Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 36 200K
2: EX-1 Agreement and Plan of Merger 54 211K
3: EX-2 License Agreement Dated October 15, 1998 27 87K
4: EX-3 Stockholder Agreement With King R. Lee 10 37K
5: EX-4 Stockholder Agreement With Frank W. T. Lahaye 10 37K
6: EX-5 Stockholder Agreement With William H. Lane Iii 10 37K
7: EX-6 Stockholder Agreement With Howard Morgan 10 37K
8: EX-7 Stockholder Agreement With Frank Greico 10 37K
9: EX-8 Stockholder Agreement With Joyce Wrenn 10 36K
10: EX-9 Stockholder Agreement With Suzanne Dickson 10 37K
11: EX-10 Stockholder Agreement With Gadi Navon 10 36K
12: EX-11 Stockholder Agreement With Cheri Kaplan-Smith 10 37K
13: EX-12 Stockholder Agreement With John Strosahl 10 37K
14: EX-13 Letter to Stockholders of Quarterdeck Corporation 2± 11K
15: EX-14 Fairness Opinion of Broadview International LLC 2 17K
16: EX-15 Confidentiality Agreement Dated September 15, 1998 3 15K
17: EX-16 Disclosure Agreement 6 27K
18: EX-17 Form of Indemnification Agreement 7 33K
19: EX-18 Proxy Statement Pages 8 41K
SC 14D9 — Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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QUARTERDECK CORPORATION
(NAME OF SUBJECT COMPANY)
QUARTERDECK CORPORATION
(NAMES OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $0.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
747712107
(CUSIP NUMBER OF CLASS OF SECURITIES)
FRANK R. GREICO
CHIEF FINANCIAL OFFICER
QUARTERDECK CORPORATION
13160 MINDANAO WAY, 3RD FLOOR
MARINA DEL REY, CA 90292
(310) 309-3700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
BRADLEY D. SCHWARTZ
SCHWARTZ & ASSOCIATES
333 SOUTH GRAND AVENUE, SUITE 3950
LOS ANGELES, CALIFORNIA 90071
(213) 629-0978
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Quarterdeck Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 13160 Mindanao Way, Marina del Rey, California 90292. The title
of the class of equity securities to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (this "Schedule 14D-9" or "Statement") relates is
the common stock, $0.001 par value, of the Company (the "Common Stock"),
together with the associated preferred stock purchase rights issued pursuant to
the Rights Agreement dated August 11, 1992, as amended, between the Company and
American Stock Transfer & Trust (the "Rights"). Unless the context otherwise
requires, as used herein the term "Shares" shall mean shares of Common Stock,
including the Rights.
ITEM 2. TENDER OFFER OF THE PURCHASER
This Statement relates to the cash tender offer (the "Offer") described in
the Tender Offer Statement on Schedule 14D-1, dated October 19, 1998 (as amended
or supplemented, the "Schedule 14D-1"), filed by Symantec Corporation, a
Delaware corporation ("Symantec" or "Parent"), and Oak Acquisition Corporation,
a Delaware corporation and wholly owned subsidiary of Parent ("Purchaser"), with
the Securities and Exchange Commission (the "SEC"), relating to an offer to
purchase all of the issued and outstanding Shares at $0.52 per Share (such
amount, or any greater amount per Share paid pursuant to the Offer, hereinafter
referred to as the "Offer Price"), net to the seller in cash, upon the terms and
subject to the conditions (including the condition that a majority of the
fully-diluted Shares are validly tendered) set forth in Purchaser's Offer to
Purchase, dated October 19, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which together with any amendments or supplements thereto
constitute the "Offer Documents").
The Offer is being made in accordance with an Agreement and Plan of Merger,
dated as of October 15, 1998 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. Pursuant to the Merger Agreement, at the effective
time of the Merger (the "Effective Time") and pursuant to the provisions of the
Delaware General Corporation Law (the "DGCL"), Purchaser will be merged with and
into the Company (the "Merger"), and the Company will become a wholly owned
subsidiary of Parent (the "Surviving Corporation"). At the Effective Time, each
Share issued and outstanding immediately prior to the Effective Time (other than
Shares held by Parent, Purchaser, the Company or any of their wholly owned
subsidiaries and Shares held by stockholders of the Company who will have
properly perfected their dissenters' rights, if any, under Delaware law) will be
converted into the right to receive $0.52 in cash, or any greater amount paid
per Share in the Offer, without interest (the "Merger Consideration"). The
Merger Agreement is summarized in Item 3 of this Schedule 14D-9.
The Offer Documents indicate that the principal executive offices of Parent
and Purchaser are located at 10201 Torre Avenue, Cupertino, California 95014.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in the Company's Proxy Statement, dated January 5,
1998, relating to its February 5, 1998 Annual Meeting of Stockholders (the
"Proxy Statement") under the headings "DIRECTORS' COMPENSATION," "EXECUTIVE
COMPENSATION," "EMPLOYMENT AGREEMENTS," "REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS," "DISCRETIONARY BONUS PLAN" and "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS." A copy of the applicable portions of the Proxy
Statement has been filed as an exhibit to this Schedule 14D-9 and is
incorporated herein by reference.
2
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement which is incorporated by reference herein and a copy of
which has been filed as an Exhibit to this Schedule. Capitalized terms not
otherwise defined in the following description of the Merger Agreement have the
respective meanings ascribed to them in the Merger Agreement.
The Merger Agreement provides for the commencement of the Offer within five
business days after the public announcement of the execution of the Merger
Agreement. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer is subject to there being validly tendered and not
withdrawn prior to the expiration of the Offer that number of Shares which shall
constitute at last a majority of the then outstanding Shares on a fully-diluted
basis (after giving effect to the exercise or conversion of all options, rights
and securities exercisable or convertible into Shares, but only to the extent
that any such options, rights or securities are exercisable or convertible into
such Shares at a price per Share less than $0.52), and to certain other
conditions that are described below under "Conditions to the Offer." Purchaser
and Symantec have agreed that no change in the Offer may be made which decreases
the price per Share payable in the Offer, reduces the maximum number of Shares
to be purchased in the Offer, imposes conditions to the Offer in addition to
those set forth below under "Conditions to the Offer," changes the form of
consideration payable in the Offer or amends any other material terms of the
Offer in a manner materially adverse to the Company's stockholders.
The Merger Agreement provides that, following consummation of the Offer and
upon the terms and subject to the conditions in the Merger Agreement and in
accordance with Delaware Law, at the Effective Time, Purchaser will be merged
with and into the Company. As a result of the Merger, the separate corporate
existence of Purchaser will cease and the Company will continue as the Surviving
Corporation (the "Surviving Corporation") and will become a direct or indirect
wholly owned subsidiary of Symantec. Upon consummation of the Merger, each
issued and outstanding Share (other than any Shares owned by the Company or by
any subsidiary of the Company, or owned by Purchaser, Symantec or any other
subsidiary of Symantec and any Shares which are held by stockholders who have
not voted in favor of the Merger or consented thereto in writing and who shall
have demanded appraisal for such Shares in accordance with Delaware Law) shall
be automatically converted into, and exchanged for, the right to receive the
Merger Consideration.
Pursuant to the Merger Agreement, each share of capital stock of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock, par value $0.001 per share,
of the Surviving Corporation, which will thereby become a wholly owned
subsidiary of Symantec.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement further provides that the Certificate of Incorporation and
by-laws of Purchaser as in effect at the Effective Time shall be the Certificate
of Incorporation and by-laws of the Surviving Corporation.
Pursuant to and subject to the conditions in the Merger Agreement, if
stockholder approval is required by law, the Company will, at the request of
Symantec, as soon as practicable following the consummation of the Offer, duly
call, give notice of, convene and hold a meeting of its stockholders for the
purpose of obtaining stockholder approval of the Merger (the "Stockholders
Meeting"). If Purchaser acquires a majority of the outstanding Shares pursuant
to the Offer, Purchaser will have sufficient voting power to approve the Merger,
even if no other stockholder votes in favor of the Merger.
The Merger Agreement provides that, if stockholder approval is required by
law, the Company will, at Symantec's request, as soon as practicable following
the expiration of the Offer, prepare and file a preliminary proxy statement and
related proxy materials (the "Proxy Statement") with the Commission under the
Exchange Act, and will use all reasonable efforts to respond to any comments of
the Commission or its staff
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and to cause the Proxy Statement to be mailed to stockholders of the Company as
promptly as practicable after responding to all such comments to the
satisfaction of the staff of the Commission. The Company has agreed, subject to
certain fiduciary duties under applicable law as described below, to include in
the Proxy Statement the recommendation of the Board of Directors that the
stockholders of the Company approve and adopt the Merger. The Merger Agreement
provides that, in the event that Purchaser or any other subsidiary of Symantec
acquires at least 90% of the outstanding Shares, Symantec, Purchaser and the
Company agree, at the request of Symantec, to take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after
expiration of the Offer without a meeting of the Company's stockholders, in
accordance with Delaware Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed to
carry on the businesses of the Company and its subsidiaries in the ordinary
course of business consistent with past practices and to use all reasonable
efforts to preserve intact their current business organizations, to keep
available the services of their current officers and employees and to preserve
relationships with distributors, licensors, contractors, customers, suppliers,
lenders, employees and others having business dealings with any of them. The
Merger Agreement provides that, except as expressly permitted by the other
provisions of the Merger Agreement and the Ancillary Agreements, or as may be
agreed to in writing by Symantec, neither the Company nor any subsidiary will do
any of the following: (i) declare, set aside or pay any dividends on or make any
other distributions in respect of any of its capital stock, other than by any
wholly owned subsidiary of the Company to its parent or, in the case of less
than wholly owned subsidiaries, as required by agreements existing on the date
of the Merger Agreement, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for Shares of its capital stock or purchase,
redeem or otherwise acquire any shares of its capital stock or any of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities; (ii) issue, deliver, sell,
pledge or otherwise encumber any shares of its or of any subsidiary's capital
stock, any other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible securities (other than the issuance of Company Common Stock upon the
exercise of Options and warrants outstanding on the date of the Merger Agreement
and disclosed in the Company's disclosure schedule and the issuance of Company
Common Stock upon conversion of the Convertible Notes or Company Preferred
Stock); (iii) amend its Certificate of Incorporation, by-laws or other
comparable charter or organizational documents; (iv) acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division thereof,
or any assets that individually or in the aggregate are material to the business
of the Company and its subsidiaries taken as a whole; (v) sell, lease, license,
mortgage or otherwise encumber or subject to any pledge, claim, lien, charge,
title retention, mortgage, security interest or encumbrance or otherwise dispose
of any of its properties or assets (including intellectual property) except for
sales, leases or encumbrances of immaterial or obsolete properties or assets,
and non-exclusive licenses of intellectual property rights, in each case in the
ordinary course of business consistent with past practices; (vi) transfer or
license to any person or entity or otherwise extend, amend or modify in any
material respect any rights to any of the Company's intellectual property rights
or the Company's intellectual property, other than non-exclusive licenses in the
ordinary course of business, or assign or grant any exclusive license to any of
the Company's intellectual property rights; (vii) incur any indebtedness for
borrowed money or draw down on any credit facility or arrangement or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or rights to acquire debt securities of the Company or any subsidiary
of the Company, or guarantee any debt securities of any person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing (other than borrowings of not more than $2.0 million in any
calendar month, not to exceed $3.0 million in the aggregate outstanding at any
time after the date of the Merger Agreement);(viii) make any loans, advances or
capital contributions to, or investments in, any other person, other than to the
Company or any subsidiary of the Company; (ix) make or agree to make any new
capital expenditure(s) which individually is in excess of $100,000 or which in
the aggregate are in excess of $200,000; (x) make any material tax election or
settle or compromise any income or franchise tax liability; (xi) pay, discharge,
settle or satisfy any claims (accrued,
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asserted or unasserted, contingent or otherwise) for an amount greater than
$100,000; (xii) enter into, amend, modify or terminate any agreement,
transaction, commitment or other right or obligation that, if in effect on the
date of the Merger Agreement, would be a material agreement, or that requires or
contemplates a current and/or future financial commitment, expense or obligation
on the part of the Company or any of its subsidiaries in excess of $100,000,
other than in the ordinary course of business consistent with past practices, or
waive, release or assign any material rights or claims thereunder, other than
discounting of accounts receivable to obtain prompt collection; (xiii) terminate
or lay off any material numbers of employees, other than for cause consistent
with past practice and Company policy; (xiv) other than as disclosed by the
Company in its Disclosure Schedule (as defined in the Merger Agreement)
delivered to Symantec, adopt or amend in any material respect any employee
benefit or employee stock purchase or employee option plan, or enter into any
employment contract, pay any special bonus or special remuneration to any
director or employee, or increase the salaries, wage rates or other compensation
payable to its officers or employees other than in the ordinary course of
business consistent with past practices, or commit or agree to do any of the
foregoing, or otherwise alter or commit to any compensation, benefit or
severance or change of control arrangement for or with any officer or employee
of the Company; (xv) grant or provide any severance or termination pay to any
officer or employee except payments that are in amounts consistent with the
Company's policies and past practices, are made pursuant to written plans or
agreements outstanding or policies existing on the date of the Merger Agreement;
(xvi) voluntarily take actions to liquidate or dissolve the Company or to take
advantage of bankruptcy or other creditor protection laws; (xvii) take any
action that would cause or constitute a breach of any representation or warranty
made by the Company in the Merger Agreement or any Ancillary Agreement or
(xviii) authorize any of, or commit or agree to take any of, the foregoing
actions.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, the Company shall, and shall cause its subsidiaries
to, afford Symantec and its officers, employees, accountants, counsel, financial
advisors and other representatives, reasonable access during normal business
hours to all their respective properties, books, contracts, commitments,
personnel and records and to furnish or make available promptly to Symantec a
copy of each report, schedule, registration statement and other document filed
by it during such period pursuant to the requirements of federal or state
securities laws, and all other information concerning its business, properties
and personnel as Symantec may reasonably request.
The Company has agreed that until the earlier of the Effective Time or
termination of the Merger Agreement, the Company shall not, nor shall it permit
any of its subsidiaries, nor shall it authorize or permit any of their
respective officers, directors, employees, investment bankers, attorneys or
other advisors or representatives, directly or indirectly, to (i) solicit,
initiate or encourage the submission of any "takeover proposals" (as defined
below), (ii) participate in any discussions or negotiations with, or furnish any
information to any person or group (other than Symantec) in connection with any
takeover proposal or (iii) take any other action to facilitate any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any takeover proposal. Under the Merger Agreement, a "takeover
proposal" means any proposal for a merger or other business combination
involving the Company or any of its subsidiaries, any proposal, offer or tender
offer to acquire (including by license) in any manner, directly or indirectly,
an equity interest in, not less than 35% of the outstanding voting securities of
the Company or any of its subsidiaries, or any proposal to acquire assets
representing not less than 25% of the annual revenues of the Company or any of
its subsidiaries in the fiscal year ended September 30, 1998 or to obtain a
license to the Company's ProComm or CleanSweep products or to any of the
Company's intellectual property that is incorporated, embodied or used therein
and that is material to such product, other than the transactions contemplated
by the Merger Agreement or the Ancillary Agreements. The Company has also agreed
that it, its subsidiaries, officers, directors, employees, investment bankers,
attorneys and other agents and representatives will immediately cease any and
all existing activities, discussions or negotiations with any parties conducted
previously regarding a takeover proposal. Pursuant to the Merger Agreement, the
Company will promptly advise Symantec orally and in writing of any request for
information or of any takeover proposal, or any inquiry with respect to, or
which could reasonably be expected to lead to, any takeover proposal, the
material terms and conditions of such request, takeover proposal or inquiry, and
the identity of the person
5
making any such takeover proposal or inquiry. The Company has also agreed to
keep Symantec informed of the status and material terms of any such request,
takeover proposal or inquiry.
Notwithstanding the foregoing, the Merger Agreement provides that, prior to
the Effective Time the Company may, to the extent the Board of Directors of the
Company determines in good faith, after consultation with outside counsel, that
the Board of Director's fiduciary duty under applicable law requires it to do
so, participate in discussions or negotiations with, or furnish information to,
any person, entity or group in response to an unsolicited bona fide takeover
proposal which the Company's Board of Directors in its good faith reasonable
judgment determines, after consultation with its independent financial advisors,
would result in a transaction more favorable to the Company's stockholders from
a financial point of view than the Offer and the Merger and after reasonable
inquiry by the Company that the party making such takeover proposal is
financially capable of consummating such takeover proposal (a "Superior
Proposal"). In the event the Company receives a Superior Proposal, nothing
contained in the Merger Agreement (subject to the provisions set forth in this
paragraph) will prevent the Company's Board of Directors from recommending such
Superior Proposal to the Company's stockholders, subject to the payment of a
break-up fee discussed below, if the Board determines, in good faith after
consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law, and, in connection therewith, withdraw,
modify or refrain from making its recommendation of the Offer; provided,
however, that the Company shall not recommend to the Company's stockholders a
Superior Proposal for a period of not less than 48 hours after the Company's
receipt of such Superior Proposal. The Company further agrees that it will not
provide any non-public information to a third party unless such information is
provided pursuant to a nondisclosure agreement with terms regarding the
protection of confidential information at least as restrictive as such terms in
the mutual nondisclosure agreement between the Company and Symantec. The
provisions described in this paragraph shall not prohibit the Company's Board of
Directors from taking and disclosing to the Company's stockholders a position
with respect to a takeover proposal pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act.
Pursuant to the Merger Agreement, the Company will give written notice to
each holder of a Company Option stating that such Option will terminate at the
Effective Time and that all outstanding Options, whether or not vested, will be
exercisable during the thirty (30) day period preceding the Effective Date. All
Options that are outstanding immediately prior to the Effective Time will be
terminated and canceled at the Effective Time and the holders of cancelled
Options having an exercise price that is less than the Offer Price, other than
members of the Company's Board of Directors or the Company's Chief Executive
Officer, will be entitled to receive an amount in cash equal to the product of
the difference between the Offer Price and the exercise price of such Option,
multiplied by the number of Shares issuable upon exercise of such Option
immediately prior to the Effective Time.
The Company has entered into an agreement with the holder of the
Convertible Notes providing that, immediately after the Effective Time, the
Surviving Corporation shall be entitled to repay all then-outstanding
Convertible Notes in their original principal amount and accrued interest
without premium or penalty and that the Merger Agreement would provide that
Surviving Corporation will repay the Notes in full within five business days
after consummation of the Merger.
Symantec has agreed to fulfill and honor and cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to its Certificate of Incorporation, by-laws and any indemnification
agreements between the Company and its directors and officers in their capacity
as such existing prior to the date of the Merger Agreement. From and after the
Effective Time, such obligations will be the joint and several obligations of
Symantec and the Surviving Corporation, and Symantec has assumed such
obligations. The Certificate of Incorporation and by-laws of the Surviving
Corporation will contain provisions with respect to indemnification and
elimination of liability for monetary damages set forth in the Certificate of
Incorporation and by-laws of the Company, which provisions will not be amended,
repealed or otherwise modified from the Effective Time in any manner that would
adversely affect the rights of the individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of the Company or
its subsidiaries, unless required by law.
6
For at least three years from the Effective Time, Symantec shall maintain
in effect the Company's current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time for those persons who are directors and
officers as of the date of the Merger Agreement (and, to the extent covered by
the existing policy, persons who were directors or officers prior to the date of
the Merger Agreement) in their capacity as such, so long as the annual premium
would not be in excess of 150% of the last annual premium paid prior to the date
of the Merger Agreement (the "Maximum Premium") and, to the extent the annual
premium would exceed the Maximum Premium, Symantec will cause to be maintained
the maximum amount of insurance that can be procured for the Maximum Premium. If
the existing insurance expires, is terminated or is canceled during such three
year period, Symantec will use all reasonable efforts to cause to be obtained as
much insurance as can be obtained for the remainder of the period for an
annualized premium not in excess of the amount indicated above, on terms and
conditions no less advantageous than the existing insurance. In lieu of
maintaining the Company's current insurance, Symantec may elect to add the
directors and officers of the Company on the date of the Merger Agreement to its
own insurance policy, provided that such election does not diminish the rights
provided to such persons under the Company's existing insurance.
The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement and the Ancillary Agreements, each
of the parties thereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to use all reasonable
efforts to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in an
expeditious manner, the Offer, the Merger and the transactions contemplated by
the Merger Agreement and the Ancillary Agreements. Among other things, the
Merger Agreement specifies the following actions: (i) obtaining all necessary
actions and no actions, waivers, consents and approvals from any federal, state
or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), and making all necessary registrations and filings and
taking all reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity, (ii)
obtaining all necessary consents, approvals and waivers from third parties,
(iii) defending any lawsuits or other legal proceedings challenging the Merger
Agreement or any Ancillary Agreement or the consummation of any of the
transactions contemplated thereby and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and fully to carry out the purposes of, the Merger Agreement and the Ancillary
Agreements. In particular, the Company and the Board of Directors have agreed to
take all action necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to the Offer, the Merger, the
Merger Agreement, the Ancillary Agreements or any other transaction contemplated
thereby. Further, the Company has agreed that if any state takeover statute or
similar statute or regulation becomes applicable to the Offer, the Merger, the
Merger Agreement or the Ancillary Agreements or any other transaction
contemplated thereby, it will take all action necessary to ensure that the
Offer, the Merger and the other transactions contemplated thereby may be
consummated as promptly as practicable on the terms contemplated by the Merger
Agreement and the Ancillary Agreements and otherwise to minimize the effect of
such statute or regulation on the Offer, the Merger and the other transactions
contemplated thereby.
The Company and Symantec are obligated to give prompt notice to the other
party of any material breach of any representation or warranty made by it in the
Merger Agreement or any Ancillary Agreement. Further, such parties are obligated
to give prompt notice of the failure to comply with or satisfy in any material
respect any covenant, condition or agreement under the Merger Agreement or any
Ancillary Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to its organization, standing and corporate
power, the absence of certain changes or events concerning the Company's
business, litigation, employee benefit plans, taxes, compliance with laws,
environmental matters, intellectual property, and material contracts.
Conditions to the Merger. Under the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction or
waiver on or prior to the Effective Time of the following conditions:
7
(i) if required by applicable law, the approval of the Company's stockholders
shall have been obtained; (ii) Purchaser shall have purchased Shares pursuant to
the Offer; and (iii) no statute, rule, regulation, executive order, decree,
injunction, judgment or other order or ruling issued by any court or other
Governmental Entity or other legal restraint or prohibition shall be in effect
which would (a) make the acquisition or holding by Symantec or its affiliates of
Shares or shares of Common Stock of the Surviving Corporation illegal or
otherwise prevent the consummation of the Merger, (b) prohibit Symantec's or
Purchaser's ownership or operation of, or compel Symantec or Purchaser to
dispose of or hold separate, all or a material portion of the business or assets
of Symantec or its subsidiaries taken as a whole, or the Company or its
subsidiaries taken as a whole, (c) compel Symantec, Purchaser or the Company to
dispose of or hold separate all or a material portion of the business or assets
of Symantec or its subsidiaries taken as a whole or the Company or any of its
subsidiaries taken as a whole, (d) impose material limitations on the ability of
Symantec or Purchaser or their affiliates effectively to exercise full ownership
and financial benefits of the Surviving Corporation, or (e) impose any material
condition to the Merger Agreement, any Ancillary Agreements or the Merger which
would be materially adverse to Symantec.
Termination; Fees and Expenses. The Merger Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company (provided, however, that if Shares are purchased pursuant to the Offer,
Symantec may not terminate the Merger Agreement):
(i) by mutual written consent of Symantec and the Company;
(ii) by Symantec or the Company (a) if, as a result of the failure of
any of the conditions to the Offer, the Purchaser fails to commence the
Offer in the time required by the Merger Agreement, or as a result of the
failure of any of the conditions to the Offer the Offer has terminated or
expired in accordance with its terms (as extended, if applicable) without
the Purchaser having accepted for payment any Shares pursuant to the Offer,
or the Purchaser has not accepted for payment any Shares pursuant to the
Offer by December 31, 1998 as a result of the failure of any of the
conditions to the Offer, provided that the ability to terminate in the
above circumstances is not available to a party whose failure to perform in
any material respect any of its obligations under the Merger Agreement
results in a failure of such condition or if the failure of such condition
results from facts or circumstances that constitute a material breach of a
representation or warranty under the Merger Agreement by such party; or (b)
if any Governmental Entity has issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, the Shares
pursuant to the Offer or the Merger and such order, decree or ruling or
other action has become final and nonappealable;
(iii) by the Company, if prior to the purchase of any Shares by the
Purchaser pursuant to the Offer the Company has received any Superior
Proposal;
(iv) by Symantec in the event that (a) the Company's Board of
Directors or any committee thereof has failed to recommend the Offer, the
Merger, or the Merger Agreement, or shall have so resolved; (b) the
Company's Board of Directors or any committee thereof has withdrawn or
modified in a manner adverse to Symantec or Purchaser its approval or
recommendation of the Offer, the Merger, the Merger Agreement and the
Ancillary Agreements, has approved or recommended any takeover proposal,
has authorized the redemption or amendment of the Rights Agreement after
the Company has received a takeover proposal (other than the amendment to
the Rights Agreement required by the Merger Agreement) or shall have so
resolved (provided that a statement that states that a takeover proposal is
under consideration by the Company's Board of Directors or management and
states that the Company will, at a future date, take a position with
respect to such takeover proposal, without making any adverse statements
with respect to the Offer, shall not be deemed to constitute such a
withdrawal, modification, approval or recommendation); or (c) the Company
has entered into any letter of intent, acquisition agreement or similar
agreement with respect to any Superior Proposal or the Company's Board of
Directors or any committee thereof shall have resolved to do so;
(v) by Symantec in the event that (a) any person entity or "group" (as
defined in Section 13(d)(3) of the Exchange Act) other than Symantec or
Purchaser acquires beneficial ownership of 35% or more of
8
the outstanding Shares; or (b) the Board of Directors of the Company or any
committee thereof upon a request to reaffirm the Company's approval of
recommendation of the Offer, the Merger or the Merger Agreement and the
Ancillary Agreements, shall have failed to do so within three business days
after such request is made or shall have so resolved;
(vi) by Symantec if any of the Company's representations and
warranties set forth in the Merger Agreement are not true and correct in
any manner that either represents or results from a Willful Breach (as
defined below) or has or represents a Material Adverse Effect (as defined
below) or the Company has committed a material breach of any of the
Company's covenants under the Merger Agreement and such breach either
represents or results from a Willful Breach or has a Material Adverse
Effect, and the Company has not cured such material breach within thirty
days after Symantec has given to the Company written notice of the material
breach and its intention to terminate the Merger Agreement; or
(vii) by the Company if the Purchaser has not accepted for payment any
Shares pursuant to the Offer on or prior to December 31, 1998 and (a) any
of Symantec's representations and warranties set forth in Section 4.2 of
the Merger Agreement are not true and correct in any manner that has or
represents a material adverse effect on Symantec or materially adversely
affects the exercise by the Company of its rights under the Merger
Agreement or the License Agreement, or (b) Symantec has committed a
material breach of any of its covenants under the Merger Agreement, which
breach has a Material Adverse Effect or materially adversely affects the
Company's exercise of its rights under the Merger Agreement or the License
Agreement and Symantec has not cured such material breach within thirty
days after the Company has given Symantec written notice of the material
breach and its intention to terminate the Merger Agreement.
"Material Adverse Change" or "Material Adverse Effect" means any change or
effect that (i) materially adversely affects, or is highly likely to materially
adversely affect, the ability of the Company and its subsidiaries to market and
license either its ProComm product or its CleanSweep product (or both), or to
use any of the Company's intellectual property rights or its intellectual
property that is incorporated, embodied or used therein and that is material to
such product or the ownership by the Company and its subsidiaries of any such
intellectual property right or intellectual property, (ii) materially adversely
affects, or is highly likely to materially adversely affect, the exercise by
Symantec of its material rights under the Merger Agreement or the License
Agreement or (iii) represents or results in, or is highly likely to result in, a
liability, cost or expense of more than $3.0 million, or the reduction of the
fair value of any assets by more than $3.0 million (in each case after giving
effect to the availability of payments under any insurance policy). For purposes
of clause (iii), no change, event or effect that is demonstrated by the Company
to result from any of the following shall be deemed by itself to constitute a
Material Adverse Change or be taken into account in determining whether there
has been or would be a Material Adverse Change: (a) conditions affecting the
U.S. economy generally or the economy of any nation or region in which the
Company or any of its subsidiaries conducts business that is material to the
Company and its subsidiaries, taken as a whole; (b) conditions generally
affecting the utility software industry or (c) the announcement or pendency of
the Offer or the Merger or the execution of the Merger Agreement or the License
Agreement. "Willful Breach" by the Company means (i) the failure of a
representation or warranty of the Company in this Agreement to be true and
correct in all material respects as a result of any fact or condition of which
any of the Company's executive officers or directors had actual knowledge as of
the date of the Merger Agreement or (ii) a material breach or failure to perform
in any material respect any obligation or to comply in any material respect with
any agreement or covenant to be performed or complied with by it pursuant to the
Merger Agreement, where performance of such obligation, or compliance with such
agreement or covenant was not impossible and (a) in the case of a breach that
can not readily be cured by the Company within thirty days after written notice
of such breach, the action or inaction constituting such breach was taken by or
at the request of or with the express permission of any of the Company's
executive officers or directors and (b) in the case of a breach that can readily
be cured by the Company within thirty days after written notice of such breach,
such period shall expire without the cure of such breach.
The Merger Agreement provides that the Company shall pay to Symantec the
sum of $2.0 million (the "Break-up Fee"), if: (i) the Merger Agreement is
terminated as set forth in subsection (ii)(a) in the first
9
paragraph of this section as a result of the failure of the following conditions
to the Offer: the Board of Directors of the Company or any committee thereof
shall have failed to recommend the Offer, the Merger or the Merger Agreement,
including any failure to include such recommendation in the Schedule 14D-9, or
shall have so resolved, the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified (including without limitation by
amendment of the Schedule 14D-9) in a manner adverse to Symantec or Purchaser
its approval or recommendation of the Offer, the Merger or the Merger Agreement
and the Ancillary Agreements, shall have approved or recommended any takeover
proposal, shall have authorized the redemption or amendment of the Rights
Agreement after the Company has received any takeover proposal (except as
described below under "Rights Agreement") or shall have resolved to do any of
the foregoing; (ii) the Merger Agreement is terminated as set forth in
subsections (iii) and (iv) in the first paragraph of this section or (iii) the
Merger Agreement is terminated by Symantec as set forth in subsection (ii)(a) or
(vi) as a result of a Willful Breach by the Company of its nonsolicitation
covenants. The Break-Up Fee may be applied by the Company dollar for dollar to
reduce any royalty obligations of Symantec to the Company pursuant to the
License Agreement (and shall not be payable to the extent the Break-Up Fee
exceeds the amount of such royalties required to be paid over the term of the
License Agreement), except that if, pursuant to the terms of the License
Agreement, Symantec would not be required at any time after the date of
termination of the Merger Agreement to pay any royalties, the Break-Up Fee shall
be payable in cash. In each case described in subsection (iii), payments of the
foregoing amount, together with the exercise by Parent of its rights under the
License Agreement, shall constitute the sole remedy for Symantec.
Post Merger Employment Benefits. Employees of the Company who become
employed by Symantec or any controlled subsidiary thereof after the Effective
Time will either, at Symantec's election, to the extent permitted under the
terms of the Company's employee benefit plans, continue to be eligible to
participate in such plans, if and for so long as continued, or become eligible
to participate in the same standard employee benefit plans as are generally
available to similarly situated Symantec employees.
Rights Agreement. The Company has entered into an amendment to the Rights
Agreement to (i) exclude Symantec and the Purchaser and their respective
Affiliates and Associates (as such terms are defined in the Rights Agreement)
from the definition of "Acquiring Person" therein, with respect to the
beneficial ownership of the Shares which Symantec, Purchaser and/or any of their
respective Affiliates and Associates have obtained the right to acquire, or will
acquire, as a result of the transactions contemplated by the Merger Agreement or
any Ancillary Agreement, (ii) provide that no Distribution Date (as such term is
defined in the Rights Agreement) shall result from the Offer and (iii) provide
for the expiration of the Rights Agreement upon the Effective Date.
CERTAIN CONDITIONS OF THE OFFER
The Merger Agreement provides that, notwithstanding any other provision of
the Offer or the Merger Agreement, and in addition to (and not in limitation of)
Purchaser's rights to extend and amend the Offer (subject to certain
limitations), Purchaser shall not be required to accept for payment, purchase or
pay for, subject to Rule 14e-1(c) under the Exchange Act, any Shares tendered
pursuant to the Offer and may terminate the Offer as to any Shares not then paid
for unless (i) the Minimum Condition is satisfied and (ii) any waiting period
(and any extension thereof) under the HSR Act applicable to the purchase of
Shares pursuant to the Offer shall have expired or been terminated. Furthermore,
the Merger Agreement provides that Purchaser shall not be required to commence
the Offer or accept for payment, purchase or pay for any Shares not previously
accepted for payment or paid for and may terminate or amend the Offer, if at any
time before acceptance of the Shares any of the following events shall occur or
shall be determined by Symantec in good faith to have occurred which, in the
reasonable good faith judgment of Symantec or Purchaser, and regardless of the
circumstances giving rise to any such condition (other than action or inaction
by Symantec or any of its subsidiaries which constitutes a breach of the Merger
Agreement), makes it inadvisable to proceed with such acceptance for payment or
payment:
(a) there shall be pending any suit, action or proceeding brought by
or on behalf of any Governmental Entity (or the staff of the Federal Trade
Commission or the staff of the Antitrust Division
10
of the Department of Justice shall have recommended the commencement of
such), any shareholder of the Company or any other person or party,
directly or indirectly,
(1) challenging the acquisition by Symantec or Purchaser of any of
the Shares, seeking to restrain or prohibit the making or consummation
of the Offer or the Merger or the performance of any of the other
transactions contemplated by the Merger Agreement, or alleging (on
grounds that Purchaser reasonably and in good faith determines are
reasonably likely to result in financial exposure to the Company in
excess of $3 million taking into account available insurance coverage
and/or proceeds) that any such acquisition or other transaction relates
to, involves or constitutes a violation by the Company or its directors
of federal securities law or applicable corporate statutes or
principles,
(2) seeking to prohibit or limit the ownership or operation by the
Company, Symantec or any of their respective subsidiaries of a material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or Symantec and its subsidiaries, taken as a whole, or
to compel the Company or Symantec to dispose of or hold separate any
material portion of the business or assets of the Company and its
subsidiaries, taken as a whole, or Symantec and its subsidiaries, taken
as a whole, as a result of the Offer or any of the other transactions
contemplated by the Merger Agreement,
(3) seeking to impose material limitations on the ability of
Symantec or Purchaser to acquire or hold, or exercise full rights of
ownership of, any of the Shares accepted for payment pursuant to the
Offer, including the right to vote any such Shares accepted for payment
by it on all matters properly presented to the stockholders of the
Company,
(4) seeking to prohibit Symantec or any of its subsidiaries from
effectively managing or controlling in any material respect the business
or operations of the Company and its subsidiaries taken as a whole,
(5) which is likely to result in a Material Adverse Effect or
(6) seeking to impose a material condition to the Offer, the Merger
or the Merger Agreement which would be materially adverse to Symantec;
provided that in case of any such suit, action or proceeding by any
person other than a Governmental Entity, such suit, action or proceeding
could reasonably be expected to result in a Material Adverse Effect; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity or court, other than the application to the Offer or
the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, in any of the consequences referred to in
clauses (a)(1) through (a)(6) above;
(c) there shall have occurred since June 30, 1998, any Material
Adverse Change;
(d) either (1) the Board of Directors of the Company or any committee
thereof shall have failed to recommend the Offer, the Merger or the Merger
Agreement, including any failure to include such recommendation in the
Schedule 14D-9, or shall have so resolved, or (2) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified
(including without limitation by amendment of the Schedule 14D-9) in a
manner adverse to Symantec or Purchaser its approval or recommendation of
the Offer, the Merger or the Merger Agreement and Ancillary Agreements,
shall have approved or recommended any takeover proposal (provided that a
statement that states that a takeover proposal is under consideration by
the Company's Board of Directors or management and states that the Company
will, at a future date, take a position with respect to such takeover
proposal, without making any adverse statements with respect to the Offer,
shall not be deemed to constitute such a withdrawal, modification, approval
or recommendation), or shall have authorized the redemption or amendment of
the Rights Agreement after the Company has received any takeover proposal
(other than the Rights Amendment in accordance with the Merger Agreement)
or shall have resolved to do any of the foregoing;
11
(e) either (1) any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) other than Symantec and Purchaser acquired
beneficial ownership of 35% or more of the outstanding Shares or (2) the
Board of Directors of the Company or any committee thereof upon request to
reaffirm the Company's approval or recommendation of the Offer, the Merger
or the Merger Agreement, shall have failed to do so within three business
days after such request is made or shall have so resolved;
(f) the representations and warranties of the Company in the Merger
Agreement shall not be true and correct in all material respects (without
regard to any qualification therein as to the Company's knowledge) as a
result of any facts or circumstances that have a Material Adverse Effect;
(g) the Company shall have breached or failed to perform in any
material respect any obligation or to comply in any material respect with
any agreement or covenant of the Company to be performed or complied with
by it pursuant to the Merger Agreement and the same shall have a Material
Adverse Effect;
(h) the Merger Agreement shall have been terminated in accordance with
its terms; or
(i) any voluntary, involuntary or ancillary petition in bankruptcy
shall have been instituted under Title 11 to the United States Code with
respect to the Company as a debtor or alleged debtor and not dismissed. The
Merger Agreement provides that the foregoing conditions are for the sole
benefit of Symantec and Purchaser and their respective affiliates and may
be asserted by Symantec or Purchaser regardless of the circumstances giving
rise to such condition (other than any action or inaction by Symantec or
any of its subsidiaries which constitutes a breach of the Merger Agreement)
or may be waived (except for the Minimum Condition, which can only be
waived with the consent of the Company) by Symantec and the Purchaser in
whole or in part at any time and from time to time in their sole
discretion. The failure by Symantec, Purchaser or any other affiliate of
Symantec at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver
of any such rights with respect to any other facts and circumstances and
each such right shall be deemed an ongoing right that may asserted at any
time and from time to time prior to expiration of the Offer.
THE LICENSE AGREEMENT
Concurrently with the execution of the Merger Agreement, the Company and
Parent entered into the License Agreement. The following is a summary of the
material terms of the License Agreement. This summary is not a complete
description of the terms and conditions of the License Agreement and is
qualified in its entirety by reference to the full text of the License
Agreement, which is incorporated herein by reference, and a copy of which has
been filed as an exhibit to this Schedule 14D-9.
The Company has granted to Symantec, pursuant to the License Agreement
entered into concurrently with the Merger Agreement, a non-exclusive license
(the "Distribution License") to use, copy, distribute, display and perform all
of the Company's CleanSweep(TM) product and related technology (the "Licensed
Product") and a nonexclusive license (the "Development License") under all of
the Company's intellectual property rights to use, copy and create derivative
works during the term of the License Agreement from the source code of the
Licensed Product or materials and information provided by the Company relating
thereto. In consideration of this grant, Symantec has agreed to pay the Company
royalties equal to 8% of net revenue from the distribution or other revenue
producing exploitation of the Licensed Product, provided that the royalty rate
shall be 6% if the Company is obligated to pay a Break-up Fee as a result of a
Willful Breach of the Company's covenant not to solicit or negotiate a takeover
proposal. The parties have further agreed that, for copies of the Licensed
Products, the royalty per seat shall not be less than $1.25 for stand-alone
sales of the Licensed Product, $0.75 for bundles of the Licensed Product as part
of Norton Systemworks and $0.20 for original equipment manufacturer
transactions. The Development License commences on October 15, 1998 and the
Distribution License commences upon the earlier of either (i) the consummation
of the Offer or (ii) an event giving rise to the Company's obligation to pay the
Break-up Fee under the Merger Agreement. If neither of these events occur, no
right to distribute the CleanSweep product will arise. The Company has deposited
in escrow the source code for its CleanSweep product and related technology to
be released to
12
Symantec upon commencement of the Distribution License. The License Agreement
terminates immediately if, after consummation of the Offer, Symantec fails to
close the Merger in accordance with the Merger Agreement or the Merger has not
occurred by January 31, 1999 and the Company has not been obligated to pay the
Break-up Fee. The License Agreement also terminates for a material breach of any
term of the License Agreement unless such breach is cured within thirty days of
notice of such breach.
THE STOCKHOLDER AGREEMENTS
Concurrently with the execution of the Merger Agreement, Parent and
Purchaser entered into a Stockholder Agreement with each of the directors and
executive officers of the Company, namely King R. Lee, Frank W. T. LaHaye,
William H. Lane III, Howard Morgan, Frank R. Greico, Joyce Wrenn, Suzanne
Dickson, Cheri Kaplan-Smith, Gadi Navon and John Strosahl (collectively, the
"Stockholder Agreements"). In the aggregate, the signatories to the Stockholder
Agreements beneficially own 316,004, or 0.43%, of the outstanding Shares and
1,816,004, or 2.0%, of the Shares on a fully-diluted basis (to calculate
fully-diluted Shares, each outstanding option with an exercise price of less
than $0.52 per share is treated as exercised). The following is a summary of the
material terms of the Stockholder Agreements. This summary is not a complete
description of the terms and conditions of the Stockholder Agreements and is
qualified in its entirety by reference to the full text of the Stockholder
Agreements which are incorporated herein by reference and copies of which have
been filed as exhibits to this Schedule 14D-9.
Pursuant to the Stockholder Agreements, these stockholders agreed to tender
and not withdraw their Shares pursuant to the Offer. Such stockholders have also
agreed, for so long as the Stockholder Agreement is in effect, at any meeting of
the stockholders of the Company, however called, to vote their Shares (i) in
favor of the Merger, (ii) against any action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement, and (iii) against any
action or agreement that would impede, frustrate, prevent or nullify the
Stockholder Agreement or result in any of the conditions to the consummation of
the Offer or the Merger, which are set forth in the Merger Agreement, not being
fulfilled. Such stockholders also granted representatives of Parent an
irrevocable proxy to vote their Shares in favor of the Merger and other
transactions contemplated by the Merger Agreement, and against any other
takeover transaction proposed by a third party.
In addition, such stockholders agreed not to (i) transfer any or all of
their Shares, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of their Shares, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
their Shares, (iv) deposit their Shares into a voting trust or enter into a
voting agreement or arrangement with respect to his Shares or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of his obligations under the Stockholder Agreements or the Merger Agreement or
which would make any representation or warranty of such stockholder under the
Stockholder Agreement untrue or incorrect.
The agreements and proxy contained in each Stockholder Agreement will
terminate on the earlier of payment for the Shares pursuant to the Offer or the
termination of the Merger Agreement in accordance with its terms.
CONVERSION AND/OR REPURCHASE OF SERIES C CONVERTIBLE PREFERRED STOCK
After negotiating the terms thereof over a period of several weeks, the
Company has entered into an agreement, dated October 9, 1998, with the holders
of the Company's Series C Convertible Preferred Stock. Pursuant to the
agreement, the holders of the Series C Convertible Preferred Stock agreed not to
convert any such shares at a conversion price of less than $0.2650 for a period
of six months after October 9, 1998, the date of the Agreement and that, during
the first sixty calendar days following such date, upon conversion of any shares
of the Series C Convertible Preferred Stock in accordance with their terms, the
Company will issue shares of Common Stock at a conversion price of $0.2650
notwithstanding the actual conversion price then in effect. At a conversion
price of $0.2650, each share of Series C Convertible Preferred Stock is
convertible into 3,774 shares of Common Stock. The Company has agreed to issue
additional shares of Common Stock (or, at the Company's election, cash) to each
holder of the Series C Convertible Preferred Stock, up to an amount
13
equal to five percent of the original purchase price of such shares of Series C
Convertible Preferred Stock, but only to the extent that such holder does not
realize at least a 50% gross aggregate return upon resale of the shares of
Common Stock received upon conversion of such shares of Series C Convertible
Preferred Stock. During the six months following October 9, 1998, the Company
has the right to repurchase all of the shares of Series C Convertible Preferred
Stock owned by the holders thereof at a price equal to 110% of the original
purchase price. The Company may exercise this repurchase right upon 10 days
notice (which may be by press release), during which time period the holders of
the Series C Convertible Preferred Stock will remain entitled to convert such
shares into shares of Common Stock. The holders of the Series C Convertible
Preferred Stock also agreed that upon a "sales event" (as defined below), the
Company may, at its option, repurchase the shares of Series C Convertible
Preferred Stock at a price equal to 110% of the original price or require such
holders to convert their shares of Series C Convertible Preferred Stock into
shares of Common Stock, or to effect a combination of the foregoing. A "sales
event" means the sale of all or substantially all of the assets of the Company,
a consolidation or merger of the Company in which the stockholders of the
Company immediately prior to such event do not retain a majority of the voting
power of the surviving corporation or the sale of more than 50% of the stock of
the Company.
INDEMNIFICATION
The Company's Certificate of Incorporation provides that a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for a breach of fiduciary duty as a director by such director except, to
the extent permitted by Delaware law, if such breach relates to (i) a breach of
the duty of loyalty; (ii) an act or omission in bad faith or which involved
intentional misconduct or knowing violation of law; (iii) an unlawfully paid
dividend or unlawful stock purchase or redemption; or (iv) any transaction from
which a director derived an improper personal benefit.
The Company's Bylaws provide that the Company is required to indemnify its
directors and officers and the directors and officers of each of its
subsidiaries and may indemnify its other employees and agents, and persons
serving in such capacities in other business enterprises at the Company's
request, in any proceeding, provided such persons acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the Company and, in the case of a criminal proceeding, if such persons had no
reasonable cause to believe their actions were unlawful. The Bylaws require the
Company to advance expenses incurred by such directors and officers and permit
the Company to advance expenses to such other employees and agents in connection
with defending a proceeding, however, the Company is not required to advance
expenses to a person against whom the Company brings a claim for breach of the
duty of loyalty, failure to act in good faith, intentional misconduct, knowing
violation of law or deriving an improper personal benefit. The rights conferred
in the Bylaws are not exclusive and the Company is authorized to enter into
indemnification agreements with its directors, officers, employees and agents.
In addition, the Bylaws permit the Company to maintain director and officer
liability insurance to the extent reasonably available. The Company may not
retroactively amend the Bylaw provisions in a way that is adverse to such
directors, officers, employees and agents.
The Company has previously also entered into an agreement with its
directors and certain of its officers indemnifying them to the fullest extent
permitted by the Bylaws.
A copy of the applicable portions of the Certificate of Incorporation and
Bylaws and a copy of the Company's form of indemnification agreement have been
filed as exhibits to this Schedule 14D-9 and are incorporated herein by
reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE COMPANY BOARD.
The Company Board has unanimously (i) determined that the Merger Agreement
and the transactions contemplated thereby, including each of the Offer and the
Merger, are fair to and in the best interests of the holders of the Shares, (ii)
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and (iii) resolved to recommend that the stockholders of the Company
accept the Offer, tender their
14
Shares pursuant to the Offer and approve and adopt the Merger Agreement and
approve the transactions contemplated thereby.
(b) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION.
Background
In early 1997, the Company Board resolved to undertake a search for
strategic alternatives to the Company's then current strategy. The Company Board
decided to retain an investment banker to explore the capital needs of the
Company and the strategic alternatives available to the Company, including an
expansion into additional product lines, a partnering of the Company with third
parties, and a sale of particular product lines or of the entire Company.
On or about May 22, 1997, Broadview International LLC ("Broadview")
presented to the Company Board its analysis of the strategic alternatives
available to the Company. In light of this presentation, the Company engaged
Broadview on June 19, 1997 to advise the Company with respect to opportunities
involving partnering with third parties or the sale of either all of the Company
or of particular product lines.
In late September 1997 and the following months, the Company issued
approximately $29 million of its Series C Convertible Preferred Stock and
related warrants. The Company used the net proceeds of this sale for working
capital and to redeem all $10 million of its outstanding Series B Preferred
Stock.
During the period from June 1997 to March 1998, Broadview conducted
extensive interviews with senior management, engaged in customary due diligence
procedures, analyzed valuation parameters, explored new product opportunities
and product line sales and developed a list of potential acquirors for the
Company. Broadview and the Company Board discussed and explored these
possibilities in numerous meetings. Broadview and the Company contacted several
parties to explore partnering relationships and/or the sale of the entire
Company. As of March 1998, no party had expressed serious interest in partnering
with or acquiring the Company and the Company terminated its engagement of
Broadview.
In April 1998, however, a publicly traded company contacted the Company and
expressed interest in entering into a partnering relationship with the Company.
The parties held preliminary discussions until June 1998 when the potential
partner was acquired by a third party.
On June 3, 1998, the Company was notified by the Nasdaq National Market
("Nasdaq") of the possible delisting of the Common Stock due to the failure of
the Common Stock to satisfy Nasdaq's continued listing requirements.
In June 1998, the Company Board continued to discuss the Company's need for
capital and the status of possible strategic alternatives. On June 24, 1998, the
Company signed an engagement letter with TikSoft LLC (which letter was
subsequently assigned to Software Syndicate, Inc. ("SSI")), pursuant to which
SSI agreed to assist the Company with respect to opportunities involving four
potential acquirors that had been identified.
In June 1998, the Company determined that additional cost-cutting measures,
including layoffs, were needed in order to manage cash flow. In late June 1998,
the Company laid off 70 employees. On July 6, 1998, Curtis Hessler resigned as
the Chief Executive Officer of the Company and King R. Lee was appointed Interim
Chief Executive Officer and President.
In July 1998, SSI introduced the Company to another publicly traded company
interested in a merger. The parties held several meetings, conducted mutual
standard due diligence, interviewed senior management at the respective
companies and entered into a confidentiality agreement regarding the matter. The
parties ultimately terminated these discussions in September 1998 without any
agreement regarding a transaction.
By letter dated July 13, 1998, Nasdaq advised the Company that it was not
convinced the Company could satisfy Nasdaq's continued listing requirements. At
the Company's request, an oral hearing on the matter was scheduled for late
August. In connection with its preparation for such oral hearing, and to assist
the Company in its exploration of its strategic alternatives, the Company again
retained Broadview as its financial advisor on August 4, 1998.
15
On August 10, 1998, Broadview discussed with the Company a list of
approximately 20 potential partners or acquirors, including Parent. Over the
next few weeks, Broadview and SSI contacted several parties, including Parent,
none of whom expressed interest in acquiring the Company at that time. In mid-
to late August, Broadview and SSI again contacted Parent and discussed the
Company generally, as well as the existence of potentially significant net
operating losses of the Company that could be advantageous to a potential buyer.
At that point, Parent expressed interest in a transaction with the Company to
SSI and Broadview. Broadview contacted Gordon E. Eubanks, Jr., the Chief
Executive Officer of Parent, with additional information about the Company.
Representatives of Broadview and Parent held several telephone calls and
discussed possible transaction alternatives through the end of August.
On August 27, 1998, the Company had a hearing with Nasdaq regarding the
potential delisting of the Company's Common Stock.
On September 11, 1998, Enrique T. Salem, Chief Technical Officer of Parent,
contacted Suzanne Dickson, Vice President of Product Management of the Company,
to discuss the possibility of the Company entering into a technology licensing
agreement with Symantec with respect to the Company's CleanSweep uninstaller
product. On September 13, 1998, the Company replied that it was not interested
in licensing its CleanSweep product and instead proposed a license of its
RemoveIt uninstaller product, which also has some of the capabilities of the
Norton Uninstall Deluxe product. On September 18, 1998, Symantec and the Company
entered into a license agreement under which the Company licensed Symantec to
distribute the Company's RemoveIt uninstaller.
In mid-September 1998, Broadview reported to the Company Board that Parent
had proposed that the transaction take the form of an acquisition of the
Company's assets. On September 15, 1998, representatives of Parent and the
Company met at the Company's offices to discuss the Company's financial
performance and condition, and Parent and the Company entered into a
Confidentiality Agreement, pursuant to which Parent was furnished with certain
financial and business information concerning the Company. Over the next few
weeks, discussions between Parent and the Company continued in which Broadview
represented the Company in framing possible transaction alternatives.
Also in mid-September, the Company and Broadview met and held preliminary
discussions with an investment group proposing a recapitalization and
acquisition of the Company as part of an industry segment consolidation. The
discussions were terminated with no expression of interest by such party after
the parties determined they would be unlikely to obtain financing.
On September 17, 1998, the Company Board met to discuss the status of
negotiations between Parent and the Company. On September 18, 1998,
representatives of Parent notified the Company of the Parent's interest in
commencing due diligence investigations of the Company. In response to this
call, the Company organized diligence materials and prepared them for review by
Parent and its legal and financial advisors. Two senior executives of Parent met
with representatives of the Company at the Company's offices on Monday,
September 21, 1998.
On September 23, 1998, the Company Board met. Representatives of Broadview
informed the Company Board about their discussions with Parent's representatives
earlier that day. During these discussions, Parent had indicated its willingness
to proceed with a tender offer and subsequent merger, with the grant by the
Company of a nonexclusive license agreement for the Company's CleanSweep
product. The Company Board discussed the framework of Parent's proposals
concerning a possible transaction. The Company Board indicated that a
substantial risk would be involved if the Company granted Parent a license to
the CleanSweep product and the proposed tender offer and merger did not close.
The Company Board also discussed the possibility of selling the CleanSweep
product line on a stand-alone basis. The Company Board instructed Broadview and
its management team to resist the granting of the CleanSweep license if at all
possible and also to explore selling the CleanSweep product line on a
stand-alone basis.
During the period from September 24, 1998 through the end of September, the
Company Board held several meetings in which representatives of Broadview, the
Company's legal counsel and the Company's management team participated. The
principal terms of the proposed transaction were reviewed and discussed.
16
The Company Board also discussed the possibility of any other acquirors or
partners becoming available, and representatives of Broadview advised the
Company Board that no other potential investors and acquirors had expressed
interest in the Company. The Company Board instructed management to continue
negotiating and attempt to avoid granting the license of CleanSweep, and to
address the additional concerns raised by the Company Board. During this time
period, the Company Board received a memorandum from its counsel outlining its
fiduciary duties in the context of a potential change of control. Also during
this period, the Company and Parent decided that they would not be able to agree
on the price or terms of a sale of the CleanSweep product line on a stand-alone
basis.
From early October to October 15, 1998, representatives of the Company,
Broadview and the Company's legal counsel held discussions with representatives
of Parent and Parent's legal counsel to negotiate various aspects of, and the
definitive agreements related to, the acquisition proposal. In addition, from
time to time during such period, Parent's legal counsel, accountants and
representatives of Parent conducted legal, financial and technical reviews of
the Company.
On October 3, 1998, after receiving a preliminary indication of price from
Parent, the Company Board authorized the Company's management to enter into a
Non-disclosure Agreement, under which the Company agreed not to solicit takeover
proposals from third parties through the close of business on October 13, 1998,
which period was subsequently extended through the close of business on October
16, 1998. During the first week of October 1998, the Company Board held several
meetings regarding the status of the negotiations. Also during this period, the
Company Board and its representatives continued to negotiate with Parent about
the terms of the transaction, including the license of CleanSweep. Parent
insisted that the license was an integral part of the transaction and that the
transaction could not be consummated without it.
On October 7, 1998, the Company Board held a meeting during which the
Company's legal counsel reviewed for the Company Board (i) its fiduciary duties
in the context of a sale of the Company and (ii) the status of negotiations of
the terms of the proposed transaction. Counsel for the Company explained the
Board's fiduciary duties in the context of granting the license of CleanSweep
requested by Parent. Representatives of Broadview provided an analysis of the
proposed transaction that included an overview of the Company's financial
condition and recent stock price performance, as well as various analyses for
determining Company's valuation. The Company's management also reviewed for the
Company Board the Company's financial and operating history, discussions
relating to the unsuccessful search by Broadview and SSI for additional
potential partners or acquirors, discussions regarding the potential delisting
of the Common Stock by Nasdaq, the nature and strength of competing companies,
industry developments and comparable transactions. The Company Board discussed
the continuing need for financing. The Company Board then discussed the open
issues related to Parent's acquisition proposal and directed management to
continue negotiations with Parent.
From October 7 through October 15, 1998, representatives of the Company's
management and the Company Board continued to negotiate the transaction with
Parent. During such negotiations, the terms of the transaction, including the
terms upon which the license of CleanSweep would become effective, were
discussed and agreed upon, and discussions on valuation occurred.
On October 15, 1998, the Company Board held a meeting to review and discuss
Parent's proposed acquisition of the Company. At this meeting, the Company's
legal counsel gave a presentation to the Board on the terms of the Merger
Agreement and related documents, the structure of the Offer and the Merger, the
terms of the License Agreement and the Company Board's fiduciary duties to
stockholders. The Company Board also received an opinion from Broadview to the
effect that, as of such date, the consideration to be received by the holders of
Shares pursuant to the Offer and the Merger as contemplated in the Merger
Agreement was fair from a financial point of view to such holders. The Company
Board members discussed the terms of the proposed acquisition with its advisors
and among themselves. Following this discussion, the Company Board unanimously
(a) determined that the Merger Agreement, the License Agreement and the
transactions contemplated thereby, including each of the Offer and the Merger,
are fair to and in the best interests of the holders of the Shares, (b) approved
and adopted the Merger Agreement and the transactions contemplated thereby, and
(c) resolved to recommend that the stockholders of the Company accept the Offer,
17
tender their shares of Common Stock pursuant to the Offer and approve and adopt
the Merger Agreement and approve the transactions contemplated thereby.
At approximately 1:00 p.m., Pacific Standard Time on October 15, 1998,
Parent and the Company executed the Merger Agreement and the License Agreement
and, simultaneously, the directors and executive officers of the Company
executed the Stockholder Agreements. After the close of trading on October 15,
1998, the Company and Parent issued a press release announcing the execution of
the Merger Agreement and the License Agreement. Shortly thereafter, the Company
received notification from Nasdaq by fax that the Common Stock had been
delisted, effective at the close of trading on October 15, 1998, for failure to
satisfy certain continued listing requirements.
Factors Considered by the Board of Directors
In approving the Merger Agreement and the transactions contemplated
thereby, and recommending that all stockholders tender their Shares pursuant to
the Offer, the Company Board considered a number of factors, including:
(1) the financial and other terms of the Offer, the Merger Agreement,
the License Agreement and the related transaction agreements;
(2) Broadview's presentations to the Company Board and its opinion to
the effect that, as of the date of its opinion and based upon and subject
to certain matters stated therein, the $0.52 per Share cash consideration
to be received by the holders of Shares pursuant to the Offer and the
Merger was fair to the stockholders of the Company, from a financial point
of view (the "Fairness Opinion"). THE FULL TEXT OF BROADVIEW'S WRITTEN
FAIRNESS OPINION IS FILED AS EXHIBIT 14 TO THIS SCHEDULE 14D-9 AND IS ALSO
ATTACHED HERETO AS ANNEX A. STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN
ITS ENTIRETY.
(3) that the $0.52 per share tender offer price represents a premium
of 10.9%, 28.0% and 95.5% over the closing price of the Common Stock on
October 14, 1998 (one day prior to the announcement of the Merger
Agreement), September 17, 1998 (20 days prior to such announcement) and
September 2, 1998 (30 days prior to such announcement), respectively;
(4) the declining price of the Shares on Nasdaq over the last two
years, and the fact that the price of the Common Stock would adversely
impact the ability of the Company to make acquisitions using its Common
Stock or to successfully raise additional equity capital;
(5) the Company's difficulty in competing effectively with companies
having significantly greater financial and marketing resources than the
Company, especially given that (i) the industry segments in which certain
of the Company's leading products compete were entering a period of
predicted decline, (ii) the anticipated industry shift to "suite products,"
which bundle a number of utility products into one package, would likely
adversely impact revenues from the Company's products, the majority of
which are individual utility products and (iii) the fact that the Company
does not currently possess the ability to obtain or develop the additional
products necessary to compete in the "suite" market environment;
(6) the significant need for the Company to raise additional capital
to support research and development activities that would be necessary to
rebuild revenues in light of the market factors noted above and the Company
Board's belief, which was based on the advice of Company management and
Broadview, that the Company's ability to raise capital would be impaired by
the financial condition of the Company, including the terms of its
outstanding debt and Series C Convertible Preferred Stock, and the
condition of the capital markets generally;
(7) the adverse impact of the pending delisting of the Shares by
Nasdaq;
(8) the Company Board's view that a superior offer was unlikely to
arise, which view was based upon presentations by management and Broadview,
the lack of additional potential financing sources or merger candidates,
and the fact that the discussions that had been held between the Company
and several other parties over the last year had ultimately proven
unsuccessful;
18
(9) the Company's lack of success in negotiating with Parent a sale of
CleanSweep on a stand-alone basis or a sale of the Company which did not
include a license for CleanSweep;
(10) the fact that the terms of the License Agreement and the
conditions under which Parent's license to CleanSweep would come into
effect were heavily negotiated by representatives of the Company when it
became clear that Parent would not enter into a transaction that did not
include the License Agreement;
(11) the provisions of the Merger Agreement and the License Agreement,
including the provisions allowing the Company to respond to certain
unsolicited inquiries concerning an acquisition of the Company, and the
provisions which permit the Company to terminate the Merger Agreement upon
payment to Parent of a break-up fee, which fee includes the effectiveness
of the license of CleanSweep; and
(12) the fact that Parent's and Purchaser's obligations under the
Offer were not subject to any financing condition, and the fact that Parent
has the financial condition and ability to cause Purchaser to meet its
obligations under the Merger Agreement.
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger Agreement and the Offer, the Company Board did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Company Board may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Broadview in connection with the Offer and the Merger.
Pursuant to a letter agreement, dated August 4, 1998, the Company is required to
pay Broadview, upon delivery of the Fairness Opinion, a fee, payable in cash, of
$325,000, which amount will be credited against any compensation otherwise
payable by the Company to Broadview upon the consummation of a sale of the
Company. Upon consummation of a sale of the Company, including a sale pursuant
to the transactions contemplated by the Merger Agreement, the Company has agreed
to pay Broadview a fee, payable in cash on closing, of $500,000 plus 1% of all
consideration in excess of $20 million received by the Company and/or its
stockholders, which amount is net of the fee paid in connection with the
delivery of the Fairness Opinion and net of $125,000 in fees and payments
previously paid to Broadview. In addition to the foregoing compensation, the
Company has agreed to indemnify Broadview against certain liabilities and
expenses arising out of the engagement and the transactions in connection
therewith, including certain liabilities under the federal securities laws. The
Company's engagement of Broadview is an exclusive engagement, except with
respect to the efforts of SSI described below.
In addition, the Company entered into a letter agreement, dated June 24,
1998, with TikSoft, pursuant to which TikSoft agreed to contact certain
companies with respect to a potential sale of the Company. By amendment to the
letter agreement dated August 15, 1998, SSI replaced TikSoft under the
agreement. Upon the consummation of a sale of the Company to a buyer which SSI
introduced to the Company, the Company is required to pay SSI a fee, payable in
cash on closing, equal to 1% of the consideration received by the Company and/or
its shareholders. The Company will be required to pay such fee to SSI upon
consummation of the transactions contemplated by the Merger Agreement. In
addition to the foregoing fee, the Company is required to indemnify SSI against
certain liabilities and expenses arising out of the engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer and the Merger.
19
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) As part of the Company's restructuring efforts, in July 1998 King R.
Lee was appointed Interim Chief Executive Officer and President, a new
management team was promoted from within the Company, and the outside members of
the Company Board decided to take a significantly increased role in the
Company's restructuring efforts and its exploration of strategic alternatives.
As part of this process, management and the Company Board undertook a review of
appropriate compensation levels in light of certain considerations, including
the Company's desire to conserve cash and retain key individuals, the low market
price of the Company's Common Stock and the substantial increase in the number
of outstanding shares of capital stock. On September 1, 1998 the Company Board
approved a grant of options to purchase 200,000 shares of Common Stock to each
director, except for Joyce Wrenn who received options to purchase 100,000 shares
of Common Stock. At such time, each of the Company's new executive officers
received options to purchase 150,000 shares of Common Stock. Each of the
foregoing options have an exercise price of $0.281 per share. Other than these
option grants and certain option grants to employees of the Company, no
transactions in the Shares have been effected during the past 60 days by the
Company or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Purchaser pursuant to the Offer. See "Item 3--Stockholder
Agreements."
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth herein, there are no transactions, Company Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Short Form Merger. Under the DGCL, if Purchaser acquires, pursuant to the
Offer or otherwise, at least 90% of the outstanding shares of Common Stock,
Purchaser will be able to effect the Merger after consummation of the Offer
without a vote of the Company's stockholders. However, if Purchaser does not
acquire at least 90% of the outstanding Shares of Common Stock pursuant to the
Offer or otherwise and a vote of the Company's stockholders is required under
Delaware Law, a significantly longer period of time will be required to effect
the Merger.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
------- -----------
1 Agreement and Plan of Merger, dated October 15, 1998, by and
among Symantec Corporation, Oak Acquisition Corporation and
Quarterdeck Corporation, including Conditions to the Offer.
2 License Agreement, dated October 15, 1998, by and between
Symantec Corporation, Oak Acquisition Corporation and
Quarterdeck Corporation.
3 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and King R. Lee.
4 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Frank W. T. LaHaye.
5 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and William H. Lane III.
6 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Howard Morgan.
7 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Frank R. Greico.
8 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Joyce Wrenn.
9 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Suzanne Dickson.
10 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Gadi Navon.
11 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Cheri Kaplan-Smith.
12 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and John Strosahl.
13 Letter to Stockholders of Quarterdeck Corporation, dated
October 19, 1998.
14 Fairness Opinion of Broadview International LLC, dated
October 15, 1998.
15 Confidentiality Agreement, dated September 15, 1998, by and
between Symantec Corporation and Quarterdeck Corporation.
16 Non-Disclosure Agreement, dated October 1, 1998, by and
between Symantec Corporation and Quarterdeck Corporation, as
amended October 13, 1998.
17 Form of Indemnification Agreement and provisions regarding
indemnification of directors and officers from the Company's
Certificate of Incorporation and Bylaws.
18 Selected pages of the Company's Proxy Statement, dated
January 5, 1998, for the Annual Stockholder Meeting on
February 5, 1998.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ KING R. LEE
------------------------------------
King R. Lee
Interim Chief Executive Officer and
President
Dated: October 19, 1998
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SCHEDULE I
QUARTERDECK CORPORATION
13160 MINDANAO WAY, 3RD FLOOR
MARINA DEL REY, CALIFORNIA 90292
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about October 20, 1998 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of shares (the "Shares") of common stock, $0.001
par value (the "Common Stock"), of Quarterdeck Corporation, a Delaware
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9. You are
receiving this Information Statement in connection with the possible election of
persons designated by Oak Acquisition Corporation ("Purchaser"), a wholly owned
subsidiary of Symantec Corporation, a Delaware corporation ("Parent"), to the
board of directors of the Company (the "Company Board"). Such designation is to
be made pursuant to an Agreement and Plan of Merger, dated as of October 15,
1998 (the "Merger Agreement"), by and among Parent, Purchaser and the Company.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended, and Rule 14f-1 thereunder. YOU ARE URGED TO
READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT, HOWEVER, REQUIRED TO
TAKE ANY ACTION.
Pursuant to the Merger Agreement, Purchaser commenced a cash tender offer
to acquire all of the Shares (the "Offer"). The Offer is scheduled to expire at
12:00 Midnight, New York City time, on November 16, 1998, unless the Offer is
extended. Following the successful completion of the Offer, upon approval by a
stockholder vote, if required, and subject to certain other conditions,
Purchaser will be merged with and into the Company (the "Merger").
The information contained in this Information Statement concerning
Purchaser has been furnished to the Company by Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Common Stock is the only class of voting securities of the Company
outstanding. Each Share entitles its record holder to one vote. As of October
15, 1998, there were 73,531,703 Shares outstanding (not including Shares
issuable upon conversion of shares of Series C Convertible Preferred Stock or
Shares that are subject to purchase upon the exercise of outstanding options).
PROPOSED CHANGES TO THE COMPANY'S BOARD OF DIRECTORS
If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Parent will be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors (determined after giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent or its affiliates
bears to the total number of Shares then outstanding. The Company has further
agreed, upon request of Parent, to promptly take all actions necessary to cause
Parent's designees to be so elected, including, if necessary, increasing the
size of the Company Board and/or obtaining the resignation of one or more
incumbent directors, provided, however, that until such time as the Purchaser
acquires a majority of the outstanding Shares, on a fully-diluted basis, the
Company shall use all reasonable
I-1
efforts to ensure that all of the members of the Company Board who are not
employees of the Company remain members of the Company Board.
Parent has informed the Company that Parent will designate directors from
among the persons set forth in the following table. With respect to Parent's
designees, the following table, prepared from information furnished to the
Company by Parent, sets forth the name, age, present principal occupation or
employment and five-year employment history for each of the persons who may be
designated by Parent as Parent's designees. Each occupation set forth opposite a
person's name, unless otherwise indicated, refers to employment with Parent. If
necessary, Parent may choose additional or other Parent's designees, subject to
the requirements of Rule 14f-1. Unless otherwise indicated below, the business
address of each person is Symantec Corporation, 10201 Torre Avenue, Cupertino,
California 95014.
[Enlarge/Download Table]
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME AND CITIZENSHIP AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
-------------------- --- --------------------------------------------------
Gordon E. Eubanks, Jr. 51 President and Chief Executive Officer since October 1986 and
a member of the Board of Directors since November 1983.
Howard A. Bain III 52 Vice President, Worldwide Operations and Chief Financial
Officer. Mr. Bain joined Parent in October 1991 as its Vice
President, Finance.
Enrique T. Salem 32 Vice President, Security and Assistance Business Unit and
Chief Technical Officer. Mr. Salem joined Parent in April
1990 and has held numerous positions including Director of
Development and General Manager of Advanced Utilities Group.
Derek Witte 41 Vice President, General Counsel and Secretary. Mr. Witte
joined Parent in October 1990.
Parent has advised the Company that to the best knowledge of Parent, none
of Parent's designees currently is a director of, or holds any position with,
the Company, and except as disclosed in the Offer to Purchase, none of Parent's
designees beneficially owns any securities (or rights to acquire any securities)
of the Company or has been involved in any transactions with the Company or any
of its directors, executive officers or affiliates that are required to be
disclosed pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), except as may be disclosed in the Offer to Purchase. None of Parent's
designees has any family relationship with any director or executive officer of
the Company.
Parent has advised the Company that each of the persons listed in the table
above has consented to act as a director, and that none of such persons has
during the last five years been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was, or is, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.
It is expected that Parent's designees may assume office at any time
following the purchase by Parent of a majority of outstanding Shares pursuant to
the Offer, which purchase cannot be earlier than November 16, 1998, and that,
upon assuming office, Parent's designees will thereafter constitute a majority
of the Company Board.
I-2
THE CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The names of the current directors, their ages as of October 9, 1998 and
certain other information about them are set forth below. Some of the current
directors may resign effective immediately following the purchase of Shares by
Purchaser pursuant to the Offer.
[Enlarge/Download Table]
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL OCCUPATION
NAME OF DIRECTOR AGE DIRECTOR DURING THE PAST FIVE YEARS
---------------- --- ---------- -------------------------------------------------
King R. Lee........... 58 1994 Mr. Lee has served as the Interim Chief Executive
Officer and President of the Company since July
1998. Mr. Lee also served as a member of the
Office of the President of the Company from
August 27, 1996 until February 1997. Mr. Lee also
served as Interim Chief Executive Officer of the
Company from December 1994 until January 1995 and
served as Interim Chief Operating Officer of the
Company between July and December 1994. He was
elected a Director of the Company in July 1994.
Mr. Lee served as the Chief Executive Officer of
Wynd Communications Corporation, a two-way
wireless messaging service provider, from October
1995 to January 1997, and has served as its
Chairman since October 1995. Mr. Lee is President
of King R. Lee & Associates, Inc., a management
consulting firm, which provides consulting
services to the Company. From 1987 to 1993, Mr.
Lee was President and Chief Executive Officer of
Xtree Company, a developer of computer systems
software. He serves as a director of Nettech
Systems, Inc., Outback Resource Group, Inc., Boss
Entertainment, Dover Pacific, Inc. and Mobile
Automation, Inc.
Frank W. T. LaHaye.... 69 1982 Mr. LaHaye has been a Director of the Company
since 1982 and the Chairman of the Board since
1985. Mr. LaHaye was a general partner of the
general partnership of Peregrine Ventures, a
venture capital investment partnership, from its
formation in 1981 until its dissolution in 1998.
Mr. LaHaye has been a general partner of the
general partnership of Peregrine Ventures II, a
venture capital investment partnership, since its
formation in 1983. Mr. LaHaye serves as a
director or trustee of various funds affiliated
with the Franklin/Templeton Group of Funds and as
a director of Digital Transmission Systems, Inc.
William H. Lane III... 60 1996 Mr. Lane has been a director of the Company since
September 1996. He retired from Intuit Inc., a
personal and small business finance software
publisher, effective July 31, 1996, having served
as its Vice President, Chief Financial Officer,
Secretary and Treasurer since January 1994. Mr.
Lane served in a similar capacity at ChipSoft,
Inc., a tax preparation software company, from
July 1991 until its acquisition by Intuit Inc. in
December 1993. Mr. Lane is also a director of
Expert Software, Inc., a value-priced general PC
software publisher, MetaCreations Corporation, a
visual computing software company, and Storm
Technology, Inc., a scanning devices company.
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[Enlarge/Download Table]
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL OCCUPATION
NAME OF DIRECTOR AGE DIRECTOR DURING THE PAST FIVE YEARS
---------------- --- ---------- -------------------------------------------------
Dr. Howard L. 52 1983 Dr. Morgan has been a Director of the Company
Morgan.............. since 1983. He is currently President of Arca
Group, Inc., a consulting and investment
management firm specializing in the areas of
computer and communications technologies. He
serves as a director of Cylink Corporation, a
developer of software for secure communications,
Franklin Electronic Publishers, Inc., a developer
of electronic books, Infonautics Corporation, a
provider of online information, Kentek
Information Systems, a manufacturer of laser
printers, Neoware Systems, Inc., a provider of
network terminals, MetaCreations, Inc., a
developer of computer graphics software, Segue
Software, a developer of automated software
systems, and Unitronix Corp., a software
supplier.
Joyce Wrenn........... 62 1998 Ms. Wrenn became a director of the Company on
September 8, 1998. Since March 1992, Ms. Wrenn
has been Vice President -- Information
Technologies and Chief Information Officer of
Union Pacific Railroad.
Each of the directors has been engaged in the principal occupation(s)
described above during the past five years. There are no family relationships
among any of the directors or executive officers of the Company.
INFORMATION CONCERNING THE BOARD; DIRECTOR COMPENSATION
The Company's Board of Directors has a standing Audit Committee and
Compensation Committee.
The Audit Committee, currently comprised of Messrs. LaHaye, Lane and
Morgan, advises and assists the Board of Directors in evaluating the performance
of the Company's auditors, including the scope and adequacy of the auditors'
examinations. During fiscal year 1998, the Audit Committee held two meetings.
The Compensation Committee, currently comprised of Messrs. LaHaye and Lane,
oversees the Company's overall executive compensation program, reviews the
Company's employee benefit plans and administers the Company's stock option
plans. The Compensation Committee met six times during the last fiscal year.
The Company's Board of Directors selects nominees for election as
directors. The Company does not have a standing nominating committee.
Stockholder nominations for election as directors may be voted on at an annual
meeting only if such nominations are made pursuant to written notice timely
given to the Secretary of the Company accompanied by certain information
specified in the Company's bylaws. To be timely, a stockholder's written notice
must be delivered to or mailed and received at the principal executive offices
of the Company not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that, in the event that less than 60 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders, a
stockholder's notice will be timely if received not later than the tenth day
following the day on which such notice of the date of the meeting is mailed or
such public disclosure is made. Such stockholder's notice must set forth with
respect to each director nominee all of the information relating to such person
that is required to be disclosed in solicitations for elections of directors
under the rules of the Securities and Exchange Commission and such stockholder's
name and address, as they appear on the Company's books, and the number of
shares of Common Stock owned by the stockholder giving the notice.
The Board of Directors held 24 meetings during the fiscal year ended
September 30, 1998. All directors then in office attended at least 75% of the
meetings of the Board of Directors, and all members of the committees of the
Board of Directors attended at least 75% of the meetings of those committees, in
each case, after the election of such individuals to the Board of Directors or
to such committee.
I-4
DIRECTORS' COMPENSATION
Non-employee directors receive $6,000 ($12,000 in the case of the Chairman
of the Board) annually, payable quarterly, as compensation for serving on the
Board of Directors, plus $1,500 per meeting for Board or Committee meetings
attended ($500 for telephonic meetings). Non-employee directors are reimbursed
for their reasonable expenses incurred in attending meetings. Non-employee
directors also participate in the 1990 Directors Stock Option Plan which
provides for automatic grants of options to non-employee directors. Under the
1990 Directors Stock Option Plan, each non-employee director is granted an
option to purchase 30,000 shares of the Company's Common Stock three business
days following his or her first election as a director (the "initial grant").
Thereafter, each non-employee director who has been re-elected or who is
continuing as a member of the Board of Directors is granted an option to
purchase 7,500 shares of the Company's Common Stock on the date of the Company's
annual meeting of stockholders (an "annual grant"). Options are granted at 100%
of the fair market value of the Company's Common Stock on the grant date and
have a term of five years. Initial grants vest immediately as to one-third of
the shares and vest an additional one-third of the shares on each of the first
and second anniversaries of the grant date. Annual grants vest in full on the
first anniversary of the grant date. The Board of Directors or the Compensation
Committee may also make discretionary option grants to non-employee directors.
During fiscal 1998, the Board of Directors made discretionary grants of 670,000
options, in the aggregate, to the non-employee directors.
On August 27, 1996, when King R. Lee, the Interim President and a director
of the Company, assumed the duties as a member of the Office of the President,
Mr. Lee entered into a consulting agreement (the "Prior Consulting Agreement")
with the Company. Under the terms of the Prior Consulting Agreement, as amended,
King R. Lee & Associates, Inc., of which Mr. Lee is President and sole
stockholder, was paid $1,500 per full day plus expenses in exchange for Mr.
Lee's consulting services to the Company. The Company paid to King R. Lee &
Associates, Inc. $33,000 during fiscal year 1996 and a total of $76,500 during
fiscal year 1997 pursuant to the Prior Consulting Agreement. Mr. Lee provided
consulting services to the Company under the Prior Consulting Agreement through
February 1997. In addition, the Company entered into a new consulting agreement
(the "New Consulting Agreement") with Mr. Lee on July 8, 1998 when Mr. Lee
assumed the duties of Interim President of the Company. Pursuant to the New
Consulting Agreement, King R. Lee & Associates, Inc. is paid $2,500 per full
day, plus expenses and medical benefits, in exchange for consulting services
rendered by Mr. Lee to the Company. During fiscal year 1998, the Company paid
$150,000 to King R. Lee & Associates, Inc. and granted 200,000 options to Mr.
Lee, all of which were fully vested on the grant date. The New Consulting
Agreement provides for severance in the amount of $162,500 in the event that Mr.
Lee's consulting services to the Company are terminated.
EXECUTIVE OFFICERS OF THE COMPANY
The following individuals currently serve as executive officers of the
Company:
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NAME AGE POSITION(S) HELD
---- --- ----------------
King R. Lee...................... 58 Interim President
Frank R. Greico.................. 40 Chief Financial Officer
John Strosahl.................... 31 Vice President -- International
Cheri Kaplan-Smith............... 33 Vice President -- North American
Sales
Suzanne Dickson.................. 38 Vice President -- Product Marketing
Gadi Navon....................... 33 Vice President and General Counsel
See "The Current Members of the Board" above for background information on
Mr. Lee.
Mr. Greico was named Chief Financial Officer and Senior Vice President in
February 1996. On October 9, 1998, Mr. Greico ceased to be an employee of the
Company and began to serve as a consultant, however he continues to serve as the
Company's Chief Financial Officer. Prior to joining the Company, Mr. Greico
served as Chief Financial Officer and Vice President of Finance and Operations
of Knowledge Adventure, Inc., a developer and publisher of educational software.
I-5
Mr. Strosahl was appointed as the Company's Vice President -- International
in August 1997. Prior to that, Mr. Strosahl served as Interim Vice
President -- Worldwide Sales from March 1997 to August 1997, and as Senior
Director -- Asia/Pacific and Latin America from March 1996 until March 1997.
Ms. Kaplan-Smith was appointed as the Company's Vice President -- North
American Sales in June 1998. From March 1998 until such time, she served as
Senior Director of Enterprise Sales. Prior to joining the Company, Ms.
Kaplan-Smith was Vice President of Channel Sales and Programs at Novonyx, and
earlier held a similar position at Cheyenne Software.
Ms. Dickson was appointed Vice President -- Product Marketing in September
1997. From October 1995 until her appointment to her current position, Ms.
Dickson served as Vice President in the Company's Communication and
Collaboration Unit. From October 1994 until September 1995, Ms. Dickson was a
Director in the Company's Internet Business Unit, and prior to that she was a
Senior Product Manager in the same unit from the time she joined the Company in
February 1994. Prior to her employment by the Company, Ms. Dickson was a Senior
Marketing Manager at Symantec.
Mr. Navon was appointed General Counsel of the Company in June 1998. Prior
to that, he served as the Company's corporate counsel since September 1995.
Prior to joining the Company, Mr. Navon was an associate at the law firm of
Arter & Hadden LLP.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid by the Company during the fiscal years ended
September 30, 1998, 1997 and 1996 to (i) the persons who served as Chief
Executive Officer or performed the functions thereof during fiscal year 1998,
(ii) the four most highly compensated executive officers as of the end of fiscal
year 1998, whose total annual salary and bonus exceeded $100,000 and (iii) two
additional individuals who would have been included among the four most highly
compensated executive officers, but for the fact that neither individual was
serving as an executive officer at the end of fiscal year 1998 (each, a "Named
Officer").
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
LONG-TERM
COMPENSATION AWARDS
ANNUAL ----------------------------
COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
--------------------------- ---- -------- -------- ------------ ------------
Curtis A. Hessler(1)............... 1998 $380,770 $125,000 150,000 $ 24,040
Former President and CEO 1997 297,692 0 1,350,000 0
King R. Lee(2)..................... 1998 170,000 0 207,500 0
Interim Chief Executive Officer 1997 101,250 0 122,500 0
and President 1996 58,500 0 100,000 0
Frank R. Greico(3)................. 1998 189,909 32,500 75,000 0
Senior VP and CFO 1997 187,589 61,250 106,250 0
1996 129,230 25,000 75,000 0
Joseph Fusco(4).................... 1998 169,507 20,000 150,000 45,000
Former Senior VP -- Marketing 1997 145,802 43,531 150,000 0
and Product Management
Mark Epstein(5).................... 1998 216,150 60,000 0 55,380
Former Chief Technology Officer 1997 38,769 0 600,000 0
John Strosahl(6)................... 1998 188,461 19,026 180,000 0
Vice President -- International 1997 138,221 72,320 51,575 0
1996 60,000 30,000 0 0
---------------
(1) Mr. Hessler served as the President and Chief Executive Officer of the
Company from February 1997 to July 6, 1998.
I-6
(2) Mr. Lee has served as Interim Chief Executive Officer and President since
July 8, 1998. From September of 1994 until January 1995, Mr. Lee acted in
the capacity of Chief Executive Officer and was formally appointed Interim
Chief Executive Officer in December 1994. In addition, Mr. Lee was Interim
Chief Executive Officer between July and December 1994. Mr. Lee was
appointed as a member of the Office of President in August 1996 and resigned
from such position upon the appointment of Mr. Hessler in February 1997. Mr.
Lee is also a director of the Company and received compensation as a
non-employee director. Mr. Lee's salary for fiscal 1996 includes $33,000 of
consulting fees paid to King R. Lee & Associates and $25,000 of non-employee
director fees, Mr. Lee's salary for fiscal 1997 includes $76,500 of
consulting fees paid to King R. Lee & Associates and approximately $25,000
of non-employee director fees, and Mr. Lee's salary for fiscal 1998 includes
$150,000 of consulting fees paid to King R. Lee & Associates and $20,000 of
non-employee director fees. The options granted to Mr. Lee during fiscal
1997 include 90,000 options granted to Mr. Lee in connection with a like
value exchange of options described in the Company's Proxy Statement dated
January 5, 1998.
(3) Mr. Greico was an employee of the Company and an executive officer from
February 1996 until October 9, 1998. Mr. Greico is currently a consultant to
the Company although he continues to serve as Chief Financial Officer. The
options granted to Mr. Greico during fiscal 1997 include 56,250 options
granted to Mr. Greico in connection with a like value exchange of options
described in the Company's Proxy Statement dated January 5, 1998.
(4) Mr. Fusco was appointed as a Vice President in September 1996 and as Senior
Vice President -- Marketing and Product Management on April 28, 1997. Mr.
Fusco served in these positions until July 15, 1998 when his employment with
the Company terminated. The options granted to Mr. Fusco during fiscal 1997
include 67,500 options granted to Mr. Fusco in connection with a like value
exchange of options described in the Company's Proxy Statement dated January
5, 1998.
(5) Mr. Epstein served as Chief Technology Officer of the Company from July 1997
through July 15, 1998. He is no longer employed by the Company. The options
granted to Mr. Epstein during fiscal 1997 include 700,000 options granted to
Mr. Epstein in connection with a like value exchange of options described in
the Company's Proxy Statement dated January 5, 1998.
(6) Mr. Strosahl was appointed as the Company's Vice President -- International
in August 1997. Prior to that, Mr. Strosahl served as Interim Vice
President -- Worldwide Sales from March 1997 to August 1997, and as Senior
Director -- Asia/Pacific and Latin America from March 1996 until March 1997.
The bonus amount for Mr. Strosahl in fiscal 1997 includes reimbursement of
relocation and relocation related expenses that he received from the Company
in the amount of $38,722. The options granted to Mr. Strosahl during fiscal
1997 include 21,575 options granted to Mr. Strosahl in connection with a
like value exchange of options described in the Company's Proxy
Statement,dated January 5, 1998.
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The following two tables set forth information concerning stock options
granted to, exercised by and held by the named executive officers in fiscal year
1998. No SARs were granted by the Company or exercised by the named executive
officers in fiscal year 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
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INDIVIDUAL GRANTS
--------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR
OPTIONS/SARS GRANTED TO OR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ------------ ------------ ---------- ---------- ----------- -----------
Curtis A. Hessler.... 150,000 3.6 % $1.8125 12/08/07 $171,281.25 $432,281.25
King R. Lee.......... 7,500 .18 2.1250 02/05/08 10,040.625 25,340.625
200,000 4.8 0.2810 09/01/08 35,406.00 89,358.00
Frank R. Greico...... 75,000 1.8 2.3438 11/10/07 110,744.55 279,498.15
Joseph Fusco......... 150,000 3.6 2.3438 11/10/07 221,489.10 558,996.30
Mark Epstein......... -- -- -- -- -- --
John Strosahl........ 30,000 .72 2.3438 11/10/07 44,297.82 111,799.26
150,000 3.6 .2810 09/01/08 26,554.50 67,018.50
---------------
(1) Except as noted below, the options granted to the executive officers listed
above vest in the following manner: one fourth of the options vest on the
first anniversary of the date of grant and 1/48 of the total number of
options vest thereafter on a monthly basis. The employment agreements of
certain individuals also provide for accelerated vesting under certain
circumstances generally related to achievement of certain targets or certain
changes-of-control. See "Executive Compensation -- Employment Agreements."
Options generally remain exercisable for ten years from the date of grant.
All options were granted at a price equal to the fair market value on the
date of grant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
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NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES ACQUIRED VALUE REALIZED FISCAL YEAR-END (#) AT FISCAL YEAR-END (#)
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
Curtis A. Hessler.... 0 $0 590,625 909,375 $ 0 $ 0
King R. Lee.......... 0 0 343,750 43,750 68,800 0
Frank R. Greico...... 0 0 55,208 0 0 0
Joseph Fusco......... 0 0 53,596 0 0 0
Mark Epstein......... 0 0 300,000 0 0 0
John Strosahl........ 0 0 22,985 208,590 0 51,600
EMPLOYMENT AGREEMENTS
The Company's former Chief Executive Officer, Curtis A. Hessler, was
employed pursuant to a four-year employment agreement dated as of January 13,
1997. Pursuant to that agreement, Mr. Hessler was entitled to receive a base
salary of $450,000 per year and an annual target bonus of $250,000 based upon
achievement of objectives established by the Board of Directors or the
Compensation Committee. In addition, Mr. Hessler was granted options to purchase
1,350,000 shares of Common Stock. The employment agreement also provided for
accelerated vesting of Mr. Hessler's options upon the occurrence of certain
"change in control" transactions or if certain stock price levels were reached.
Pursuant to the terms of an agreement entered into
I-8
with Mr. Hessler upon his resignation in July 1998, Mr. Hessler is entitled to
receive severance payments in an aggregate amount equal to $173,089, payable
over 18 months.
As described above, King R. Lee received compensation from the Company
pursuant to the terms of the New Consulting Agreement.
The terms of Mr. Greico's offer letter provided that, as a result of the
termination of his employment, he is entitled to receive an amount equal to six
months' salary plus six months' targeted bonus and accelerated vesting of 50% of
his unvested options. In addition, upon Mr. Greico's termination as an employee,
the Company forgave approximately $33,000 of outstanding debt owed to the
Company by Mr. Greico. In connection with Mr. Greico's agreement to serve as the
Company's Chief Financial Officer throughout the acquisition process, Mr. Greico
will be paid a retention bonus in the amount of $37,500.
The Company entered into a two-year employment agreement with Joseph Fusco,
its former Senior Vice President -- Marketing and Product Management, dated as
of September 16, 1996. Pursuant to that agreement, Mr. Fusco was entitled to
receive a base salary of $135,000 per year and an annual target bonus of $67,500
determined in accordance with the terms of a management performance bonus plan
of the Company and contingent upon attainment of objectives mutually agreed upon
by Mr. Fusco and the Chief Executive Officer of the Company. In addition, Mr.
Fusco was granted options to purchase 75,000 shares of Common Stock pursuant to
the terms of the employment agreement. Mr. Fusco is entitled to receive $92,500
in severance as a result of the termination of his employment, payable over six
months.
Mr. Epstein, the Company's former Senior Vice President and Chief
Technology Officer, was employed pursuant to an offer letter dated July 11,
1997. Mr. Epstein's offer letter provided for a base salary of $240,000 and an
annual target bonus of $120,000 determined in accordance with the terms of a
management performance bonus plan of the Company and contingent upon attainment
of objectives mutually agreed upon by Mr. Epstein and the Chief Executive
Officer of the Company. In addition, Mr. Epstein was granted options to purchase
700,000 shares of Common Stock pursuant to the terms of the employment offer
letter. Mr. Epstein is entitled to received $240,000 in severance as a result of
the termination of his employment, payable over twelve months.
I-9
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's Compensation Committee oversees the Company's overall
executive compensation program in addition to reviewing and administering
programs available to employees of the Company.
COMPENSATION POLICIES
In recognition that the recruitment of personnel in the computer software
industry is highly competitive, the Company's compensation policies, both for
executive and non-executive employees, are structured to attract and retain
highly skilled technical, marketing and management personnel. To reward and
encourage performance that enhances both the short-term and long-term results of
the Company, the Company's compensation program is centered in three specific
areas: base salary, performance bonus and long-term incentive awards.
In applying these main components to executive compensation, the
Compensation Committee has determined to place a greater emphasis on merit and
risk-oriented compensation for the Company's executive officers. Consequently,
for executive officers, the Compensation Committee has generally preferred base
salaries for executive officers that fall within the moderate range of
competitor salaries and to establish bonus guidelines and long-term incentive
programs (particularly option grants) that are designed to inspire and reward
performance.
BASE SALARY
In general, the Compensation Committee reviews salaries for the Chief
Executive Officer and executive officers on an annual basis, generally
coordinated with the Board's annual election of executive officers following the
Company's annual meeting. During fiscal year 1998, the base salary for each of
Messrs. Hessler, Greico, Fusco and Epstein was paid pursuant to the terms of
their employment agreements. Also during such year, consulting fees were paid to
Mr. Lee pursuant to the New Consulting Agreement. The Compensation Committee
believes that the terms of each employment agreement are consistent with the
Committee's philosophy of establishing base salaries within the moderate range
and placing greater emphasis on merit and risk-oriented compensation such as
bonus payments based on performance and stock options.
DISCRETIONARY BONUS PLAN
In fiscal 1997, the Company implemented a Discretionary Bonus Plan (the
"Bonus Plan") designed to further the long-term growth and profitability of the
Company by motivating participants to achieve predefined quarterly and annual
objectives. Employees of the Company in senior management positions were
eligible to receive benefits under the Bonus Plan with the exception of Messrs.
Hessler and Lee, neither of whom are eligible to receive any benefits under the
Bonus Plan. Awards under the Bonus Plan were based on a combination of Company,
departmental and individual performance.
The Company performance objectives were established by the Board of
Directors in conjunction with the Chief Executive Officer. Quarterly and annual
personal and departmental performance objectives were generally established by
the Chief Executive Officer in conjunction with each eligible employee and
reviewed by the Compensation Committee. In general, payment of bonus amounts was
dependent on achievement of the objectives according to the following formula:
(i) 50% of the individual bonus award for each eligible employee was based upon
achievement of company-wide sales and profitability relative to the established
performance objective and (ii) 50% of the individual bonus award for the
executive officer was based on an evaluation of the eligible employee's personal
performance against the targeted personal performance objectives and achievement
of department objectives.
Pursuant to his employment agreement, Mr. Hessler received a base salary of
$450,000 per year and was entitled to receive an annual target bonus of $250,000
based upon achievement of objectives established by the Board of Directors or
the Compensation Committee. Mr. Hessler received a bonus of $125,000, which was
the minimum guaranteed bonus for the first year of Mr. Hessler's employment
under his employment contract.
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Pursuant to the New Consulting Agreement, Mr. Lee is paid a fixed per-day
consulting fee and is not entitled to any bonuses from the Company.
LONG-TERM INCENTIVE AWARDS
The Company's Stock Plan permits the Compensation Committee to grant to
eligible employees stock options, stock appreciation rights and other stock
awards such as restricted stock and bonus stock. The Compensation Committee
believes that the option grants made to the executive officers of the Company
were a key factor in the Company's ability to hire such executives during fiscal
year 1998 and were consistent with the Committee's philosophy of placing
emphasis on risk-oriented compensation. The Compensation Committee has
determined that long-term incentives should be granted on a discretionary basis
based principally on the quality of individual performance and base salary
levels. The Compensation Committee takes into consideration the amount of
previous option grants held when granting additional options.
INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
per-person limit of $1,000,000 on the amount of compensation that may be
deducted by the Company in any year with respect to certain of the Company's
most highly compensated officers. Section 162(m) does not, however, disallow a
deduction for qualified "performance-based compensation" the material terms of
which are disclosed to and approved by stockholders. In February 1995, the
stockholders approved amendments to and a restatement of the Company's 1990
Stock Plan with the result that compensation resulting from most awards granted
thereunder would be qualified "performance-based compensation" and would be
deductible. However, the Company may from time to time pay compensation to its
executive officers that may not be deductible. None of the options granted to
either Mr. Hessler during fiscal year 1998 were granted outside of the Company's
1990 Stock Plan.
Compensation Committee:
Frank W.T. LaHaye
William H. Lane III
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of October 15, 1998 for (i) each person known
to the Company to be the beneficial owner of more than 5% percent of the
outstanding Common Stock, (ii) each director of the Company, (iii) the Named
Officers, and (iv) all current directors and executive officers of the Company
as a group. The address of each such person is that of the Company, 13160
Mindanao Way, Marina del Rey, California 90292.
[Enlarge/Download Table]
NUMBER OF
SHARES AND
NUMBER OF SHARES OF PERCENT OF SHARES OF IN-THE-MONEY
NAME COMMON STOCK COMMON STOCK(1) OPTIONS(2)
---- ------------------- -------------------- --------------------
Frank W.T. LaHaye(3)....... 269,221 * 351,721
Howard Morgan(4)........... 246,926 * 329,426
King R. Lee(5)............. 355,833 * 210,000
William H. Lane III(6)..... 130,000 * 215,000
Joyce Wrenn(7)............. 23,334 * 100,000
Curtis A. Hessler(8)....... 684,375 * 0
Frank R. Greico(9)......... 62,208 * 7,000
Joseph Fusco(10)........... 53,596 * 0
Mark Epstein(11)........... 300,000 * 0
John Strosahl(12).......... 82,634 * 152,857
All directors and executive
officers as a group (10
persons)(13)............. 1,407,881 1.9% 1,816,004
---------------
* Less than one percent
(1) Percent Ownership is based on 73,531,705 shares of Common Stock outstanding
as of October 15, 1998. Unless otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable. Shares subject to options that are currently
exercisable or exercisable within 60 days of October 15, 1998 are deemed to
be outstanding and to be beneficially owned by the person holding such
options or warrants for the purpose of computing the percentage ownership
of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
(2) This column reflects all shares that will, under the terms of the Merger
Agreement, be sold by such individuals, consisting of shares of Common
Stock that are currently owned by such individuals and additional shares
that are, or will be under the terms of the Merger Agreement, purchasable
upon the exercise of options which have exercise prices of less than $0.52
per share.
(3) Includes 117,500 shares that may be purchased by Mr. LaHaye upon the
exercise of options that are either currently exercisable or will become so
within 60 days of October 15, 1998, and includes 151,721 shares of Common
Stock held by the Frank LaHaye Family Trust, of which Mr. LaHaye is
Trustee.
(4) Includes 117,500 shares that may be purchased by Dr. Morgan upon the
exercise of options that are either currently exercisable or will become so
within 60 days of October 15, 1998, and includes 24,000 shares of Common
Stock held in trust for Dr. Morgan's children with respect to which Dr.
Morgan disclaims beneficial ownership.
(5) Includes 345,833 shares that may be purchased by Mr. Lee upon the exercise
of options that are either currently exercisable or will become so within
60 days of October 15, 1998, and includes 10,000 shares of Common Stock
held by The Lee Living Trust, of which Mr. Lee and his spouse are the
Trustees.
(6) Includes 115,000 shares that may be purchased by Mr. Lane upon the exercise
of options that are either currently exercisable or will become so within
60 days of October 15, 1998, and includes 15,000 shares
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of Common Stock held by the Canyon Lane Corporation Profit Sharing Plan, of
which Mr. Lane is the sole stockholder.
(7) Includes 23,334 shares that may be purchased by Ms. Wrenn upon the exercise
of options that are either currently exercisable or will become so within
60 days of October 15, 1998.
(8) Includes 684,375 shares that may be purchased by Mr. Hessler upon the
exercise of options that are either currently exercisable or will become so
within 60 days of October 15, 1998.
(9) Includes 55,208 shares that may be purchased by Mr. Greico upon the
exercise of options that are either currently exercisable or will become so
within 60 days of October 15, 1998, and includes 6,000 shares of Common
Stock held by the Greico Family Trust, of which Mr. Greico and his spouse
are the Trustees, and with respect to which Mr. Greico disclaims beneficial
ownership.
(10) Includes 53,596 shares that may be purchased by Mr. Fusco upon the exercise
of options that are either currently exercisable or will become so within
60 days of October 15, 1998.
(11) Includes 300,000 shares that may be purchased by Mr. Epstein upon the
exercise of options that are either currently exercisable or will become so
within 60 days of October 15, 1998.
(12) Includes 22,985 shares which may be purchased by Mr. Strosahl upon the
exercise of options that are either currently exercisable or will become so
within 60 days of October 15, 1998.
(13) Includes 976,877 shares which may be purchased upon the exercise of options
granted to the directors and executive officers as a group, which are
either currently exercisable or will become so within 60 days of October
15, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1996, Mr. Greico, the Company's Chief Financial Officer,
received an advance on the bonus portion of his compensation in the amount of
approximately $74,000, which advance was made pursuant to the terms of Mr.
Greico's employment offer letter. At the end of fiscal 1998, approximately
$33,000 remained outstanding on this advance. On October 9, 1998, Mr. Greico
ceased to be an employee of the Company and the balance of the advance then
outstanding was forgiven by the Company as part of Mr. Greico's severance
package.
As noted above, Mr. Lee receives consulting fees under the New Consulting
Agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
To the Company's knowledge, based solely on its review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that all of its officers and
directors and greater than ten percent beneficial owners complied with all
Section 16(a) filing requirements applicable to them with respect to those
transactions during the fiscal year ended September 30, 1998.
I-13
EXHIBIT INDEX
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1 Agreement and Plan of Merger, dated October 15, 1998, by and
among Symantec Corporation, Oak Acquisition Corporation and
Quarterdeck Corporation, including Conditions to the Offer.
2 License Agreement, dated October 15, 1998, by and between
Symantec Corporation and Quarterdeck Corporation.
3 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and King R. Lee.
4 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Frank W. T. LaHaye.
5 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and William H. Lane III.
6 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Howard Morgan.
7 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Frank R. Greico.
8 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Joyce Wrenn.
9 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Suzanne Dickson.
10 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Gadi Navon.
11 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and Cheri Kaplan-Smith.
12 Stockholder Agreement, dated as of October 15, 1998, by and
between Symantec Corporation, Oak Acquisition Corporation
and John Strosahl.
13 Letter to Stockholders of Quarterdeck Corporation, dated
October 19, 1998.
14 Fairness Opinion of Broadview International LLC, dated
October 15, 1998.
15 Confidentiality Agreement, dated September 15, 1998, by and
between Symantec Corporation and Quarterdeck Corporation.
16 Non-Disclosure Agreement, dated October 1, 1998, by and
between Symantec Corporation and Quarterdeck Corporation, as
amended October 13, 1998.
17 Form of Indemnification Agreement and provisions regarding
indemnification of directors and officers from the Company's
Certificate of Incorporation and Bylaws.
18 Selected pages of the Company's Proxy Statement, dated
January 5, 1998, for the Annual Stockholder Meeting on
February 5, 1998.
I-14
Dates Referenced Herein and Documents Incorporated by Reference
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