1
EXHIBIT 17
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- ----------------------------------------x
STANLEY SCHNEIDER, |
|
Plaintiff, |
|
v. |
|
SUHAS PATIL, RICHARD S. POSNER, KANWAL | C.A. No. 16565NC
REKHI, JAMES R. TOLONEN, CYBERMEDIA, | ---------------
INC. and NETWORK ASSOCIATES, INC. |
|
Defendants. |
- ----------------------------------------x
CLASS ACTION COMPLAINT
Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of CyberMedia, Inc.
("CyperMedia" or the "Company") since prior to the transaction herein
complained of and continuously to date.
2. Defendant CyberMedia is a corporation duly organized and existing
under the laws of the State of Delaware. The Company is a pioneer in
"self-healing" technology and software for personal resolve problems
automatically without resort to costly and scarce technology support services
of computer and software companies. The Company maintains its principal offices
at 2850 Ocean Park Boulevard, Santa Monica, California.
3. Defendant Network Associates, Inc. ("Network Associates") is a
Delaware corporation and is a leading supplier of enterprise security and
management solutions.
-1-
2
4. Defendant Kanwal Rekhi is Chairman of the Board of Directors and
Chief Executive Officer of the Company.
5. Defendant James R. Tolonen is President, Chief Operating Officer and
a Director of the Company.
6. Defendants Suhas Patil and Richard S. Posner are Directors of the
Company.
7. The Individual Defendants are in a fiduciary relationship with
Plaintiff and the other public stockholders of CyberMedia and owe them the
highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
8. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
common stockholders of the Company (except the defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully described
herein.
9. This action is properly maintainable as a class action because:
(a) The class is so numerous that joinder of all members is
impracticable. As of April 20, 1998, there were approximately 12,733,348 shares
of CyberMedia common stock outstanding owned by hundreds, if not thousands, of
record and beneficial, holders;
-2-
3
(b) There are questions of law and fact which are common to the
class including, inter alia, the following: (i) whether defendants have
breached their fiduciary and other common law duties owed by them to plaintiff
and the members of the class; and (ii) whether the class is entitled to
injunctive relief or damages as a result of the wrongful conduct committed by
defendants.
(c) Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of the plaintiff are typical of the claims of other members of the class and
plaintiff has the same interests as the other members of the class. Plaintiff
will fairly and adequately represent the class.
(d) Defendants have acted in a manner which affects plaintiff
and all members of the class alike, thereby making appropriate injunctive
relief and/or corresponding declaratory relief with respect to the class as a
whole.
(e) The prosecution of separate actions by individual members
of the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish incompatible
standards of conduct for defendants, or adjudications with respect to
individual members of the Class which would, as a practical matter, be
dispositive of the interests of other members or substantially impair or impede
their ability to protect their interests.
-3-
4
SUBSTANTIVE ALLEGATIONS
10. On July 27, 1998, defendants CyberMedia and Network Associates
announced that CyberMedia and Network Associates had entered into a definitive
merger agreement pursuant to which Network Associates will acquire CyberMedia
in a transaction valued at approximately $130 million. Under the terms of the
transaction as presently proposed Network Associates will commence a cash
tender offer for all of the Company's outstanding common shares at $9.50 per
share. The tender offer will be followed by a merger in which shares of
CyberMedia not tendered will be converted into right to receive $9.50 per share
in cash.
11. By entering into the agreement with Network Associates, the
CyberMedia Board has initiated a process to sell the Company which imposes
heightened fiduciary responsibilities and requires enhanced scrutiny by the
Court. However, the terms of the proposed transaction were not the result of an
auction process or active market check; they were arrived at without full and
thorough investigation by the Individual Defendants; and they are intrinsically
unfair and inadequate from the standpoint of the CyberMedia shareholders.
12. The Individual Defendants failed to make an informed decision, as no
market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of CyberMedia's
highest transactional value.
-4-
5
13. The Individual Defendants have violated the fiduciary duties owed to
the public shareholders of CyberMedia. The Individual Defendants' agreement to
the terms of the transaction, its timing, and the failure to auction the
Company and invite other bidders, and defendants' failure to provide a market
check demonstrate a clear absence of the exercise of due care and of loyalty to
CyberMedia's public shareholders.
14. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of CyberMedia's net worth as
a merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt
to obtain the best value for CyberMedia's public shareholders.
15. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with Network Associates without making the requisite effort
to obtain the best offer possible.
16. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of CyberMedia's assets and business, and will be prevented from obtaining
fair and adequate consideration for their shares of CyberMedia common stock.
-5-
6
17. The consideration to be paid to class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of CyberMedia's common stock is materially
in excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company;
(b) The merger price is not the result of an appropriate
consideration of the value of CyberMedia because the CyberMedia Board approved
the proposed merger without undertaking steps to accurately ascertain
CyberMedia's value through open bidding or at least a "market check mechanism";
and
(c) By entering into the agreement with Network Associates, the
Individual Defendants have allowed the price of CyberMedia stock to be capped,
thereby depriving plaintiff and the Class of the opportunity to realize any
increase in the value of CyberMedia stock.
18. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
19. Defendant Network Associates knowingly aided and abetted the breaches
of fiduciary duty by the Individual Defendants by agreeing to the transaction as
structured. Network Associates so agreed to enable it to acquire CyberMedia at
the lowest possible price.
-6-
7
20. Plaintiff and other members of the Class have no adequate remedy at
law.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
a. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the representative of the Class;
b. Preliminarily and permanently enjoining defendants and their counsel,
agents, employees and all persons acting under, in concert with, or for
them, from proceeding with, consummating, or closing the proposed
transaction;
c. In the event that the proposed transaction is consummated, rescinding
it and setting it aside, or awarding rescissory damages to the Class;
d. Awarding compensatory damages against defendants, individually and
severally, in an amount to be determined at trial, together with
pre-judgment and post-judgment interest at the maximum rate allowable
by law, arising from the proposed transaction;
e. Awarding plaintiff its costs and disbursements and reasonable
allowances for fees of plaintiff's counsel and experts and
reimbursement of expenses; and
-7-
8
f. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A.
By: /s/
---------------------------------
Suite 1401, Mellon Bank Center
P. O. Box 1070
Wilmington, Delaware 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
Dated: July 28, 1998
-8-