Item 1.01 Entry into a
Material Definitive Agreement
On March 2, 2017, Quantum
Corporation (the Company) entered into an agreement (the Settlement
Agreement) with VIEX Capital Advisors, LLC, and certain of its affiliates
(collectively, VIEX), which beneficially owns approximately 10.9% of the
outstanding common stock of the Company (Common Stock).
Pursuant to the Settlement
Agreement, the Companys board of directors (the Board) agreed to decrease the
size of the Board from nine to seven following the Annual Meeting of
Stockholders to be held on March 31, 2017 (the Annual Meeting). The Company
and VIEX have agreed that the Company shall nominate the following individuals
for election as directors at the Annual Meeting: Paul R. Auvil III, Gregg J.
Powers, Clifford Press, Raghu Rau, Jon W. Gacek, David E. Roberson and John
Mutch. The parties have agreed that Mr. Auvil will serve as Chairman of the
Board. The Company has also agreed that, until the Annual Meeting, Messrs. Rau
and Mutch may attend meetings of the Board in a board observer capacity,
subject to certain limitations. The Settlement Agreement further provides that
VIEX will vote ratably all of the shares of Common Stock that it beneficially
owns for the election of each of the foregoing director nominees at the Annual
Meeting.
As part of the settlement,
the Company has agreed to form a Search Committee consisting of Messrs. Powers
and Press. The Search Committee will engage Korn/Ferry International to assist
the Company in recruiting and appointing three highly qualified new, independent
directors to replace Messrs. Mutch, Gacek and Roberson following their election
at the Annual Meeting. The Search Committee will consult with Mr. Auvil
throughout the process. The Company and VIEX have agreed that the new
independent directors shall (i) not have, and have not had in the past three (3)
years, a professional or other material relationship with the Company, VIEX or
any of their respective affiliates and their affiliates respective directors,
officers or managing members, (B) qualify as an independent director under
applicable rules and regulations (with at least one new director who is
qualified to serve as chair of the audit committee of the Board (the Audit
Committee) and one who is qualified to serve as a member of the Leadership and
Compensation Committee (the LCC)), and (C) have data storage expertise, with
at least one new director having expertise in the cloud/software space. The
Company has granted VIEX a right to approve or reject all candidates recommended
by the Search Committee prior to such candidates being presented to the full
Board (and VIEX has agreed not to unreasonably withhold its consent to the
nomination of candidates recommended by the Search Committee). The Company has
agreed to appoint two of the new independent directors within 60 days of the
date of the Settlement Agreement and the third new independent director within
90 days of the date of the Settlement Agreement.
In accordance with the
foregoing, each of Messrs. Mutch, Gacek and Roberson have executed letters of
resignation from the Board that will become effective upon the appointment of
the new directors, with Mr. Mutchs resignation to become effective upon the
appointment of the first new director, Mr. Gaceks resignation to become
effective upon the appointment of the second new director and Mr. Robersons
resignation to become effective upon the appointment of the third new director.
Mr. Gacek will continue as the Companys Chief Executive Officer following his
resignation from the Board of Directors and Mr. Gacek has agreed to waive any
claim under the Quantum Corporation Amended and Restated Change of Control
Agreement dated as of December 3, 2015 (the CoC Agreement) solely with respect
to any claim or potential claim arising
from,
or that may be deemed to arise as a
result
of, Mr.
Gaceks resignation from the Board. In connection with the
resignation of Mr. Roberson, the Board will appoint a qualified new director to
fill the vacancies on the Audit Committee and the LCC.
In addition, if any of the
VIEX nominees is unable to serve as a director, resigns as a director or is
removed as a director prior to the Next Annual Meeting (defined below), other
than as a result of the resignations described above, VIEX will have the ability
to identify a replacement.
Pursuant to the Settlement
Agreement, the Company has agreed to nominate Messrs. Auvil, Powers, Press and
Rau (including any replacement directors) and the three new, independent
directors who will replace Messrs. Mutch, Gacek and Roberson for election at the
next Annual Meeting of Stockholders to be held no later than August 31, 2017
(the Next Annual Meeting), unless (i) (A) the standstill period (described
below) has terminated, and (B) VIEX is soliciting proxies with respect to the
election of directors in opposition to the Company at the Next Annual Meeting or
taking any action to support a solicitation of proxies with respect to the
election of directors in opposition to the Company at the Next Annual Meeting,
or (ii) the Termination Date (defined below) has occurred. If the standstill
period remains in effect, VIEX has agreed that it will vote ratably all of the
shares of Common Stock that it beneficially owns for the election of each of the
Companys director nominees at the Next Annual Meeting.
The right of VIEX under the
Settlement Agreement to participate in the recommendation of replacement
directors, should one of their nominees be unable to serve, and in the selection
of new directors (each as described above) shall automatically terminate on the
date that VIEX sells or transfers beneficial ownership of shares of Common Stock
such that VIEXs aggregate beneficial ownership of Common Stock decreases to
less than one percent (1%) of the Companys then outstanding Common Stock (the
Termination Date).
The Settlement Agreement
also provides that VIEX will be subject to certain standstill provisions. Such
provisions generally remain in effect until the completion of the Next Annual
Meeting, subject to earlier termination under certain circumstances. These
provisions restrict VIEXs ability to engage in certain proxy solicitations,
make certain stockholder proposals, call meetings of stockholders or solicit
consents from stockholders, obtain additional representation on the Board or
seek to remove any of the Companys directors. The Company has agreed that it
will accept stockholder nominations for director and proposals of business for
the Next Annual Meeting until June 30, 2017.
The Company has also agreed
to reimburse VIEX for its out-of-pocket fees and expenses (including legal
expenses) incurred in connection with the nomination of candidates for director
by VIEX, the preparation of proxy materials and other communications, the
negotiation and execution of the Settlement Agreement and all other activities
related thereto, up to a maximum of $350,000. Each of the parties to the
Settlement Agreement has also agreed to mutual non-disparagement
obligations.
The foregoing description
of the terms and conditions of the Settlement Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Settlement Agreement, which is attached as Exhibit 10.1 hereto and incorporated
herein by reference.
On March 2, 2017, the
Company issued a press release announcing the signing of the Settlement
Agreement. A copy of the press release is attached as Exhibit 99.1 hereto.