Companies in Controversy Shore Up Protections

Two West Coast software companies under intense legal and investor pressure have moved to strengthen their anti-takeover defenses. Siebel Systems Inc., which has been blasted by major shareholders for poor performance and has undergone a recent management shake-up, installed a workforce-wide golden parachute that kicks in if the company is acquired. WatchGuard Technologies Inc., hit by a barrage of class-action suits after saying it would have to restate prior results because it found problems in internal financial controls, installed a poison pill but gave shareholders the right to kill it next year. In an 8-K filing with the SEC, Siebel said the compensation plan, which it called an “employee retention benefit program,” would “cover essentially all” of its more than 5,200 employees that are active or on leave of absence. The San Mateo, Calif.-based producer of e-business applications software stated that “recent rumors” about possible takeover bids “have created a great deal of uncertainty among the company’s employees and executives, which could negatively impact employee productivity and performance.” WatchGuard, which develops network security software, installed a preferred share purchase right but planned to put it up for a vote by shareholders at the 2006 annual meeting. The pill will die if shareholders reject it. WatchGuard is among a small group of companies of modest size that in recent months have let stockholders determine the fate of existing or proposed pills. They hope to achieve takeover protection while currying favor with the anti-pill corporate governance police. Two other companies recently installed pills in response to market developments. Main Street Restaurant Group Inc. directors adopted a rights plan after two buyers accumulated for more than 30% of the company’s shares, and Neuberger Berman Real Estate Income Fund moved after receiving a hostile bid. JPS Industries Inc. put in a pill with a 5% trigger to protect its net operating loss (NOL) tax credits while others installing rights plans recently were Axonyx Inc., Neurobiological Technologies Inc., and Pain Therapeutics Inc. Wintrust Financial Corp. dropped its pill. (c) 2005 Mergers and Acquisitions Journal and SourceMedia, Inc. All Rights Reserved. http://www.majournal.com http://www.sourcemedia.com