point.
Mr. Boesenberg also received an option to purchase 14,000 shares of Symantec
Common Stock in March 1995 under Symantec's 1988 Employees Stock Option Plan,
and an option to purchase 16,000 shares of Symantec Common Stock under
Symantec's 1993 Directors Stock Option Plan in January 1995. Pursuant to the
Employment Agreement, Mr. Boesenberg was also reimbursed for relocation expenses
of approximately US$134,000 incurred in moving from the Portland, Oregon area to
Saratoga, California, and allowed to keep certain office equipment used by him.
This reimbursement was in lieu of a comparable reimbursement that would have
been provided pursuant to the pre-existing agreement with Central Point referred
to above. The Employment Agreement also provides that Mr. Boesenberg may not
compete, directly or indirectly, with Symantec in the area of computer utility
software for a period of four years. During the Consulting Period, Mr.
Boesenberg has provided Symantec with advice on employee compensation and has
been substantially involved in assisting Symantec in defending lawsuits arising
from the business of Central Point.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ending March 31, 1995, Symantec's Compensation
Committee initially consisted of Walter W. Bregman and L. John Doerr. Mr. Doerr
resigned from the Board on September 27, 1994, and Leslie L. Vadasz was
appointed to fill the vacancy on the Compensation Committee created by Mr.
Doerr's resignation. None of Mr. Bregman, Mr. Doerr or Mr. Vadasz has ever been
an officer of Symantec or any of its subsidiaries, and none has any relationship
with Symantec requiring disclosure under any paragraph of Item 404 of Regulation
S-K.
REPORT OF THE COMPENSATION COMMITTEE
AND BOARD ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE POLICY
The Compensation Committee (the "Committee") acts on behalf of the Board to
establish the general compensation policies for Symantec's executive officers,
including the salary levels and target bonuses for the Chief Executive Officer
("CEO") and other executive officers. The Committee also administers Symantec's
quarterly bonus program. The Board administers awards to executive officers
under the Stock Option Plan. During Committee or Board meetings, all discussions
regarding compensation of the CEO are held without his attendance. Similarly,
none of the other named executive officers are present during discussions
regarding their compensation.
The Board and the Committee believe that the compensation of the CEO and
Symantec's other executive officers should be based to a substantial extent on
Symantec's performance. Consistent with this philosophy, a designated portion of
the compensation of each executive is contingent upon
134
<PAGE>
corporate performance and adjusted where appropriate, based on an executive's
performance against personal performance objectives. Each executive officer's
performance for the past fiscal year and objectives for the current year are
reviewed, together with the executive's responsibility level and Symantec's
fiscal performance versus objectives and potential performance targets for the
current year. When establishing salaries, bonus levels and stock option awards
for executive officers, the Committee considers: (1) Symantec's financial
performance during the past year and recent quarters, (2) the individual's
performance during the past year and recent quarters, and (3) the salaries of
executive officers in similar positions of companies of comparable size and
other companies within the computer industry. With respect to executive officers
other than the CEO, the Committee places considerable weight upon the
recommendations of the CEO. In general, for the fiscal year ended March 31,
1995, no one factor was given greater consideration in determining compensation
than any other factor. The method for determining compensation varies from case
to case based on a discretionary and subjective determination of what is
appropriate at the time.
Symantec's Human Resources department obtains from an independent consultant
executive compensation data from other high technology companies, including high
technology companies of a similar size, and in fiscal 1995 provided this data to
the Board and the Committee for their consideration in connection with the
determination of levels of compensation and stock option awards. The companies
included in the sample from which this data was derived included companies
present in the S&P High Tech Index (used for purposes of the returns data
presented in "Company Stock Price Performance" below), but the sample was not
intended to correlate with this index. For fiscal 1995, Symantec did not set
target compensation levels for executive compensation based on this survey, but
used this data for informational purposes only. Changes to compensation levels
were established based on discretionary judgments made by the Compensation
Committee and with respect to executive officers other than the CEO, by the CEO.
COMPENSATION OF EXECUTIVE OFFICERS DURING FISCAL 1995
During the fiscal year ended March 31, 1995, salaries for executive officers
began at levels established in the prior year. The salaries of Messrs. Laing,
Dykes and Wang remained the same or increased moderately (less than 10%). The
salaries of Ms. Taylor and Mr. Schlein increased more significantly (between 17%
and 23%) in recognition of increased responsibilities undertaken during the
period.
Bonuses for executive officers are paid pursuant to Symantec's quarterly
bonus program. Under the quarterly bonus program, a bonus pool is established by
the Board each quarter. The pool for the quarterly bonus program, plus a pool
for non-management profit sharing is increased, on a pro rata basis, by a
percentage of operating income in excess of Symantec's plan for the quarter, and
is reduced if operating income falls below Symantec's plan. Target bonuses are
assigned for each executive officer (expressed as a percentage of the executive
officer's base salary), and performance objectives are established as a basis
for determining performance. The Committee determines the amount payable to the
CEO, and the CEO allocates the remainder of the pool to the remaining
participants (including executive officers), all based on each participant's
performance during the quarter. The total of individual bonuses is controlled by
the overall bonus pool, as adjusted by factors relating to earnings and
individual performance.
Under the quarterly bonus program, bonuses for executive officers are
determined based on overall corporate performance, group performance and
individual performance. These factors receive approximately equal weighting, but
subjective factors can alter the weighting in any specific case. Overall
corporate performance is judged based primarily on operating profit/loss,
excluding non-recurring charges. Group performance is judged based on a variety
of factors, including ability to achieve budgeted revenue and expense levels,
and to release new products and upgrades to existing products on a timely basis.
Individual performance is judged based on a variety of factors, including
ability to achieve individual performance goals. Because the pool of funds
available for bonuses is determined by corporate financial performance, bonuses
can be significantly affected if corporate
135
<PAGE>
financial performance falls short of desired objectives. Overall corporate
performance determines the pool of funds available for bonuses; individual and
group performance ratings determine actual payouts. While bonuses are determined
largely based on the total amount of the pool, individual and group performance
ratings reflect a variety of subjective considerations.
The specific financial and business objectives established under the
quarterly bonus program are confidential commercial and business information. As
such, such information need not be disclosed pursuant to Instruction 2 to Item
402(k) of Regulation S-K. Nevertheless, the general criteria taken into account
by Symantec in awarding bonuses in fiscal year 1995 included Symantec's ability
to achieve budgeted revenue levels, to stay within budgeted expense levels and
to release new products and upgrades to existing products on a timely basis.
Bonuses to Messrs. Dykes and Laing during the fiscal year ended March 31,
1995 increased significantly from the prior year, reflecting the good overall
performance of Symantec in meeting desired targets and objectives. Ms. Taylor's
bonus increased moderately, and Mr. Wang's bonus remained approximately the
same, reflecting the relative performance of their groups in meeting desired
targets and objectives. Symantec establishes its financial objectives in
connection with its normal financial budgeting process. Approximately every six
months, a budget is established for the following four fiscal quarters. During
each six-month budget cycle, changes to the budgets are made to reflect changed
conditions. In addition, the budgets may be modified in between normal budget
cycles if significant events occur. Symantec's performance with respect to
operating profit/loss is the primary financial objective considered in
determining compensation for executive officers, although subjective factors,
such as ability to meet project schedules and ship products in accordance with
those schedules are also considered for executive officers with management
responsibility for product groups. While Symantec did not fully meet its
budgeted goals during the first and second quarters of the fiscal year, Symantec
substantially achieved its financial performance goals for the 1995 fiscal year
as a whole.
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS IN FISCAL 1995
The Board periodically reviews the number of vested and unvested options
held by executive officers and makes stock option grants to executive officers
to provide greater incentives to those officers to continue their employment
with Symantec and to strive to increase the value of Symantec Common Stock.
Stock options typically have been granted to executive officers when the
executive first joins Symantec, in connection with a significant change in
responsibilities and, occasionally, to achieve equity within a peer group. When
making stock option grants for executive officers, the Board considers
Symantec's performance during the past year and recent quarters, the
responsibility level and performance of the executive officer, prior option
grants to the executive officer and the level of vested and unvested options.
The stock options generally become exercisable over a four-year period, and have
exercise prices equal to the fair market value of Symantec Common Stock on the
date of grant.
During the fiscal year ended March 31, 1995, the Board, based on
recommendations from the Compensation Committee, made certain stock option
grants to executive officers (see "Option Grants in Fiscal 1995"). The general
purpose of these grants was to provide greater incentives to these executive
officers to continue their employment with Symantec and to strive to increase
the long-term value of Symantec Common Stock. Specific stock option grants made
by the Board, upon recommendation of the Compensation Committee, during
Symantec's fiscal year 1995 were based on past performance, anticipated future
contribution and ability to impact corporate and/or business unit results,
consistency within the executive's peer group, prior option grants to the
executive officer and the level of vested and unvested options. Symantec does
not set specific target levels for options granted to named executive officers
or for Mr. Eubanks. The number of stock options awarded is based on a
discretionary and subjective determination by the Compensation Committee of what
they believe is appropriate for each officer, with consideration given by the
Compensation Committee to the foregoing factors. The relative importance of
these factors varies from case to case based on a
136
<PAGE>
discretionary and subjective determination by the Compensation Committee of what
is appropriate at the time. In fiscal 1995, the primary factor considered in
granting the options to executive officers was the number of unvested options
held by the executive officers.
FISCAL 1995 CEO COMPENSATION
Compensation for the CEO is determined through a process similar to that
discussed above for executive officers in general.
During the fiscal year ended March 31, 1995, the salary for the CEO began at
a level established in the prior year. In addition, the Board, based on the
recommendation of the Compensation Committee approved a moderate increase in Mr.
Eubanks' base salary (less than 10%).
Mr. Eubanks' bonuses are determined on the same basis as bonuses for other
executive officers, except that no group performance factor is considered (i.e.,
overall corporate performance is used in lieu of group performance). Bonuses
paid to Mr. Eubanks increased significantly from levels of the prior fiscal
year, reflecting the good performance of Symantec in meeting desired targets and
objectives. As noted above, Symantec's financial performance was measured
primarily with respect to operating profit/loss. While Symantec did not fully
meet its budgeted goals during the first and second quarters of the fiscal year,
Symantec substantially achieved its financial performance goals for the 1995
fiscal year as a whole.
STOCK OPTIONS GRANTED TO CEO IN FISCAL 1995
The Board periodically reviews the number of vested and unvested options
held by the CEO and makes stock option grants to the CEO to provide greater
incentives to him to continue his employment with Symantec and to strive in
increase the value of Symantec Common Stock. When making stock option grants to
the CEO, the Board considers Symantec's performance during the past year and
recent quarters, the performance of the CEO, prior option grants to the CEO and
the level of vested and unvested options. The stock options generally become
exercisable over a four-year period, and have exercise prices equal to the fair
market value of Symantec Common Stock on the date of grant.
During the fiscal year ended March 31, 1995, Mr. Eubanks did not receive any
additional options. The primary consideration for not making a new grant was the
number of unvested options held by Mr. Eubanks.
CHANGES TO TAX LAW -- LIMITS ON EXECUTIVE COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
U.S. Code. Section 162(m) limits deductions for certain executive compensation
in excess of US$1 million. Certain types of compensation are deductible only if
performance criteria are specified in detail, and payments are contingent on
stockholder approval of the compensation arrangement. Symantec believes that it
is in the best interests of its stockholders to structure its compensation plans
to achieve maximum deductibility under Section 162(m) with minimal sacrifices in
flexibility and corporate objectives. To that end, the Stock Option Plan has
been amended to ensure continued deductibility under Section 162(m). With
respect to non-equity compensation arrangements, the Compensation Committee has
reviewed the terms of those arrangements most likely to be subject to Section
162(m) and believes that at this time no changes are necessary. The Committee
will continue to monitor this situation and will take appropriate action if and
when it is warranted. Since corporate objectives may not always be consistent
with the requirements for full deductibility, it is conceivable that Symantec
may enter into
137
<PAGE>
compensation arrangements in the future under which payments are not deductible
under Section 162(m); deductibility will not be the sole factor used by the
Committee in ascertaining appropriate levels or modes of compensation.
<TABLE>
<CAPTION>
BOARD OF DIRECTORS COMPENSATION COMMITTEE
<S> <C>
Charles M. Boesenberg Walter W. Bregman
Walter W. Bregman Leslie L. Vadasz
Carl D. Carman
Gordon E. Eubanks, Jr.
Robert S. Miller
Leslie L. Vadasz
</TABLE>
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total stockholder return on Symantec
Common Stock from March 31, 1990 to the present with the cumulative total return
on the S&P 500 Composite Index and the S&P High Technology Index over the same
period (assuming the investment of US$100 in Symantec Common Stock and in each
of the other indices on March 31, 1990, and reinvestment of all dividends). The
past performance of Symantec's Common Stock is no indication of future
performance.
SYMANTEC CORPORATION
COMPARISON OF CUMULATIVE TOTAL RETURN
MARCH 31, 1990 TO MARCH 31, 1995
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P HIGH TECH COMPOSITE S&P 500 SYMANTEC CORPORATION
<S> <C> <C> <C>
3/90 100 100 100
3/91 109 114 241
3/92 112 127 428
3/93 123 129 146
3/94 144 149 156
3/95 183 172 230
</TABLE>
- ------------------------
(1) The graph assumes that US$100.00 was invested in Symantec Common Stock and
in each Index on March 31, 1990.
(2) The total return for each of Symantec Common Stock, the S&P 500 and the S&P
High Tech Composite assumes the reinvestment of dividends, although
dividends have not been declared on Symantec's Common Stock. Historical
returns are not necessarily indicative of future performance.
138
<PAGE>
The graph below compares the cumulative total shareholder return on Symantec
Common Stock from June 30, 1989 (the date of Symantec's initial public offering
was June 23, 1989) to the present with the cumulative total return on the S&P
500 Composite Index and the S&P High Technology Index over the same period
(assuming the investment of US$100 in Symantec Common Stock and in each of the
other indices on June 30, 1989, and reinvestment of all dividends). Symantec has
provided this additional data to provide the perspective of a longer time period
which is consistent with Symantec's history as a public company. The past
performance of Symantec's Common Stock is no indication of future performance.
COMPARISON OF CUMULATIVE ANNUAL RETURN
JUNE 30, 1989 TO MARCH 31, 1995
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P HIGH TECH COMPOSITE S&P 500 SYMANTEC CORPORATION
<S> <C> <C> <C>
6/89 100 100 100
3/90 101 109 174
3/91 110 125 420
3/92 112 138 743
3/93 124 160 224
3/94 145 162 272
3/95 184 187 400
</TABLE>
- ------------------------
(1) Symantec's initial public offering was on June 23, 1989. Data is shown
beginning June 30, 1989 because data for cumulative returns on the S&P 500
and the S&P High Tech Composite indices are available only at month end.
(2) The graph assumes that US$100 was invested in Symantec's Common Stock and in
each Index on June 30, 1989.
(3) The total return for each of Symantec Common Stock, the S&P 500 and the S&P
High Tech Composite assumes the reinvestment of dividends, although
dividends have not been declared on Symantec Common Stock. Historical
returns are not necessarily indicative of future performance.
CERTAIN TRANSACTIONS
In March 1989, Symantec sold 45,000 shares of Symantec Common Stock to
Gordon E. Eubanks, Jr., at a per share price of US$2.67. Mr. Eubanks paid for
the shares with a US$120,000, 9% promissory note payable in four years. On March
23, 1993, the promissory note representing this indebtedness became due and was
replaced with a new nine-year promissory note, bearing interest at 6%. So as
139
<PAGE>
long as Mr. Eubanks remains employed by Symantec, accrued interest on the note
will be forgiven annually and Symantec will pay Mr. Eubanks the amount of his
tax liability on such forgiveness. As of March 31, 1995, the outstanding
principal balance on this note was US$120,000.
In August 1989, Symantec entered into a Housing Assistance Agreement with
John C. Laing, whereby Symantec agreed to pay Mr. Laing US$2,194 per month
towards the mortgage on his residence until July 1, 1996, unless certain events
occur, including the sale of the residence or Mr. Laing's termination of
employment with Symantec. If the residence is sold, Mr. Laing must pay Symantec
approximately 20% of any gain on such sale, and, if the residence is not sold by
July 1, 1996, Mr. Laing must pay Symantec approximately 20% of any appreciation
in the value of the residence as of that date.
In connection with the merger of Peter Norton Computing, Inc. with and into
Symantec in August 1990, (the "Norton Merger"), Symantec and Peter Norton, who
was a member of the Board until September 1994, entered into a Publicity
Agreement pursuant to which Mr. Norton has granted to Symantec a perpetual,
exclusive license to use his name and image for computer software products for a
royalty equal to the greater of 1% of net sales of products bearing Mr. Norton's
name or 0.4% of the suggested retail price of such products. Mr. Norton also has
agreed to make himself available until August 31, 1995 for certain personal
appearances, press conferences and other public appearances. Mr. Norton may
terminate the agreement if Symantec fails to pay Mr. Norton an average of at
least US$30,000 of royalties in any three consecutive years. For the fiscal
years ended April 2, 1993, April 1, 1994 and March 31, 1995 the amount of these
royalties payable to Mr. Norton was approximately US$1.4 million, US$1.6 million
and US$1.9 million, respectively.
As a condition of the Norton Merger, Symantec amended its present
Registration Rights Agreement, to include Mr. Norton as a holder (collectively,
the "Holders"), thereby extending to Mr. Norton certain rights to register the
shares of Symantec Common Stock received in the Norton Merger under the
Securities Act. The Registration Rights Agreement entitles the Holders, whenever
Symantec proposes to register any of its securities under the Securities Act,
either for its own account or the accounts of its security holders, to notice of
such registration and to include shares of such Common Stock therein, subject to
certain conditions and limitations. The Holders of a majority of the shares with
registration rights may require Symantec, on not more than two occasions with
respect to registration on forms other than Form S-3 (Mr. Norton being only
allowed to make one such demand) and on an unlimited number of occasions with
respect to registrations on Form S-3, to register all or a part of their
registrable shares under the Securities Act, and Symantec is required to use its
best efforts to effect such registration, subject to certain conditions and
limitations. Generally, Symantec is required to bear the expense of all such
registrations (other than those on Form S-3) except for underwriting discounts
and commissions. The foregoing registration rights under the amended
Registration Rights Agreement will terminate on January 1, 2000. Accordingly,
Mr. Norton has the right to cause Symantec to use its best efforts to register
some or all of his shares for resale.
Symantec has adopted provisions in its certificate of incorporation and
by-laws that limit the liability of its directors and provide for
indemnification of its officers and directors to the full extent permitted under
Delaware law. Under Symantec's Certificate of Incorporation, and as permitted
under the DGCL, directors are not liable to Symantec or its stockholders for
monetary damages arising from a breach of their fiduciary duty of care as
directors, including such conduct during a merger or tender offer. In addition,
Symantec has entered into separate indemnification agreements with its directors
and officers that could require Symantec, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service
as directors or officers. Such provisions do not, however, affect liability for
any breach of a director's duty of loyalty to Symantec or its stockholders,
liability for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, liability for transactions in which the
director derived an improper personal benefit or liability for the payment of a
dividend in violation of Delaware law. Such
140
<PAGE>
limitation of liability also does not limit a director's liability for violation
of, or otherwise relieve Symantec or its directors from the necessity of
complying with, federal or state securities laws or affect the availability of
equitable remedies such as injunctive relief or rescission.
COMPARISON OF STOCKHOLDER RIGHTS
In the event that the Transaction is consummated, holders of Delrina Common
Shares will, upon the Effective Time, have their Delrina Common Shares exchanged
for Exchangeable Shares. They will have the right to retract these shares for an
equivalent number of shares of Symantec Common Stock. Symantec is a corporation
organized under the Delaware General Corporation Law ("DGCL"). While the rights
and privileges of shareholders of an Ontario corporation are, in many instances,
comparable to those of stockholders of a Delaware corporation, there are certain
differences. These differences arise from differences between Ontario and
Delaware law, between the OBCA and DGCL and between the Delrina Articles and
Delrina Bylaws and the Symantec Certificate and Symantec Bylaws. For a
description of the respective rights of the holders of Delrina Common Shares and
Symantec Common Stock, see, respectively, "INFORMATION CONCERNING DELRINA --
Share Capital Matters" and "INFORMATION CONCERNING SYMANTEC -- Description of
Capital Stock."
VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS
Under the OBCA, certain extraordinary corporate actions, such as certain
amalgamations, continuances, and sales, leases or exchanges of all or
substantially all the property of a corporation other than in the ordinary
course of business, and other extraordinary corporate actions such as
liquidations, dissolutions and (if ordered by a court) arrangements, are
required to be approved by special resolution. A special resolution is a
resolution passed at a meeting by not less than two-thirds of the votes cast by
the shareholders entitled to vote on the resolution. In certain cases, a special
resolution to approve an extraordinary corporate action is also required to be
approved separately by the holders of a class or series of shares.
The DGCL requires the affirmative vote of a majority of the outstanding
stock entitled to vote thereon to authorize any merger, consolidation,
dissolution or sale of substantially all of the assets of a corporation, except
that, unless required by its certificate of incorporation, (a) no authorizing
stockholder vote is required of a corporation surviving a merger if (i) such
corporation's certificate of incorporation is not amended by the merger, (ii)
each share of stock of such corporation will be an identical share of the
surviving corporation after the merger, and (iii) the number of shares to be
issued in the merger does not exceed 20% of such corporation's outstanding
common stock immediately prior to the effective date of the merger; and (b) no
authorizing stockholder vote is required of a corporation to authorize a merger
with or into a single direct or indirect wholly-owned subsidiary of such
corporation (provided certain other limited circumstances apply). The Symantec
Certificate does not require a greater percentage vote for such actions.
Stockholder approval is also not required under the DGCL for mergers or
consolidations in which a parent corporation merges or consolidates with a
subsidiary of which it owns at least 90% of the outstanding shares of each class
of stock.
AMENDMENT TO GOVERNING DOCUMENTS
Under the OBCA, any amendment to the articles generally requires approval by
special resolution, which is a resolution passed by a majority of not less than
two-thirds of the votes cast by shareholders entitled to vote on the resolution.
The OBCA provides that unless the articles or by-laws otherwise provide, the
directors may, by resolution, make, amend or repeal any by-laws that regulate
the business or affairs of a corporation. Where the directors make, amend or
repeal a by-law, they are required under the OBCA to submit the by-law,
amendment or repeal to the shareholders at the next meeting of shareholders, and
the shareholders may confirm, reject or amend the by-law, amendment or repeal by
an ordinary resolution, which is a resolution passed by a majority of the votes
cast by shareholders entitled to vote on the resolution.
The DGCL requires a vote of the corporation's board of directors followed by
the affirmative vote of a majority of the outstanding stock entitled to vote for
any amendment to the certificate of
141
<PAGE>
incorporation, unless a greater level of approval is required by the certificate
of incorporation. The Symantec Certificate does not require a greater level of
approval for an amendment thereto. If an amendment would have the effect of
altering the powers, preferences or special rights of a particular class or
series of stock, the class or series shall be given the power to vote as a class
notwithstanding the absence of any specifically enumerated power in the
certificate of incorporation. The DGCL also states that the power to adopt,
amend or repeal the by-laws of a corporation shall be in the stockholders
entitled to vote, provided that the corporation in its certificate of
incorporation may confer such power on the corporation's board of directors. The
Symantec Certificate expressly authorizes the Symantec Board of Directors and
the stockholders to adopt, amend or repeal the Symantec Bylaws.
DISSENTERS' RIGHTS
The OBCA provides that shareholders of an Ontario corporation entitled to
vote on certain matters are entitled to exercise dissent rights and to be paid
the fair value of their shares in connection therewith. The OBCA does not
distinguish for this purpose between listed and unlisted shares. Such matters
include (a) any amalgamation with another corporation (other than with certain
affiliated corporations); (b) an amendment to the corporation's articles to add,
change or remove any provisions restricting the issue, transfer or ownership of
shares; (c) an amendment to the corporation's articles to add, change or remove
any restriction upon the business or businesses that the corporation may carry
on or upon the powers that the corporation may exercise; (d) a continuance under
the laws of another jurisdiction; (e) a sale, lease or exchange of all or
substantially all the property of the corporation other than in the ordinary
course of business; (f) a court order permitting a shareholder to dissent in
connection with an application to the court for an order approving an
arrangement proposed by the corporation; or (g) certain amendments to the
articles of a corporation which require a separate class or series vote,
provided that a shareholder is not entitled to dissent if an amendment to the
articles is effected by a court order approving a reorganization or by a court
order made in connection with an action for an oppression remedy. Under the
OBCA, a shareholder may, in addition to exercising dissent rights, seek an
oppression remedy for any act or omission of a corporation which is oppressive,
unfairly prejudicial to or that unfairly disregards a shareholder's interest.
Under the DGCL, holders of shares of any class or series have the right, in
certain circumstances, to dissent from a merger or consolidation by demanding
payment in cash for their shares equal to the fair value (excluding any
appreciation or depreciation as a consequence or in expectation of the
transaction) of such shares, as determined by agreement with the corporation or
by an independent appraiser appointed by a court in an action timely brought by
the corporation or the dissenters. The DGCL grants dissenters' appraisal rights
only in the case of mergers or consolidations and not in the case of a sale or
transfer of assets or a purchase of assets for stock regardless of the number of
shares being issued. Further, no appraisal rights are available for shares of
any class or series listed on a national securities exchange or designated as a
national market system security on Nasdaq or held of record by more than 2,000
stockholders, unless the agreement of merger or consolidation converts such
shares into anything other than (a) stock of the surviving corporation, (b)
stock of another corporation which is either listed on a national securities
exchange or designated as a national market system security on Nasdaq or held of
record by more than 2,000 stockholders, (c) cash in lieu of fractional shares,
or (d) some combination of the above.
OPPRESSION REMEDY
The OBCA provides an oppression remedy that enables the court to make any
order, both interim and final, to rectify the matters complained of, if the
Director appointed under section 278 of the OBCA or the OSC is satisfied upon
application by a complainant (as defined below) that: (i) any act or omission of
the corporation or an affiliate effects or threatens to effect a result; (ii)
the business or affairs of the corporation or an affiliate are, have been or are
threatened to be carried on or conducted in a manner; or (iii) the powers of the
directors of the corporation of an affiliate are, have been or are threatened to
be exercised in a manner, that is oppressive or unfairly prejudicial to or that
unfairly disregards the interest of any security holder, creditor, director or
officer of the corporation. A complainant includes: (a) a present or former
registered holder or beneficial owner of securities of a
142
<PAGE>
corporation or any of its affiliates; (b) a present or former officer or
director of the corporation or any of its affiliates; and (c) any other person
who in the discretion of the court is a proper person to make such application.
Because of the breadth of the conduct which can be complained of and the
scope of the court's remedial powers, the oppression remedy is very flexible and
is sometimes relied upon to safeguard the interests of shareholders and other
complainants with a substantial interest in the corporation. Under the OBCA, it
is not necessary to prove that the directors of a corporation acted in bad faith
in order to seek an oppression remedy. Furthermore, the court may order the
corporation to pay the interim expenses of a complainant seeking an oppression
remedy, but the complainant may be held accountable for such interim costs on
final disposition of the complaint (as in the case of a derivative action). The
DGCL does not provide for a similar remedy.
DERIVATIVE ACTION
Derivative actions may be brought in Delaware by a stockholder on behalf of,
and for the benefit of, the corporation. The DGCL provides that a stockholder
must aver in the complaint that he or she was a stockholder of the corporation
at the time of the transaction of which he or she complains. A stockholder may
not sue derivatively unless he or she first makes demand on the corporation that
it bring suit and such demand has been refused, unless it is shown that such
demand would have been futile.
Under the OBCA, a complainant may apply to the court for leave to bring an
action in the name of and on behalf of a corporation or any subsidiary, or to
intervene in an existing action to which any such body corporate is a party, for
the purpose of prosecuting, defending or discontinuing the action on behalf of
the body corporate. Under the OBCA, no action may be brought and no intervention
in an action may be made unless the complainant has given 14 days' notice to the
directors of the corporation or its subsidiary of the complainant's intention to
apply to the court and the court is satisfied that (a) the directors of the
corporation or its subsidiary will not bring, diligently prosecute or defend or
discontinue the action; (b) the complainant is acting in good faith; and (c) it
appears to be in the interests of the corporation or its subsidiary that the
action be brought, prosecuted, defended or discontinued. Where a complainant
makes an application without having given the required notice, the OBCA permits
the court to make an interim order pending the complainant giving the required
notice, provided that the complainant can establish that at the time of seeking
the interim order it was not expedient to give the required notice.
Under the OBCA, the court in a derivative action may make any order it
thinks fit. Additionally, under the OBCA, a court may order a corporation or its
subsidiary to pay the complainant's interim costs, including reasonable legal
fees and disbursements. Although the complainant may be held accountable for the
interim costs on final disposition of the complaint, it is not required to give
security for costs in a derivative action.
SHAREHOLDER CONSENT IN LIEU OF MEETING
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required to be taken or which may be taken at an
annual or special meeting of stockholders may be taken without a meeting if a
consent in writing is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize such
action at a meeting at which all shares entitled to vote were present and voted.
The Symantec Certificate does not contain any special provision relating to
action by written consent. Under the OBCA, shareholder action without a meeting
may only be taken by written resolution signed by all shareholders who would be
entitled to vote thereon at a meeting.
DIRECTOR QUALIFICATIONS
A majority of the directors of an OBCA corporation generally must be
resident Canadians but where a corporation has only one or two directors, that
director or one of the two directors, as the case
143
<PAGE>
may be, must be a resident Canadian. The OBCA also requires that at least
one-third of the directors of a corporation whose securities are publicly traded
must not be officers or employees of the corporation or any of its affiliates.
The DGCL does not have comparable requirements.
FIDUCIARY DUTIES OF DIRECTORS
Directors of corporations governed by the OBCA have fiduciary obligations to
the corporation. Directors of corporations incorporated or organized under the
DGCL have fiduciary obligations to the corporation and its shareholders.
Pursuant to these fiduciary obligations, the directors must act in accordance
with the so-called duties of "due care" and "loyalty". Under the DGCL, the duty
of care requires that the directors act in an informed and deliberative manner
and to inform themselves, prior to making a business decision, of all material
information reasonably available to them. The duty of loyalty must be summarized
as the duty to act in good faith in a manner which the directors reasonably
believe to be in the best interests of the stockholders. It requires that there
be no conflict between duty and self-interest.
Under the OBCA, the duty of loyalty requires directors of an Ontario
corporation to act honestly and in good faith with a view to the best interests
of the corporation, and the duty of care requires that the directors exercise
the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the OBCA, a corporation may indemnify a director or officer, a former
director or officer or a person who acts or acted at the corporation's request
as a director or officer of a body corporate of which the corporation is or was
a shareholder or creditor, and his or her heirs and legal representatives (an
"Indemnifiable Person"), against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, reasonably incurred by
him or her in respect of any civil, criminal or administrative action or
proceeding to which he or she is made a party by reason of being or having been
a director or officer of such corporation or such body corporate, if: (a) he or
she acted honestly and in good faith with a view to the best interests of such
corporation; and (b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he or she had reasonable
grounds for believing that his or her conduct was lawful. An Indemnifiable
Person is entitled to such indemnity from the corporation if he or she was
substantially successful on the merits in his or her defense of the action or
proceeding and fulfilled the conditions set out in (a) and (b), above. A
corporation may, with the approval of a court, also indemnify an Indemnifiable
Person in respect of an action by or on behalf of the corporation or body
corporate to procure a judgment in its favor, to which such person is made a
party by reason of being or having been a director or an officer of the
corporation or body corporate, if he or she fulfills the conditions set out in
(a) and (b), above. The Delrina Bylaws provide for indemnification of directors
and officers to the fullest extent authorized by the OBCA.
The DGCL provides that a corporation may indemnify its present and former
directors, officers, employees and agents (each, an "indemnitee") against all
reasonable expenses (including attorneys' fees) and, except in actions initiated
by or in the right of the corporation, against all judgments, fines and amounts
paid in settlement in actions brought against them, if such individual acted in
good faith and in a manner which he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The corporation shall indemnify an indemnitee to the extent that he or she is
successful on the merits or otherwise in the defense of any claim, issue or
matter associated with an action. The Symantec Certificate provides for
indemnification of directors and officers to the fullest extent authorized by
the DGCL.
The DGCL allows for the advance payment of an indemnitee's expenses prior to
the final disposition of an action, provided that the indemnitee undertakes to
repay any such amount advanced if it is
144
<PAGE>
later determined that the indemnitee is not entitled to indemnification with
regard to the action for which the expenses were advanced. Neither the OBCA nor
the Delrina Bylaws expressly provides for such advance payment.
Symantec has entered into Indemnity Agreements with each of its directors
and executive officers.
DIRECTOR LIABILITY
The DGCL provides that the charter of a corporation may include a provision
which limits or eliminates the liability of directors to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided such liability does not arise from certain proscribed conduct,
including acts or omissions not in good faith or which involve intentional
misconduct or breach of the duty of loyalty. The Symantec Certificate contains a
provision limiting the liability of its directors to the fullest extent
permitted by the DGCL. The OBCA does not permit any such limitation of a
director's liability.
ANTI-TAKEOVER PROVISIONS AND INTERESTED STOCKHOLDER TRANSACTIONS
The DGCL prohibits, in certain circumstances, a "business combination"
between the corporation and an "interested stockholder" within three years of
the stockholder becoming an "interested stockholder." An "interested
stockholder" is a holder who, directly or indirectly, controls 15% or more of
the outstanding voting stock or is an affiliate of the corporation and was the
owner of 15% or more of the outstanding voting stock at any time within the
prior three-year period. A "business combination" includes a merger,
consolidation, sale or other disposition of assets having an aggregate value in
excess of 10% of the consolidated assets of the corporation and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation. This provision does not apply where: (i) the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder is approved by the corporation's board of
directors prior to the time the interested stockholder acquired such 15%
interest; (ii) upon the consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the outstanding voting stock of the corporation excluding, for
the purpose of determining the number of shares outstanding, shares held by
persons who are directors and also officers and by employee stock plans in which
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered; (iii) the business combination is
approved by a majority of the board of directors and the affirmative vote of
two-thirds of the outstanding votes entitled to be cast by disinterested
stockholders at an annual or special meeting; (iv) the corporation does not have
a class of voting stock that is listed on a national securities exchange,
authorized for quotation on an inter-dealer quotation system of the Nasdaq Stock
Market, or held of record by more than 2,000 stockholders unless any of the
foregoing results from action taken, directly or indirectly, by an interested
stockholder or from a transaction in which a person becomes an interested
stockholder; (v) the corporation has opted out of this provision; or (vi) in
certain other limited circumstances. Symantec has not opted out of this
provision.
The OBCA does not contain a comparable provision with respect to business
combinations. However, policies of certain Canadian securities regulatory
authorities, including Policy 9.1 of the OSC ("Policy 9.1"), contain
requirements in connection with related party transactions. A related party
transaction means, generally, any transaction by which an issuer, directly or
indirectly, acquires or transfers an asset or acquires or issues treasury
securities or assumes or transfers a liability from or to, as the case may be, a
related party by any means in any one or any combination of transactions.
"Related party" is defined in Policy 9.1 and includes directors, senior officers
and holders of at least 10% of the voting securities of the issuer.
Policy 9.1 requires more detailed disclosure in the proxy material sent to
security holders in connection with a related party transaction, and, subject to
certain exceptions, the preparation of a formal valuation of the subject matter
of the related party transaction and any non-cash consideration offered therefor
and the inclusion of a summary of the valuation in the proxy material. Policy
9.1 also
145
<PAGE>
requires, subject to certain exceptions, that the minority shareholders of the
issuer separately approve the transaction, by either a simple majority or
two-thirds of the votes cast, depending on the circumstances.
DISSENTING SHAREHOLDERS' RIGHTS
DELRINA
Section 185 of the OBCA provides shareholders with the right to dissent from
certain resolutions of a corporation which effect extraordinary corporate
transactions or fundamental corporate changes. The Interim Order and the Final
Order provide Delrina shareholders with the right to dissent from the
Arrangement Resolution pursuant to section 185 of the OBCA and the Plan of
Arrangement.
Any Delrina shareholder who dissents from the Arrangement Resolution in
compliance with section 185 of the OBCA and the Plan of Arrangement will be
entitled, in the event the Arrangement becomes effective, to be paid by Delrina
the fair value of the Delrina Common Shares held by such dissenting Delrina
shareholder determined as of the close of business on the day before the
Arrangement Resolution is adopted.
A Delrina shareholder who wishes to dissent must send to Delrina, no later
than the termination of the Delrina Shareholders Meeting (or any adjournment
thereof), written objection to the Arrangement Resolution (a "Dissent Notice").
The filing of a Dissent Notice does not deprive a Delrina shareholder of the
right to vote; however, the OBCA provides, in effect, that a Delrina shareholder
who has submitted a Dissent Notice and who votes in favor of the Arrangement
Resolution will no longer be considered a dissenting Delrina shareholder with
respect to that class of shares voted in favor of the Arrangement Resolution.
The OBCA does not provide, and Delrina will not assume, that a vote against the
Arrangement Resolution or an abstention constitutes a Dissent Notice but a
Delrina shareholder need not vote his or her Delrina Common Shares against the
Arrangement Resolution in order to dissent. Similarly, the revocation of a proxy
conferring authority on the proxyholder to vote in favor of the Arrangement
Resolution does not constitute a Dissent Notice; however, any proxy granted by a
Delrina shareholder who intends to dissent, other than a proxy that instructs
the proxyholder to vote against the Arrangement Resolution, should be validly
revoked (see "THE MEETINGS -- GENERAL PROXY INFORMATION -- Delrina -- Revocation
of Proxy") in order to prevent the proxyholder from voting such Delrina Common
Shares in favor of the Arrangement Resolution and thereby disentitling the
Delrina shareholder from his or her right to dissent. Under the OBCA, there is
no right of partial dissent and, accordingly, a dissenting Delrina shareholder
may only dissent with respect to all Delrina Common Shares held by him or her on
behalf of any one beneficial owner and which are registered in the name of the
dissenting Delrina shareholder.
Delrina is required, within 10 days after the Delrina shareholders adopt the
Arrangement Resolution, to notify each Delrina shareholder who has filed a
Dissent Notice that the Arrangement Resolution has been adopted, but such notice
is not required to be sent to any Delrina shareholder who voted for the
Arrangement Resolution or who has withdrawn his or her Dissent Notice.
A dissenting Delrina shareholder who has not withdrawn his or her Dissent
Notice must then, within 20 days after receipt of notice that the Arrangement
Resolution has been adopted or, if he or she does not receive such notice,
within 20 days after he or she learns that the Arrangement Resolution has been
adopted, send to Delrina a written notice (a "Payment Demand") containing his or
her name and address, the number of Delrina Common Shares in respect of which he
or she dissents, and a demand for payment of the fair value of such Delrina
Common Shares. Within 30 days after sending a Payment Demand, the dissenting
Delrina shareholder must send to the Delrina transfer agent the certificates
representing the Delrina Common Shares in respect of which he or she dissents. A
dissenting Delrina shareholder who fails to send certificates representing the
Delrina Common Shares in respect of which he or she dissents forfeits his or her
right to make a claim under section 185 of the
146
<PAGE>
OBCA. The Delrina transfer agent will endorse on share certificates received
from a dissenting Delrina shareholder a notice that the holder is a dissenting
Delrina shareholder and will forthwith return the share certificates to the
dissenting Delrina shareholder.
On sending a Payment Demand to Delrina, a dissenting Delrina shareholder
ceases to have any rights as a Delrina shareholder, other than the right to be
paid the fair value of his or her Delrina Common Shares as determined under
section 185 of the OBCA, except where:
(a) the dissenting Delrina shareholder withdraws his or her Payment
Demand before Delrina makes an offer to him or her pursuant to the OBCA;
(b) Delrina fails to make an offer as hereinafter described and the
dissenting Delrina shareholder withdraws his or her Payment Demand; or
(c) the Arrangement does not proceed;
in which case his or her rights as a Delrina shareholder are reinstated as of
the date he or she sent the Payment Demand.
Delrina is required, not later than seven days after the later of the
effective date of the Arrangement or the date on which Delrina received the
Payment Demand of a dissenting Delrina shareholder, to send to each dissenting
Delrina shareholder who has sent a Payment Demand a written offer to pay ("Offer
to Pay") for his or her Delrina Common Shares in an amount considered by the
Delrina Board of Directors to be the fair value thereof, accompanied by a
statement showing the manner in which the fair value was determined. Every Offer
to Pay must be on the same terms. Delrina must pay for the Delrina Common Shares
of a dissenting Delrina shareholder within 10 days after an offer made as
aforesaid has been accepted by a dissenting Delrina shareholder, but any such
offer lapses if Delrina does not receive an acceptance thereof within 30 days
after the Offer to Pay has been made.
If Delrina fails to make an Offer to Pay for a dissenting Delrina
shareholder's Delrina Common Shares, or if a dissenting Delrina shareholder
fails to accept an offer which has been made, Delrina may, within 50 days after
the effective date of the Arrangement or within such further period as a court
may allow, apply to a court to fix a fair value for the Delrina Common Shares of
dissenting Delrina shareholders. If Delrina fails to apply to a court, a
dissenting Delrina shareholder may apply to a court for the same purpose within
a further period of 20 days or within such further period as a court may allow.
A dissenting Delrina shareholder is not required to give security for costs in
such an application.
Upon an application to a court, all dissenting Delrina shareholders whose
Delrina Common Shares have not been purchased by Delrina will be joined as
parties and bound by the decision of the court, and Delrina will be required to
notify each affected dissenting Delrina shareholder of the date, place and
consequences of the application and of his or her right to appear and be heard
in person or by counsel. Upon any such application to a court, the court may
determine whether any person is a dissenting Delrina shareholder who should be
joined as a party, and the court will then fix a fair value for the Delrina
Common Shares of all dissenting Delrina shareholders. The final order of a court
will be rendered against Delrina in favor of each dissenting Delrina shareholder
and for the amount of the fair value of his or her Delrina Common Shares as
fixed by the court. The court may, in its discretion, allow a reasonable rate of
interest on the amount payable to each dissenting Delrina shareholder from the
effective date of the Arrangement until the date of payment.
The above is only a summary of the dissenting shareholder provisions of the
OBCA, which are technical and complex. It is suggested that any Delrina
shareholder wishing to avail himself or herself of his or her rights under those
provisions seek his or her own legal advice as failure to comply strictly with
the provisions of the OBCA may prejudice his or her right of dissent. For a
general summary of certain income tax implications to a dissenting Delrina
shareholder, see "INCOME TAX CONSIDERATIONS TO DELRINA SHAREHOLDERS -- Canadian
Federal Income Tax Considerations to
147
<PAGE>
Delrina Shareholders -- Dissenting Shareholders" and "INCOME TAX CONSIDERATIONS
TO DELRINA SHAREHOLDERS -- United States Federal Income Tax Considerations to
Delrina Shareholders -- Dissenting Shareholders."
SYMANTEC
Under the DGCL, holders of Symantec Common Stock who object to the
Transaction will not be entitled to demand appraisal of, or to receive payment
for, their Symantec Common Stock.
ADDITIONAL MATTERS FOR CONSIDERATION OF SYMANTEC STOCKHOLDERS
PROPOSAL NO. 2 -- APPROVAL OF AN AMENDMENT TO SYMANTEC'S CERTIFICATE OF
INCORPORATION
At the Symantec Stockholders Meeting, Symantec's stockholders will be asked
to consider and act upon a proposal to amend Symantec's Certificate of
Incorporation to increase by 30,000,000 (from 70,000,000 to 100,000,000) the
number of shares of Common Stock, par value US$0.01, authorized for issuance and
to create a new class of stock, designated Special Voting Stock, par value
US$1.00 per share, and to authorize one share for issuance thereunder. This
amendment was adopted by Symantec's Board on July 5, 1995.
Symantec's authorized capital stock currently consists of a total of
71,000,000 shares, including 70,000,00 shares of Common Stock, par value US$0.01
per share and 1,000,000 shares of Preferred Stock, par value US$0.01 per share.
There are no shares of Symantec's Preferred Stock outstanding. There are no
preemptive rights associated with any of Symantec's capital stock. As of
September 30, 1995, there were outstanding 39,315,019 shares of Symantec Common
Stock and options to purchase approximately 7,039,677 shares of Symantec's
Common Stock.
PROPOSED AMENDMENT
The amendment to Symantec's Certificate of Incorporation, if approved, would
increase by 30,000,000 (from 70,000,000 to 100,000,000) the number of shares of
Common Stock, par value US$0.01, authorized for issuance by Symantec. Symantec's
Board believes that it is desirable for Symantec to have additional authorized
but unissued shares of Symantec's Common Stock to provide shares to be issued
upon exchange of the Exchangeable Shares from time to time after the Transaction
and upon exercise of Delrina Options assumed by Symantec in the Transaction, and
to provide flexibility to act promptly with respect to acquisitions, public and
private financings, and other appropriate corporate purposes. Approval of the
increase at the Symantec Stockholders Meeting will eliminate the delays and
expense that otherwise would be incurred if stockholder approval were required
to increase the authorized number of shares of Symantec's Common Stock for
possible future transactions involving the issuance of additional shares.
However, the rules of the National Association of Securities Dealers, Inc.
governing corporations with securities listed on the NNM would still require
stockholder approval by a majority of the total votes cast in person or by proxy
prior to the issuance of designated securities where (1) the issuance would
result in a change of control of the issuer, (2) in connection with the
acquisition of the stock or assets of another company if an affiliate of the
issuer has certain interlocking interests with Symantec to be acquired or where
the issuer issues more than 20% of its currently outstanding shares or (3) in
connection with a transaction other than a public offering involving the sale or
issuance of more that 20% of the common stock or voting power outstanding before
the issuance.
The additional Symantec Common Stock to be authorized by adoption of the
amendment would have rights identical to the currently outstanding Symantec
Common Stock. Adoption of the proposed amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding
Symantec Common Stock except for effects incidental to increasing the number of
shares of Symantec's Common Stock outstanding, including possible dilution of
the equity interests of existing stockholders or reduction of the proportionate
voting power of existing stockholders. In addition, the issuance of additional
shares could have the effect of making it more difficult for a third
148
<PAGE>
party to acquire a majority of the outstanding voting stock of Symantec, thereby
delaying, deferring or preventing a change in control of Symantec. If the
amendment is adopted, it will become effective upon filing the Symantec
Certificate with the Secretary of State of the State of Delaware.
If the Transaction is approved, Symantec will issue up to 13,700,000 shares
of Symantec Common Stock from time to time in exchange for Exchangeable Shares.
With regard to the remaining additional shares authorized, the Symantec Board of
Directors desires to have such shares available to provide additional
flexibility to use its capital stock for business and financial purposes in the
future. The additional shares may be used, without further stockholder approval,
for various purposes including, without limitation, raising capital, effecting
future stock splits, establishing strategic relationships with other companies
and expanding Symantec's business or product lines through the acquisition of
other businesses or products. Symantec does believe that it is probable that it
will engage in acquisitions in the future in order to expand Symantec's business
or product lines through the acquisition of other businesses or products, and
that additional shares will be issued in connection with such acquisitions.
Stockholders have no preemptive rights to subscribe to additional shares when
issued. The share of Special Voting Stock will be issued to the Trustee at the
Effective Time to give holders of Exchangeable Shares the same voting power as
if they held Symantec Common Stock. See "THE COMPANIES AFTER THE TRANSACTION --
Voting and Exchange Trust Agreement." A copy of the Symantec Certificate, as
proposed to be amended, is included as Annex G hereto.
THE BOARD RECOMMENDS A VOTE "FOR" AMENDMENT
OF SYMANTEC'S CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 3 -- ELECTION OF DIRECTORS
At the Symantec Stockholders Meeting, the six current members of the Board
will be nominated for reelection. These nominees are Charles M. Boesenberg,
Walter W. Bregman, Carl D. Carman, Gordon E. Eubanks, Jr., Robert S. Miller and
Leslie L. Vadasz. Each of these directors was elected at Symantec's annual
meeting of stockholders on November 21, 1994.
Each director will hold office until the next annual meeting of stockholders
and until his successor has been elected and qualified or until his earlier
resignation or removal. The size of Symantec's Board is currently set at six
members. Shares represented by the accompanying proxy will be voted for the
election of the six nominees recommended by Symantec's management unless the
proxy is marked in such a manner as to withhold authority so to vote. If any
nominee for any reason is unable to serve or for good cause will not serve, the
proxies may be voted for such substitute nominee as the proxy holder may
determine. Symantec is not aware of any nominee who will be unable to or for
good cause will not serve as a director. There is no family relationship between
any director or executive officer of Symantec and any other director or
executive officer of Symantec.
For certain information about the current directors, see "INFORMATION
CONCERNING SYMANTEC -- Directors and Management."
Effective upon the Effective Time, the size of Symantec's Board will be
increased to eight members and Dennis Bennie and Mark Skapinker will be
appointed to the Symantec Board. These individuals will be nominated for
reelection at the stockholders meeting following the fiscal year ending March
31, 1996. Information regarding Messrs. Bennie and Skapinker is located under
the Section "INFORMATION CONCERNING DELRINA -- Directors and Management."
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1995, the Board of Symantec held a
total of eight meetings. The Board has an Audit Committee and a Compensation
Committee. The Board does not have a nominating committee or a committee
performing a similar function.
Messrs. Carman and Miller are currently the members of Symantec's Audit
Committee, which met four times during the fiscal year ended March 31, 1995. The
Audit Committee meets with Symantec's outside auditors and reviews Symantec's
accounting policies and internal controls.
149
<PAGE>
Messrs. Bregman and Vadasz are currently the members of Symantec's
Compensation Committee, which met five during the fiscal year ended March 31,
1995. The Compensation Committee recommends cash-based compensation for
executive officers of Symantec.
DIRECTORS' COMPENSATION
Messrs. Bregman and Miller each received US$6,000 in fiscal 1995 for
attending Board meetings. Messrs. Bregman, Miller and Vadasz are entitled to
receive US$1,500 per meeting of the Board or a Committee of the Board which they
attend. All members of the Board are reimbursed for invoiced out-of-pocket
expenses that they incur in attending Board meetings.
Mr. Boesenberg, who was also an executive officer of Symantec during fiscal
1995, has an employment and consulting agreement with Symantec that states the
terms of his compensation. Pursuant to that agreement, Mr. Boesenberg was an
employee of Symantec until December 31, 1994, and since that time has been a
consultant to Symantec.
Mr. Bregman began to provide services to Symantec as a marketing consultant
in July 1995. In exchange for these services, Mr. Bregman has been included for
coverage under Symantec's Employee Medical Plan.
During fiscal 1995, Messrs. Bregman and Vadasz each received a non-qualified
stock option to purchase 11,250 shares of Symantec's Common Stock at an exercise
price of US$15.25 per share. During fiscal 1995, Mr. Miller received a
non-qualified stock option to purchase 16,000 shares of Symantec's Common Stock
at an exercise price of US$15.375 per share. During fiscal 1995, Mr. Carman
received a non-qualified stock option to purchase 20,000 shares of Symantec's
Common Stock at an exercise price of US$15.25 per share. Each of these options
were granted automatically, pursuant to the 1993 Directors Plan. During fiscal
1995, Mr. Boesenberg, who was an executive officer of Symantec until December
31, 1994, and continues to provide consulting services to Symantec, was granted
an incentive stock option to purchase 9,302 shares of Symantec's Common Stock at
an exercise price of US$10.75 and non-qualified stock options to purchase an
aggregate of 54,698 shares of Symantec's Common Stock at a weighted average
exercise price of US$12.99 under the Stock Option Plan, and a non-qualified
option to purchase 16,000 shares of Symantec's Common Stock at an exercise price
of US$17.5625 per share under the 1993 Directors Plan. Until September 1994, the
1993 Directors Plan provided for an automatic initial grant of options for
30,000 shares of Symantec's Common Stock to each new non-employee director and
automatic annual grants of options for 11,250 shares of Symantec's Common Stock
to each continuing non-employee director other than the Chairman, and 20,000
shares of Symantec's Common Stock to the Chairman. Effective in September 1994,
the 1993 Directors Plan was amended to reduce the initial grant to new directors
from 30,000 to 16,000 shares, to reduce the annual grant for continuing
non-employee directors other than the Chairman from 11,250 to 6,000 shares, and
to reduce the total number of shares authorized for issuance from 600,000 to
450,000 shares. The annual grant to the Chairman remains at 20,000 shares.
THE BOARD RECOMMENDS A VOTE "FOR" ELECTION
OF EACH OF THE SIX NOMINATED DIRECTORS.
PROPOSAL NO. 4 -- APPROVAL OF AMENDMENT TO SYMANTEC'S 1989 EMPLOYEE STOCK
PURCHASE PLAN
At the Symantec Stockholders Meeting, Symantec's stockholders will be asked
to consider a proposal to amend the Stock Purchase Plan to increase the number
of shares authorized for issuance under the Stock Purchase Plan from 1,500,000
to 2,000,000.
The Board believes that the increase in shares available under the Stock
Purchase Plan is in the best interests of Symantec. The purpose of the Stock
Purchase Plan is to provide employees of Symantec with a convenient means to
acquire an equity interest in Symantec through payroll deductions, and to
provide an incentive for continued employment. The Board believes that the
additional reserve of shares from which shares may be issued is needed to ensure
that Symantec can meet those goals.
150
<PAGE>
PROPOSED AMENDMENT
The amendment to the Stock Purchase Plan, if approved, would increase the
number of shares of Symantec's Common Stock that may be issued under the Stock
Purchase Plan from 1,500,000 to 2,000,000. The Stock Purchase Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the U.S.
Code. The shares awarded under the Stock Purchase Plan come from authorized but
unissued shares of Symantec Common Stock. As of September 30, 1995, a total of
1,207,589 shares of Symantec Common Stock had been issued pursuant to the Stock
Purchase Plan, at an average purchase price of US$10.09 per share, and
approximately 1,700 employees were eligible to participate in the Stock Purchase
Plan. A summary of the history and principal provisions of the Stock Purchase
Plan follows; the summary is qualified in its entirety by reference to the full
text of the Stock Purchase Plan, which is included as Annex K hereto.
The number of persons employed by Symantec and eligible to participate in
the Stock Purchase Plan has increased, and is expected to increase further over
the next year, including as a result of the consummation of the Transaction. If
the Combination Agreement is approved, employees of Delrina and its affiliates
will also be eligible to participate under the Stock Purchase Plan. In addition,
the amount of Symantec Common Stock outstanding will increase significantly due
to the issuance of Symantec shares to the shareholders of Delrina. Currently,
there are approximately 1,700 employees eligible to participate and 39 million
shares outstanding. If the Transaction is approved, the number of employees
eligible to participate will increase by approximately 550, or nearly 35%, and
the number of shares of Symantec Common Stock outstanding is expected to
increase by approximately 15 million shares, or nearly 40%. As a result, the
number of shares currently authorized will not be sufficient to meet future
needs under the Stock Purchase Plan.
Because benefits under the Stock Purchase Plan will vary depending on
participants' elections and the fair market value of Symantec's Common Stock at
various future dates, it is not possible to determine exactly what benefits
might be received by Symantec's directors, executive officers and other
employees following the adoption of the proposed amendment to the Stock Purchase
Plan. The following table summarizes the benefits that were received by various
persons under the Stock Purchase Plan in the fiscal year ended March 31, 1995:
AMENDED PLAN BENEFITS
1989 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
U.S. DOLLAR NUMBER OF
NAME AND POSITION VALUE SHARES
- --------------------------------------------------- ------------- -----------
<S> <C> <C>
Gordon E. Eubanks, Jr. $ 2,956 1,877
Robert R.B. Dykes $ 2,944 1,869
John C. Laing $ 2,944 1,869
Eugene Wang $ 0 0
Ellen Taylor $ 4,001 791
Charles Boesenberg $ 16,304 1,907
Executive Group (seven persons) $ 32,251 10,766
Non-executive director group (five persons) 0 0
Non-executive officer employee group $ 1,632,934 321,922
</TABLE>
Dollar value is based on the difference between the purchase price of the
shares (85% of the lesser of the fair market value of the shares on the first
day of the two-year offering period or the fair market value on the last
business day of the six-month purchase period, as described in more detail in
the following summary) and the closing sales price of the Symantec Common Stock
on the immediately preceding business day.
151
<PAGE>
SUMMARY OF STOCK PURCHASE PLAN
The following is a summary of the principal provisions of the Stock Purchase
Plan as proposed to be amended. Tax information related to the Stock Purchase
Plan follows this summary.
GENERAL. The Stock Purchase Plan, was adopted by the Board of Directors on
October 24, 1989 and approved by the shareholders on August 28, 1990. The Stock
Purchase Plan was amended in 1992 to increase the number of shares available for
issuance from 600,000 to 700,000, in 1993 to increase the number of shares
available for issuance from 700,000 to 1,100,000, and in 1994 to increase the
number of shares available from 1,100,000 to 1,500,000. If Proposal No. 4 is
adopted, the number of shares available for issuance will be increased to
2,000,000. The shares awarded under the Stock Purchase Plan come from authorized
but unissued shares of Symantec Common Stock. Symantec intends that the Stock
Purchase Plan qualify as an "employee stock purchase plan" under Section 423 of
the U.S. Code. The Stock Purchase Plan was implemented on January 1, 1990 with
the initial Purchase Period (as defined below) being nine months instead of the
customary six months.
ADMINISTRATION. The Stock Purchase Plan permits either the Board of
Directors or a committee appointed by the Board to administer the Stock Purchase
Plan. The Stock Purchase Plan requires the Board of Directors to establish a
committee of at least three members to administer the Stock Purchase Plan unless
a majority of the Board of Directors is comprised of "Disinterested Persons," as
defined in Rule 16b-3, each of whom is ineligible to participate in the Stock
Purchase Plan. Currently this requires that a majority of the Board of Directors
or all of the members of the committee that administers the Stock Purchase Plan
be ineligible to participate in any discretionary stock plans of Symantec. The
Stock Purchase Plan is currently administered by the Board of Directors.
References herein to the "Committee" mean either the committee appointed to
administer the Stock Purchase Plan or the Board of Directors if no committee
continues to have authority to do so. The interpretation by the Committee of any
of the provisions of the Stock Purchase Plan or of any option granted under it
is final and conclusive.
ELIGIBILITY. All employees of Symantec (including directors who are
employees), or any parent or subsidiary thereof, are eligible to participate in
the Stock Purchase Plan, except the following:
(a) employees who are not employed by Symantec on the fifteenth day of
the month before the beginning of an Offering Period;
(b) employees who are customarily employed for less than twenty hours
per week;
(c) employees who are customarily employed for less than five months in
a calendar year;
(d) employees who own or hold options to purchase, or who as a result of
participation in the Stock Purchase Plan would own stock or hold options to
purchase, stock possessing 5% or more of the total combined voting power or
value of all classes of stock of Symantec pursuant to Section 425(d) of the
U.S. Code.
Each offering of Symantec Common Stock under the Stock Purchase Plan is for
a period of 24 months (the "Offering Period"). Offering Periods commence on the
first day of January and July of each year. The first day of each Offering
Period is the "Offering Date" for such Offering Period. An employee cannot
participate simultaneously in more than one Offering Period. The Committee has
the power to change the duration of Offering Periods without stockholder
approval. Each Offering Period consists of four six-month exercise periods (each
a "Purchase Period") commencing on the first day of January and July of each
year, provided that, for the initial Offering Period, the first two Purchase
Periods commenced on January 1, 1990 and October 1, 1990 and ended on September
30, 1990 and December 31, 1990, respectively. The last business day of each
Purchase Period is the "Exercise Date." All accrued payroll deductions of each
participant are applied to the purchase of shares in accordance with the terms
of the Stock Purchase Plan at the end of each six-month Purchase Period.
152
<PAGE>
Employees participate in the Stock Purchase Plan during each pay period
through payroll deductions. An employee sets the rate of such payroll
deductions, which may not be less than 2% nor more than 10% of the employee's
W-2 compensation, unreduced by the amount by which the employee's salary is
reduced pursuant to Sections 125 or 401(k) of the U.S. Code. Eligible employees
may elect to participate in any Offering Period by enrolling as provided under
the terms of the Stock Purchase Plan. Once enrolled, a participating employee
will automatically participate in each succeeding Offering Period unless such
employee withdraws from the Offering Period or the Stock Purchase Plan. After
the rate of payroll deductions for an Offering Period has been set by an
employee, that rate continues to be effective for the remainder of the Offering
Period (and for all subsequent Offering Periods in which the employee is
automatically enrolled) unless otherwise changed by the employee. The employee
may increase or lower the rate of payroll deductions for any upcoming Purchase
Period, but may only lower the rate of payroll deductions during the current
Purchase Period. Not more than one change may be made effective during any one
Purchase Period.
PURCHASE PRICE. The purchase price of shares that may be acquired in any
Offering Period under the Stock Purchase Plan is 85% of the lesser of (a) the
fair market value of the shares on the Offering Date, or (b) the fair market
value of the shares on the applicable Exercise Date. The fair market value of
the Common Stock on a given date is the closing sales price of the Common Stock
on the immediately preceding business day as quoted on the NNM and reported in
The Wall Street Journal. On September 30, 1995, the fair market value of
Symantec Common Stock (as determined by the closing price on the NNM on the last
trading day prior to such date) was US$30.00.
PURCHASE OF STOCK; EXERCISE OF OPTION. The number of whole shares an
employee is able to purchase in any Purchase Period within an Offering Period is
determined by dividing the total amount of payroll deductions withheld from the
employee during the Purchase Period pursuant to the Stock Purchase Plan by the
price for each share determined as described above. The purchase takes place
automatically on the Exercise Date. Any cash balance remaining in an employee's
account following the purchase is refunded to the employee as soon as
practicable; however, any such cash balance representing a fractional share may
be applied to the purchase of additional shares in the immediately succeeding
Purchase Period. No employee is permitted to purchase more than (i) 200% of the
number of shares determined by using 85% of the fair market value of a share of
Symantec Common Stock on the Offering Date as the denominator or (ii) the
maximum number of shares set by the Committee.
WITHDRAWAL. An employee may withdraw from any Offering Period or from the
Stock Purchase Plan. No further payroll deductions for the purchase of shares
will be made for the succeeding Offering Period unless the employee enrolls in
the new Offering Period in the same manner as for initial participation in the
Stock Purchase Plan. An employee may also participate in a current Purchase
Period under an Offering Period and enroll in the next Offering Period by (i)
withdrawing from participation in the current Offering Period effective as of
the last day of the concurrent Purchase Period and (ii) enrolling in the new
Offering Period. If the purchase price (as defined below) for an Offering Period
is lower than the purchase price for a concurrent Offering Period that commenced
earlier, then all participating employees will be automatically withdrawn from
such earlier commencing Offering Period and re-enrolled in the lower-priced
Offering Period.
TERMINATION OF EMPLOYMENT. Termination of an employee's employment for any
reason, including retirement or death, cancels his or her participation in the
Stock Purchase Plan immediately. In such event, the payroll deductions credited
to the employee's account will be returned to such employee or, in the case of
death, to the employee's legal representative.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares subject to
any option, and the number of shares issuable under the Stock Purchase Plan, are
subject to adjustment in the event of a recapitalization of Symantec Common
Stock. In the event of a proposed dissolution or liquidation of Symantec, or in
the event of a proposed sale of all or substantially all of the assets of
Symantec, or the merger of Symantec with or into another corporation, the
Committee in its sole discretion may give each employee the right immediately to
exercise all or any part of the employee's outstanding
153
<PAGE>
options, including options that would not otherwise then be exercisable. If
Symantec issues additional securities to raise additional capital, no adjustment
will be made in the number or price per share of the shares available under the
Stock Purchase Plan. In the event any change is made in the capital structure of
Symantec, such as a stock split or a stock dividend, that results in an increase
or decrease in the number of shares of Common Stock outstanding without receipt
of additional consideration by Symantec, appropriate adjustment will be made by
Symantec in the number of shares available under the Stock Purchase Plan, the
number of shares subject to outstanding options and in the purchase price per
share, subject to any required action by the Board of Directors or stockholders
of Symantec.
U.S. FEDERAL INCOME TAX INFORMATION. The Stock Purchase Plan is intended to
qualify as an "employee stock purchase plan" within the meaning of Section 423
of the U.S. Code.
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO SYMANTEC AND THE PARTICIPATING
EMPLOYEE ASSOCIATED WITH THE PURCHASE OF SHARES UNDER THE STOCK PURCHASE PLAN.
THE U.S. FEDERAL TAX LAWS MAY CHANGE AND THE U.S. FEDERAL, STATE AND LOCAL TAX
CONSEQUENCES FOR ANY PARTICIPATING EMPLOYEE WILL DEPEND UPON HIS OR HER
INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE HAS BEEN AND IS ENCOURAGED
TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE STOCK PURCHASE PLAN.
TAX TREATMENT OF THE EMPLOYEE. Participating employees will not recognize
income for U.S. federal income tax purposes either upon enrollment in the Stock
Purchase Plan or upon the purchase of shares. All tax consequences are deferred
until a participating employee sells the shares, disposes of shares by gift or
dies. Payroll deductions, however, remain fully taxable as ordinary income at
the time the deduction is taken, and there is no deferral of the ordinary income
tax assessed on these amounts.
If shares are held for more than one year after the date of purchase and
more than two years from the beginning of the applicable Offering Period, or if
the employee dies while owning the shares, the employee realizes ordinary income
on a sale (or a disposition by way of gift or upon death) to the extent of the
lesser of: (i) 15% of the fair market value of the shares at the beginning of
the Offering Period; or (ii) the actual gain (the amount by which the market
value of the shares on the date of sale, gift or death exceeds the purchase
price). All additional gain upon the sale of shares is treated as long-term
capital gain. If the shares are sold and the sale price is less than the
purchase price, there is no ordinary income, and the employee has a long-term
capital loss for the difference between the sale price and the purchase price.
If the shares are sold, or are otherwise disposed of including by way of
gift (but not death, bequest or inheritance) (in any case, a "disqualifying
disposition"), within either the one-year or the two-year holding periods
described above, the employee, realizes ordinary income at the time of sale or
other disposition taxable to the extent that the fair market value of the shares
at the date of purchase was greater than the purchase price. This excess will
constitute ordinary income (not currently subject to withholding) in the year of
the sale or other disposition even if no gain is realized on the sale or if a
gratuitous transfer is made. The difference, if any, between the proceeds of
sale and the fair market value of the shares at the date of purchase is a
capital gain or loss.
Ordinary income recognized by a participant upon a disqualifying disposition
constitutes taxable compensation that will be reported on the participant's W-2
form. The ordinary income should not constitute "wages" subject to withholding
by Symantec; however, the IRS is presently studying this position and may
require withholding in the future.
Capital gains may be offset by capital losses and up to US$3,000 of capital
losses may be offset annually again ordinary income.
154
<PAGE>
OMNIBUS BUDGET RECONCILIATION ACT OF 1993. The Omnibus Budget
Reconciliation Act of 1993, enacted in August 1993, provides that the maximum
tax rate applicable to ordinary income is 39.6%. Long-term capital gain will be
taxed at a maximum of 28%. For this purpose, in order to receive long-term
capital gain treatment, the stock purchased must be held for more than one year.
TAX TREATMENT OF SYMANTEC. Symantec will be entitled to a deduction in
connection with the disposition of shares acquired under the Stock Purchase Plan
only to the extent that the employee recognizes ordinary income on a
disqualifying disposition of the shares (but not if an employee meets the
holding period requirements). The Omnibus Budget Reconciliation Act of 1993
denies deductions to companies for certain compensation paid to certain
employees in excess of US$1 million. It is unclear whether the IRS will assert
that ordinary income recognized on a disqualifying disposition will be subject
to this limitation. Symantec will treat any transfer of record ownership of
shares including a transfer to a broker or nominee or into "street name," as a
disposition, unless it is notified to the contrary. In order to enable Symantec
to learn of disqualifying dispositions and ascertain the amount of the
deductions to which it is entitled, employees are required to notify Symantec in
writing of the date and terms of any disposition of shares purchased under the
Stock Purchase Plan.
OFFICERS AND DIRECTORS. Shares purchased under the Stock Purchase Plan by
affiliates of Symantec (that is, persons in a control relationship with
Symantec) are subject to special restrictions on resale imposed by the
Securities Act. Such shares can be resold only if registered for resale, sold
under Rule 144 of the Commission or sold under another exemption from
registration. Among other requirements, Rule 144 imposes volume limitations on
resales.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. 5 -- APPROVAL OF AMENDMENT TO SYMANTEC'S 1988 EMPLOYEES STOCK
OPTION PLAN
At the Symantec Stockholders Meeting, Symantec's stockholders will be asked
to consider a proposal to amend the Stock Option Plan to increase the number of
shares authorized for issuance under the Stock Option Plan from 12,700,000 to
13,700,000.
The Board believes that the amendments to the Stock Option Plan are in the
best interests of Symantec. The purpose of the Stock Option Plan is to provide
employees of Symantec with a convenient means to acquire an equity interest in
Symantec, to provide to employees incentives based upon an increase in the value
of Symantec's Common Stock, and to provide an incentive for continued
employment. The Board believes that the additional reserve of shares with
respect to which shares may be issued is needed to ensure that Symantec can meet
those goals.
PROPOSED AMENDMENT
The proposed amendment to the increase the number of shares authorized for
issuance under the Stock Option Plan would increase the number of shares of
Symantec's Common Stock which may be subject to options issued under the Stock
Option Plan from 12,700,000 to 13,700,000. All employees of Symantec and its
subsidiaries (including employees who are also members of the Board), as well as
certain consultants, are eligible to receive options under the Stock Option
Plan. The Plan also imposes a limit of 1,200,000 shares in the aggregate number
of shares that may be purchased by any individual participant pursuant to
options granted during the term of the Stock Option Plan. In addition, the Stock
Option Plan requires that any committee appointed by the Board to administer the
Stock Option Plan meet the requirements of Section 162(m) of the U.S. Code.
The number of persons employed by Symantec and eligible to participate in
the Stock Option Plan has increased and is expected to increase further over the
next year, including as a result of the consummation of the Transaction. If the
Combination Agreement is approved, employees of Delrina
155
<PAGE>
and its affiliates will also be eligible to participate under the Stock Option
Plan and the amount of Symantec Common Stock outstanding will increase
significantly. Currently, there are approximately 1,700 employees eligible to
participate and 39 million shares outstanding. If the Transaction is approved,
the number of employees eligible to participate will increase by approximately
550, or nearly 35%, and the number of shares of Symantec Common Stock
outstanding is expected to increase by approximately 14 million shares, or
nearly 40%. As a result, the number of shares currently authorized will
represent a significantly lower proportion of the outstanding shares, and will
not be sufficient to meet future needs under the Stock Option Plan.
The Stock Option Plan is intended to provide incentives for employees of and
consultants to Symantec and its subsidiaries to promote the financial success
and progress of Symantec. The shares awarded under the Stock Option Plan come
from authorized but unissued shares of Symantec Common Stock. Without the
1,000,000 shares that are the subject of this proposal, there are a total of
12,700,000 shares of Symantec's Common Stock authorized for issuance upon the
exercise of options granted under the Plan. As of September 30, 1995, a total of
5,127,336 shares had been purchased upon the exercise of options issued under
the Stock Option Plan, and a total of 6,465,060 shares of Symantec Common Stock
were subject to outstanding options that have been granted pursuant to the Stock
Option Plan to an aggregate of approximately 1,600 persons leaving 1,107,604
shares reserved for grant of options under the Stock Option Plan. The
outstanding options are exercisable at an average exercise price of US$15.93 per
share. A summary of the history and principal provisions of the Stock Option
Plan follows; the summary is qualified in its entirety by reference to the full
text of the Stock Option Plan, which is included as Annex L hereto.
Over the term of the Stock Option Plan up to September 30, 1995, a total of
19,495,386 options had been granted and options for a total of 7,902,989 shares
had been canceled (including 3,128,290 shares canceled in connection with
repriced options). During this same period, the following named executive
officers had been granted options under the Stock Option Plan to purchase shares
of Symantec's Common Stock as follows: Gordon E. Eubanks, Jr., 635,000 shares
(including 75,000 shares repriced in 1988 and counted as a separate grant);
Robert R.B. Dykes, 340,000 shares; John C. Laing, 403,000 shares (including
115,000 shares repriced in 1992 and counted as a separate grant); Ellen Taylor,
106,000 shares (including 28,500 shares repriced in 1992 and counted as a
separate grant); and Eugene Wang, 120,000 shares. Symantec's current executive
officers, as a group (seven persons), had been granted options to purchase
1,897,362 shares (including 258,900 shares that were repriced and counted as
separate grants). During the same period, all employees and consultants other
than the current executive officers had been granted options to purchase
17,136,741 shares (including 2,870,390 shares that were repriced and counted as
separate grants). Options outstanding under the Stock Option Plan have
expiration dates ranging from October 15, 1996 to September 15, 2005 (subject to
earlier termination if an optionee's association with Symantec terminates).
Because benefits under the Stock Option Plan will vary depending on the
timing of participants' exercise decisions and on the fair market value of
Symantec's Common Stock at various future dates, it is not possible to determine
exactly what benefits might be received by Symantec's directors, executive
officers and other employees following the adoption of the proposed amendment to
the Stock Option Plan. The following table summarizes the options that were
received by various persons under the Stock Option Plan in the fiscal year ended
March 31, 1995.
156
<PAGE>
AMENDED PLAN BENEFITS
1988 EMPLOYEES STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
NAME AND POSITION SHARES (US$)(2)
- ------------------------------------------------------------------------ ----------- ----------------
<S> <C> <C>
Gordon E. Eubanks, Jr................................................... 0 N/A
Robert R.B. Dykes....................................................... 30,000 $10.50
John C. Laing........................................................... 23,000 $10.50
Eugene Wang............................................................. 20,000 $10.50
Ellen Taylor............................................................ 12,000 $17.6875
Executive Group (seven persons)......................................... 97,000 $10.50-$17.69
Non-executive director group (five persons)............................. 0 N/A
Non-executive officer employee group.................................... 2,619,293 $10.06-$23.75
</TABLE>
- ------------------------
(1) Future grants are discretionary and future exercise prices are unknown,
since they are based on fair market value on the date of the grant.
(2) It is not possible to determine the value of these benefits because the
benefits will depend upon exercise decisions by participants and the fair
market value of Symantec's Common Stock at various future dates following
the adoption of the proposed amendment to the Stock Option Plan.
SUMMARY OF EMPLOYEES STOCK OPTION PLAN
The following is a summary of the principal provisions of the Stock Option
Plan (herein the "Option Plan") as proposed to be amended. Tax information
related to the Option Plan follows this summary.
GENERAL. The Stock Option Plan was adopted by Symantec's Board of Directors
on June 1, 1988 and approved by Symantec's stockholders on May 31, 1988. In
January 1990, the Board approved an amendment to the Stock Option Plan to ensure
that the Stock Option Plan complied with certain U.S. federal securities laws
and to implement certain additional payment alternatives. On April 26, 1990, the
Board approved an amendment to the Stock Option Plan increasing the number of
shares of Symantec's Common Stock that may be subject to options granted under
the Stock Option Plan from a total of 2,640,120 shares to a total of 5,100,000
shares (adjusted for the stock split approved by Symantec's Stockholders on
October 3, 1991) and permitting employees who are also directors of Symantec to
participate in the Option Plan. This increase was approved by Symantec's
stockholders on August 28, 1990. On April 25, 1991, the Board approved an
amendment to the Stock Option Plan increasing the number of shares of Symantec's
Common Stock that may be subject to options granted under the Stock Option Plan
from a total of 5,100,000 shares to a total of 5,800,000 shares. This increase
was approved by Symantec's stockholders on October 3, 1991. On March 26, 1992,
the Board approved an amendment to the Stock Option Plan increasing the number
of shares of Symantec's Common Stock that may be subject to options granted
under the Stock Option Plan from a total of 5,800,000 shares to a total of
8,700,000 shares. This increase was approved by Symantec's stockholders on
September 23, 1992. On August 18, 1994, the Board approved an amendment to the
Stock Option Plan increasing the number of shares of Symantec's Common Stock
that may be subject to options granted under the Stock Option Plan from a total
of 8,700,000 shares to a total of 12,700,000 shares, and to amend the Stock
Option Plan to provide that no individual is eligible to receive more than
1,200,000 shares at any time during the term of the option plan pursuant to the
grant of options thereunder, and to make certain other changes. This increase
and the amendment were approved by Symantec's stockholders on November 21, 1994.
If Proposal No. 5 is approved, a total of 13,700,000 shares of Symantec's Common
Stock may be subject to options granted under the Stock Option Plan. The Stock
Option Plan provides for the issuance of ISOs to officers and other employees of
Symantec (or any subsidiary or parent of Symantec) and NQSOs to officers, other
employees, consultants and independent contractors of Symantec (or any parent,
subsidiary or affiliate of Symantec).
157
<PAGE>
ADMINISTRATION. The Option Plan permits either the Board of Directors or a
committee appointed by the Board to administer the Option Plan. If the Board
establishes such a committee, the committee must consist of at least three
members, each of whom are "disinterested persons" as that term is defined under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") in the
event grants are made to officers or directors. Members of the Committee must
also be "outside directors" as that term is defined in Section 162(m) of the
U.S. Code. Currently, the Board of Directors administers the Option Plan, except
that it has delegated to Gordon E. Eubanks, Jr. the authority to make option
grants to employees, independent contractors and consultants who are not
corporate officers or directors subject to certain share limitations imposed by
the Board of Directors. References herein to the "Committee" mean either the
committee appointed to administer the Option Plan or the Board. The
interpretation by the Committee of any of the provisions of the Option Plan or
any option granted under the Option Plan is final and conclusive.
ELIGIBILITY. The Option Plan currently provides that options may be granted
to employees, officers, consultants and independent contractors of Symantec or
of any parent, subsidiary or affiliate of Symantec as the Committee may
determine. An optionee may hold more than one option under the Option Plan. As
of September 30, 1995, approximately 1,600 persons were eligible to receive
stock options under the Option Plan.
STOCK. The stock subject to options under the Option Plan consists of
shares of Symantec authorized but unissued Common Stock. The aggregate number of
shares that may be issued under options pursuant to the Option Plan is
12,700,000 shares (or, if the proposed amendment is approved, 13,700,000
shares). In the event that any outstanding option under the Option Plan for any
reason expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such option may again be available for the grant of
options under the Option Plan.
TERMS OF OPTIONS. Subject to the terms and conditions of the Option Plan,
the Committee, in its discretion, determines for each option whether the option
is to be an ISO or an NQSO, the number of shares for which the option will be
granted, the exercise price of the option, the periods during which the option
may be exercised, and other terms and conditions. Each option is evidenced by an
option grant in such form as the Committee approves and is subject to the
following conditions, in addition to those described elsewhere herein or in the
Option Plan:
(a) NUMBER OF SHARES: Each option states the number of shares to which
it pertains.
(b) OPTION PRICE: Each option states the option exercise price, which
may not be less than 100% of the fair market value of the shares of Common
Stock on the date of the grant. On September 30, 1995, the fair market value
of Symantec Common Stock (as determined by the closing price on the NNM on
the last trading day prior to such date) was US$30.00.
(c) FORM OF PAYMENT: The option exercise price is typically payable in
cash or by check, but may also be payable, at the discretion of the
Committee, in a number of other forms of consideration, including fully paid
shares of Symantec Common Stock, promissory note, by waiver of compensation
due or accrued to an optionee for services rendered, through a "same day
sale," through a "margin commitment," or through any combination of the
foregoing.
(d) TERM OF EXERCISE OF OPTIONS: Under the Option Plan, options are
permitted to be exercisable for up to ten years, except that an ISO granted
to a 10% stockholder can be exercisable only for five years. Most of the
options that have been granted under the Option Plan are exercisable for ten
years. Options granted under the Option Plan generally vest and become
exercisable at a rate of 25% one year after the date of grant, and then
ratably in monthly increments over the succeeding three years of employment.
All options granted under the Option Plan prior to November 18, 1988 were
immediately exercisable, with the shares purchased being subject to a
repurchase option on termination of employment at the original purchase
price in favor of Symantec that lapsed over time, based on a vesting
schedule similar to the one currently in use.
158
<PAGE>
(e) LIMITATIONS ON ISOS: An individual will not be eligible to receive
an ISO unless such individual is an employee of Symantec or of a parent or
subsidiary of Symantec. The aggregate fair market value (determined as of
the time an option is granted) of the shares with respect to which ISOs are
exercisable for the first time by an optionee during any calendar year may
not exceed US$100,000.
(f) LIMITATIONS ON MAXIMUM NUMBER OF SHARES GRANTED: The stock subject
to options under the Option Plan consists of shares of Symantec authorized
but unissued Common Stock. No individual is eligible to receive more than
1,200,000 shares at any time during the term of the option plan pursuant to
the grant of options thereunder.
(g) TERMINATION OF EMPLOYMENT: If an optionee ceases to be employed by
Symantec, or a parent, subsidiary or affiliate of Symantec, the optionee
typically has three months to exercise any then-exercisable options;
provided, however, that the exercise period may be extended to prevent an
optionee subject to Section 16(b) of the Exchange Act from having a matching
purchase and sale. A twelve month exercise period applies in cases of
disability and death.
(h) TRANSFERABILITY: An option generally is not transferable, and is
exercisable during the optionee's lifetime only by the optionee.
(i) RECAPITALIZATION: The number of shares subject to any option, and
the number of shares issuable under the Option Plan, are subject to
adjustment in the event of a stock dividend, stock split, reverse stock
split or similar change relating to Symantec Common Stock without
consideration. In the event of a dissolution or liquidation of Symantec, a
merger in which Symantec does not survive (other than a merger with a wholly
owned subsidiary or where there is no substantial change in the stockholders
of the corporation and the options granted are assumed by the successor
corporation), a sale of all or substantially all of Symantec's assets or any
other transaction that qualifies as a "corporate transaction" under Section
424(a) of the U.S. Code, all outstanding options accelerate and will become
exercisable in full prior to (and expire on) the consummation of such event,
on such conditions as the Committee determines, unless a successor company
assumes them in full or substitutes substantially equivalent options.
(j) RIGHTS AS STOCKHOLDER: An optionee has no rights as a stockholder
with respect to any shares covered by an option until the option has been
validly exercised.
(k) OTHER PROVISIONS: The option grant and exercise agreements
authorized under the Option Plan, which may be different for each option,
may contain such other provisions as the Committee deems advisable,
including without limitation: (1) restrictions upon the exercise of the
option; and (2) a right of repurchase in favor of Symantec to repurchase
unvested shares held by an optionee upon termination of the optionee's
employment at the original purchase price.
AMENDMENT OF THE OPTION PLAN. The Committee, to the extent permitted by
law, and with respect to any shares at the time not subject to options, may
suspend or discontinue the Option Plan or revise or amend the Option Plan in any
respect whatsoever; provided that the Committee may not, without approval of the
stockholders, amend the Option Plan in a manner that requires stockholder
approval pursuant to the U.S. Code or the regulations thereunder or pursuant to
Rule 16b-3.
TERM OF THE OPTION PLAN. Options may be granted pursuant to the Option Plan
from time to time until June 1, 1998, ten years from the date the Option Plan
was adopted by the Board of Directors.
U.S. FEDERAL INCOME TAX INFORMATION. Options so designated under the Option
Plan are intended to qualify as ISOs. All options that are not designated as
ISOs are intended to be NQSOs.
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF
THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO SYMANTEC AND PARTICIPATING EMPLOYEES
ASSOCIATED WITH STOCK OPTIONS GRANTED UNDER THE OPTION PLAN. THE U.S. FEDERAL
TAX LAWS MAY CHANGE AND THE U.S. FEDERAL, STATE AND
159
<PAGE>
LOCAL TAX CONSEQUENCES FOR ANY OPTIONEE WILL DEPEND UPON HIS OR HER INDIVIDUAL
CIRCUMSTANCES. EACH PARTICIPATING EMPLOYEE HAS BEEN AND IS ENCOURAGED TO SEEK
THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
PARTICIPATION IN THE OPTION PLAN.
TAX TREATMENT OF THE OPTIONEE
INCENTIVE STOCK OPTIONS. An optionee will recognize no income upon grant of
an ISO and will incur no tax upon exercise of an ISO unless the optionee is
subject to the alternative minimum tax. If the optionee holds the shares
purchased upon exercise of the ISO (the "ISO Shares") for more than one year
after the date the option was exercised and for more than two years after the
option grant date, the optionee generally will realize long-term capital gain or
loss (rather than ordinary income or loss) upon disposition of the ISO Shares.
This gain or loss will be equal to the difference between the amount realized
upon such disposition and the amount paid for the ISO Shares.
If the optionee disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), then gain realized upon
such disposition, up to the difference between the option exercise price and the
fair market value of the ISO Shares on the date of exercise (or, if less, the
amount realized on a sale of such ISO Shares), will be treated as ordinary
income. Any additional gain will be long-term or short-term capital gain,
depending upon the amount of time the ISO Shares were held by the optionee.
ALTERNATIVE MINIMUM TAX. The difference between the exercise price and fair
market value of the ISO Shares on the date of exercise is an adjustment to
income for purposes of the alternative minimum tax ("AMT"). The AMT (imposed to
the extent it exceeds the taxpayer's regular tax) is currently 26% of an
individual taxpayer's alternative minimum taxable income (28% percent in the
case of alternative minimum taxable income in excess of US$175,000). Alternative
minimum taxable income is determined by adjusting regular taxable income for
certain items, increasing that income by certain tax preference items and
reducing this amount by the applicable exemption amount (US$45,000 in the case
of a joint return, subject to reduction under certain circumstances). If a
disqualifying disposition of the ISO Shares occurs in the same calendar year as
exercise of the ISO, there is no AMT adjustment with respect to those ISO
Shares. Also, upon a sale of ISO Shares that is not a disqualifying disposition,
alternative minimum taxable income is reduced in the year of sale by the excess
of the fair market value of the ISO Shares at exercise over the amount paid for
the ISO Shares.
NONQUALIFIED STOCK OPTIONS. An optionee will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO the
optionee must include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the optionee's purchase price. The included amount must be treated as
ordinary income by the optionee and may be subject to income tax withholding by
Symantec (either by payment in cash or withholding out of the optionee's
salary). The Omnibus Budget Reconciliation Act of 1993 has increased the
required flat federal withholding rate to 28% effective with respect to taxable
years beginning after December 31, 1993. Upon resale of the shares by the
optionee, any subsequent appreciation or depreciation in the value of the shares
will be treated as capital gain or loss.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993. The Omnibus Reconciliation Act
of 1993 provides that the maximum tax rate applicable to ordinary income is
39.6%. Long-term capital gain will be taxed at a maximum rate of 28%. For this
purpose, in order to receive long-term capital gain treatment, the stock must be
held for more than one year. Capital gains will continue to be offset by capital
losses and up to US$3,000 of capital losses may be offset annually against
ordinary income. The Omnibus Reconciliation Act of 1993 also increased the AMT
to 26% (28% for alternative minimum taxable income in excess of US$175,000) of
an individual taxpayer's alternative minimum taxable income, effective with
respect to taxable years beginning after December 31, 1992.
160
<PAGE>
ESTIMATED TAXES. Estimated tax payments may be due on amounts an optionee
includes in income if the income recognition event occurs before the last month
of his or her taxable year and no other exceptions to the underpayment of
estimated tax penalties applies. Generally, estimated taxes must be paid with
respect to regular and alternative minimum tax liabilities if the amount of a
taxpayer's withheld taxes together with any estimated taxes is less than 90
percent of that taxpayer's total regular or alternative minimum tax liability
for the year, unless an exception applies.
TAX TREATMENT OF SYMANTEC. Symantec will be entitled to a deduction in
connection with the exercise of an NQSO by a domestic employee or other person
to the extent that the optionee recognizes ordinary income. Symantec will be
entitled to a deduction in connection with the disposition of shares acquired
under an ISO only to the extent that the optionee recognizes ordinary income on
a disqualifying disposition of the ISO Shares. The IRS is currently considering
regulations that would require companies to withhold taxes from an optionee in
the even that the optionee makes a disqualifying disposition of shares acquired
under an ISO.
OFFICERS AND DIRECTORS. Shares purchased under the Option Plan by
affiliates of Symantec (that is, persons in a control relationship with
Symantec) are subject to special restrictions on resale imposed by the
Securities Act. Such shares can be resold only if registered for resale, sold
under Rule 144 of the Commission or sold under another exemption from
registration. Among other requirements, Rule 144 imposes volume limitations on
resales.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE 1988 EMPLOYEES STOCK OPTION PLAN.
PROPOSAL NO. 6 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP as its principal independent
auditors to perform the audit of Symantec's financial statements for fiscal
1996, and the stockholders are being asked to ratify such selection. Ernst &
Young LLP audited Symantec's financial statements for Symantec's fiscal years
ended March 31, 1989, 1990 and 1991, April 3, 1992, April 2, 1993, April 1, 1994
and March 31, 1995. Representatives of Ernst & Young LLP will be present at the
Symantec Stockholders Meeting, will be given an opportunity to make a statement
at the Symantec Stockholders Meeting if they desire to do so, and will be
available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP
COMPLIANCE UNDER SECTION 16(A) OF THE EXCHANGE ACT
Section 16 of the Exchange Act requires Symantec's directors and officers,
and persons who own more that 10% of Symantec's Common Stock to file initial
reports of ownership and reports of changes in ownership with the SEC and the
NNM. Such persons are required by SEC regulation to furnish Symantec with copies
of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms furnished to Symantec
and written representation from the executive officers and directors, Symantec
believes that all Section 16(a) filing requirements were met in fiscal 1995.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy statement and form of proxy
relating to Symantec's 1996 Annual Meeting of Stockholders must be received by
Symantec a reasonable time before a solicitation is made, and in any event not
later than June 17, 1996.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Symantec Stockholders Meeting and, so far as is known to the Board, no matters
are to be brought before the Symantec Stockholders Meeting except as specified
in the notice of the Symantec Stockholders Meeting. As to
161
<PAGE>
any business that may properly come before the Symantec Stockholders Meeting,
however, it is intended that proxies, in the form enclosed, will be voted in
respect thereof in accordance with the judgment of the persons voting such
proxies.
DISCLAIMER REGARDING INCORPORATION BY REFERENCE OF THE REPORT OF THE
COMPENSATION COMMITTEE AND THE STOCK PRICE PERFORMANCE GRAPH
THE INFORMATION SHOWN IN THE SECTIONS ENTITLED "REPORT OF THE COMPENSATION
COMMITTEE AND BOARD ON EXECUTIVE COMPENSATION" AND "COMPANY STOCK PRICE
PERFORMANCE" SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE BY ANY GENERAL
STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING BY
SYMANTEC WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO
THE EXTENT THAT SYMANTEC INCORPORATES THIS INFORMATION BY SPECIFIC REFERENCE,
AND SUCH INFORMATION SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
ADDITIONAL MATTERS FOR CONSIDERATION BY DELRINA SHAREHOLDERS
In addition to consideration of and voting on the Arrangement Resolution, at
the Delrina Shareholders Meeting the shareholders of Delrina will be asked to
vote on the following additional matters.
ELECTION OF DIRECTORS
Under the articles of incorporation of Delrina, the Delrina Board of
Directors consists of a minimum of three members and a maximum of eleven
members; the number of directors within such range is to be determined by the
Delrina Board of Directors from time to time. The number of directors is
currently fixed at seven.
The persons named in the enclosed form of proxy intend to vote for the
reelection of the seven current directors of Delrina. Certain information
regarding these individuals is set out above under "INFORMATION CONCERNING
DELRINA -- Directors and Management" and "-- Executive Compensation."
IT IS NOT ANTICIPATED THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE AS
DIRECTORS BUT IF THAT SHOULD OCCUR FOR ANY REASON PRIOR TO THE DELRINA
SHAREHOLDERS MEETING, THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY SHALL BE
ENTITLED TO VOTE FOR ANY OTHER NOMINEES IN THEIR DISCRETION.
Each director elected will hold office until the next annual meeting of
shareholders or until a successor is duly elected or appointed. It is
anticipated that those directors who are currently members of the Compensation
Committee and/or Audit Committee of the Delrina Board of Directors will continue
in those positions.
If the Transaction is completed, each member of the Delrina Board of
Directors immediately prior to the Effective Time will resign effective as of
the Effective Time, and Delrina's sole voting shareholder Symantec will appoint
new directors to the Delrina Board of Directors effective as of the Effective
Time.
APPOINTMENT OF AUDITORS
The persons designated in the enclosed form of proxy intend to vote for the
reappointment of Delrina's current independent auditors, Price Waterhouse, as
independent auditors of Delrina and to authorize the directors to fix their
remuneration.
If the Transaction is completed, it is expected that Ernst & Young LLP will
become the independent auditors of Symantec and all of its subsidiaries,
including Delrina, after the Effective Time.
162
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Transaction will be passed upon
by Skadden, Arps, Slate, Meagher & Flom, New York, New York, and Osler, Hoskin &
Harcourt, Toronto, Ontario, on behalf of Delrina, and by Fenwick & West, Palo
Alto, California, and Davies, Ward & Beck, Toronto, Ontario, on behalf of
Symantec.
EXPERTS
The consolidated financial statements of Delrina included herein have been
audited by Price Waterhouse, Chartered Accountants, independent auditors, as set
forth in their report included herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Symantec included herein have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included herein which, as to fiscal 1993 is based in part on the report
of KPMG Peat Marwick LLP, independent accountants, as it relates to Fifth
Generation Systems, Inc.'s ("Fifth Generation") consolidated financial
statements for the year ended December 31, 1992, which report is included in the
Symantec Annual Report on Form 10-K for the year ended March 31, 1995 filed with
the SEC. Such consolidated financial statements of Symantec and Fifth Generation
referred to above are included and/or incorporated herein by reference in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing. The report of Ernst & Young LLP insofar as it relates
to amounts included for Fifth Generation is based solely upon the report of KPMG
Peat Marwick LLP. The report of KPMG Peat Marwick LLP referred to above contains
an explanatory paragraph that states that Fifth Generation's recurring losses
and maturity of long term debt raise substantial doubt about Fifth Generation's
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
AVAILABLE INFORMATION
Symantec and Delrina are subject to the informational requirements of the
Exchange Act, and in accordance therewith file reports, proxy statements and
other information with the SEC. The reports, proxy statements and other
information filed by Symantec and Delrina with the SEC can be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511. Copies of such material also can be obtained from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, material filed by
Symantec and Delrina can be inspected at the offices of the National Association
of Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006.
By Order of the Board of Directors
--------------------------------------
Derek P. Witte
VICE PRESIDENT AND GENERAL COUNSEL
163
<PAGE>
APPROVAL OF PROXY STATEMENT BY
DELRINA BOARD OF DIRECTORS
The contents of this joint management information circular and proxy
statement and the sending thereof to the shareholders of Delrina have been
approved by the Delrina Board of Directors.
By Order of the Delrina Board of
Directors
--------------------------------------
Michael Cooperman, Secretary
October 17, 1995
Toronto, Ontario
164
<PAGE>
INDEX TO DELRINA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AUDITED FINANCIAL STATEMENTS............................................................................... F-1
Report of Price Waterhouse, Chartered Accountants.......................................................... F-1
Consolidated Balance Sheets at June 30, 1995 and 1994...................................................... F-2
Consolidated Statements of Operations for the years ended June 30, 1995, 1994 and 1993..................... F-3
Consolidated Statements of Retained Earnings (Deficit) for the years ended June 30, 1995, 1994 and 1993.... F-4
Consolidated Statements of Changes in Financial Position for years ended June 30, 1995, 1994 and 1993...... F-5
Notes to Consolidated Financial Statements................................................................. F-6
<CAPTION>
INDEX TO SYMANTEC FINANCIAL STATEMENTS
PAGE
---------
<S> <C>
AUDITED FINANCIAL STATEMENTS............................................................................... F-17
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-17
Report of KPMG Peat Marwick LLP, Independent Auditors...................................................... F-18
Consolidated Balance Sheets as of March 31, 1995 and 1994.................................................. F-19
Consolidated Statements of Operations for the years ended March 31, 1995, 1994, and 1993................... F-20
Consolidated Statements of Stockholders' Equity for the years ended March 31, 1995,
1994 and 1993............................................................................................. F-21
Consolidated Statements of Cash Flow for the years ended March 31, 1995, 1994
and 1993.................................................................................................. F-22
Notes to Consolidated Financial Statements................................................................. F-23
UNAUDITED INTERIM FINANCIAL STATEMENTS..................................................................... F-38
Consolidated Balance Sheets as of June 30, 1995 and March 31, 1995......................................... F-38
Consolidated Statements of Income for the three months ended June 30, 1995 and 1994........................ F-39
Consolidated Statements of Cash Flow for the three months ended June 30, 1995
and 1994.................................................................................................. F-40
Notes to Consolidated Financial Statements................................................................. F-41
</TABLE>
F-(i)
<PAGE>
AUDITORS' REPORT
To the Shareholders of Delrina Corporation
We have audited the consolidated balance sheets of Delrina Corporation as at
June 30, 1995 and 1994 and the consolidated statements of operations, retained
earnings (deficit) and changes in financial position for the years ended June
30, 1995, 1994 and 1993. These financial statements are the responsibility of
the company's management. Our responsiblity is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at June 30, 1995
and 1994 and the results of its operations and the changes in its financial
position for the years ended June 30, 1995, 1994 and 1993 in accordance with
generally accepted accounting principles.
PRICE WATERHOUSE
Chartered Accountants, Toronto, Canada
August 8, 1995
F-1
<PAGE>
DELRINA CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
JUNE 30
------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current
Cash and short-term investments....................................................... $ 36,553 $ 62,449
Accounts receivable................................................................... 36,079 21,210
Inventories........................................................................... 7,221 3,671
Deposits and prepaid expenses......................................................... 2,660 2,157
Income taxes recoverable.............................................................. 4,595 --
Deferred income taxes................................................................. 344 406
----------- -----------
87,452 89,893
----------- -----------
Capital assets (Note 3)................................................................. 14,423 7,579
Deferred development costs.............................................................. 8,497 4,801
Acquired software products.............................................................. 5,459 1,844
Investment tax credits recoverable...................................................... 4,434 1,699
Other assets (Note 4)................................................................... 2,777 709
----------- -----------
$ 123,042 $ 106,525
----------- -----------
<CAPTION>
LIABILITIES
<S> <C> <C>
Current
Accounts payable and accrued liabilities.............................................. $ 18,430 $ 14,777
Income taxes payable.................................................................. -- 1,857
Deferred revenue...................................................................... 462 --
----------- -----------
18,892 16,634
Deferred income taxes................................................................... 1,588 641
<CAPTION>
SHAREHOLDERS' EQUITY
<S> <C> <C>
Share capital (Note 6).................................................................. 95,048 90,896
Retained earnings (deficit)............................................................. 7,514 (1,646)
----------- -----------
102,562 89,250
----------- -----------
$ 123,042 $ 106,525
----------- -----------
----------- -----------
Commitments and contingent liabilities (Notes 10 and 11)
</TABLE>
F-2
<PAGE>
DELRINA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER COMMON SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-----------------------------------
1995 1994 1993
----------- ----------- ---------
<S> <C> <C> <C>
REVENUE
Sales..................................................................... $ 132,925 $ 101,113 $ 47,938
Cost of sales............................................................. 33,545 25,383 14,136
----------- ----------- ---------
Gross profit.............................................................. 99,380 75,730 33,802
OPERATING EXPENSES
Research and development.................................................. 13,904 6,806 2,236
Sales and marketing....................................................... 58,934 33,586 18,373
Administrative and general................................................ 17,089 12,289 6,488
Purchased research and development........................................ -- -- 13,852
Foreign exchange (gain)/ loss............................................. (1,017) (2,850) 151
----------- ----------- ---------
88,910 49,831 41,100
----------- ----------- ---------
Income/(loss) from operations............................................. 10,470 25,899 (7,298)
Interest income........................................................... 3,190 1,299 646
----------- ----------- ---------
Income /(loss) before income taxes........................................ 13,660 27,198 (6,652)
Income taxes (Note 5)..................................................... 4,500 10,380 3,059
----------- ----------- ---------
Net income/(loss) for the year............................................ $ 9,160 $ 16,818 $ (9,711)
----------- ----------- ---------
----------- ----------- ---------
Earnings/(loss) per common share
Basic (Note 9).......................................................... 42 CENTS 82 CENTS (57 CENTS)
Fully diluted (Note 9).................................................. 38 CENTS 76 CENTS n/a
----------- ----------- ---------
----------- ----------- ---------
Weighted average shares outstanding
Basic................................................................... 22,017 20,459 17,201
Fully diluted........................................................... 24,260 22,260 n/a
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
F-3
<PAGE>
DELRINA CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
---------------------------------
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Deficit, beginning of year.................................................... $ (1,646) $ (16,762) $ (6,612)
Net income (loss) for the year................................................ 9,160 16,818 (9,711)
Share issue expenses (net of income taxes: Nil; 1994: $1,356; 1993: $328)..... -- (1,702) (439)
--------- ---------- ----------
Retained earnings (deficit), end of year...................................... $ 7,514 $ (1,646) $ (16,762)
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
F-4
<PAGE>
DELRINA CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for the year............................................ $ 9,160 $ 16,818 $ (9,711)
Amortization of capital assets.......................................... 3,196 1,619 733
Amortization of deferred development costs.............................. 4,962 2,301 744
Amortization of acquired software products.............................. 2,353 1,495 369
Deferred income taxes................................................... 1,396 388 2,118
Gain on disposal of division............................................ -- -- (13)
Purchased research and development included under investing activities.... -- -- 13,852
Changes in non cash working capital and other components net of amounts
included under acquisition of subsidiaries
Accounts receivable..................................................... (14,857) (14,229) (2,443)
Inventories............................................................. (3,549) (2,155) (407)
Deposits and prepaid expenses........................................... (495) (822) (746)
Deferred support fees................................................... -- -- (139)
Accounts payable and accrued liabilities................................ 3,184 6,504 (801)
Income taxes payable/recoverable........................................ (6,452) 1,495 471
Deferred revenue........................................................ (24) -- --
---------- ---------- ----------
Cash (used in) provided by operating activities........................... (1,126) 13,414 4,027
---------- ---------- ----------
---------- ---------- ----------
INVESTING ACTIVITIES
Purchase of capital assets.............................................. (9,682) (6,355) (1,937)
Purchase of acquired software........................................... (2,131) (1,612) (4,367)
Deferred development costs (net of investment tax credits recognized of
$617; 1994: $811; 1993: $1,339)........................................ (8,529) (3,544) (2,391)
Investment tax credits recoverable...................................... (2,735) (856) (843)
Acquisition of subsidiaries (Note 2).................................... (3,776) -- (5,533)
Other................................................................... (2,068) (33) (17)
---------- ---------- ----------
Cash used in investing activities......................................... (28,921) (12,400) (15,088)
---------- ---------- ----------
---------- ---------- ----------
FINANCING ACTIVITIES
Issue of common shares for cash......................................... 2,237 2,662 965
Issue of common shares by public offering (net of related costs of
$3,058)................................................................ -- 40,188 --
Issue of common shares to acquire technology in process................. -- -- 3,739
Issue of special warrants -- for cash (net of related costs of $766).... -- -- 11,702
Issue of common shares to acquire subsidiary............................ 1,914 -- 5,075
Repayment of loan receivable from director.............................. -- 170 --
---------- ---------- ----------
Cash provided by financing activities....................................... 4,151 43,020 21,481
---------- ---------- ----------
---------- ---------- ----------
(Decrease) increase in cash during the year................................. (25,896) 44,034 10,420
Cash and short-term investments, beginning of year.......................... 62,449 18,415 7,995
---------- ---------- ----------
Cash and short-term investments, end of year................................ $ 36,553 $ 62,449 $ 18,415
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-5
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and reflect the following
accounting policies:
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the company
and its subsidiaries. Acquisitions are accounted for using the purchase method.
REVENUE RECOGNITION
Revenue from the sale of products is recognized at the time of the shipment
to the customer and is net of discounts and allowances for estimated future
returns.
CAPITAL ASSETS
Capital assets are stated at cost. Amortization is provided on computer
equipment using the straight-line basis over five years. Amortization is
provided on office equipment and furniture and fixtures using the diminishing
balance basis at the rates of 30% and 20% per annum, respectively. Leasehold
improvements are amortized using the straight-line basis over the terms of the
respective leases.
INVENTORIES
Finished goods are valued at the lower of cost and net realizable value.
Components on hand are valued at the lower of cost and replacement cost.
ACQUIRED SOFTWARE PRODUCTS
Acquired software products are stated at cost and amortized on the
straight-line basis over a period of three years.
RESEARCH AND DEVELOPMENT COSTS
When management determines that a new product is technologically feasible,
costs relating to further development of that product are deferred until
commercial production commences. These costs are then amortized on a
straight-line basis over three years, which is the estimated average sales life
of the products.
Research costs are expensed as incurred.
TRANSLATION OF FOREIGN CURRENCIES
Transactions denominated in foreign curriencies and accounts of foreign
subsidiaries (all of which are considered integrated with the company's domestic
operations) are translated using the temporal method. Under this method,
monetary assets and liabilities are translated at rates in effect at the balance
sheet date and non-monetary assets and liabilities at historical rates. Income
and expenses are translated at average rates prevailing during the year.
Exchange gains or losses arising from the translation are included in
operations.
2. ACQUISITIONS
On March 10, 1995, the company issued 94,500 shares, which after
adjustments, were used to acquire all of the issued and outstanding shares of
CRS Online Ltd., a company engaged in the business of providing private
electronic bulletin board services.
The purchase price of $1,790,000 has been allocated to assets and
liabilities with fair values of $2,338,000 and $548,000 respectively.
Also on October 28, 1994, the company acquired all of the outstanding shares
of Audiofile Inc., a company engaged in the development of voice technology.
F-6
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
The purchase price was satisfied by cash consideration of $1,986,000, and
has been allocated to assets and liabilities with fair values of $2,182,000 and
$196,000 respectively.
These transactions have been accounted for using the purchase method, and
results of operations have been included in the consolidated financial
statements from the dates of acquisition.
The majority of the purchase price in both transactions has been allocated
to acquired software.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
NET JUNE 30
ACCUMULATED --------------------
COST AMORTIZATION 1995 1994
--------- ------------ --------- ---------
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C>
Computer equipment................................................ $ 13,511 $ 4,156 $ 9,355 $ 4,547
Office equipment.................................................. 3,598 1,208 2,390 1,435
Furniture and fixtures............................................ 1,836 438 1,398 957
Leasehold improvements............................................ 1,886 606 1,280 640
--------- ------------ --------- ---------
$ 20,831 $ 6,408 $ 14,423 $ 7,579
--------- ------------ --------- ---------
--------- ------------ --------- ---------
</TABLE>
Amortization amounted to $3,196 in 1995; $1,619 in 1994 and $733 in 1993.
4. OTHER ASSETS
Other assets in 1994 consisted of an interest free note receivable from a
former director, which was repaid during 1995.
5. INCOME TAXES
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS OF CANADIAN
DOLLARS)
<S> <C> <C> <C>
Current..................................................................... $ 3,104 $ 9,994 $ 941
Deferred.................................................................... 1,396 386 2,118
--------- --------- ---------
$ 4,500 $ 10,380 $ 3,059
--------- --------- ---------
--------- --------- ---------
</TABLE>
The income tax provision reported differs from the amount computed by
applying the combined Canadian Federal and Provincial statutory rate to income
(loss) before taxes. The reasons for this difference and the related tax effects
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS OF CANADIAN
DOLLARS)
<S> <C> <C> <C>
Statutory tax rate......................................................... 44.34% 44.34% 44.34%
--------- --------- ---------
Expected income tax provision (recovery)................................... $ 6,057 $ 12,060 $ (2,950)
Purchased research and development not tax deductible...................... -- -- 6,142
Amortization of acquired software not deductible........................... 553 298 164
Provincial research and development allowance.............................. (666) (547) (131)
Differences in tax rates of other countries................................ (1,663) (981) --
Non-capital tax loss....................................................... -- (166) --
Other...................................................................... 219 (284) (166)
--------- --------- ---------
$ 4,500 $ 10,380 $ 3,059
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-7
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The company computes and records income taxes currently payable based upon
the determination of taxable income which may differ from pretax accounting
income. Differences arise from recording in pretax accounting income,
transactions which enter the determination of taxable income in another period.
The tax effect of these timing differences is recognized by adjustment of the
provision for income taxes.
During the year, the company recognized the benefit of approximately
$2,599,000; 1994: $2,702,000; 1993: $1,300,000 of investment tax credits
resulting from research and development expenditures incurred in the fiscal
year. Of this amount, approximately $1,982,000; 1994: $1,892,000; 1993: $670,000
has been recognized in the statement of operations, and the balance has been
recorded as a reduction of deferred development costs.
6. SHARE CAPITAL
AUTHORIZED
Unlimited number of common and preference shares
A summary of the changes during the years in issued and fully paid common
shares is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES AMOUNT
---------- -----------------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Balance June 30, 1992........................................... 15,333,446 $ 22,741
Issued for cash during the year on the exercise of options...... 483,696 716
Issued for services rendered during the year.................... 77,407 249
Issued on acquisition of a subsidiary........................... 1,749,890 5,075
Issued on acquisition of research and development............... 299,141 3,739
---------- --------
Balance June 30, 1993........................................... 17,943,580 32,520
1,750,000 warrants converted into common shares................. 1,750,000 12,469
1,500,000 common shares issued by public offering............... 1,500,000 43,246
Issued for cash during the year on the exercise of options...... 577,495 2,369
Issued for cash during the year pursuant to the employee share
purchase plan.................................................. 6,355 141
Other shares issued during the year............................. 15,500 151
---------- --------
Balance June 30, 1994........................................... 21,792,930 90,896
Issued on acquisition of subsidiary............................. 94,500 1,914
Issued for cash during the year on the exercise of options...... 423,665 2,060
Issued for cash during the year persuant to the employee share
purchase plan.................................................. 9,621 178
---------- --------
Balance June 30, 1995........................................... 22,320,716 $ 95,048
---------- --------
---------- --------
</TABLE>
On February 24, 1994, the company issued by way of a public offering
1,500,000 common shares for US $32,062,500 (Cdn $43,245,900).
On March 3, 1993, the company issued by way of private placement 1,750,000
special warrants for $12,468,750. Each special warrant entitled the holder
thereof to acquire one common share of the company, without payment of any
additional amount at the time of the exercise. The special warrants were
exercised on July 5, 1993.
F-8
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHARE CAPITAL (CONTINUED)
Under a share option arrangement, options are outstanding to directors,
senior officers, and employees entitling the holders to purchase an aggregate of
2,374,035; 1994: 1,838,907; 1993: 1,774,301 common shares from treasury at
prices ranging from $1.38 to $28.75 per share. These options expire at various
dates from July 1995 to December 2001.
The company has employee stock purchase plans for both its Canadian and U.S.
employees, meeting certain eligibility criteria. Under these plans, employees
may purchase shares of the Company's common stock, subject to certain
limitations, at 10% less than the average fair market value as defined in the
plans. A total of 20,000 shares has been reserved for issuance under each of the
Canadian and U.S. plans.
7. INFORMATION BY GEOGRAPHIC AREA
The company operates within one dominant segment, the development and sale
of computer software products.
<TABLE>
<CAPTION>
CANADIAN U.S. INTERNATIONAL
OPERATIONS OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995
Net revenues:
Customers.................................. $ 8,252 $ 98,507 $ 26,166 $ -- $ 132,925
Intercompany............................... 33 4,424 19,029 (23,486) --
----------- ----------- ------------ ------------ ------------
Total........................................ 8,285 102,931 45,195 (23,486) 132,925
----------- ----------- ------------ ------------ ------------
Operating income............................. 3,558 6,323 3,779 -- 13,660
Identifiable assets.......................... 69,645 40,923 12,474 -- 123,042
----------- ----------- ------------ ------------ ------------
Liabilities.................................. 11,302 6,306 2,872 -- 20,480
----------- ----------- ------------ ------------ ------------
Translation loss............................. -- 141 306 -- 447
----------- ----------- ------------ ------------ ------------
----------- ----------- ------------ ------------ ------------
YEAR ENDED JUNE 30, 1994
Net revenues:
Customers.................................. 7,569 83,894 9,650 -- 101,113
Intercompany............................... 7,872 2,042 3,776 (13,690) --
----------- ----------- ------------ ------------ ------------
Total........................................ 15,441 85,936 13,426 (13,690) 101,113
----------- ----------- ------------ ------------ ------------
Income before income taxes................... 13,788 12,537 873 -- 27,198
----------- ----------- ------------ ------------ ------------
Identifiable assets.......................... 66,447 36,255 3,823 -- 106,525
----------- ----------- ------------ ------------ ------------
Liabilities.................................. 9,951 5,633 1,691 -- 17,275
----------- ----------- ------------ ------------ ------------
Translation gain (loss)...................... -- 168 (67) -- 101
----------- ----------- ------------ ------------ ------------
----------- ----------- ------------ ------------ ------------
</TABLE>
F-9
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INFORMATION BY GEOGRAPHIC AREA (CONTINUED)
<TABLE>
<CAPTION>
CANADIAN U.S. INTERNATIONAL
OPERATIONS OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------ ------------
YEAR ENDED JUNE 30, 1993
<S> <C> <C> <C> <C> <C>
Net revenues:
Customers.................................. $ 8,252 $ 38,253 $ 1,433 $ -- $ 47,938
Intercompany............................... 20,443 214 -- (20,657) --
----------- ----------- ------------ ------------ ------------
Total........................................ 28,695 38,467 1,433 (20,657) 47,938
----------- ----------- ------------ ------------ ------------
Operating income (loss)...................... 7,380 211 (247) (144) 7,200
----------- ----------- ------------ ------------ ------------
Purchased research and development........... (13,852)
Loss before income taxes..................... (6,652)
------------
Identifiable assets.......................... 24,513 12,868 792 (144) 38,029
----------- ----------- ------------ ------------ ------------
Liabilities.................................. 6,821 2,965 186 -- 9,972
----------- ----------- ------------ ------------ ------------
Translation loss............................. -- (433) (118) -- (551)
----------- ----------- ------------ ------------ ------------
----------- ----------- ------------ ------------ ------------
</TABLE>
8. MAJOR CUSTOMERS
In fiscal 1995, two customers accounted for approximately 23% and 10% of
sales respectively (1994: 21% and 11% respectively). In fiscal 1993, one
customer accounted for approximately 16% of sales.
9. EARNINGS (LOSS) PER COMMON SHARE
The earnings (loss) per common share has been calculated using the weighted
average number of common shares outstanding during the year. The 1,750,000
special warrants have been included in the calculation of the loss per share for
1993. For fiscal 1993 the exercising of stock options would be antidilutive.
10. COMMITMENTS
The company is committed to payments under operating leases and other
commitments as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF CANADIAN
DOLLARS)
--------------------------------
<S> <C>
1996...................... $ 2,713
1997...................... 1,671
1998...................... 1,090
1999...................... 951
2000...................... 766
2001 through to 2005...... 1,373
</TABLE>
11. CONTINGENT LIABILITIES
CAROLIAN
Delrina has been involved in ongoing litigation to combat infringement of
the intellectual property of a former division, Carolian, which was sold in
March 1993. On February 12, 1993 the Ontario Court (General Division) declined
to grant a permanent injunction to Delrina. The defendants subsequently filed a
claim for damages allegedly resulting from the preliminary injunction granted in
favor of Delrina. The defendants allege damages of approximately Cdn$6,000,000,
for lost revenues during the time in which the preliminary injunction was in
place. The defendants have not yet provided evidence of the basis for the
calculation of the amount of damages claimed, which, if awarded, would
F-10
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONTINGENT LIABILITIES (CONTINUED)
be material. Delrina intends to appeal the decision of the court not to grant a
permanent injunction to Delrina and to contest the amount of damages, if any,
sustained by the defendants. A date has not yet been set for the hearing
regarding the defendants' claim for damages.
AUDIOFAX
On April 25, 1995, AudioFAX, Inc. ("AudioFAX") instituted a civil action
against Delrina, Delrina (Canada) Corporation ("Delrina Canada") and Delrina
(US) Corporation in the United States District Court for the Northern District
of Georgia. In its complaint, AudioFAX alleges that all three of the defendants
have infringed two United States patents and certain copyrights of AudioFAX,
that Delrina and Delrina Canada have infringed a Canadian patent of AudioFAX and
that Delrina Canada has breached a non-disclosure agreement and misappropriated
trade secrets of AudioFAX. The patents at issue are directed to certain enhanced
facsimile services using a store and forward facility. On June 14, 1995, the
defendants filed (i) motions to dismiss the Canadian patent infringement and
copyright infringement claims, (ii) a motion for a more definitive statement of
the patent infringement claims and (iii) a partial answer directed to the claims
of breach of the non-disclosure agreement and misappropriation of trade secrets.
On June 28, 1995, AudioFAX filed oppositions to the three motions. On July 17,
1995, Delrina served reply memoranda in support of its motions to dismiss. This
matter is in its early stages and Delrina believes that it has meritorious
defenses and intends to vigorously defend all of the claims.
IBM
Delrina received a letter dated June 8, 1995, from International Business
Machines Corporation ("IBM") identifying alleged infringements of 12 United
States patents of IBM and offering to grant Delrina a license under the patents.
Delrina's outside patent counsel is reviewing the patents to determine the
appropriate response.
GREENTREE
During August 1995, Greentree Software, Inc. ("Greentree") instituted a
civil action against Delrina Technology, Inc. (name changed to Delrina (Canada)
Corporation on June 8, 1988) in the United States District Court for the
Northern District of California. In its complaint, Greentree claims unspecified
damages for alleged misrepresentations and negligent misrepresentations
regarding the performance of Delrina's FormFlow software, as well as a breach of
an oral agreement. Delrina (Canada) Corporation believes that it has meritorious
defenses and intends to vigorously defend all of the claims.
Neither management nor the company's legal counsel is able to make a
reasonable estimate of the liabilities, if any, which might result from these
actions. Any settlement or judgement resulting from these lawsuits may be
material.
Given the importance of intellectual property for a technology company, from
time to time, actions have been threatened or commenced against Delrina and
certain of its affiliates, alleging patent infringement, copyright infringement,
misuse of certain confidential information, breach of trust and unlawful
interference with the plaintiffs' business relationships. The plaintiffs' claims
may include a request for an injunction which would, among other things, prevent
Delrina from marketing any or all of its primary products or services. In each
case Delrina retains counsel and vigorously contests the claim, and any request
for an injunction or damages. There is no such case at present, which Delrina,
after consultation with its litigation counsel, believes it will not be able to
successfully defend. However, in the event that in any such case the plaintiff
succeeded in obtaining an injunction or judgement against Delrina, the
injunction or judgement could, depending upon its terms, have a material,
adverse effect on Delrina.
F-11
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES
These financial statements have been prepared in accordance with Canadian
generally accepted accounting principles (GAAP). In certain aspects GAAP as
applied in the United States differs from Canadian GAAP.
CONSOLIDATED BALANCE SHEETS
Costs related to the issue of shares and special warrants under US GAAP are
recorded as a reduction of the proceeds from issue, rather than a charge to
deficit under Canadian GAAP.
Share capital and deficit per the financial statements are reconciled to US
GAAP as follows:
<TABLE>
<CAPTION>
JUNE 30
----------------------
1995 1994
----------- ---------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Share capital (per financial statements)............................................... $ 95,048 $ 90,896
Costs related to issue of shares and warrants.......................................... (2,569) (2,569)
----------- ---------
Share capital (per US GAAP)............................................................ 92,479 88,327
----------- ---------
Retained earnings (deficit) (per financial statements)................................. 7,514 (1,646)
Costs related to issue of shares and warrants.......................................... 2,569 2,569
----------- ---------
Retained earnings (deficit) (per US GAAP).............................................. 10,083 923
----------- ---------
Shareholders' equity (per US GAAP)..................................................... $ 102,562 $ 89,250
----------- ---------
----------- ---------
</TABLE>
Under US GAAP, cash and cash equivalents include only short-term investments
with original maturities of three months or less, whereas under Canadian GAAP
cash and short-term investments include short-term investments having maturities
extending to 12 months.
Cash and short-term investments per the financial statements is reconciled
to US GAAP as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------------
1995 1994
--------- ---------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Cash and short-term investments (per financial statements)............................... $ 36,553 $ 62,449
Short-term investments................................................................... 26,360 41,479
--------- ---------
Cash and cash equivalents (per US GAAP).................................................. $ 10,193 $ 20,970
--------- ---------
--------- ---------
</TABLE>
Under Canadian GAAP, deferred development costs are amortized on a
straight-line basis over three years, which is the estimated average sales life
of the products. Under US GAAP, the amortization shall be the greater of (a) the
ratio that current revenues for a product bears to the total of current and
anticipated future revenue for the product and (b) the straight-line method.
Based on this method, the amortization of deferred development costs would
increase by $642,000.
Since August 1994, under Canadian GAAP, companies must capitalize the fair
value of research and development in process acquired in a business combination.
Under US GAAP such acquired research and development in process is expensed. In
connection with the business acquisitions during the year, the company allocated
$1,989,000 to technology-in-process which is expensed under US GAAP. The net
effect after amortization is a reduction of acquired software products of
$1,547,000.
F-12
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (CONTINUED)
The accounts affected are reconciled as follows
<TABLE>
<CAPTION>
JUNE 30
--------------------
1995 1994
--------- ---------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Deferred development costs (per financial statements)...................................... $ 8,497 $ 4,801
Additional amortization.................................................................... 642 --
--------- ---------
Deferred development costs (per US GAAP)................................................... $ 7,855 $ 4,801
--------- ---------
--------- ---------
Acquired software products (per financial statements)...................................... $ 5,459 $ 1,844
Purchased research and development expensed................................................ 1,547 --
--------- ---------
Acquired software products (per US GAAP)................................................... $ 3,912 $ 1,844
--------- ---------
--------- ---------
</TABLE>
OTHER DISCLOSURE
Allowance for doubtful accounts Included in accounts receivable are
allowances for doubtful accounts of $893,000; 1994: $664,000.
INVENTORIES
Included in inventories are the following amounts:
<TABLE>
<CAPTION>
JUNE 30
--------------------
1995 1994
--------- ---------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Finished goods............................................................................. $ 3,359 $ 1,386
Raw materials.............................................................................. 3,862 2,285
--------- ---------
$ 7,221 $ 3,671
--------- ---------
--------- ---------
</TABLE>
ACCOUNTS PAYABLE
Included in accounts payable are the following amounts:
<TABLE>
<CAPTION>
JUNE 30
--------------------
1995 1994
--------- ---------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Trade payables........................................................................... $ 13,103 $ 10,954
Accrual for employee performance incentives.............................................. $ 885 $ 2,405
</TABLE>
F-13
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS
Reconciliation of net income between accounting principles generally
accepted in Canada and the United States
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C> <C>
Net income (loss) as reported.................................................... $ 9,160 $ 16,818 $ (9,711)
Additional amortization of deferred development costs............................ (642) -- --
Purchased research and development expensed...................................... (1,547) -- --
Adjustments relating to the liability method of accounting for income taxes...... (232) 330 --
--------- --------- ---------
Net income in accordance with US GAAP............................................ $ 6,739 $ 17,148 $ (9,711)
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per common share................................................. .31 NTS .84 NTS (.57 CENTS)
Fully diluted earnings per share................................................. .28 NTS .77 NTS n/a
</TABLE>
The cumulative adjustment related to the accounting for income taxes in
accordance with US GAAP is an increase in retained earnings of $98,000.
At June 30, 1995, deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
--------- -----------
<S> <C> <C>
Accounting provisions not deductible for tax purposes....................................... $ 2,089 $ --
Capital cost allowance in excess of amortization............................................ -- 1,004
Deferred development costs.................................................................. -- 2,076
Investment tax credits...................................................................... -- 1,951
Net operating loss carry forwards........................................................... 486 --
Share issue costs........................................................................... 955 --
Acquired software........................................................................... 355 --
--------- -----------
$ 3,885 $ 5,031
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
CANADIAN FOREIGN TOTAL
----------- --------- ---------
<S> <C> <C> <C>
Net income before tax in accordance with US GAAP................................. $ 2,916 $ 8,555 $ 11,471
Taxation
Current........................................................................ 899 2,201 3,100
Deferred....................................................................... 952 680 1,632
----------- --------- ---------
$ 1,851 $ 2,881 $ 4,732
----------- --------- ---------
----------- --------- ---------
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
Under Canadian GAAP, all important aspects of financing and investing
activities should be disclosed in the statement of changes in financial
position, while under US GAAP, important aspects of financing and investing
activities that do not result in cash flows should be excluded from the
statement and disclosed separately.
F-14
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES (CONTINUED)
The following transactions which did not result in cash flows would have
been excluded from the financing and investing activities in the statements of
changes in financial position under US GAAP:
In fiscal 1993, 1,749,890 common shares, at a value of $5,074,681 were
issued to acquire all the shares of a corporation and 299,141 common shares, at
a value of $3,739,263 were issued to acquire research and development.
In fiscal 1995, 94,500 common shares, at a value of $1,914,000 were issued
in connection with the acquisition of all the shares of a corporation.
The statement of changes in financial position per the financial statements
is reconciled to US GAAP as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Operating activities (per financial statements)............................. $ (1,126) $ 13,414 $ 4,027
---------- ---------- ----------
Operating activities (per US GAAP).......................................... (1,126) 13,414 4,027
---------- ---------- ----------
Investing activities (per financial statements)............................. (28,921) (12,400) (15,088)
Acquired research and development........................................... -- -- 3,739
Acquisition of subsidiary................................................... 1,914 -- 5,075
Purchases of short-term investments......................................... (68,336) (41,479) --
Sales of short-term investments............................................. 83,456 -- 5,838
---------- ---------- ----------
Investing activities........................................................ (11,887) (53,879) (436)
---------- ---------- ----------
---------- ---------- ----------
Financing activities (per financial statements)............................. 4,151 43,020 21,481
Issue of common shares to acquire research and development.................. -- -- (3,739)
Issue of common shares to acquire subsidiary................................ (1,914) -- (5,075)
---------- ---------- ----------
Financing activities (per US GAAP).......................................... 2,237 43,020 12,667
---------- ---------- ----------
Increase (decrease) in cash during year (per US GAAP)....................... (10,777) 2,555 16,258
Cash and cash equivalents, beginning of year (per US GAAP).................. 20,970 18,415 2,157
---------- ---------- ----------
Cash and cash equivalents, end of year (per US GAAP)........................ $ 10,193 $ 20,970 $ 18,415
---------- ---------- ----------
Payment of taxes............................................................ $ 9,374 $ 6,554 $ 94
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
13. SUBSEQUENT EVENTS
COMBINATION AGREEMENT
On July 5, 1995, the Company signed a definitive combination agreement (the
"Agreement") with Symantec Corporation ("Symantec"). Consummation of the
Agreement is subject to a number of conditions, including regulatory clearances
in Canada and the United States, judicial clearance in Canada and formal
approval by the shareholders of both companies. It is anticipated that the
transaction will close during November 1995.
Symantec, a Delaware corporation, develops, markets and supports a
diversified line of application and system software products designed to enhance
individual and workgroup productivity as well as manage networked computing
environments. Symantec's product groups include advanced utilities, security
utilities, network/communications utilities, contact management, development
tools, project management/productivity applications and client-server
technology. Symantec's principal executive offices are located in Cupertino,
California.
F-15
<PAGE>
DELRINA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUBSEQUENT EVENTS (CONTINUED)
THE TRANSACTION
Under the terms of the Agreement, at the effective time, Delrina
shareholders will receive for each Delrina common share held, 0.61 of a Delrina
Exchangeable Share. At any time during a period of seven years from the
effective time, holders of the Exchangeable Shares will be entitled to retract
any or all such Exchangeable Shares and to receive an equivalent number of
shares of Symantec Common Stock. Holders will also receive an additional amount
equivalent to all declared and unpaid dividends on such Exchangeable Shares.
Pursuant to the Agreement, at the effective time, Delrina will undergo a
reorganization of its capital whereby; (1) Delrina will authorize a new series
of Delrina Preferred Shares, the Series A Preferred Shares; (2) Delrina will
issue one Series A Preferred Share to Symantec in exchange for one share of
Symantec Common Stock; (3) the existing Delrina Common Shares will be converted
into shares of a new class of non-voting Exchangeable Shares of Delrina at a
ratio of .61 of an Exchangeable Share per Delrina Common Share; and (4) the
Series A Preferred Share held by Symantec will be converted into a Delrina
Common Share.
In addition, Symantec will authorize and issue a special voting share to a
trustee for the benefit of the holders of the Delrina Exchangeable Shares and
the trustee will hold such share pursuant to the terms of a voting and exchange
trust agreement for the benefit of the holders of the Delrina Exchangeable
Shares. The holder of the special voting share will be entitled at Symantec
stockholder meetings to exercise a number of votes equal to the number of
Delrina Exchangeable Shares outstanding at such time and not owned by Symantec
or one of its affiliates. These voting rights will be exercised by the trustee
only on instructions received from time to time from the holders of the Delrina
Exchangeable Shares not owned by Symantec or one of its affiliates.
The transaction is anticipated to be accounted for using the
pooling-of-interests method of accounting under United States generally accepted
accounting principles.
14. RELATED PARTY TRANSACTIONS
During the year, the company incurred billing and customer service fees in
the amount of $380,000 (1994: $64,000) from a company the President and CEO of
which is a Director of Delrina. Included in accounts payable is $167,000 (1994:
NIL) owing to this company.
F-16
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Symantec Corporation
We have audited the accompanying consolidated balance sheets of Symantec
Corporation as of March 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended March 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of
Fifth Generation Systems, Inc., which statements reflect a net loss constituting
approximately 39% of the related 1993 consolidated financial statement total.
Those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to data included for Fifth
Generations Systems, Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Symantec Corporation
at March 31, 1995 and 1994, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended March 31, 1995,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Jose, California
April 21, 1995
F-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Fifth Generation Systems, Inc.
We have audited the consolidated balance sheet of Fifth Generation Systems,
Inc. (the Company) and subsidiaries as of December 31, 1992 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Fifth
Generation Systems, Inc. and subsidiaries at December 31, 1992, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principals.
The accompanying consolidated financial statements have been prepared
assuming that Fifth Generation Systems, Inc. and subsidiaries will continue as a
going concern. As discussed in Note 1 to the consolidated financial statements,
substantially all of the Company's debt matured May 15, 1993 and redemption of
one half of the redeemable preferred stock is redeemable June 30, 1993. In
addition, the Company suffered substantial losses from operations for the year
ended December 31, 1992. These situations raise substantial doubt about the
entity's ability to continue as a going concern. Management's plans in regard to
these matters are also described in note 1. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of reported asset amounts or the amounts and classification of
liabilities that might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
August 6, 1993
Baton Rouge, Louisiana
F-18
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1995 1994
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and short-term investments....................................................... $ 105,188 $ 60,534
Trade accounts receivable............................................................. 53,986 48,342
Inventories........................................................................... 4,177 7,842
Deferred income taxes................................................................. 9,939 17,975
Other................................................................................. 6,339 13,660
----------- -----------
Total current assets................................................................ 179,629 148,353
Equipment and leasehold improvements.................................................... 28,880 25,369
Purchased intangibles................................................................... 8,274 11,228
Other................................................................................... 4,532 3,842
----------- -----------
$ 221,315 $ 188,792
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 17,919 $ 27,556
Accrued compensation and benefits..................................................... 12,347 12,257
Other accrued expenses................................................................ 51,789 57,745
Income taxes payable.................................................................. 2,006 367
Current portion of long-term obligations.............................................. 524 847
----------- -----------
Total current liabilities........................................................... 84,585 98,772
Convertible subordinated debentures..................................................... 25,000 25,000
Long-term obligations................................................................... 408 966
Commitments and contingencies
Stockholders' equity:
Preferred stock (authorized: 1,000; issued and outstanding: none)..................... -- --
Common stock (authorized: 70,000; issued and outstanding: 37,175
and 34,990 shares)................................................................... 372 350
Capital in excess of par value........................................................ 177,418 157,637
Notes receivable from stockholders.................................................... (144) (149)
Cumulative translation adjustment..................................................... (2,860) (2,183)
Accumulated deficit................................................................... (63,464) (91,601)
----------- -----------
Total stockholders' equity.......................................................... 111,322 64,054
----------- -----------
$ 221,315 $ 188,792
----------- -----------
----------- -----------
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
F-19
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS, EXCEPT NET INCOME
(LOSS) PER SHARE)
<S> <C> <C> <C>
Net revenues............................................. $ 334,867 $ 328,299 $ 344,626
Cost of revenues......................................... 60,830 80,388 104,706
----------- ----------- -----------
Gross margin........................................... 274,037 247,911 239,920
Operating expenses:
Research and development............................... 62,761 64,088 71,106
Sales and marketing.................................... 147,647 165,052 178,903
General and administrative............................. 16,953 25,196 31,134
Acquisition, restructuring and other
expenses.............................................. 9,545 56,094 12,773
----------- ----------- -----------
Total operating expenses............................. 236,906 310,430 293,916
----------- ----------- -----------
Operating income (loss).................................. 37,131 (62,519) (53,996)
Interest income.......................................... 3,334 1,478 1,693
Interest expense......................................... (2,419) (2,517) (1,389)
Other income (expense), net.............................. 327 (419) (1,659)
----------- ----------- -----------
Income (loss) before income taxes........................ 38,373 (63,977) (55,351)
Provision (benefit) for income taxes..................... 9,873 (7,010) (16,256)
----------- ----------- -----------
Net income (loss)........................................ $ 28,500 $ (56,967) $ (39,095)
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per share -- primary................... $ 0.77 $ (1.69) $ (1.22)
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per share -- fully diluted............. $ 0.71 $ (1.69) $ (1.22)
----------- ----------- -----------
----------- ----------- -----------
Shares used to compute net income (loss)
per share -- primary.................................... 37,383 33,790 32,131
----------- ----------- -----------
----------- ----------- -----------
Shares used to compute net income (loss)
per share -- fully diluted.............................. 41,693 33,790 32,131
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
F-20
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES RETAINED
CAPITAL IN RECEIVABLE CUMULATIVE EARNINGS TOTAL
COMMON EXCESS OF FROM STOCK- TRANSLATION (ACCUMULATED STOCKHOLDERS'
STOCK PAR VALUE HOLDERS ADJUSTMENT DEFICIT) EQUITY
----------- ---------- ----------- ----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balances, March 31, 1992................. $ 312 $ 100,929 $ (275) $ 156 $ 29,927 $ 131,049
Acquisition of MultiScope and
Whitewater:
Issued 323 shares of common stock.... 3 5,004 -- -- -- 5,007
Accumulated deficit.................. -- -- -- -- (6,951) (6,951)
Net loss............................... -- -- -- -- (39,095) (39,095)
Certus net loss for the quarter ended
March 31, 1992........................ -- -- -- -- (1,015) (1,015)
Contact net loss for the quarter ended
June 30, 1992......................... -- -- -- -- 92 92
Issued common stock:
1,197 shares under stock plans........ 12 6,475 -- -- -- 6,487
Repayments on notes.................... -- -- 58 -- -- 58
Other equity transactions of acquired
companies............................. -- 18,197 -- -- -- 18,197
Distributions to stockholders of
acquired companies.................... -- -- -- -- (162) (162)
Translation adjustment................. -- -- -- (794) -- (794)
Income tax benefit related to stock
options............................... -- 3,770 -- -- -- 3,770
----- ---------- ----------- ----------- ------------ ------------
Balances, March 31, 1993................. 327 134,375 (217) (638) (17,204) 116,643
Net loss............................... -- -- -- -- (56,967) (56,967)
Fifth Generation net loss for the
quarter ended March 31, 1993.......... -- -- -- -- (16,390) (16,390)
XTree net loss for the six months ended
March 31, 1993........................ -- -- -- -- (1,040) (1,040)
Issued common stock:
1,870 shares under stock plans....... 19 13,725 -- -- -- 13,744
391 shares for acquisition of product
rights.............................. 4 6,496 -- -- -- 6,500
Repayments on notes.................... -- -- 68 -- -- 68
Other equity transactions of acquired
companies............................. -- 3,041 -- -- -- 3,041
Translation adjustment................. -- -- -- (1,545) -- (1,545)
----- ---------- ----------- ----------- ------------ ------------
Balances, March 31, 1994................. 350 157,637 (149) (2,183) (91,601) 64,054
Acquisition of Intec and SLR:
Issued 303 shares of common stock.... 3 38 -- -- -- 41
Accumulated deficit.................. -- -- -- -- (363) (363)
Net income............................. -- -- -- -- 28,500 28,500
Issued common stock:
1,882 shares under stock plans....... 19 19,743 -- -- -- 19,762
Repayments on notes.................... -- -- 5 -- -- 5
Translation adjustment................. -- -- -- (677) -- (677)
----- ---------- ----------- ----------- ------------ ------------
Balances, March 31, 1995................. $ 372 $ 177,418 $ (144) $ (2,860) $ (63,464) $ 111,322
----- ---------- ----------- ----------- ------------ ------------
----- ---------- ----------- ----------- ------------ ------------
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
F-21
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------
1995 1994 1993
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................... $ 28,500 $ (56,967) $ (39,095)
Fifth Generation net loss for the quarter ended March 31, 1993.............. -- (16,390) --
XTree net loss for the six months ended March 31, 1993 -- (1,040) --
Contact net loss for the quarter ended June 30, 1992........................ -- -- 92
Certus net loss for the quarter ended March 31, 1992........................ -- -- (1,015)
Acquired companies' net assets.............................................. (322) -- (1,944)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operations:
Depreciation and amortization of equipment and leasehold improvements..... 13,363 15,122 17,113
Amortization and write-off of capitalized software costs.................. 6,442 17,793 17,503
Write-off of equipment and leasehold improvements......................... 1,539 4,403 (337)
Deferred income taxes..................................................... 8,073 1,409 (7,608)
Net change in assets and liabilities:
Trade accounts receivable............................................... (3,265) 3,799 7,799
Inventories............................................................. 3,891 (1,596) 3,926
Other current assets.................................................... 7,685 10,796 (11,227)
Other assets............................................................ 33 446 (392)
Accounts payable........................................................ (10,383) (2,602) 3,406
Accrued compensation and benefits....................................... (123) 1,608 1,328
Accrued other expenses.................................................. (6,765) 27,864 8,375
Income tax benefit related to stock options............................. -- -- 3,770
Income taxes payable.................................................... 1,430 (3,170) (4,321)
----------- --------- ---------
Net cash provided by (used in) operating activities........................... 50,098 1,475 (2,627)
----------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures........................................................ (17,701) (9,103) (21,123)
Purchased intangibles....................................................... (4,191) (4,632) (12,863)
Purchases of short-term, available-for-sale investments..................... (116,782) (72,043) (17,187)
Maturities of short-term, available-for-sale investments.................... 61,989 46,732 22,728
Sales of fixed assets and other............................................. -- 149 2,941
----------- --------- ---------
Net cash used in investing activities......................................... (76,685) (38,897) (25,504)
----------- --------- ---------
FINANCING ACTIVITIES:
Principal payments on long-term obligations................................. (889) (12,459) (34,726)
Borrowings under long-term obligations...................................... -- -- 59,673
Distributions to stockholders of acquired companies......................... -- -- (162)
Net proceeds from sales of common stock and other........................... 19,767 16,853 24,742
----------- --------- ---------
Net cash provided by financing activities..................................... 18,878 4,394 49,527
----------- --------- ---------
Effect of exchange rate fluctuations on cash and cash equivalents............. (2,430) (761) (632)
Increase (decrease) in cash and cash equivalents.............................. (10,139) (33,789) 20,764
Beginning cash and cash equivalents........................................... 32,911 66,700 45,936
----------- --------- ---------
Ending cash and cash equivalents.............................................. $ 22,772 $ 32,911 $ 66,700
----------- --------- ---------
----------- --------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid (net of refunds) during the year............................ $ (7,578) $ (8,777) $ 2,589
Interest paid on convertible subordinated debentures and
long-term obligations........................................................ 2,070 1,891 1,293
</TABLE>
The accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements are an integral part of these statements.
F-22
<PAGE>
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Symantec develops, markets and supports a diversified line of application
and system software products designed to enhance individual and workgroup
productivity as well as manage networked computing environments.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Symantec Corporation and its wholly-owned subsidiaries ("Symantec" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
BASIS OF PRESENTATION
During fiscal 1995, 1994 and 1993, Symantec acquired various companies in
transactions accounted for as poolings of interest. Accordingly, all financial
information has been restated to reflect the combined operations of Symantec and
the acquired companies with the exception of Intec, SLR, MultiScope and
Whitewater. The results of operations of these companies were not material to
Symantec's consolidated financial statements and, therefore, prior year amounts
were not combined with Symantec's financial statements.
Symantec has a 52/53-week fiscal accounting year. Accordingly, all
references as of and for the periods ended March 31, 1995, 1994 and 1993 reflect
amounts as of and for the periods ended March 31, 1995, April 1, 1994 and April
2, 1993, respectively.
FOREIGN CURRENCY TRANSLATION
In general, the local currency is the functional currency of the Company's
foreign subsidiaries. Assets and liabilities denominated in foreign currencies
are translated using the exchange rate on the balance sheet dates. The
cumulative translation adjustments resulting from this process are shown
separately as a component of stockholders' equity. Revenues and expenses are
translated using average exchange rates prevailing during the year. Foreign
currency transaction gains and losses are not material and are included in the
determination of net income (loss).
REVENUE RECOGNITION
Symantec recognizes revenue upon shipment when no significant vendor
obligations remain and collection of the receivable, net of provisions for
estimated future returns, is probable. Prior to fiscal 1994, Central Point
generally recognized revenue upon shipment, along with a provision for estimated
returns. Due to significant changes in the market's perception of Central
Point's long-term viability and the Agreement and Plan of Reorganization signed
by Symantec and Central Point in fiscal 1994, Central Point was no longer able
to reasonably estimate future returns from distributors and resellers. In
accordance with Statement of Financial Accounting Standards No. 48, revenue and
the related cost of revenue for 1994 for software shipments to these
distributors and resellers was deferred until sold by the distributor or
reseller to the end user. The effect of this revenue and cost of revenue
deferral was to increase the 1994 loss before provision for income taxes.
Amounts related to significant post-contract support agreements (generally
product maintenance agreements) are deferred and recognized over the period of
the agreements. The estimated cost of providing insignificant post-contract
support (generally telephone support) is accrued at the time of the sale.
In March 1994, due to the market's concerns regarding Central Point's
long-term viability and the announced acquisition of Central Point by Symantec,
Central Point was unable to reasonably estimate future product returns from its
distributors and resellers. In addition, there were high levels of inventory in
the distribution channel which had been shipped into the channel prior to the
acquisition. Central Point believed that there was a high risk of this inventory
being returned. In
F-23
<PAGE>
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accordance with Statement of Financial Accounting Standards No. 48, Central
Point revenue and the related cost of revenue for fiscal 1994 for software
shipments to Central Point's distributors and resellers was deferred until sold
by the distributors or resellers to the end user.
As a result, revenues relating to product inventory at Central Point's
distributors and resellers as of March 31, 1994 were deferred until sold by the
distributors or resellers to end users. This revenue and cost of revenue
deferral resulted in a decrease in domestic net revenues of approximately $5.0
million and international net revenues of approximately $10.0 million and an
increase in the fiscal 1994 loss before provision for income taxes of
approximately $12.3 million. Symantec's marketing and sales programs were
successful in moving the domestic deferred channel inventory through to end
users. Symantec has also been analyzing returns related to the Central Point
products for the last four quarters to determine when such products were being
sold through to end users and in the March 1995 quarter Symantec was able to
assess the remaining Central Point product returns in the domestic distribution
channel and as a result recognized approximately $3.0 million of domestic net
revenue previously deferred by Central Point.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Symantec considers investments in highly liquid instruments purchased with
an original maturity of 90 days or less to be cash equivalents. In fiscal 1995,
the Company adopted Financial Accounting Standards Board Statement No. 115
("SFAS 115"), "Accounting for Certain Investments in Debt and Equity
Securities." All of the Company's cash equivalents and short-term investments,
consisting principally of commercial paper and auction rate preferred bonds, are
classified as available-for-sale as of the balance sheet date and are reported
at fair value with unrealized gains and losses included in stockholders' equity.
Realized gains and losses and declines in value judged to be
other-than-temporary are included in interest income. The cost of securities
sold is based upon the specific identification method. In accordance with SFAS
No. 115, prior period financial statements have not been restated to reflect the
change in accounting principle. The cumulative effect of adopting SFAS No. 115
was not material to the Company's financial statements.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is principally
determined using currently adjusted standards, which approximate actual cost on
a first-in, first-out basis.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization is provided on a
straight-line basis over the estimated useful lives of the respective assets,
generally the shorter of the lease term or three to seven years.
PURCHASED INTANGIBLES
Purchased intangibles are comprised of acquired software ("product rights")
and are stated at cost less accumulated amortization. The cost of product rights
represents the fair value of various software products acquired by Symantec.
Amortization is provided on the greater of the straight-line basis over the
estimated useful lives of the respective assets, generally three to five years,
or on the basis of the ratio of current revenues to current revenues plus
anticipated future revenues.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenditures are charged to operations as incurred.
Financial accounting rules requiring capitalization of certain software
development costs have not materially affected the Company.
F-24
<PAGE>
SYMANTEC CORPORATION
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income taxes are computed in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is calculated using the treasury stock or the
modified treasury stock method, as applicable. Common stock equivalents are
attributable to outstanding stock options. Fully diluted earnings per share
includes the assumed conversion of all of the outstanding convertible
subordinated debentures.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of short-term investments and
trade accounts receivable. The Company's investment portfolio is diversified and
consists of investment grade securities. The credit risk in the Company's trade
accounts receivable is substantially mitigated by the Company's credit
evaluation process, reasonably short collection terms and the geographical
dispersion of sales transactions.
F-25
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. -- BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1995 1994
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments:
Cash................................................................................... $ 12,325 $ 15,718
Cash equivalents....................................................................... 10,447 17,193
Short-term investments................................................................. 82,416 27,623
----------- ----------
$ 105,188 $ 60,534
----------- ----------
----------- ----------
Trade accounts receivable:
Receivables............................................................................ $ 58,188 $ 52,676
Less: allowance for doubtful accounts.................................................. (4,202) (4,334)
----------- ----------
$ 53,986 $ 48,342
----------- ----------
----------- ----------
Inventories:
Raw materials.......................................................................... $ 904 $ 1,189
Finished goods......................................................................... 3,273 6,653
----------- ----------
$ 4,177 $ 7,842
----------- ----------
----------- ----------
Equipment and leasehold improvements:
Computer equipment..................................................................... $ 49,983 $ 39,804
Office furniture and equipment......................................................... 19,659 20,723
Leasehold improvements................................................................. 8,236 7,201
----------- ----------
77,878 67,728
Less: accumulated depreciation and amortization........................................ (48,998) (42,359)
----------- ----------
$ 28,880 $ 25,369
----------- ----------
----------- ----------
Purchased intangibles:
Product rights......................................................................... $ 29,583 $ 29,998
Less: accumulated amortization......................................................... (21,309) (18,770)
----------- ----------
$ 8,274 $ 11,228
----------- ----------
----------- ----------
Other accrued expenses:
Acquisition and restructuring expenses................................................. $ 8,614 $ 14,076
Deferred revenue....................................................................... 22,556 23,612
Marketing development funds............................................................ 7,706 6,438
Other.................................................................................. 12,913 13,619
----------- ----------
$ 51,789 $ 57,745
----------- ----------
----------- ----------
</TABLE>
F-26
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. -- BUSINESS COMBINATIONS AND PURCHASED PRODUCT RIGHTS
During the three fiscal years ended March 31, 1995, Symantec completed
acquisitions of the following companies:
<TABLE>
<CAPTION>
SHARES OF ACQUIRED
SYMANTEC COMPANY
COMMON STOCK OPTIONS
COMPANIES ACQUIRED DATE ACQUIRED STOCK ISSUED ASSUMED
- ------------------------------------------------------------ ----------------------- ------------ -------------
<S> <C> <C> <C>
Intec Systems Corporation ("Intec")......................... August 31, 1994 133,332 --
Central Point Software, Inc. ("Central Point").............. June 1, 1994 4,029,429 707,452
SLR Systems, Inc. ("SLR")................................... May 31, 1994 170,093 --
Fifth Generation Systems, Inc. ("Fifth Generation")......... October 4, 1993 2,769,010 --
Contact Software International, Inc. ("Contact")............ June 2, 1993 2,404,019 232,589
Certus International Corporation ("Certus")................. November 30, 1992 368,141 32,619
MultiScope, Inc. ("MultiScope")............................. September 2, 1992 253,075 125,089
The Whitewater Group, Inc. ("Whitewater")................... September 2, 1992 69,740 9,644
</TABLE>
All of these acquisitions were accounted for as poolings of interest. In
connection with the acquisitions of the companies listed above, Symantec
incurred significant acquisition expenses (See Note 10). Due to differing year
ends of Symantec, Fifth Generation, Contact and Certus, financial information
for dissimilar fiscal year ends was combined. Fifth Generation's fiscal year
ended December 31, 1992 was combined with Symantec's fiscal year ended March 31,
1993. Accordingly, Fifth Generation's results of operations for the quarter
ended March 31, 1993 were charged to stockholders' equity. Fifth Generation's
net loss of $16.4 million for the quarter ended March 31, 1993 was largely due
to the decline in net revenues to $1.9 million and the write-off of previously
capitalized software costs. Contact's fiscal years ended June 30, 1993 and 1992
were combined with Symantec's fiscal years ended March 31, 1993 and 1992,
respectively. Accordingly, Contact's results for the quarter ended June 30, 1992
were duplicated in the combined statements of operations for fiscal 1993 and
1992 and Contact's net loss for the quarter ended June 30, 1992, was credited to
stockholders' equity. Contact's net revenues for the quarter ended June 30, 1992
were $3.4 million. Certus' fiscal year ended December 31, 1991 was combined with
Symantec's fiscal year ended March 31, 1992. Accordingly, Certus' results of
operations for the quarter ended March 31, 1992 were charged to stockholders'
equity. Certus' net revenues for the quarter ended March 31, 1992 were $0.8
million.
In addition, during the year ended March 31, 1994, Central Point acquired
Executive Systems, Inc. ("XTree"), which was accounted for as a pooling of
interest. Due to differing fiscal year ends of Central Point and XTree,
financial information related to XTree's fiscal year ended September 30, 1992,
was combined with financial information related to Central Point's year ended
March 31, 1993. Accordingly, XTree's results of operations for the six months
ended March 31, 1993, were charged to stockholders' equity. XTree reported net
revenues of $6.9 million and a net loss of $1.0 million for the six months ended
March 31, 1993.
F-27
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. -- BUSINESS COMBINATIONS AND PURCHASED PRODUCT RIGHTS (CONTINUED)
The table below sets forth the composition of combined net revenues and net
income (loss) for the pre-acquisition periods indicated. Information for the
year ended March 31, 1995 with respect to Central Point reflects the two months
ended June 1, 1994, the date Central Point was acquired. Net revenues and net
income (loss) of Intec and SLR for the pre-acquisition periods were immaterial.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues:
Symantec................................................................. $ 321,381 $ 267,700 $ 257,541
Central Point............................................................ 13,486 60,599 87,085
----------- ----------- -----------
$ 334,867 $ 328,299 $ 344,626
----------- ----------- -----------
----------- ----------- -----------
Net income (loss):
Symantec................................................................. $ 25,849 $ (11,112) $ (28,603)
Central Point............................................................ 2,651 (45,855) (10,492)
----------- ----------- -----------
$ 28,500 $ (56,967) $ (39,095)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
On December 31, 1993, Symantec acquired certain technology for developing an
architecture and tools to build client-server applications from DataEase
International, Inc. in exchange for 391,456 shares of Symantec common stock and
cancellation of the principal and accrued interest on a $1.0 million outstanding
note receivable. The Company capitalized approximately $7.7 million of purchased
product rights as a result of this transaction.
NOTE 3. -- CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
All cash equivalents and short-term investments have been classified as
available-for-sale securities and as of March 31, 1995 consisted of the
following:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Tax-exempt commercial paper and agency discount notes............. $ 7,452 $ -- $ -- $ 7,452
Auction-rate preferred securities................................. 5,033 -- 1 5,032
Taxable commercial paper.......................................... 80,368 11 -- 80,379
------- ----- ----- ----------
$92,853 $ 11 $ 1 $ 92,863
------- ----- ----- ----------
------- ----- ----- ----------
</TABLE>
All of the Company's available-for-sale securities as of March 31, 1995 have
a contractual maturity of one year or less. For the year ended March 31, 1995,
there were no material sales of available-for-sale securities. Fair values of
cash, cash equivalents and short-term investments approximate cost due to the
short period to maturity.
Symantec utilizes some natural hedging to mitigate the Company's transaction
exposures and effective December 31, 1993, the Company commenced hedging some
residual transaction exposures through the use of 30-day foreign exchange
forward contracts. The Company enters into foreign exchange forward contracts
with financial institutions primarily to protect against currency exchange risks
associated with certain firmly committed transactions. Fair value of foreign
exchange forward contracts are based on quoted market prices. At March 31, 1995
there was a total notional amount of approximately $30.0 million of outstanding
foreign exchange forward contracts all of which were less
F-28
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. -- CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS (CONTINUED)
than 30 days old. The net liability of forward contracts was a notional amount
of approximately $12.3 million at March 31, 1995. Fair value of foreign currency
exchange forward contracts approximate cost due to the short period to maturity.
The Company does not hedge its translation risk.
The estimated fair value of the $25.0 million convertible subordinated
debentures, was approximately $49.0 million at March 31, 1995. The estimated
fair value was based on the total shares of common stock reserved for issuance
upon conversion of the debentures at the closing price of the Company's common
stock at March 31, 1995.
NOTE 4. -- CONVERTIBLE SUBORDINATED DEBENTURES
On April 2, 1993, the Company issued convertible subordinated debentures
totaling $25.0 million. The debentures bear interest at 7.75% payable
semiannually and are convertible into Symantec common stock at $12 per share at
the option of the investor. The debentures are due in three equal annual
installments beginning in 1999 and are redeemable at the option of the investors
in the event of a change in control of Symantec or the sale of all or
substantially all of the assets of the Company or at the option of the Company
at the face amount plus interest should the Company's then current stock price
meet or exceed $16.80 per share. The holders are entitled to certain
registration rights relating to the shares of common stock resulting from the
conversion of the debentures. The Company has reserved 2,083,333 shares of
common stock to be issued upon conversion of these debentures. The debentures
limit the payment of cash dividends and the repurchase of capital stock to a
total of $10.0 million plus 25% of cumulative net income subsequent to April 2,
1993.
On April 26, 1995, convertible subordinated debentures totaling $10.0
million were converted into 833,333 shares of Symantec common stock.
NOTE 5. -- LINE OF CREDIT
The Company has a $10.0 million bank line of credit that expires in October
1995. The line of credit is available for general corporate purposes and bears
interest at the banks' reference (prime) interest rate (9.0% at March 31, 1995),
the U.S. offshore rate plus 1.5%, a CD rate plus 1.5% or LIBOR plus 1.5%, at the
Company's discretion. The line of credit requires bank approval for the payment
of cash dividends. Borrowings under this line are unsecured and are subject to
the Company maintaining certain financial ratios and profits. The Company was in
compliance with the line of credit covenants as of March 31, 1995. At March 31,
1995, there was approximately $0.5 million of standby letters of credit
outstanding under this line of credit. There were no borrowings outstanding
under this line at March 31, 1995.
NOTE 6. -- COMMITMENTS
Symantec leases all of its facilities and certain equipment under operating
leases that expire at various dates through 2026.
F-29
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. -- COMMITMENTS (CONTINUED)
The future fiscal year minimum operating lease commitments were as follows
at March 31, 1995:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------
<S> <C>
1996......................................... $ 9,605
1997......................................... 8,000
1998......................................... 6,169
1999......................................... 3,014
2000......................................... 1,004
Thereafter................................... 7,017
-----------------
$ 34,809
-----------------
-----------------
</TABLE>
Rent expense charged to operations totaled $7.8 million, $8.6 million and
$8.8 million for the years ended March 31, 1995, 1994 and 1993, respectively.
NOTE 7. -- INCOME TAXES
The components of the provision (benefit) for income taxes were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1995 1994 1993
--------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal....................................................................... $ -- $ (9,371) $ (8,900)
State......................................................................... 100 60 (554)
Foreign....................................................................... 1,737 818 935
--------- --------- ----------
1,837 (8,493) (8,519)
Deferred:
Federal....................................................................... 6,306 1,925 (6,641)
State......................................................................... 1,730 (450) (1,072)
Foreign....................................................................... -- 8 (24)
--------- --------- ----------
8,036 1,483 (7,737)
--------- --------- ----------
$ 9,873 $ (7,010) $ (16,256)
--------- --------- ----------
--------- --------- ----------
</TABLE>
The difference between the Company's effective income tax rate and the
federal statutory income tax rate as a percentage of income (loss) before income
taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- ----------- -----------
Federal statutory rate....................................................... 35.0% (34.0)% (34.0)%
State taxes, net of federal benefit.......................................... 3.1 (2.3) (2.0)
Non-deductible acquisition expenses.......................................... 3.0 2.0 0.8
Benefit of preacquisition losses of Central Point............................ (7.8) -- --
Impact of foreign operations................................................. (8.7) 0.4 3.3
Current year losses not benefited............................................ -- 21.9 1.1
Other, net................................................................... 1.1 1.0 1.4
----- ----------- -----------
25.7% (11.0)% (29.4)%
----- ----------- -----------
----- ----------- -----------
</TABLE>
F-30
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. -- INCOME TAXES (CONTINUED)
The principal components of deferred tax assets were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Tax credit carryforwards................................................................. $ 6,228 $ 3,485
Net operating loss carryforwards......................................................... 14,123 13,726
Inventory valuation accounts............................................................. 1,122 1,920
Other reserves and accruals not currently tax deductible................................. 3,756 3,866
Accrued compensation and benefits........................................................ 1,744 2,541
Deferred revenue......................................................................... 2,960 6,176
Sales incentive programs................................................................. 968 3,187
Allowance for doubtful accounts.......................................................... 825 1,037
Acquired software........................................................................ 3,563 3,621
Accrued acquisition, restructuring and other expenses.................................... 2,264 5,337
Other.................................................................................... 1,300 2,392
---------- ----------
38,853 47,288
Valuation allowance...................................................................... (28,914) (29,313)
---------- ----------
$ 9,939 $ 17,975
---------- ----------
---------- ----------
</TABLE>
Approximately $11.1 million of the valuation allowance for deferred tax
assets is attributable to stock option deductions, the benefit of which will be
credited to equity when realized. The remaining portion of the valuation
allowance is comprised primarily of $14.7 million for Central Point
preacquisition losses and $3.1 million for net operating loss and tax credit
carryforwards of other acquired companies that are limited under the "change of
ownership" rules of Internal Revenue Code Section 382. The change in the
valuation allowance for the years ended March 31, 1995 and 1994 was a net
decrease of $0.4 million and a net increase of $27.4 million, respectively.
Pretax income (loss) from foreign operations was approximately $22.3
million, $10.0 million and $(4.6) million for the years ended March 31, 1995,
1994 and 1993, respectively.
At March 31, 1995, the Company had tax credit carryforwards of $6.2 million
that expire in fiscal 1997 through 2010 and net operating loss carryforwards of
$35.3 million that expire in fiscal 1999 through 2010.
NOTE 8. -- EMPLOYEE BENEFITS
401(k) Plan Symantec maintains a salary deferral 401(k) plan for all of its
domestic employees. The plan allows employees to contribute up to 15% of their
pretax salary up to the maximum dollar limitation prescribed by the Internal
Revenue Code. Symantec matches 50% of employees' contributions up to 6% of the
employees' contribution. Company contributions under the plan were $1.2 million,
$1.1 million and $0.8 million for the years ended March 31, 1995, 1994 and 1993,
respectively.
STOCK PURCHASE PLAN In October 1989, the Company established the 1989
Employee Stock Purchase Plan and has reserved 1.1 million shares of common stock
for issuance under the plan. During fiscal 1995, Symantec shareholders approved
an increase in the number of shares reserved for issuance under the Stock
Purchase Plan from 1.1 million to 1.5 million. Subject to certain limitations,
Symantec employees may purchase, through payroll deductions of 2 to 10% of
compensation, shares of
F-31
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. -- EMPLOYEE BENEFITS (CONTINUED)
common stock at a price per share that is the lesser of 85% of the fair market
value as of the beginning of the offering period or the end of the purchase
period. As of March 31, 1995, 1.0 million shares had been issued under the plan.
STOCK OPTION PLANS The Company has reserved 13.8 million shares of its
common stock for issuance as incentive and nonqualified stock options to
employees, officers, directors, consultants and independent contractors,
including an increase of 4.0 million shares approved in fiscal 1995 by
Symantec's stockholders for issuance under the 1988 Employees Stock Option Plan.
Options under the Company's option plans may be granted at prices not less than
100% of fair market value on the date of grant, have a maximum term of ten years
and generally vest over a four-year period. In addition, the Company has
reserved an additional 0.6 million shares of its common stock for issuance under
acquired company option plans and acquired company warrants.
During September 1992 the Board of Directors authorized the Company to offer
to each employee with stock options having an exercise price greater than $11
(the "Old Options") the opportunity to amend the terms of the Old Options and
reduce the exercise price to $11 per share (the fair market value of the
Company's stock as of the offer date). Under the terms of this stock option
repricing, no portion of any repriced option (the "Repriced Options") could be
exercised until September 23, 1993 and each Repriced Option was converted to a
nonqualified stock option. Options representing 3,128,290 shares of common stock
were repriced. The President and Chief Executive Officer, the Executive Vice
President, Worldwide Operations, and Chief Financial Officer and the members of
the Board of Directors elected to exclude themselves from this stock option
repricing.
F-32
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. -- EMPLOYEE BENEFITS (CONTINUED)
Stock option and warrant activity was as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE
OF SHARES PRICE PER SHARE
----------- ------------------
(IN THOUSANDS, EXCEPT EXERCISE
PRICE PER SHARE)
<S> <C> <C>
Outstanding at March 31, 1992............................................ 6,096 $ 0.05 - $54.95
Granted................................................................ 2,691 3.14 - 64.65
Exercised.............................................................. (658) 0.07 - 54.95
Cancelled.............................................................. (1,456) 1.00 - 64.65
-----------
Outstanding at March 31, 1993............................................ 6,673 0.05 - 64.65
Granted................................................................ 3,362 0.07 - 21.01
Exercised.............................................................. (1,347) 0.05 - 21.01
Cancelled.............................................................. (1,125) 0.05 - 64.65
-----------
Outstanding at March 31, 1994............................................ 7,563 0.05 - 64.65
Granted................................................................ 2,971 10.06 - 23.75
Exercised.............................................................. (1,554) 0.05 - 21.01
Cancelled.............................................................. (1,439) 0.50 - 64.65
-----------
Outstanding at March 31, 1995............................................ 7,541 0.50 - 54.95
-----------
-----------
<CAPTION>
MARCH 31,
-------------------------------
1995 1994
----------- -------
(IN THOUSANDS)
<S> <C> <C>
Balances are as follows:
Reserved for issuance............................................................... 9,893 7,752
Available for future grants......................................................... 2,352 189
Exercisable and vested.............................................................. 3,335 3,120
Exercised, subject to repurchase.................................................... 1 1
</TABLE>
NOTE 9. -- RELATED PARTY TRANSACTIONS
As part of the acquisition of Peter Norton Computing, Incorporated
("Norton") in fiscal 1991, Symantec assumed Norton's perpetual exclusive license
agreement with Mr. Norton, a member of Symantec's Board of Directors until his
resignation on September 27, 1994, to use his name and image for computer
software products. Under the terms of the license, Mr. Norton is entitled to
receive a royalty equal to the greater of 1% of net sales or 0.4% of the
suggested retail price of products bearing Mr. Norton's name. Mr. Norton may
terminate the agreement if Symantec fails to pay Mr. Norton an average of at
least $30,000 of royalties in any three consecutive years. Royalty expense under
the agreement was $1.9 million, $1.6 million and $1.4 million for the years
ended March 31, 1995, 1994 and 1993, respectively.
Additionally, in connection with certain indemnification agreements entered
into as part of the acquisition of Norton, Mr. Norton agreed to reimburse
Symantec for certain litigation and acquisition costs in excess of specified
amounts.
The net amount payable to Mr. Norton pursuant to these agreements at March
31, 1995 and 1994 was $0.3 million and $0.9 million, respectively.
F-33
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. -- ACQUISITION, RESTRUCTURING AND OTHER EXPENSES
Acquisition, restructuring and other expense consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
SLR acquisition................................................................. $ 545 $ -- $ --
Central Point acquisition....................................................... 9,000 -- --
Fifth Generation acquisition.................................................... -- 15,000 --
Contact acquisition............................................................. -- 7,400 --
XTree acquisition............................................................... -- 3,514 --
Certus acquisition.............................................................. -- -- 3,000
Whitewater acquisition.......................................................... -- -- 1,648
MultiScope acquisition.......................................................... -- -- 452
Centralization and restructuring expense........................................ -- 4,700 4,400
Central Point restructuring charges............................................. -- 16,025 673
Purchased in-process research and development................................... -- 2,955 --
Class action lawsuit settlement................................................. -- 6,500 --
Civil lawsuit and related criminal legal fees................................... -- -- 2,600
--------- --------- ---------
Total acquisition, restructuring and other expenses............................. $ 9,545 $ 56,094 $ 12,773
--------- --------- ---------
--------- --------- ---------
</TABLE>
On August 31, 1994, Symantec completed the acquisition of Intec Systems
Corporation ("Intec"). No significant acquisition expenses related to the
combination of Symantec and Intec were incurred.
In connection with the acquisitions of Central Point and SLR (See Notes 2
and 10), Symantec recorded total acquisition charges of $9.5 million in fiscal
1995. The charges included $3.2 million for legal, accounting and financial
advisory services, $1.0 million for the write-off of duplicative product-related
expenses and modification of certain development contracts, $0.9 million for the
elimination of duplicative and excess facilities, $3.1 million for personnel
severance and outplacement expenses, and $1.3 million for the consolidation and
discontinuance of certain operational activities and other acquisition related
expenses.
In connection with the acquisitions of Fifth Generation and Contact by
Symantec and the acquisition of XTree by Central Point (See Notes 2 and 10), the
Company recorded total charges of $25.9 million in fiscal 1994. The charges
included $4.3 million for legal, accounting and financial advisory services,
$7.6 million for the write-off of duplicative product related expenses and
modification of certain development contracts, $3.6 million for the elimination
of duplicative and excess facilities, $5.3 million for personnel severance and
outplacement expenses, and $5.1 million for the consolidation and discontinuance
of certain operational activities and other acquisition related expenses.
In connection with the acquisitions of Certus, Whitewater and MultiScope in
fiscal 1993 (See Notes 2 and 10), Symantec incurred significant acquisition
expenses for legal, accounting and financial advisory services and expenses
related to the combination of the companies, including the elimination of
duplicative and excess facilities and personnel. These expenses approximated
$5.1 million in fiscal 1993.
During fiscal 1994, Symantec implemented a plan to consolidate and
centralize certain operational activities. The plan was designed to reduce
operating expenses and enhance operational efficiencies by centralizing certain
order administration, technical support and customer service activities in
Eugene, Oregon. The Company recorded a charge of $4.7 million which included
$1.1
F-34
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. -- ACQUISITION, RESTRUCTURING AND OTHER EXPENSES (CONTINUED)
million for the elimination of duplicative and excess facility expenses, $1.5
million for the relocation of the Company's existing operations and equipment,
$1.1 million for employee relocation expenses and $1.0 million for employee
severance payments. The Company's centralization has been completed.
During fiscal 1994, Central Point incurred $16.0 million of expenses related
to the restructuring of its operations in order to reduce its overall cost
structure and to redirect its software development and marketing efforts away
from the personal desktop computer market toward personal computer network
markets. The charge included $6.2 million for employee severance, outplacement
and relocation expenses, $5.6 million for the write-off of certain excess fixed
and intangible assets, $1.8 million for lease abandonments and facility
relocation and $2.4 million for the consolidation and discontinuance of certain
operational activities and other related expenses. Of the total charges, $5.9
million resulted from the write-off of assets and $10.1 million involved cash
outflows. This restructuring has been substantially completed.
During fiscal 1993, Symantec recorded a $4.4 million charge for expenses
relating to the restructuring of certain operational functions within the
Company. The plan was designed to reduce operating expenses and reallocate
resources from DOS products to Windows and Development Tools products. This
charge included $1.0 million for the elimination of excess facilities, $0.4
million for the relocation of certain employees and $3.0 million for
outplacement expenses and severance payments associated with the reduction in
staffing. This restructuring has been completed.
During fiscal 1993, Central Point incurred $0.7 million of charges related
to the restructuring of its operations, including the sale of its manufacturing
operation, personnel relocation and severance, and the write-off of certain
property and equipment. This restructuring has been completed.
As of March 31, 1995, total accrued acquisition and restructuring expenses
were $8.6 million and included $1.1 million for the modification of certain
development contracts, $1.4 million for the elimination of duplicative and
excess facilities, $1.3 million for employee severance, outplacement and
relocation expenses and $4.8 million for the consolidation and discontinuance of
certain operational activities and other acquisition related expenses.
During fiscal 1994, Central Point purchased from unrelated parties certain
in-process software technologies for approximately $3.0 million which was
immediately expensed.
During fiscal 1994, Symantec reached an agreement with the plaintiffs and
Symantec's insurance carriers to settle two securities class action lawsuits and
a related derivative lawsuit brought by stockholders of Symantec. The combined
settlement amount of the cases was $19.0 million, approximately $12.5 million of
which was paid by Symantec's insurance carriers. Symantec recorded a charge of
$6.5 million representing Symantec's portion of the class action settlement.
During fiscal 1993, the Company recorded a $2.6 million charge for estimated
total legal fees expected to be incurred in connection with the Borland civil
lawsuit and the related criminal prosecution (See Note 11).
NOTE 11. -- LITIGATION
On May 19, 1995, Personal Computer Peripherals Corporation ("PCPC") filed a
lawsuit in the U.S. District Court for the District of Delaware against Symantec
and five other companies, alleging that the defendants' products for backing up
data on a computer network infringe a patent held by PCPC. The complaint seeks
an injunction preventing the sale of infringing products. Symantec believes that
the complaint has no merit.
F-35
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. -- LITIGATION (CONTINUED)
On December 30, 1994, Software Engineering Carmel ("Carmel") filed a lawsuit
in the U.S. District Court for the District of Oregon against Central Point, a
wholly owned subsidiary of the Company. Carmel developed and maintains the
anti-virus program distributed by Central Point. The complaint alleges that
Central Point breached its contract with Carmel by not fulfilling an implied
obligation under the contract to use its best efforts or, alternatively, its
reasonable efforts to market the anti-virus program developed by Carmel. The
complaint also alleges that Central Point violated the non-competition provision
in its agreement, by selling a competing anti-virus program, apparently based on
Symantec's sale of its own anti-virus product. The complaint seeks damages in
the amount of $6.75 million and a release of Carmel from its obligation not to
sell competing products. Symantec believes the complaint has no merit.
On September 3, 1992, Borland International, Inc. ("Borland") filed a
lawsuit in the Superior Court for Santa Cruz County, California against
Symantec, Gordon E. Eubanks, Jr. (Symantec's President and Chief Executive
Officer) and Eugene Wang (an Executive Vice President of Symantec who is a
former employee of Borland). The complaint, as amended, alleges misappropriation
of trade secrets, unfair competition, inducing breach of contract, interference
with prospective economic advantage and unjust enrichment. Borland alleged that
prior to joining Symantec, Mr. Wang transmitted to Mr. Eubanks confidential
information concerning Borland's product and marketing plans. Borland claims
damages in an unspecified amount. Symantec has denied the allegations of
Borland's complaint and contends that Borland has suffered no damages from the
alleged actions. Borland obtained a temporary restraining order and a
preliminary injunction prohibiting the defendants from using, disseminating or
destroying any Borland proprietary information or trade secrets. Symantec filed
a cross complaint against Borland alleging that Borland had committed abuse of
process and defamation in publishing statements that Symantec had acted in
contempt of a temporary restraining order. The case is not being actively
prosecuted at this time pending the outcome of the criminal proceedings,
discussed below. Symantec believes the claims have no merit.
On September 2, 1992, the Scotts Valley, California police department,
operating with search warrants for Borland proprietary and trade secret
information, searched Symantec's offices and the homes of Messrs. Eubanks and
Wang and removed documents and other materials. On February 26, 1993, criminal
indictments were filed against Messrs. Eubanks and Wang for allegedly violating
various California Penal Code Sections relating to the misappropriation of trade
secrets and unauthorized access to a computer system. On August 23, 1993, the
Court recused the District Attorney's Office from prosecution of the action. On
October 5, 1993, the State Attorney General and the District Attorney's Office
filed a Notice of Appeal of the Order. The matter is still pending in the
appellate court. Symantec believes the criminal charges against Messrs. Eubanks
and Wang have no merit.
On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a
wholly-owned subsidiary of Symantec, commenced an action against EKD Computer
Sales & Supplies Corporation ("EKD"), a former licensee of DMA and Thomas Green,
a principal of EKD, for copyright infringement, violations of the Lanham Act,
trademark infringement, misappropriation, deceptive acts and practices and
unfair competition and breach of contract. On July 14, 1992, the Suffolk County
sheriff's department conducted a search of EKD's premises and seized and
impounded thousands of infringing articles. On July 21, 1992, the Court issued a
preliminary injunction against EKD and Mr. Green, enjoining them from
manufacturing, marketing, distributing, copying or purporting to license DMA's
pcANYWHERE III or using DMA's marks.
On July 20, 1992 and in a subsequent amendment, EKD and Mr. Green answered
Symantec's complaint denying all liability and asserting counterclaims against
Symantec and Lee Rautenberg, a
F-36
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. -- LITIGATION (CONTINUED)
former principal of DMA. In May 1993, EKD and Mr. Green were granted permission
to file a Second Amended Answer and counterclaims that dropped every previously
raised claim and now allege that DMA obtained the temporary restraining order
and preliminary injunction in bad faith and that DMA, Symantec and Mr.
Rautenberg breached certain license agreements and violated certain federal and
New York State antitrust laws. In February 1995, DMA was granted leave to file
an Amended Complaint, which EKD subsequently responded to by a Third Amended
Answer and Counterclaims virtually identical to EKD's Second Amended pleading.
Symantec believes the charges made by EKD and Mr. Green have no merit.
Subsequent to the acquisition of DMA by Symantec, Peter Byer, a former sales
and marketing employee of DMA, filed a lawsuit in the Supreme Court of the State
of New York against DMA, Symantec and Lee Rautenberg (who was formerly President
of DMA). The lawsuit alleges that Peter Byer was orally promised an 8% equity
interest in DMA in connection with his performance of services, that he was
underpaid commissions under DMA's commission plan, and that DMA was unjustly
enriched because it paid Mr. Byer less than the fair value of his services. The
lawsuit seeks damages of at least $5.3 million. Symantec believes the charges
have no merit. Furthermore, Mr. Rautenberg and the other stockholders of DMA
have an obligation to indemnify Symantec for any liabilities resulting from this
action.
Symantec is involved in other judicial and administrative proceedings
incidental to its business. The Company intends to defend all of the
aforementioned pending lawsuits vigorously and although an adverse decisions (or
settlements) may occur in one or more of the cases, the final resolution of
these lawsuits, individually or in the aggregate, is not expected to have a
material adverse effect on the financial position of the Company. However,
depending on the amount and timing of an unfavorable resolution of these
lawsuits, it is possible that the Company's future results of operations or cash
flows could be materially adversely affected in a particular period.
NOTE 12. -- SEGMENT INFORMATION
Symantec operates in the microcomputer software industry business segment.
The Company markets its products in the United States and in foreign countries
primarily through retail and distribution channels.
F-37
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. -- SEGMENT INFORMATION (CONTINUED)
INFORMATION BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues:
Domestic operations:
Domestic customers..................................................... $ 219,259 $ 219,032 $ 237,822
Foreign customers...................................................... 16,977 33,504 40,382
Intercompany........................................................... 1,393 496 180
----------- ----------- -----------
237,629 253,032 278,384
Foreign operations:
Customers.............................................................. 98,631 75,763 66,422
Intercompany........................................................... 65 58 101
----------- ----------- -----------
98,696 75,821 66,523
Eliminations............................................................. (1,458) (554) (281)
----------- ----------- -----------
$ 334,867 $ 328,299 $ 344,626
----------- ----------- -----------
----------- ----------- -----------
Operating income (loss):
Domestic operations...................................................... $ 15,625 $ (72,198) $ (49,528)
Foreign operations....................................................... 22,299 9,984 (4,447)
Eliminations............................................................. (793) (305) (21)
----------- ----------- -----------
$ 37,131 $ (62,519) $ (53,996)
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
MARCH 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Identifiable assets:
Domestic operations...................................................... $ 179,487 $ 152,880 $ 194,196
Foreign operations....................................................... 41,828 35,912 36,698
----------- ----------- -----------
$ 221,315 $ 188,792 $ 230,894
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Intercompany sales between geographic areas are accounted for at prices
representative of unaffiliated party transactions.
SIGNIFICANT CUSTOMERS
The following customers accounted for more than 10% of net revenues during
fiscal 1995, 1994 and 1993:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------
<S> <C> <C> <C>
1995 1994 1993
----- ----- -----
Ingram Micro D............................................................................. 22% 17% 15%
Merisel.................................................................................... 11 13 13
</TABLE>
F-38
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and short-term investments...................................................... $ 113,725 $ 105,188
Trade accounts receivable............................................................ 49,525 53,986
Inventories.......................................................................... 3,313 4,177
Deferred income taxes................................................................ 8,172 9,939
Other................................................................................ 5,858 6,339
----------- -----------
Total current assets............................................................... 180,593 179,629
Equipment and leasehold improvements................................................... 31,703 28,880
Purchased intangibles.................................................................. 7,684 8,274
Other.................................................................................. 4,785 4,532
----------- -----------
$ 224,765 $ 221,315
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable..................................................................... $ 16,225 $ 17,919
Accrued compensation and benefits.................................................... 10,840 12,347
Other accrued expenses............................................................... 40,208 51,789
Income taxes payable................................................................. 2,886 2,006
Current portion of long-term obligations............................................. 464 524
----------- -----------
Total current liabilities.......................................................... 70,623 84,585
Convertible subordinated debentures.................................................... 15,000 25,000
Long-term obligations.................................................................. 293 408
Commitments and contingencies
Stockholders' equity:
Preferred stock (authorized: 1,000 shares; issued and outstanding: none)............. -- --
Common stock (authorized: 70,000; issued and outstanding: 38,599 and 37,175
shares)............................................................................. 386 372
Capital in excess of par value....................................................... 193,772 177,418
Notes receivable from stockholders................................................... (144) (144)
Cumulative translation adjustment.................................................... (3,401) (2,860)
Accumulated deficit.................................................................. (51,764) (63,464)
----------- -----------
Total stockholders' equity......................................................... 138,849 111,322
----------- -----------
$ 224,765 $ 221,315
----------- -----------
----------- -----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-38
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
1995 1994
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA; UNAUDITED)
<S> <C> <C>
Net revenues............................................................................... $ 90,109 $ 83,113
Cost of revenues........................................................................... 14,915 16,653
--------- ---------
Gross margin............................................................................. 75,194 66,460
Operating expenses:
Research and development................................................................. 18,576 14,883
Sales and marketing...................................................................... 38,366 35,990
General and administrative............................................................... 4,849 4,437
Acquisition and restructuring expenses................................................... (71) 9,545
--------- ---------
Total operating expenses............................................................... 61,720 64,855
--------- ---------
Operating income........................................................................... 13,474 1,605
Interest income............................................................................ 1,625 553
Interest expense........................................................................... (439) (558)
Other income (expense), net................................................................ (36) (125)
--------- ---------
Income before income taxes................................................................. 14,624 1,475
Provision for income taxes................................................................. 2,924 428
--------- ---------
Net income................................................................................. $ 11,700 $ 1,047
--------- ---------
--------- ---------
Net income per share -- primary............................................................ $ 0.29 $ 0.03
--------- ---------
--------- ---------
Net income per share -- fully diluted...................................................... $ 0.28 $ 0.03
--------- ---------
--------- ---------
Shares used to compute net income per share -- primary..................................... 40,603 35,941
--------- ---------
--------- ---------
Shares used to compute net income per share -- fully diluted............................... 42,381 35,941
--------- ---------
--------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-39
<PAGE>
SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
----------------------
1995 1994
---------- ----------
(IN THOUSANDS;
UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................................. $ 11,700 $ 1,047
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of equipment and
leasehold improvements................................................................ 3,914 3,381
Amortization and write-off of capitalized software costs............................... 935 2,151
Deferred income taxes.................................................................. 1,767 156
Net change in assets and liabilities:
Trade accounts receivable............................................................ 4,463 7,851
Inventories.......................................................................... 868 2,461
Other current assets................................................................. 449 (1,088)
Other assets......................................................................... 52 55
Accounts payable..................................................................... (1,645) (10,920)
Accrued compensation and benefits.................................................... (1,485) (2,727)
Accrued other expenses............................................................... (11,566) 3,675
Income taxes payable................................................................. 908 139
---------- ----------
Net cash provided by operating activities................................................ 10,360 6,181
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures................................................................... (6,809) (2,595)
Purchased intangibles.................................................................. (655) (1,286)
Purchases of short-term investments.................................................... (31,000) (22,320)
Proceeds from sales of short-term investments.......................................... 25,158 10,800
---------- ----------
Net cash used in investing activities.................................................... (13,306) (15,401)
---------- ----------
FINANCING ACTIVITIES:
Principal payments on long-term obligations............................................ (173) (238)
Net proceeds from sales of common stock and other...................................... 6,368 3,068
---------- ----------
Net cash provided by financing activities................................................ 6,195 2,830
---------- ----------
Effect of exchange rate fluctuations on cash and cash equivalents........................ (554) (948)
---------- ----------
Increase (decrease) in cash and cash equivalents......................................... 2,695 (7,338)
Beginning cash and cash equivalents...................................................... 22,772 32,911
---------- ----------
Ending cash and cash equivalents......................................................... $ 25,467 $ 25,573
---------- ----------
---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
F-40
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. -- BASIS OF PRESENTATION
The consolidated financial statements of Symantec Corporation ("Symantec" or
the "Company") as of June 30, 1995 and for the three months ended June 30, 1995
and 1994 are unaudited and, in the opinion of management, contain all
adjustments, consisting of only normal recurring items necessary for the fair
presentation of the financial position and results of operations for the interim
periods. These consolidated financial statements should be read in conjunction
with the Consolidated Financial Statements and notes thereto included in
Symantec's Annual Report on Form 10-K, as amended, for the year ended March 31,
1995. The results of operations for the three months ended June 30, 1995 are not
necessarily indicative of the results to be expected for the entire year.
Symantec has a 52/53-week fiscal accounting year. Accordingly, all
references as of and for the periods ended June 30, 1995 and 1994 reflect
amounts as of and for the periods ended June 30, 1995 and July 1, 1994,
respectively.
F-41
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. -- BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
------------ ------------
(IN THOUSANDS; UNAUDITED)
<S> <C> <C>
Cash and short-term investments:
Cash................................................................................ $ 13,090 $ 12,325
Cash equivalents.................................................................... 12,377 10,447
Short-term investments.............................................................. 88,258 82,416
------------ ------------
$ 113,725 $ 105,188
------------ ------------
------------ ------------
Trade accounts receivable:
Receivables......................................................................... $ 53,726 $ 58,188
Less: allowance for doubtful accounts............................................... (4,201) (4,202)
------------ ------------
$ 49,525 $ 53,986
------------ ------------
------------ ------------
Inventories:
Raw materials....................................................................... $ 1,392 $ 904
Finished goods...................................................................... 1,921 3,273
------------ ------------
$ 3,313 $ 4,177
------------ ------------
------------ ------------
Equipment and leasehold improvements:
Computer equipment.................................................................. $ 55,535 $ 49,983
Office furniture and equipment...................................................... 20,080 19,659
Leasehold improvements.............................................................. 8,923 8,236
------------ ------------
84,538 77,878
Less: accumulated depreciation and amortization..................................... (52,835) (48,998)
------------ ------------
$ 31,703 $ 28,880
------------ ------------
------------ ------------
Purchased intangibles:
Product rights...................................................................... $ 30,692 $ 29,583
Less: accumulated amortization...................................................... (23,008) (21,309)
------------ ------------
$ 7,684 $ 8,274
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1995 1995
------------ ------------
(IN THOUSANDS; UNAUDITED)
<S> <C> <C>
Other accrued expenses:
Acquisition and restructuring expenses.............................................. $ 5,182 $ 8,614
Deferred revenue.................................................................... 14,728 22,556
Marketing development funds......................................................... 8,347 7,706
Other............................................................................... 11,951 12,913
------------ ------------
$ 40,208 $ 51,789
------------ ------------
------------ ------------
</TABLE>
NOTE 3. -- LINE OF CREDIT
The Company has a $10.0 million bank line of credit that expires in October
1995. The line of credit is available for general corporate purposes and bears
interest at the banks' reference (prime) interest rate (9.0% at June 30, 1995),
the U.S. offshore rate plus 1.5%, a CD rate plus 1.5% or LIBOR plus 1.5%, at the
Company's discretion. The line of credit requires bank approval for the payment
of cash dividends. Borrowings under this line are unsecured and are subject to
the Company maintaining certain financial ratios and profits. The Company was in
compliance with the line of credit covenants
F-42
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. -- LINE OF CREDIT (CONTINUED)
as of June 30, 1995. At June 30, 1995, there was approximately $0.5 million of
standby letters of credit outstanding under this line of credit. There were no
borrowings outstanding under this line at June 30, 1995.
NOTE 4. -- ACQUISITION AND RESTRUCTURING EXPENSES
Acquisition and restructuring expenses consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Relocation of certain research and development activities......................... $ 2,229 $ --
Central Point acquisition......................................................... (2,300) 9,000
SLR acquisition................................................................... -- 545
--------- ---------
Total acquisition and restructuring expenses.................................... $ (71) $ 9,545
--------- ---------
--------- ---------
</TABLE>
During February 1995, Symantec announced a plan to consolidate certain
research and development activities. This plan is designed to gain greater
synergy between the Company's Third Generation Language and Fourth Generation
Language development groups. During the quarter ended June 30, 1995, the Company
incurred $2.2 million for the relocation costs of moving equipment and
personnel. The Company expects to incur remaining costs of $1.8 to $2.8 million
for the relocation of the Company's existing research and development
activities, equipment and personnel from Shelton, Connecticut to Cupertino,
California. The Company expects to complete this relocation by December 1995.
In connection with the acquisitions of Central Point Software, Inc.
("Central Point") and SLR Systems, Inc. ("SLR"), Symantec recorded total
acquisition charges of $9.5 million in the quarter ended June 30, 1994. The
charges included $3.2 million for legal, accounting and financial advisory
services, $1.0 million for the write-off of duplicative product-related expenses
and modification of certain development contracts, $0.9 million for the
elimination of duplicative and excess facilities, $3.1 million for personnel
severance and outplacement expenses, and $1.3 million for the consolidation and
discontinuance of certain operational activities and other acquisition related
expenses.
During fiscal 1994, Central Point incurred $16.0 million of expenses related
to the restucturing of its operations. In the quarter ended June 30, 1994,
Symantec incurred $9.0 million of expenses related to the acquisition of Central
Point. In the quarter ended June 30, 1995, the Company recognized a reduction in
accrued acquisition and restructuring expenses of $2.3 million as actual costs
incurred were less than costs previously accrued by the companies.
As of June 30, 1995, total remaining accrued acquisition and restructuring
expenses were $5.2 million and included $1.0 million for the modification of
certain development contracts, $1.3 million for the elimination of duplicative
and excess facilities and $2.9 million for the consolidation and discontinuance
of certain operational activities and other acquisition related expenses.
NOTE 5. -- INCOME TAXES
Income taxes are computed in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Symantec provides
for income taxes during interim reporting periods based upon an estimate of its
annual effective tax rate. This estimate reflects U.S. federal, state and
foreign income taxes.
F-43
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. -- NET INCOME PER SHARE
Net income per share is calculated using the treasury stock or the modified
treasury stock method, as applicable. Common stock equivalents are attributable
to outstanding stock options. Fully diluted earnings per share includes the
assumed conversion of all of the outstanding convertible subordinated
debentures.
NOTE 7. -- LITIGATION
On May 19, 1995, Personal Computer Peripherals Corporation ("PCPC") filed a
lawsuit in the U.S. District Court for the District of Delaware against Symantec
and five other companies, alleging that the defendants' products for backing up
data on a computer network infringe a patent held by PCPC. The complaint seeks
unspecified damages and an injunction preventing the sale of infringing
products. Symantec believes that the complaint has no merit.
On December 30, 1994, Software Engineering Carmel ("Carmel") filed a lawsuit
in the U.S. District Court for the District of Oregon against Central Point, a
wholly owned subsidiary of the Company. Carmel developed and maintains the
anti-virus program distributed by Central Point. The complaint alleges that
Central Point breached its contract with Carmel by not fulfilling an implied
obligation under the contract to use its best efforts or, alternatively, its
reasonable efforts to market the anti-virus program developed by Carmel. The
complaint also alleges that Central Point violated the non-competition provision
in its agreement by selling a competing anti-virus program, apparently based on
Symantec's sale of its own anti-virus product. The complaint seeks damages in
the amount of $6.75 million and a release of Carmel from its obligation not to
sell competing products. Symantec believes the complaint has no merit.
On September 3, 1992, Borland International, Inc. ("Borland") filed a
lawsuit in the Superior Court for Santa Cruz County, California against
Symantec, Gordon E. Eubanks, Jr. (Symantec's President and Chief Executive
Officer) and Eugene Wang (an Executive Vice President of Symantec who is a
former employee of Borland). The complaint, as amended, alleges misappropriation
of trade secrets, unfair competition, inducing breach of contract, interference
with prospective economic advantage and unjust enrichment. Borland alleged that
prior to joining Symantec, Mr. Wang transmitted to Mr. Eubanks confidential
information concerning Borland's product and marketing plans. Borland claims
damages in an unspecified amount. Symantec has denied the allegations of
Borland's complaint and contends that Borland has suffered no damages from the
alleged actions. Borland obtained a temporary restraining order and a
preliminary injunction prohibiting the defendants from using, disseminating or
destroying any Borland proprietary information or trade secrets. Symantec filed
a cross complaint against Borland alleging that Borland had committed abuse of
process and defamation in publishing statements that Symantec had acted in
contempt of a temporary restraining order. The case is not being actively
prosecuted at this time pending the outcome of the criminal proceedings,
discussed below. Symantec believes that Borland's claims have no merit.
On September 2, 1992, the Scotts Valley, California police department,
operating with search warrants for Borland proprietary and trade secret
information, searched Symantec's offices and the homes of Messrs. Eubanks and
Wang and removed documents and other materials. On February 26, 1993, criminal
indictments were filed against Messrs. Eubanks and Wang for allegedly violating
various California Penal Code Sections relating to the misappropriation of trade
secrets and unauthorized access to a computer system. On August 23, 1993, the
Court recused the District Attorney's Office from prosecution of the action. On
October 5, 1993, the State Attorney General and the District Attorney's Office
filed a Notice of Appeal of the Order, and that appeal was argued on July 11,
1995. The parties are awaiting a decision on that appeal. Symantec believes the
criminal charges against Messrs. Eubanks and Wang have no merit.
F-44
<PAGE>
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. -- LITIGATION (CONTINUED)
On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a
wholly-owned subsidiary of Symantec, commenced an action against EKD Computer
Sales & Supplies Corporation ("EKD"), a former licensee of DMA and Thomas Green,
a principal of EKD, for copyright infringement, violations of the Lanham Act,
trademark infringement, misappropriation, deceptive acts and practices and
unfair competition and breach of contract. On July 14, 1992, the Suffolk County
sheriff's department conducted a search of EKD's premises and seized and
impounded thousands of infringing articles. On July 21, 1992, the Court issued a
preliminary injunction against EKD and Mr. Green, enjoining them from
manufacturing, marketing, distributing, copying or purporting to license DMA's
pcANYWHERE III or using DMA's marks.
On July 20, 1992 and in a subsequent amendment, EKD and Mr. Green answered
Symantec's complaint denying all liability and asserting counterclaims against
Symantec and Lee Rautenberg, a former principal of DMA. In May 1993, EKD and Mr.
Green were granted permission to file a Second Amended Answer and counterclaims
that dropped every previously raised claim and now allege that DMA obtained the
temporary restraining order and preliminary injunction in bad faith and that
DMA, Symantec and Mr. Rautenberg breached certain license agreements and
violated certain federal and New York State antitrust laws. In February 1995,
DMA was granted leave to file an Amended Complaint, which EKD subsequently
responded to by a Third Amended Answer and Counterclaims virtually identical to
EKD's Second Amended pleading. Symantec believes that the claims asserted by EKD
and Mr. Green have no merit.
Subsequent to the acquisition of DMA by Symantec, Peter Byer, a former sales
and marketing employee of DMA, filed a lawsuit in the Supreme Court of the State
of New York against DMA, Symantec and Lee Rautenberg (who was formerly President
of DMA). The lawsuit alleges that Peter Byer was orally promised an 8% equity
interest in DMA in connection with his performance of services, that he was
underpaid commissions under DMA's commission plan, and that DMA was unjustly
enriched because it paid Mr. Byer less than the fair value of his services. The
lawsuit seeks damages of at least $5.3 million. Symantec believes the claims
have no merit. Furthermore, Mr. Rautenberg and the other stockholders of DMA
have an obligation to indemnify Symantec for any liabilities resulting from this
action.
Symantec is involved in a number of other judicial and administrative
proceedings incidental to its business. The Company intends to defend all of the
aforementioned pending lawsuits vigorously and although an adverse decisions (or
settlements) may occur in one or more of the cases, the final resolution of
these lawsuits, individually or in the aggregate, is not expected to have a
material adverse effect on the financial position of the Company. However,
depending on the amount and timing of an unfavorable resolution of these
lawsuits, it is possible that the Company's future results of operations or cash
flows could be materially adversely affected in a particular period.
NOTE 8. -- SUBSEQUENT EVENT
On July 6, 1995, Symantec announced a definitive agreement to acquire
Delrina Corporation ("Delrina") for approximately 15 million shares of Symantec
common stock. The Company expects to complete the acquisition in the quarter
ending December 31, 1995 and expects to incur acquisition expenses related to
the combination of the companies of approximately $25 to $30 million. The
acquisition is expected to be accounted for as a pooling of interests.
F-45
<PAGE>
ANNEX A
FORM OF THE ARRANGEMENT RESOLUTION
<PAGE>
RESOLUTION FOR CONSIDERATION AT THE ANNUAL AND SPECIAL MEETING
OF THE SHAREHOLDERS
OF
DELRINA CORPORATION
(THE "CORPORATION")
BE IT RESOLVED AS A SPECIAL RESOLUTION OF THE SHAREHOLDERS THAT:
1. The arrangement involving the Corporation (the "Arrangement") under section
182 of the BUSINESS CORPORATIONS ACT (Ontario) (the "OBCA"), as more
particularly described in the Joint Management Information Circular and
Proxy Statement of the Corporation and Symantec Corporation (the "Joint
Proxy Statement") accompanying the notice of this meeting (as the
Arrangement may be modified or amended) is hereby authorized, approved and
adopted;
2. The plan of arrangement involving the Corporation, the full text of which is
set out as Annex D to the Joint Proxy Statement (as the same may be or may
have been amended), is hereby approved and adopted;
3. Notwithstanding the passing of this resolution by shareholders or the
approval of the Ontario Court of Justice (General Division), the Board of
Directors of the Corporation, without further notice to or approval of the
shareholders, may decide not to proceed with the Arrangement or may revoke
this resolution at any time prior to the Arrangement becoming effective
pursuant to the OBCA;
4. Any two directors or officers of the Corporation are hereby authorized and
directed for and on behalf of the Corporation to execute or cause to be
executed and to deliver or cause to be delivered all such documents,
agreements and instruments and to do or cause to be done all such other acts
and things as such directors or officers of the Corporation shall determine
to be necessary or desirable in order to carry out the intent of the
foregoing paragraphs of this resolution and the matters authorized thereby,
such determination to be conclusively evidenced by the execution and
delivery of such document, agreement or instrument or the doing of any such
act or thing.
A-1
<PAGE>
ANNEX B
COMBINATION AGREEMENT
BETWEEN
SYMANTEC CORPORATION
AND
DELRINA CORPORATION
JULY 5, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <C> <S> <C>
1. THE ARRANGEMENT............................................................................... B-1
1.1 The Arrangement............................................................................... B-1
1.2 Adjustments for Capital Changes............................................................... B-2
1.3 Dissenting Shares............................................................................. B-2
1.4 Delrina Options............................................................................... B-2
1.5 Other Effects of the Arrangement.............................................................. B-3
1.6 Joint Management Information Circular/Proxy Statement; Registration Statement................. B-3
1.7 Reorganization................................................................................ B-4
1.8 Pooling of Interests.......................................................................... B-4
1.9 Material Adverse Effect....................................................................... B-4
1.10 Currency...................................................................................... B-4
2. REPRESENTATIONS AND WARRANTIES OF DELRINA..................................................... B-4
2.1 Organization; Good Standing; Qualification and Power.......................................... B-5
2.2 Capital Structure............................................................................. B-5
2.3 Authority..................................................................................... B-6
2.4 Securities Regulatory Authority Reports and Financial Statements.............................. B-7
2.5 Information Supplied.......................................................................... B-7
2.6 Compliance with Applicable Laws............................................................... B-8
2.7 Litigation.................................................................................... B-8
2.8 ERISA and Other Compliance.................................................................... B-8
2.9 Absence of Undisclosed Liabilities............................................................ B-10
2.10 Absence of Certain Changes or Events.......................................................... B-10
2.11 Agreements.................................................................................... B-11
2.12 No Defaults................................................................................... B-13
2.13 Certain Agreements............................................................................ B-13
2.14 Taxes......................................................................................... B-13
2.15 Intellectual Property......................................................................... B-14
2.16 Products and Distribution..................................................................... B-15
2.17 Fees and Expenses............................................................................. B-15
2.18 Insurance..................................................................................... B-15
2.19 Ownership of Property......................................................................... B-15
2.20 Environmental Matters......................................................................... B-15
2.21 Interested Party Transactions................................................................. B-16
2.22 Board Approval................................................................................ B-16
2.23 Vote Required................................................................................. B-16
2.24 Disclosure.................................................................................... B-16
2.25 Fairness Opinion.............................................................................. B-17
2.26 Restrictions on Business Activities........................................................... B-17
2.27 Pooling Matters............................................................................... B-17
2.28 Books and Records............................................................................. B-17
2.29 Government Contracts.......................................................................... B-17
</TABLE>
B-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <C> <S> <C>
3. REPRESENTATIONS AND WARRANTIES OF SYMANTEC.................................................... B-17
3.1 Organization; Good Standing; Qualification and Power.......................................... B-18
3.2 Capital Structure............................................................................. B-18
3.3 Authority..................................................................................... B-19
3.4 SEC Reports and Financial Statements.......................................................... B-20
3.5 Information Supplied.......................................................................... B-20
3.6 Compliance with Applicable Laws............................................................... B-20
3.7 Litigation.................................................................................... B-21
3.8 ERISA and Other Compliance.................................................................... B-21
3.9 Absence of Undisclosed Liabilities............................................................ B-22
3.10 Absence of Certain Changes or Events.......................................................... B-22
3.11 Agreements.................................................................................... B-24
3.12 No Defaults................................................................................... B-25
3.13 Certain Agreements............................................................................ B-25
3.14 Taxes......................................................................................... B-25
3.15 Intellectual Property......................................................................... B-25
3.16 Products and Distribution..................................................................... B-26
3.17 Fees and Expenses............................................................................. B-26
3.18 Insurance..................................................................................... B-26
3.19 Ownership of Property......................................................................... B-26
3.20 Environmental Matters......................................................................... B-27
3.21 Interested Party Transactions................................................................. B-27
3.22 Board Approval................................................................................ B-27
3.23 Vote Required................................................................................. B-27
3.24 Disclosure.................................................................................... B-28
3.25 Fairness Opinion.............................................................................. B-28
3.26 Restrictions on Business Activities........................................................... B-28
3.27 Pooling Matters............................................................................... B-28
3.28 Books and Records............................................................................. B-28
3.29 Government Contracts.......................................................................... B-28
4. DELRINA COVENANTS............................................................................. B-28
4.1 Advice of Changes............................................................................. B-28
4.2 Maintenance of Business....................................................................... B-29
4.3 Conduct of Business........................................................................... B-29
4.4 Shareholder Approval.......................................................................... B-31
4.5 Delrina Affiliate Agreements.................................................................. B-31
4.6 Joint Proxy Statement......................................................................... B-31
4.7 Regulatory Approvals.......................................................................... B-31
4.8 Necessary Consents............................................................................ B-31
4.9 Access to Information......................................................................... B-31
4.10 Satisfaction of Conditions Precedent.......................................................... B-32
4.11 No Other Negotiations......................................................................... B-32
4.12 Representations of Shareholders............................................................... B-33
4.13 Employment and Noncompetition Agreements...................................................... B-33
</TABLE>
B-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <C> <S> <C>
5. SYMANTEC COVENANTS............................................................................ B-33
5.1 Advice of Changes............................................................................. B-33
5.2 Maintenance of Business....................................................................... B-33
5.3 Conduct of Business........................................................................... B-33
5.4 Stockholder Approval.......................................................................... B-34
5.5 Symantec Affiliate Agreements................................................................. B-34
5.6 Joint Proxy Statement......................................................................... B-34
5.7 Regulatory Approvals.......................................................................... B-35
5.8 Necessary Consents............................................................................ B-35
5.9 Access to Information......................................................................... B-35
5.10 Satisfaction of Conditions Precedent.......................................................... B-35
5.11 Indemnification............................................................................... B-35
5.12 Listing....................................................................................... B-36
5.13 Employment and Employee Benefits After the Closing............................................ B-36
5.14 Reorganization Procedures..................................................................... B-36
6. CLOSING MATTERS............................................................................... B-36
6.1 The Closing................................................................................... B-36
6.2 Ancillary Documents/Reservation of Shares..................................................... B-36
6.3 Exchange of Options........................................................................... B-37
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF DELRINA................................................ B-37
7.1 Accuracy of Representations and Warranties.................................................... B-37
7.2 Covenants..................................................................................... B-37
7.3 Absence of Material Adverse Change............................................................ B-37
7.4 Compliance with Law........................................................................... B-37
7.5 Government Consents........................................................................... B-37
7.6 SEC Filings................................................................................... B-37
7.7 Opinion of Symantec's Counsel................................................................. B-37
7.8 Documents..................................................................................... B-38
7.9 Shareholder Approval.......................................................................... B-38
7.10 Symantec Approvals............................................................................ B-38
7.11 No Legal Action............................................................................... B-38
7.12 Tax Opinion................................................................................... B-38
7.13 Pooling Opinion............................................................................... B-38
7.14 Court Approval................................................................................ B-38
7.15 OSC, Etc...................................................................................... B-38
7.16 Election to Symantec Board.................................................................... B-38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SYMANTEC............................................... B-38
8.1 Accuracy of Representations and Warranties.................................................... B-39
8.2 Covenants..................................................................................... B-39
8.3 Absence of Material Adverse Change............................................................ B-39
8.4 Compliance with Law........................................................................... B-39
8.5 Government Consents........................................................................... B-39
8.6 SEC Filings................................................................................... B-39
8.7 Opinion of Delrina's Counsel.................................................................. B-39
8.8 Documents..................................................................................... B-39
</TABLE>
B-iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<C> <C> <S> <C>
8.9 Stockholder Approval.......................................................................... B-39
8.10 Delrina Approvals............................................................................. B-39
8.11 No Legal Action............................................................................... B-40
8.12 Delrina Option Agreements..................................................................... B-40
8.13 Pooling Opinion............................................................................... B-40
8.14 Affiliate Agreements.......................................................................... B-40
8.15 Court Approval................................................................................ B-40
8.16 OSC, Etc...................................................................................... B-40
8.17 Shipment of WinFax 95......................................................................... B-40
9. TERMINATION OF AGREEMENT...................................................................... B-40
9.1 Termination................................................................................... B-40
9.2 Notice of Termination......................................................................... B-41
9.3 Effect of Termination......................................................................... B-41
9.4 Termination Fees.............................................................................. B-42
10. SURVIVAL OF REPRESENTATIONS................................................................... B-42
11. MISCELLANEOUS................................................................................. B-42
11.1 Governing Law................................................................................. B-42
11.2 Assignment; Binding Upon Successors and Assigns............................................... B-43
11.3 Severability.................................................................................. B-43
11.4 Counterparts.................................................................................. B-43
11.5 Other Remedies................................................................................ B-43
11.6 Amendment and Waivers......................................................................... B-43
11.7 Expenses...................................................................................... B-43
11.8 Attorneys' Fees............................................................................... B-43
11.9 Notices....................................................................................... B-43
11.10 Construction of Agreement..................................................................... B-44
11.11 No Joint Venture.............................................................................. B-44
11.12 Further Assurances............................................................................ B-44
11.13 Absence of Third Party Beneficiary Rights..................................................... B-44
11.14 Public Announcement........................................................................... B-44
11.15 Entire Agreement.............................................................................. B-45
</TABLE>
<TABLE>
<S> <C>
EXHIBITS
Exhibit 1.1 Plan of Arrangement
Exhibit 2.9 Delrina Balance Sheet
Exhibit 3.9 Symantec Balance Sheet
Exhibit 4.4 Form of Stock Option Agreement
Exhibit 4.5 Delrina Affiliates Agreement
Exhibit 4.13 Employment and Noncompetition Agreements
Exhibit 5.5 Symantec Affiliates Agreements
Exhibit 5.11(c) Form of Indemnity Agreement
Exhibit 6.2(a) Exchangeable Share Provisions
Exhibit
6.2(b)(i) Support Agreement
Exhibit
6.2(b)(ii) Voting and Exchange Trust Agreement
Exhibit
6.2(b)(iii) Restated Certificate of Incorporation
</TABLE>
B-iv
<PAGE>
COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT (this "AGREEMENT") is entered into as of July 5,
1995, by and between Symantec Corporation, a Delaware corporation ("SYMANTEC")
and Delrina Corporation, an Ontario corporation ("DELRINA").
RECITALS
A. The respective Boards of Directors of Delrina and Symantec have approved
the transactions contemplated by this Agreement, and the Board of Directors of
Delrina has agreed to submit the Plan of Arrangement (as defined in Section 1.1)
and other transactions contemplated hereby to its shareholders for approval.
B. The Arrangement is intended to be treated as (i) a reorganization
pursuant to the provisions of section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "CODE"), (ii) a "pooling of interests" under United States
generally accepted accounting principles ("US GAAP") and (iii) a reorganization
of capital for purposes of section 86 of the Income Tax Act (Canada) (the
"ITA").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. THE ARRANGEMENT
1.1 THE ARRANGEMENT. As promptly as practicable after the execution of
this Agreement, Delrina will apply to the Ontario Court of Justice (General
Division) (the "COURT") pursuant to section 182 of the Business Corporations Act
(Ontario) (the "OBCA") for an interim order in Form and substance satisfactory
to Symantec (such approval not to be unreasonably withheld or delayed) (the
"INTERIM ORDER") providing for, among other things, the calling and holding of
the Delrina Shareholders Meeting (as defined below) for the purpose of
considering and, if deemed advisable, approving the arrangement (the
"ARRANGEMENT") under section 182 of the OBCA and pursuant to the Agreement and
Plan of Arrangement substantially in the Form of Exhibit 1.1 hereto (the "PLAN
OF ARRANGEMENT"). If the Delrina shareholders approve the Arrangement,
thereafter Delrina will take the necessary steps to submit the Arrangement to
the Court and apply for a final order of the Court approving the Arrangement in
such fashion as the Court may direct (the "FINAL ORDER"). At 12:01 a.m. (the
"EFFECTIVE TIME") on the date (the "EFFECTIVE DATE") shown on the certificate of
arrangement issued by the Director under the OBCA giving effect to the
Arrangement, the following reorganization of capital shall occur and shall be
deemed to occur in the following order without any further act or formality:
(a) The articles of incorporation of Delrina shall be amended to
authorize a class of exchangeable shares (the "EXCHANGEABLE SHARES") and one
Series A Preferred Share of Delrina (the "SERIES A PREFERRED SHARE").
(b) Delrina shall issue to Symantec one Series A Preferred Share in
consideration of the issuance to Delrina of one share of the common stock,
$.01 par value, of Symantec (the "SYMANTEC COMMON STOCK"). The stated
capital of the Series A Preferred Share shall be equal to the fair market
value, as determined by the board of directors of Delrina, of a share of
Symantec Common Stock. No certificate shall be issued in respect of the
Series A Preferred Share.
(c) Each of the common shares of Delrina (the "DELRINA COMMON SHARES")
(other than Delrina Common Shares held by holders who have exercised their
rights of dissent in accordance with the Plan of Arrangement and who are
ultimately entitled to be paid full value for such shares) will be exchanged
for a number of Exchangeable Shares at an exchange ratio equal to 0.61 of an
Exchangeable Share per Delrina Common Share (the "EXCHANGE RATIO"). Each
holder of Delrina Common Shares (other than Delrina Common Shares held by
holders who have exercised their rights of dissent in accordance with the
Plan of Arrangement and who are ultimately entitled to be paid full value
for such shares) will receive that whole number of Exchangeable Shares
resulting from the exchange of such holder's Delrina Common Shares. In lieu
of fractional
B-1
<PAGE>
Exchangeable Shares, each holder of a Delrina Common Share who otherwise
would be entitled to receive a fraction of an Exchangeable Share shall be
paid by Delrina an amount determined in accordance with the Plan of
Arrangement.
(d) Upon the exchange referred to in paragraph (c) above, each holder of
a Delrina Common Share shall cease to be such a holder, shall have his name
removed from the register of holders of Delrina Common Shares and shall
become a holder of the number of fully paid Exchangeable Shares to which he
is entitled as a result of the exchange referred to in paragraph (c) and
such holder's name shall be added to the register of holders of Exchangeable
Shares accordingly.
(e) The stated capital of the Exchangeable Shares will be equal to the
stated capital of the Delrina Common Shares immediately prior to the
Arrangement.
(f) The one outstanding Series A Preferred Share will be exchanged for
one Delrina Common Share and the holder thereof shall cease to be a holder
of the Series A Preferred Share, shall have its name removed from the
register of holders of Series A Preferred Shares and shall become a holder
of the one fully paid and non-assessable Delrina Common Share to which it is
entitled as a result of the exchange referred to in this paragraph (f) and
such holder's name shall be added to the register of holders of Delrina
Common Shares accordingly.
(g) The stated capital of the one Delrina Common Share shall be equal to
the stated capital of the one Series A Preferred Share prior to the
Arrangement.
1.2 ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the Effective Time,
Symantec or Delrina recapitalizes through a subdivision of its outstanding
shares into a greater number of shares, or a combination of its outstanding
shares into a lesser number of shares, or reorganizes, reclassifies or otherwise
changes its outstanding shares into the same or a different number of shares of
other classes, or declares a dividend on its outstanding shares payable in
shares of its capital stock or securities convertible into shares of its capital
stock, then the Exchange Ratio will be adjusted appropriately so as to maintain
the relative proportionate interests of the holders of Delrina Common Shares and
the holders of the shares of Symantec Common Stock.
1.3 DISSENTING SHARES. Holders of Delrina Common Shares may exercise
rights of dissent with respect to such shares in connection with the Arrangement
pursuant to and in the manner set forth in section 185 of the OBCA and section
3.1 of the Plan of Arrangement (such holders referred to as "DISSENTING
SHAREHOLDERS"). Delrina shall give Symantec (i) prompt notice of any written
demands of a right of dissent, withdrawals of such demands, and any other
instruments served pursuant to the OBCA and received by Delrina and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
such rights. Delrina shall not, except with the prior written consent of
Symantec, voluntarily make any payment with respect to any such rights or offer
to settle or settle any such rights. All payments to Dissenting Shareholders
shall be the sole responsibility of Delrina, and Symantec will not directly or
indirectly provide any funds for the purposes of making payments to Dissenting
Shareholders. In the event that Delrina does not have sufficient funds to make
payments to Dissenting Shareholders, Delrina will undertake to borrow the funds
necessary to make such payments from sources other than Symantec or any
affiliate of Symantec.
1.4 DELRINA OPTIONS.
(a) EXCHANGE. At the Effective Time, after the actions described in
Sections 1.1(a) through (g), each of the then outstanding options to purchase
Delrina Common Shares (collectively, the "DELRINA OPTIONS") (including all
outstanding options granted under Delrina's 1994 Stock Option Plan and the
Delrina Stock Option Plan (the "DELRINA OPTION PLANS")) will, at the Effective
Time, and without any further action on the part of any holder thereof, be
exchanged for an option to purchase that number of shares of Symantec Common
Stock determined by multiplying the number of Delrina Common Shares subject to
such Delrina Option at the Effective Time by the Exchange Ratio, at an exercise
price per share of Symantec Common Stock equal to the exercise price per share
of such Delrina Option immediately prior to the Effective Time divided by the
Exchange Ratio. If the foregoing
B-2
<PAGE>
calculation results in an exchanged Delrina Option being exercisable for a
fraction of a share of Symantec Common Stock, then the number of shares of
Symantec Common Stock subject to such option will be rounded down to the nearest
whole number of shares and the total exercise price for the option will be
reduced by the exercise price of the fractional share. The term, exercisability,
vesting schedule, status as an "incentive stock option" under section 422 of the
Code, if applicable, and all other terms and conditions of the Delrina Options
will otherwise be unchanged. Continuous employment with Delrina or any of the
Delrina Subsidiaries (as hereinafter defined) will be credited to an optionee of
Delrina for purposes of determining the number of shares of Symantec Common
Stock subject to exercise under an exchanged Delrina Option after the Effective
Time.
(b) REGISTRATION. Symantec will cause the Symantec Common Stock issuable
upon exercise of the assumed Delrina Options to be registered on Form S-8
promulgated by the Securities and Exchange Commission (the "SEC") as soon as
reasonably practicable after the Effective Time and will use its best efforts to
maintain the effectiveness of such registration statement or registration
statements for so long as such converted Delrina Options shall remain
outstanding. With respect to those individuals who subsequent to the Arrangement
will be subject to the reporting requirements under section 16(a) of the
Exchange Act (as defined below), Symantec shall administer the Delrina Option
Plans assumed pursuant to this Section in a manner that complies with Rule 16b-3
promulgated by the SEC under the Exchange Act. Symantec will reserve a
sufficient number of shares of Symantec Common Stock for issuance upon exercise
of the Delrina Options assumed by Symantec pursuant to this Section.
1.5 OTHER EFFECTS OF THE ARRANGEMENT. At the Effective Time: (a) the
bylaws of Delrina immediately prior to the Effective Time will continue as the
bylaws of Delrina, subject to later amendment; (b) the directors of Delrina will
be as designated by Symantec prior to the Effective Time; (c) the officers of
Delrina will be as designated by Symantec prior to the Effective Time; (d) each
Delrina Common Share and each Delrina Option outstanding immediately prior to
the Effective Time will be exchanged as provided in Sections 1.1 and 1.4; and
(e) the Arrangement will, from and after the Effective Time, have all of the
effects provided by applicable law, including, without limitation, the OBCA.
1.6 JOINT MANAGEMENT INFORMATION CIRCULAR/PROXY STATEMENT; REGISTRATION
STATEMENT. (a) As promptly as practicable after execution of this Agreement,
Symantec and Delrina shall, if so required, prepare and file with the SEC a
preliminary joint management information circular and proxy statement (the
"JOINT PROXY STATEMENT"), together with any other documents required by the
Securities Act of 1933, as amended (the "SECURITIES ACT") or the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), in connection with the
Arrangement. The Joint Proxy Statement shall constitute (i) the management
information circular of Delrina with respect to the Delrina Shareholders Meeting
relating to the Arrangement, (ii) the proxy statement of Symantec with respect
to the meeting of stockholders of Symantec to be held with respect to the
approval by Symantec's stockholders of the issuance of the Symantec Common Stock
in connection with the issuance of Symantec Common Stock from time to time upon
exchange of the Exchangeable Shares (the "SYMANTEC STOCKHOLDERS MEETING") and
(iii) the prospectus with respect to the issuance by Delrina of the Exchangeable
Shares in connection with the Arrangement, which prospectus may, if Symantec's
counsel or Delrina's counsel determines it is required by the Securities Act, be
included in a registration statement filed by Delrina on Form F-4 or such other
registration Form as may be applicable (collectively, the "FORM F-4"). As
promptly as practicable after comments are received from the SEC thereon and
after the furnishing by Symantec and Delrina of all information required to be
contained therein, Symantec and Delrina shall cause the Joint Proxy Statement to
be mailed to each company's shareholders. Notwithstanding anything in this
Agreement to the contrary, Delrina shall be under no obligation to file the Form
F-4 if Symantec shall have determined on the advice of its counsel that the
issuance of the Exchangeable Shares pursuant to the Arrangement is exempt from
the registration requirements of section 5 of the Securities Act by virtue of
section 3(a)(10) thereof. If Symantec determines on the advice of its counsel
that it is necessary to file a registration statement on Form S-3 (the "FORM
S-3") in order to register the
B-3
<PAGE>
Symantec Common Stock to be issued from time to time after the Effective Time
upon exchange of the Exchangeable Shares, then Symantec shall file the Form S-3
with the SEC and use its best efforts to maintain the effectiveness of such
registration for 7 years or for such shorter period as such Exchangeable Shares
remain outstanding, and Symantec and Delrina shall use all reasonable efforts to
cause the Form S-3 to become effective. Notwithstanding anything herein to the
contrary, Symantec shall be under no obligation to file the Form S-3 if it shall
have determined on the advice of its outside counsel that the issuance of shares
of Symantec Common Stock upon exchange of the Exchangeable Shares after the
Effective Time is exempt from the registration requirements of section 5 of the
Securities Act by virtue of section 3(a)(9) thereof.
(b) Each party shall promptly furnish to the other party all information
concerning such party and its shareholders as may be reasonably required in
connection with any action contemplated by this Section 1.6. The Joint Proxy
Statement and, if required, the Form F-4 and Form S-3, shall comply in all
material respects with all applicable requirements of law. Each of Symantec and
Delrina will notify the other 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 Joint Proxy Statement or the Form F-4 or Form S-3 or for
additional information, and will supply the other with copies of all
correspondence with the SEC or its staff with respect to the Joint Proxy
Statement or the Form F-4 or Form S-3. Whenever any event occurs which should be
set forth in an amendment or supplement to the Joint Proxy Statement or the Form
F-4 or Form S-3, Symantec or Delrina, as the case may be, shall promptly inForm
the other of such occurrence and cooperate in filing with the SEC or its staff,
and/or mailing to stockholders of Symantec and Delrina, such amendment or
supplement.
1.7 REORGANIZATION. The parties intend to adopt this Agreement and the
Plan of Arrangement as a plan of reorganization under section 368(a)(1) of the
Code, and the parties intend to adopt the Arrangement as a reorganization of
capital of Delrina under section 86 of the ITA.
1.8 POOLING OF INTERESTS. The parties intend that the Arrangement be
treated as a "pooling of interests" under US GAAP. Promptly following the
execution of this Agreement, Symantec and Delrina shall use their respective
best efforts to obtain and deliver Affiliates Agreements from their respective
affiliates, as contemplated by Section 4.5 and Section 5.5.
1.9 MATERIAL ADVERSE EFFECT. In this Agreement, any reference to any
event, change or effect being "MATERIAL" with respect to any entity or group of
entities means any material event, change or effect related to the condition
(financial or otherwise), properties, assets, liabilities, businesses,
operations, results of operations or prospects of such entity or group of
entities. In this Agreement, the term "MATERIAL ADVERSE EFFECT" used with
respect to a party means any event, change or effect that is materially adverse
to the condition (financial or otherwise), properties, assets, liabilities,
businesses, operations, results of operations or prospects of such party and its
subsidiaries, taken as a whole; provided that a Material Adverse Effect shall
not include any adverse effect resulting from (i) changes in general economic
conditions or conditions generally affecting the personal computer application
software industry or (ii) a decline in Delrina's consolidated gross sales
revenues for the fiscal quarter ending September 30, 1995 to the extent that
such decline is reasonably attributable to the failure of Delrina to have made
the first customer shipment in commercial volumes to retail sales channels of
its WinFax for Windows 95 product and its other Windows 95-compatible products
prior to September 30, 1995.
1.10 CURRENCY. Unless otherwise specified, all references in this
Agreement to "dollars" or "$" shall mean United States dollars.
2. REPRESENTATIONS AND WARRANTIES OF DELRINA
Except as set forth in a letter dated the date of this Agreement and
delivered by Delrina to Symantec concurrently herewith (the "DELRINA DISCLOSURE
LETTER"), Delrina hereby represents and warrants to Symantec that:
B-4
<PAGE>
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Delrina and each
of its subsidiaries (the "DELRINA SUBSIDIARIES") is a corporation (or, in the
case of Delrina (Wyoming) Limited Liability
Company, is a limited liability company) duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to qualify
would not have a Material Adverse Effect on Delrina. Section 2.1 of the Delrina
Disclosure Letter sets forth a correct and complete list of the Delrina
Subsidiaries, the number of each subsidiary's outstanding capital stock owned by
Delrina or another Delrina Subsidiary and a correct and complete list of each
jurisdiction in which each of Delrina and each Delrina Subsidiary is duly
qualified and in good standing to do business. Delrina has delivered to
Symantec's counsel complete and correct copies of the certificate or articles of
incorporation (or similar document) and bylaws of Delrina, in each case as
amended to the date of this Agreement. Unless otherwise specified, all
references in this Agreement to deliveries to Symantec or its counsel shall mean
delivery to Symantec's internal General Counsel.
2.2 CAPITAL STRUCTURE.
(a) STOCK AND OPTIONS. The authorized capital stock of Delrina consists of
an unlimited number of Delrina Common Shares, no par value, and an unlimited
number of Preference Shares, no par value (the "DELRINA PREFERRED SHARES"). At
the close of business on June 30, 1995, 22,320,716 Delrina Common Shares were
issued and outstanding and no Delrina Common Shares were held by Delrina in its
treasury. An aggregate of 2,927,773 Delrina Common Shares are reserved and
authorized for issuance pursuant to the Delrina Option Plans in respect of which
Delrina Options granted pursuant to the Delrina Option Plans to purchase a total
of 2,374,035 Delrina Common Shares were outstanding as of June 30, 1995. An
aggregate of 40,000 Delrina Common Shares are reserved and authorized for
issuance pursuant to Delrina's Canadian and U.S. Employee Stock Purchase Plans.
There are no outstanding Delrina Options that have not been granted under these
plans. No Delrina Preferred Shares are issued or outstanding. All outstanding
Delrina Common Shares have been duly authorized, validly issued, are fully paid
and nonassessable and not subject to preemptive rights. All issued and
outstanding shares of the capital stock of each of the Delrina Subsidiaries have
been duly authorized and validly issued, are fully paid and nonassessable, are
not subject to any right of rescission, and have been offered, issued, sold and
delivered by Delrina in compliance with all registration, qualification and
prospectus requirements (or applicable exemptions therefrom) of applicable
federal, provincial and state securities laws. Except as set forth in Section
2.1 of the Delrina Disclosure Letter, Delrina does not have any subsidiaries or
any equity interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. With respect to each such Delrina Subsidiary,
the Delrina Disclosure Letter lists all shareholders, the number of shares held
by each shareholder, the number of directors (or local law equivalent) of such
Delrina Subsidiary and the officers (or local law equivalent) of such Delrina
Subsidiary. Delrina has provided to Symantec's counsel a correct and complete
list of each Delrina Option outstanding as of the date hereof, including the
name of the holder of such Delrina Option, the grant date of each Delrina
Option, the Delrina Option Plan pursuant to which such Delrina Option was
issued, the number of shares covered by such Delrina Option, the per share
exercise price of such Delrina Option and the vesting schedule applicable to
each such Delrina Option.
(b) NO OTHER COMMITMENTS. Except for the Delrina Options disclosed in
Section 2.2(a) above and listed in the Delrina Disclosure Letter, there are no
options, warrants, calls, rights, commitments, conversion rights or agreements
of any character to which Delrina or any of the Delrina Subsidiaries is a party
or by which Delrina or any of the Delrina Subsidiaries is bound obligating
Delrina or any of the Delrina Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of capital stock of Delrina or any
of the Delrina Subsidiaries or securities convertible into or exchangeable for
shares of capital stock of Delrina or any of the Delrina Subsidiaries, or
obligating Delrina or any of the Delrina Subsidiaries to grant, extend or enter
into any such option, warrant, call, right,
B-5
<PAGE>
commitment, conversion right or agreement. There are no voting trusts or other
agreements or understandings to which Delrina is a party with respect to the
voting of the capital stock of Delrina or any of the Delrina Subsidiaries.
(c) REGISTRATION RIGHTS. Delrina is not under any obligation to register
under the Securities Act any of its presently outstanding securities or any
securities that may be subsequently issued.
2.3 AUTHORITY.
(a) CORPORATE ACTION. Delrina has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement and the Arrangement by the shareholders of Delrina and approval by the
Court, to perForm its obligations hereunder and to consummate the Arrangement
and the other transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Delrina and, subject to approval of this Agreement
and the Arrangement by the shareholders of Delrina and approval by the Court,
the consummation by Delrina of the Arrangement and the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Delrina. This Agreement has been duly executed and delivered by
Delrina and this Agreement is the valid and binding obligation of Delrina,
enforceable in accordance with its terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) NO CONFLICT. Neither the execution, delivery and performance of this
Agreement or the Plan of Arrangement by Delrina, nor the consummation of the
transactions contemplated hereby or thereby by Delrina nor compliance with the
provisions hereof or thereof by Delrina will: (i) conflict with, or result in
any violations of, the articles of incorporation or bylaws of Delrina or any
equivalent document of any of the Delrina Subsidiaries, or (ii) result in any
breach of or cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties or assets of Delrina or any of
the Delrina Subsidiaries under, any term, condition or provision of any loan or
credit agreement, note, bond, mortgage, indenture, lease or other material
agreement, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Delrina or any of the Delrina Subsidiaries or their respective
properties or assets, other than any such breaches, defaults, losses, liens,
security interests, charges or encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on Delrina; or (iii) except
for the requirement under the OBCA that the Arrangement be approved by the
holders of at least two-thirds (or such other proportion as may be set out in
the Interim Order) of the outstanding Delrina Common Shares who are permitted
to, and who, vote in accordance with the OBCA at the Delrina Shareholders
Meeting, require the affirmative vote of the holders of greater than a majority
of the issued and outstanding Delrina Common Shares.
(c) GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (each a "GOVERNMENTAL ENTITY"), is required to be obtained
by Delrina or any of the Delrina Subsidiaries in connection with the execution
and delivery of this Agreement or the Plan of Arrangement or the consummation of
the transactions contemplated hereby or thereby, except for: (i) the filing with
the Ontario Securities Commission (the "OSC") and the Court and the mailing to
shareholders of Delrina of the Joint Proxy Statement relating to the meeting of
the shareholders of Delrina (the "DELRINA SHAREHOLDERS MEETING") to be held with
respect to the approval by Delrina's shareholders of this Agreement and the
Arrangement, (ii) the filing of the Form F-4 or the furnishing to the SEC of
such reports and information under the Exchange Act and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby (the "SEC
FILINGS"); (iii) approval of the Court to the Arrangement and the filings of the
Articles of Arrangement and any other required
B-6
<PAGE>
amalgamation, arrangement or other documents as required by the OBCA; (iv) such
filings, authorizations, orders and approvals as may be required under state
"control share acquisition," "anti-takeover" or other similar statutes and
regulations (collectively, "State Takeover Laws"); (v) such filings,
authorizations, orders and approvals as may be required under the Securities Act
(Ontario) and other relevant Canadian securities statutes, any other applicable
federal, provincial or state securities laws and the rules of the National
Association of Securities Dealers, Inc. (the "NASD") or The Toronto Stock
Exchange (the "TSE"); (vi) such filings and notifications as may be necessary
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"); (vii) required notices and filings under the Investment Canada Act
and under the Competition Act (Canada); and (viii) where the failure to obtain
such consents, approvals, etc., would not prevent or delay the consummation of
the Arrangement or otherwise prevent Delrina from performing its obligations
under this Agreement and would not reasonably be expected to have a Material
Adverse Effect on Delrina.
2.4 SECURITIES REGULATORY AUTHORITY REPORTS AND FINANCIAL STATEMENTS.
(a) CANADIAN COMPLIANCE. Since June 30, 1993, Delrina has filed all forms,
reports and documents with the OSC required to be filed by it pursuant to the
Securities Act (Ontario) and the regulations promulgated thereunder and the
applicable policies and rules of the OSC (collectively, the "DELRINA OSC
REPORTS"), all of which have complied in all material respects with all
applicable requirements of such statute, regulations, policies and rules. None
of the Delrina OSC Reports, at the time filed or as subsequently amended,
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
made therein, in light of the circumstances under which they were made, not
misleading. Delrina has delivered to Symantec's outside counsel correct and
complete copies of each Delrina OSC Report.
(b) SEC REPORTS. Delrina has delivered to Symantec's counsel correct and
complete copies of each report, schedule, registration statement and definitive
proxy statement (other than preliminary material) filed by Delrina with the SEC
on or after June 30, 1993 (the "DELRINA SEC DOCUMENTS"), which are all the
documents that Delrina was required to file with the SEC on or after such date.
As of their respective dates or, in the case of registration statements, their
effective dates (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), none of the Delrina SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) 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, and the Delrina SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder. Delrina has filed
all material documents and agreements which were required to be filed as
exhibits to the Delrina SEC Documents.
(c) FINANCIAL STATEMENTS. The consolidated balance sheets and the
consolidated statements of operations, retained earnings and cash flows
(including the related notes thereto) of Delrina contained in the Delrina OSC
Reports present fairly the consolidated financial position and the consolidated
results of operations and cash flows of Delrina and its consolidated Delrina
Subsidiaries as of the dates or for the periods presented therein in conformity
with Canadian generally accepted accounting principles applied on a consistent
basis during the periods involved, except as otherwise noted therein and subject
in the case of quarterly financial statements to normal and recurring year-end
audit adjustments.
2.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Delrina for inclusion or incorporation by reference in the Joint
Proxy Statement (and, if filed, the Form F-4) will, at the time the Joint Proxy
Statement is mailed to the shareholders of Delrina and at the time of the
Delrina Shareholders Meeting (and, if filed, at the time the Form F-4 is
declared effective), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
B-7
<PAGE>
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Joint Proxy Statement will comply as to
Form in all material respects with the provisions of the OBCA and applicable
Canadian securities laws and the rules and regulations promulgated thereunder.
2.6 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the Delrina
OSC Reports filed prior to the date of this Agreement, the businesses of Delrina
and the Delrina Subsidiaries are not being conducted in violation of any law,
ordinance, regulation, rule or order of any Governmental Entity where such
violation would have a Material Adverse Effect. Except as disclosed in the
Delrina OSC Reports filed prior to the date of this Agreement, Delrina has not
been notified by any Governmental Entity that any investigation or review with
respect to Delrina or any of the Delrina Subsidiaries is pending or threatened,
nor has any Governmental Entity notified Delrina of its intention to conduct the
same. Delrina and the Delrina Subsidiaries have all material permits, licenses
and franchises from Governmental Entities required to conduct their businesses
as now being conducted, and are in material compliance with all such permits,
licenses and franchises, except for those whose absence would not have a
Material Adverse Effect on Delrina.
2.7 LITIGATION. Except as disclosed in the Delrina OSC Reports filed prior
to the date of this Agreement, there is no suit, action, arbitration, demand,
claim or proceeding pending or, to the best knowledge of Delrina, threatened
against Delrina or any of the Delrina Subsidiaries that could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Delrina; nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Delrina or any of the
Delrina Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Delrina. Delrina has made
available to Symantec correct and complete copies of all correspondence prepared
by its counsel for Delrina's auditors in connection with the last two completed
audits of Delrina's financial statements and any such correspondence since the
date of the last such audit.
2.8 ERISA AND OTHER COMPLIANCE.
(a) Delrina shall deliver to Symantec prior to Closing a list of all
employees of Delrina and of any Delrina Subsidiary ("EMPLOYEES"), their salaries
and the date and amount of their most recent salary increase. The Delrina
Disclosure Letter identifies (i) each "employee benefit plan," as defined in
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), regardless of whether ERISA is applicable thereto, and (ii) all other
Delrina Benefit Arrangements (as defined below) (including those sponsored by
the federal or any provincial government of Canada), and all other material
written or formal plans or agreements, if any, which currently provides
compensation or benefits to any Employee or former employee of Delrina or any of
the Delrina Subsidiaries (including any employment agreements entered into
between Delrina or any of the Delrina Subsidiaries and any Employee and workers'
compensation, unemployment compensation and other government-mandated programs)
and which is currently or previously was maintained, contributed to or entered
into by Delrina or any of the Delrina Subsidiaries under which Delrina or any of
the Delrina Subsidiaries or any ERISA Affiliate (as defined below) thereof has
any present obligation or liability (collectively, the "DELRINA EMPLOYEE
PLANS"). For purposes of this Section 2.8, "ERISA Affiliate" shall mean any
entity which is a member of (A) a "controlled group of corporations," as defined
in section 414(b) of the Code, (B) a group of entities under "common control,"
as defined in section 414(c) of the Code, or (C) an "affiliated service group,"
as defined in section 414(m) of the Code, or treasury regulations promulgated
under section 414(o) of the Code, any of which includes Delrina or any of the
Delrina Subsidiaries. Copies of all Delrina Employee Plans (and, if applicable,
related trust agreements) and all amendments thereto and any summary plan
descriptions shall have been delivered to Symantec or its counsel prior to
Closing (as defined in Section 6.1), together with the three most recent annual
reports (Form 5500, including, if applicable, schedule B thereto) prepared in
connection with any such Delrina Employee Plan. All Delrina Employee Plans which
individually or collectively would constitute an "employee pension benefit
plan," as defined in section 3(2) of ERISA (collectively, the "DELRINA PENSION
PLANS"), are identified as such in the Delrina Disclosure Letter. All
B-8
<PAGE>
contributions due from Delrina or any of the Delrina Subsidiaries through the
Effective Time with respect to any of the Delrina Employee Plans has been or
will be timely made as required under ERISA or any other applicable legislation
or have been accrued on Delrina's or any such Delrina Subsidiary's financial
statements as of March 31, 1995. Each Delrina Employee Plan is in compliance in
all material respects with, and has been maintained in material compliance with
its terms and with the requirements prescribed by, any and all statutes, orders,
rules and regulations, including, without limitation, ERISA and the Code, which
are applicable to such Delrina Employee Plans. Each Delrina Employee Plan that
is required or intended to be qualified under applicable law or registered or
approved by a governmental agency or authority has been so qualified, registered
or approved by the appropriate governmental agency or authority, and nothing has
occurred since the date of the last qualification, registration or approval to
adversely affect, or cause, the appropriate governmental agency or authority to
revoke, such qualification, registration or approval.
(b) No Delrina Pension Plan constitutes, or has since the enactment of ERISA
constituted, a "multiemployer plan," as defined in section 3(37) of ERISA. No
Delrina Pension Plans are subject to Title IV of ERISA. No "prohibited
transaction," as defined in section 406 of ERISA or section 4975 of the Code,
has occurred with respect to any Delrina Employee Plan which is covered by Title
I of ERISA which would result in a material liability to Delrina and the Delrina
Subsidiaries taken as a whole, excluding transactions effected pursuant to a
statutory or administrative exemption. Nothing done or omitted to be done and no
transaction or holding of any asset under or in connection with any Delrina
Employee Plan has or will make Delrina or any officer or director of Delrina
subject to any material liability under Title I of ERISA or liable for any
material Tax (as defined in Section 2.14) or penalty pursuant to sections 4972,
4975, 4976 or 4979 of the Code or section 502 of ERISA.
(c) Any Delrina Pension Plan which is intended to be qualified under section
401(a) of the Code (a "DELRINA 401(a) Plan") is so qualified and has been so
qualified during the period from its adoption to date, and the trust forming a
part thereof is exempt from tax pursuant to section 501(a) of the Code. Delrina
has delivered to Symantec or its counsel a complete and correct copy of the most
recent Internal Revenue Service determination letter with respect to each
Delrina 401(a) Plan.
(d) Except for those Delrina Benefit Arrangements (as defined below)
regarding severance benefits or employment termination which exist under the
employment laws, regulations or judicial decisions relating to employers in
Canada and other jurisdictions in which Delrina or any Delrina Subsidiary has
employees ("EMPLOYER LAWS"), the Delrina Disclosure Letter identifies each
employment, consulting, severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) 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 (A) is not a Delrina Employee Plan, (B) is entered into, maintained or
contributed to, as the case may be, by Delrina or any of the Delrina
Subsidiaries and (C) covers any Employee or former employee of Delrina or any of
the Delrina Subsidiaries. Such contracts, plans and arrangements as are
described in this Section 2.8(d) are herein referred to collectively as the
"DELRINA BENEFIT ARRANGEMENTS." Each Delrina Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Delrina Benefit Arrangement. Delrina has delivered to
Symantec or its counsel a complete and correct copy or description of each
Delrina Benefit Arrangement. None of the Delrina Benefits Arrangements or
Delrina Employee Plans promises or provides retiree medical or retiree insurance
benefits to any person.
(e) There has been no amendment to, written interpretation or announcement
by Delrina or any of the Delrina Subsidiaries relating to, or change in employee
participation or coverage under, any
B-9
<PAGE>
Delrina Employee Plan or Delrina Benefit Arrangement that would increase
materially the expense of maintaining such Delrina Employee Plan or Delrina
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year ended June 30, 1995.
(f) Delrina has provided, or will have provided prior to the Closing, to
individuals entitled thereto all required notices and coverage pursuant to
section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), with respect to any "qualifying event" (as
defined in section 4980B(f)(3) of the Code) occurring prior to and including the
Closing Date (as defined in Section 6.1), and no material Tax payable on account
of section 4980B of the Code has been incurred with respect to any Employee or
former employees (or their beneficiaries) of Delrina or any of the Delrina
Subsidiaries.
(g) No benefit payable or which may become payable by Delrina or any of the
Delrina Subsidiaries pursuant to any Delrina Employee Plan or any Delrina
Benefit Arrangement or as a result of or arising under this Agreement shall
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.
(h) Delrina and each Delrina Subsidiary is in compliance in all material
respects with all applicable laws, agreements and contracts relating to
employment, employment practices, wages, hours, and terms and conditions of
employment, including, but not limited to, employee compensation matters, but
not including ERISA.
(i) Delrina and each Delrina Subsidiary believes it has good labor
relations; nothing has come to Delrina's attention as a result of the
negotiation or entering into of this Agreement that would lead Delrina to
believe that the consummation of the transactions contemplated hereby will have
a Material Adverse Effect on labor relations; and neither Delrina nor any
Delrina Subsidiary has any knowledge that any of its or their key employees
intends to leave its or their employ except to the extent such knowledge is
obtained by Delrina through Symantec.
(j) Neither Delrina or any of its Subsidiaries has an employment contract
or material consulting agreement currently in effect that is not terminable at
will (other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions), except
as such termination rights are limited under Employer Laws. All Employees and
all officers and consultants of Delrina and the Delrina Subsidiaries having
access to proprietary information of Delrina have executed and delivered to
Delrina an agreement regarding the protection of such proprietary information
and the assignment of inventions to Delrina; copies of the forms of all such
agreements have been delivered or made available to Symantec's counsel.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. At March 31, 1995 (the "DELRINA
BALANCE SHEET DATE"), (i) neither Delrina nor any of the Delrina Subsidiaries
had any liabilities or obligations of any nature (matured or unmatured, fixed or
contingent) which were material to Delrina and the Delrina Subsidiaries, taken
as a whole, and were not provided for in the consolidated balance sheet of
Delrina at the Delrina Balance Sheet Date, a copy of which is attached hereto as
EXHIBIT 2.9 (the "DELRINA BALANCE SHEET"); and (ii) all reserves established by
Delrina and set forth in the Delrina Balance Sheet were reasonably adequate.
2.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Delrina OSC Reports filed prior to the date of this Agreement, since the Delrina
Balance Sheet Date there has not occurred:
(a) any change in the condition (financial or otherwise), properties,
assets, liabilities, businesses, operations, results of operations or
prospects of Delrina and the Delrina Subsidiaries, that could reasonably be
expected to have a Material Adverse Effect on Delrina;
(b) any amendments or changes in the articles of incorporation or bylaws
of Delrina;
(c) any damage, destruction or loss, whether covered by insurance or
not, that could reasonably be expected to have a Material Adverse Effect on
Delrina;
B-10
<PAGE>
(d) any redemption, repurchase or other acquisition of Delrina Common
Shares by Delrina (other than the repurchase of unvested shares at cost
pursuant to arrangements with terminated employees or consultants), or any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to Delrina Common Shares;
(e) any material increase in or material modification of the
compensation or benefits payable or to become payable by Delrina to any of
its directors or employees, except in the ordinary course of business
consistent with past practice;
(f) any material increase in or material modification of any bonus,
pension, insurance or Delrina Employee Plan or Delrina Benefit Arrangement
(including, but not limited to, the granting of stock options, restricted
stock awards or stock appreciation rights) made to, for or with any of its
employees, other than in the ordinary course of business consistent with
past practice;
(g) any acquisition or sale of a material amount of property or assets
of Delrina, other than in the ordinary course of business consistent with
past practice;
(h) any alteration in any term of any outstanding security of Delrina;
(i) (A) other than in the ordinary course of business consistent with
past practice or other nonmaterial amounts, any incurrence, assumption or
guarantee by Delrina of any debt for borrowed money; (B) any issuance or
sale of any securities convertible into or exchangeable for debt securities
of Delrina; or (C) any issuance or sale of options or other rights to
acquire from Delrina, directly or indirectly, debt securities of Delrina or
any securities convertible into or exchangeable for any such debt
securities;
(j) other than in the ordinary course of business consistent with past
practice or other nonmaterial amounts, any creation or assumption by Delrina
of any mortgage, pledge, security interest or lien or other encumbrance on
any asset;
(k) other than in the ordinary course of business consistent with past
practice, any making of any loan, advance or capital contribution to or
investment in any person other than (i) travel loans or advances made in the
ordinary course of business of Delrina, (ii) other loans and advances in an
aggregate amount which does not exceed $100,000 outstanding at any time and
(iii) purchases on the open market of liquid, publicly traded securities;
(l) any entering into, amendment of, relinquishment, termination or
non-renewal by Delrina of any material contract, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business;
(m) any transfer or grant of a material right under the Delrina
Intellectual Property Rights (as defined in Section 2.15 below), other than
those transferred or granted in the ordinary course of business;
(n) any labor dispute or charge of unfair labor practice (other than
routine individual grievances), any activity or proceeding by a labor union
or representative thereof to organize any employees of Delrina or any
campaign being conducted to solicit authorization from employees to be
represented by such labor union; or
(o) any agreement or arrangement made by Delrina to take any action
which, if taken prior to the date hereof, would have made any representation
or warranty set forth in this Agreement materially untrue or incorrect as of
the date when made unless otherwise disclosed.
2.11 AGREEMENTS. Section 2.11 of the Delrina Disclosure Letter sets forth
a list of any of the following written or oral contracts, agreements and other
instruments, copies of each of which written contracts, agreements or
instruments have been delivered to Symantec's counsel:
(a) contract with or commitment to any labor union;
B-11
<PAGE>
(b) continuing contract for the future purchase, sale or manufacture of
products, material, supplies, equipment or services requiring payment to or
from Delrina or any Delrina Subsidiary in an amount in excess of $500,000
per annum (i) which is not terminable on 120 days' or less notice without
cost or other liability at or at any time after the Effective Time or (ii)
in which Delrina or such Delrina Subsidiary has granted or received
manufacturing rights, most favored nations pricing provisions or exclusive
marketing rights relating to any product, group of products or territory;
(c) contract providing for the development of software for, or license
of software to, Delrina, or other Intellectual Property Rights used or
incorporated in one or more of the products referred to in Section 2.16 of
the Delrina Disclosure Letter (other than software licensed to Delrina from
a third party as to which Delrina has a fully-paid perpetual license to use
and distribute as Delrina is currently doing without any restrictions or
requirements as to how the Delrina Published Product is marketed, or that is
generally available to the public from such third party at a per copy
license fee of less than $5,000, but including any site or corporate license
and each agreement providing for either the delivery of source code or the
escrow of source code for the benefit of the licensee or any OEM,
distribution or other agreement that requires Delrina to perform any ongoing
development of software including updates and error corrections);
(d) joint venture contract or other agreement which has involved or is
reasonably expected to involve a sharing of profits or losses in excess of
$25,000 per annum with any other party;
(e) indenture, mortgage, promissory note, loan 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;
(f) lease or other agreement under which Delrina or any Delrina
Subsidiary 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;
(g) agreement or arrangement for the sale of any assets, properties or
rights having a value in excess of $25,000, other than in the ordinary
course of business consistent with past practice;
(h) agreement which restricts Delrina or any Delrina Subsidiary from
engaging in any aspect of its business or competing in any line of business
in any geographic area or in any functional area or that requires Delrina or
any Delrina Subsidiary to distribute or use exclusively a third party
technology or product;
(i) agreement between or among Delrina or any Delrina Subsidiary
regarding intercompany loans, revenue or cost sharing, ownership or license
of Delrina IP Rights, intercompany royalties or dividends or similar
matters;
(j) written dealer, distributor, sales representative, original
equipment manufacturer, value added remarketer or other agreement for the
ongoing distribution of the Delrina Products (as defined in Section 2.16);
(k) to the extent not identified in Section 2.8 of the Delrina
Disclosure Letter, contract or commitment for the employment of any officer,
employee or consultant or any other type of contract or understanding with
any officer, employee or consultant which is not immediately terminable
without cost or other liability (except for normal severance benefits
available to employees generally as set forth in any Delrina Benefit Plan
and except for limitations on such termination rights as exist under
applicable Employer Laws;
(l) any other loan or credit agreement, note, bond, mortgage, indenture,
lease or other material agreement which is not otherwise disclosed elsewhere
in the Delrina Disclosure Letter, the breach or termination of which would
have a Material Adverse Effect on Delrina; and
B-12
<PAGE>
(m) Delrina IP Rights Agreement (as defined in Section 2.15 below) or
other material agreements relating to Delrina Products (as defined in
Section 2.16 below) other than any Delrina IP Rights Agreement or other such
material agreement already identified in response to Section 2.11(c) above
or elsewhere in the Delrina Disclosure Letter.
2.12 NO DEFAULTS. Except as disclosed in the Delrina OSC Reports filed
prior to the date of this Agreement, to Delrina's knowledge, neither it nor any
of the Delrina Subsidiaries is in default under, and there exists no event,
condition or occurrence which, after notice or lapse of time, or both, would
constitute such a default by Delrina or any of the Delrina Subsidiaries under,
any contract or agreement to which Delrina or any of the Delrina Subsidiaries is
a party and which would, if terminated due to such default, have, insofar as can
reasonably be foreseen, a Material Adverse Effect on Delrina.
2.13 CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of Delrina or any of the Delrina Subsidiaries from Delrina or any of
the Delrina Subsidiaries, under any Delrina Employee Plan, Delrina Benefit
Arrangement or otherwise, (ii) materially increase any benefits otherwise
payable under any Delrina Employee Plan or Delrina Benefit Arrangement or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits, including but not limited to the time of exercise of stock options.
2.14 TAXES. Delrina and each of the Delrina Subsidiaries have timely
filed, or caused to be filed, all Tax Returns (as defined below) required to be
filed by them (all of which returns were correct and complete in all material
respects) and have paid or withheld, or caused to be paid or withheld, all Taxes
(as defined below) that are due and payable, and Blue has provided adequate
accruals in accordance with Canadian generally accepted accounting principles in
its Financial Statements for any Taxes that have not been paid, whether or not
shown as being due on any returns. Since the Delrina Balance Sheet Date, no
material Tax liability has been assessed, proposed to be assessed, incurred or
accrued other than in the ordinary course of business. Neither Delrina nor any
Delrina Subsidiary has received any written notification that any material
issues have been raised (and are currently pending) by Revenue Canada, the
Internal Revenue Service or any other taxing authority, including, without
limitation, any sales tax authority, in connection with any of the Tax Returns
referred to above, and no waivers of statutes of limitations have been given or
requested with respect to Delrina or any of the Delrina Subsidiaries, in each
case except for any such written notices or waivers which have not had and could
not reasonably be expected to have a Material Adverse Effect. There are no
material proposed (but unassessed) additional Taxes, none have been asserted and
no Tax liens have been filed other than for Taxes not yet due and payable. None
of Delrina or any of the Delrina Subsidiaries (i) has made an election to be
treated as a "consenting corporation" under section 341(f) of the Code or (ii)
is a "personal holding company" within the meaning of section 542 of the Code.
As used in this Agreement, "TAX" and "TAXES" means, with respect to any
entity, (A) all income taxes (including any tax on or based upon net income,
gross income, income as specially defined, earnings, profits or selected items
of income, earnings or profits) and all capital, gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
severance, utility, compensation, social security, workers' compensation,
unemployment insurance or compensation, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties or
other taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties or additional amounts imposed by any taxing
authority (domestic or foreign) on such entity, and any interest, penalties,
additional taxes and additions to tax imposed with respect to the foregoing, and
(B) any liability for the payment of any amount of the type described in the
immediately preceding clause (A) as a result of being a "transferee" (within the
meaning of section 6901 of the Code or any other applicable law) of another
entity or a member of an affiliated or combined group. As used in this
Agreement, "TAX RETURNS" means all returns relating to Taxes.
B-13
<PAGE>
2.15 INTELLECTUAL PROPERTY. Except in each case as disclosed in the
Delrina OSC Reports filed prior to the date of this Agreement and subject to the
matters disclosed in Section 2.7 of the Delrina Disclosure Letter:
(a) Delrina and the Delrina Subsidiaries own, or have the right to use,
sell or license all material Intellectual Property Rights (as defined below)
necessary or required for the conduct of their respective businesses as
presently conducted and as proposed to be conducted by Delrina as of the
date hereof (such Intellectual Property Rights being hereinafter
collectively referred to as the "DELRINA IP RIGHTS") and such rights to use,
sell or license are reasonably sufficient for such conduct of their
respective businesses;
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any assignment, conveyance or agreement governing any
Delrina IP Right significant to a product that accounted for more than 5% of
Delrina's gross revenues for the nine months ended March 31, 1995 (the
"DELRINA IP RIGHTS AGREEMENTS"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any
Delrina IP Right or materially impair the right of Delrina and/or the
Delrina Subsidiaries to use, sell or license any Delrina IP Right or portion
thereof (except where such breach, forfeiture or termination would not have
a Material Adverse Effect on Delrina);
(c) there are no royalties, honoraria, fees or other payments in excess
of $100,000 payable by Delrina to any person by reason of the publication or
distribution of the Delrina Published Products (as defined in Section 2.16
below) other than as set forth in the Delrina IP Rights Agreements listed in
the Delrina Disclosure Letter;
(d) neither the manufacture, marketing, license, sale or lawful use of
any product currently licensed or sold by Delrina or any of the Delrina
Subsidiaries or currently under development by Delrina or any of the Delrina
Subsidiaries violates any license or agreement between Delrina or any of the
Delrina Subsidiaries and any third party or infringes any Intellectual
Property Right of any other party; and there is no pending or, to the best
knowledge of Delrina, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any Delrina
IP Right nor, to the best knowledge of Delrina, is there any basis for any
such claim, nor has Delrina received any notice asserting that any Delrina
IP Right or the proposed use, sale, license or disposition thereof conflicts
or will conflict with the rights of any other party, nor, to the best
knowledge of Delrina, is there any basis for any such assertion, except to
the extent that such violation(s), or notice or basis therefor, have not had
and could not reasonably be expected to have a Material Adverse Effect on
Delrina; and
(e) Delrina has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material Delrina IP Rights. All officers,
employees involved in the development of products or product documentation
and consultants of Delrina or any of the Delrina Subsidiaries have executed
and delivered to Delrina or the Delrina Subsidiary an agreement regarding
the protection of proprietary information and the assignment to Delrina or
the Delrina Subsidiary of all Intellectual Property Rights arising from the
services performed for Delrina or the Delrina Subsidiary by such persons;
and copies of the forms of all such agreements have been delivered to
Symantec's counsel. No current or prior officers, employees or consultants
of Delrina claim an ownership interest in any Delrina IP Rights as a result
of having been involved in the development of such property while employed
by or consulting to Delrina, or otherwise.
Delrina will deliver prior to Closing a list of all applications,
registrations, filings and other formal actions made or taken pursuant to United
States, Canadian, provincial, federal, state and foreign laws by Delrina to
perfect or protect its interest in Delrina IP Rights, including, without
limitation, all patents, patent applications, trademarks and service marks,
trademark and service mark applications, copyrights and copyright applications
and to the knowledge of Delrina, there is no cancellation,
B-14
<PAGE>
termination or expiration of any such registration or patent that is reasonably
foreseeable and is not intended to be renewed or extended by Delrina, except
where the failure to renew or extend would not have a Material Adverse Effect on
Delrina. To the best of Delrina's knowledge, it is not using any confidential
information or trade secrets of any former employer of any past or present
employees.
As used herein, the term "INTELLECTUAL PROPERTY RIGHTS" shall mean all
worldwide industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications, copyright,
copyright applications, mask works, franchises, licenses, know-how, trade
secrets, customer lists, proprietary processes and formulae, all source and
object code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records.
2.16 PRODUCTS AND DISTRIBUTION. Section 2.16 of the Delrina Disclosure
Letter contains a complete list of all of the top five software products (by
title, determined by aggregate sales receipts by Delrina or any of the Delrina
Subsidiaries in fiscal 1994 and fiscal 1995 through March 31, 1995 from such
title) published and/or distributed by Delrina or the Delrina Subsidiaries (the
"DELRINA PUBLISHED PRODUCTS") and all material products under development or
consideration by Delrina or with an estimated public availability date on or
prior to March 31, 1996 (the "DELRINA PRODUCTS UNDER DEVELOPMENT" and,
collectively with the Delrina Published Products, the "DELRINA PRODUCTS"). The
Delrina Disclosure Letter sets forth, for each Delrina Product Under
Development, the currently estimated public availability date (which Delrina
believes to be reasonable).
2.17 FEES AND EXPENSES. Except for the fees and expenses set forth in the
Delrina Disclosure Letter payable to Broadview Associates, L.P., neither Delrina
or any of the Delrina Subsidiaries has paid or become obligated to pay any fee
or commission to any broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
2.18 INSURANCE. Delrina and the Delrina Subsidiaries maintain and at all
times since January 1, 1993 have maintained fire and casualty, general
liability, business interruption, product liability and sprinkler and water
damage insurance that Delrina believes to be reasonably prudent for its
business. Delrina will deliver prior to Closing a list of all such insurance
policies presently in effect, and correct and complete copies of all such
policies along with a history of claims made under such policies will have been
provided to Symantec or its counsel prior to Closing.
2.19 OWNERSHIP OF PROPERTY. Except (a) as disclosed in the Delrina OSC
Reports filed prior to the date of this Agreement, (b) for liens for current
Taxes not yet delinquent or (c) for liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materialmen and the like, Delrina and each of the
Delrina Subsidiaries owns its real and personal property free and clear of all
security interests, mortgages, liens, charges, claims, options and encumbrances.
All real and tangible personal property of Delrina and each of the Delrina
Subsidiaries is generally in good repair and is operational and usable in the
operations of Delrina, subject to ordinary wear and tear and subject to
technical obsolescence. Neither Delrina nor any Delrina Subsidiary is in
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties (the violation of which would have a Material Adverse Effect on its
business or financial condition), or has received any notice of violation with
which it has not complied, except where such violation would not have a Material
Adverse Effect on Delrina.
2.20 ENVIRONMENTAL MATTERS.
(a) To Delrina's knowledge, during the period that Delrina and the
Delrina Subsidiaries have leased or owned their respective properties or
owned or operated any facilities, there have been no disposals, releases,
emissions, spills, discharges or threatened releases of Hazardous Materials
(as defined below) on, from or under such properties or facilities. Delrina
has no actual
B-15
<PAGE>
knowledge of any presence, disposals, releases, emissions, spills,
discharges or threatened releases of Hazardous Materials on, from or under
any of such properties or facilities, which may have occurred prior to
Delrina or any of the Delrina Subsidiaries having taken possession of any of
such properties and facilities. For the purposes of this Agreement, insofar
as properties and facilities in Canada are concerned, "HAZARDOUS MATERIALS"
shall mean any pollutant, contaminant, chemical, deleterious substance or
industrial, toxic or hazardous waste or substance and, insofar as properties
and facilities in the United States are concerned, shall mean any hazardous
or toxic substance, material or waste which is or becomes prior to the
Closing regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous chemical" under, (1) the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA"); (2) any similar
federal, state or local law; or (3) regulations promulgated under any of the
above laws or statutes. Insofar as properties and facilities in the United
States are concerned, the terms "disposal," "release" and "threatened
release" shall have the definitions assigned thereto by CERCLA.
(b) To Delrina's knowledge, none of the properties, facilities and
operations of Delrina and the Delrina Subsidiaries is in violation of any
federal, provincial, state, municipal and local laws, statutes, bylaws,
ordinances, regulations and orders ("ENVIRONMENTAL LAWS") relating to
protection of the environment, occupational health and safety, industrial
hygiene or Hazardous Materials. During the time that Delrina or the Delrina
Subsidiaries have owned or leased their respective properties and
facilities, neither Delrina nor any of the Delrina Subsidiaries nor, to
Delrina's knowledge, any third party, has used, generated, manufactured,
processed, treated, disposed of, handled or stored on, under or about such
properties or facilities or transported to or from such properties or
facilities any Hazardous Materials.
(c) There has been no litigation brought or threatened against Delrina
or any of the Delrina Subsidiaries by, or any settlement reached by Delrina
or any of the Delrina Subsidiaries with, any party or parties alleging the
presence, disposal, emission, spill, discharge, release or threatened
release of any Hazardous Materials on, from or under any properties or
facilities.
2.21 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Delrina OSC
Reports filed prior to the date of this Agreement, no officer or director of
Delrina or any "affiliate" or "associate" (as those terms are defined in Rule
405 promulgated under the Securities Act) of any such person has had, either
directly or indirectly, a material interest in: (i) any person or entity which
purchases from or sells, licenses or furnishes to Delrina or any of the Delrina
Subsidiaries any goods, property, technology or intellectual or other property
rights or services; or (ii) any contract or agreement to which Delrina or any of
the Delrina Subsidiaries is a party or by which it may be bound or affected.
2.22 BOARD APPROVAL. The Board of Directors of Delrina has, as of the date
hereof, (i) unanimously approved this Agreement and the Arrangement, (ii)
determined that the Arrangement is in the best interests of the shareholders of
Delrina and is on terms that are fair to such shareholders and (iii) recommended
that the shareholders of Delrina approve this Agreement and the Arrangement.
2.23 VOTE REQUIRED. The affirmative vote of two-thirds of the votes cast
by the holders of the outstanding Delrina Common Shares entitled to be cast (or
such other vote as may be set out in the Interim Order) is the only vote of the
holders of any class or series of Delrina's capital stock necessary to approve
this Agreement and the Arrangement.
2.24 DISCLOSURE. No representation or warranty made by Delrina in this
Agreement, nor any document, written information, statement, financial
statement, certificate or Exhibit prepared and furnished or to be prepared and
furnished by Delrina or its representatives pursuant hereto or in connection
with the transactions contemplated hereby, when taken together, contained any
untrue statement of a material fact when made, or omitted to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished.
B-16
<PAGE>
2.25 FAIRNESS OPINION. Delrina's Board of Directors has received a written
opinion from Broadview Associates, L.P. that the Exchange Ratio is fair to
Delrina's shareholders from a financial point of view.
2.26 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Delrina or any Delrina
Subsidiary that has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Delrina or any
Delrina Subsidiary, any acquisition of property by Delrina or any Delrina
Subsidiary or the conduct of business by Delrina or any Delrina Subsidiary as
currently conducted.
2.27 POOLING MATTERS. Neither Delrina nor any of its affiliates has, to
Delrina's knowledge and based upon consultation with its independent auditors,
taken or agreed to take any action that (without giving effect to this
Agreement, the transactions contemplated hereby or actions related thereto, or
any action taken or agreed to be taken by Symantec or any of its affiliates)
would adversely affect the ability of Symantec to account for the business
combination to be effected by the Arrangement as a pooling of interests under US
GAAP.
2.28 BOOKS AND RECORDS. The books, records and accounts of Delrina and its
Subsidiaries (a) have been maintained in accordance with good business practices
on a basis consistent with prior years, (b) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the assets of
Delrina and (c) accurately and fairly reflect the basis for the Delrina
Financial Statements. Delrina 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; and (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with Canadian generally
accepted accounting principles, US GAAP or any other criteria applicable to such
statements and (ii) to maintain accountability for assets.
2.29 GOVERNMENT CONTRACTS. All representations, certifications and
disclosures made by Delrina to any Government Contract Party (as defined below)
have been in all material respects current, complete and accurate at the times
they were made. Delrina has no knowledge of, and has no reason to know of, any
acts, omissions or noncompliance with regard to any applicable public
contracting statute, regulation or contract requirement (whether express or
incorporated by reference) relating to any of Delrina's contracts with any
Government Contract Party (as defined below) in either case that have led to or
could lead to, either before or after the Closing Date, (a) any claim or dispute
involving Delrina and/or Symantec as successor in interest to Delrina and any
Government Contract Party or (b) any suspension, debarment or contract
termination, or proceeding related thereto. Delrina has no knowledge of, and has
no reason to know of, any act or omission that relates to the marketing,
licensing or selling to any Government Contract Party (as defined below) of any
of Delrina technical data and computer software and that has led to or could
lead to, either before or after the Closing Date (as defined in Section 6.1
below), any material cloud on any of Delrina's rights in and to its technical
data and computer software. Except for (i) Canadian or provincial government
incentives for certain nonmaterial employees, and (ii) research tax credits, all
of Delrina's development of technical data and computer software was developed
exclusively at private expense. For purposes of this Agreement, the term
"GOVERNMENT CONTRACT PARTY" means any independent or executive agency, division,
subdivision, audit group or procuring office of the Canadian or United States
federal government, including any prime contractor of the federal government and
any higher level subcontractor of a prime contractor of the federal government,
and including any employees or agents thereof, in each case acting in such
capacity.
3. REPRESENTATIONS AND WARRANTIES OF SYMANTEC
Except as set forth in a letter dated the date of this Agreement and
delivered by Symantec to Delrina concurrently herewith (the "SYMANTEC DISCLOSURE
LETTER"), Symantec hereby represents and warrants to Delrina that:
B-17
<PAGE>
3.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Symantec and
each of its subsidiaries (the "SYMANTEC SUBSIDIARIES") is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure so to qualify would not have a
Material Adverse Effect on Symantec. The Symantec Disclosure Letter sets forth a
correct and complete list of the Symantec Subsidiaries, the percentage of each
such subsidiary's outstanding capital stock owned by Symantec or another
subsidiary of Symantec and a correct and complete list of each jurisdiction in
which each of Symantec and each Symantec Subsidiary is duly qualified and in
good standing to do business. Symantec has delivered to Delrina's counsel
complete and correct copies of the certificate of incorporation and bylaws of
Symantec as amended to the date of this Agreement. Unless otherwise specified,
all references in this Agreement to deliveries to Delrina or its counsel shall
mean delivery to its outside counsel, Skadden, Arps, Slate, Meagher & Flom.
3.2 CAPITAL STRUCTURE.
(a) The authorized capital stock of Symantec consists of 70,000,000 shares
of Symantec Common Stock, of which 38,599,353 shares were issued and outstanding
as of June 30, 1995 (the "MEASUREMENT DATE") and 1,000,000 shares of Symantec
Preferred Stock, of which there were no shares outstanding as of the Measurement
Date. An aggregate of 12,700,000 shares of Symantec Common Stock are reserved
and authorized for issuance pursuant to the Symantec 1988 Employees Stock Option
Plan (the "SYMANTEC OPTION PLAN"), in respect of which options ("SYMANTEC
OPTIONS") to purchase a total of 6,456,418 shares of Symantec Common Stock were
outstanding as of the Measurement Date. Options or warrants to purchase an
aggregate of 460,577 shares of Symantec Common Stock were outstanding on the
Measurement Date to former employees or warrant holders of companies that have
been acquired by Symantec. An aggregate of 600,000 shares of Symantec Common
Stock are reserved and authorized for issuance pursuant to the Symantec 1988
Directors Stock Option Plan, of which options to purchase a total of 167,500
shares of Symantec Common Stock were outstanding as of the Measurement Date and
an aggregate of 450,000 shares of Symantec Common Stock are reserved and
authorized for issuance pursuant to the Symantec 1993 Directors Stock Option
Plan (collectively, the "SYMANTEC DIRECTORS PLANS"), under which options to
purchase 127,250 shares were outstanding as of the Measurement Date. An
aggregate of 1,500,000 shares of Symantec Common Stock are reserved and
authorized for issuance pursuant to the Symantec 1989 Employee Stock Purchase
Plan (the "423 PLAN"), of which 1,207,529 have been issued as of the Measurement
Date. As of the Measurement Date, there was $15,000,000 of debt outstanding,
convertible at the option of the holders into a maximum of 1,250,000 shares of
Symantec Common Stock. All issued and outstanding shares of Symantec Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any preemptive rights or right of rescission,
and have been offered, issued, sold and delivered by Symantec in compliance with
all registration, qualification and prospectus requirements (or applicable
exemptions therefrom) of applicable federal and state securities laws. Except as
set forth in Section 3.2 of the Symantec Disclosure Letter, Symantec does not
have any material subsidiaries or any material equity interest, direct or
indirect, in any corporation, partnership, joint venture or other business
entity. Except as set forth in Section 3.2 of the Symantec Disclosure Letter,
all of the shares of capital stock of the Symantec Subsidiaries are owned by
Symantec or a Symantec Subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Symantec's voting rights,
charges or other encumbrances of any nature whatsoever.
(b) NO OTHER COMMITMENTS. Except for the Symantec Options and warrants
disclosed in Section 3.2(a) above, there are no options, warrants, calls,
rights, commitments, conversion rights or agreements of any character to which
Symantec or any of the Symantec Subsidiaries is a party or by which Symantec or
any of the Symantec Subsidiaries is bound obligating Symantec or any of the
Symantec Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of
B-18
<PAGE>
capital stock of Symantec or any of the Symantec Subsidiaries or securities
convertible into or exchangeable for shares of capital stock of Symantec or any
of the Symantec Subsidiaries, or obligating Symantec or any of the Symantec
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, commitment, conversion right or agreement. There are no voting trusts or
other agreements or understandings to which Symantec is a party with respect to
the voting of the capital stock of Symantec or any of the Symantec Subsidiaries.
(c) REGISTRATION RIGHTS. Except as set forth in the Symantec Disclosure
Letter, Symantec is not under any obligation to register under the Securities
Act any of its presently outstanding securities or any securities that may be
subsequently issued.
3.3 AUTHORITY.
(a) CORPORATE ACTION. Symantec has all requisite corporate power and
authority to enter into this Agreement and, subject to approval by the
stockholders of Symantec of the issuance of Symantec Common Stock in connection
with the Arrangement and upon exchange of the Exchangeable Shares and to
approval of the Arrangement by the Court, to perform its obligations hereunder
and to consummate the Arrangement and the other transactions contemplated by
this Agreement. The execution and delivery of this Agreement by Symantec and,
subject to approval by the stockholders of Symantec of the issuance of Symantec
Common Stock in connection with the Arrangement and upon exchange of the
Exchangeable Shares and to approval of the Arrangement by the Court, the
consummation by Symantec of the Arrangement and the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Symantec. This Agreement has been duly executed and delivered by
Symantec and this Agreement is the valid and binding obligation of Symantec,
enforceable in accordance with its terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) NO CONFLICT. Neither the execution, delivery and performance of this
Agreement or the Plan of Arrangement by Symantec, nor the consummation of the
transactions contemplated hereby or thereby by Symantec nor compliance with the
provisions hereof or thereof by Symantec will: (i) conflict with, or result in
any violations of the certificate of incorporation or bylaws of Symantec or any
of the Symantec Subsidiaries; or (ii) result in any breach or cause a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, amendment, cancellation or acceleration of any obligation
contained in, or the loss of any material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
material properties or assets of Symantec or any of the Symantec Subsidiaries
under, any term, condition or provision of any loan or credit agreement, note,
bond, mortgage, indenture, lease or other material agreement, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Symantec or
any of the Symantec Subsidiaries or their respective properties or assets, other
than any such breaches, defaults, losses, liens, security interests, charges or
encumbrances which, individually or in the aggregate, would not have a Material
Adverse Effect on Symantec; or (iii) require the affirmative vote of the holders
of greater than a majority of the issued and outstanding shares of Symantec
Common Stock.
(c) GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required to be obtained by Symantec or any of the Symantec Subsidiaries in
connection with the execution and delivery of this Agreement or the Plan of
Arrangement or the consummation of the transactions contemplated hereby or
thereby, except for: (i) the filing with the SEC of (A) the Form F-4 or the Form
S-3 (if applicable) or (B) the Joint Proxy Statement relating to the Symantec
Stockholders Meeting, and (C) such reports and information under the Exchange
Act and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement and the transactions contemplated
hereby; (ii) the filing of the Plan of Arrangement with the Ministry of Consumer
and Commercial Relations of the Province of Ontario and appropriate documents
with the relevant authorities of other states in which Symantec is qualified to
do business; (iii) such filings, authorizations, orders and approvals as may be
required
B-19
<PAGE>
under State Takeover Laws; (iv) such filings, authorizations, orders and
approvals as may be required under foreign laws, state securities laws and the
Bylaws of the NASD; (v) such filings and notifications as may be necessary under
the HSR Act; and (vi) where the failure to obtain such consents, approvals,
etc., would not prevent or delay the consummation of the Arrangement or
otherwise prevent Symantec from performing its obligations under this Agreement
and would not reasonably be expected to have a Material Adverse Effect on
Symantec.
3.4 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) SEC REPORTS. Symantec has delivered to Delrina's counsel correct and
complete copies of each report, schedule, registration statement and definitive
proxy statement (other than preliminary material) filed by Symantec with the SEC
on or after March 31, 1993 (the "SYMANTEC SEC DOCUMENTS"), which are all the
documents that Symantec was required to file with the SEC on or after such date.
As of their respective dates or, in the case of registration statements, their
effective dates (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), none of the Symantec SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) 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, and the Symantec SEC Documents
complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder. Symantec has filed
all documents and agreements which were required to be filed as exhibits to the
Symantec SEC Documents.
(b) FINANCIAL STATEMENTS. The financial statements of Symantec included in
the Symantec SEC Documents complied as to form in all material respects with the
then applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with US GAAP
applied on a consistent basis during the periods involved (except as may have
been indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Form 10-Q promulgated by the SEC) and fairly present (subject,
in the case of the unaudited statements, to normal, year-end audit adjustments)
the consolidated financial position of Symantec and its consolidated Symantec
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows (or changes in financial position prior to the
approval of Statement of Financial Accounting Standards Number 95) for the
respective periods then ended.
3.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Symantec for inclusion or incorporation by reference in the Joint
Proxy Statement (and, if filed, the Form F-4 and Form S-3) will, at the date the
Joint Proxy Statement is mailed to the stockholders of Symantec and at the time
of the Symantec Stockholders Meeting (and, if filed, at the time the Form F-4
and Form S-3 are declared effective), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Joint Proxy Statement will comply as to
form in all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated by the SEC thereunder.
3.6 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in the Symantec
SEC Documents filed prior to the date of this Agreement, the businesses of
Symantec and the Symantec Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, rule or order of any Governmental Entity where
such violation would have a Material Adverse Effect. Except as disclosed in the
Symantec SEC Documents filed prior to the date of this Agreement, Symantec has
not been notified by any Governmental Entity that any investigation or review
with respect to Symantec or any of the Symantec Subsidiaries is pending or
threatened, nor has any Governmental Entity notified Symantec of its intention
to conduct the same. Symantec and the Symantec Subsidiaries have all material
B-20
<PAGE>
permits, licenses and franchises from Governmental Entities required to conduct
their businesses as now being conducted, and are in material compliance with all
such permits, licenses and franchises, except for those whose absence would not
have a Material Adverse Effect on Symantec.
3.7 LITIGATION. Except as disclosed in the Symantec SEC Documents filed
prior to the date of this Agreement, there is no suit, action, arbitration,
demand, claim or proceeding pending or, to the best knowledge of Symantec,
threatened against Symantec or any of the Symantec Subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Symantec; nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Symantec or any of the Symantec Subsidiaries that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect on
Symantec. Symantec has made available to Delrina correct and complete copies of
all correspondence prepared by its counsel for Symantec's auditors in connection
with the last two completed audits of Symantec's financial statements and any
such correspondence since the date of the last such audit.
3.8 ERISA AND OTHER COMPLIANCE.
(a) The Symantec Disclosure Letter identifies (i) each "employee benefit
plan," as defined in section 3(3) of ERISA, and (ii) all other written or formal
plans or agreements involving direct or indirect compensation or benefits in
excess of $60,000 per person per annum (including any employment agreements
entered into between Symantec or any of the Symantec Subsidiaries and any
employee of Symantec or any of the Symantec Subsidiaries, but excluding workers'
compensation, unemployment compensation and other government-mandated programs)
currently or previously maintained, contributed to or entered into by Symantec
or any of the Symantec Subsidiaries under which Symantec or any of the Symantec
Subsidiaries or any ERISA Affiliate thereof has any present or future obligation
or liability (collectively, the "SYMANTEC EMPLOYEE PLANS"). All Symantec
Employee Plans which individually or collectively would constitute an "employee
pension benefit plan," as defined in section 3(2) of ERISA (collectively, the
"SYMANTEC PENSION PLANS"), are identified as such in the Symantec Disclosure
Letter. All contributions due from Symantec or any of the Symantec Subsidiaries
through the Effective Time with respect to any of the Symantec Employee Plans
has been or will be timely made as required under ERISA or any other applicable
legislation or have been accrued on Symantec's or any such Symantec Subsidiary's
financial statements as of March 31, 1995. Each Symantec Employee Plan has been
maintained in material compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including,
without limitation, ERISA and the Code, which are applicable to such Symantec
Employee Plans.
(b) No Symantec Pension Plan constitutes, or has since the enactment of
ERISA constituted, a "multiemployer plan," as defined in section 3(37) of ERISA.
No Symantec Pension Plans are subject to Title IV of ERISA. No "prohibited
transaction," as defined in section 406 of ERISA or section 4975 of the Code,
has occurred with respect to any Symantec Employee Plan which is covered by
Title I of ERISA which would result in a material liability to Symantec and the
Symantec Subsidiaries taken as a whole, excluding transactions effected pursuant
to a statutory or administrative exemption. Nothing done or omitted to be done
and no transaction or holding of any asset under or in connection with any
Symantec Employee Plan has or will make Symantec or any officer or director of
Symantec subject to any material liability under Title I of ERISA or liable for
any material Tax or penalty pursuant to sections 4972, 4975, 4976 or 4979 of the
Code or section 502 of ERISA.
(c) Any Symantec Pension Plan which is intended to be qualified under
section 401(a) of the Code (a "SYMANTEC 401(A) PLAN") is so qualified and has
been so qualified during the period from its adoption to date, and the trust
forming a part thereof is exempt from tax pursuant to section 501(a) of the
Code. Symantec has delivered to Delrina or its counsel a complete and correct
copy of the most recent Internal Revenue Service determination letter with
respect to each Symantec 401(a) Plan.
(d) Each Symantec plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), workers' benefits,
vacation benefits, severance benefits,
B-21
<PAGE>
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 (collectively "SYMANTEC BENEFIT
ARRANGEMENTS") has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Symantec Benefit Arrangement.
(e) There has been no amendment to, written interpretation or announcement
(whether or not written) by Symantec or any of the Symantec Subsidiaries
relating to, or change in employee participation or coverage under, any Symantec
Employee Plan or Symantec Benefit Arrangement that would increase materially the
expense of maintaining such Symantec Employee Plan or Symantec Benefit
Arrangement above the level of the expense incurred in respect thereof for the
fiscal year ended March 31, 1995.
(f) Symantec has provided, or will have provided prior to the Closing (as
defined in Section 6.1), to individuals entitled thereto all required notices
and coverage pursuant to section 4980B of COBRA, with respect to any "qualifying
event" (as defined in section 4980B(f)(3) of the Code) occurring prior to and
including the Closing Date, and no material Tax payable on account of section
4980B of the Code has been incurred with respect to any current or former
employees (or their beneficiaries) of Symantec or any of the Symantec
Subsidiaries.
(g) No benefit payable or which may become payable by Symantec or any of the
Symantec Subsidiaries pursuant to any Symantec Employee Plan or any Symantec
Benefit Arrangement or as a result of or arising under this Agreement shall
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.
(h) Symantec and each Symantec Subsidiary is in compliance in all material
respects with all applicable laws, agreements and contracts relating to
employment, employment practices, wages, hours, and terms and conditions of
employment, including, but not limited to, employee compensation matters, but
not including ERISA.
(i) Symantec and each Symantec Subsidiary believes it has good labor
relations; nothing has come to Symantec's attention as a result of the
negotiation or entering into this Agreement that would lead Symantec to believe
that the consummation of the transactions contemplated hereby will have a
material adverse effect on labor relations; and neither Symantec nor any
Symantec Subsidiary has any knowledge that any of its or their key employees
intends to leave its or their employ.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. At March 31, 1995 (the "SYMANTEC
BALANCE SHEET DATE"), (i) neither Symantec nor any of the Symantec Subsidiaries
had any liabilities or obligations of any nature (matured or unmatured, fixed or
contingent) which were material to Symantec and the Symantec Subsidiaries, taken
as a whole, and were not provided for in the consolidated balance sheet of
Symantec at the Symantec Balance Sheet Date, a copy of which is attached hereto
as EXHIBIT 3.9 (the "SYMANTEC BALANCE SHEET"); and (ii) all reserves established
by Symantec and set forth in the Symantec Balance Sheet were reasonably
adequate.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Symantec SEC Documents filed prior to the date of this Agreement, since the
Symantec Balance Sheet Date there has not occurred:
(a) any change in the condition (financial or otherwise), properties,
assets, liabilities, businesses, operations, results of operations or
prospects of Symantec and the Symantec Subsidiaries, taken as a whole that
could reasonably be expected to have a Material Adverse Effect on Symantec;
(b) any amendments or changes in the certificate of incorporation or
bylaws of Symantec;
B-22
<PAGE>
(c) any damage, destruction or loss, whether covered by insurance or
not, that could reasonably be expected to have a Material Adverse Effect on
Symantec;
(d) any redemption, repurchase or other acquisition of shares of
Symantec Common Stock by Symantec (other than the repurchase of unvested
shares at cost pursuant to arrangements with terminated employees or
consultants), or any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to
Symantec Common Stock;
(e) any material increase in or material modification of the
compensation or benefits payable or to become payable by Symantec to any of
its directors or employees, except in the ordinary course of business
consistent with past practice;
(f) any material increase in or material modification of any bonus,
pension, insurance or Symantec Employee Plan or Symantec Benefit Arrangement
(including, but not limited to, the granting of stock options, restricted
stock awards or stock appreciation rights) made to, for or with any of its
employees, other than in the ordinary course of business consistent with
past practice;
(g) any acquisition or sale of a material amount of property or assets
of Symantec, other than in the ordinary course of business consistent with
past practice;
(h) any alteration in any term of any outstanding security of Symantec;
(i) (A) other than in the ordinary course of business consistent with
past practice or other nonmaterial amounts, any incurrence, assumption or
guarantee by Symantec of any debt for borrowed money; (B) any issuance or
sale of any securities convertible into or exchangeable for debt securities
of Symantec; or (C) any issuance or sale of options or other rights to
acquire from Symantec, directly or indirectly, debt securities of Symantec
or any securities convertible into or exchangeable for any such debt
securities;
(j) other than in the ordinary course of business consistent with past
practice or other nonmaterial amounts, any creation or assumption by
Symantec of any mortgage, pledge, security interest or lien or other
encumbrance on any asset;
(k) other than in the ordinary course of business consistent with past
practice, any making of any loan, advance or capital contribution to or
investment in any person other than (i) travel loans or advances made in the
ordinary course of business of Symantec, (ii) other loans and advances in an
aggregate amount which does not exceed $100,000 outstanding at any time and
(iii) purchases on the open market of liquid, publicly traded securities;
(l) any entering into, amendment of, relinquishment, termination or
non-renewal by Symantec of any material contract, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business;
(m) any transfer or grant of a material right under the Symantec IP
Rights (as defined in Section 3.15 below), other than those transferred or
granted in the ordinary course of business consistent with past practices;
(n) any labor dispute or charge of unfair labor practice (other than
routine individual grievances), any activity or proceeding by a labor union
or representative thereof to organize any employees of Symantec or any
campaign being conducted to solicit authorization from employees to be
represented by such labor union; or
(o) any agreement or arrangement made by Symantec to take any action
which, if taken prior to the date hereof, would have made any representation
or warranty set forth in this Agreement materially untrue or incorrect as of
the date when made unless otherwise disclosed.
B-23
<PAGE>
3.11 AGREEMENTS. Section 3.11 of the Symantec Disclosure Letter sets forth
a list of any of the following written or oral contracts, agreements and other
instruments, copies of each of which written contracts, agreements or
instruments have been delivered to Delrina's counsel:
(a) contract with or commitment to any labor union;
(b) continuing contract for the future purchase, sale or manufacture of
products, material, supplies, equipment or services requiring payment to or
from Symantec or any Symantec Subsidiary in an amount in excess of $500,000
per annum (i) which is not terminable on 120 days' or less notice without
cost or other liability at or at any time after the Effective Time or (ii)
in which Symantec or such Symantec Subsidiary has granted or received
manufacturing rights, most favored nations pricing provisions or exclusive
marketing rights relating to any product, group of products or territory;
(c) contract providing for the development of software for, or license
of software to, Symantec, or other Intellectual Property Rights used or
incorporated in one or more of the products referred in Section 3.16 of the
Symantec Disclosure Letter in (other than software licensed to Symantec from
a third party as to which Symantec has a fully-paid perpetual license to use
and distribute as Symantec is currently doing without any restriction or
requirements as to how the Symantec Published Product is marketed, or that
is generally available to the public from such third party at a per copy
license fee of less than $5,000, but including any site or corporate license
and each agreement providing for either the delivery of source code or the
escrow of source code for the benefit of the licensee or any OEM,
distribution or other agreement that requires Symantec to perform any
ongoing development of software including updates and error corrections);
(d) joint venture contract or other agreement which has involved or is
reasonably expected to involve a sharing of profits or losses in excess of
$25,000 per annum with any other party;
(e) contract or commitment for the employment of any officer, employee
or consultant or any other type of contract or understanding with any
officer which is not immediately terminable without cost or other liability
(except for normal severance benefits available to employees generally as
set forth in any Symantec Benefit Arrangement);
(f) indenture, mortgage, promissory note, loan 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;
(g) lease or other agreement under which Symantec or any Symantec
Subsidiary 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;
(h) agreement or arrangement for the sale of any assets, properties or
rights having a value in excess of $25,000 other than in the ordinary course
of business consistent with past practice;
(i) agreement which restricts Symantec or any Symantec Subsidiary from
engaging in any aspect of its business or competing in any line of business
in any geographic area;
(j) agreement between or among Symantec or any Symantec Subsidiary
regarding intercompany loans, revenue or cost sharing, ownership or license
of Symantec IP Rights, intercompany royalties or dividends or similar
matters; or
(k) Symantec IP Rights Agreement (as defined in Section 3.15 below) or
other material agreements relating to Symantec Products (as defined in
Section 3.16 below) other than any Symantec IP Rights Agreement or other
such material agreement already identified in response to Section 3.11(c)
above or elsewhere in the Symantec Disclosure Letter.
B-24
<PAGE>
3.12 NO DEFAULTS. Except as disclosed in the Symantec SEC Documents filed
prior to the date of this Agreement, to Symantec's knowledge, neither it nor any
of the Symantec Subsidiaries is in default under, and there exists no event,
condition or occurrence which, after notice or lapse of time, or both, would
constitute such a default by Symantec or any of the Symantec Subsidiaries under,
any contract or agreement to which Symantec or any of the Symantec Subsidiaries
is a party and which would, if terminated or modified, have, insofar as can
reasonably be foreseen, a Material Adverse Effect on Symantec.
3.13 CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any director
or employee of Symantec or any of the Symantec Subsidiaries from Symantec or any
of the Symantec Subsidiaries, under any Symantec Employee Plan, Symantec Benefit
Arrangement or otherwise, (ii) materially increase any benefits otherwise
payable under any Symantec Employee Plan or Symantec Benefit Arrangement or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits, including but not limited to the time of exercise of stock options.
3.14 TAXES. Symantec and each of the Symantec Subsidiaries have timely
filed, or caused to be filed, all Tax Returns required to be filed by them (all
of which returns were correct and complete in all material respects) and have
paid or withheld, or caused to be paid or withheld, all Taxes that are due and
payable, and has provided adequate accruals in accordance with US GAAP in its
Financial Statements for any Taxes that have not been paid, whether or not shown
as being due on any returns. Since the Symantec Balance Sheet Date, no material
Tax liability has been assessed, proposed to be assessed, incurred or accrued
other than in the ordinary course of business. Neither Symantec nor any Symantec
Subsidiary has received any written notification that any material issues have
been raised (and are currently pending) by the United States Internal Revenue
Service, Revenue Canada or any other taxing authority, including, without
limitation, any sales tax authority, in connection with any of the Tax returns
referred to above, and no waivers of statutes of limitations have been given or
requested with respect to Symantec or any of the Symantec Subsidiaries, in each
case except for any such written notices or waivers which have not had and could
not reasonably be expected to have a Material Adverse Effect. There are no
material proposed (but unassessed) additional Taxes, none have been asserted and
no Tax liens have been filed other than for Taxes not yet due and payable. None
of Symantec or any of the Symantec Subsidiaries (i) has made an election to be
treated as a "consenting corporation" under section 341(f) of the Code or (ii)
is a "personal holding company" within the meaning of section 542 of the Code.
Symantec is not a "specified financial institution" or specified person in
relation to any such institution for purposes of subsection 112(2.2) of the
Income Tax Act (Canada).
3.15 INTELLECTUAL PROPERTY. Except in each case as disclosed in the
Symantec SEC Documents filed prior to the date of this Agreement:
(a) Symantec and the Symantec Subsidiaries own, or have the right to
use, sell or license all material Intellectual Property Rights necessary or
required for the conduct of their respective businesses as presently
conducted (such Intellectual Property Rights being hereinafter collectively
referred to as the "SYMANTEC IP RIGHTS") and such rights to use, sell or
license are reasonably sufficient for such conduct of their respective
businesses;
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any assignment, conveyance or agreement governing any
Symantec IP Right significant to a product that accounted for more than 5%
of Symantec's gross revenues for the twelve months ended March 31, 1995 (the
"SYMANTEC IP RIGHTS AGREEMENTS"), will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any
Symantec IP Right or materially impair the right of Symantec
B-25
<PAGE>
and/or the Symantec Subsidiaries to use, sell or license any Symantec IP
Right or portion thereof (except where such breach, forfeiture or
termination would not have a Material Adverse Effect on Symantec);
(c) there are no royalties, honoraria, fees or other payments in excess
of $100,000 payable by Symantec to any person by reason of the publication
or distribution of the Symantec Published Products (as defined in Section
3.16 below) other than as set forth in the Symantec IP Rights Agreements
listed in the Symantec Disclosure Letter;
(d) neither the manufacture, marketing, license, sale or lawful use of
any product currently licensed or sold by Symantec or any of the Symantec
Subsidiaries or currently under development by Symantec or any of the
Symantec Subsidiaries violates any license or agreement between Symantec or
any of the Symantec Subsidiaries and any third party or infringes any
Intellectual Property Right of any other party; and there is no pending or,
to the best knowledge of Symantec, threatened claim or litigation contesting
the validity, ownership or right to use, sell, license or dispose of any
Symantec IP Right nor, to the best knowledge of Symantec, is there any basis
for any such claim, nor has Symantec received any notice asserting that any
Symantec IP Right or the proposed use, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party, nor, to the
best knowledge of Symantec, is there any basis for any such assertion,
except to the extent that such violation(s), or notice or basis therefor,
have not had and could not reasonably be expected to have, a Material
Adverse Effect on Symantec; and
(e) Symantec has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material Symantec IP Rights. All officers,
employees and consultants of Symantec or any of the Symantec Subsidiaries
have executed and delivered to Symantec or the Symantec Subsidiary an
agreement regarding the protection of proprietary information and the
assignment to Symantec or the Symantec Subsidiary of all Intellectual
Property Rights arising from the services performed for Symantec or the
Symantec Subsidiary by such persons. No current or prior officers, employees
or consultants of Symantec claim an ownership interest in any Symantec IP
Rights as a result of having been involved in the development of such
property while employed by or consulting to Symantec, or otherwise.
3.16 PRODUCTS AND DISTRIBUTION. The Symantec Disclosure Letter contains a
complete list of all of the top five software products (by title, determined by
aggregate sales receipts by Symantec or any of the Symantec Subsidiaries in
fiscal 1995 from such title) published and/or distributed by Symantec or the
Symantec Subsidiaries (the "SYMANTEC PUBLISHED PRODUCTS") and the top five
material products under development or consideration by Symantec or the Symantec
Subsidiaries with a scheduled public availability date on or prior to March 31,
1996 (the "SYMANTEC PRODUCTS UNDER DEVELOPMENT" and, collectively with the
Symantec Published Products, the "SYMANTEC PRODUCTS"). The Symantec Disclosure
Letter sets forth, for each Symantec Product Under Development, the currently
scheduled public availability date (which Symantec believes to be reasonable).
3.17 FEES AND EXPENSES. Except for the fees and expenses set forth in the
Symantec Disclosure Letter payable to Donaldson, Lufkin & Jenrette Securities
Corporation, neither Symantec or any of the Symantec Subsidiaries has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
3.18 INSURANCE. Symantec and the Symantec Subsidiaries maintain and at all
times since January 1, 1993 have maintained fire and casualty, general
liability, business interruption, product liability and sprinkler and water
damage insurance that Symantec believes to be reasonably prudent for its
business.
3.19 OWNERSHIP OF PROPERTY. Except (a) as disclosed in the Symantec SEC
Documents filed prior to the date of this Agreement, (b) for liens for current
Taxes not yet delinquent or (c) for liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to carriers,
B-26
<PAGE>
warehousemen, laborers, materialmen and the like, Symantec and each of the
Symantec Subsidiaries owns its real and personal property free and clear of all
security interests, mortgages, liens, charges, claims, options and encumbrances.
All real and tangible personal property of Symantec and each of the Symantec
Subsidiaries is generally in good repair and is operational and usable in the
operations of Symantec, subject to ordinary wear and tear and subject to
technical obsolescence. Neither Symantec nor any Symantec Subsidiary is in
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties (the violation of which would have a Material Adverse Effect on its
business or financial condition), or has received any notice of violation with
which it has not complied, except where such violation would not have a Material
Adverse Effect on Symantec.
3.20 ENVIRONMENTAL MATTERS.
(a) To Symantec's knowledge, during the period that Symantec and the
Symantec Subsidiaries have leased or owned their respective properties or owned
or operated any facilities, there have been no disposals, releases or threatened
releases of Hazardous Materials on, from or under such properties or facilities.
Symantec has no actual knowledge of any presence, disposals, releases or
threatened releases of Hazardous Materials on, from or under any of such
properties or facilities, which may have occurred prior to Symantec or any of
the Symantec Subsidiaries having taken possession of any of such properties or
facilities.
(b) To Symantec's knowledge, none of the properties or facilities of
Symantec or the Symantec Subsidiaries is in violation of any federal, state or
local law, ordinance, regulation or order relating to industrial hygiene or to
the environmental conditions on, under or about such properties or facilities,
including, but not limited to, soil and ground water condition. During the time
that Symantec or the Symantec Subsidiaries have owned or leased their respective
properties and facilities, neither Symantec nor any of the Symantec Subsidiaries
nor, to Symantec's knowledge, any third party, has used, generated, manufactured
or stored on, under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials.
(c) During the time that Symantec or the Symantec Subsidiaries have owned or
leased their respective properties and facilities, there has been no litigation
brought or threatened against Symantec or any of the Symantec Subsidiaries by,
or any settlement reached by Symantec or any of the Symantec Subsidiaries with,
any party or parties alleging the presence, disposal, release or threatened
release of any Hazardous Materials on, from or under any of such properties or
facilities.
3.21 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Symantec
SEC Documents filed prior to the date of this Agreement, no officer or director
of Symantec or any "affiliate" or "associate" (as those terms are defined in
Rule 405 promulgated under the Securities Act) of any such person has had,
either directly or indirectly, a material interest in: (i) any person or entity
which purchases from or sells, licenses or furnishes to Symantec or any of the
Symantec Subsidiaries any goods, property, technology or intellectual or other
property rights or services; or (ii) any contract or agreement to which Symantec
or any of the Symantec Subsidiaries is a party or by which it may be bound or
affected.
3.22 BOARD APPROVAL. The Board of Directors of Symantec has, as of the
date hereof, unanimously (i) approved this Agreement and the Arrangement, (ii)
determined that the Arrangement is in the best interests of the stockholders of
Symantec and is on terms that are fair to such stockholders and (iii)
recommended that the stockholders of Symantec approve this Agreement and the
Arrangement.
3.23 VOTE REQUIRED. The affirmative vote of a majority of the votes that
holders of the outstanding shares of Symantec Common Stock are entitled to cast
is the only vote of the holders of any class or series of Symantec's capital
stock necessary to approve the issuance of the Symantec Common Stock issuable
upon consummation of the Arrangement and the exchange of the Exchangeable Shares
pursuant to this Agreement and the Arrangement.
B-27
<PAGE>
3.24 DISCLOSURE. No representation or warranty made by Symantec in this
Agreement, nor any document, written information, statement, financial
statement, certificate or exhibit prepared and furnished or to be prepared and
furnished by Symantec or its representatives pursuant hereto or in connection
with the transactions contemplated hereby, when taken together, contained any
untrue statement of a material fact when made, or omitted to state a material
fact necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished.
3.25 FAIRNESS OPINION. Symantec's Board of Directors has received a
written opinion from Donaldson, Lufkin & Jenrette Securities Corporation that
the Exchange Ratio is fair to Symantec's stockholders from a financial point of
view.
3.26 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Symantec of any of its
Subsidiaries that has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Symantec or any of
its Subsidiaries, any acquisition of property by Symantec or any of its
Subsidiaries or the conduct of business by Symantec or any of its Subsidiaries
as currently conducted.
3.27 POOLING MATTERS. Neither Symantec nor any of its affiliates has, to
Symantec's knowledge and based upon consultation with its independent auditors,
taken or agreed to take any action that (without giving effect to this
Agreement, the transactions contemplated hereby or actions related thereto, or
any action taken or agreed to be taken by Delrina or any of its affiliates)
would affect the ability of Symantec to account for the business combination to
be effected by the Arrangement as a pooling of interests.
3.28 BOOKS AND RECORDS. The books, records and accounts of Symantec and
its Subsidiaries (a) have been maintained in accordance with good business
practices on a basis consistent with prior years, (b) are stated in reasonable
detail and accurately and fairly reflect the transactions and dispositions of
the assets of Symantec and (c) accurately and fairly reflect the basis for the
Symantec Financial Statements. Symantec 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; and (b) transactions are recorded as necessary (i) to
permit preparation of financial statements in conformity with US GAAP or any
other criteria applicable to such statements and (ii) to maintain accountability
for assets.
3.29 GOVERNMENT CONTRACTS. All representations, certifications and
disclosures made by Symantec to any Government Contract Party have been in all
material respects current, complete and accurate at the times they were made.
Symantec has no knowledge of, and has no reason to know of, any acts, omissions
or noncompliance with regard to any applicable public contracting statute,
regulation or contract requirement (whether express or incorporated by
reference) relating to any of Symantec's contracts with any Government Contract
Party in either case that have led to or could lead to, either before or after
the Closing Date, (a) any claim or dispute involving Symantec and/or Delrina as
successor in interest to Symantec and any Government Contract Party or (b) any
suspension, debarment or contract termination, or proceeding related thereto.
Symantec has no knowledge of, and has no reason to know of, any act or omission
that relates to the marketing, licensing or selling to any Government Contract
Party of any of Symantec technical data and computer software and that has led
to or could lead to, either before or after the Closing Date (as defined in
Section 6.1 below), any material cloud on any of Symantec's rights in and to its
technical data and computer software. All of Symantec's development of technical
data and computer software was developed exclusively at private expense.
4. DELRINA COVENANTS
4.1 ADVICE OF CHANGES. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Delrina will promptly advise Symantec in writing (a)
of any event occurring subsequent to the date of this
B-28
<PAGE>
Agreement that would render any representation or warranty of Delrina or
Symantec contained in this Agreement, if made on or as of the date of such event
or the Closing Date, untrue or inaccurate in any material respect, (b) of any
Material Adverse Effect on Delrina and (c) of any breach by Delrina or Symantec
of any covenant or agreement contained in this Agreement. To ensure compliance
with this Section 4.1, Delrina shall deliver to Symantec as soon as practicable
after the end of each monthly and quarterly accounting period ending after the
date of this Agreement and before the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, (i) within thirty
days after the end of each monthly accounting period, an unaudited statement of
consolidated worldwide revenues for Delrina and the Delrina Subsidiaries and an
unaudited unconsolidated balance sheet, statement of operations and statement of
cash flows for Delrina and each of the Delrina Subsidiaries and (ii) within
forty-five days after the end of each quarterly accounting period, an unaudited
consolidated balance sheet, statement of operations and statement of cash flows
for Delrina, all of which financial statements shall be prepared in the ordinary
course of business, in accordance with Delrina's books and records and Canadian
generally accepted accounting principles and shall fairly present the
consolidated financial position of Delrina and the Delrina Subsidiaries as of
their respective dates and the results of Delrina's and the Delrina
Subsidiaries' operations for the periods then ended.
4.2 MAINTENANCE OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Delrina will use its diligent commercial
efforts to carry on and preserve its business and its relationships with
customers, suppliers, employees and others in substantially the same manner as
it has prior to the date hereof. If Delrina becomes aware of any material
deterioration in the relationship with any material customer, supplier or key
employee, Delrina will promptly bring such information to the attention of
Symantec in writing and, if requested by Symantec, Delrina will exert its best
efforts to restore the relationship.
4.3 CONDUCT OF BUSINESS. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Delrina will continue to conduct its business and
maintain its business relationships in the ordinary and usual course and will
not (other than as contemplated in Article 1 of this Agreement), without the
prior consent of Symantec, which will not be unreasonably withheld:
(a) borrow any money except for amounts that are not in the aggregate
material to the financial condition of Delrina and the Delrina Subsidiaries,
taken as a whole;
(b) enter into any material transaction not in the ordinary course of
its business;
(c) encumber or permit to be encumbered any of its assets except in the
ordinary course of its business consistent with past practice;
(d) dispose of any material portion of its assets except in the ordinary
course of business consistent with past practice;
(e) enter into (except as disclosed in the Delrina Disclosure Letter)
any material lease or contract for the purchase or sale or license of any
property, real or personal, except in the ordinary course of business
consistent with past practice;
(f) fail to maintain its equipment and other assets in good working
condition and repair according to the standards it has maintained to the
date of this Agreement, subject only to ordinary wear and tear;
(g) pay (or make any oral or written commitments or representations to
pay) any bonus, increased salary or special remuneration to any officer,
employee or consultant (except for normal salary increases consistent with
past practices not to exceed 10% per year and except pursuant to existing
arrangements previously disclosed to Symantec) or enter into or vary the
terms of any employment, consulting or severance agreement with any such
person, pay any severance or
B-29
<PAGE>
termination pay (other than payments made in accordance with plans or
agreements existing on the date hereof and disclosed in the Delrina
Disclosure Letter), grant any stock option (except for normal grants to
newly hired employees, consultants and directors and "evergreen" or
incentive grants to existing employees, consultants and directors pursuant
to Delrina's existing option plans or policies consistent with past practice
of options to purchase up to an aggregate of 250,000 Delrina Common Shares)
or issue any restricted stock, or enter into or modify any agreement or plan
or increase benefits of the type described in Section 2.8;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any
of its capital stock (other than the repurchase of unvested shares at cost
pursuant to arrangements with terminated employees or consultants in the
ordinary course of business consistent with Delrina's past practice);
(j) amend or terminate any material contract, agreement or license to
which it is a party except for those amendments or terminations in the
ordinary course of its business, consistent with past practice, which are
not material in amount or effect;
(k) lend any amount to any person or entity, other than (i) advances for
travel and expenses which are incurred in the ordinary course of business
consistent with past practice and documented by receipts for the claimed
amounts, (ii) any loans pursuant to any Delrina 401(a) Plan, or (iii) loans
to employees of Delrina not exceeding $30,000 in any individual case or
$150,000 in the aggregate, which loans shall not be made for the purpose of
exercising Delrina Options;
(l) guarantee or act as a surety for any obligation except for
obligations in amounts that are not material in the aggregate;
(m) waive or release any right or claim except for the waiver or release
of non-material claims in the ordinary course of business, consistent with
past practice or the waiver or release of rights or claims set forth in the
Delrina Disclosure Letter;
(n) issue or sell any shares of its capital stock of any class (except
upon the exercise of a bona fide option or warrant currently outstanding or
permitted to be granted under Section 4.3(g)), or any other of its
securities, or issue or create any warrants, obligations, subscriptions,
options (except as expressly permitted under Section 4.3(g)), convertible
securities or other commitments to issue shares of capital stock, or
accelerate the vesting of any outstanding option or other security;
(o) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization or agreement affecting the number
or rights of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(p) subject to Section 9.1(h), merge, consolidate or reorganize with, or
acquire any entity, or enter into any agreement to do any of the foregoing,
except as set forth in the Delrina Disclosure Letter;
(q) amend its articles of incorporation or bylaws except as contemplated
by this Agreement;
(r) license any Delrina IP Rights except in the ordinary course of
business consistent with past practice;
(s) agree to any audit assessments by any Tax authority in excess of
$200,000 in the aggregate;
(t) change any insurance coverage or issue any certificates of insurance
except in the ordinary course of business consistent with past practice; or
(u) agree to do, or permit any Delrina Subsidiary to do or agree to do,
or enter into negotiations with respect to, any of the things described in
the preceding clauses in this Section 4.3.
B-30
<PAGE>
4.4 SHAREHOLDER APPROVAL. Delrina will call the Delrina Shareholders
Meeting to be held within 45 days after the SEC has indicated that it has no
further comments on the Joint Proxy Statement (or, if the Form F-4 is filed, the
date on which the Form F-4 is declared effective by the SEC) to submit this
Agreement, the Arrangement and related matters for the consideration and
approval of the Delrina Shareholders. Such approval will be recommended by
Delrina's Board of Directors and management, subject to the fiduciary
obligations of its directors and officers. Such meeting will be called, held and
conducted, and any proxies will be solicited, in compliance with applicable law.
Concurrently with the execution of this Agreement, Dennis Bennie, Mark Skapinker
and Bert Amato (collectively, the "DELRINA PRINCIPAL SHAREHOLDERS") have
executed Delrina Affiliate Agreements (as defined in Section 4.5), agreeing
among other things to vote in favor of the Arrangement, and have executed Stock
Option Agreements in the form of EXHIBIT 4.4 (the "OPTION AGREEMENTS") granting
Symantec the option to purchase their Delrina Common Shares under certain
circumstances.
4.5 DELRINA AFFILIATE AGREEMENTS. To ensure that the Arrangement will be
accounted for as a "pooling of interests" and to ensure compliance with Rule 145
of the rules and regulations promulgated by the SEC under the Securities Act,
Delrina's Affiliates have concurrently signed and delivered to Symantec the
Delrina Affiliates Agreements in the form of EXHIBIT 4.5 (the "DELRINA AFFILIATE
AGREEMENTS") agreeing that such persons will make no disposition of Delrina
Common Shares from the date 30 days prior to the Effective Time until Symantec
shall have publicly released its first report of quarterly financial statements
that include the combined financial results of Delrina and Symantec for a period
of at least 30 days of combined operations, and agreeing to certain other
restrictions as set forth in such Delrina Affiliate Agreements. For purposes of
this Agreement, an "AFFILIATE" shall have the meaning referred to in Rule 145
under the Securities Act.
4.6 JOINT PROXY STATEMENT. Delrina will mail the Joint Proxy Statement to
its shareholders in a timely manner for the purpose of considering and voting
upon the Arrangement at the Delrina Shareholders Meeting. Delrina will promptly
provide all information relating to its business or operations necessary for
inclusion in the Joint Proxy Statement to satisfy all requirements of applicable
U. S. and Canadian state, provincial and federal corporate and securities laws.
Delrina shall be solely responsible for any statement, information or omission
in the Joint Proxy Statement relating to it or its Affiliates based upon written
information furnished by it. Delrina will not provide to its shareholders or
publish any material concerning it or its Affiliates that violates applicable
Canadian law, the Securities Act or the Exchange Act with respect to the
transactions contemplated hereby.
4.7 REGULATORY APPROVALS. Delrina will promptly execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Entity, which may be reasonably required, or which Symantec may
reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. Delrina will use its best efforts to promptly
obtain all such authorizations, approvals and consents. Without limiting the
generality of the foregoing, as promptly as practicable after the execution of
this Agreement, Delrina shall file with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "DOJ"), a
pre-Arrangement notification report under the HSR Act and shall make such
filings as are necessary under the Investment Canada Act and the Competition Act
(Canada).
4.8 NECESSARY CONSENTS. During the term of this Agreement, Delrina will
use its best efforts to obtain such written consents and take such other actions
as may be necessary or appropriate in addition to those set forth in Section 4.7
to allow the consummation of the transactions contemplated hereby and to allow
Delrina to carry on its business after the Effective Time.
4.9 ACCESS TO INFORMATION. Delrina will allow Symantec and its agents
reasonable access to the files, books, records and offices of Delrina and each
Delrina Subsidiary, including, without limitation, any and all information
relating to Delrina's Taxes, commitments, contracts, leases, licenses and real,
B-31
<PAGE>
personal and intangible property and financial condition. Delrina will cause its
accountants to cooperate with Symantec and its agents in making available to
Symantec all financial information reasonably requested, including, without
limitation, the right to examine all working papers pertaining to all Tax
Returns and financial statements prepared or audited by such accountants.
4.10 SATISFACTION OF CONDITIONS PRECEDENT. During the term of this
Agreement, Delrina will use its best efforts to satisfy or cause to be satisfied
all the conditions precedent that are set forth in Article 8, and Delrina will
use its best efforts to cause the Arrangement and the other transactions
contemplated by this Agreement to be consummated.
4.11 NO OTHER NEGOTIATIONS.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, Delrina and the Delrina Subsidiaries shall not, and shall use their best
efforts to see that their respective directors do not, and shall not permit
their respective officers, employees, representatives, investment bankers,
agents and affiliates to, directly or indirectly, (i) solicit, initiate or
engage in discussions or negotiations with any person, encourage submission of
any inquiries, proposals or offers by, or take any other action intended or
designed to facilitate the efforts of any person, other than Symantec, relating
to the possible acquisition of Delrina or any of its Subsidiaries (whether by
way of Arrangement, amalgamation, take-over bid, tender offer, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
or their capital stock or assets (with any such efforts by any such person,
including a firm proposal to make such an acquisition, to be referred to as an
"ACQUISITION PROPOSAL"), (ii) provide non-public information with respect to
Delrina or any of its Subsidiaries, or afford any access to the properties,
books or records of Delrina or its Subsidiaries, to any person, other than
Symantec, relating to a possible Acquisition Proposal by any person other than
Symantec, (iii) make or authorize any statement, recommendation or solicitation
in support of any possible Acquisition Proposal by any person, other than by
Symantec, "or (iv) enter into an agreement with any person, other than Symantec,
providing for a possible Acquisition Proposal. Delrina, its Subsidiaries, and
their respective directors, officers, employees, representatives, investment
bankers, agents and affiliates, shall immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
(b) Notwithstanding the foregoing, prior to the approval of this Agreement
and the Arrangement by the Delrina Shareholders at the Delrina Shareholders
Meeting, nothing contained in this Agreement shall prevent the Board of
Directors of Delrina (or its agents pursuant to its instructions) from (i)
engaging in discussions or negotiations with (but not soliciting or initiating
such discussions or negotiations or encouraging inquiries from) a party
concerning an unsolicited Acquisition Proposal, (ii) providing non-public
information with respect to Delrina or the Delrina Subsidiaries that has
previously been provided to Symantec or (iii) making any statement or
recommendation in support of any Acquisition Proposal, in each case if the
Delrina Board of Directors first determines in good faith, based on the advice
of outside legal counsel, that such action is required by reason of the
fiduciary duties of the members of the Board to Delrina's shareholders under
applicable law; provided that in each such event Delrina first notifies Symantec
of such determination by the Delrina Board of Directors and provides Symantec
with a true and complete copy of any Acquisition Proposal or other written
communication concerning a possible Acquisition Proposal received from such
third party and of all documents containing or referring to non-public
information of Delrina that are supplied to such third party. Except to the
extent expressly referenced in this Section 4.11, nothing in such Section
however, shall relieve Delrina from complying with the other terms of this
Agreement. If Delrina or any of its Subsidiaries receives any unsolicited offer
or proposal to enter negotiations relating to an Acquisition Proposal, Delrina
shall immediately notify Symantec thereof, including information as to the
identity of the party making any such offer or proposal and the specific terms
of such offer or proposal, as the case may be. Delrina shall be responsible for
any breach of this Section by any of its (or its Subsidiaries') directors,
officers, employees, representatives, investment bankers, agents and affiliates.
B-32
<PAGE>
4.12 REPRESENTATIONS OF SHAREHOLDERS. Delrina will use its best efforts to
cause the Delrina Principal Shareholders to cooperate with counsel to Delrina to
assist them in providing the tax opinions called for by Section 7.12.
4.13 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. Concurrently with the
execution of this Agreement, Dennis Bennie, Mark Skapinker, and Bert Amato will
have entered into Employment and Noncompetition Agreements in the form attached
hereto as EXHIBIT 4.13 (the "NONCOMPETITION AGREEMENTS"), to take effect at the
Closing.
5. SYMANTEC COVENANTS
5.1 ADVICE OF CHANGES. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Symantec will promptly advise Delrina in writing (a)
of any event occurring subsequent to the date of this Agreement that would
render any representation or warranty of Symantec or Delrina contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect, (b) of any Material Adverse Effect
on Symantec and (c) of any breach by Delrina or Symantec of any covenant or
agreement contained in this Agreement. To ensure compliance with this Section
5.1, Symantec shall deliver to Delrina as soon as practicable but in any event
within thirty days after the end of each monthly accounting period ending after
the date of this Agreement and before the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms terminated, an
unaudited consolidated balance sheet, statement of operations and statement of
cash flows for Symantec, which financial statements shall be prepared in the
ordinary course of business, in accordance with Symantec's books and records and
US GAAP and shall fairly present the consolidated financial position of Symantec
as of their respective dates and the results of Symantec's operations for the
periods then ended.
5.2 MAINTENANCE OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, Symantec will use its diligent
commercial efforts to carry on and preserve its business and its relationships
with customers, suppliers, employees and others in substantially the same manner
as it has prior to the date hereof. If Symantec becomes aware of any material
deterioration in the relationship with any customer, supplier or key employee,
it will promptly bring such information to the attention of Delrina in writing
and, if requested by Delrina, will exert its best efforts to restore the
relationship.
5.3 CONDUCT OF BUSINESS. During the period from the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Symantec will continue to conduct its business and
maintain its business relationships in the ordinary and usual course and will
not, without the prior consent of Delrina, which will not be unreasonably
withheld:
(a) solicit any proposal from any third party for the acquisition of all
or substantially all of the business of Symantec (whether by way of
take-over bid, tender offer, purchase of capital stock, purchase of assets
or otherwise).
(b) dispose of any material portion of its assets except in the ordinary
course of business consistent with past practice;
(c) grant any stock option (except for (A) grants pursuant to
transactions permitted under Section 5.3(i) and (B) normal grants to newly
hired employees, consultants and directors and "evergreen" or incentive
grants to existing employees, consultants and directors pursuant to
Symantec's existing option plans or policies consistent with past practice
of options to purchase up to an aggregate of 850,000 shares of Symantec
Common Stock) or issue any restricted stock, or enter into or modify any
agreement or plan or increase benefits of the type described in Section 3.8;
(d) change accounting methods;
B-33
<PAGE>
(e) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any
of its capital stock (other than the repurchase of unvested shares at cost
pursuant to arrangements with terminated employees or consultants in the
ordinary course of business consistent with Symantec's past practice);
(f) amend or terminate any material contract, agreement or license to
which it is a party except for those amendments or terminations in the
ordinary course of business consistent with past practice, which are not
material in amount or effect;
(g) issue or sell any shares of its capital stock of any class (except
pursuant to transactions described in Section 5.3(i) and except upon the
exercise of a bona fide option or warrant currently outstanding or permitted
to be granted under Section 5.3(c)), or any other of its securities, or
issue or create any warrants, obligations, subscriptions, options (except as
expressly permitted under Section 5.3(e)), convertible securities or other
commitments to issue shares of capital stock, or accelerate the vesting of
any outstanding option or other security;
(h) split or combine the outstanding shares of its capital stock of any
class or enter into any recapitalization or agreement affecting the number
or rights of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(i) acquire any entity, enter into, or publicly announce any intention
to enter into, any agreement to acquire any entity, except as set forth in
the Symantec Disclosure Letter and except for any transactions that would
not involve the issuance of Symantec Common Stock or payment by Symantec of
other consideration having a value in excess of $300 million;
(j) amend its certificate of incorporation or bylaws except as
contemplated by this Agreement;
(k) license any Symantec IP Rights except in the ordinary course of
business consistent with past practice; or
(l) agree to any audit assessment by any Tax authority in excess of
$200,000 in the aggregate.
5.4 STOCKHOLDER APPROVAL. Symantec will call the Symantec Stockholders
Meeting to be held within 45 days after the SEC has indicated that it has no
further comments on the Joint Proxy Statement (or, if the Form F-4 is filed, the
date on which the Form F-4 is declared effective by the SEC) to submit the
issuance of Symantec Common Stock from time to time upon exchange of the
Exchangeable Shares for the consideration and approval of the Symantec
Stockholders. Such approval will be recommended by Symantec's Board of Directors
and management, subject to the fiduciary obligations of its directors and
officers. Such meeting will be called, held and conducted, and any proxies will
be solicited, in compliance with applicable law.
5.5 SYMANTEC AFFILIATE AGREEMENTS. To ensure that the Arrangement will be
accounted for as a "pooling of interests," Symantec's Affiliates have
concurrently signed and delivered to Symantec the Symantec Affiliates Agreements
in the form of EXHIBIT 5.5 (the "SYMANTEC AFFILIATE AGREEMENTS") agreeing that
such persons will make no disposition of Symantec Common Stock from the date 30
days prior to the Effective Time until Symantec shall have publicly released its
first report of quarterly financial statements that include the combined
financial results of Delrina and Symantec for a period of at least 30 days of
combined operations, except as set forth in such agreements.
5.6 JOINT PROXY STATEMENT. Symantec will mail the Joint Proxy Statement to
its stockholders in a timely manner, for the purpose of considering and voting
at the Symantec Stockholders Meeting upon the issuance of Symantec Common Stock
in connection with the Arrangement and the exchange of the Exchangeable Shares.
Symantec will promptly provide all information relating to its business or
operations necessary for inclusion in the Joint Proxy Statement to satisfy all
requirements of applicable U.S. state and federal corporate and securities laws.
Symantec shall be solely responsible for any statement, information or omission
in the Joint Proxy Statement relating to it or its affiliates based
B-34
<PAGE>
upon written information furnished by it. Symantec will not provide or publish
to its stockholders any material concerning it or its affiliates that violates
the Securities Act or the Exchange Act with respect to the transactions
contemplated hereby.
5.7 REGULATORY APPROVALS. Symantec will promptly execute and file, or join
in the execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign which may be reasonably
required, or which Delrina may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Symantec will
use its best efforts to promptly obtain all such authorizations, approvals and
consents. Without limiting the generality of the foregoing, as promptly as
practicable after the execution of this Agreement, Symantec shall file with the
FTC and the DOJ a pre-Arrangement notification report under the HSR Act and
shall make such filings as are necessary under the Investment Canada Act and the
Competition Act (Canada).
5.8 NECESSARY CONSENTS. During the term of this Agreement, Symantec will
use its best efforts to obtain such written consents and take such other actions
as may be necessary or appropriate in addition to those set forth in Section 5.7
to allow the consummation of the transactions contemplated hereby.
5.9 ACCESS TO INFORMATION. Symantec will allow Delrina and its agents
reasonable access to the files, books, records and offices of Symantec and each
Symantec Subsidiary, including, without limitation, any and all information
relating to Symantec's Taxes, commitments, contracts, leases, licenses and real,
personal and intangible property and financial condition. Symantec will cause
its accountants to cooperate with Delrina and its agents in making available to
Delrina all financial information reasonably requested, including, without
limitation, the right to examine all working papers pertaining to all Tax
Returns and financial statements prepared or audited by such accountants.
5.10 SATISFACTION OF CONDITIONS PRECEDENT. During the term of this
Agreement, Symantec will use its best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Article 7, and
Symantec will use its best efforts to cause the Arrangement and the other
transactions contemplated by this Agreement to be consummated.
5.11 INDEMNIFICATION.
(a) In addition to the rights granted under the Indemnity Agreements,
Symantec agrees that all rights to indemnification or exculpation now existing
in favor of the employees, agents, directors or officers (the "INDEMNIFIED
PARTIES") of Delrina and its subsidiaries as provided in its articles of
incorporation or bylaws, or in any agreement between an Indemnified Party and
Delrina or any of the Delrina Subsidiaries a copy of which has been provided to
Symantec's counsel prior to the date of the execution of this Agreement (an
"INDEMNIFICATION AGREEMENT"), in effect on the date hereof shall survive the
Arrangement and shall continue in full force and effect for a period of not less
than six years from the Effective Time and Symantec hereby assumes, effective
upon consummation of the Arrangement, all such liability.
(b) There shall be maintained in effect for not less than six years from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by Delrina in the amounts and with the coverages that can
be obtained with no material increase in premiums from the premiums in effect on
the date of this Agreement (other than adjustments for the general rate of
inflation); Symantec may, however, substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous,
provided that such substitution shall not result in any gaps or lapses in
coverages with respect to matters occurring prior to the Effective Time to the
extent currently available, and provided that in no event shall Symantec be
required pursuant to this Section 5.11 to pay premiums in excess of those in
effect on the date of this Agreement.
B-35
<PAGE>
(c) Upon the Closing, Symantec will enter into indemnity agreements in the
form attached hereto as EXHIBIT 5.11(c) (the "INDEMNITY AGREEMENTS") with those
individuals who become members of
the Board of Directors of Symantec pursuant to Section 7.16 and those
individuals who are appointed to serve as executive officers of Delrina
immediately after the Closing.
5.12 LISTING. Symantec will cause the shares of Symantec Common Stock to
be issued from time to time upon exchange of the Exchangeable Shares to be
listed upon the Closing on the Nasdaq National Market. Symantec will cause the
Exchangeable Shares to be listed upon the Closing on the TSE or other Canadian
securities exchange approved by Symantec and Delrina.
5.13 EMPLOYMENT AND EMPLOYEE BENEFITS AFTER THE CLOSING. Symantec hereby
agrees that from and after the Closing, and for a period of at least 12 months
thereafter, Symantec will provide to the Employees who immediately prior to the
Closing were in the employ of Delrina and any of the Delrina Subsidiaries and
who after the Closing become employees of Symantec and remain Symantec employees
during such 12 month period (the "TRANSFERRED EMPLOYEES"), benefits either (i)
under Symantec's employee benefit plans on substantially similar terms as
Symantec employees generally, or (ii) under the Delrina Employee Plans
substantially similar in the aggregate to those currently provided to the
Transferred Employees under the Delrina Employee Plans.
5.14 REORGANIZATION PROCEDURES.
(a) Following the Effective Date, Symantec will cause Delrina to
continue the historic business of Delrina or to use a significant portion of
Delrina's historic business assets in a business.
(b) Symantec does not presently have any plan or intention to liquidate
Delrina, to merge Delrina with or into another corporation, or to sell or
otherwise dispose of any of the stock of Delrina (whether acquired pursuant
to the Arrangement or pursuant to the exchange of any shares of Delrina
stock for shares of Symantec stock).
(c) Symantec does not presently have any plan or intention to cause
Delrina to issue additional shares of Delrina stock to any persons other
than Symantec.
6. CLOSING MATTERS
6.1 THE CLOSING. Subject to the termination of this Agreement as provided
in Article 9 below, the Closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at the offices of Fenwick & West, Two
Palo Alto Square, Palo Alto, California 94306 on a date (the "CLOSING DATE") and
at a time to be mutually agreed upon by the parties, which date shall be no
later than the third business day after all conditions to Closing set forth
herein shall have been satisfied or waived, unless another place, time and date
is mutually selected by Delrina and Symantec. Concurrently with the Closing, the
Plan of Arrangement will be filed with the Ministry of Consumer and Commercial
Relations of the Province of Ontario.
6.2 ANCILLARY DOCUMENTS/RESERVATION OF SHARES. (a) Provided all other
conditions of this Agreement have been satisfied or waived, Delrina shall, on
the Closing Date, file Articles of Arrangement pursuant to section 183(1) of the
OBCA to give effect to the Plan of Arrangement, such Articles of Arrangement to
contain share conditions for Exchangeable Shares substantially in the form of
those contained in Exhibit 6.2(a) hereto.
(b) On the Effective Date:
(i) Symantec shall execute and deliver a Support Agreement containing
the terms and conditions set forth in Exhibit 6.2(b)(i) hereto (the "SUPPORT
AGREEMENT"), together with such other terms and conditions as may be agreed
to by the parties hereto acting reasonably;
(ii) Symantec and a Canadian trust company to be selected by Symantec,
which shall be satisfactory to Delrina, acting reasonably, shall execute and
deliver a Voting and Exchange Trust
B-36
<PAGE>
Agreement containing the terms and conditions set forth in Exhibit
6.2(b)(ii) hereto (the "VOTING AND EXCHANGE TRUST AGREEMENT"), together with
such other terms and conditions as may be agreed to by the parties hereto
acting reasonably; and
(iii) Symantec shall file with the Secretary of State of Delaware a
Restated Certificate of Incorporation which shall be in substantially the
form set forth in Exhibit 6.2(b)(iii) hereto.
(c) On or before the Effective Date, Symantec will reserve for issuance such
number of shares of Symantec Common Stock as shall be necessary to give effect
to the exchanges and assumptions of options contemplated hereby.
6.3 EXCHANGE OF OPTIONS. Promptly after the Effective Time, Symantec will
notify in writing each holder of a Delrina Option of the exchange of such
Delrina Option for a Symantec option, the number of shares of Symantec Common
Stock that are then subject to such option, and the exercise price of such
option, as determined pursuant to Section 1.4.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF DELRINA
The obligations of Delrina hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions (any
one or more of which may be waived by Delrina, but only in a writing signed by
Delrina):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Symantec set forth in Section 3 (as qualified by the Symantec
Disclosure Letter) shall be true and accurate in all material respects on and as
of the Closing Date with the same force and effect as if they had been made at
the Closing except to the extent the failure of such representations and
warranties to be true and accurate in such respects has not had and could not
reasonably be expected to have a Material Adverse Effect on Symantec, and
Delrina shall receive a certificate to such effect executed by Symantec's Chief
Executive Officer and Chief Financial Officer.
7.2 COVENANTS. Symantec shall have performed and complied in all material
respects with all of its covenants required to be performed by it under this
Agreement or the Plan of Arrangement on or before the Closing, and Delrina shall
receive a certificate to such effect signed by Symantec's Chief Executive
Officer and Chief Financial Officer.
7.3 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have been any
event or change that has a Material Adverse Effect on Symantec.
7.4 COMPLIANCE WITH LAW. There shall be no order, decree or ruling by any
governmental agency or threat thereof, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Arrangement, which would
prohibit or render illegal the transactions contemplated by this Agreement.
7.5 GOVERNMENT CONSENTS. There shall have been obtained on or before the
Closing such material permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the Arrangement by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
federal, provincial and state securities laws and the compliance with, and
expiration or termination of any applicable waiting period under, the HSR Act or
the Investment Canada Act.
7.6 SEC FILINGS. The Form F-4 and Form S-3, if filed, shall have been
declared effective under the Securities Act and shall not be the subject of any
stop-order or proceedings seeking a stop-order, and the Joint Proxy Statement
shall on the Closing not be subject to any similar proceedings commenced or
threatened by the SEC or the OSC.
7.7 OPINION OF SYMANTEC'S COUNSEL. Delrina shall have received from
Fenwick & West and from Davies, Ward & Beck, counsel to Symantec, opinions in
customary form in connection with transactions such as the Arrangement that is
reasonably satisfactory to Delrina and its counsel.
B-37
<PAGE>
7.8 DOCUMENTS. Delrina shall have received all written consents,
assignments, waivers, authorizations or other certificates necessary to provide
for the continuation in full force and effect of any and all material contracts
and leases of Symantec and for Symantec to consummate the transactions
contemplated hereby, except when the failure to receive such consents or other
certificates would not have a Material Adverse Effect on Symantec.
7.9 SHAREHOLDER APPROVAL. The principal terms of this Agreement and the
Arrangement shall have been approved and adopted by the Delrina shareholders in
accordance with applicable law and Delrina's articles of incorporation and
bylaws.
7.10 SYMANTEC APPROVALS. The issuance of Symantec Common Stock from time
to time upon the exchange of the Exchangeable Shares shall have been approved by
the Symantec stockholders in accordance with the rules of the NASD, and with
applicable law and Symantec's certificate of incorporation and bylaws.
7.11 NO LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Arrangement shall have been issued by any Canadian or U.S. federal,
provincial or state court and remain in effect, nor shall any proceeding seeking
any of the foregoing be pending.
7.12 TAX OPINION. Delrina shall have received an opinion in form and
substance satisfactory to Delrina of Osler, Hoskin & Harcourt, counsel for
Delrina, to the effect that the Arrangement will be generally treated for
Canadian federal income tax purposes as a reorganization of capital for those
Delrina Shareholders who hold their Delrina Common Shares as capital property
for purposes of the ITA and an opinion in form and substance satisfactory to
Delrina from Skadden, Arps, Slate, Meagher & Flom, counsel for Delrina, to the
effect that the Arrangement should be treated for U.S. federal income tax
purposes as a tax-free reorganization under section 368(a) of the Code.
7.13 POOLING OPINION. Symantec shall have received from Ernst & Young an
opinion, in form and substance satisfactory to Delrina and Symantec, that the
Arrangement will be treated as a "pooling of interests" for accounting purposes.
7.14 COURT APPROVAL. The Court shall have issued its final order approving
the Arrangement in form and substance satisfactory to Symantec and Delrina (such
approvals not to be unreasonably withheld or delayed by Symantec or Delrina) and
reflecting the terms hereof.
7.15 OSC, ETC. All necessary orders shall have been obtained from the OSC
and other relevant Canadian securities regulatory authorities in connection with
the Arrangement. Symantec and Delrina shall each have filed all notices and
information (if any) required under Part IX of the Competition Act (Canada) and
the applicable waiting periods and any extensions thereof shall have expired or
the parties shall have received an Advance Ruling Certificate pursuant to
section 102 of the Competition Act (Canada) setting out that the Director under
such Act is satisfied he would not have sufficient grounds on which to apply for
an order in respect of the Arrangement. The Arrangement shall have received the
allowance or approval or deemed allowance or approval by the responsible
Minister under the Investment Canada Act in respect of the Arrangement, to the
extent such allowance or approval is required, on terms and conditions
satisfactory to the parties.
7.16 ELECTION TO SYMANTEC BOARD. Dennis Bennie and Mark Skapinker shall
have been elected to the Board of Directors of Symantec. In addition, Symantec
will nominate such individuals and solicit proxies for their re-election to the
Board of Directors of Symantec at the annual meeting of Symantec's stockholders
held following its fiscal year ending March 31, 1996. This obligation shall be a
covenant of Symantec that shall survive the Closing.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SYMANTEC
The obligations of Symantec hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions (any
one or more of which may be waived by Symantec, but only in a writing signed by
Symantec):
B-38
<PAGE>
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Delrina set forth in Section 2 (as qualified by the Delrina
Disclosure Letter) shall be true and accurate in all material respects on and as
of the Closing Date with the same force and effect as if they had been made at
the Closing except to the extent the failure of such representations and
warranties to be true and accurate in such respects has not had and could not
reasonably be expected to have a Material Adverse Effect on Delrina, and
Symantec shall receive a certificate to such effect executed by Delrina's Chief
Executive Officer and Chief Financial Officer.
8.2 COVENANTS. Delrina shall have performed and complied in all material
respects with all of its covenants required to be performed by it under this
Agreement or the Plan of Arrangement on or before the Closing, and Symantec
shall receive a certificate to such effect signed by Delrina's Chief Executive
Officer and Chief Financial Officer.
8.3 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not have been any
event or change that has a Material Adverse Effect on Delrina.
8.4 COMPLIANCE WITH LAW. There shall be no order, decree or ruling by any
governmental agency or threat thereof, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Arrangement, which would
prohibit or render illegal the transactions contemplated by this Agreement.
8.5 GOVERNMENT CONSENTS. There shall have been obtained on or before the
Closing such material permits or authorizations, and there shall have been taken
such other action, as may be required to consummate the Arrangement by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to requirements under applicable
federal and state securities laws and the compliance with, and expiration or
termination of any applicable waiting period under, the HSR Act.
8.6 SEC FILINGS. The Form F-4 and Form S-3, if filed, shall have been
declared effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop-order and the Joint Proxy Statement
shall on the Closing not be subject to any similar proceedings commenced or
threatened by the SEC or the OSC.
8.7 OPINION OF DELRINA'S COUNSEL. Symantec shall have received from
Skadden, Arps, Slate, Meagher & Flom and from Osler, Hoskin & Harcourt, counsel
to Delrina, opinions in customary form in connection with transactions such as
the Arrangement that are reasonably satisfactory to Symantec and its counsel.
8.8 DOCUMENTS. Symantec shall have received all written consents,
assignments, waivers, authorizations or other certificates necessary to provide
for the continuation in full force and effect of any and all material contracts
and leases of Delrina and for Delrina to consummate the transactions
contemplated hereby, except when the failure to receive such consents, or other
certificates would not have a Material Adverse Effect on Delrina.
8.9 STOCKHOLDER APPROVAL. The issuance of Symantec Common Stock from time
to time upon the exchange of the Exchangeable Shares shall have been approved by
the Symantec stockholders in accordance with the rules of the NASD and
applicable law and Symantec's certificate of incorporation and bylaws.
8.10 DELRINA APPROVALS. The principal terms of this Agreement and the
Arrangement shall have been approved and adopted by the Delrina shareholders in
accordance with applicable law and Delrina's articles of incorporation and
bylaws, and Delrina shall not have received on or prior to the Effective Time
notice from the holders of more than 3.5% of the Delrina Common Shares of their
intention to exercise their rights of dissent under section 185 of the OBCA.
B-39
<PAGE>
8.11 NO LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Arrangement shall have been issued by any U.S. or Canadian federal,
provincial or state court and remain in effect, nor shall any proceeding seeking
any of the foregoing be pending.
8.12 DELRINA OPTION AGREEMENTS. Symantec shall have received from each of
the Delrina Principal Shareholders an executed original Option Agreement.
8.13 POOLING OPINION. Symantec shall have received from Ernst & Young an
opinion, in form and substance satisfactory to Symantec, that the Arrangement
will be treated as a "pooling of interests" for accounting purposes.
8.14 AFFILIATE AGREEMENTS. Symantec shall have received executed originals
of all of the Delrina Affiliate Agreements.
8.15 COURT APPROVAL. The Court shall have issued its final order approving
the Arrangement in form and substance satisfactory to Symantec and Delrina (such
approvals not to be unreasonably withheld or delayed by Symantec or Delrina) and
reflecting the terms hereof.
8.16 OSC, ETC. All necessary orders shall have been obtained from the OSC
and other relevant Canadian securities regulatory authorities in connection with
the Arrangement. Symantec and Delrina shall each have filed all notices and
information (if any) required under Part IX of the Competition Act (Canada) and
the applicable waiting periods and any extensions thereof shall have expired or
the parties shall have received an Advance Ruling Certificate pursuant to
section 102 of the Competition Act (Canada) setting out that the Director under
such Act is satisfied he would not have sufficient grounds on which to apply for
an order in respect of the Arrangement. The Arrangement shall have received the
allowance or approval or deemed allowance or approval by the responsible
Minister under the Investment Canada Act in respect of the Arrangement, to the
extent such allowance or approval is required, on terms and conditions
satisfactory to the parties.
8.17 SHIPMENT OF WINFAX 95. On or before November 15, 1995, Delrina shall
have made the first customer shipment in commercial volumes to retail sales
channels of an enhanced-functionality version of WinFax (to be called WinFax
7.0), which is Windows 95-compatible and which is a logical upgrade from WinFax
4.0, in conformance with Delrina's customary quality standards and procedures
for the release of new products.
9. TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Arrangement by the
stockholders of Symantec or Delrina:
(a) by mutual agreement of Delrina and Symantec;
(b) by Delrina, if there has been a breach by Symantec of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of Symantec, or if any representation of Symantec shall have
become untrue, in either case which has or can reasonably be expected to
have a Material Adverse Effect on Symantec and which Symantec fails to cure
within 15 business days after written notice thereof from Delrina (except
that no cure period shall be provided for a breach by Symantec which by its
nature cannot be cured);
(c) by Symantec, if there has been a breach by Delrina of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of Delrina, or if any representation of Delrina shall have
become untrue, in either case which has or can reasonably be expected to
have a Material Adverse Effect on Delrina and which Delrina fails to cure
within 15 business days after written notice thereof from Symantec (except
that no cure period shall be provided for a breach by Delrina which by its
nature cannot be cured);
B-40
<PAGE>
(d) by either party (provided that such party is not then in breach of
this Agreement) if the shareholders of Delrina do not approve the
Arrangement at the Delrina Shareholders Meeting or the stockholders of
Symantec do not approve at the Symantec Stockholders Meeting the issuance of
Symantec Common Stock issuable upon the exchange of the Exchangeable Shares;
(e) by either party, if all the conditions for Closing the Arrangement
shall not have been satisfied or waived on or before 5:00 p.m., Toronto time
on November 30, 1995, other than as a result of a breach of this Agreement
by the terminating party, or in the case of termination by Delrina, a breach
by any of the Principal Shareholders of Delrina of the Delrina Affiliate
Agreements or Option Agreements referred to in Section 4.4, or, in the case
of either party, a breach by any of its Affiliates of the Affiliate
Agreements referred to in Section 4.5 or Section 5.5;
(f) by either party, if a permanent injunction or other order by any
U.S. or Canadian federal, provincial or state court shall have been issued
and shall have become final and nonappealable which would (i) make illegal
or otherwise restrain or prohibit the consummation of the Arrangement, (ii)
prohibit Symantec's ownership or operation of all or any material portion of
the business or assets of Delrina or (iii) compel Symantec to dispose of or
hold separate all or any material portion of the business or assets of
Delrina;
(g) by Symantec, if the Delrina Board of Directors shall have exercised
its right, pursuant to Section 4.11(b) to engage in discussions or
negotiations with or furnish information to a third party in connection with
an Acquisition Proposal, or shall have made any recommendation to the
shareholders of Delrina against the Arrangement or in support of an
Acquisition Proposal (an "ACQUISITION PROPOSAL TERMINATION");
(h) by Delrina, if the Delrina Board of Directors determines in good
faith, based on the advice of outside legal counsel, that it is required by
its fiduciary duties to recommend to the Delrina Shareholders that they vote
against the Arrangement and approve instead an Acquisition Proposal that the
Delrina Board of Directors has determined in good faith, based on the advice
of its outside financial advisors, is financially more favorable to the
Delrina Shareholders than the Arrangement and is the subject of a firm
written offer from a third party that is capable of consummating such
Acquisition Proposal (a "SUPERIOR PROPOSAL TERMINATION"); or
(i) by Symantec, if the Symantec Board of Directors determines in good
faith, based on the advice of outside legal counsel, that it is required by
its fiduciary duties to recommend to the Symantec Stockholders that they
vote against the issuance of Symantec Common Stock issuable upon exchange of
the Exchangeable Shares as contemplated by this Agreement and in favor of an
alternative transaction (A) in which a third party is to acquire (whether by
way of take-over bid, tender offer, purchase of capital stock, merger,
purchase of assets or otherwise) all or substantially all of the business of
Symantec and which requires that Symantec terminate this Agreement as a
condition of the consummation of such transaction or (B) which the Board of
Directors states to the Symantec stockholders prior to the Symantec
Stockholders Meeting is mutually exclusive with respect to the Arrangement
contemplated by this Agreement, provided that the consideration for such
transaction is in excess of $150 million (each an "INCONSISTENT TRANSACTION"
and the termination of this Agreement under such circumstances an
"INCONSISTENT TRANSACTION TERMINATION").
9.2 NOTICE OF TERMINATION. Any termination of this Agreement under Section
9.1 above will be effective by the delivery of written notice by the terminating
party to the other party hereto.
9.3 EFFECT OF TERMINATION. In the case of any termination of this
Agreement as provided in this Article 9, this Agreement shall be of no further
force and effect (except as provided in Section 9.4 and Article 11) and nothing
herein shall relieve any party from liability for any breach of this Agreement.
No termination of this Agreement shall affect the obligations contained in the
separate Nondisclosure Agreement between Delrina and Symantec (the
"NONDISCLOSURE AGREEMENT").
B-41
<PAGE>
9.4 TERMINATION FEES.
(a) If this Agreement is terminated (A) by either party pursuant to Section
9.1(d) as a result of the failure of Delrina's shareholders to approve the
Arrangement, (B) by Symantec pursuant to an Acquisition Proposal Termination
under Section 9.1(g) or (C) by Delrina pursuant to a Superior Proposal
Termination under Section 9.1(h), then Delrina shall pay to Symantec (by wire
transfer or cashier's check) a fee of $12 million within two business days of
the delivery of the notice of termination pursuant to Section 9.2. If this
Agreement is terminated as described in the previous sentence, and Delrina
enters into an agreement regarding an Acquisition Proposal or consummates an
Acquisition Proposal before the later of twelve months after the public
announcement of this Agreement or six months after the date of a termination
described in the previous sentence, Delrina shall, within two business days
after the consummation of any such Acquisition Proposal, pay to Symantec the
additional sum of $8 million. Symantec shall not be entitled to receive any
payment under this Section 9.4(a) if, at the time of delivery of the applicable
notice of termination pursuant to Section 9.2, Symantec is in breach of this
Agreement or Symantec's stockholders have disapproved the issuance of the
Symantec Common Stock issuable upon the exchange of the Exchangeable Shares.
(b) If this Agreement is terminated (A) by either party pursuant to Section
9.1(d) as a result of the failure of Symantec stockholders to approve the
issuance of the Symantec Common Stock issuable upon the exchange of the
Exchangeable Shares, or (B) by Symantec pursuant to an Inconsistent Transaction
Termination under Section 9.1(i), then Symantec shall pay to Delrina (by wire
transfer or cashier's check) a fee of $12 million within two business days of
the delivery of the notice of termination pursuant to Section 9.2. If Symantec
terminates this Agreement pursuant to an Inconsistent Transaction Termination
and before the later of twelve months after the public announcement of this
Agreement or six months after such termination Symantec consummates such an
Inconsistent Transaction, Symantec shall, within two business days after
consummation of any such Inconsistent Transaction, pay Delrina the additional
sum of $8 million. Delrina shall not be entitled to receive any payment under
this Section 9.4(b) if, at the time of delivery of the applicable notice of
termination pursuant to Section 9.2, Delrina is in breach of this Agreement or
Delrina's shareholders have disapproved the Arrangement.
(c) The parties' obligations to pay the termination fees set forth in
Section 9.4 are in lieu of any damages or any other payment which such party
might otherwise be obligated to pay the other party as a result of any
termination for which payment is due under Section 9.4. Symantec and Delrina
agree that, in view of the nature of the issues likely to arise in the event of
such a termination, it would be impracticable or extremely difficult to fix the
actual damages resulting from such termination and proving actual damages,
causation and foreseeability in the case of such termination would be costly,
inconvenient and difficult. In requiring a party to pay a termination fee as set
forth herein, it is the intent of the parties to provide, as of the date of this
Agreement, for a liquidated amount of damages to be paid by such party to other
party. Such liquidated amount shall be deemed full and adequate damages for such
termination and is not intended by either party to be a penalty.
10. SURVIVAL OF REPRESENTATIONS
All representations, warranties and covenants of the parties contained in
this Agreement will remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the parties to this Agreement, until
the earlier of the termination of this Agreement or the Closing Date, whereupon
such representations, warranties and covenants will expire (except for covenants
that by their terms survive for a longer period).
11. MISCELLANEOUS
11.1 GOVERNING LAW. The internal laws of the State of Delaware
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and enforcement
of the rights and duties of the parties hereto, except to the extent mandatorily
governed by the laws of Ontario.
B-42
<PAGE>
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. Neither party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of the void or unenforceable provision.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
11.5 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
11.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party to be bound thereby. The waiver by a party
of any breach hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
The Agreement may be amended by the parties hereto at any time before or after
approval of the Delrina Shareholders or the Symantec Stockholders, but, after
such approval, no amendment will be made which by applicable law requires the
further approval of the Delrina Shareholders or the Symantec Stockholders
without obtaining such further approval.
11.7 EXPENSES. Each party will bear its respective expenses and legal fees
incurred with respect to this Agreement, and the transactions contemplated
hereby. If the Arrangement is consummated, Symantec will pay the reasonable
accounting fees and expenses, investment banking fees and expenses not to exceed
the amounts specified in the Delrina Disclosure Letter, and reasonable
attorneys' fees and expenses incurred by Delrina in connection with the
Arrangement.
11.8 ATTORNEYS' FEES. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including, without limitation, costs, expenses and fees
on any appeal). The prevailing party will be entitled to recover its costs of
suit, regardless of whether such suit proceeds to final judgment.
11.9 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
<TABLE>
<S> <C>
If to Delrina to: Delrina Corporation
895 Don Mills Road, 500-2 Park Centre
Toronto, Canada M3C 1W3
Attention: Chief Executive Officer
Telecopier: 416-446-8233
</TABLE>
B-43
<PAGE>
<TABLE>
<S> <C>
With a copy to: Osler, Hoskin & Harcourt
1 First Canadian Place
Toronto, Canada M5X 1B8
Attention: James E. Kofman
Telecopier: 416-862-6666
If to Symantec Symantec Corporation
to: 10201 Torre Avenue
Cupertino, California 95014
U.S.A.
Attention: General Counsel
Telecopier: 408-252-5101
With a copy to: Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
U.S.A.
Attention: Gordon K. Davidson
Telecopier: 415-857-0361
</TABLE>
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch,
and (d) in the case of mailing, on the tenth business day following such
mailing.
11.10 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a Section or an exhibit
will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
11.11 NO JOINT VENTURE. Nothing contained in this Agreement will be deemed
or construed as creating a joint venture or partnership between any of the
parties. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other and their status is,
and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
11.12 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
11.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder or partner of any party or any other person or
entity unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement. Anything contained herein to the contrary notwithstanding, (a)
the holders of Delrina Options are intended beneficiaries of Section 1.4; and
(b) the officers and directors of Delrina are intended beneficiaries of Section
5.11.
11.14 PUBLIC ANNOUNCEMENT. Upon execution of this Agreement, Symantec and
Delrina promptly will issue a joint press release approved by both parties
announcing the Arrangement.
B-44
<PAGE>
Thereafter, Symantec or Delrina may issue such press releases, and make such
other disclosures regarding the Arrangement, as it determines (after
consultation with legal counsel) are required under applicable securities laws
or by the NASD or the TSE rules.
11.15 ENTIRE AGREEMENT. This Agreement and the exhibits hereto constitute
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Nondisclosure Agreement,
which shall remain in full force and effect. The express terms hereof control
and supersede any course of performance or usage of the trade inconsistent with
any of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Combination
Agreement as of the date first above written.
<TABLE>
<S> <C>
SYMANTEC CORPORATION DELRINA CORPORATION
By: /s/ GORDON EUBANKS By: /s/ DENNIS BENNIE
-------------------------------------- --------------------------------------
Chief Executive Officer Chief Executive Officer
</TABLE>
B-45
<PAGE>
ANNEX C
INTERIM ORDER
<PAGE>
Court File No. B289/95
ONTARIO COURT OF JUSTICE
(GENERAL DIVISION)
COMMERCIAL LIST
<TABLE>
<S> <C>
FRIDAY, THE 6TH DAY OF
THE HONOURABLE MADAM JUSTICE HALEY OCTOBER, 1995
</TABLE>
IN THE MATTER OF the BUSINESS CORPORATIONS ACT,
(Ontario), R.S.O. 1990, c. B. 16, as amended
AND IN THE MATTER OF a plan of arrangement of
DELRINA CORPORATION
ORDER
THIS MOTION, made by the Applicant Delrina Corporation ("Delrina") for
advice and directions of the Court in connection with an arrangement under
section 182 of the BUSINESS CORPORATIONS ACT (Ontario), R.S.O. 1990, c. B. 16,
as amended (the "OBCA"), was heard this day at Toronto, Ontario.
ON READING the Affidavit of Dennis Bennie sworn October 5, 1995 (the
"Affidavit") and the exhibits thereto, and on hearing the submissions of counsel
for Delrina,
1. THIS COURT ORDERS that Delrina call, hold and conduct an Annual and
Special Meeting (the "Meeting") of the holders of its common shares (the "Common
Shares") to, among other things, consider and, if deemed advisable, to pass,
with or without variation, a special resolution (the "Arrangement Resolution")
to approve an arrangement (the "Arrangement") substantially in the form set
forth in the Plan of Arrangement attached as Annex D to Exhibit 3 to the
Affidavit.
2. THIS COURT ORDERS that the Meeting shall be called, held and conducted
in accordance with the OBCA and the articles and by-laws of Delrina, subject to
what may be provided hereafter and subject to any further order of this
Honourable Court.
3. THIS COURT ORDERS that (i) the Notice of Application herein, (ii) the
Notice of the Meeting and (iii) a Joint Management Information Circular and
Proxy Statement of Delrina and Symantec Corporation in substantially the same
form as contained in Exhibit 3 to the Affidavit with such amendments thereto as
counsel for Delrina may advise are necessary or desirable, provided that such
amendments are not inconsistent with the terms of this Order shall be
distributed to the holders of Common Shares, to Delrina's directors and
auditors, and to the Director under the OBCA, by mailing the same by prepaid
ordinary mail to such persons in accordance with the OBCA at least twenty-five
(25) days prior to the date of the Meeting, excluding the date of mailing and
the date of the Meeting.
4. THIS COURT ORDERS that the vote required to pass the Arrangement
Resolution shall be the affirmative vote of not less than two-thirds of the
votes cast by the holders of Common Shares present in person or represented by
proxy at the Meeting.
5. THIS COURT ORDERS that the holders of Common Shares shall be permitted
to dissent in respect of the Arrangement pursuant to section 185 of the OBCA and
the Plan of Arrangement and to seek fair value for their Common Shares, provided
they provide Delrina with written objection to the Arrangement at or before the
Meeting and they otherwise comply with the requirements of section 185 of the
OBCA and the Plan of Arrangement.
C-1
<PAGE>
6. THIS COURT ORDERS that the only persons entitled to notice of or to
attend the Meeting shall be the holders of Common Shares and Delrina's officers,
directors and auditors, and that the only persons entitled to be represented and
to vote at the Meeting shall be the holders of record of Common Shares as at the
record date for the Meeting subject to the provisions of the OBCA with respect
to persons who become registered holders of shares after that date.
7. THIS COURT ORDERS that upon approval by the holders of Common Shares of
the Arrangement in the manner set forth in this Order, Delrina may apply to this
Honourable Court for approval of the Arrangement and that service of the Notice
of Application herein, in accordance with paragraph 3 of this Order, shall
constitute good and sufficient service of such Notice of Application upon all
persons who are entitled to receive such Notice of Application pursuant to this
Order and no other form of service need be made and no other material need be
served on such persons in respect of these proceedings, and such service shall
be effective on the fifth day after the Notice of Application is mailed.
8. THIS COURT ORDERS that any notice of appearance served in response to
the Notice of Application shall be served on counsel for Delrina at the
following address: Osler, Hoskin & Harcourt, P.O. Box 50, 1 First Canadian
Place, Toronto, Ontario M5X 1B8, Attention: Aleck Dadson, and on counsel for
Symantec Corporation at the following address: Davies, Ward & Beck, P.O. Box 63,
1 First Canadian Place, Toronto, Ontario M5X 1B1, Attention: Michael Creery.
/s/ DONALD RUST
--------------------------------------
Deputy Local Registrar
C-2
<PAGE>
ANNEX D
PLAN OF ARRANGEMENT AND
EXCHANGEABLE SHARE PROVISIONS
<PAGE>
PLAN OF ARRANGEMENT
UNDER SECTION 182
OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE 1 -- INTERPRETATION
1.1 DEFINITIONS. In this Plan of Arrangement unless there is something in
the subject matter or context inconsistent therewith, the following terms shall
have the respective meanings set out below and grammatical variations of such
terms shall have corresponding meanings:
(a) "ARRANGEMENT" means the arrangement under section 182 of the OBCA on
the terms and subject to the conditions set out in this Plan of Arrangement,
subject to any amendments thereto made in accordance with Section 6.1 hereof
or made at the direction of the Court in the Final Order;
(b) "ARRANGEMENT RESOLUTION" means the special resolution passed by the
holders of the Delrina Common Shares at the Meeting;
(c) "AUTOMATIC REDEMPTION DATE" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
(d) "AVERAGE CLOSING PRICE" means the average closing price (computed
and rounded to the third decimal point) of Symantec Common Shares on NASDAQ
as of 4:00 p.m. eastern standard time as published by the National
Association of Securities Dealers, Inc. during the 10 trading days ending on
the last trading day prior to the Effective Date.
(e) "DELRINA" means Delrina Corporation, a corporation existing under
the OBCA;
(f) "DELRINA COMMON SHARES" means the common shares in the capital of
Delrina;
(g) "BUSINESS DAY" means any day other than a Saturday, Sunday or a day
when banks are not open for business in either or both of San Francisco,
California and Toronto, Ontario;
(h) "CLASS A PREFERRED SHARES" means the Class A Preferred Shares of
Delrina having the rights, privileges, restrictions and conditions set out
in Appendix A annexed hereto.
(i) "COMBINATION AGREEMENT" means the agreement by and among Symantec
and Delrina, dated as of July 5, 1995, as the same may be amended and
restated, providing for, among other things, the Arrangement;
(j) "CORPORATION" means Delrina;
(k) "COURT" means the Ontario Court of Justice (General Division);
(l) "DEPOSITARY" means The R-M Trust Company at its principal office in
Toronto, Ontario;
(m) "DISSENT PROCEDURES" has the meaning set out in section 3.1;
(n) "EFFECTIVE DATE" means the date shown on the certificate of
arrangement issued by the Director under the OBCA giving effect to the
Arrangement;
(o) "EFFECTIVE TIME" means 12:01 a.m. on the Effective Date;
(p) "EXCHANGE RATIO" is equal to 0.61;
(q) "EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares, which are
set forth in Appendix A hereto;
(r) "EXCHANGEABLE SHARES" means the Exchangeable Shares in the capital
of Delrina;
(s) "FINAL ORDER" means the final order of the Court approving the
Arrangement as such order may be amended by the Court at any time prior to
the Effective Time;
D-1
<PAGE>
(t) "SYMANTEC" means Symantec Corporation, a corporation existing under
the laws of the State of Delaware;
(u) "SYMANTEC COMMON SHARES" means the common stock of the capital of
Symantec;
(v) "LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in section
5.1;
(w) "LIQUIDATION DATE" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
(x) "MEETING" means the Special Meeting of the shareholders of Delrina
to be held to consider the Arrangement;
(y) "NASDAQ" means the Nasdaq National Market;
(z) "OBCA" means the Business Corporations Act (Ontario), as amended;
(aa) "PROXY STATEMENT" means the Joint Management Information Circular
and Proxy Statement of Delrina and Symantec dated , 1995;
(bb) "REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto
in Section 5.2; and
(cc) "REDEMPTION CALL RIGHT" has the meaning ascribed thereto in section
5.2.
1.2 SECTIONS AND HEADINGS. The division of this Plan of Arrangement into
sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of this Plan of Arrangement. Unless otherwise
indicated, any reference in this Plan of Arrangement to a section or an Appendix
refers to the specified section of or Appendix to this Plan of Arrangement.
1.3 NUMBER, GENDER AND PERSONS. In this Plan of Arrangement, unless the
context otherwise requires, words importing the singular number include the
plural and vice versa, words importing any gender include all genders and words
importing persons include individuals, corporations, partnerships, associations,
trusts, unincorporated organizations, governmental bodies and other legal or
business entities of any kind.
ARTICLE 2 -- ARRANGEMENT
2.1 ARRANGEMENT. At the Effective Time on the Effective Date, the
following reorganization of capital shall occur and shall be deemed to occur in
the following order without any further act or formality:
(a) The articles of incorporation of Delrina shall be amended to (i)
delete the Preference Shares from the authorized share capital, (ii) replace
the rights, privileges, restrictions and conditions attaching to the common
shares with those set forth in Appendix A and (iii) authorize an unlimited
number of Exchangeable Shares and one Class A Preferred Share.
(b) Delrina shall issue to Symantec one Class A Preferred Share in
consideration of the issuance to Delrina of one Symantec Common Share. The
stated capital of the Class A Preferred Share shall be equal to the fair
market value, as determined by the board of directors of Delrina, of a
Symantec Common Share. No certificate shall be issued in respect of the
Class A Preferred Share.
(c) Each Delrina Common Share (other than Delrina Common Shares held by
holders who have exercised their rights of dissent in accordance with
section 3.1 hereof and who are ultimately entitled to be paid full value for
such shares) will be exchanged at the Exchange Ratio for a number of
Exchangeable Shares. Each holder of Delrina Common Shares (other than
holders of Delrina Common Shares who have exercised their rights of dissent
in accordance with section 3.1 hereof and who are ultimately entitled to be
paid full value for such shares) will receive that whole number of
Exchangeable Shares resulting from the exchange of all such holder's Delrina
Common Shares for Exchangeable Shares. In lieu of fractional Exchangeable
Shares, each holder of a
D-2
<PAGE>
Delrina Common Share who otherwise would be entitled to receive a fraction
of an Exchangeable Share on the exchange of all such holder's Delrina Common
Shares shall be paid by Delrina an amount determined as set forth in section
4.3 hereto.
(d) Upon the exchange referred to in subsection (c) above, each such
holder of a Delrina Common Share shall cease to be such a holder, shall have
his name removed from the register of holders of Delrina Common Shares and
shall become a holder of the number of fully paid Exchangeable Shares to
which he is entitled as a result of the exchange referred to in subsection
(c) and such holder's name shall be added to the register of holders of
Exchangeable Shares accordingly.
(e) The aggregate stated capital of the Exchangeable Shares will be
equal to the aggregate stated capital of the Delrina Common Shares
immediately prior to the Arrangement that are exchanged pursuant to such
Subsection 2.1(c) above.
(f) The one outstanding Class A Preferred Share will be exchanged for
one Delrina Common Share and the holder thereof shall cease to be a holder
of the Class A Preferred Share, shall have his name removed from the
register of holders of Class A Preferred Shares and shall become a holder of
one fully paid and non-assessable Delrina Common Share to which he is
entitled as a result of the exchange referred to in this subsection (f) and
such holder's name shall be added to the register of holders of Delrina
Common Shares accordingly.
(g) The stated capital of the one Delrina Common Share shall be equal to
the stated capital of the one Class A Preferred Share immediately prior to
the exchange of such Class A Preferred Share pursuant to subsection (f).
ARTICLE 3 -- RIGHTS OF DISSENT
3.1 RIGHTS OF DISSENT. Holders of Delrina Common Shares may exercise
rights of dissent with respect to such shares pursuant to and in the manner set
forth in section 185 of the OBCA and this section 3.1 (the "Dissent Procedures")
in connection with the Arrangement and holders who duly exercise such rights of
dissent and who:
(a) are ultimately entitled to be paid fair value for their Delrina
Common Shares shall be deemed to have transferred such Delrina Common Shares
to Delrina for cancellation on the Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid fair value
for their Delrina Common Shares shall be deemed to have participated in the
Arrangement on the same basis as any non-dissenting holder of Delrina Common
Shares, and shall receive Exchangeable Shares on the basis determined in
accordance with subsection 2.1(c) of this Plan of Arrangement,
but in no case shall Delrina be required to recognize such holders as holders of
Delrina Common Shares on and after the Effective Date, and the names of such
holders of Delrina Common Shares shall be deleted from the register of holders
of Delrina Common Shares on the Effective Date.
ARTICLE 4 -- CERTIFICATES AND FRACTIONAL SHARES
4.1 ISSUANCE OF CERTIFICATES REPRESENTING EXCHANGEABLE SHARES. At or
promptly after the Effective Time, the Corporation shall deposit with the
Depositary, for the benefit of the holders of Delrina Common Shares exchanged
pursuant to subsection 2.1(c), certificates representing the Exchangeable Shares
issued pursuant to subsection 2.1(c) upon the exchange of outstanding Delrina
Common Shares. Upon surrender to the Depositary for cancellation of a
certificate which immediately prior to the Effective Time represented
outstanding Delrina Common Shares that were exchanged for Exchangeable Shares,
together with such other documents and instruments as would have been required
to effect the transfer of the shares formerly represented by such certificate
under the OBCA and the by-laws of Delrina and such additional documents and
instruments as the Depositary may reasonably
D-3
<PAGE>
require, the holder of such surrendered certificate shall be entitled to receive
in exchange therefor, and the Depositary shall deliver to such holder, a
certificate representing that number (rounded down to the nearest whole number)
of Exchangeable Shares which such holder has the right to receive (together with
any dividends or distributions with respect thereto pursuant to section 4.2 and
any cash in lieu of fractional Exchangeable Shares pursuant to section 4.3), and
the certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Delrina Common Shares which is not registered in the
transfer records of Delrina, a certificate representing the proper number of
Exchangeable Shares may be issued to a transferee if the certificate
representing such Delrina Common Shares is presented to the Depositary,
accompanied by all documents required to evidence and effect such transfer.
Until surrendered as contemplated by this section 4.1, each certificate which
immediately prior to the Effective Time represented outstanding Delrina Common
Shares that were exchanged for Exchangeable Shares shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender (i) the certificate representing Exchangeable Shares as contemplated
by this section 4.1, (ii) a cash payment in lieu of any fractional Exchangeable
Shares as contemplated by section 4.3 and (iii) any dividends or distributions
with a record date after the Effective Time theretofore paid or payable with
respect to Exchangeable Shares as contemplated by section 4.2.
4.2 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No dividends
or other distributions declared or made after the Effective Time with respect to
Exchangeable Shares with a record date after the Effective Time shall be paid to
the holder of any unsurrendered certificate which, immediately prior to the
Effective Time, represented outstanding Delrina Common Shares that were
exchanged pursuant to section 2.1, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to section 4.3, and no interest
will be earned or payable on these proceeds unless and until such certificate
shall be surrendered in accordance with section 4.1. Subject to applicable law
and to Section 4.5, at the time of such surrender of any such certificate (or,
in the case of clause (iii) below, at the appropriate payment date), there shall
be paid to the record holder of the certificates representing whole Exchangeable
Shares without interest, (i) the amount of any cash payable in lieu of a
fractional Exchangeable Share to which such holder is entitled pursuant to
section 4.3, (ii) the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole
Exchangeable Share, and (iii) the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole Exchangeable
Share.
4.3 NO FRACTIONAL SHARES. No certificates or scrip representing fractional
Exchangeable Shares shall be issued upon the surrender for exchange of
certificates pursuant to section 4.1 and no dividend, stock split or other
change in the capital structure of Delrina shall relate to any such fractional
security and such fractional interests shall not entitle the owner thereof to
vote or to exercise any rights as a security holder of Delrina. In lieu of any
such fractional securities, each person entitled to a fractional interest in an
Exchangeable Share will receive an amount of cash (rounded to the nearest whole
cent), without interest, equal to the Canadian Dollar Equivalent (as defined in
the Exchangeable Share Provisions) of the product of (i) such fraction,
multiplied by (ii) the Average Closing Price of the Symantec Common Shares, such
amount to be provided to the Depositary by the Corporation upon request.
4.4 LOST CERTIFICATES. If any certificate which immediately prior to the
Effective Time represented outstanding Delrina Common Shares that were exchanged
pursuant to section 2.1 has been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed, the Depositary will issue in exchange for such lost, stolen
or destroyed certificate, certificates representing Exchangeable Shares (and any
dividends or distributions with respect thereto and any cash pursuant to section
4.3) deliverable in respect thereof as determined in accordance with section
2.1. When authorizing such payment in exchange for any lost, stolen or destroyed
certificate, the person to whom certificates representing Exchangeable Shares
are to be issued shall, as a condition precedent to the issuance thereof, give a
bond satisfactory to the
D-4
<PAGE>
Corporation, Symantec and the Corporation's transfer agent (the "Transfer
Agent"), as the case may be, in such sum as the Corporation may direct or
otherwise indemnify the Corporation or Symantec in a manner satisfactory to the
Corporation and the Transfer Agent against any claim that may be made against
the Corporation, Symantec or the Transfer Agent with respect to the certificate
alleged to have been lost, stolen or destroyed.
4.5 EXTINGUISHMENT OF RIGHTS. Any certificate which immediately prior to
the Effective Time represented outstanding Delrina Common Shares that were
exchanged pursuant to section 2.1 and has not been deposited, with all other
instruments required by section 4.1, on or prior to the tenth anniversary of the
Effective Date shall cease to represent a claim or interest of any kind or
nature as a shareholder of the Corporation. On such date, the Exchangeable
Shares to which the former registered holder of the certificate referred to in
the preceding sentence was ultimately entitled shall be deemed to have been
surrendered to the Corporation together with all entitlements to dividends,
distributions and interests thereon held for such former registered holder for
no consideration.
ARTICLE 5 -- CERTAIN RIGHTS OF
SYMANTEC TO ACQUIRE EXCHANGEABLE SHARES
5.1 SYMANTEC LIQUIDATION CALL RIGHT. (a) Symantec shall have the
overriding right (the "Liquidation Call Right"), in the event of and
notwithstanding the proposed liquidation, dissolution or winding-up of Delrina
pursuant to Article 5 of the Exchangeable Share Provisions, to purchase from all
but not less than all of the holders (other than Symantec) of Exchangeable
Shares on the Liquidation Date all but not less than all of the Exchangeable
Shares held by each such holder on payment by Symantec of an amount per share
equal to (a) the Current Market Price (as defined in the Exchangeable Share
Provisions) of a Symantec Common Share on the last Business Day prior to the
Liquidation Date, which shall be satisfied in full by causing to be delivered to
such holder one Symantec Common Share, plus (b) an additional amount equivalent
to the full amount of all dividends declared and unpaid on such Exchangeable
Share (collectively the "Liquidation Call Purchase Price") without interest. In
the event of the exercise of the Liquidation Call Right by Symantec, each holder
shall be obligated to sell all the Exchangeable Shares held by the holder to
Symantec on the Liquidation Date on payment by Symantec to the holder of the
Liquidation Call Purchase Price for each such share.
(b) To exercise the Liquidation Call Right, Symantec must notify the
Corporation's Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and the Corporation of Symantec's intention to exercise
such right at least 55 days before the Liquidation Date in the case of a
voluntary liquidation, dissolution or winding up of the Corporation and at least
five Business Days before the Liquidation Date in the case of an involuntary
liquidation, dissolution or winding up of the Corporation. The Transfer Agent
will notify the holders of Exchangeable Shares as to whether or not Symantec has
exercised the Liquidation Call Right forthwith after the expiry of the date by
which the same may be exercised by Symantec. If Symantec exercises the
Liquidation Call Right, on the Liquidation Date Symantec will purchase and the
holders will sell all of the Exchangeable Shares then outstanding for a price
per share equal to the Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Liquidation Call Right, Symantec shall deposit with the Transfer
Agent, on or before the Liquidation Date, certificates representing the
aggregate number of Symantec Common Shares deliverable by Symantec (which shares
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any lien, claim, encumbrance, security interest or adverse claim) in
payment of the total Liquidation Call Purchase Price and a cheque or cheques in
the amount of the remaining portion, if any, of the total Liquidation Call
Purchase Price without interest. Provided that the total Liquidation Call
Purchase Price has been so deposited with the Transfer Agent, on and after the
Liquidation Date the rights of each holder of Exchangeable Shares will be
limited to receiving such holder's proportionate part of the total Liquidation
Call Purchase Price payable by Symantec without interest upon
D-5
<PAGE>
presentation and surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and the holder shall on and after the
Liquidation Date be considered and deemed for all purposes to be the holder of
the Symantec Common Shares delivered to it. Upon surrender to the Transfer Agent
of a certificate or certificates representing Exchangeable Shares, together with
such other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the OBCA and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require, the holder of such surrendered certificate or certificates shall be
entitled to receive in exchange therefor, and the Transfer Agent on behalf of
Symantec shall deliver to such holder, certificates representing the Symantec
Common Shares to which the holder is entitled and a cheque or cheques of
Symantec payable at par and in Canadian dollars at any branch of the bankers of
Symantec or of the Corporation in Canada in payment of the remaining portion, if
any, of the total Liquidation Call Purchase Price. If Symantec does not exercise
the Liquidation Call Right in the manner described above, on the Liquidation
Date the holders of the Exchangeable Shares will be entitled to receive in
exchange therefor the liquidation price otherwise payable by the Corporation in
connection with the liquidation, dissolution or winding-up of the Corporation
pursuant to Article 5 of the Exchangeable Share Provisions.
5.2 SYMANTEC REDEMPTION CALL RIGHT. (a) Symantec shall have the
overriding right (the "Redemption Call Right"), notwithstanding the proposed
redemption of the Exchangeable Shares by the Corporation pursuant to Article 7
of the Exchangeable Share Provisions, to purchase from all but not less than all
of the holders (other than Symantec) of Exchangeable Shares on the Automatic
Redemption Date all but not less than all of the Exchangeable Shares held by
each such holder on payment by Symantec to the holder of an amount per share
equal to (a) the Current Market Price (as defined in the Exchangeable Share
Provisions) of a Symantec Common Share on the last Business Day prior to the
Automatic Redemption Date which shall be satisfied in full by causing to be
delivered to such holder one Symantec Common Share plus (b) an additional amount
equivalent to the full amount of all dividends declared and unpaid on such
Exchangeable Share (collectively the "Redemption Call Purchase Price"). In the
event of the exercise of the Redemption Call Right by Symantec, each holder
shall be obligated to sell all the Exchangeable Shares held by the holder to
Symantec on the Automatic Redemption Date on payment by Symantec to the holder
of the Redemption Call Purchase Price for each such share.
(b) To exercise the Redemption Call Right, Symantec must notify the Transfer
Agent in writing, as agent for the holders of Exchangeable Shares, and the
Corporation of Symantec's intention to exercise such right at least 125 days
before the Automatic Redemption Date. The Transfer Agent will notify the holders
of the Exchangeable Shares as to whether or not Symantec has exercised the
Redemption Call Right forthwith after the date by which the same may be
exercised by Symantec. If Symantec exercises the Redemption Call Right, on the
Automatic Redemption Date Symantec will purchase and the holders will sell all
of the Exchangeable Shares then outstanding for a price per share equal to the
Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable Shares
pursuant to the Redemption Call Right, Symantec shall deposit with the Transfer
Agent, on or before the Automatic Redemption Date, certificates representing the
aggregate number of Symantec Common Shares deliverable by Symantec (which shares
shall be duly issued as fully paid and non-assessable and shall be free and
clear of any lien, claim, encumbrance, security interest or adverse claim) in
payment of the total Redemption Call Purchase Price and a cheque or cheques in
the amount of the remaining portion, if any, of the total Redemption Call
Purchase Price. Provided that the total Redemption Call Purchase Price has been
so deposited with the Transfer Agent, on and after the Automatic Redemption Date
the rights of each holder of Exchangeable Shares will be limited to receiving
such holder's proportionate part of the total Redemption Call Purchase Price
payable by Symantec upon presentation and surrender by the holder of
certificates representing the Exchangeable Shares held by such holder and the
holder shall on and after the Liquidation Date be considered and deemed for all
purposes to be the holder of the Symantec Common Shares delivered to such holder
without interest.
D-6
<PAGE>
Upon surrender to the Transfer Agent of a certificate or certificates
representing Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the OBCA and the by-laws of the Corporation and such additional documents and
instruments as the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of Symantec shall deliver to such
holder, certificates representing the Symantec Common Shares to which the holder
is entitled and a cheque or cheques of Symantec payable at par and in Canadian
dollars at any branch of the bankers of Symantec or of the Corporation in Canada
in payment of the remaining portion, if any, of the total Redemption Call
Purchase Price. If Symantec does not exercise the Redemption Call Right in the
manner described above, on the Automatic Redemption Date the holders of the
Exchangeable Shares will be entitled to receive in exchange therefor the
redemption price otherwise payable by the Corporation in connection with the
redemption of the Exchangeable Shares pursuant to Article 7 of the Exchangeable
Share Provisions.
ARTICLE 6 -- AMENDMENT
6.1 PLAN OF ARRANGEMENT AMENDMENT. The Corporation reserves the right to
amend, modify and/or supplement this Plan of Arrangement at any time and from
time to time provided that any such amendment, modification, or supplement must
be contained in a written document that is (i) agreed to by Symantec, (ii) filed
with the Court and, if made following the Meeting, approved by the Court and
(iii) communicated to holders of Delrina Common Shares in the manner required by
the Court (if so required).
Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by the Corporation at any time prior to or at the Meeting (provided
that Symantec shall have consented thereto) with or without any other prior
notice or communication, and if so proposed and accepted by the persons voting
at the Meeting (other than as may be required under the Court's interim order),
shall become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement that
is approved by the Court following the Meeting shall be effective only (i) if it
is consented to by the Corporation, (ii) if it is agreed to by Symantec and
(iii) if required by applicable law, it is consented to by the holders of the
Exchangeable Shares.
D-7
<PAGE>
APPENDIX A TO PLAN OF ARRANGEMENT
OF DELRINA CORPORATION
PROVISIONS ATTACHING TO THE COMMON SHARES
The common shares in the capital of the Corporation shall have attached
thereto the following rights, privileges, restrictions and conditions:
DIVIDENDS
Subject to the prior rights of the holders of the Exchangeable Shares, the
Class A Preferred Share and any other shares ranking senior to the common shares
with respect to priority in the payment of dividends, the holders of common
shares shall be entitled to receive dividends and the Corporation shall pay
dividends thereon, as and when declared by the board of directors of the
Corporation out of moneys properly applicable to the payment of dividends, in
such amount and in such form as the board of directors may from time to time
determine and all dividends which the directors may declare on the common shares
shall be declared and paid in equal amounts per share on all common shares at
the time outstanding.
DISSOLUTION
In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs, subject to the prior rights of the holders of the Exchangeable
Shares and the Class A Preferred Share and to any other shares ranking senior to
the common shares with respect to priority in the distribution of assets upon
dissolution, liquidation or winding-up, the holders of the common shares shall
be entitled to receive the remaining property and assets of the Corporation
ratably with the holders of the common shares.
VOTING RIGHTS
The holders of the common shares shall be entitled to receive notice of and
to attend all meetings of the shareholders of the Corporation and shall have one
vote for each common share held at all meetings of the shareholders of the
Corporation, except for meetings at which only holders of another specified
class or series of shares of the Corporation are entitled to vote separately as
a class or series.
PROVISIONS ATTACHING TO CLASS A PREFERRED SHARES
The Class A Preferred Shares in the capital of the Corporation shall have
attached thereto the following rights, privileges, restrictions and conditions:
DIVIDENDS
Subject to the prior rights of the holders of any shares ranking senior to
the Class A Preferred Shares with respect to priority in the payment of
dividends, the holders of Class A Preferred Shares shall be entitled to receive
dividends and the Corporation shall pay dividends thereon, as and when declared
by the board of directors of the Corporation as cumulative dividends in the
amount of $1.00 per share per annum payable annually on December 31 in each year
in arrears. Such dividends shall accrue from the date of issue to and including
the date to which the computation of dividends is to be made. A cheque for the
amount of the dividend less any required deduction shall be mailed by first
class mail to the address of the registered holder thereof.
DISSOLUTION
In the event of the dissolution, liquidation or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding up
its affairs, subject to the prior rights of the holders of any shares ranking
senior to the Class A Preferred Shares with respect to priority in the
distribution of assets upon dissolution, liquidation or winding-up, the holders
of the Class A Preferred Shares shall be entitled to receive the stated capital
in respect of the Class A Preferred Shares and dividends remaining unpaid,
including all
D-8
<PAGE>
cumulative dividends, whether or not declared. After payment to the holders of
the Class A Preferred Shares of such amounts, such holders shall not be entitled
to share in any further distribution of the assets of the Corporation.
VOTING RIGHTS
Except where specifically provided by the BUSINESS CORPORATIONS ACT
(Ontario), the holders of the Class A Preferred Shares shall not be entitled to
receive notice of or to attend meetings of the shareholders of the Corporation
and shall not be entitled to vote at any meeting of shareholders of the
Corporation.
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have the
following rights, privileges, restrictions and conditions.
ARTICLE 1
INTERPRETATION
For the purposes of these share provisions:
1.1 "AFFILIATE" of any person means any other person directly or indirectly
controlled by, or under common control with, that person. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as applied to any person,
means the possession by another person, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that first
mentioned person, whether through the ownership of voting securities, by
contract or otherwise.
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption by
the Corporation of Exchangeable Shares pursuant to Article 7 of these share
provisions, which date shall be November 22, 2002 unless (a) such date shall be
extended at any time or from time to time to a specified later date by the Board
of Directors or (b) such date shall be accelerated at any time to a specified
earlier date by the Board of Directors if at such time there are less than
500,000 Exchangeable Shares outstanding (other than Exchangeable Shares held by
Symantec and its Affiliates and as such number of shares may be adjusted as
deemed appropriate by the Board of Directors to give effect to any subdivision
or consolidation of or stock dividend on the Exchangeable Shares, any issue or
distribution of rights to acquire Exchangeable Shares or securities exchangeable
for or convertible into Exchangeable Shares, any issue or distribution of other
securities or rights or evidences of indebtedness or assets, or any other
capital reorganization or other transaction affecting the Exchangeable Shares),
in each case upon at least 60 days' prior written notice of any such extension
or acceleration, as the case may be, to the registered holders of the
Exchangeable Shares, in which case the Automatic Redemption Date shall be such
later or earlier date; provided, however, that the accidental failure or
omission to give any such notice of extension or acceleration, as the case may
be, to less than 10% of such holders of Exchangeable Shares shall not affect the
validity of such extension or acceleration.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in either or both of San Francisco, California
and Toronto, Ontario.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot exchange
rate is not available, such exchange rate on such date for such foreign currency
expressed in Canadian dollars as may be deemed by the Board of Directors to be
appropriate for such purpose.
D-9
<PAGE>
"CORPORATION" means Delrina Corporation, a corporation incorporated under
the laws of the Province of Ontario.
"CURRENT MARKET PRICE" means, in respect of a Symantec Common Share on any
date, the Canadian Dollar Equivalent of the average of the closing bid and asked
prices of Symantec Common Shares during a period of 20 consecutive trading days
ending not more than five trading days before such date on the Nasdaq National
Market, or, if the Symantec Common Shares are not then quoted on the Nasdaq
National Market, on such other stock exchange or automated quotation system on
which the Symantec Common Shares are listed or quoted, as the case may be, as
may be selected by the Board of Directors for such purpose; provided, however,
that if in the opinion of the Board of Directors the public distribution or
trading activity of Symantec Common Shares during such period does not create a
market which reflects the fair market value of a Symantec Common Share, then the
Current Market Price of a Symantec Common Share shall be determined by the Board
of Directors based upon the advice of such qualified independent financial
advisors as the Board of Directors may deem to be appropriate, and provided
further that any such selection, opinion or determination by the Board of
Directors shall be conclusive and binding.
"EXCHANGEABLE SHARES" mean the Exchangeable Non-Voting Shares of the
Corporation having the rights, privileges, restrictions and conditions set forth
herein.
"SYMANTEC" means Symantec Corporation, a corporation organized and existing
under the laws of the State of Delaware, and any successor corporation.
"SYMANTEC CALL NOTICE" has the meaning ascribed thereto in Section 6.3 of
these share provisions.
"SYMANTEC COMMON SHARES" mean the shares of common stock of Symantec, with a
par value of U.S. $0.01 per share, having voting rights of one vote per share,
and any other securities into which such shares may be changed.
"SYMANTEC DIVIDEND DECLARATION DATE" means the date on which the Board of
Directors of Symantec declares any dividend on the Symantec Common Shares.
"SYMANTEC SPECIAL SHARE" means the one share of Special Voting Stock of
Symantec with a par value of U.S. $1.00 and having voting rights at meetings of
holders of Symantec Common Shares equal to the number of Exchangeable Shares
outstanding from time to time (other than Exchangeable Shares held by Symantec
and its Affiliates) to be issued to, and voted by, the Trustee pursuant to the
Voting Trust Agreement.
"LIQUIDATION AMOUNT" has the meaning ascribed thereto in Section 5.1 of
these share provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"LIQUIDATION DATE" has the meaning ascribed thereto in Section 5.1 of these
share provisions.
"PLAN OF ARRANGEMENT" means the plan of arrangement relating to the
arrangement of the Corporation under section 182 of the Business Corporations
Act (Ontario), to which plan these share provisions are attached.
"PURCHASE PRICE" has the meaning ascribed thereto in Section 6.3 of these
share provisions.
"REDEMPTION CALL PURCHASE PRICE" has the meaning ascribed thereto in the
Plan of Arrangement.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in the Plan of
Arrangement.
"REDEMPTION PRICE" has the meaning ascribed thereto in Section 7.1 of these
share provisions.
"RETRACTED SHARES" has the meaning ascribed thereto in Subsection 6.1(a) of
these share provisions.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in Subsection
6.1(c) of these share provisions.
D-10
<PAGE>
"RETRACTION DATE" has the meaning ascribed thereto in Subsection 6.1(b) of
these share provisions.
"RETRACTION PRICE" has the meaning ascribed thereto in Section 6.1 of these
share provisions.
"RETRACTION REQUEST" has the meaning ascribed thereto in Section 6.1 of
these share provisions.
"SUPPORT AGREEMENT" means the Support Agreement between Symantec and the
Corporation, made as of November 22, 1995.
"TRANSFER AGENT" means The R-M Trust Company or such other person as may
from time to time be the registrar and transfer agent for the Exchangeable
Shares.
"TRUSTEE" means The R-M Trust Company, a corporation organized and existing
under the laws of Canada, and any successor trustee appointed under the Voting
Trust Agreement.
"VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and Exchange Trust
Agreement between the Corporation, Symantec and the Trustee, made as of November
22, 1995.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank junior to the Class A Preferred
Shares, and shall be entitled to a preference over the Common Shares and any
other shares ranking junior to the Exchangeable Shares, with respect to the
payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, or any other distribution of the assets of the Corporation among
its shareholders for the purpose of winding up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and the
Board of Directors shall, subject to applicable law, on each Symantec Dividend
Declaration Date, declare a dividend on each Exchangeable Share (a) in the case
of a cash dividend declared on the Symantec Common Shares, in an amount in cash
for each Exchangeable Share equal to the Canadian Dollar Equivalent on the
Symantec Dividend Declaration Date of the cash dividend declared on each
Symantec Common Share or (b) in the case of a stock dividend declared on the
Symantec Common Shares to be paid in Symantec Common Shares, in such number of
Exchangeable Shares for each Exchangeable Share as is equal to the number of
Symantec Common Shares to be paid on each Symantec Common Share or (c) in the
case of a dividend declared on the Symantec Common Shares in property other than
cash or Symantec Common Shares, in such type and amount of property for each
Exchangeable Share as is the same as or economically equivalent to (to be
determined by the Board of Directors as contemplated by Section 2.7 of the
Support Agreement) the type and amount of property declared as a dividend on
each Symantec Common Share. Such dividends shall be paid out of money, assets or
property of the Corporation properly applicable to the payment of dividends, or
out of authorized but unissued shares of the Corporation.
3.2 Cheques of the Corporation payable at par at any branch of the bankers
of the Corporation shall be issued in respect of any cash dividends contemplated
by Subsection 3.1(a) hereof and the sending of such a cheque to each holder of
an Exchangeable Share shall satisfy the cash dividend represented thereby unless
the cheque is not paid on presentation. Certificates registered in the name of
the registered holder of Exchangeable Shares shall be issued or transferred in
respect of any stock dividends contemplated by Subsection 3.1(b) hereof and the
sending of such a certificate to each holder of an Exchangeable Share shall
satisfy the stock dividend represented thereby. Such other type and amount of
property in respect of any dividends contemplated by Subsection 3.1(c) hereof
shall be issued, distributed or transferred by the Corporation in such manner as
it shall determine and the
D-11
<PAGE>
issuance, distribution or transfer thereof by the Corporation to each holder of
an Exchangeable Share shall satisfy the dividend represented thereby. No holder
of an Exchangeable Share shall be entitled to recover by action or other legal
process against the Corporation any dividend that is represented by a cheque
that has not been duly presented to the Corporation's bankers for payment or
that otherwise remains unclaimed for a period of six years from the date on
which such dividend was payable.
3.3 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under Section 3.1 hereof shall be the same
dates as the record date and payment date, respectively, for the corresponding
dividend declared on the Symantec Common Shares.
3.4 If on any payment date for any dividends declared on the Exchangeable
Shares under Section 3.1 hereof the dividends are not paid in full on all of the
Exchangeable Shares then outstanding, any such dividends that remain unpaid
shall be paid on a subsequent date or dates determined by the Board of Directors
on which the Corporation shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not at any time without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Section
9.2 of these share provisions:
(a) pay any dividends on the Common Shares, or any other shares ranking
junior to the Exchangeable Shares, other than stock dividends payable in
Common Shares or any such other shares ranking junior to the Exchangeable
Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable Shares;
(c) redeem or purchase any other shares of the Corporation ranking
equally with the Exchangeable Shares with respect to the payment of
dividends or on any liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of the Corporation
ranking equally with, or superior to, the Exchangeable Shares other than by
way of stock dividends to the holders of such Exchangeable Shares or as
contemplated by the Support Agreement.
The restrictions in Subsections 4.1(a), 4.1(b), and 4.1(c) above shall not apply
if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared to date on the Symantec Common Shares shall have been
declared on the Exchangeable Shares and paid in full.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law, to receive from the assets
of the Corporation in respect of each Exchangeable Share held by such holder on
the effective date (the "Liquidation Date") of such liquidation, dissolution or
winding-up, before any distribution of any part of the assets of the Corporation
among the holders of the Common Shares or any other shares ranking junior to the
Exchangeable Shares, an amount per share equal to (a) the Current Market Price
of a Symantec Common Share on the last Business Day prior to the Liquidation
Date, which shall be satisfied in full by the Corporation causing to be
delivered to such holder one Symantec Common Share, plus (b) an additional
amount equivalent to the full amount of all declared and unpaid dividends on
each such Exchangeable Share (collectively the "Liquidation Amount").
D-12
<PAGE>
5.2 On or promptly after the Liquidation Date, and subject to the exercise
by Symantec of the Liquidation Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the BUSINESS CORPORATIONS ACT (Ontario) and the by-laws of the Corporation and
such additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to the holders
of the Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or by holding for pick up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of Exchangeable Shares, on
behalf of the Corporation of certificates representing Symantec Common Shares
(which shares shall be duly issued as fully paid and non-assessable and shall be
free and clear of any lien, claim, encumbrance, security interest or adverse
claim) and a cheque of the Corporation payable at par at any branch of the
bankers of the Corporation in respect of the amount equivalent to the full
amount of all declared and unpaid dividends comprising part of the total
Liquidation Amount (less any tax required to be deducted and withheld from the
total Liquidation Amount by the Corporation without interest). On and after the
Liquidation Date, the holders of the Exchangeable Shares shall cease to be
holders of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate part of the total Liquidation Amount, unless payment of the total
Liquidation Amount for such Exchangeable Shares shall not be made upon
presentation and surrender of share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain
unaffected until the total Liquidation Amount has been paid in the manner
hereinbefore provided. The Corporation shall have the right at any time on or
after the Liquidation Date to deposit or cause to be deposited the total
Liquidation Amount in respect of the Exchangeable Shares represented by
certificates that have not at the Liquidation Date been surrendered by the
holders thereof in a custodial account with any chartered bank or trust company
in Canada. Upon such deposit being made, the rights of the holders of
Exchangeable Shares after such deposit shall be limited to receiving their
proportionate part of the total Liquidation Amount (less any tax required to be
deducted and withheld therefrom) without interest for such Exchangeable Shares
so deposited, against presentation and surrender of the said certificates held
by them, respectively, in accordance with the foregoing provisions. Upon such
payment or deposit of the total Liquidation Amount, the holders of the
Exchangeable Shares shall thereafter be considered and deemed for all purposes
to be the holders of the Symantec Common Shares delivered to them.
5.3 After the Corporation has satisfied its obligations to pay the holders
of the Exchangeable Shares the Liquidation Amount per Exchangeable Share
pursuant to Section 5.1 of these share provisions, such holders shall not be
entitled to share in any further distribution of the assets of the Corporation.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time, subject
to the exercise by Symantec of the Retraction Call Right and otherwise upon
compliance with the provisions of this Article 6, to require the Corporation to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount per share equal to (a) the Current Market Price of a
Symantec Common Share on the last Business Day prior to the Retraction Date,
which shall be satisfied in full by the Corporation causing to be delivered to
such holder one Symantec Common Share for each Exchangeable Share presented and
surrendered by the holder, plus (b) an additional amount equivalent to the full
amount of all dividends declared and unpaid thereon (collectively the
"Retraction
D-13
<PAGE>
Price", provided that if the record date for any such declared and unpaid
dividends occurs on or after the Retraction Date the Retraction Price shall not
include such additional amount equivalent to the declared and unpaid dividends).
To effect such redemption, the holder shall present and surrender at the
registered office of the Corporation or at any office of the Transfer Agent as
may be specified by the Corporation by notice to the holders of Exchangeable
Shares the certificate or certificates representing the Exchangeable Shares
which the holder desires to have the Corporation redeem, together with such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the BUSINESS CORPORATIONS ACT (Ontario) and the
by-laws of the Corporation and such additional documents and instruments as the
Transfer Agent may reasonably require, and together with a duly executed
statement (the "Retraction Request") in the form of Schedule A hereto or in such
other form as may be acceptable to the Corporation:
(a) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by such certificate
or certificates (the "Retracted Shares") redeemed by the Corporation;
(b) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "Retraction Date"), provided
that the Retraction Date shall be not less than five Business Days nor more
than 10 Business Days after the date on which the Retraction Request is
received by the Corporation and further provided that, in the event that no
such Business Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the tenth Business Day after the date
on which the Retraction Request is received by the Corporation; and
(c) acknowledging the overriding right (the "Retraction Call Right") of
Symantec to purchase all but not less than all the Retracted Shares directly
from the holder and that the Retraction Request shall be deemed to be a
revocable offer by the holder to sell the Retracted Shares to Symantec in
accordance with the Retraction Call Right on the terms and conditions set
out in Section 6.3 below.
6.2 Subject to the exercise by Symantec of the Retraction Call Right, upon
receipt by the Corporation or the Transfer Agent in the manner specified in
Section 6.1 hereof of a certificate or certificates representing the number of
Exchangeable Shares which the holder desires to have the Corporation redeem,
together with a Retraction Request, and provided that the Retraction Request is
not revoked by the holder in the manner specified in Section 6.7, the
Corporation shall redeem the Retracted Shares effective at the close of business
on the Retraction Date and shall cause to be delivered to such holder the total
Retraction Price with respect to such shares. If only a part of the Exchangeable
Shares represented by any certificate are redeemed (or purchased by Symantec
pursuant to the Retraction Call Right), a new certificate for the balance of
such Exchangeable Shares shall be issued to the holder at the expense of the
Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the Corporation
shall immediately notify Symantec thereof. In order to exercise the Retraction
Call Right, Symantec must notify the Corporation in writing of its determination
to do so (the "Symantec Call Notice") within two Business Days of notification
to Symantec by the Corporation of the receipt by the Corporation of the
Retraction Request. If Symantec does not so notify the Corporation within such
two Business Day period, the Corporation will notify the holder as soon as
possible thereafter that Symantec will not exercise the Retraction Call Right.
If Symantec delivers the Symantec Call Notice within such two Business Day time
period, and provided that the Retraction Request is not revoked by the holder in
the manner specified in Section 6.7, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the Retracted Shares to
Symantec in accordance with the Retraction Call Right. In such event, the
Corporation shall not redeem the Retracted Shares and Symantec shall purchase
from such holder and such holder shall sell to Symantec on the Retraction Date
the Retracted Shares for a purchase price (the "Purchase Price") per share equal
to the Retraction Price per share. For the purposes of completing a purchase
pursuant to the Retraction Call Right, Symantec shall deposit with
D-14
<PAGE>
the Transfer Agent, on or before the Retraction Date, certificates representing
Symantec Common Shares and a cheque in the amount of the remaining portion, if
any, of the total Purchase Price. Provided that the total Purchase Price has
been so deposited with the Transfer Agent, the closing of the purchase and sale
of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to
have occurred as at the close of business on the Retraction Date and, for
greater certainty, no redemption by the Corporation of such Retracted Shares
shall take place on the Retraction Date. In the event that Symantec does not
deliver a Symantec Call Notice within such two Business Day period, and provided
that Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the Corporation shall redeem the Retracted Shares on the Retraction
Date and in the manner otherwise contemplated in this Article 6.
6.4 The Corporation or Symantec, as the case may be, shall deliver or cause
the Transfer Agent to deliver to the relevant holder, at the address of the
holder recorded in the securities register of the Corporation for the
Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick up by the holder at the registered office of the
Corporation or at any office of the Transfer Agent as may be specified by the
Corporation by notice to the holders of Exchangeable Shares, certificates
representing the Symantec Common Shares (which shares shall be duly issued as
fully paid and non-assessable and shall be free and clear of any lien, claim,
encumbrance, security interest or adverse claim) registered in the name of the
holder or in such other name as the holder may request in payment of the total
Retraction Price or the total Purchase Price, as the case may be, and a cheque
of the Corporation payable at par at any branch of the bankers of the
Corporation in payment of the remaining portion, if any, of the total Retraction
Price (less any tax required to be deducted and withheld from the total
Retraction Price by the Corporation) without interest or a cheque of Symantec
payable at par and in Canadian dollars at any branch of the bankers of Symantec
or of the Corporation in Canada in payment of the remaining portion, if any, of
the total Purchase Price, as the case may be, and such delivery of such
certificates and cheque on behalf of the Corporation or by Symantec, as the case
may be, by the Transfer Agent shall be deemed to be payment of and shall satisfy
and discharge all liability for the total Retraction Price or total Purchase
Price, as the case may be, to the extent that the same is represented by such
share certificates and cheque (plus any tax required and in fact deducted and
withheld therefrom and remitted to the proper tax authority without interest),
unless such cheque is not paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the holder of
the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
Retraction Price or total Purchase Price, as the case may be, unless upon
presentation and surrender of certificates in accordance with the foregoing
provisions, payment of the total Retraction Price or the total Purchase Price,
as the case may be, shall not be made, in which case the rights of such holder
shall remain unaffected until the total Retraction Price or the total Purchase
Price, as the case may be, has been paid in the manner hereinbefore provided. On
and after the close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of the total Retraction
Price or the total Purchase Price, as the case may be, has been made in
accordance with the foregoing provisions, the holder of the Retracted Shares so
redeemed by the Corporation or purchased by Symantec shall thereafter be
considered and deemed for all purposes to be a holder of the Symantec Common
Shares delivered to it.
6.6 Notwithstanding any other provision of this Article 6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
the Corporation believes that on any Retraction Date it would not be permitted
by any of such provisions to redeem the Retracted Shares tendered for redemption
on such date, and provided that Symantec shall not have exercised the Retraction
Call Right with respect to the Retracted Shares, the Corporation shall only be
obligated to redeem Retracted Shares specified by a
D-15
<PAGE>
holder in a Retraction Request to the extent of the maximum number that may be
so redeemed (rounded down to a whole number of shares) as would not be contrary
to such provisions and shall notify the holder at least two Business Days prior
to the Retraction Date as to the number of Retracted Shares which will not be
redeemed by the Corporation. In any case in which the redemption by the
Corporation of Retracted Shares would be contrary to solvency requirements or
other provisions of applicable law, the Corporation shall redeem Retracted
Shares in accordance with Section 6.2 of these share provisions on a PRO RATA
basis and shall issue to each holder of Retracted Shares a new certificate, at
the expense of the Corporation, representing the Retracted Shares not redeemed
by the Corporation pursuant to Section 6.2 hereof. Provided that the Retraction
Request is not revoked by the holder in the manner specified in Section 6.7, the
holder of any such Retracted Shares not redeemed by the Corporation pursuant to
Section 6.2 of these share provisions as a result of solvency requirements of
applicable law shall be deemed by giving the Retraction Request to require
Symantec to purchase such Retracted Shares from such holder on the Retraction
Date or as soon as practicable thereafter on payment by Symantec to such holder
of the Purchase Price for each such Retracted Share, all as more specifically
provided in the Voting Trust Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to the Corporation before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Symantec shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION
7.1 Subject to applicable law, and if Symantec does not exercise the
Redemption Call Right, the Corporation shall on the Automatic Redemption Date
redeem the whole of the then outstanding Exchangeable Shares for an amount per
share equal to (a) the Current Market Price of a Symantec Common Share on the
last Business Day prior to the Automatic Redemption Date, which shall be
satisfied in full by the Corporation causing to be delivered to each holder of
Exchangeable Shares one Symantec Common Share for each Exchangeable Share held
by such holder, plus (b) an additional amount equivalent to the full amount of
all declared and unpaid dividends thereon (collectively the "Redemption Price").
7.2 In any case of a redemption of Exchangeable Shares under this Article 7,
the Corporation shall, at least 120 days before the Automatic Redemption Date,
send or cause to be sent to each holder of Exchangeable Shares a notice in
writing of the redemption by the Corporation or the purchase by Symantec under
the Redemption Call Right, as the case may be, of the Exchangeable Shares held
by such holder. Such notice shall set out the formula for determining the
Redemption Price or the Redemption Call Purchase Price, as the case may be, the
Automatic Redemption Date and, if applicable, particulars of the Redemption Call
Right.
7.3 On or after the Automatic Redemption Date and subject to the exercise by
Symantec of the Redemption Call Right, the Corporation shall cause to be
delivered to the holders of the Exchangeable Shares to be redeemed the
Redemption Price for each such Exchangeable Share upon presentation and
surrender at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation in such notice of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the BUSINESS CORPORATIONS ACT (Ontario) and the
by-laws of the Corporation and such additional documents and instruments as the
Transfer Agent may reasonably require. Payment of the total Redemption Price for
such Exchangeable Shares shall be made by delivery to each holder, at the
address of the holder recorded in the securities register of the Corporation or
by holding for pick up by the holder at the registered office of the Corporation
or at any office of the Transfer Agent as may be specified by the Corporation in
such notice, on behalf of the Corporation of
D-16
<PAGE>
certificates representing Symantec Common Shares (which shares shall be duly
issued as fully paid and non-assessable and shall be free and clear of any lien,
claim, encumbrance, security interest or adverse claim) and a cheque of the
Corporation payable at par at any branch of the bankers of the Corporation in
respect of the additional amount equivalent to the full amount of all declared
and unpaid dividends comprising part of the total Redemption Price (less any tax
required to be deducted and withheld from the total Redemption Price by the
Corporation) without interest. On and after the Automatic Redemption Date, the
holders of the Exchangeable Shares called for redemption shall cease to be
holders of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate part of the total Redemption Price, unless payment of the total
Redemption Price for such Exchangeable Shares shall not be made upon
presentation and surrender of certificates in accordance with the foregoing
provisions, in which case the rights of the holders shall remain unaffected
until the total Redemption Price has been paid in the manner hereinbefore
provided. The Corporation shall have the right at any time after the sending of
notice of its intention to redeem the Exchangeable Shares as aforesaid to
deposit or cause to be deposited the total Redemption Price of the Exchangeable
Shares so called for redemption, or of such of the said Exchangeable Shares
represented by certificates that have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption, in a
custodial account with any chartered bank or trust company in Canada named in
such notice. Upon the later of such deposit being made and the Automatic
Redemption Date, the Exchangeable Shares in respect whereof such deposit shall
have been made shall be redeemed and the rights of the holders thereof after
such deposit or Automatic Redemption Date, as the case may be, shall be limited
to receiving their proportionate part of the total Redemption Price (less any
tax required to be deducted or withheld therefrom) without interest for such
Exchangeable Shares so deposited, against presentation and surrender of the said
certificates held by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of the total Redemption Price, the
holders of the Exchangeable Shares shall thereafter be considered and deemed for
all purposes to be holders of the Symantec Common Shares delivered to them.
ARTICLE 8
VOTING RIGHTS
8.1 Except as required by applicable law and the provisions of Sections 9.1,
10.1, 11.1 and 11.2, the holders of the Exchangeable Shares shall not be
entitled as such to receive notice of or to attend any meeting of the
shareholders of the Corporation or to vote at any such meeting.
ARTICLE 9
AMENDMENT AND APPROVAL
9.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified.
9.2 Any approval given by the holders of the Exchangeable Shares to add to,
change or remove any right, privilege, restriction or condition attaching to the
Exchangeable Shares or any other matter requiring the approval or consent of the
holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than two-thirds of the votes cast on such resolution at a meeting of
holders of Exchangeable Shares duly called and held at which the holders of at
least 50% of the outstanding Exchangeable Shares at that time are present or
represented by proxy; provided that such approval must be given also by the
affirmative vote of holders of more than two-thirds of the Exchangeable Shares
represented in person or by proxy at the meeting (excluding Exchangeable Shares
beneficially owned by Symantec). If at any such meeting the holders of at least
50% of the outstanding Exchangeable Shares at that time are not
D-17
<PAGE>
present or represented by proxy within one-half hour after the time appointed
for such meeting then the meeting shall be adjourned to such date not less than
10 days thereafter and to such time and place as may be designated by the
Chairman of such meeting. At such adjourned meeting the holders of Exchangeable
Shares present or represented by proxy thereat may transact the business for
which the meeting was originally called and a resolution passed thereat by the
affirmative vote of not less than two-thirds of the votes cast on such
resolution at such meeting shall constitute the approval or consent of the
holders of the Exchangeable Shares.
ARTICLE 10
RECIPROCAL CHANGES, ETC. IN RESPECT OF SYMANTEC COMMON SHARES
10.1 (a) Each holder of an Exchangeable Share acknowledges that the
Support Agreement provides, in part, that Symantec will not without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of these share
provisions:
(i) issue or distribute Symantec Common Shares (or securities
exchangeable for or convertible into or carrying rights to acquire Symantec
Common Shares) to the holders of all or substantially all of the then
outstanding Symantec Common Shares by way of stock dividend or other
distribution, other than an issue of Symantec Common Shares (or securities
exchangeable for or convertible into or carrying rights to acquire Symantec
Common Shares) to holders of Symantec Common Shares who exercise an option
to receive dividends in Symantec Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire Symantec Common
Shares) in lieu of receiving cash dividends; or
(ii) issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding Symantec Common Shares
entitling them to subscribe for or to purchase Symantec Common Shares (or
securities exchangeable for or convertible into or carrying rights to
acquire Symantec Common Shares); or
(iii) issue or distribute to the holders of all or substantially all of
the then outstanding Symantec Common Shares (A) shares or securities of
Symantec of any class other than Symantec Common Shares (other than shares
convertible into or exchangeable for or carrying rights to acquire Symantec
Common Shares), (B) rights, options or warrants other than those referred to
in Section 10.1(a)(ii) above, (C) evidences of indebtedness of Symantec or
(D) assets of Symantec;
unless the economic equivalent on a per share basis of such rights,
options, securities, shares, evidences of indebtedness or other assets is
issued or distributed simultaneously to holders of the Exchangeable Shares.
(b) Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that Symantec will not without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of these share
provisions:
(i) subdivide, redivide or change the then outstanding Symantec Common
Shares into a greater number of Symantec Common Shares; or
(ii) reduce, combine or consolidate or change the then outstanding
Symantec Common Shares into a lesser number of Symantec Common Shares; or
(iii) reclassify or otherwise change the Symantec Common Shares or effect
an amalgamation, merger, reorganization or other transaction affecting the
Symantec Common Shares;
unless the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of, the
Exchangeable Shares.
D-18
<PAGE>
The Support Agreement further provides, in part, that the aforesaid provisions
of the Support Agreement shall not be changed without the approval of the
holders of the Exchangeable Shares given in accordance with Section 9.2 of these
share provisions.
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
11.1 The Corporation will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by Symantec with all provisions of the Support
Agreement applicable to the Corporation and Symantec, respectively, in
accordance with the terms thereof including, without limitation, taking all such
actions and doing all such things as shall be necessary or advisable to enforce
to the fullest extent possible for the direct benefit of the Corporation all
rights and benefits in favour of the Corporation under or pursuant to such
agreement.
11.2 The Corporation shall not propose, agree to or otherwise give effect
to any amendment to, or waiver or forgiveness of its rights or obligations
under, the Support Agreement without the approval of the holders of the
Exchangeable Shares given in accordance with Section 9.2 of these share
provisions other than such amendments, waivers and/or forgiveness as may be
necessary or advisable for the purposes of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Exchangeable Shares; or
(b) making such provisions or modifications not inconsistent with such
agreement as may be necessary or desirable with respect to matters or
questions arising thereunder which, in the opinion of the Board of
Directors, it may be expedient to make, provided that the Board of Directors
shall be of the opinion, after consultation with counsel, that such
provisions and modifications will not be prejudicial to the interests of the
holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement which, on
the advice of counsel to the Corporation, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error contained therein, provided
that the Board of Directors shall be of the opinion, after consultation with
counsel, that such changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
ARTICLE 12
LEGEND
12.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend, in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Liquidation Call Right and the Redemption Call
Right, and the Voting and Exchange Trust Agreement (including the provisions
with respect to the voting rights, exchange right and automatic exchange
thereunder).
ARTICLE 13
NOTICES
13.1 Any notice, request or other communication to be given to the
Corporation by a holder of Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the registered office of the Corporation and addressed to the
D-19
<PAGE>
attention of the President. Any such notice, request or other communication, if
given by mail, telecopy or delivery, shall only be deemed to have been given and
received upon actual receipt thereof by the Corporation.
13.2 Any presentation and surrender by a holder of Exchangeable Shares to
the Corporation or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding up of the
Corporation or the retraction or redemption of Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the registered office of
the Corporation or to such office of the Transfer Agent as may be specified by
the Corporation, in each case addressed to the attention of the President of the
Corporation. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
13.3 Any notice, request or other communication to be given to a holder of
Exchangeable Shares by or on behalf of the Corporation shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the securities register of the
Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given by mail, shall be deemed to have been
given and received on the fifth Business Day following the date of mailing and,
if given by delivery, shall be deemed to have been given and received on the
date of delivery. Accidental failure or omission to give any notice, request or
other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be taken by
the Corporation pursuant thereto.
D-20
<PAGE>
SCHEDULE A
NOTICE OF RETRACTION
To the Corporation and Symantec Corporation
This notice is given pursuant to Article 6 of the provisions (the "Share
Provisions") attaching to the share(s) represented by this certificate and all
capitalized words and expressions used in this notice which are defined in the
Share Provisions have the meanings ascribed to such words and expressions in
such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Call Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 6 of the Share Provisions:
/ / all share(s) represented by this certificate; or
/ / _____________________ share(s) only.
The undersigned hereby notifies the Corporation that the Retraction Date
shall be _________________________________ .
NOTE: The Retraction Date must be a Business Day and must not be less than five
Business Days nor more than 10 Business Days after the date upon which
this notice is received by the Corporation. In the event that no such
Business Day is specified above, the Retraction Date shall be deemed to
be the tenth Business Day after the date on which this notice is received
by the Corporation.
The undersigned acknowledges the Retraction Call Right of Symantec
Corporation to purchase all but not less than all the Retracted Shares from the
undersigned and that this notice shall be deemed to be a revocable offer by the
undersigned to sell the Retracted Shares to Symantec Corporation in accordance
with the Retraction Call Right on the Retraction Date for the Retraction Price
and on the other terms and conditions set out in Section 6.3 of the Share
Provisions. If Symantec Corporation determines not to exercise the Retraction
Call Right, the Corporation will notify the undersigned of such fact as soon as
possible. This notice of retraction, and offer to sell the Retracted Shares to
Symantec Corporation, may be revoked and withdrawn by the undersigned by notice
in writing given to the Corporation at any time before the close of business on
the Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions of
applicable law, the Corporation is unable to redeem all Retracted Shares, the
undersigned will be deemed to have exercised the Exchange Right (as defined in
the Voting and Exchange Trust Agreement) so as to require Symantec Corporation
to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the Corporation and
Symantec Corporation that the undersigned has good title to, and owns, the
share(s) represented by this certificate to be acquired by the Corporation or
Symantec Corporation, as the case may be, free and clear of all liens, claims
and encumbrances.
<TABLE>
<S> <C> <C>
- ------------------------ --------------------------------- ----------------------------
(Date) (Signature of Shareholder) (Guarantee of Signature)
</TABLE>
/ / Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up
by the shareholder at the principal transfer office of The R-M Trust
Company (the "Transfer Agent") in Toronto, failing which the securities and
any cheque(s) will be mailed to the last address of the shareholder as it
appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be deposited
with the Transfer Agent at its
D-21
<PAGE>
principal transfer office in Toronto. The securities and any cheque(s)
resulting form the retraction or purchase of the Retracted Shares will be
issued and registered in, and made payable to, respectively, the name of
the shareholder as it appears on the register of the Corporation and the
securities and cheque(s) resulting from such retraction or purchase will
be delivered to such shareholder as indicated above, unless the form
appearing immediately below is duly completed.
<TABLE>
<S> <C>
- ------------------------------------------------------ Date -----------------------------
Name of Person in Whose Name Securities or Cheque(s)
Are To Be Registered, Issued or Delivered (please
print)
- ------------------------------------------------------ ----------------------------------
Street Address or P.O. Box Signature of Shareholder
- ------------------------------------------------------ ----------------------------------
City -- Province Signature Guaranteed by
</TABLE>
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the remaining
shares of the Corporation will be issued and registered in the name of
the shareholder as it appears on the register of the Corporation, unless
the Share Transfer Power on the share certificate is duly completed in
respect of such shares.
D-22
<PAGE>
ANNEX E
FORM OF SUPPORT AGREEMENT
<PAGE>
SUPPORT AGREEMENT
MEMORANDUM OF AGREEMENT made as of November 22, 1995.
B E T W E E N:
SYMANTEC CORPORATION,
a corporation existing under the laws of the State of Delaware,
(hereinafter referred to as the "Parent"),
OF THE FIRST PART,
-and -
DELRINA CORPORATION
a corporation existing under the laws of the Province of Ontario,
(hereinafter referred to as the "Company"),
OF THE SECOND PART.
WHEREAS pursuant to a combination agreement dated as of July 5, 1995, by and
between the Parent and the Company (such agreement as it may be amended or
restated is hereinafter referred to as the "Combination Agreement") the parties
agreed that on the Effective Date (as defined in the Combination Agreement), the
Parent and the Company would execute and deliver a Support Agreement containing
the terms and conditions set forth in Exhibit 6.2(b)(i) to the Combination
Agreement together with such other terms and conditions as may be agreed to by
the parties to the Combination Agreement acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
articles of arrangement dated November 22, 1995 filed pursuant to the BUSINESS
CORPORATIONS ACT (Ontario), each issued and outstanding common share of the
Company (a "Company Common Share") was exchanged for 0.61 issued and outstanding
Exchangeable Non-Voting Shares of the Company (the "Exchangeable Shares"), and
thereafter, the Company's sole issued and outstanding share of Class A Preferred
Stock was exchanged by the holder thereof for one issued and outstanding Company
Common Share;
AND WHEREAS the above-mentioned articles of arrangement set forth the
rights, privileges, restrictions and conditions (collectively the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares;
AND WHEREAS the parties hereto desire to make appropriate provision and to
establish a procedure whereby the Parent will take certain actions and make
certain payments and deliveries necessary to ensure that the Company will be
able to make certain payments and to deliver or cause to be delivered shares of
Parent Common Stock in satisfaction of the obligations of the Company under the
Exchangeable Share Provisions with respect to the payment and satisfaction of
dividends, Liquidation Amounts, Retraction Prices and Redemption Prices, all in
accordance with the Exchangeable Share Provisions;
E-1
<PAGE>
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINED TERMS. Each term denoted herein by initial capital letters and
not otherwise defined herein shall have the meaning ascribed thereto in the
Exchangeable Share Provisions, unless the context requires otherwise.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
agreement into articles, sections and paragraphs and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
taken under this agreement is not a Business Day, such action shall be required
to be taken on the next succeeding Business Day. For the purposes of this
agreement, a "Business Day" means a day other than a Saturday, a Sunday or a
statutory holiday in the City of Toronto, Ontario or the City of San Francisco,
California.
ARTICLE 2
COVENANTS OF THE PARENT AND THE COMPANY
2.1 COVENANTS OF PARENT REGARDING EXCHANGEABLE SHARES. So long as any
Exchangeable Shares are outstanding, the Parent will:
(a) not declare or pay any dividend on the Parent Common Stock unless
(i) the Company will have sufficient assets, funds and other property
available to enable the due declaration and the due and punctual payment in
accordance with applicable law, of an equivalent dividend on the
Exchangeable Shares and (ii) the Company shall simultaneously declare or
pay, as the case may be, an equivalent dividend on the Exchangeable Shares;
(b) cause the Company to declare simultaneously with the declaration of
any dividend on the Parent Common Stock an equivalent dividend on the
Exchangeable Shares and, when such dividend is paid on the Parent Common
Stock, cause the Company to pay simultaneously therewith such equivalent
dividend on the Exchangeable Shares, in each case in accordance with the
Exchangeable Share Provisions;
(c) advise the Company sufficiently in advance of the declaration by the
Parent of any dividend on the Parent Common Stock and take all such other
actions as are necessary, in cooperation with the Company, to ensure that
the respective declaration date, record date and payment date for a dividend
on the Exchangeable Shares shall be the same as the record date, declaration
date and payment date for the corresponding dividend on the Parent Common
Stock and such dividend on the Exchangeable Shares shall correspond with any
requirement of the stock exchange on which the Exchangeable Shares are
listed;
(d) ensure that the record date for any dividend declared on the Parent
Common Stock is not less than 10 Business Days after the declaration date
for such dividend;
(e) take all such actions and do all such things as are necessary or
desirable to enable and permit the Company, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Liquidation Amount in respect of each issued and
outstanding Exchangeable Share upon the liquidation, dissolution or
winding-up of the Company,
E-2
<PAGE>
including without limitation all such actions and all such things as are
necessary or desirable to enable and permit the Company to cause to be
delivered shares of Parent Common Stock to the holders of Exchangeable
Shares in accordance with the provisions of Article 5 of the Exchangeable
Share Provisions;
(f) take all such actions and do all such things as are necessary or
desirable to enable and permit the Company, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
satisfaction of the Retraction Price and the Redemption Price, including
without limitation all such actions and all such things as are necessary or
desirable to enable and permit the Company to cause to be delivered shares
of Parent Common Stock to the holders of Exchangeable Shares, upon the
retraction or redemption of the Exchangeable Shares in accordance with the
provisions of Article 6 or Article 7 of the Exchangeable Share Provisions,
as the case may be; and
(g) not exercise its vote as a shareholder to initiate the voluntary
liquidation, dissolution or winding-up of the Company nor take any action or
omit to take any action that is designed to result in the liquidation,
dissolution or winding-up of the Company.
2.2 SEGREGATION OF FUNDS. The Parent will cause the Company to deposit a
sufficient amount of funds in a separate account and segregate a sufficient
amount of such assets and other property as is necessary to enable the Company
to pay or otherwise satisfy the applicable dividends, Liquidation Amount,
Retraction Price or Redemption Price, in each case for the benefit of holders
from time to time of the Exchangeable Shares, and will use such funds, assets
and other property so segregated exclusively for the payment of dividends and
the payment or other satisfaction of the Liquidation Amount, the Retraction
Price or the Redemption Price, as applicable.
2.3 RESERVATION OF SHARES OF PARENT COMMON STOCK. The Parent hereby
represents, warrants and covenants that it has irrevocably reserved for issuance
and will at all times keep available, free from pre-emptive and other rights,
out of its authorized and unissued capital stock such number of shares of Parent
Common Stock (or other shares or securities into which the Parent Common Stock
may be reclassified or changed as contemplated by section 2.7 hereof) (a) as is
equal to the sum of (i) the number of Exchangeable Shares issued and outstanding
from time to time and (ii) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares outstanding from time to
time and (b) as are now and may hereafter be required to enable and permit the
Company to meet its obligations hereunder, under the Voting and Exchange Trust
Agreement, under the Exchangeable Share Provisions and under any other security
or commitment pursuant to which the Parent may now or hereafter be required to
issue shares of Parent Common Stock.
2.4 NOTIFICATION OF CERTAIN EVENTS. In order to assist the Parent to
comply with its obligations hereunder, the Company will give the Parent notice
of each of the following events at the time set forth below:
(a) in the event of any determination by the Board of Directors of the
Company to institute voluntary liquidation, dissolution or winding up
proceedings with respect to the Company or to effect any other distribution
of the assets of the Company among its shareholders for the purpose of
winding up its affairs, at least 60 days prior to the proposed effective
date of such liquidation, dissolution, winding up or other distribution;
(b) immediately, upon the earlier of (i) receipt by the Company of
notice of, and (ii) the Company otherwise becoming aware of, any threatened
or instituted claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding up of the Company or to
effect any other distribution of the assets of the Company among its
shareholders for the purpose of winding up its affairs;
(c) immediately, upon receipt by the Company of a Retraction Request (as
defined in the Exchangeable Share Provisions);
E-3
<PAGE>
(d) at least 130 days prior to any accelerated Automatic Redemption Date
determined by the Board of Directors of the Company in accordance with the
Exchangeable Share Provisions; and
(e) as soon as practicable upon the issuance by the Company of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
2.5 DELIVERY OF SHARES OF PARENT COMMON STOCK. In furtherance of its
obligations under sections 2.1(e) and 2.1(f) hereof, upon notice of any event
which requires the Company to cause to be delivered shares of Parent Common
Stock to any holder of Exchangeable Shares, the Parent shall forthwith issue and
deliver the requisite shares of Parent Common Stock to or to the order of the
former holder of the surrendered Exchangeable Shares, as the Company shall
direct. All such shares of Parent Common Stock shall be duly issued as fully
paid and non-assessable and shall be free and clear of any lien, claim,
encumbrance, security interest or adverse claim. In consideration of the
issuance of each such share of Parent Common Stock by the Parent, the Company
shall issue to the Parent, or as the Parent shall direct, such number of Company
Common Shares as is equal to the fair value of such shares of Parent Common
Stock.
2.6 QUALIFICATION OF SHARES OF PARENT COMMON STOCK. The Parent covenants
that if any shares of Parent Common Stock (or other shares or securities into
which the Parent Common Stock may be reclassified or changed as contemplated by
Section 2.7 hereof) to be issued and delivered hereunder, including for greater
certainty, pursuant to the Exchangeable Share Provisions, or pursuant to the
Exchange Right or the Automatic Exchange Rights require registration or
qualification with or approval of or the filing of any document including any
prospectus or similar document or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any governmental or regulatory
authority under any Canadian or United States federal, provincial or state law
or regulation or pursuant to the rules and regulations of any regulatory
authority or the fulfillment of any other legal requirement (collectively, the
"Applicable Laws") before such shares (or other shares or securities into which
the Parent Common Stock may be reclassified or changed as contemplated by
Section 2.7 hereof) may be issued and delivered by the Parent to the initial
holder thereof or in order that such shares may be freely traded thereafter
(other than any restrictions on transfer by reason of a holder being a "control
person" of the Parent for purposes of Canadian federal or provincial securities
law or an "affiliate" of the Parent for purposes of United States federal or
state securities law), the Parent will in good faith expeditiously take all such
actions and do all such things as are necessary to cause such shares of Parent
Common Stock (or other shares or securities into which the Parent Common Stock
may be reclassified or changed as contemplated by Section 2.7 hereof) to be and
remain duly registered, qualified or approved. The Parent represents and
warrants that it has in good faith taken all actions and done all things as are
necessary under Applicable Laws as they exist on the date hereof to cause the
shares of Parent Common Stock (or other shares or securities into which the
Parent Common Stock may be reclassified or changed as contemplated by Section
2.7 hereof) to be issued and delivered hereunder, including for greater
certainty, pursuant to the Exchangeable Share Provisions, or pursuant to the
Exchange Right and the Automatic Exchange Rights to be freely tradeable
thereafter (other than restrictions on transfer by reason of a holder being a
"control person" of the Parent for the purposes of Canadian federal and
provincial securities law or an "affiliate" of the Parent for the purposes of
United States federal or state securities law). The Parent will in good faith
expeditiously take all such actions and do all such things as are necessary to
cause all shares of Parent Common Stock (or other shares or securities into
which the Parent Common Stock may be reclassified or changed as contemplated by
Section 2.7 hereof) to be delivered hereunder, including for greater certainty,
pursuant to the Exchangeable Share Provisions, or pursuant to the Exchange Right
or the Automatic Exchange Rights to be listed, quoted or posted for trading on
all stock exchanges and quotation systems on which such shares are listed,
quoted or posted for trading at such time. The Parent will in good faith
expeditiously take all such action and do all such things as are necessary to
cause all Exchangeable Shares to be listed posted for trading on a stock
exchange in Canada.
E-4
<PAGE>
2.7 ECONOMIC EQUIVALENCE.
(a) The Parent will not without the prior approval of the Company and the
prior approval of the holders of the Exchangeable Shares given in accordance
with Section 10.2 of the Exchangeable Share Provisions:
(i) issue or distribute shares of Parent Common Stock (or securities
exchangeable for or convertible into or carrying rights to acquire shares of
Parent Common Stock) to the holders of all or substantially all of the then
outstanding Parent Common Stock by way of stock dividend or other
distribution, other than an issue of shares of Parent Common Stock (or
securities exchangeable for or convertible into or carrying rights to
acquire shares of Parent Common Stock) to holders of shares of Parent Common
Stock who exercise an option to receive dividends in Parent Common Stock (or
securities exchangeable for or convertible into or carrying rights to
acquire shares of Parent Common Stock) in lieu of receiving cash dividends;
or
(ii) issue or distribute rights, options or warrants to the holders of
all or substantially all of the then outstanding shares of Parent Common
Stock entitling them to subscribe for or to purchase shares of Parent Common
Stock (or securities exchangeable for or convertible into or carrying rights
to acquire shares of Parent Common Stock); or
(iii) issue or distribute to the holders of all or substantially all of
the then outstanding shares of Parent Common Stock (A) shares or securities
of the Parent of any class other than Parent Common Stock (other than shares
convertible into or exchangeable for or carrying rights to acquire shares of
Parent Common Stock), (B) rights, options or warrants other than those
referred to in subsection 2.7(a)(ii) above, (C) evidences of indebtedness of
the Parent or (D) assets of the Parent;
unless (i) the Company is permitted under applicable law to issue or distribute
the economic equivalent on a per share basis of such rights, options,
securities, shares, evidences of indebtedness or other assets to holders of the
Exchangeable Shares and (ii) the Company shall issue or distribute such rights,
options, securities, shares, evidences of indebtedness or other assets
simultaneously to holders of the Exchangeable Shares.
(b) The Parent will not without the prior approval of the Company and the
prior approval of the holders of the Exchangeable Shares given in accordance
with Section 10.2 of the Exchangeable Share Provisions:
(i) subdivide, redivide or change the then outstanding shares of Parent
Common Stock into a greater number of shares of Parent Common Stock; or
(ii) reduce, combine or consolidate or change the then outstanding
shares of Parent Common Stock into a lesser number of shares of Parent
Common Stock; or
(iii) reclassify or otherwise change the shares of Parent Common Stock or
effect an amalgamation, merger, reorganization or other transaction
affecting the shares of Parent Common Stock;
unless (i) the Company is permitted under applicable law to simultaneously make
the same or an economically equivalent change to, or in the rights of holders
of, the Exchangeable Shares and (ii) the same or an economically equivalent
change is made to, or in the rights of the holders of, the Exchangeable Shares.
(c) The Parent will ensure that the record date for any event referred to in
section 2.7(a) or 2.7(b) above, or (if no record date is applicable for such
event) the effective date for any such event, is not less than 20 Business Days
after the date on which such event is declared or announced by the Parent (with
simultaneous notice thereof to be given by the Parent to the Company).
(d) The Board of Directors of the Company shall determine, in good faith and
in its sole discretion (with the assistance of such reputable and qualified
independent financial advisors and/or other
E-5
<PAGE>
experts as the board may require), economic equivalence for the purposes of any
event referred to in subsection 2.7(a) or 2.7(b) above and each such
determination shall be conclusive and binding on the Parent. In making each such
determination, the following factors shall, without excluding other factors
determined by the board to be relevant, be considered by the Board of Directors
of the Company:
(i) in the case of any stock dividend or other distribution payable in
shares of Parent Common Stock, the number of such shares issued in
proportion to the number of shares of Parent Common Stock previously
outstanding;
(ii) in the case of the issuance or distribution of any rights, options
or warrants to subscribe for or purchase shares of Parent Common Stock (or
securities exchangeable for or convertible into or carrying rights to
acquire shares of Parent Common Stock), the relationship between the
exercise price of each such right, option or warrant and the current market
value (as determined by the Board of Directors of the Company in the manner
above contemplated) of a share of Parent Common Stock;
(iii) in the case of the issuance or distribution of any other form of
property (including without limitation any shares or securities of the
Parent of any class other than Parent Common Stock, any rights, options or
warrants other than those referred to in subsection 2.7(d)(ii) above, any
evidences of indebtedness of the Parent or any assets of the Parent), the
relationship between the fair market value (as determined by the Board of
Directors of the Company in the manner above contemplated) of such property
to be issued or distributed with respect to each outstanding share of Parent
Common Stock and the current market value (as determined by the Board of
Directors of the Company in the manner above contemplated) of a share of
Parent Common Stock;
(iv) in the case of any subdivision, redivision or change of the then
outstanding shares of Parent Common Stock into a greater number of shares of
Parent Common Stock or the reduction, combination or consolidation or change
of the then outstanding shares of Parent Common Stock into a lesser number
of shares of Parent Common Stock or any amalgamation, merger, reorganization
or other transaction affecting the Parent Common Stock, the effect thereof
upon the then outstanding shares of Parent Common Stock; and
(v) in all such cases, the general taxation consequences of the relevant
event to holders of Exchangeable Shares to the extent that such consequences
may differ from the taxation consequences to holders of shares of Parent
Common Stock as a result of differences between taxation laws of Canada and
the United States (except for any differing consequences arising as a result
of differing marginal taxation rates and without regard to the individual
circumstances of holders of Exchangeable Shares).
For purposes of the foregoing determinations, the current market value of
any security listed and traded or quoted on a securities exchange shall be the
weighted average of the daily trading prices of such security during a period of
not less than 20 consecutive trading days ending not more than five trading days
before the date of determination on the principal securities exchange on which
such securities are listed and traded or quoted; provided, however, that if in
the opinion of the Board of Directors of the Company the public distribution or
trading activity of such securities during such period does not create a market
which reflects the fair market value of such securities, then the current market
value thereof shall be determined by the Board of Directors of the Company, in
good faith and in its sole discretion (with the assistance of such reputable and
qualified independent financial advisors and/or other experts as the board may
require), and provided further that any such determination by the board shall be
conclusive and binding on the Parent.
2.8 TENDER OFFERS, ETC. In the event that a tender offer, share exchange
offer, issuer bid, take-over bid or similar transaction with respect to Parent
Common Stock (an "Offer") is proposed by the Parent or is proposed to the Parent
or its shareholders and is recommended by the Board of Directors
E-6
<PAGE>
of the Parent, or is otherwise effected or to be effected with the consent or
approval of the Board of Directors of the Parent, the Parent will use its best
efforts expeditiously and in good faith to take all such actions and do all such
things as are necessary or desirable to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same extent and on an
economically equivalent basis as the holders of shares of Parent Common Stock,
without discrimination. Without limiting the generality of the foregoing, the
Parent will use its best efforts expeditiously and in good faith to ensure that
holders of Exchangeable Shares may participate in all such Offers without being
required to retract Exchangeable Shares as against the Company (or, if so
required, to ensure that any such retraction shall be effective only upon, and
shall be conditional upon, the closing of the Offer and only to the extent
necessary to tender or deposit to the Offer).
2.9 OWNERSHIP OF OUTSTANDING SHARES. Without the prior approval of the
Company and the prior approval of the holders of the Exchangeable Shares given
in accordance with Section 10.2 of the Exchangeable Share Provisions, the Parent
covenants and agrees in favour of the Company that, as long as any outstanding
Exchangeable Shares are owned by any person or entity other than the Parent or
any of its Affiliates, the Parent will be and remain the direct or indirect
beneficial owner of all issued and outstanding shares in the capital of the
Company and all outstanding securities of the Company carrying or otherwise
entitled to voting rights in any circumstances, in each case other than the
Exchangeable Shares.
2.10 PARENT NOT TO VOTE EXCHANGEABLE SHARES. The Parent covenants and
agrees that it will appoint and cause to be appointed proxyholders with respect
to all Exchangeable Shares held by the Parent and its subsidiaries for the sole
purpose of attending each meeting of holders of Exchangeable Shares in order to
be counted as part of the quorum for each such meeting. The Parent further
covenants and agrees that it will not, and will cause its subsidiaries not to,
exercise any voting rights which may be exercisable by holders of Exchangeable
Shares from time to time pursuant to the Exchangeable Share Provisions or
pursuant to the provisions of the BUSINESS CORPORATIONS ACT (Ontario) (or any
successor or other corporate statute by which the Company may in the future be
governed) with respect to any Exchangeable Shares held by it or by its
subsidiaries in respect of any matter considered at any meeting of holders of
Exchangeable Shares.
2.11 DUE PERFORMANCE. On and after the Effective Date, the Parent shall
duly and timely perform all of its obligations provided for in the Plan of
Arrangement, including any obligations that may arise upon the exercise of the
Parent's rights under the Exchangeable Share Provisions.
ARTICLE 3
GENERAL
3.1 TERM. This agreement shall come into force and be effective as of the
date hereof and shall terminate and be of no further force and effect at such
time as no Exchangeable Shares (or securities or rights convertible into or
exchangeable for or carrying rights to acquire Exchangeable Shares) are held by
any party other than the Parent and any of its Affiliates.
3.2 CHANGES IN CAPITAL OF PARENT AND THE COMPANY. Notwithstanding the
provisions of section 3.4 hereof, at all times after the occurrence of any event
effected pursuant to section 2.7 or 2.8 hereof, as a result of which either the
Parent Common Stock or the Exchangeable Shares or both are in any way changed,
this agreement shall forthwith be amended and modified as necessary in order
that it shall apply with full force and effect, mutatis mutandis, to all new
securities into which the Parent Common Stock or the Exchangeable Shares or both
are so changed and the parties hereto shall execute and deliver an agreement in
writing giving effect to and evidencing such necessary amendments and
modifications.
E-7
<PAGE>
3.3 SEVERABILITY. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby and this agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 AMENDMENTS, MODIFICATIONS, ETC. This agreement may not be amended or
modified except by an agreement in writing executed by the Company and the
Parent and approved by the holders of the Exchangeable Shares in accordance with
Section 10.2 of the Exchangeable Share Provisions.
3.5 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section 3.4,
the parties to this agreement may in writing, at any time and from time to time,
without the approval of the holders of the Exchangeable Shares, amend or modify
this agreement for the purposes of:
(a) adding to the covenants of either or both parties for the protection
of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the Board of Directors of each of the
Company and the Parent, it may be expedient to make, provided that each such
board of directors shall be of the opinion that such amendments or
modifications will not be prejudicial to the interests of the holders of the
Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel
to the Company and the Parent, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error, provided that the boards of directors
of each of the Company and the Parent shall be of the opinion that such
changes or corrections will not be prejudicial to the interests of the
holders of the Exchangeable Shares.
3.6 MEETING TO CONSIDER AMENDMENTS. The Company, at the request of the
Parent, shall call a meeting or meetings of the holders of the Exchangeable
Shares for the purpose of considering any proposed amendment or modification
requiring approval pursuant to section 3.4 hereof. Any such meeting or meetings
shall be called and held in accordance with the by-laws of the Company, the
Exchangeable Share Provisions and all applicable laws.
3.7 AMENDMENTS ONLY IN WRITING. No amendment to or modification or waiver
of any of the provisions of this agreement otherwise permitted hereunder shall
be effective unless made in writing and signed by both of the parties hereto.
3.8 INUREMENT. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
3.9 NOTICES TO PARTIES. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if delivered
personally or by confirmed telecopy to the parties at the following addresses
(or at such other address for either such party as shall be specified in like
notice):
(a) if to the Parent at: Symantec Corporation
10201 Torre Avenue
Cupertino, CA 95014
ATTENTION: GENERAL COUNSEL
Telecopy: (408) 252-5101
(b) if to the Company at: Delrina Corporation
895 Don Mills Road, 500-2 Park Centre
Toronto, Ontario, Canada M3C1W3
ATTENTION: GENERAL COUNSEL
Telecopy: (416) 441-2498
E-8
<PAGE>
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof
unless such day is not a Business Day in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
3.10 COUNTERPARTS. This agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
3.11 JURISDICTION. This agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
3.12 ATTORNMENT. The Parent agrees that any action or proceeding arising
out of or relating to this agreement may be instituted in the courts of Ontario,
waives any objection which it may have now or hereafter to the venue of any such
action or proceeding, irrevocably submits to the jurisdiction of the said courts
in any such action or proceeding, agrees to be bound by any judgment of the said
courts and not to seek, and hereby waives, any review of the merits of any such
judgment by the courts of any other jurisdiction and hereby appoints the Company
at its registered office in the Province of Ontario as the Parent's attorney for
service of process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
SYMANTEC CORPORATION
By
--------------------------------------
--------------------------------------
DELRINA CORPORATION
By
--------------------------------------
--------------------------------------
E-9
<PAGE>
ANNEX F
FORM OF VOTING AND EXCHANGE
TRUST AGREEMENT
<PAGE>
VOTING AND EXCHANGE TRUST AGREEMENT
MEMORANDUM OF AGREEMENT made as of the 22nd day of November, 1995.
B E T W E E N:
SYMANTEC CORPORATION,
a corporation existing under the laws of the State of Delaware,
(hereinafter referred to as the "Parent"),
OF THE FIRST PART,
-and -
DELRINA CORPORATION,
a corporation existing under the laws of the Province of Ontario,
(hereinafter referred to as the "Company"),
OF THE SECOND PART,
-and -
THE R-M TRUST COMPANY,
a trust company incorporated under the laws of Canada,
(hereinafter referred to as the "Trustee"),
OF THE THIRD PART.
WHEREAS pursuant to a combination agreement dated as of July 5, 1995, by and
between the Parent and the Company (such agreement as it may be amended or
restated is hereinafter referred to as the "Combination Agreement") the parties
agreed that on the Effective Date (as defined in the Combination Agreement), the
Parent and the Company would execute and deliver a Voting and Exchange Trust
Agreement containing the terms and conditions set forth in Exhibit 6.2(b)(ii) to
the Combination Agreement together with such other terms and conditions as may
be agreed to by the parties to the Combination Agreement acting reasonably;
AND WHEREAS pursuant to an arrangement (the "Arrangement") effected by
articles of arrangement dated November 22, 1995 filed pursuant to the BUSINESS
CORPORATIONS ACT (Ontario), each issued and outstanding common share of the
Company (a "Company Common Share") was exchanged for 0.61 issued and outstanding
Exchangeable Non-Voting Shares of the Company (the "Exchangeable Shares"), and
thereafter, the Company's sole issued and outstanding share of Class A Preferred
Stock was exchanged by the holder thereof for one issued and outstanding Company
Common Share;
AND WHEREAS the above-mentioned articles of arrangement set forth the
rights, privileges, restrictions and conditions (collectively the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares;
AND WHEREAS the Parent is to provide voting rights in the Parent to each
holder (other than the Parent, its subsidiaries and Affiliates) from time to
time of Exchangeable Shares, such voting rights per Exchangeable Share to be
equivalent to the voting rights per share of the Parent Common Stock (the
"Parent Common Stock");
F-1
<PAGE>
AND WHEREAS the Parent is to grant to and in favour of the holders (other
than the Parent, its subsidiaries and Affiliates) from time to time of
Exchangeable Shares the right, in the circumstances set forth herein, to require
the Parent to purchase from each such holder all or any part of the Exchangeable
Shares held by the holder;
AND WHEREAS the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in the Parent shall be exercisable
by holders (other than the Parent, its subsidiaries and Affiliates) from time to
time of Exchangeable Shares by and through the Trustee, which will hold legal
title to one share of Parent Special Voting Stock (the "Parent Special Voting
Stock") to which voting rights attach for the benefit of such holders and
whereby the rights to require the Parent to purchase Exchangeable Shares from
the holders thereof (other than the Parent, its subsidiaries and Affiliates)
shall be exercisable by such holders from time to time of Exchangeable Shares by
and through the Trustee, which will hold legal title to such rights for the
benefit of such holders;
AND WHEREAS these recitals and any statements of fact in this trust
agreement are made by the Parent and the Company and not by the Trustee;
NOW THEREFORE in consideration of the respective covenants and agreements
provided in this trust agreement and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this trust agreement, the following terms shall have
the following meanings:
"AFFILIATE" of any person means any other person directly or indirectly
controlled by, or under common control of, that person. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control of"), as applied to any person,
means the possession by another person, directly or indirectly, of the power
to direct or cause the direction of the management and policies of that
first mentioned person, whether through the ownership of voting securities,
by contract or otherwise.
"ARRANGEMENT" has the meaning ascribed thereto in the recitals hereto.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of the
Parent to effect the automatic exchange of shares of Parent Common Stock for
Exchangeable Shares pursuant to section 5.12 hereof.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or a statutory
holiday in the City of Toronto, Ontario or the City of San Francisco,
California.
"CANADIAN DOLLAR EQUIVALENT" means in respect of an amount expressed in a
foreign currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the noon spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as reported by the Bank of Canada or, in the event such spot
exchange rate is not available, such exchange rate on such date for such
foreign currency expressed in Canadian dollars as may be deemed by the Board
of Directors to be appropriate for such purpose.
"COMPANY COMMON SHARES" has the meaning ascribed thereto in the recitals
hereto.
"CURRENT MARKET PRICE" means, in respect of a share of Parent Common Stock
on any date, the Canadian Dollar Equivalent of the average of the closing
bid and asked prices of shares of Parent
F-2
<PAGE>
Common Stock during a period of 20 consecutive trading days ending not more
than five trading days before such date on the Nasdaq National Market, or,
if the shares of Parent Common Stock are not then quoted on the Nasdaq
National Market, on such other stock exchange or automated quotation system
on which the shares of Parent Common Stock are listed or quoted, as the case
may be, as may be selected by the Board of Directors for such purpose;
provided, however, that if in the opinion of the Board of Directors the
public distribution or trading activity of Parent Common Stock during such
period does not create a market which reflects the fair market value of the
Parent Common Stock, then the Current Market Price of the Parent Common
Stock shall be determined by the Board of Directors based upon the advice of
such qualified independent financial advisors as the Board of Directors of
the Parent may deem to be appropriate, and provided further that any such
selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"EXCHANGE RIGHT" has the meaning ascribed thereto in Section 5.1 hereof.
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares.
"EXCHANGEABLE SHARES" has the meaning ascribed thereto in the recitals
hereto.
"HOLDER VOTES" has the meaning ascribed thereto in section 4.2 hereof.
"HOLDERS" means the registered holders from time to time of Exchangeable
Shares, other than the Parent and its subsidiaries.
"INSOLVENCY EVENT" means the institution by the Company of any proceeding to
be adjudicated a bankrupt or insolvent or to be dissolved or wound up, or
the consent of the Company to the institution of bankruptcy, insolvency,
dissolution or winding up proceedings against it, or the filing of a
petition, answer or consent seeking dissolution or winding up under any
bankruptcy, insolvency or analogous laws, including without limitation the
COMPANIES CREDITORS' ARRANGEMENT ACT (CANADA) AND THE BANKRUPTCY AND
INSOLVENCY ACT (Canada), and the failure by the Company to contest in good
faith any such proceedings commenced in respect of the Company within 15
days of becoming aware thereof, or the consent by the Company to the filing
of any such petition or to the appointment of a receiver, or the making by
the Company of a general assignment for the benefit of creditors, or the
admission in writing by the Company of its inability to pay its debts
generally as they become due, or the Company not being permitted, pursuant
to solvency requirements of applicable law, to redeem any Retracted Shares
pursuant to Section 6.6 of the Exchangeable Share Provisions.
"LIQUIDATION CALL RIGHT" has the meaning ascribed thereto in Section 1.1 of
the Plan of Arrangement.
"LIQUIDATION EVENT" has the meaning ascribed thereto in subsection 5.12(b)
hereof.
"LIQUIDATION EVENT EFFECTIVE DATE" has the meaning ascribed thereto in
subsection 5.12(c) hereof.
"LIST" has the meaning ascribed thereto in section 4.6 hereof.
"OFFICER'S CERTIFICATE" means, with respect to the Parent or the Company, as
the case may be, a certificate signed by any one of the Chairman of the Board,
the Vice-Chairman of the Board, the President, any Vice-President or any other
senior officer of the Parent or the Company, as the case may be.
"PARENT COMMON STOCK" has the meaning ascribed thereto in the recitals
hereto.
"PARENT CONSENT" has the meaning ascribed thereto in section 4.2 hereof.
"PARENT MEETING" has the meaning ascribed thereto in section 4.2 hereof.
"PARENT SPECIAL VOTING STOCK" has the meaning ascribed thereto in the
recitals hereto.
F-3
<PAGE>
"PARENT SUCCESSOR" has the meaning ascribed thereto in subsection 11.1(a)
hereof.
"PERSON" includes an individual, partnership, corporation, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"PLAN OF ARRANGEMENT" means the plan of arrangement of the Company providing
for the Arrangement.
"REDEMPTION CALL RIGHT" has the meaning ascribed thereto in Section 1.1 of
the Exchangeable Share Provisions.
"RETRACTED SHARES" has the meaning ascribed thereto in section 5.7 hereof.
"RETRACTION CALL RIGHT" has the meaning ascribed thereto in Section 6.1 of
the Exchangeable Share Provisions.
"SUPPORT AGREEMENT" means that certain support agreement made as of even
date hereof between the Company and the Parent.
"TRUST" means the trust created by this agreement.
"TRUST ESTATE" means the Voting Share, any other securities, the Exchange
Right, the Automatic Exchange Rights and any money or other property which may
be held by the Trustee from time to time pursuant to this trust agreement.
"TRUSTEE" means The R-M Trust Company and, subject to the provisions of
Article 10 hereof, includes any successor trustee or permitted assigns.
"VOTING RIGHTS" means the voting rights attached to the Voting Share.
"VOTING SHARE" means the one share of Parent Special Voting Stock, U.S.
$1.00 par value, issued by the Parent to and deposited with the Trustee, which
entitles the holder of record to a number of votes at meetings of holders of
Parent Common Stock equal to the number of Exchangeable Shares outstanding from
time to time other than Exchangeable Shares held by the Parent, its subsidiaries
and Affiliates.
1.2 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. The division of this
trust agreement into articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this trust agreement.
1.3 NUMBER, GENDER, ETC. Words importing the singular number only shall
include the plural and vice versa. Words importing the use of any gender shall
include all genders.
1.4 DATE FOR ANY ACTION. If any date on which any action is required to be
taken under this trust agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 ESTABLISHMENT OF TRUST. The purpose of this trust agreement is to
create the Trust for the benefit of the Holders, as herein provided. The Trustee
will hold the Voting Share in order to enable the Trustee to exercise the Voting
Rights and will hold the Exchange Right and the Automatic Exchange Rights in
order to enable the Trustee to exercise such rights, in each case as trustee for
and on behalf of the Holders as provided in this trust agreement.
F-4
<PAGE>
ARTICLE 3
VOTING SHARE
3.1 ISSUE AND OWNERSHIP OF THE VOTING SHARE. The Parent hereby issues to
and deposits with the Trustee the Voting Share to be hereafter held of record by
the Trustee as trustee for and on behalf of, and for the use and benefit of, the
Holders and in accordance with the provisions of this trust agreement. The
Parent hereby acknowledges receipt from the Trustee as trustee for and on behalf
of the Holders of good and valuable consideration (and the adequacy thereof) for
the issuance of the Voting Share by the Parent to the Trustee. During the term
of the Trust and subject to the terms and conditions of this trust agreement,
the Trustee shall possess and be vested with full legal ownership of the Voting
Share and shall be entitled to exercise all of the rights and powers of an owner
with respect to the Voting Share, provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as trustee solely
for the use and benefit of the Holders in accordance with the provisions of
this trust agreement; and
(b) except as specifically authorized by this trust agreement, have no
power or authority to sell, transfer, vote or otherwise deal in or with the
Voting Share and the Voting Share shall not be used or disposed of by the
Trustee for any purpose other than the purposes for which this Trust is
created pursuant to this trust agreement.
3.2 LEGENDED SHARE CERTIFICATES. The Company will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of their right to instruct the Trustee with respect to the exercise of
the Voting Rights with respect to the Exchangeable Shares held by a Holder.
3.3 SAFE KEEPING OF CERTIFICATE. The certificate representing the Voting
Share shall at all times be held in safe keeping by the Trustee or its agent.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 VOTING RIGHTS. The Trustee, as the holder of record of the Voting
Share, shall be entitled to all of the Voting Rights, including the right to
consent to or to vote in person or by proxy the Voting Share, on any matter,
question or proposition whatsoever that may properly come before the
stockholders of the Parent at a Parent Meeting or in connection with a Parent
Consent (in each case, as hereinafter defined). The Voting Rights shall be and
remain vested in and exercised by the Trustee. Subject to section 7.15 hereof,
the Trustee shall exercise the Voting Rights only on the basis of instructions
received pursuant to this Article 4 from Holders entitled to instruct the
Trustee as to the voting thereof at the time at which the Parent Consent is
sought or the Parent Meeting is held. To the extent that no instructions are
received from a Holder with respect to the Voting Rights to which such Holder is
entitled, the Trustee shall not exercise or permit the exercise of such Holder's
Voting Rights.
4.2 NUMBER OF VOTES. With respect to all meetings of stockholders of the
Parent at which holders of shares of Parent Common Stock are entitled to vote (a
"Parent Meeting") and with respect to all written consents sought by the Parent
from its stockholders including the holders of shares of Parent Common Stock (a
"Parent Consent"), each Holder shall be entitled to instruct the Trustee to cast
and exercise, in the manner instructed, one of the votes comprised in the Voting
Rights for each Exchangeable Share owned of record by such Holder on the record
date established by the Parent or by applicable law for such Parent Meeting or
Parent Consent, as the case may be (the "Holder Votes") in respect of each
matter, question or proposition to be voted on at such Parent Meeting or to be
consented to in connection with such Parent Consent.
4.3 MAILINGS TO SHAREHOLDERS. With respect to each Parent Meeting and
Parent Consent, the Trustee will mail or cause to be mailed (or otherwise
communicate in the same manner as the Parent utilizes in communications to
holders of Parent Common Stock, subject to the Trustee's ability to
F-5
<PAGE>
provide this method of communication and upon being advised in writing of such
method) to each of the Holders named in the List on the same day as the initial
mailing or notice (or other communication) with respect thereto is given by the
Parent to its stockholders:
(a) a copy of such notice, together with any proxy or information
statement and related materials to be provided to stockholders of the
Parent;
(b) a statement that such Holder is entitled to instruct the Trustee as
to the exercise of the Holder Votes with respect to such Parent Meeting or
Parent Consent, as the case may be, or, pursuant to section 4.7 hereof, to
attend such Parent Meeting and to exercise personally the Holder Votes
thereat;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions may be
given to the Trustee to give:
(i) a proxy to such Holder or his designee to exercise personally the
Holder Votes; or
(ii) a proxy to a designated agent or other representative of the
management of the Parent to exercise such Holder Votes;
(d) a statement that if no such instructions are received from the
Holder, the Holder Votes to which such Holder is entitled will not be
exercised;
(e) a form of direction whereby the Holder may so direct and instruct
the Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such instructions must
be received by the Trustee in order to be binding upon it, which in the case
of a Parent Meeting shall not be earlier than the close of business on the
second Business Day prior to such meeting, and (ii) the method for revoking
or amending such instructions.
The materials referred to above are to be provided by the Parent to the Trustee,
but shall be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder is entitled in
respect of any such Parent Meeting or Parent Consent, the number of Exchangeable
Shares owned of record by the Holder shall be determined at the close of
business on the record date established by the Parent or by applicable law for
purposes of determining stockholders entitled to vote at such Parent Meeting or
to give written consent in connection with such Parent Consent. The Parent will
notify the Trustee in writing of any decision of the Board of Directors of the
Parent with respect to the calling of any such Parent Meeting or the seeking of
any such Parent Consent and shall provide all necessary information and
materials to the Trustee in each case promptly and in any event in sufficient
time to enable the Trustee to perform its obligations contemplated by this
section 4.3.
4.4 COPIES OF STOCKHOLDER INFORMATION. The Parent will deliver to the
Trustee copies of all proxy materials, (including notices of Parent Meetings but
excluding proxies to vote shares of Parent Common Stock), information
statements, reports (including without limitation all interim and annual
financial statements) and other written communications that are to be
distributed from time to time to holders of Parent Common Stock in sufficient
quantities and in sufficient time so as to enable the Trustee to send those
materials to each Holder at the same time as such materials are first sent to
holders of Parent Common Stock. The Trustee will mail or otherwise send to each
Holder, at the expense of Parent, copies of all such materials (and all
materials specifically directed to the Holders or to the Trustee for the benefit
of the Holders by the Parent) received by the Trustee from the Parent at the
same time as such materials are first sent to holders of Parent Common Stock.
The Trustee will make copies of all such materials available for inspection by
any Holder at the Trustee's principal office in the cities of Toronto and
Vancouver.
4.5 OTHER MATERIALS. Immediately after receipt by the Parent or any
stockholder of the Parent of any material sent or given generally to the holders
of Parent Common Stock by or on behalf of a
F-6
<PAGE>
third party, including without limitation dissident proxy and information
circulars (and related information and material) and tender and exchange offer
circulars (and related information and material), the Parent shall use its best
efforts to obtain and deliver to the Trustee copies thereof in sufficient
quantities so as to enable the Trustee to forward such material (unless the same
has been provided directly to Holders by such third party) to each Holder as
soon as possible thereafter. As soon as practicable after receipt thereof, the
Trustee will mail or otherwise send to each Holder, at the expense of the
Parent, copies of all such materials received by the Trustee from the Parent.
The Trustee will also make copies of all such materials available for inspection
by any Holder at the Trustee's principal office in the cities of Toronto and
Vancouver.
4.6 LIST OF PERSONS ENTITLED TO VOTE. The Company shall, (a) prior to each
annual, general and special Parent Meeting or the seeking of any Parent Consent
and (b) forthwith upon each request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names and addresses of
the Holders arranged in alphabetical order and showing the number of
Exchangeable Shares held of record by each such Holder, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a Parent Meeting or a Parent
Consent, at the close of business on the record date established by the Parent
or pursuant to applicable law for determining the holders of Parent Common Stock
entitled to receive notice of and/or to vote at such Parent Meeting or to give
consent in connection with such Parent Consent. Each such List shall be
delivered to the Trustee promptly after receipt by the Company of such request
or the record date for such meeting or seeking of consent, as the case may be,
and in any event within sufficient time as to enable the Trustee to perform its
obligations under this Agreement. The Parent agrees to give the Company written
notice (with a copy to the Trustee) of the calling of any Parent Meeting or the
seeking of any Parent Consent, together with the record dates therefor,
sufficiently prior to the date of the calling of such meeting or seeking of such
consent so as to enable the Company to perform its obligations under this
section 4.6.
4.7 ENTITLEMENT TO DIRECT VOTES. Any Holder named in a List prepared in
connection with any Parent Meeting or any Parent Consent will be entitled (a) to
instruct the Trustee in the manner described in section 4.3 hereof with respect
to the exercise of the Holder Votes to which such Holder is entitled or (b) to
attend such meeting and personally to exercise thereat (or to exercise with
respect to any written consent), as the proxy of the Trustee, the Holder Votes
to which such Holder is entitled except, in each case, to the extent that such
Holder has transferred the ownership of any Exchangeable Shares in respect of
which such Holder is entitled to Holder Votes after the close of business on the
record date for such meeting or seeking of consent.
4.8 VOTING BY TRUSTEE, AND ATTENDANCE OF TRUSTEE REPRESENTATIVE, AT
MEETING.
(a) In connection with each Parent Meeting and Parent Consent, the Trustee
shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to section 4.3 hereof, the Holder
Votes as to which such Holder is entitled to direct the vote (or any lesser
number thereof as may be set forth in the instructions); provided, however, that
such written instructions are received by the Trustee from the Holder prior to
the time and date fixed by it for receipt of such instructions in the notice
given by the Trustee to the Holder pursuant to section 4.3 hereof.
(b) The Trustee shall cause such representatives as are empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend
each Parent Meeting. Upon submission by a Holder (or its designee) of
identification satisfactory to the Trustee's representatives, and at the
Holder's request, such representatives shall sign and deliver to such Holder (or
its designee) a proxy to exercise personally the Holder Votes as to which such
Holder is otherwise entitled hereunder to direct the vote, if such Holder either
(i) has not previously given the Trustee instructions pursuant to section 4.3
hereof in respect of such meeting, or (ii) submits to the Trustee's
representatives written revocation of any such previous instructions. At such
meeting, the Holder exercising such Holder Votes shall have the same rights as
the Trustee to speak at the meeting in respect of any matter,
F-7
<PAGE>
question or proposition, to vote by way of ballot at the meeting in respect of
any matter, question or proposition and to vote at such meeting by way of a show
of hands in respect of any matter, question or proposition.
4.9 DISTRIBUTION OF WRITTEN MATERIALS. Any written materials to be
distributed by the Trustee to the Holders pursuant to this trust agreement shall
be delivered or sent by mail (or otherwise communicated in the same manner as
the Parent utilizes in communications to holders of Parent Common Stock) to each
Holder at its address as shown on the books of the Company. The Company shall
provide or cause to be provided to the Trustee for this purpose, on a timely
basis and without charge or other expense:
(a) current lists of the Holders; and
(b) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this trust agreement.
The materials referred to above are to be provided by the Parent to the Trustee,
but shall be subject to review and comment by the Trustee.
4.10 TERMINATION OF VOTING RIGHTS. All of the rights of a Holder with
respect to the Holder Votes exercisable in respect of the Exchangeable Shares
held by such Holder, including the right to instruct the Trustee as to the
voting of or to vote personally such Holder Votes, shall be deemed to be
surrendered by the Holder to the Parent and such Holder Votes and the Voting
Rights represented thereby shall cease immediately upon the delivery by such
holder to the Trustee of the certificates representing such Exchangeable Shares
in connection with the exercise by the Holder of the Exchange Right or the
occurrence of the automatic exchange of Exchangeable Shares for shares of Parent
Common Stock, as specified in Article 5 hereof (unless in either case the Parent
shall not have delivered the requisite shares of Parent Common Stock issuable in
exchange therefor to the Trustee for delivery to the Holders), or upon the
redemption of Exchangeable Shares pursuant to Article 6 or Article 7 of the
Exchangeable Share Provisions, or upon the effective date of the liquidation,
dissolution or winding-up of the Company pursuant to Article 5 of the
Exchangeable Share Provisions, or upon the purchase of Exchangeable Shares from
the holder thereof by the Parent pursuant to the exercise by the Parent of the
Retraction Call Right, the Redemption Call Right or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 GRANT AND OWNERSHIP OF THE EXCHANGE RIGHT. The Parent hereby grants to
the Trustee as trustee for and on behalf of, and for the use and benefit of, the
Holders (a) the right (the "Exchange Right"), upon the occurrence and during the
continuance of an Insolvency Event, to require the Parent to purchase from each
or any Holder all or any part of the Exchangeable Shares held by the Holder and
(b) the Automatic Exchange Rights, all in accordance with the provisions of this
agreement. The Parent hereby acknowledges receipt from the Trustee as trustee
for and on behalf of the Holders of good and valuable consideration (and the
adequacy thereof) for the grant of the Exchange Right and the Automatic Exchange
Rights by the Parent to the Trustee. During the term of the Trust and subject to
the terms and conditions of this trust agreement, the Trustee shall possess and
be vested with full legal ownership of the Exchange Right and the Automatic
Exchange Rights and shall be entitled to exercise all of the rights and powers
of an owner with respect to the Exchange Right and the Automatic Exchange
Rights, provided that the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and the
legal title thereto as trustee solely for the use and benefit of the Holders
in accordance with the provisions of this trust agreement; and
F-8
<PAGE>
(b) except as specifically authorized by this trust agreement, have no
power or authority to exercise or otherwise deal in or with the Exchange
Right or the Automatic Exchange Rights, and the Trustee shall not exercise
any such rights for any purpose other than the purposes for which this Trust
is created pursuant to this trust agreement.
5.2 LEGENDED SHARE CERTIFICATES. The Company will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of:
(a) their right to instruct the Trustee with respect to the exercise of
the Exchange Right in respect of the Exchangeable Shares held by a Holder;
and
(b) the Automatic Exchange Rights.
5.3 GENERAL EXERCISE OF EXCHANGE RIGHT. The Exchange Right shall be and
remain vested in and exercised by the Trustee. Subject to section 7.15 hereof,
the Trustee shall exercise the Exchange Right only on the basis of instructions
received pursuant to this Article 5 from Holders entitled to instruct the
Trustee as to the exercise thereof. To the extent that no instructions are
received from a Holder with respect to the Exchange Right, the Trustee shall not
exercise or permit the exercise of the Exchange Right.
5.4 PURCHASE PRICE. The purchase price payable by the Parent for each
Exchangeable Share to be purchased by the Parent under the Exchange Right shall
be an amount per share equal to (a) the Current Market Price of a share of
Parent Common Stock on the last Business Day prior to the day of closing of the
purchase and sale of such Exchangeable Share under the Exchange Right plus (b)
an additional amount equivalent to the full amount of all dividends declared and
unpaid on each such Exchangeable Share (provided that if the record date for any
such declared and unpaid dividends occurs on or after the day of closing of such
purchase and sale the purchase price shall not include such additional amount
equivalent to the declared and unpaid dividends). In connection with each
exercise of the Exchange Right, the Parent will provide to the Trustee an
Officer's Certificate setting forth the calculation of the purchase price for
each Exchangeable Share. The purchase price for each such Exchangeable Share so
purchased may be satisfied only by the Parent issuing and delivering or causing
to be delivered to the Trustee, on behalf of the relevant Holder, one share of
Parent Common Stock and a cheque for the balance, if any, of the purchase price
without interest.
5.5 EXERCISE INSTRUCTIONS. Subject to the terms and conditions herein set
forth, a Holder shall be entitled, upon the occurrence and during the
continuance of an Insolvency Event, to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Holder on the books of the Company. To cause the
exercise of the Exchange Right by the Trustee, the Holder shall deliver to the
Trustee, in person or by certified or registered mail, at its principal office
in Toronto, Ontario or at such other places in Canada as the Trustee may from
time to time designate by written notice to the Holders, the certificates
representing the Exchangeable Shares which such Holder desires the Parent to
purchase, duly endorsed in blank, and accompanied by such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the BUSINESS CORPORATIONS ACT (Ontario) and the by-laws of the Company and such
additional documents and instruments as the Trustee may reasonably require
together with (a) a duly completed form of notice of exercise of the Exchange
Right, contained on the reverse of or attached to the Exchangeable Share
certificates, stating (i) that the Holder thereby instructs the Trustee to
exercise the Exchange Right so as to require the Parent to purchase from the
Holder the number of Exchangeable Shares specified therein, (ii) that such
Holder has good title to and owns all such Exchangeable Shares to be acquired by
the Parent free and clear of all liens, claims and encumbrances, (iii) the names
in which the certificates representing the Parent Common Stock issuable in
connection with the exercise of the Exchange Right are to be issued and (iv) the
names and addresses of the persons to whom such new certificates should be
delivered and (b) payment (or evidence satisfactory to the Trustee, the Company
and the Parent of payment) of the taxes (if any) payable as contemplated by
section 5.8 of this trust agreement. If only a part of the Exchangeable
F-9
<PAGE>
Shares represented by any certificate or certificates delivered to the Trustee
are to be purchased by the Parent under the Exchange Right, a new certificate
for the balance of such Exchangeable Shares shall be issued to the holder at the
expense of the Company.
5.6 DELIVERY OF PARENT COMMON STOCK; EFFECT OF EXERCISE. Promptly after
receipt of the certificates representing the Exchangeable Shares which the
Holder desires the Parent to purchase under the Exchange Right (together with
such documents and instruments of transfer and a duly completed form of notice
of exercise of the Exchange Right (and payment of taxes, if any, or evidence
thereof)), duly endorsed for transfer to the Parent, the Trustee shall notify
the Parent and the Company of its receipt of the same, which notice to the
Parent and the Company shall constitute exercise of the Exchange Right by the
Trustee on behalf of the holder of such Exchangeable Shares, and the Parent
shall immediately thereafter deliver or cause to be delivered to the Trustee,
for delivery to the Holder of such Exchangeable Shares (or to such other
persons, if any, properly designated by such Holder), the certificates for the
number of shares of Parent Common Stock issuable in connection with the exercise
of the Exchange Right, which shares shall be duly issued as fully paid and
non-assessable and shall be free and clear of any lien, claim or encumbrance,
and cheques for the balance, if any, of the total purchase price therefor
without interest; provided, however, that no such delivery shall be made unless
and until the Holder requesting the same shall have paid (or provided evidence
satisfactory to the Trustee, the Company and the Parent of the payment of) the
taxes (if any) payable as contemplated by section 5.8 of this trust agreement.
Immediately upon the giving of notice by the Trustee to the Parent and the
Company of the exercise of the Exchange Right, as provided in this section 5.6,
the closing of the transaction of purchase and sale contemplated by the Exchange
Right shall be deemed to have occurred, and the Holder of such Exchangeable
Shares shall be deemed to have transferred to the Parent all of its right, title
and interest in and to such Exchangeable Shares and in the related interest in
the Trust Estate and shall cease to be a holder of such Exchangeable Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive his proportionate part of the total
purchase price therefor, unless the requisite number of shares of Parent Common
Stock (together with a cheque for the balance, if any, of the total purchase
price therefor without interest) is not allotted, issued and delivered by the
Parent to the Trustee, for delivery to such Holder (or to such other persons, if
any, properly designated by such Holder), within five Business Days of the date
of the giving of such notice by the Trustee, in which case the rights of the
Holder shall remain unaffected until such shares of Parent Common Stock are so
allotted, issued and delivered by the Parent and any such cheque is so delivered
and paid. Concurrently with such Holder ceasing to be a holder of Exchangeable
Shares, the Holder shall be considered and deemed for all purposes to be the
holder of the shares of Parent Common Stock delivered to it pursuant to the
Exchange Right.
5.7 EXERCISE OF EXCHANGE RIGHT SUBSEQUENT TO RETRACTION. In the event that
a Holder has exercised its right under Article 6 of the Exchangeable Share
Provisions to require the Company to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by the
Company pursuant to Section 6.6 of the Exchangeable Share Provisions that the
Company will not be permitted as a result of solvency requirements of applicable
law to redeem all such Retracted Shares, subject to receipt by the Trustee of
written notice to that effect from the Company and provided that the Parent
shall not have exercised the Retraction Call Right with respect to the Retracted
Shares and that the Holder has not revoked the retraction request delivered by
the Holder to the Company pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Holder to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares which the
Company is unable to redeem. In any such event, the Company hereby agrees with
the Trustee and in favour of the Holder immediately to notify the Trustee of
such prohibition against the Company redeeming all of the Retracted Shares and
immediately to forward or cause to be forwarded to the Trustee all relevant
materials delivered by the Holder to the Company or to the transfer agent of the
Exchangeable Shares (including without limitation a copy of the retraction
request delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
in connection with such proposed
F-10
<PAGE>
redemption of the Retracted Shares and the Trustee will thereupon exercise the
Exchange Right with respect to the Retracted Shares that the Company is not
permitted to redeem and will require the Parent to purchase such shares in
accordance with the provisions of this Article 5.
5.8 STAMP OR OTHER TRANSFER TAXES. Upon any sale of Exchangeable Shares to
the Parent pursuant to the Exchange Right or the Automatic Exchange Rights, the
share certificate or certificates representing the Parent Common Stock to be
delivered in connection with the payment of the total purchase price therefor
shall be issued in the name of the Holder of the Exchangeable Shares so sold or
in such names as such Holder may otherwise direct in writing without charge to
the holder of the Exchangeable Shares so sold, provided, however, that such
Holder (a) shall pay (and neither the Parent, the Company nor the Trustee shall
be required to pay) any documentary, stamp, transfer or other similar taxes that
may be payable in respect of any transfer involved in the issuance or delivery
of such shares to a person other than such Holder or (b) shall have established
to the satisfaction of the Trustee, the Parent and the Company that such taxes,
if any, have been paid.
5.9 NOTICE OF INSOLVENCY EVENT. Immediately upon the occurrence of an
Insolvency Event or any event which with the giving of notice or the passage of
time or both would be an Insolvency Event, the Company and the Parent shall give
written notice thereof to the Trustee. As soon as practicable after receiving
notice from the Company and the Parent or from any other person of the
occurrence of an Insolvency Event, the Trustee will mail to each Holder, at the
expense of the Parent, a notice of such Insolvency Event in the form provided by
the Parent, which notice shall contain a brief statement of the right of the
Holders with respect to the Exchange Right.
5.10 QUALIFICATION OF PARENT COMMON STOCK. The Parent covenants that if
any shares of Parent Common Stock to be issued and delivered pursuant to the
Exchange Right or the Automatic Exchange Rights require registration or
qualification with or approval of or the filing of any document including any
prospectus or similar document or the taking of any proceeding with or the
obtaining of any order, ruling or consent from any governmental or regulatory
authority under any Canadian or United States federal, provincial or state law
or regulation or pursuant to the rules and regulations of any regulatory
authority or the fulfillment of any other legal requirement (collectively, the
"Applicable Laws") before such shares may be issued and delivered by the Parent
to the initial holder thereof or in order that such shares may be freely traded
thereafter (other than any restrictions on transfer by reason of a holder being
a "control person" of the Parent for purposes of Canadian federal or provincial
securities law or an "affiliate" of the Parent for purposes of United States
federal or state securities law), the Parent will in good faith expeditiously
take all such actions and do all such things as are necessary to cause such
shares of Parent Common Stock to be and remain duly registered, qualified or
approved. The Parent represents and warrants that it has in good faith taken all
actions and done all things as are necessary under Applicable Laws as they exist
on the date hereof to cause the shares of Parent Common Stock to be issued and
delivered pursuant to the Exchange Right and the Automatic Exchange Rights and
to be freely tradeable thereafter (other than restrictions on transfer by reason
of a holder being a "control person" of the Parent for the purposes of Canadian
federal and provincial securities law or an "affiliate" of the Parent for the
purposes of United States federal or state securities law). The Parent will in
good faith expeditiously take all such actions and do all such things as are
necessary to cause all shares of Parent Common Stock to be delivered pursuant to
the Exchange Right or the Automatic Exchange Rights to be listed, quoted or
posted for trading on all stock exchanges and quotation systems on which such
shares are listed, quoted or posted for trading at such time.
5.11 RESERVATION OF SHARES OF PARENT COMMON STOCK.
The Parent hereby represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available, free from
pre-emptive and other rights, out of its authorized and unissued capital stock
such number of shares of Parent Common Stock (a) as is equal to the sum of (i)
the number of Exchangeable Shares issued and outstanding from time to time and
F-11
<PAGE>
(ii) the number of Exchangeable Shares issuable upon the exercise of all rights
to acquire Exchangeable Shares outstanding from time to time and (b) as are now
and may hereafter be required to enable and permit the Company to meet its
obligations hereunder, under the Support Agreement, under the Exchangeable Share
Provisions and under any other security or commitment pursuant to which the
Parent may now or hereafter be required to issue shares of Parent Common Stock.
5.12 AUTOMATIC EXCHANGE ON LIQUIDATION OF PARENT.
(a) The Parent will give the Trustee written notice of each of the following
events at the time set forth below:
(i) in the event of any determination by the Board of Directors of the
Parent to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to the Parent or to effect any other distribution
of assets of the Parent among its stockholders for the purpose of winding up
its affairs, at least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by the Parent of
notice of and (B) the Parent otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding up of the Parent or to
effect any other distribution of assets of the Parent among its stockholders
for the purpose of winding up its affairs.
(b) Immediately following receipt by the Trustee from the Parent of notice
of any event (a "Liquidation Event") contemplated by section 5.12(a)(i) or
5.12(a)(ii) above, the Trustee will give notice thereof to the Holders. Such
notice will be provided by the Parent to the Trustee and shall include a brief
description of the automatic exchange of Exchangeable Shares for shares of
Parent Common Stock provided for in section 5.12(c) below.
(c) In order that the Holders will be able to participate on a PRO RATA
basis with the holders of Parent Common Stock in the distribution of assets of
the Parent in connection with a Liquidation Event, on the fifth Business Day
prior to the effective date (the "Liquidation Event Effective Date") of a
Liquidation Event all of the then outstanding Exchangeable Shares shall be
automatically exchanged for shares of Parent Common Stock. To effect such
automatic exchange, the Parent shall purchase each Exchangeable Share
outstanding on the fifth Business Day prior to the Liquidation Event Effective
Date and held by Holders, and each Holder shall sell the Exchangeable Shares
held by it at such time, for a purchase price per share equal to (a) the Current
Market Price of a share of Parent Common Stock on the fifth Business Day prior
to the Liquidation Event Effective Date, which shall be satisfied in full by the
Parent issuing to the Holder one share of Parent Common Stock, plus (b) an
additional amount equivalent to the full amount of all dividends declared and
unpaid on each such Exchangeable Share and all dividends declared on the Parent
Common Stock that have not been declared on such Exchangeable Shares in
accordance with Section 3.1 of the Exchangeable Share Provisions (provided that
if the record date for any such declared and unpaid dividends occurs on or after
the day of closing of such purchase and sale, the purchase price shall not
include such additional amounts equivalent to such declared and unpaid
dividends). In connection with such automatic exchange, the Parent will provide
to the Trustee an Officer's Certificate setting forth the calculation of the
purchase price for each Exchangeable Share.
(d) On the fifth Business Day prior to the Liquidation Event Effective Date,
the closing of the transaction of purchase and sale contemplated by the
automatic exchange of Exchangeable Shares for Parent Common Stock shall be
deemed to have occurred, and each Holder of Exchangeable Shares shall be deemed
to have transferred to the Parent all of the Holder's right, title and interest
in and to such Exchangeable Shares and the related interest in the Trust Estate
and shall cease to be a holder of such Exchangeable Shares and the Parent shall
issue to the Holder the shares of Parent Common Stock issuable upon the
automatic exchange of Exchangeable Shares for Parent Common Stock and shall
deliver to the Trustee for delivery to the Holder a cheque for the balance, if
any, of the total
F-12
<PAGE>
purchase price for such Exchangeable Shares without interest. Concurrently with
such Holder ceasing to be a holder of Exchangeable Shares, the Holder shall be
considered and deemed for all purposes to be the holder of the shares of Parent
Common Stock issued to it pursuant to the automatic exchange of Exchangeable
Shares for Parent Common Stock and the certificates held by the Holder
previously representing the Exchangeable Shares exchanged by the Holder with the
Parent pursuant to such automatic exchange shall thereafter be deemed to
represent the shares of Parent Common Stock issued to the Holder by the Parent
pursuant to such automatic exchange. Upon the request of a Holder and the
surrender by the Holder of Exchangeable Share certificates deemed to represent
shares of Parent Common Stock, duly endorsed in blank and accompanied by such
instruments of transfer as the Parent may reasonably require, the Parent shall
deliver or cause to be delivered to the Holder certificates representing the
shares of Parent Common Stock of which the Holder is the holder.
ARTICLE 6
RESTRICTIONS ON ISSUE OF PARENT SPECIAL VOTING STOCK
6.1 ISSUE OF ADDITIONAL SHARES. During the term of this trust agreement,
the Parent will not issue any shares of Parent Special Voting Stock in addition
to the Voting Share.
ARTICLE 7
CONCERNING THE TRUSTEE
7.1 POWERS AND DUTIES OF THE TRUSTEE. The rights, powers and authorities
of the Trustee under this trust agreement, in its capacity as trustee of the
Trust, shall include:
(a) receipt and deposit of the Voting Share from the Parent as trustee
for and on behalf of the Holders in accordance with the provisions of this
agreement;
(b) granting proxies and distributing materials to Holders as provided
in this trust agreement;
(c) voting the Holder Votes in accordance with the provisions of this
trust agreement;
(d) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from the Parent as trustee for and on behalf of the Holders in
accordance with the provisions of this trust agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the provisions of
this trust agreement, and in connection therewith receiving from Holders
Exchangeable Shares and other requisite documents and distributing to such
Holders the shares of Parent Common Stock and cheques, if any, to which such
Holders are entitled upon the exercise of the Exchange Right or pursuant to
the Automatic Exchange Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this trust agreement;
(h) taking action at the direction of a Holder or Holders to enforce the
obligations of the Parent under this trust agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this trust agreement.
In the exercise of such rights, powers and authorities the Trustee shall
have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this trust agreement as
the Trustee, acting in good faith and in the reasonable exercise of its
discretion, may deem necessary, appropriate or desirable to effect the purpose
of the Trust. Any exercise of such
F-13
<PAGE>
discretionary rights, powers and authorities by the Trustee shall be final,
conclusive and binding upon all persons. For greater certainty, the Trustee
shall have only those duties as are set out specifically in this trust
agreement.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith with a view to the best interests
of the Holders and shall exercise the care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give any notice or do or take any act,
action or proceeding by virtue of the powers conferred on it hereby unless and
until it shall be specifically required to do so under the terms hereof; nor
shall the Trustee be required to take any notice of, or to do or to take any
act, action or proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or breach, which
notices shall distinctly specify the default or breach desired to be brought to
the attention of the Trustee and in the absence of such notice the Trustee may
for all purposes of this Agreement conclusively assume that no default or breach
has been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
7.2 NO CONFLICT OF INTEREST. The Trustee represents to the Company and the
Parent that at the date of execution and delivery of this trust agreement there
exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder and the role of the Trustee in any other capacity. The
Trustee shall, within 90 days after it becomes aware that such a material
conflict of interest exists, either eliminate such material conflict of interest
or resign in the manner and with the effect specified in Article 10 hereof. If,
notwithstanding the foregoing provisions of this section 7.2, the Trustee has
such a material conflict of interest, the validity and enforceability of this
trust agreement shall not be affected in any manner whatsoever by reason only of
the existence of such material conflict of interest. If the Trustee contravenes
the foregoing provisions of this section 7.2, any interested party may apply to
the Ontario Court of Justice (General Division) for an order that the Trustee be
replaced as trustee hereunder.
7.3 DEALINGS WITH TRANSFER AGENTS, REGISTRARS, ETC. The Company and the
Parent irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent registrar or
transfer agent, of the Exchangeable Shares and the Parent Common Stock; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the records maintained
by it which the Trustee may reasonably require for the discharge of its
duties and responsibilities under this trust agreement and (ii) from the
transfer agent of the Parent Common Stock, and any subsequent transfer agent
of such shares, the share certificates issuable upon the exercise from time
to time of the Exchange Right and pursuant to the Automatic Exchange Rights
in the manner specified in Article 5 hereof.
The Company and the Parent irrevocably authorize their respective registrars
and transfer agents to comply with all such requests. The Parent covenants that
it will supply its transfer agent with duly executed share certificates for the
purpose of completing the exercise from time to time of the Exchange Right and
the Automatic Exchange Rights, in each case pursuant to Article 5 hereof.
F-14
<PAGE>
7.4 BOOKS AND RECORDS. The Trustee shall keep available for inspection by
the Parent and the Company, at the Trustee's principal office in Toronto,
Ontario, correct and complete books and records of account relating to the
Trustee's actions under this trust agreement, including without limitation all
information relating to mailings and instructions to and from Holders and all
transactions pursuant to the Voting Rights, the Exchange Right and the Automatic
Exchange Rights for the term of this Agreement. On or before June 30, 1996, and
on or before June 30 in every year thereafter, so long as the Voting Share is on
deposit with the Trustee, the Trustee shall transmit to the Parent and the
Company a brief report, dated as of the preceding March 31, with respect to:
(a) the property and funds comprising the Trust Estate as of that date;
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on behalf of
Holders in consideration of the issue and delivery by the Parent of shares
of Parent Common Stock in connection with the Exchange Right, during the
calendar year ended on such date; and
(c) all other actions taken by the Trustee in the performance of its
duties under this trust agreement which it had not previously reported.
7.5 INCOME TAX RETURNS AND REPORTS. The Trustee shall, to the extent
necessary, prepare and file on behalf of the Trust appropriate United States and
Canadian income tax returns and any other returns or reports as may be required
by applicable law or pursuant to the rules and regulations of any securities
exchange or other trading system through which the Exchangeable Shares are
traded and, in connection therewith, may obtain the advice and assistance of
such experts as the Trustee may consider necessary or advisable. If requested by
the Trustee, the Parent shall retain such experts for purposes of providing such
advice and assistance.
7.6 INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE. The Trustee shall
exercise any or all of the rights, duties, powers or authorities vested in it by
this trust agreement at the request, order or direction of any Holder upon such
Holder furnishing to the Trustee reasonable funding, security and indemnity
against the costs, expenses and liabilities which may be incurred by the Trustee
therein or thereby, provided that no Holder shall be obligated to furnish to the
Trustee any such funding, security or indemnity in connection with the exercise
by the Trustee of any of its rights, duties, powers and authorities with respect
to the Voting Share pursuant to Article 4 hereof, subject to section 7.15
hereof, and with respect to the Exchange Right pursuant to Article 5 hereof,
subject to section 7.15 hereof, and with respect to the Automatic Exchange
Rights pursuant to Article 5 hereof.
None of the provisions contained in this trust agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties or authorities unless
funded, given funds, security and indemnified as aforesaid.
7.7 ACTIONS BY HOLDERS. No Holder shall have the right to institute any
action, suit or proceeding or to exercise any other remedy authorized by this
trust agreement for the purpose of enforcing any of its rights or for the
execution of any trust or power hereunder unless the Holder has requested the
Trustee to take or institute such action, suit or proceeding and furnished the
Trustee with the funding, security and indemnity referred to in section 7.6
hereof and the Trustee shall have failed to act within a reasonable time
thereafter. In such case, but not otherwise, the Holder shall be entitled to
take proceedings in any court of competent jurisdiction such as the Trustee
might have taken; it being understood and intended that no one or more Holders
shall have any right in any manner whatsoever to affect, disturb or prejudice
the rights hereby created by any such action, or to enforce any right hereunder
or under the Voting Rights, the Exchange Right or the Automatic Exchange Rights,
except subject to the conditions and in the manner herein provided, and that all
powers and trusts hereunder shall be exercised and all proceedings at law shall
be instituted, had and maintained by the Trustee, except only as herein
provided, and in any event for the equal benefit of all Holders.
7.8 RELIANCE UPON DECLARATIONS. The Trustee shall not be considered to be
in contravention of any of its rights, powers, duties and authorities hereunder
if, when required, it acts and relies in good
F-15
<PAGE>
faith upon lists, mailing labels, notices, statutory declarations, certificates,
opinions, reports or other papers or documents furnished pursuant to the
provisions hereof or required by the Trustee to be furnished to it in the
exercise of its rights, powers, duties and authorities hereunder and such lists,
mailing labels, notices, statutory declarations, certificates, opinions, reports
or other papers or documents comply with the provisions of section 7.9 hereof,
if applicable, and with any other applicable provisions of this trust agreement.
7.9 EVIDENCE AND AUTHORITY TO TRUSTEE. The Company and/or the Parent shall
furnish to the Trustee evidence of compliance with the conditions provided for
in this trust agreement relating to any action or step required or permitted to
be taken by the Company and/or the Parent or the Trustee under this trust
agreement or as a result of any obligation imposed under this trust agreement,
including, without limitation, in respect of the Voting Rights or the Exchange
Right or the Automatic Exchange Rights and the taking of any other action to be
taken by the Trustee at the request of or on the application of the Company
and/or the Parent forthwith if and when:
(a) such evidence is required by any other section of this trust
agreement to be furnished to the Trustee in accordance with the terms of
this section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this trust agreement, gives the Company and/or the Parent
written notice requiring it to furnish such evidence in relation to any
particular action or obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of the Company
and/or the Parent or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this trust agreement.
Whenever such evidence relates to a matter other than the Voting Rights or
the Exchange Right or the Automatic Exchange Rights, and except as otherwise
specifically provided herein, such evidence may consist of a report or opinion
of any solicitor, auditor, accountant, appraiser, valuer, engineer or other
expert or any other person whose qualifications give authority to a statement
made by him, provided that if such report or opinion is furnished by a director,
officer or employee of the Company and/or the Parent it shall be in the form of
an Officer's Certificate or a statutory declaration.
Each statutory declaration, certificate, opinion or report furnished to the
Trustee as evidence of compliance with a condition provided for in this trust
agreement shall include a statement by the person giving the evidence:
(a) declaring that he has read and understands the provisions of this
trust agreement relating to the condition in question:
(b) describing the nature and scope of the examination or investigation
upon which he based the statutory declaration, certificate, statement or
opinion; and
(c) declaring that he has made such examination or investigation as he
believes is necessary to enable him to make the statements or give the
opinions contained or expressed therein.
7.10 EXPERTS, ADVISERS AND AGENTS. The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice of
or information obtained from or prepared by any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert, whether retained by the Trustee or
by the Company and/or the Parent or otherwise, and may employ such assistants as
may be necessary to the proper determination and discharge of its powers and
duties and determination of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other advice or assistance as
aforesaid; and
(b) employ such agents and other assistants as it may reasonably require for
the proper determination and discharge of its powers and duties hereunder, and
may pay reasonable remuneration for all services performed for it (and shall be
entitled to receive reasonable remuneration for all services
F-16
<PAGE>
performed by it) in the discharge of the trusts hereof and compensation for all
disbursements, costs and expenses made or incurred by it in the determination
and discharge of its duties hereunder and in the management of the Trust.
7.11 INVESTMENT OF MONEYS HELD BY TRUSTEE. Unless otherwise provided in
this trust agreement, any moneys held by or on behalf of the Trustee which under
the terms of this trust agreement may or ought to be invested or which may be on
deposit with the Trustee or which may be in the hands of the Trustee may be
invested and reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Province of Ontario, trustees are
authorized to invest trust moneys, provided that such securities are stated to
mature within two years after their purchase by the Trustee, and the Trustee
shall so invest such moneys on the written direction of the Company. Pending the
investment of any moneys as hereinbefore provided, such moneys may be deposited
in the name of the Trustee in any chartered bank in Canada or, with the consent
of the Company, in the deposit department of the Trustee or any other loan or
trust company authorized to accept deposits under the laws of Canada or any
province thereof at the rate of interest then current on similar deposits.
7.12 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be
required to give any bond or security in respect of the execution of the trusts,
rights, duties, powers and authorities of this trust agreement or otherwise in
respect of the premises.
7.13 TRUSTEE NOT BOUND TO ACT ON COMPANY'S REQUEST. Except as in this
trust agreement otherwise specifically provided, the Trustee shall not be bound
to act in accordance with any direction or request of the Company and/or the
Parent or of the directors thereof until a duly authenticated copy of the
instrument or resolution containing such direction or request shall have been
delivered to the Trustee, and the Trustee shall be empowered to act and rely
upon any such copy purporting to be authenticated and believed by the Trustee to
be genuine.
7.14 AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to the Company
and the Parent that at the date of execution and delivery by it of this trust
agreement it is authorized to carry on the business of a trust company in the
Province of Ontario but if, notwithstanding the provisions of this section 7.14,
it ceases to be so authorized to carry on business, the validity and
enforceability of this trust agreement and the Voting Rights, the Exchange Right
and the Automatic Exchange Rights shall not be affected in any manner whatsoever
by reason only of such event but the Trustee shall, within 90 days after ceasing
to be authorized to carry on the business of a trust company in the Province of
Ontario, either become so authorized or resign in the manner and with the effect
specified in Article 10 hereof.
7.15 CONFLICTING CLAIMS. If conflicting claims or demands are made or
asserted with respect to any interest of any Holder in any Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with any
such conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been adjudicated by a final judgment of a
court of competent jurisdiction; or
F-17
<PAGE>
(b) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or demands have
been conclusively settled by a valid written agreement binding on all such
adverse claimants, and the Trustee shall have been furnished with an
executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any demand made
by any such adverse claimant, it may in its discretion require such claimant to
furnish such surety bond or other security satisfactory to the Trustee as it
shall deem appropriate fully to indemnify it as between all conflicting claims
or demands.
7.16 ACCEPTANCE OF TRUST. The Trustee hereby accepts the Trust created and
provided for by and in this trust agreement and agrees to perform the same upon
the terms and conditions herein set forth and to hold all rights, privileges and
benefits conferred hereby and by law in trust for the various persons who shall
from time to time be Holders, subject to all the terms and conditions herein set
forth.
ARTICLE 8
COMPENSATION
8.1 FEES AND EXPENSES OF THE TRUSTEE. The Parent and the Company jointly
and severally agree to pay to the Trustee reasonable compensation for all of the
services rendered by it under this trust agreement and will reimburse the
Trustee for all reasonable expenses (including but not limited to taxes,
compensation paid to experts, agents and advisors and travel expenses) and
disbursements, including the cost and expense of any suit or litigation of any
character and any proceedings before any governmental agency reasonably incurred
by the Trustee in connection with its rights and duties under this trust
agreement; provided that the Parent and the Company shall have no obligation to
reimburse the Trustee for any expenses or disbursements paid, incurred or
suffered by the Trustee in any suit or litigation in which the Trustee is
determined to have acted in bad faith or with negligence or willful misconduct.
ARTICLE 9
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 INDEMNIFICATION OF THE TRUSTEE. The Parent and the Company jointly and
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this trust agreement (collectively, the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable expenses
(including reasonable expenses of the Trustee's legal counsel) which, without
fraud, negligence, willful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by
reason of or as a result of the Trustee's acceptance or administration of the
Trust, its compliance with its duties set forth in this trust agreement, or any
written or oral instructions delivered to the Trustee by the Parent or the
Company pursuant hereto. In no case shall the Parent or the Company be liable
under this indemnity for any claim against any of the Indemnified Parties unless
the Parent and the Company shall be notified by the Trustee of the written
assertion of a claim or of any action commenced against the Indemnified Parties,
promptly after any of the Indemnified Parties shall have received any such
written assertion of a claim or shall have been served with a summons or other
first legal process giving information as to the nature and basis of the claim.
Subject to (ii), below, the Parent and the Company shall be entitled to
participate at their own expense in the defense and, if the Parent or the
Company so elect at any time after receipt of such notice, either of them may
assume the defense of any suit brought to enforce any such claim. The Trustee
shall have the right to employ separate counsel in any such suit and participate
in the defense thereof but the fees and expenses of such counsel shall be at the
expense of the Trustee unless: (i) the employment of such counsel has been
authorized by the Parent or the Company, such authorization not to be
unreasonably withheld; or (ii) the named parties to any such suit include both
the Trustee and the
F-18
<PAGE>
Parent or the Company and the Trustee shall have been advised by counsel
acceptable to the Parent or the Company that there may be one or more legal
defenses available to the Trustee that are different from or in addition to
those available to the Parent or the Company and that an actual or potential
conflict of interest exists (in which case the Parent and the Company shall not
have the right to assume the defense of such suit on behalf of the Trustee but
shall be liable to pay the reasonable fees and expenses of counsel for the
Trustee).
9.2 LIMITATION OF LIABILITY. The Trustee shall not be held liable for any
loss which may occur by reason of depreciation of the value of any part of the
Trust Estate or any loss incurred on any investment of funds pursuant to this
trust agreement, except to the extent that such loss is attributable to the
fraud, negligence, willful misconduct or bad faith on the part of the Trustee.
ARTICLE 10
CHANGE OF TRUSTEE
10.1 RESIGNATION. The Trustee, or any trustee hereafter appointed, may at
any time resign by giving written notice of such resignation to the Parent and
the Company specifying the date on which it desires to resign, provided that
such notice shall never be given less than 60 days before such desired
resignation date unless the Parent and the Company otherwise agree and provided
further that such resignation shall not take effect until the date of the
appointment of a successor trustee and the acceptance of such appointment by the
successor trustee. Upon receiving such notice of resignation, the Parent and the
Company shall promptly appoint a successor trustee by written instrument in
duplicate, one copy of which shall be delivered to the resigning trustee and one
copy to the successor trustee. Failing acceptance by a successor trustee, a
successor trustee may be appointed by an order of the Ontario Court of Justice
(General Division) upon application of one or more of the parties hereto.
10.2 REMOVAL. The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on 60 days' prior notice by written
instrument executed by the Parent and the Company, in duplicate, one copy of
which shall be delivered to the trustee so removed and one copy to the successor
trustee.
10.3 SUCCESSOR TRUSTEE. Any successor trustee appointed as provided under
this trust agreement shall execute, acknowledge and deliver to the Parent and
the Company and to its predecessor trustee an instrument accepting such
appointment. Thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this trust agreement, with like effect as
if originally named as trustee in this trust agreement. However, on the written
request of the Parent and the Company or of the successor trustee, the trustee
ceasing to act shall, upon payment of any amounts then due it pursuant to the
provisions of this trust agreement, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act. Upon the request of any such successor trustee, the Parent,
the Company and such predecessor trustee shall execute any and all instruments
in writing for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers.
10.4 NOTICE OF SUCCESSOR TRUSTEE. Upon acceptance of appointment by a
successor trustee as provided herein, the Parent and the Company shall cause to
be mailed notice of the succession of such trustee hereunder to each Holder
specified in a List. If the Parent or the Company shall fail to cause such
notice to be mailed within 10 days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Parent and the Company.
F-19
<PAGE>
ARTICLE 11
PARENT SUCCESSORS
11.1 CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC. The Parent shall
not enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other person or, in the case of a merger, of the
continuing corporation resulting therefrom unless, but may do so if:
(a) such other person or continuing corporation is a corporation (herein
called the "Parent Successor") incorporated under the laws of any state of
the United States or the laws of Canada or any province thereof;
(b) the Parent Successor, by operation of law, becomes, without more,
bound by the terms and provisions of this trust agreement or, if not so
bound, executes, prior to or contemporaneously with the consummation of such
transaction a trust agreement supplemental hereto and such other instruments
(if any) as are satisfactory to the Trustee and in the opinion of legal
counsel to the Trustee are necessary or advisable to evidence the assumption
by the Parent Successor of liability for all moneys payable and property
deliverable hereunder and the covenant of such Parent Successor to pay and
deliver or cause to be delivered the same and its agreement to observe and
perform all the covenants and obligations of the Parent under this trust
agreement; and
(c) such transaction shall, to the satisfaction of the Trustee and in
the opinion of legal counsel to the Trustee, be upon such terms as
substantially to preserve and not to impair in any material respect any of
the rights, duties, powers and authorities of the Trustee or of the Holders
hereunder.
11.2 VESTING OF POWERS IN SUCCESSOR. Whenever the conditions of section
11.1 hereof have been duly observed and performed, the Trustee, if required, by
section 11.1 hereof, the Parent Successor and the Company shall execute and
deliver the supplemental trust agreement provided for in Article 12 hereof and
thereupon the Parent Successor shall possess and from time to time may exercise
each and every right and power of the Parent under this trust agreement in the
name of the Parent or otherwise and any act or proceeding by any provision of
this trust agreement required to be done or performed by the Board of Directors
of the Parent or any officers of the Parent may be done and performed with like
force and effect by the directors or officers of such Parent Successor.
11.3 WHOLLY-OWNED SUBSIDIARIES. Nothing herein shall be construed as
preventing the amalgamation or merger of any wholly-owned subsidiary of the
Parent with or into the Parent or the winding-up, liquidation or dissolution of
any wholly-owned subsidiary of the Parent provided that all of the assets of
such subsidiary are transferred to the Parent or another wholly-owned subsidiary
of the Parent, and any such transactions are expressly permitted by this Article
11.
ARTICLE 12
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
12.1 AMENDMENTS, MODIFICATIONS, ETC. This trust agreement may not be
amended or modified except by an agreement in writing executed by the Company,
the Parent and the Trustee and approved by the Holders in accordance with
Section 10.2 of the Exchangeable Share Provisions.
12.2 MINISTERIAL AMENDMENTS. Notwithstanding the provisions of section
12.1 hereof, the parties to this trust agreement may in writing, at any time and
from time to time, without the approval of the Holders, amend or modify this
trust agreement for the purposes of:
(a) adding to the covenants of any or all of the parties hereto for the
protection of the Holders hereunder;
F-20
<PAGE>
(b) making such amendments or modifications not inconsistent with this
trust agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the Board of Directors of each of the
Parent and Company and in the opinion of the Trustee and its counsel, having
in mind the best interests of the Holders as a whole, it may be expedient to
make, provided that such boards of directors and the Trustee and its counsel
shall be of the opinion that such amendments and modifications will not be
prejudicial to the interests of the Holders as a whole; or
(c) making such changes or corrections which, on the advice of counsel
to the Company, the Parent and the Trustee, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provision or
clerical omission or mistake or manifest error, provided that the Trustee
and its counsel and the Board of Directors of each of the Company and the
Parent shall be of the opinion that such changes or corrections will not be
prejudicial to the interests of the Holders as a whole.
12.3 MEETING TO CONSIDER AMENDMENTS. The Company, at the request of the
Parent, shall call a meeting or meetings of the Holders for the purpose of
considering any proposed amendment or modification requiring approval pursuant
hereto. Any such meeting or meetings shall be called and held in accordance with
the by-laws of the Company, the Exchangeable Share Provisions and all applicable
laws.
12.4 CHANGES IN CAPITAL OF PARENT AND THE COMPANY. At all times after the
occurrence of any event effected pursuant to section 2.7 or section 2.8 of the
Support Agreement, as a result of which either the Parent Common Stock or the
Exchangeable Shares or both are in any way changed, this trust agreement shall
forthwith be amended and modified as necessary in order that it shall apply with
full force and effect, MUTATIS MUTANDIS, to all new securities into which the
Parent Common Stock or the Exchangeable Shares or both are so changed and the
parties hereto shall execute and deliver a supplemental trust agreement giving
effect to and evidencing such necessary amendments and modifications.
12.5 EXECUTION OF SUPPLEMENTAL TRUST AGREEMENTS. No amendment to or
modification or waiver of any of the provisions of this trust agreement
otherwise permitted hereunder shall be effective unless made in writing and
signed by all of the parties hereto. From time to time the Company (when
authorized by a resolution of the Board of Directors), the Parent (when
authorized by a resolution of its Board of Directors) and the Trustee may,
subject to the provisions of these presents, and they shall, when so directed by
these presents, execute and deliver by their proper officers, trust agreements
or other instruments supplemental hereto, which thereafter shall form part
hereof, for any one or more of the following purposes:
(a) evidencing the succession of Parent Successors to the Parent and the
covenants of and obligations assumed by each such Parent Successor in
accordance with the provisions of Article 11 and the successor of any
successor trustee in accordance with the provisions of Article 10;
(b) making any additions to, deletions from or alterations of the
provisions of this trust agreement or the Voting Rights, the Exchange Right
or the Automatic Exchange Rights which, in the opinion of the Trustee and
its counsel, will not be prejudicial to the interests of the Holders as a
whole or are in the opinion of counsel to the Trustee necessary or advisable
in order to incorporate, reflect or comply with any legislation the
provisions of which apply to the Parent, the Company, the Trustee or this
trust agreement; and
(c) for any other purposes not inconsistent with the provisions of this
trust agreement, including without limitation to make or evidence any
amendment or modification to this agreement as contemplated hereby, provided
that, in the opinion of the Trustee and its counsel, the rights of the
Trustee and the Holders as a whole will not be prejudiced thereby.
F-21
<PAGE>
ARTICLE 13
TERMINATION
13.1 TERM. The Trust created by this trust agreement shall continue until
the earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder;
(b) each of the Company and the Parent elects in writing to terminate
the Trust and such termination is approved by the Holders of the
Exchangeable Shares in accordance with Section 10.2 of the Exchangeable
Share Provisions; and
(c) 21 years after the death of the last survivor of the descendants of
His Majesty King George VI of the United Kingdom of Great Britain and
Northern Ireland living on the date of the creation of the Trust.
13.2 SURVIVAL OF AGREEMENT. This trust agreement shall survive any
termination of the Trust and shall continue until there are no Exchangeable
Shares outstanding held by a Holder; provided, however, that the provisions of
Articles 8 and 9 hereof shall survive any such termination of this trust
agreement.
ARTICLE 14
GENERAL
14.1 SEVERABILITY. If any provision of this trust agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this trust agreement shall not in any way be affected or
impaired thereby and the agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
14.2 INUREMENT. This trust agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns and to the benefit of the Holders.
14.3 NOTICES TO PARTIES. All notices and other communications between the
parties hereunder shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for such party as shall be specified in like
notice):
(a) if to the Parent at:
Symantec Corporation
10201 Torre Avenue
Cupertino, CA 95014
ATTENTION: PRESIDENT
Telecopy: (408) 252-5101
(b) if to the Company at:
Delrina Corporation
895 Don Mills Road, 500-2 Park Centre
Toronto, Ontario, Canada M3CIW3
ATTENTION: PRESIDENT
Telecopy: (416) 441-2498
F-22
<PAGE>
(c) if to the Trustee at:
if by mail or delivery:
The R-M Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario M5C2W9
ATTENTION: VICE-PRESIDENT, CLIENT SERVICES
Telecopy: (416) 813-4555
Any notice or other communication given personally shall be deemed to have
been given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of receipt thereof unless
such day is not a Business Day in which case it shall be deemed to have been
given and received upon the immediately following Business Day.
14.4 NOTICE OF HOLDERS. Any and all notices to be given and any documents
to be sent to any Holders may be given or sent to the address of such holder
shown on the register of holders of Exchangeable Shares in any manner permitted
by the by-laws of the Company from time to time in force in respect of notices
to shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such by-laws, the provisions of which by-laws
shall apply MUTATIS MUTANDIS to notices or documents as aforesaid sent to such
holders.
14.5 RISK OF PAYMENTS BY POST. Whenever payments are to be made or
documents are to be sent to any Holder by the Trustee or by the Company, or by
such Holder to the Trustee or to the Parent or the Company, the making of such
payment or sending of such document sent through the post shall be at the risk
of the Company, in the case of payments made or documents sent by the Trustee or
the Company, and the Holder, in the case of payments made or documents sent by
the Holder.
14.6 COUNTERPARTS. This trust agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
14.7 JURISDICTION. This trust agreement shall be construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
14.8 ATTORNMENT. The Parent agrees that any action or proceeding arising
out of or relating to this trust agreement may be instituted in the courts of
Ontario, waives any objection which it may have now or hereafter to the venue of
any such action or proceeding, irrevocably submits to the jurisdiction of the
said courts in any such action or proceeding, agrees to be bound by any judgment
of the said courts and agrees not to seek, and hereby waives, any review of the
merits of any such judgment by the courts of any other jurisdiction and hereby
appoints the Company at its registered office in the Province of Ontario as the
Parent's attorney for service of process.
F-23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this trust agreement to
be duly executed as of the date first above written.
SYMANTEC CORPORATION
By
--------------------------------------
--------------------------------------
DELRINA CORPORATION
By
--------------------------------------
--------------------------------------
THE R-M TRUST COMPANY
By
--------------------------------------
--------------------------------------
F-24
<PAGE>
ANNEX G
RESTATED CERTIFICATE OF INCORPORATION
OF SYMANTEC
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
SYMANTEC CORPORATION
(A DELAWARE CORPORATION)
ARTICLE 1
The name of the Corporation is Symantec Corporation.
ARTICLE 2
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801. The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE 4
4.1 CLASSES OF STOCK. This corporation is authorized to issue three
classes of stock to be designated "Common Stock," "Preferred Stock" and "Special
Voting Stock." Each share of Common Stock and each share of Preferred Stock
shall have a par value of $0.01. There shall be one share designated as Special
Voting Stock, such share of Special Voting Stock shall have a par value of
$1.00. The total number of shares which the corporation is authorized to issue
is one hundred one million and one (101,000,001). One hundred million
(100,000,000) shares shall be Common Stock, one million (1,000,000) shares shall
be Preferred Stock, and one (1) share shall be Special Voting Stock.
4.2 RIGHTS, PRIVILEGES AND RESTRICTIONS. The rights, privileges and
restrictions of the Common Stock and the Special Voting Stock shall be set forth
in this Article 4.
4.3 PREFERRED STOCK SERIES DETERMINATION. The Preferred Stock may be
issued from time to time in one or more series. The Board of Directors is
authorized to provide for the issuance of such shares of Preferred Stock in one
or more series, to establish from time to time the number of shares to be
included in each such series, to fix the designation, powers, preferences and
rights of the shares of each such series and any qualifications, limitations or
restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then
outstanding).
4.4 VOTING RIGHTS.
4.4.1 GENERAL. Except as otherwise required by law or this Restated
Certificate of Incorporation, (i) each holder of record of Common Stock
shall have one vote in respect of each share of stock held by the holder of
the books of the Corporation, and (ii) the holder of record of the share of
Special Voting Stock shall have a number of votes equal to the number of
Exchangeable Non-Voting Shares ("Exchangeable Shares") of Delrina
Corporation, an Ontario corporation, from time to time which are not owned
by the Corporation, any of its subsidiaries or any person directly or
indirectly controlled by or under common control of the Corporation, in each
case for the election of directors and on all matters submitted to a vote of
stockholders of the Corporation. Any vacancy in the Board of Directors
occurring because of the death, resignation or removal of a director elected
by the holders of Common Stock and Special Voting Stock shall be filled by
the vote or written consent of the holders of such Common Stock and Special
Voting Stock or, in the absence of action by such holders, such vacancy
shall be filled by action of the remaining directors. A director elected by
the holders of Common Stock and Special Voting Stock may be removed from the
Board of Directors with or without cause by the vote or consent of the
holders of such
G-1
<PAGE>
Common Stock and Special Voting Stock, as provided by the Delaware General
Corporation Law. For the purpose hereof, "control" (including the
correlative meanings, the terms "controlled by" and "under common control
of") as applied to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of that person through the ownership of voting securities, by contract or
otherwise.
4.4.2 COMMON STOCK AND SPECIAL VOTING STOCK IDENTICAL IN VOTING. In
respect of all matters concerning the voting of shares, the Common Stock and
the Special Voting Stock shall vote as a single class and such voting rights
shall be identical in all respects.
4.5 LIQUIDATION. In the event of any liquidation, dissolution or winding
up of the Corporation, the holders of Common Stock shall be entitled to receive,
pro rata, all of the remaining assets of the Corporation available for
distribution to its stockholders and the holders of Special Voting Stock shall
not be entitled to receive any such assets.
4.6 DIVIDENDS. The holders of shares of Common Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of the assets
of the Corporation which are by law available therefor, dividends payable either
in cash, in property or in shares of capital stock and the holders of Special
Voting Stock shall not be entitled to receive any such dividends.
4.7 SPECIAL VOTING STOCK.
4.7.1 Pursuant to the terms of that certain Combination Agreement,
dated as of July 5, 1995, by and among the Corporation and Delrina
Corporation, an Ontario corporation, one share of Special Voting Stock is
being issued to the trustee (the "Trustee") under the Voting and Exchange
Trust Agreement, dated as of November 22, 1995 by and between the
Corporation, Delrina Corporation and the Trustee.
4.7.2 The holder of the share of Special Voting Stock is entitled to
exercise the voting rights attendant thereto in such manner as such holder
desires.
4.7.3 At such time as the Special Voting Stock has no votes attached to
it because there are no Exchangeable Shares of Delrina Corporation
outstanding which are not owned by the Corporation, any of its subsidiaries
or any person directly or indirectly controlled by or under common control
of the Corporation, and there are no shares of stock, debt, options or other
agreements of Delrina Corporation which could give rise to the issuance of
any Exchangeable Shares of Delrina Corporation to any person (other than the
Corporation, any of its subsidiaries or any person directly or indirectly
controlled by or under common control of the Corporation), the Special
Voting Stock shall be canceled.
ARTICLE 5
The stockholders of the Corporation holding a majority of the Corporation's
outstanding voting stock shall have the power to adopt, amend or repeal Bylaws.
The Board of Directors of the Corporation shall also have the power to adopt,
amend or repeal Bylaws of the Corporation, except as such power may be expressly
limited by Bylaws adopted by the stockholders.
ARTICLE 6
Election of the Directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
ARTICLE 7
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in
G-2
<PAGE>
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
Any repeal or modification of the foregoing provisions of this Article 7
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
G-3
<PAGE>
ANNEX H
DONALDSON, LUFKIN & JENRETTE
FAIRNESS OPINION
<PAGE>
[LETTERHEAD]
July 5, 1995
Board of Directors
Symantec Corporation
10201 Torre Avenue
Cupertino, CA 95014-2132
Dear Directors:
You have requested our opinion as to the fairness, from a financial point of
view, to Symantec Corporation ("Symantec," or the "Company") and its
stockholders of the Exchange Ratio (as defined below) which will be used to
exchange shares of Delrina Corporation ("Delrina") common stock for shares of
Symantec common stock pursuant to a Combination Agreement (the "Agreement")
dated July 5, 1995, by and between Symantec and Delrina.
Pursuant to the Agreement, each share of common stock of Delrina will be
exchanged for 0.61 shares of common stock of the Company (the "Exchange Ratio").
In addition, pursuant to the Agreement, each outstanding warrant or option to
purchase shares of common stock of Delrina will be exchanged for a warrant or
option to purchase shares of common stock of Symantec based on the Exchange
Ratio.
In arriving at our opinion, we have reviewed the Agreement and financial and
other information that was publicly available or furnished to us by the Company
and Delrina, including information provided during discussions with their
respective managements. Such information included certain financial projections
for the Company for the period beginning June 1, 1995 and ending March 31, 1997
prepared by the management of the Company. In addition, we have compared certain
financial and securities data of the Company and Delrina with various other
companies whose securities are traded in public markets, reviewed the historical
stock prices and trading volumes of the common stock of the Company and Delrina,
reviewed prices and premiums paid in other business combinations in the software
business generally and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion. We have
also held discussions with members of the senior management of the Company and
Delrina regarding the past and current business operations, financial condition
and future prospects of their respective companies.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of the
financial and other information that was available to us from public sources,
that was provided to us by the Company and Delrina or their respective
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future operating and
financial performance of the Company and Delrina. In particular, we have relied,
without independent investigation, upon the estimates of the management of the
Company of the operating synergies achievable as a result of the merger. We have
not assumed any responsibility for making any independent evaluation of the
Company's or Delrina's assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have relied on advice
of counsel to the Company as to all legal matters. We have assumed that the
acquisition will be treated as a pooling of interest under generally accepted
accounting principles.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to
H-1
<PAGE>
update, revise or reaffirm this opinion. Our opinion does not constitute a
recommendation to any board member or stockholder of the Company as to how such
board member or stockholder should vote on the proposed transaction or otherwise
address the Company's decision to effect the acquisition.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. DLJ has performed
investment banking and other services for the Company in the past and has been
compensated for such services. In the ordinary course of its business, DLJ may
actively trade the equity securities of the Company for its own account or for
the account of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair, from a financial point of view,
to the Company and its stockholders.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ JAMES W. RUNCIE_______________
JAMES W. RUNCIE
VICE PRESIDENT
H-2
<PAGE>
ANNEX I
BROADVIEW ASSOCIATES FAIRNESS OPINION
<PAGE>
[LETTERHEAD]
July 5, 1995
CONFIDENTIAL
Board of Directors
Delrina Corporation
895 Don Mills Road
500-2 Park Center
Toronto, Ontario M3C 1W3
CANADA
Dear Members of the Board:
We understand that Delrina Corporation ("Delrina") and Symantec Corporation
("Symantec") have entered into a Combination Agreement dated as of July 5, 1995
(the "Agreement") pursuant to which holders of Delrina Common Stock will receive
securities of Delrina (the "Exchangeable Shares") in exchange for their Delrina
Common Stock at a ratio (the "Exchange Ratio") of 0.6100 Exchangeable Shares for
each share of Delrina Common Stock. Generally, each Exchangeable Share may, at
the option of the holder, be exchanged for one share of Symantec Common Stock.
In addition, the Exchangeable Shares will be subject to (i) mandatory redemption
by Delrina at the time specified in the Agreement and (ii) the limited right to
purchase by Symantec in the circumstances set forth in the Agreement. The
proposed transaction (the "Transaction") is intended to be a tax-free
reorganization within the meaning of section 368 (a) of the United States
Internal Revenue Code of 1986, as amended, and to be accounted for as a pooling
of interests pursuant to Opinion No. 16 of the Accounting Principles Board. The
terms and conditions of the Transaction are more fully detailed in the
Agreement.
You have requested our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to the shareholders of Delrina.
Broadview Associates specializes in mergers and acquisitions of information
technology ("IT") businesses. 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 Delrina's Board of Directors and will receive a fee from Delrina upon
the successful conclusion of the Transaction.
In rendering our opinion, we have, among other things:
1) reviewed the terms of the Agreement and the associated exhibits to the
Agreement furnished to us by Delrina's counsel;
2) reviewed the audited financial statements of Delrina for its fiscal years
ended June 30, 1993 and 1994 and the unaudited financial statements of
Delrina for the nine months ended March 31, 1995 included in the Delrina
Third Quarter Interim Report for such period;
3) reviewed certain internal historical financial and operating data concerning
Delrina prepared by Delrina management;
4) analyzed certain financial projections for Delrina provided to us by
Delrina's management;
5) participated in discussions with Delrina's management concerning the
operations, business strategy, financial performance and prospects for
Delrina;
I-1
<PAGE>
Delrina Corporation Board of Directors July 5, 1995
Page 2
6) discussed with Delrina management the financial outlook for its fiscal
quarters ending June 30, 1995 and September 30, 1995;
7) discussed with Delrina management its view of the strategic rationale for
the Transaction;
8) reviewed the reported closing prices and trading activity for Delrina Common
Stock;
9) compared certain aspects of the financial performance of Delrina and the
price of Delrina Common Stock with other public companies we deemed
comparable;
10) analyzed available information, both public and private, concerning other
mergers and acquisitions we believe to be comparable in whole or in part to
the Transaction;
11) reviewed the audited financial statements of Symantec for its fiscal years
ended March 31, 1993, 1994 and 1995
12) reviewed certain internal historical financial and operating data concerning
Symantec prepared by Symantec management;
13) reviewed the reported closing prices and trading activity for Symantec
Common Stock;
14) compared certain aspects of the financial performance of Symantec and the
price of Symantec Common Stock with other public companies we deemed
comparable;
15) analyzed the anticipated effect of the Transaction on the future financial
performance of the consolidated entity;
16) participated in negotiations and discussions related to the Transaction
among Delrina, Symantec and their financial and legal advisors;
17) 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 Delrina 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 judgments of the management of Delrina as to the future
performance of Delrina. We have neither made nor obtained an independent
appraisal or valuation of any of Delrina's assets. We have not analyzed any
internal financial projections prepared by Symantec management as such
projections have not been made available to us.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair, from a financial point of view, to the shareholders of
Delrina.
I-2
<PAGE>
Delrina Corporation Board of Directors July 5, 1995
Page 3
This opinion speaks only as of the date hereof and may be relied upon only
by the Board of Directors of Delrina and no other person. 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 Associates
hereby consents to references to and the inclusion of this opinion in its
entirety in the proxy statement to be disseminated to the shareholders of
Delrina in connection with the Transaction.
Sincerely,
BROADVIEW ASSOCIATES, L.P.
I-3
<PAGE>
ANNEX J
SECTION 185 OF THE
BUSINESS CORPORATIONS ACT
(ONTARIO)
<PAGE>
SECTION 185 OF THE OBCA
185. (1) RIGHTS OF DISSENTING SHAREHOLDERS. -- Subject to subsection (3)
and to sections 186 and 248, if a corporation resolves to,
(a) amend its articles under section 168 to add, remove or change
restrictions on the issue, transfer or ownership of shares of a class or series
of the shares of the corporation;
(b) amend its articles under section 168 to add, remove or change any
restriction upon the business or businesses that the corporation may carry on or
upon the powers that the corporation may exercise;
(c) amalgamate with another corporation under sections 175 and 176;
(d) be continued under the laws of another jurisdiction under section 181;
or
(e) sell, lease or exchange all or substantially all its property under
subsection 184(3),
a holder of shares of any class or series entitled to vote on the resolution may
dissent.
(2) IDEM. -- If a corporation resolves to amend its articles in a manner
referred to in subsection 170(1), a holder of shares of any class or series
entitled to vote on the amendment under section 168 or 170 may dissent, except
in respect of an amendment referred to in,
(a) clause 170(1)(a), (b) or (e) where the articles provide that the holders
of shares of such class or series are not entitled to dissent; or
(b) subsection 170(5) or (6).
(3) EXCEPTION. -- A shareholder of a corporation incorporated before the
29th day of July, 1983 is not entitled to dissent under this section in respect
of an amendment of the articles of the corporation to the extent that the
amendment,
(a) amends the express terms of any provision of the articles of the
corporation to conform to the terms of the provision as deemed to be amended by
section 277; or
(b) deletes from the articles of the corporation all of the objects of the
corporation set out in its articles, provided that the deletion is made by the
29th day of July, 1986.
(4) SHAREHOLDER'S RIGHT TO BE PAID FAIR VALUE. -- In addition to any other
right the shareholder may have, but subject to subsection (30), a shareholder
who complies with this section is entitled, when the action approved by the
resolution from which the shareholder dissents becomes effective, to be paid by
the corporation the fair value of the shares held by the shareholder in respect
of which the shareholder dissents, determined as of the close of business on the
day before the resolution was adopted.
(5) NO PARTIAL DISSENT. -- A dissenting shareholder may only claim under
this section with respect to all the shares of a class held by the dissenting
shareholder on behalf of any one beneficial owner and registered in the name of
the dissenting shareholder.
(6) OBJECTION. -- A dissenting shareholder shall send to the corporation,
at or before any meeting of shareholders at which a resolution referred to in
subsection (1) or (2) is to be voted on, a written objection to the resolution,
unless the corporation did not give notice to the shareholder of the purpose of
the meeting or of the shareholder's right to dissent.
(7) IDEM. -- The execution or exercise of a proxy does not constitute a
written objection for purposes of subsection (6).
(8) NOTICE OF ADOPTION OF RESOLUTION. -- The corporation shall, within ten
days after the shareholders adopt the resolution, send to each shareholder who
has filed the objection referred to in subsection (6) notice that the resolution
has been adopted, but such notice is not required to be sent to any shareholder
who voted for the resolution or who has withdrawn the objection.
J-1
<PAGE>
(9) IDEM. -- A notice sent under subsection (8) shall set out the rights of
the dissenting shareholder and the procedures to be followed to exercise those
rights.
(10) DEMAND FOR PAYMENT OF FAIR VALUE. -- A dissenting shareholder entitled
to receive notice under subsection (8) shall, within twenty days after receiving
such notice, or, if the shareholder does not receive such notice, within twenty
days after learning that the resolution has been adopted, send to the
corporation a written notice containing,
(a) the shareholder's name and address;
(b) the number and class of shares in respect of which the shareholder
dissents; and
(c) a demand for payment of the fair value of such shares.
(11) CERTIFICATES TO BE SENT IN. -- Not later than the thirtieth day after
the sending of a notice under subsection (10), a dissenting shareholder shall
send the certificates representing the shares in respect of which the
shareholder dissents to the corporation or its transfer agent.
(12) IDEM. -- A dissenting shareholder who fails to comply with subsections
(6), (10) and (11) has no right to make a claim under this section.
(13) ENDORSEMENT ON CERTIFICATE. -- A corporation or its transfer agent
shall endorse on any share certificate received under subsection (11) a notice
that the holder is a dissenting shareholder under this section and shall return
forthwith the share certificates to the dissenting shareholder.
(14) RIGHTS OF DISSENTING SHAREHOLDER. -- On sending a notice under
subsection (10), a dissenting shareholder ceases to have any rights as a
shareholder other than the right to be paid the fair value of the shares as
determined under this section except where,
(a) the dissenting shareholder withdraws notice before the corporation makes
an offer under subsection (15);
(b) the corporation fails to make an offer in accordance with subsection
(15) and the dissenting shareholder withdraws notice; or
(c) the directors revoke a resolution to amend the articles under subsection
168(3), terminate an amalgamation agreement under subsection 176(5) or an
application for continuance under subsection 181(5), or abandon a sale, lease or
exchange under subsection 184(8),
in which case the dissenting shareholder's rights are reinstated as of the date
the dissenting shareholder sent the notice referred to in subsection (10), and
the dissenting shareholder is entitled, upon presentation and surrender to the
corporation or its transfer agent of any certificate representing the shares
that has been endorsed in accordance with subsection (13), to be issued a new
certificate representing the same number of shares as the certificate so
presented, without payment of any fee.
(15) OFFER TO PAY. -- A corporation shall, not later than seven days after
the later of the day on which the action approved by the resolution is effective
or the day the corporation received the notice referred to in subsection (10),
send to each dissenting shareholder who has sent such notice,
(a) a written offer to pay for the dissenting shareholder's shares in an
amount considered by the directors of the corporation to be the fair value
thereof, accompanied by a statement showing how the fair value was determined;
or
(b) if subsection (30) applies, a notification that it is unable lawfully to
pay dissenting shareholders for their shares.
(16) IDEM. -- Every offer made under subsection (15) for shares of the same
class or series shall be on the same terms.
J-2
<PAGE>
(17) IDEM. -- Subject to subsection (30), a corporation shall pay for the
shares of a dissenting shareholder within ten days after an offer made under
subsection (15) has been accepted, but any such offer lapses if the corporation
does not receive an acceptance thereof within thirty days after the offer has
been made.
(18) APPLICATION TO COURT TO FIX FAIR VALUE. -- Where a corporation fails
to make an offer under subsection (15) or if a dissenting shareholder fails to
accept an offer, the corporation may, within fifty days after the action
approved by the resolution is effective or within such further period as the
court may allow, apply to the court to fix a fair value for the shares of any
dissenting shareholder.
(19) IDEM. -- If a corporation fails to apply to the court under subsection
(18), a dissenting shareholder may apply to the court for the same purpose
within a further period of twenty days or
within such further period as the court may allow.
(20) IDEM. -- A dissenting shareholder is not required to give security for
costs in an application made under subsection (18) or (19).
(21) COSTS. -- If a corporation fails to comply with subsection (15), then
the costs of a shareholder application under subsection (19) are to be borne by
the corporation unless the court otherwise orders.
(22) NOTICE TO SHAREHOLDERS. -- Before making application to the court
under subsection (18) or not later than seven days after receiving notice of an
application to the court under subsection (19), as the case may be, a
corporation shall given notice to each dissenting shareholder who, at the date
upon which the notice is given,
(a) has sent to the corporation the notice referred to in subsection (10);
and
(b) has not accepted an offer made by the corporation under subsection (15),
if such an offer was made,
of the date, place and consequences of the application and of the dissenting
shareholder's right to appear and be heard in person or by counsel, and a
similar notice shall be given to each dissenting shareholder who, after the date
of such first mentioned notice and before termination of the proceedings
commenced by the application, satisfies the conditions set out in clauses (a)
and (b) within three days after the dissenting shareholder satisfies such
conditions.
(23) PARTIES JOINED. -- All dissenting shareholders who satisfy the
conditions set out in clauses (22)(a) and (b) shall be deemed to be joined as
parties to an application under subsection (18) or (19) on the later of the date
upon which the application is brought and the date upon which they satisfy the
conditions, and shall be bound by the decision rendered by the court in the
proceedings commenced by the application.
(24) IDEM. -- Upon an application to the court under subsection (18) or
(19), the court may determine whether any other person is a dissenting
shareholder who should be joined as a party, and the court shall fix a fair
value for the shares of all dissenting shareholders.
(25) APPRAISERS. -- The court may in its discretion appoint one or more
appraisers to assist the court to fix a fair value for the shares of the
dissenting shareholders.
(26) FINAL ORDER. -- The final order of the court in the proceedings
commenced by an application under subsection (18) or (19) shall be rendered
against the corporation and in favour of each dissenting shareholder who,
whether before or after the date of the order, complies with the conditions set
out in clauses (22)(a) and (b).
(27) INTEREST. -- The court may in its discretion allow a reasonable rate
of interest on the amount payable to each dissenting shareholder from the date
the action approved by the resolution is effective until the date of payment.
J-3
<PAGE>
(28) WHERE CORPORATION UNABLE TO PAY. -- Where subsection (30) applies, the
corporation shall, within ten days after the pronouncement of an order under
subsection (26), notify each dissenting shareholder that is unable lawfully to
pay dissenting shareholders for their shares.
(29) IDEM. -- Where subsection (30) applies, a dissenting shareholder, by
written notice sent to the corporation within thirty days after receiving a
notice under subsection (28), may,
(a) withdraw a notice of dissent, in which case the corporation is deemed to
consent to the withdrawal and the shareholder's full rights are reinstated; or
(b) retain a status as a claimant against the corporation, to be paid as
soon as the corporation is lawfully able to do so or, in a liquidation, to be
ranked subordinate to the rights of creditors of the corporation but in priority
to its shareholders.
(30) IDEM. -- A corporation shall not make a payment to dissenting
shareholder under this section if there are reasonable grounds for believing
that,
(a) the corporation is or, after the payment, would be unable to pay its
liabilities as they become due; or
(b) the realizable value of the corporation's assets would thereby by less
than the aggregate of its liabilities.
(31) COURT ORDER. -- Upon application by a corporation that proposes to
take any of the actions referred to in subsection (1) or (2), the court may, if
satisfied that the proposed action is not in all the circumstances one that
should give rise to the rights under subsection (4), by order declare that those
rights will not arise upon the taking of the proposed action, and the order may
be subject to compliance upon such terms and conditions as the court thinks fit
and, if the corporation is an offering corporation, notice of any such
application and a copy of any order made by the court upon such application
shall be served upon the Commission.
(32) COMMISSION MAY APPEAR. -- The Commission may appoint counsel to assist
the court upon the hearing of an application under subsection (31) if the
corporation is an offering corporation.
J-4
<PAGE>
ANNEX K
SYMANTEC'S 1988
EMPLOYEES STOCK
OPTION PLAN
<PAGE>
SYMANTEC CORPORATION
A DELAWARE CORPORATION
1988 EMPLOYEES STOCK OPTION PLAN
AS ADOPTED JUNE 1, 1988
AS AMENDED THROUGH OCTOBER 4, 1995
1. PURPOSE. This Stock Option Plan (this "PLAN") is established to provide
incentives for selected persons to promote the financial success and progress of
Symantec Corporation, a Delaware corporation (the "COMPANY") by granting such
persons options to purchase shares of stock of the Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall become effective on
the date that it is adopted by the Board of Directors (the "BOARD") of the
Company. This Plan shall be approved by the unanimous written consent of the
stockholders or the affirmative vote at a meeting of the holders of a majority
of the outstanding shares of the Company within twelve months before or after
the date this Plan is adopted by the Board.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"OPTIONS") may be either (a) incentive stock options ("ISOS") within the meaning
of Section 422A of the Internal Revenue Code of 1986 (the "CODE"), or (b)
non-qualified stock options ("NQSO'S), as designated at the time of grant. The
shares of stock that may be purchased upon exercise of Options granted under
this Plan (the "SHARES") are shares of the common stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan is 13,700,000 shares, subject to
adjustment as provided in this Plan. If any Option is terminated in whole or in
part for any reason without being exercised in whole or in part, the Shares
thereby released from such Option shall be available for purchase under other
Options subsequently granted under this Plan. At all times during the term of
this Plan, the Company shall reserve and keep available such number of Shares as
shall be required to satisfy the requirements of outstanding Options under this
Plan.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of the Board appointed to administer this Plan (the "COMMITTEE"). If
the Board establishes a Committee, and if at least two members of the Board are
Outside Directors, (as defined in Section 6(f) of the Plan) the Committee must
consist of at least the number of members required under Rule 16b-3, each of
whom is an Outside Director and a "Disinterested Person" (as defined in Section
6(d) of the Plan). As used in this Plan, references to the Committee shall mean
either the committee appointed by the Board to administer this Plan, or the
Board if no committee has been established. After registration of the Company
under the Securities Exchange Act of 1934, as then in effect, (the "EXCHANGE
ACT"), Board members who are not Disinterested Persons may not vote on any
matters affecting the administration of this Plan or on the grant of any Options
pursuant to this Plan to any officer or director of the Company or other person
(in each case, an "INSIDER") whose transactions in the Company's common stock
are subject to Section 16(b) of the Exchange Act; but any such member may be
counted for determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to Options or administration of this
Plan and may vote on the grant of any Options pursuant to this Plan other than
to Insiders. Notwithstanding the above, the Board may appoint a Committee
consisting of one person (who need not be a member of the Board) to administer
and grant options to employees, consultants and independent contractors who are
not corporate officers or directors. The interpretation by the Committee of any
of the provisions of this Plan or any Option granted under this Plan shall be
final and binding upon the Company and all persons having an interest in any
Option or any Shares purchased pursuant to an Option.
6. ELIGIBILITY. Options may be granted only to such employees, officers,
consultants and independent contractors of the Company or any Parent, Subsidiary
or Affiliate of the Company (as
K-1
<PAGE>
defined below) as the Committee shall select from time to time in its sole
discretion (the "OPTIONEES"); provided, however, that only employees of the
Company or a Parent or Subsidiary of the Company shall be eligible to receive
ISOs. An Optionee may be granted more than one Option under this Plan. As used
in this Plan, the following terms shall have the following meanings:
(a) "PARENT"means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
the granting of the Option, each of such corporations other than the Company
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(b) "SUBSIDIARY"means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time
of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(c) "AFFILIATE"means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to cause the direction of the
management and policies of the corporation, whether through the ownership of
voting securities, by contract or otherwise.
(d) "DISINTERESTED PERSON"shall have the meaning set forth in Rule
16b-3(d) (3) as promulgated by the Securities and Exchange Commission
(the "SEC") under Section 16(b) of the Exchange Act, as such rule is amended
from time to time and as interpreted by the SEC.
(e) "FAIR MARKET VALUE"shall mean the fair market value of the Shares as
determined by the Committee from time to time in good faith. If a public
market exists for the Shares, the Fair Market Value shall be the average of
the last reported bid and asked prices for common stock of the Company on
the last trading day prior to the date of determination or, in the event the
common stock of the Company is listed on a stock exchange or the NASDAQ
National Market System, the Fair Market Value shall be the closing price on
such exchange or quotation system on the last trading day prior to the date
of determination.
(f) "OUTSIDE DIRECTOR"shall have the meaning set forth in Internal
revenue Code Section162(m), as amended from time to time.
The Company may, from time to time, assume outstanding options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either:
(i) granting an option under this Plan in replacement of the option
assumed by the Company, or
(ii) treating the assumed option as if it had been granted under this
Plan if the terms of such assumed option could be applied to an option
granted under this Plan. Such assumption shall be permissible if the holder
of the assumed option would have been eligible to be granted an option
hereunder if the other company had applied the rules of this Plan to such
grant.
7. TERMS AND CONDITIONS OF OPTIONS. The Committee shall determine whether
each Option is to be an ISO or an NQSO, the number of Shares for which the
Option shall be granted, the exercise price of the Option, the periods during
which the Option may be exercised, and all other terms and conditions of the
Option, subject to the following:
(a) FORM OF OPTION GRANT. Each Option granted under this Plan shall be
evidenced by a written Stock Option Grant (the "GRANT") in such form (which
need not be the same for each Optionee) as the Committee shall from time to
time approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
K-2
<PAGE>
(b) EXERCISE PRICE. The exercise price of an Option shall be not less
than the Fair Market Value of the Shares, at the time that the Option is
granted. The exercise price of any Option granted to a person owning more
than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary of the Company ("TEN PERCENT
STOCKHOLDER") shall not be less than 110% of the Fair Market Value of the
Shares at the time of the grant.
(c) EXERCISE PERIOD. Options shall be exercisable within the times or
upon the events determined by the Committee as set forth in the Grant,
provided, however, that no Option shall be exercisable after the expiration
of ten years from the date the Option is granted, and provided further that
no Option granted to a Ten Percent Stockholder shall be exercisable after
the expiration of five years from the date the Option is granted. In
addition, no Option shall be exercisable until this Plan, or any required
increase in Shares reserved pursuant to this Plan, has been approved by the
stockholders of the company. The Committee may accelerate the vesting of any
option in its sole discretion, subject to any requirements that the
Committee determines should be imposed on shares purchased as a result of
such acceleration.
(d) LIMITATIONS ON ISOS. The aggregate Fair Market Value (determined
as of the time an Option is granted) of stock with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year
(under this Plan or under any other incentive stock option plan of the
Company or any Parent or Subsidiary of the Company) shall not exceed
$100,000. If the Fair Market Value of stock with respect to which ISOs are
first exercised exceeds $100,000, the Options for the first $100,000 worth
of stock shall be ISOs and Options for the amount in excess of $100,000
shall be NQSOs.
(e) LIMITATION OF GRANTS TO AN INDIVIDUAL. No individual shall be
eligible to receive more than 1,200,000 shares at any time during the term
of this plan pursuant to the grant of options hereunder.
(f) DATE OF GRANT. The date of grant of an Option shall be the date on
which the Committee makes the determination to grant such Option unless
otherwise specified by the Committee. The Grant representing the Option
shall be delivered to the Optionee within a reasonable time after the
granting of the Option.
(g) ASSUMED OPTIONS. In the event the Company assumes an option
granted by another company, the terms and conditions of such option shall
remain unchanged (except the exercise price and the number and nature of
shares issuable upon exercise, which will be adjusted appropriately pursuant
to Section 424(c) of the Code). In the event the Company elects to grant a
new option rather than assuming an existing option (as specified in Section
6), such new option need not be granted at Fair Market Value on the date of
grant and may instead be granted with a similarly adjusted exercise price.
8. EXERCISE OF OPTIONS.
(a) NOTICE. Options may be exercised only by delivery to the Company of a
written notice and exercise agreement in a form approved by the Committee,
stating the number of Shares being purchased, the restrictions imposed on the
Shares and such representations and agreements regarding the Optionee's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws, together with payment in full of the
exercise price for the number of Shares being purchased.
(b) PAYMENT. Payment for the Shares may be made (i) in cash (by check),
(ii) by surrender of shares of common stock of the Company that have been owned
by Optionee for more than six (6) months (and which have been paid for within
the meaning of SEC Rule 144 and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully paid with respect to such
shares) or were obtained by the Optionee in the open public market, having a
Fair Market Value equal to the exercise price of the Option; (iii) by waiver of
compensation due or accrued to Optionee for services rendered; (iv) provided
that a public market for the Company's stock exists,
K-3
<PAGE>
through a "same day sale" commitment from the Optionee and a broker-dealer that
is a member of the National Association of Securities Dealers (an "NASD DEALER")
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the Shares so purchased to pay for the exercise price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; (v) provided that a public market for
the company's stock exists, through a "margin" commitment from the Optionee and
an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; (vi) where permitted by
applicable law and approved by the Committee in its sole discretion, by tender
of a full recourse promissory note having such terms as may be approved by the
Committee; or (vii) by any combination of the foregoing where approved by the
Committee in its sole discretion. Optionees who are not employees or directors
of the Company shall not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the Shares.
(c) WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise of an
Option, the Optionee shall pay or make adequate provision for any federal or
state withholding obligations of the Company, if applicable.
(d) LIMITATIONS ON EXERCISE. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(i) If an Optionee ceases to be employed by the Company or any Parent,
Subsidiary or Affiliate of the Company for any reason except death or
disability, the Optionee may exercise such Optionee's Options to the extent
(and only to the extent) that it would have been exercisable upon the date
of termination, within three (3) months after the date of termination (or
such shorter time period as may be specified in the Grant), provided that,
if Optionee is an Insider and the Company is subject to Section 16(b) of the
Exchange Act, the Optionee's Option will be exercisable for a period of time
sufficient to allow such Optionee from having a matching purchase and sale
under Section 16(b), with any extension beyond three (3) months from
termination of employment in the case of an Option constituting an ISO being
deemed to be as a NQSO, and provided further that in no event may an Option
be exercisable later than the expiration date of the Option.
(ii) If an Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated because of the death of
the Optionee or disability of Optionee within the meaning of Section 22(e)
(3) of the Code, such Optionee's Options may be exercised to the extent (and
only to the extent) that it would have been exercisable by the Optionee on
the date of termination, by the Optionee (or the Optionee's legal
representative) within twelve (12) months after the date of termination (or
such shorter time period as may be specified in the Grant), but in any event
no later than the expiration date of the Options.
(iii) The Committee shall have discretion to determine whether the
Optionee is an employee of or has ceased to be employed by the Company or
any Parent, Subsidiary or Affiliate of the Company and the effective date on
which such employment terminated.
(iv) In the case of an Optionee who is an independent consultant,
contractor or advisor, the Committee will have the discretion to determine
whether the Optionee is "employed by the Company or any Parent, Subsidiary
or Affiliate of the Company" pursuant to the foregoing section.
(v) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act of 1933, as amended, and all applicable
state securities laws, as they are in effect on the date of exercise.
K-4
<PAGE>
(vi) The Committee may specify a reasonable minimum number of Shares that
may be purchased on any exercise of an Option, provided that such minimum
number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
(e) ESCROW; PLEDGE OF SHARES. To enforce any restrictions on an Optionee's
Shares, the Committee may require the Optionee to deposit all certificates,
together with stock powers or other instruments of transfer approved by the
Committee, appropriately endorsed in blank, with the Company or an agent
designated by the Company to hold in escrow until such restrictions have lapsed
or terminated, and the Committee may cause a legend or legends referencing such
restrictions to be place on the certificates. Any Optionee who is permitted to
execute a promissory note as partial or full consideration for the purchase of
Shares under the Plan shall be required to pledge and deposit with the Company
all or part of the Shares so purchased as collateral to secure the payment of
the Optionee's obligation to the Company under the promissory note; provided,
however, that the Committee may in its sole discretion require or accept other
or additional forms of collateral to secure the payment of such obligation. In
connection with any pledge of the Shares, Optionee shall be required to execute
and deliver a written pledge agreement in such form as the Committee shall from
time to time approve. The Shares purchased with the promissory note may be
released from the pledge on a pro rata basis as the promissory note is paid.
9. NONTRANSFERABILITY OF OPTIONS. If an Option is an ISO, or if Optionee
is an Insider subject to Section 16(b) of the Exchange Act, then an Option may
not be transferred in any manner other than by will or by the law of descent and
distribution and may be exercised during the lifetime of the Optionee only by
the Optionee. Otherwise, an Option may only be transferred to Optionee's
immediate family, to a trust for the benefit of Optionee or Optionee's immediate
family, or to a charitable entity qualified under IRC Section 501(c), where
"immediate family" shall mean spouse, lineal descendant or antecedent, brother
or sister. The terms of this Option shall be binding upon the executors,
administrators, successors and assigns of the Optionee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time
after the close of each fiscal year of the Company as they are released by the
Company to its stockholders.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of common stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such Options shall be
proportionately adjusted, subject to any required action by the Board or
stockholders of the Company and compliance with applicable securities laws;
provided, however, that no certificate or scrip representing fractional shares
shall be issued upon exercise of any Option and any resulting fractions of a
Share shall be ignored.
12. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer an any Optionee any right to continue in the employ
of the Company or any Parent, Subsidiary or Affiliate of the Company or limit in
any way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate the Optionee's employment at any time, with or without
cause.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the Securities Act of 1933, as
K-5
<PAGE>
amended, any required approval by the Company's stockholders and by the State of
Delaware, compliance with all other applicable state securities laws and
compliance with the requirements of any stock exchange or national market system
on which the Shares may be listed.
14. RESTRICTIONS ON SHARES. The Committee has the discretion to reserve to
the Company or its assignee(s) in the Grant a right to repurchase all Shares
held by an Optionee upon the Optionee's termination of employment or service
with the Company or its Parent, Subsidiary or Affiliate of the Company for any
reason within a specified time as determined by the Committee at the time of
grant at (i) the Optionee's original purchase price (provided that the right to
repurchase at such price lapsed at the rate of at least 20% per year from the
date of grant), (ii) the Fair Market Value of such Shares or (iii) a price
determined by a formula or other provision set forth in the Grant.
15. ASSUMPTION OF OPTIONS BY SUCCESSORS. In the event of a dissolution or
liquidation of the Company, a merger in which the Company is not the surviving
corporation (other than a merger with a wholly owned subsidiary or where there
is no substantial change in the stockholders of the Company and the Options
granted under this Plan are assumed by the successor corporation), the sale of
substantially all of the assets of the Company, or, any other transaction which
qualifies as a "corporate transaction" under Section 425(a) of the Code wherein
the stockholders of the Company give up all of their equity interest in the
Company (except for the acquisition of all or substantially all of the
outstanding shares of the Company), any or all outstanding Options shall,
notwithstanding any contrary terms of the Grant, accelerate and become
exercisable in full prior to the consummation of such dissolution, liquidation,
merger or sale of assets at such times and on such conditions as the Committee
shall determine unless the successor corporation assumes the outstanding Options
or substitutes substantially equivalent options. The aggregate Fair Market Value
(determined at the time an Option is granted) of stock with respect to ISOs
which first become exercisable in the year of such dissolution, liquidation,
merger or sale of assets cannot exceed $100,000. Any remaining accelerated ISOs
shall be NQSOs.
16. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan in any respect (including, but not limited to, any
form of grant, agreement or instrument to be executed pursuant to this Plan) or
accelerate the vesting schedule of any option grant; provided, however, that the
Committee shall not, without the approval of the stockholders of the Company,
increase the total number of Shares available under this Plan or amend this Plan
in any manner that requires such stockholder approval pursuant to the Code or
the regulations promulgated thereunder as such provisions apply to incentive
stock option plans or pursuant to the Exchange Act or Rule 16b-3 (or its
successor) promulgated thereunder. In any case, no amendment of this Plan may
adversely affect any then outstanding Options or any unexercised portions
thereof without the written consent of the Optionee.
17. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten years from the date this Plan is adopted by the
Board of Directors.
K-6
<PAGE>
ANNEX L
SYMANTEC'S 1989 EMPLOYEE
STOCK PURCHASE PLAN
<PAGE>
SYMANTEC CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(ADOPTED BY THE BOARD OF DIRECTORS ON OCTOBER 24, 1989)
(AS AMENDED THROUGH OCTOBER 4, 1995)
1. ESTABLISHMENT OF PLAN
Symantec Corporation (the "Company") proposes to grant options for purchase
of the Company's Common Stock to eligible employees of the Company and
Subsidiaries (as hereinafter defined) pursuant to this Employee Stock Purchase
Plan (the "Plan"). For purposes of this Plan, "parent corporation" and
"Subsidiary" (collectively, "Subsidiaries") shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Section 424, of the
Internal Revenue Code of 1986, as amended (the "Code"). The Company intends that
the Plan shall qualify as an "employee stock purchase plan" under Section 423 of
the Code (including any amendments or replacements of such section), and the
Plan shall be so construed. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. A total of 2,000,000 shares of Common Stock are reserved for issuance
under the Plan. Such number shall be subject to adjustments effected in
accordance with Section 14 of the Plan.
2. PURPOSES
The purpose of the Plan is to provide employees of the Company and
Subsidiaries designated by the Board of Directors as eligible to participate in
the Plan with a convenient means to acquire an equity interest in the Company
through payroll deductions, to enhance such employees' sense of participation in
the affairs of the Company and Subsidiaries, and to provide an incentive for
continued employment.
3. ADMINISTRATION
The Plan is administered by the Board of Directors of the Company or by a
committee designated by the Board of Directors of the Company (in which event
all references herein to the Board of Directors shall be to the committee).
Subject to the provisions of the Plan and the limitations of Section 423 of the
Code or any successor provision in the Code, all questions of interpretation or
application of the Plan shall be determined by the Board and its decisions shall
be final and binding upon all participants. Members of the Board shall receive
no compensation for their services in connection with the administration of the
Plan, other than standard fees as established from time to time by the Board of
Directors of the Company for services rendered by Board members serving on Board
committees. All expenses incurred in connection with the administration of the
Plan shall be paid by the Company.
4. ELIGIBILITY
Any employee of the Company or the Subsidiaries is eligible to participate
in an Offering Period (as hereinafter defined) under the Plan except the
following:
(a) employees who are not employed by the Company or Subsidiaries on the
fifteenth (15th) day of the month before the beginning of such Offering
Period;
(b) employees who are customarily employed for less than 20 hours per
week;
(c) employees who are customarily employed for less than 5 months in a
calendar year;
(d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 425(d) of the Code, own
stock or hold options to purchase stock or who, as a result of being granted
an option under the Plan with respect to such Offering Period, would own
stock or hold options to purchase stock possessing 5 percent or more of the
total combined voting power or value of all classes of stock of the Company
or any of its Subsidiaries; and
L-1
<PAGE>
(e) employees who would, by virtue of their participation in such
Offering Period, be participating simultaneously in more than one Offering
Period under the Plan.
5. OFFERING DATES
The Offering Periods of the Plan (the "Offering Period") shall be of 24
months duration commencing January 1 and July 1 of each year and ending on the
second December 31 and June 30, respectively, thereafter. The first day of each
Offering Period is referred to as the "Offering Date." Except as provided in the
next succeeding sentence, each Offering Period shall consist of four six-month
purchase periods (individually, a "Purchase Period") during which payroll
deductions of the participant are accumulated under this Plan. Each such
six-month Purchase Period shall commence on each January 1 and July 1 of an
Offering Period and shall end on the next June 30 and December 31, respectively;
provided, however, that the first two Purchase Periods during the initial
Offering Period shall commence on January 1 and October 1, respectively, and end
on September 30 and December 31, respectively. The last business day of each
Purchase Period is hereinafter referred to as the Purchase Date. The Board of
Directors of the Company shall have the power to change the duration of Offering
Periods or Purchase Periods with respect to future offerings without stockholder
approval if such change is announced at least fifteen (15) days prior to the
scheduled beginning of the first Offering Period or Purchase Period, as the case
may be, to be affected.
6. PARTICIPATION IN THE PLAN
Eligible employees may become participants in an Offering Period under the
Plan on the first Offering Date after satisfying the eligibility requirements by
delivering to the Company's or Subsidiary's (whichever employs such employee)
treasury department (the "treasury department") not later than the 15th day of
the month before such Offering Date (or not later than the 22nd day of the month
for the first Offering Date) unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a given
Offering Period a subscription agreement authorizing payroll deductions. An
eligible employee who does not deliver a subscription agreement to the treasury
department by such date after becoming eligible to participate in such Offering
Period under the Plan shall not participate in that Offering Period or any
subsequent Offering Period unless such employee enrolls in the Plan by filing
the subscription agreement with the treasury department not later than the 15th
day of the month preceding a subsequent Offering Date. Once an employee becomes
a participant in an Offering Period, such employee will automatically
participate in the Offering Period commencing immediately following the last day
of the prior Offering Period unless the employee withdraws from the Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreements in order to continue participation in the Plan. Any participant whose
option expires and who has not withdrawn from the Plan pursuant to Section 11
below will automatically be re-enrolled in the Plan and granted a new option on
the Offering Date of the next Offering Period. A participant in the Plan may
participate in only one Offering Period at any time.
7. GRANT OF OPTION ON ENROLLMENT
Enrollment by an eligible employee in the Plan with respect to an Offering
Period will constitute the grant (as of the Offering Date) by the Company to
such employee of an option to purchase on each Purchase Date up to that number
of shares of Common Stock of the Company determined by dividing the amount
accumulated in such employee's payroll deduction account during such Purchase
Period by the lower of (i) eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock on the Offering Date (the "Entry Price")
or (ii) eighty-five percent (85%) of the fair market value of a share of the
Company's Common Stock on the Purchase Date, provided, however, that the number
of shares of the Company's Common Stock subject to any option granted pursuant
to this Plan shall not exceed the lesser of (a) the maximum number of shares set
by the Board pursuant to Section 10(c) below with respect to all Purchase
Periods within the applicable Offering Period or Purchase Period, or (b) 200% of
the number of shares determined by using 85% of the fair market
L-2
<PAGE>
value of a share of the Company's Common Stock on the Offering Date as the
denominator. Fair market value of a share of the Company's Common Stock shall be
determined as provided in Section 8 hereof.
8. PURCHASE PRICE
The purchase price per share at which a share of Common Stock will be sold
in any Offering Period shall be 85 percent of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of the Plan, the term "fair market value" on a given date shall
mean the closing price from the previous day's trading of a share of the
Company's Common Stock as reported on the NASDAQ National Market System.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF SHARES
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Purchase Period. The deductions are made as a
percentage of the employee's compensation in one percent increments not less
than 2 percent nor greater than 10 percent. Compensation shall mean all W-2
compensation, including, but not limited to base salary, wages, commissions,
overtime, shift premiums and bonuses, plus draws against commissions; provided,
however, that for purposes of determining a participant's compensation, any
election by such participant to reduce his or her regular cash remuneration
under Sections 125 or 401(k) of the Code shall be treated as if the participant
did not make such election. Payroll deductions shall commence on the first
payday following the Offering Date and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in the Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during a Purchase Period by filing with the treasury department a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than 15 days after the
treasury department's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such change
in the rate of payroll deductions may be made at any time during an Offering
Period, but not more than one change may be made effective during any Purchase
Period. A participant may increase or lower the rate of payroll deductions for
any subsequent Purchase Period by filing with the treasury department a new
authorization for payroll deductions not later than the 15th day of the month
before the beginning of such Purchase Period.
(c) All payroll deductions made for a participant are credited to his or her
account under the Plan and are deposited with the general funds of the Company;
no interest accrues on the payroll deductions. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
(d) On each Purchase Date, so long as the Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under the Plan and have all payroll
deductions accumulated in the account maintained on behalf of the participant as
of that date returned to the participant, the Company shall apply the funds then
in the participant's account to the purchase of whole shares of Common Stock
reserved under the option granted to such participant with respect to the
Offering Period to the extent that such option is exercisable on the Purchase
Date. The purchase price per share shall be as specified in Section 8 of the
Plan. Any cash remaining in a participant's account after such purchase of
shares shall be refunded to such participant in cash; provided, however, that
any amount remaining in such participant's account on a Purchase Date which is
less than the amount necessary to purchase a full share of Common Stock of the
Company
L-3
<PAGE>
shall be carried forward, without interest, into the next Purchase Period or
Offering Period, as the case may be. In the event that the Plan has been
oversubscribed, all funds not used to purchase shares on the Purchase Date shall
be returned to the participant. No Common Stock shall be purchased on a Purchase
Date on behalf of any employee whose participation in the Plan has terminated
prior to such Purchase Date.
(e) As promptly as practicable after the Purchase Date, the Company shall
arrange the delivery to each participant, as appropriate, of a certificate
representing the shares purchased upon exercise of his option; provided that the
Board may deliver certificates to a broker or brokers that hold such certificate
in street name for the benefit of each such participant.
(f) During a participant's lifetime, such participant's option to purchase
shares hereunder is exercisable only by him or her. The participant will have no
interest or voting right in shares covered by his or her option until such
option has been exercised. Shares to be delivered to a participant under the
Plan will be registered in the name of the participant or in the name of the
participant and his or her spouse.
10. LIMITATIONS ON SHARES TO BE PURCHASED
(a) No employee shall be entitled to purchase stock under the Plan at a rate
which, when aggregated with his or her rights to purchase stock under all other
employee stock purchase plans of the Company or any Subsidiary, exceeds $25,000
in fair market value, determined as of the Offering Date (or such other limit as
may be imposed by the Code) for each calendar year in which the employee
participates in the Plan.
(b) No more than 200% of the number of shares determined by using 85% of the
fair market value of a share of the Company's Common Stock on the Offering Date
as the denominator may be purchased by a participant on any single Purchase
Date.
(c) No employee shall be entitled to purchase more than the Maximum Share
Amount (as defined below) on any single Purchase Date. Not less than thirty days
prior to the commencement of any Purchase Period, the Board may, in its sole
discretion, set a maximum number of shares which may be purchased by any
employee at any single Purchase Date (hereinafter the "Maximum Share Amount").
In no event shall the Maximum Share Amount exceed the amounts permitted under
Section 10(b) above. If a new Maximum Share Amount is set, then all participants
must be notified of such Maximum Share Amount not less than fifteen days prior
to the commencement of the next Purchase Period. Once the Maximum Share Amount
is set, it shall continue to apply in respect of all succeeding Purchase Dates
and Purchase Periods unless revised by the Board as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in the Plan exceeds the number of shares then available
for issuance under the Plan, the Company will make a pro rata allocation of the
remaining shares in as uniform a manner as shall be practicable and as the Board
shall determine to be equitable. In such event, the Company shall give written
notice of such reduction of the number of shares to be purchased under a
participant's option to each employee affected thereby.
(e) Any payroll deductions accumulated in a participant's account which are
not used to purchase stock due to the limitations in this Section 10 shall be
returned to the participant as soon as practicable after the end of the Offering
Period.
11. WITHDRAWAL
(a) Each participant may withdraw from an Offering Period under the Plan by
signing and delivering to the treasury department notice on a form provided for
such purpose. Such withdrawal may be elected at any time at least 15 days prior
to the end of an Offering Period.
(b) Upon withdrawal from the Plan, the accumulated payroll deductions shall
be returned to the withdrawn employee and his or her interest in the Plan shall
terminate. In the event an employee
L-4
<PAGE>
voluntarily elects to withdraw from the Plan, he or she may not resume his or
her participation in the Plan during the same Offering Period, but he or she may
participate in any Offering Period under the Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
the Plan.
(c) If the purchase price on the first day of any current Offering Period in
which a participant is enrolled is higher than the purchase price on the first
day of any subsequent Offering Period, the Company will automatically enroll
such participant in the subsequent Offering Period . A participant does not need
to file any forms with the Company to automatically be enrolled in the
subsequent Offering Period.
12. TERMINATION OF EMPLOYMENT
Termination of a participant's employment for any reason, including
retirement or death or the failure of a participant to remain an eligible
employee, terminates his or her participation in the Plan immediately. In such
event, the payroll deductions credited to the participant's account will be
returned to him or her or, in the case of his or her death, to his or her legal
representative. For this purpose, an employee will not be deemed to have
terminated employment or failed to remain in the continuous employ of the
Company in the case of sick leave, military leave, or any other leave of absence
approved by the Board of Directors of the Company; provided that such leave is
for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
13. RETURN OF PAYROLL DEDUCTIONS
In the event an employee's interest in the Plan is terminated by withdrawal,
termination of employment or otherwise, or in the event the Plan is terminated
by the Board, the Company shall promptly deliver to the employee all payroll
deductions credited to his or her account. No interest shall accrue on the
payroll deductions of a participant in the Plan.
14. CAPITAL CHANGES
Subject to any required action by the stockholders of the Company, the
number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split or the payment of a stock
dividend (but only on the Common Stock) or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that the options
under the Plan shall terminate as of a date fixed by the Board and give each
participant the right to exercise his or her option as to all of the optioned
stock, including shares which would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each option under
the Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right
L-5
<PAGE>
to exercise the option as to all of the optioned stock. If the Board makes an
option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of twenty (20) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
15. NONASSIGNABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive shares under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided in
Section 22 hereof) by the participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect.
16. REPORTS
Individual accounts will be maintained for each participant in the Plan.
Each participant shall receive promptly after the end of each Purchase Period a
report of his account setting forth the total payroll deductions accumulated,
the number of shares purchased, the per share price thereof and the remaining
cash balance, if any, carried forward to the next Purchase Period or Offering
Period, as the case may be.
17. NOTICE OF DISPOSITION
Each participant shall notify the Company if the participant disposes of any
of the shares purchased in any Offering Period pursuant to this Plan if such
disposition occurs within two years from the Offering Date or within six months
from the Purchase Date on which such shares were purchased (the "Notice
Period"). Unless such participant is disposing of any of such shares during the
Notice Period, such participant shall keep the certificates representing such
shares in his or her name (and not in the name of a nominee) during the Notice
Period. The Company may, at any time during the Notice Period, place a legend or
legends on any certificate representing shares acquired pursuant to the Plan
requesting the Company's transfer agent to notify the Company of any transfer of
the shares. The obligation of the participant to provide such notice shall
continue notwithstanding the placement of any such legend on certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT
Neither this Plan nor the grant of any option hereunder shall confer any
right on any employee to remain in the employ of the Company or any Subsidiary
or restrict the right of the Company or any Subsidiary to terminate such
employee's employment.
19. EQUAL RIGHTS AND PRIVILEGES
All eligible employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision of the Code and the
related regulations. Any provision of the Plan which is inconsistent with
Section 423 or any successor provision of the Code shall without further act or
amendment by the Company or the Board be reformed to comply with the
requirements of Section 423. This Section 19 shall take precedence over all
other provisions in the Plan.
20. NOTICES
All notices or other communications by a participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
L-6
<PAGE>
21. STOCKHOLDER APPROVAL OF AMENDMENTS
Any required approval of the stockholders of the Company shall be solicited
substantially in accordance with Section 14(a) of the Securities Exchange Act of
1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder. Such approval of an
amendment shall be solicited at or prior to the first annual meeting of
stockholders held subsequent to the grant of an option under the Plan as then
amended to an officer or director of the Company. If such stockholder approval
is obtained at a duly held stockholders' meeting, it must be obtained by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company, or if such stockholder approval is obtained by written consent, it must
be obtained by the unanimous written consent of all stockholders of the Company;
provided, however, that approval at a meeting or by written consent may be
obtained by a lesser degree of stockholder approval if the Board determines, in
its discretion after consultation with the Company's legal counsel, that such
lesser degree of stockholder approval will comply with all applicable laws and
will not adversely affect the qualification of the Plan under Section 423 of the
Code or Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
22. DESIGNATION OF BENEFICIARY
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares or cash
to the executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares or cash to the spouse or
to any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES
Shares shall not be issued with respect to an option unless the exercise of
such option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
So long as the purchase of shares on a Purchase Date is exempt from the
operation of Section 16(b) of the Exchange Act by the operation of Rule 16b-6
promulgated under the Exchange Act, shares purchased by a person subject to the
requirements of Section 16(b) of the Exchange Act may not be sold prior to the
expiration of six (6) months from the Purchase Date on which such shares were
purchased or such other date as may be required by Rule 16b-3 (or any successor
rule).
24. APPLICABLE LAW
The Plan shall be governed by the substantive laws (excluding the conflict
of laws rules) of the State of Delaware.
25. AMENDMENT OR TERMINATION OF THE PLAN
This Plan shall be effective January 1, 1990, subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted by the Board of Directors of the Company and the Plan shall continue
until the earlier to occur of termination by the Board, issuance
L-7
<PAGE>
of all of the shares of Common Stock reserved for issuance under the Plan, or
ten (10) years from the adoption of the Plan by the Board. The Board of
Directors of the Company may at any time amend or terminate the Plan, except
that any such termination cannot affect options previously granted under the
Plan, nor may any amendment make any change in an option previously granted
which would adversely affect the right of any participant, nor may any amendment
be made without approval of the stockholders of the Company obtained in
accordance with Section 21 hereof within 12 months of the adoption of such
amendment (or earlier if required by Section 21) if such amendment would:
(a) Increase the number of shares that may be issued under the Plan;
(b) Change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(c) Constitute an amendment for which stockholder approval is required
in order to comply with Rule 16b-3 (or any successor rule) of the Exchange
Act.
L-8
<PAGE>
SYMANTEC CORPORATION
10201 TORRE AVENUE
CUPERTINO, CALIFORNIA 95014
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) appoints Robert R.B. Dykes and Derek Witte,
and each of them, with full power of substitution, as attorneys and proxies for
and in the name and place of the undersigned, and hereby authorizes each of them
to represent and to vote all of the shares of Common Stock of Symantec
Corporation ("Symantec") held of record by the undersigned as of October 4, 1995
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of Symantec to be held on November 20, 1995, at the Garden Court Hotel, Palo
Alto, California, at 9:00 a.m., (Pacific Time), and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER WILL BE
VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENT THEREOF IN THE MANNER
DESCRIBED HEREIN. IF NO CONTRARY INDICATION IS MADE THE PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3, 4, 5 AND 6 AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS
NAMED AS PROXIES HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
See Reverse Side
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR PROPOSALS 1,
2, 3, 4, 5 AND 6.
1. Proposal to approve the Combination Agreement, including the issuance of
shares of Symantec Common Stock, as described in the accompanying Joint
Proxy Statements. For / / Against / /
2. Proposal to amend Symantec's Certificate of Incorporation to increase by
30,000,000 the number of shares of Common Stock, par value $.01 per share,
authorized for issuance and to create a new class of stock, designated
Special Voting Stock, par value $1.00 per share, and to authorize one share
for issuance thereunder. For / / Against / /
3. Election of Directors.
For all nominees listed below Withhold Authority to vote
(except as marked to the contrary below) for all nominees listed below
/ / / /
(Instruction: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name below)
Charles M. Boesenberg Walter W. Bregman Carl D. Carman
Gordon E. Eubanks, Jr. Robert S. Miller Leslie L. Vadasz
4. Proposal to amend Symantec's 1989 Employee Stock Purchase Plan to increase
by 500,000 shares the number of shares of Common Stock reserved for issuance
thereunder. For / / Against / /
5. Proposal to amend Symantec's 1988 Employees Stock Option Plan to increase by
1,000,000 shares the number of shares of Common Stock reserved for issuance
thereunder. For / / Against / /
6. Proposal to ratify the selection of Ernst & Young LLP as Symantec's
independent auditors for the current fiscal year. For / / Against / /
/ / MARK HERE FOR ADDRESS CHANGE AND NOTE AT
LEFT
This Proxy must be signed exactly as your name
appears hereon. When shares are held by joint
tenants, both should sign. Attorneys, executors,
administrators, trustees and guardians should
indicate their capacities. If the signer is a
corporation, please print full corporate name
and indicate capacity of duly authorized officer
executing on behalf of the corporation. If the
signer is a partnership, please print full
partnership name and indicate capacity of duly
authorized person executing on behalf of the
partnership.
(Reverse Side)
SIGNATURE(S) ________________________________________ DATE ________, 1995
<PAGE>
DELRINA CORPORATION
FORM OF PROXY SOLICITED BY MANAGEMENT FOR
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Delrina Corporation (the "Corporation")
hereby appoints Dennis Bennie, Chairman of the Board of the Corporation, or,
failing him, Mark Skapinker, President of the Corporation, or, failing him,
Michael Cooperman, Secretary of the Corporation, or, instead of any of them,
, with power of substitution, as the proxyholder of the
undersigned to attend and vote and act for and on behalf of the undersigned at
the ANNUAL AND SPECIAL MEETING OF THE SHAREHOLDERS OF THE CORPORATION TO BE HELD
ON NOVEMBER 20, 1995 (THE "DELRINA MEETING") AND ANY ADJOURNMENT THEREOF and the
undersigned hereby grants authorization to vote as follows, namely:
1. For / / or Against / / the special resolution (the "Arrangement Resolution")
to approve an arrangement (the "Arrangement") under section 182 of the
BUSINESS CORPORATIONS ACT (Ontario) (the "OBCA"), all as more particularly
described in the Joint Management Information Circular and Proxy Statement
(the "Joint Proxy Statement") accompanying the notice of the Delrina
Meeting.
2. For / / or Withheld from Voting / / in respect of the election as directors
of the Corporation of the persons named in the Joint Proxy Statement.
3. For / / or Withheld from Voting / / in respect of the appointment of Price
Waterhouse as auditors of the Corporation for the fiscal year ending June
30, 1996 and authorizing the directors of the Corporation to fix their
remuneration.
4. At the proxyholder's discretion:
(a) on any variations or amendments to any of the above matters proposed
to the Delrina Meeting or any adjournment thereof; and
(b) on any other matters that may properly come before the Delrina Meeting
or any adjournment thereof.
The shares represented by this proxy will be voted or withheld from voting
in accordance with the above instructions. IF INSTRUCTIONS ARE NOT GIVEN WITH
RESPECT TO A MATTER REFERRED TO IN THIS PROXY AND A MANAGEMENT NOMINEE (BEING
THE PERSONS DESIGNATED IN THIS PROXY) IS APPOINTED AS PROXYHOLDER, THE SHARES
REPRESENTED BY SUCH PROXY WILL BE VOTED FOR OR IN FAVOUR OF SUCH MATTER.
DATED this day of ,
1995
- --------------------------------------------------------------------------------
Signature of Shareholder
<PAGE>
1. Each shareholder has the right to
appoint a person (who need not be a
shareholder) other than the persons
designated in this proxy to attend
and vote and act for and on behalf
of such shareholder. This right may
be exercised either by striking out
the designated names and inserting
in the blank space provided the name
of the person to be appointed, or by
using another appropriate form of
proxy.
2. If this form of proxy is used it
must be dated and signed by the
shareholder or his or her attorney
authorized in writing or, where the
shareholder is a corporation, by a
duly authorized officer or attorney
of the corporation with an
indication of the title of such
officer or attorney and with the
corporation's name appearing above
the signature line.
3. If this form of proxy is not dated
in the space provided, it shall be
deemed to bear the date on which it
is mailed by management of the
Corporation.
<PAGE>
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
LETTER OF TRANSMITTAL
FOR HOLDERS OF COMMON SHARES
OF
DELRINA CORPORATION
THE DEPOSITARY IS:
THE R-M TRUST COMPANY
TELEPHONE: (416) 813-4600; (800) 387-0825
FACSIMILE: (416) 813-4646
BY HAND OR BY COURIER: BY REGISTERED MAIL:
393 University Avenue P. O. Box 1036
Lower Level Adelaide Street Postal Station
Toronto, Ontario Toronto, Ontario
M5G 2M7 M5C 2K4
This Letter of Transmittal together with the certificate(s) for Delrina
Common Shares to be exchanged for Exchangeable Shares should be delivered in
person or sent by registered mail (which is recommended) to The R-M Trust
Company (the "Depositary") at the addresses set forth above.
Capitalized terms used in this Letter of Transmittal, unless otherwise
defined, shall have the meaning ascribed to them in the Joint Management
Information Circular and Proxy Statement of Delrina and Symantec Corporation
dated October 17, 1995, a copy of which is enclosed, in the case of Delrina
shareholders in Canada, or which will be mailed under separate cover in the case
of Delrina shareholders in the United States.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF DELRINA COMMON SHARES TRANSMITTED
(if space is insufficient, please attach a signed list (see Instruction 3))
Name(s) and Address(es) of Registered Holder(s) Certificate Number(s) Number of Shares
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
To: Delrina Corporation, c/o The R-M Trust Company
The undersigned hereby represents that the undersigned is the owner of the
Delrina Common Shares represented by the certificate(s) described above and has
good title to those shares free and clear of all liens, charges, encumbrances
and adverse interests. The certificate(s) described above are enclosed. The
undersigned transmits the certificate(s) described above representing Delrina
Common Shares to be dealt with in accordance with this Letter of Transmittal.
The undersigned acknowledges that each Delrina Common Share will, provided that
the Arrangement and the Transaction are completed, be exchanged for 0.61 of an
Exchangeable Share, subject to cash payment in lieu of the issuance of
fractional Exchangeable Shares. It is understood that upon (i) receipt of this
Letter of Transmittal and the certificate(s) described above, and (ii)
completion of the Arrangement and the Transaction, the Depositary will, as soon
as practicable, send to each registered holder certificates for the number of
Exchangeable Shares to which the registered holder is entitled, together with a
cheque in the amount, if any, payable in lieu of fractional Exchangeable Shares,
all on the basis described in the Joint Proxy Statement.
Unless otherwise indicated in this Letter of Transmittal under "Special
Registration Instructions," the undersigned requests that the Depositary issue
the certificates for Exchangeable Shares (and cheque, if applicable) in the
name(s) of the registered holder(s) appearing above under "Description of
Delrina Common Shares Transmitted." Similarly, unless otherwise indicated under
"Special Delivery Instructions," the undersigned requests that the Depositary
mail the certificates for Exchangeable Shares (and cheque, if applicable) by
first class mail to the undersigned at the address appearing above under
"Description of Delrina Common Shares Transmitted." If no address is specified,
the undersigned acknowledges that the Depositary will forward the certificates
(and cheque, if applicable) to the address of the holder as shown on the share
registers maintained by Delrina.
<PAGE>
<TABLE>
<S> <C> <C>
SHAREHOLDER SIGNATURE(S) > (SIGNATURE(S) OF OWNER(S))
(This box must be signed by registered Name: ........................................
holder(s) exactly as name(s) appear(s) on the (please print)
Delrina Common Share certificate(s) or by Capacity (Title): ............................
transferee(s) of original registered holder(s) Address: .....................................
authorized to become new registered holder(s) Telephone: ...................................
by certificates and documents transmitted with
this Letter of Transmittal. See Instruction 4
below. If the signature is by a trustee,
executor, administrator, guardian, attorney-
in-fact, agent, officer of a corporation or
any other person acting in a fiduciary or
representative capacity, please provide the
following information. See Instruction 4.
GUARANTEE OF SIGNATURE(S) > Name: ........................................
Authorized Signature on behalf of Eligible (please print)
Institution. See Instructions 1 and 4. Name of Firm: ................................
Address: .....................................
Telephone: ...................................
Dated: ................................ , 1995
SPECIAL REGISTRATION INSTRUCTIONS > / / Issue certificates (and cheque, if
To be completed ONLY if the certificates for applicable) to:
Exchangeable Shares (and cheque, if Name: ........................................
applicable) are to be issued in the name of (Please Print)
someone other than the person(s) indicated Address: .....................................
above under "Shareholder Signature(s)." See
Instruction 5.
SPECIAL DELIVERY INSTRUCTIONS > / / Mail certificates (and cheque, if
To be completed ONLY if the certificates for applicable) to:
Exchangeable Shares are to be sent to someone Name: ........................................
other than the undersigned or to the (please print)
undersigned at an address other than that Address: .....................................
appearing above under "Description of Delrina / / Hold certificates for pick-up at offices
Common Shares Transmitted" or are to be held of Depositary.
by the Depositary for pick-up by the
shareholder(s) or any person designated by the
shareholder(s) in writing. See Instruction 5.
</TABLE>
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES
No signature guarantee on this Letter of Transmittal is required if (1) this
Letter of Transmittal is signed by the registered holder of the Delrina Common
Shares transmitted by this Letter of Transmittal, unless the holder has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Registration Instructions"; or (2) the Delrina Common Shares
are transmitted for the account of a Canadian chartered bank or trust company,
or by any other commercial bank or trust company having an office or
correspondent in Toronto, or by a member of a recognized stock exchange in
Canada, or the Investment Dealers' Association of Canada (collectively, the
"Eligible Institutions"). IN ALL OTHER CASES, ALL SIGNATURES ON THIS LETTER OF
TRANSMITTAL MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. See also Instruction
4.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES
This Letter of Transmittal is to be completed by holders of certificates
representing Delrina Common Shares to be submitted with this Letter of
Transmittal. Certificates of all physically delivered Delrina Common Shares, as
well as a properly completed and duly executed Letter of Transmittal in the
appropriate form, should be received by the Depositary at the addresses set
forth above. THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING DELRINA COMMON
SHARES IS AT THE OPTION AND RISK OF THE PERSON TRANSMITTING THE CERTIFICATES.
DELRINA RECOMMENDS THAT THESE DOCUMENTS BE DELIVERED BY HAND TO THE DEPOSITARY
AND A RECEIPT BE OBTAINED FOR THE DOCUMENTS OR, IF MAILED, THAT REGISTERED MAIL,
PROPERLY INSURED, BE USED WITH AN ACKNOWLEDGMENT OF RECEIPT REQUESTED.
3. INADEQUATE SPACE
If the space provided in this Letter of Transmittal is inadequate, the
certificate number(s) or the number of Delrina Common Shares should be listed on
a separate signed list attached to this Letter of Transmittal.
4. SIGNATURES ON LETTER OF TRANSMITTAL, POWERS AND ENDORSEMENTS
If this Letter of Transmittal is signed by the registered holder(s) of the
Delrina Common Shares transmitted by this Letter of Transmittal, the
signature(s) must correspond with the name(s) as written on the face of the
certificate(s) without alternation, enlargement or any change whatsoever. If any
of the Delrina Common Shares transmitted by this Letter of Transmittal are held
of record by two or more joint owners, all the owners must sign this Letter of
Transmittal. If any transmitted Delrina Common Shares are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations or certificates. If this Letter of Transmittal or any certificates
or powers are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or any other person acting in
a fiduciary or representative capacity, those persons should so indicate when
signing, and proper evidence satisfactory to the Depositary of their authority
to act should be submitted. If this Letter of Transmittal is signed by the
registered holder(s) of the Delrina Common Shares evidenced by certificates
listed and submitted with this Letter of Transmittal, no endorsements of
certificates or separate powers are required unless certificates for
Exchangeable Shares are to be issued to a person other than the registered
holder(s). Signatures on those certificates or powers must be guaranteed by an
Eligible Institution. If this Letter of Transmittal is signed by a person other
than the registered holder(s) of the Delrina Common Shares evidenced by
certificates listed and submitted by this Letter of Transmittal, the
certificates must be endorsed or accompanied by appropriate share transfer or
stock transfer powers, in either case signed exactly as the name or names of the
registered holder or holders appear on the certificates. Signatures on the
certificates or powers must be guaranteed by an Eligible Institution.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS
If the certificates for Exchangeable Shares are to be issued in the name of
a person other than the signer of this Letter of Transmittal or if the
certificates are to be sent to someone other than the person signing this Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed.
6. LOST CERTIFICATES
Shareholders who have lost the certificate(s) representing Delrina Common
Shares should immediately contact the Depositary at the addresses set forth
above.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions and requests for assistance may be directed to the Depositary and
additional copies of this Letter of Transmittal may be obtained without charge
on request from the Depositary at the telephone numbers and addresses set forth
in this Letter of Transmittal. Shareholders may also contact their local broker,
dealer, commercial bank, Canadian chartered bank, trust company or other nominee
for assistance.
