0001104659-06-055865.txt : 20060817 0001104659-06-055865.hdr.sgml : 20060817 20060817170333 ACCESSION NUMBER: 0001104659-06-055865 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20060817 DATE AS OF CHANGE: 20060817 GROUP MEMBERS: ALEXANDER R. SLUSKY GROUP MEMBERS: VECTOR CAPITAL PARTNERS III, L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WATCHGUARD TECHNOLOGIES INC CENTRAL INDEX KEY: 0001062019 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 911712427 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-57889 FILM NUMBER: 061041416 BUSINESS ADDRESS: STREET 1: 505 FIFTH AVENUE SOUTH SUITE 500 CITY: SEATTLE STATE: WA ZIP: 98104 BUSINESS PHONE: 2065218340 MAIL ADDRESS: STREET 1: 505 FIFTH AVENUE SOUTH SUITE 500 CITY: SEATTLE STATE: WA ZIP: 98104 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Vector Capital III, L.P. CENTRAL INDEX KEY: 0001357213 IRS NUMBER: 870729513 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 456 MONTGOMERY STREET STREET 2: 19TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: (415) 293-5000 MAIL ADDRESS: STREET 1: 456 MONTGOMERY STREET STREET 2: 19TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 SC 13D/A 1 a06-18263_1sc13da.htm AMENDMENT

UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 3)*

WATCHGUARD TECHNOLOGIES, INC.

(Name of Issuer)

Common Stock, $0.01 par value per share

(Title of Class of Securities)

941105 10 8

(CUSIP Number)

Vector Capital III, L.P.
Vector Capital Partners III, L.L.C.
Alexander R. Slusky
c/o Vector Capital Corporation
456 Montgomery Street, 19th Floor
San Francisco, CA 94104
Telephone: (415) 293-5000
Attn: Alexander R. Slusky

with a copy to:

Michael J. Kennedy

O’Melveny & Myers LLP

275 Battery Street, Suite 2600

San Francisco, CA 94111

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

August 16, 2006

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of this schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 9441105 10 8

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Vector Capital III, L.P.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 3,247,500 shares of Common Stock

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 3,247,500

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 3,247,500 shares of Common Stock

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 9.4%

	14.	Type of Reporting Person (See Instructions) PN

CUSIP No. 9441105 10 8

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Vector Capital Partners III, L.L.C.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 3,247,500 shares of Common Stock

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 3,247,500

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 3,247,500 shares of Common Stock

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 9.4%

	14.	Type of Reporting Person (See Instructions) OO

CUSIP No. 9441105 10 8

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Alexander R. Slusky

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United States

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 0

			8.	Shared Voting Power 3,247,500 shares of Common Stock

			9.	Sole Dispositive Power 0

			10.	Shared Dispositive Power 3,247,500

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 3,247,500 shares of Common Stock

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 9.4%

	14.	Type of Reporting Person (See Instructions) IN


This Third Amended Statement (this “Third Amended Statement”) to the initial Schedule 13D filed with the Securities and Exchange Commission on behalf of Vector Capital III, L.P., a Delaware limited partnership, Vector Capital Partners III, L.L.C., a Delaware limited liability company (together with Vector Capital III, L.P., “Vector”) and Alexander R. Slusky, an individual (together with Vector, the “Reporting Persons”) on March 23, 2006 (the “Initial Statement”), as amended pursuant to Amendment No.1 to the Initial Statement filed on May 31, 2006 and Amendment No. 2 to the Initial Statement filed on June 28, 2006 (together with the Initial Statement, the “Prior Statements”), is being filed pursuant to Rule 13d-2 of the Securities Exchange Act, as amended, on behalf of the Reporting Persons to amend certain information previously reported by the Reporting Persons in the Prior Statements by adding the information set forth below to the items indicated. Unless otherwise stated herein, all capitalized terms used in this Third Amended Statement have the same meanings as those set forth in the Prior Statements.
Item 4.	Purpose of Transaction
Item 4 is hereby amended and supplemented by inserting the following at the end of the first paragraph thereof:
On August 16, 2006 Vector Capital III, L.P. entered into a letter agreement with Francisco Partners II, L.P. and Gladiator Corporation (the “Letter”). Pursuant to the Letter, Vector Captial III, L.P. has agreed to participate with Francisco Partners II, L.P. in the equity funding of Gladiator Corporation and has also agreed to vote its shares in favor of the pending merger between the Company and Gladiator Corporation, in each case subject to the terms and conditions set forth in the Letter. The Letter is attached hereto as Exhibit 5 and is incorporated herein by reference.

Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
Item 6 is hereby amended and restated in its entirety to read as follows:
Other than the Letter, to the knowledge of the Reporting Persons, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 of this Statement or between such persons and any other person with respect to the securities of the Company, including, but not limited to, transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.
Item 7.	Material to Be Filed as Exhibits
Item 7 is hereby supplemented as set forth below:
5	Letter dated as of August 16, 2006, by and between Vector Capital III, L.P., Francisco Partners II, L.P. and Gladiator Corporation.

SIGNATURE

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: August 17, 2006
	VECTOR CAPITAL III, L.P.
	By: Vector Capital Partners III, L.L.C., its General Partner


	By:	/s/ Alexander R. Slusky
	Name: Alexander R. Slusky
	Title: Managing Member


	VECTOR CAPITAL PARTNERS III, L.L.C.


	By:	/s/ Alexander R. Slusky
	Name: Alexander R. Slusky
	Title: Managing Member


	ALEXANDER R. SLUSKY


	/s/ Alexander R. Slusky
	Alexander R. Slusky

INDEX TO EXHIBITS

Exhibit Number		Document

1		Joint Filing Agreement dated March 23, 2006, by and among Vector Capital III, L.P., Vector Capital Partners III, L.L.C. and Alexander R. Slusky. (Incorporated by reference to Exhibit 1 to the Reporting Persons’ Schedule 13D filed with the Securities and Exchange Commission on March 23, 2006).

2		Letter dated as of February 17, 2006 from Vector Capital Corporation to the Board of Directors of WatchGuard Technologies, Inc. (Incorporated by reference to Exhibit 2 to the Reporting Persons’ Schedule 13D filed with the Securities and Exchange Commission on March 23, 2006).

3		Letter dated as of May 26, 2006, from Vector Capital Corporation to WatchGuard Technologies, Inc. (Incorporated by reference to Exhibit 3 to the Reporting Persons’ Amendment No. 1 to Schedule 13D filed with the Securities and Exchange Commission on May 31, 2006)

4		Letter dated as of June 26, 2006, from Vector Capital Corporation to WatchGuard Technologies, Inc. (Incorporated by reference to Exhibit 4 to the Reporting Persons’ Amendment No. 2 to Schedule 13D filed with the Securities and Exchange Commission on June 28, 2006)

5		Letter dated as of August 16, 2006, by and between Vector Capital III, L.P., Francisco Partners II, L.P. and Gladiator Corporation.

EX-5 2 a06-18263_1ex5.htm EX-5

Exhibit 5

Vector Capital III, L.P.
c/o Vector Capital Corporation
456 Montgomery Street, 19th Floor
San Francisco, CA 94104

August 16, 2006

CONFIDENTIAL

To:	Gladiator Corporation
	c/o Francisco Partners
	2882 Sand Hill Road, Suite 280
	Menlo Park, CA 94025

Re: Equity Commitment

Ladies and Gentlemen:

Reference is made to that Agreement and Plan of Merger, dated as of July 24, 2006 (as it may be amended from time to time in accordance with this letter, the “Merger Agreement”), by and among Gladiator Corporation, a Delaware corporation (the “Parent” or “Parent”), Warrior Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Parent and Watchguard Technologies, Inc., a Delaware corporation (the “Company”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms under the Merger Agreement. As used herein, the term “Parent” shall include any entity to which Parent shall assign its rights, interests and obligations under the Merger Agreement in accordance with Section 8.7 thereof. The parties listed in Schedule A are collectively referred to herein as the “Investors”.

Subject only to (i) satisfaction or waiver, at or prior to the Closing Date, of each of the conditions to the obligation of the Parent to effect the Merger as set forth in Sections 6.1 and 6.2 of the Merger Agreement, (ii) the funding by Francisco Partners II, L.P. (and/or one or more of its Affiliates (“FP”)) of one-half of its existing equity commitment to Parent, and (iii) execution and delivery of a stockholders or similar agreement reasonably satisfactory to each of the parties hereto relating to the Investors’ ongoing relationship with Parent, FP and each other with respect to their investment in Parent on terms set forth in Annex A and otherwise in accordance with those previously discussed with FP, Vector Capital III, L.P. (“Vector”) will (and/or will cause one or more of its Affiliates to) contribute, or cause to be contributed, to Parent (and Parent and FP agree that Parent will accept), immediately prior to the Effective Time, shares of Company common stock held by such Investor, free and clear of any Encumbrances, and/or cash in accordance with Schedule A hereto. The contributions by the Investors to Parent shall be equal to the amount contributed by FP to Parent but in no event in excess of one-half of the amount required to satisfy (i) Parent’s obligation under Section 2.1 of the Merger Agreement to deposit funds with the Paying Agent, (ii) required payments under Section 1.7 of the Merger Agreement

with respect to the cancellation of Company Stock Options and (iii) all expenses incurred by any of FP, the Investors or Parent (“Expenses”) in connection with this commitment letter, the Merger Agreement and the transactions contemplated thereby (which expenses will, as among the parties, be the responsibility of Parent).

The Investors and the Parent agree to negotiate in good faith the terms of the stockholders agreement prior to the Effective Time. Parent agrees not to amend the Merger Agreement without Vector’s consent; provided, that in the event Vector does not consent to any such proposed amendment, Parent shall be permitted to proceed with such amendment so long as it first offers to Vector the option to terminate this commitment letter. Investors agree to vote any shares of Company’s common stock they may own in favor of the Merger and the Merger Agreement; provided, that the foregoing agreement to vote shall terminate upon termination (or purported termination by Parent or Merger Sub) of the Merger Agreement. Investors agree to make any filings required under the HSR Act at substantially the same time as such filings are made by FP, such that any such approvals are designed to be obtained prior to the Effective Time. Vector (i) represents and warrants to Parent and FP that, as of the date hereof, the Investors hold the number of shares of Company common stock indicated on the Schedule 13D currently on file with the Securities Exchange Commision and that such Schedule 13D reflects all shares held by Investors as of the date hereof and (ii) agrees that all such shares will either be contributed to Parent in accordance with this commitment letter or held by such Investors until the Effective Time or the termination hereof. In the event the Parent or any of its affiliates receives a payment under the second proviso to Section 7.2 (a) of the Merger Agreement or payment of all or a portion of the Company Termination Fee under Section 7.2 (b) of the Merger Agreement, it will pay (the “Payment Obligations”) such amounts to FP and the Investors in accordance with the following: any such amounts shall be distributed (A) first, to satisfy each party’s Expenses (and if the amount is insufficient to pay all of such Expenses, then pro rata with respect to each party’s Expenses; and (B) second, one-half of any remaining amount to each of FP and the Investors; provided, that, after payment of all Expenses, there shall be deducted from amounts otherwise payable to the Investors an amount equal to (on a cumulative basis) one-half of the amount of gain (determined as if the cost basis of such shares was $4.25 per share), if any, the Investors collectively shall have achieved upon the sale of the shares referred to in clause (i) above, and such deducted amount shall be paid to FP. In the event that any shares of Company common stock have been contributed by Investors to Parent, and thereafter there is an event that gives rise to a Payment Obligation, prior to calculating the amount of the Payment Obligation, either such shares (or their proceeds, net of taxes) shall be returned to the Investors, or the Payment Obligation will be calculated as if such shares had been so returned such that each party is put in the economic position that it would have been in had the shares not been so contributed.

All rights and obligations under this commitment letter will expire immediately following the termination of the Merger Agreement, or, if the Merger has not occurred by December 31, 2006, upon written notice given by Vector to Parent on any day after December 31, 2006. From and after such expiration, no party hereto nor any of its directors, officers, partners, employees, investors or affiliates will have any liability or obligation to any person or entity as a result of this commitment letter; provided, that the Payment Obligations shall survive any such expiration

or termination if and only if the Merger Agreement was terminated prior to the expiration of this commitment letter.

This commitment letter may be signed in two or more counterparts, any one of which need not contain the signature of more than one party, but all such counterparts taken together shall constitute one and the same agreement. Neither this commitment letter nor any rights or obligations of any party hereunder may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without prior written consent of the other parties hereto.

THIS LETTER SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO ITS CONFLICT OF LAWS PROVISIONS.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

				Sincerely,

				VECTOR CAPITAL III, L.P.

				By:	VECTOR CAPITAL PARTNERS III, LLC
					its general partner


				By:	/s/ Alexander R. Slusky
				Name:	Alexander R. Slusky
				Title:	Managing Member


Accepted and Agreed to as of
the date first above written.

GLADIATOR CORPORATION


By:		/s/ Benjamin Ball
Name: Benjamin Ball
Title:			President


FRANCISCO PARTNERS II, L.P.

By: FRANCISCO PARTNERS GP II, L.P.,
	its General Partner

By: FRANCISCO PARTNERS GP II
	MANAGEMENT, LLC
	its General Partner


By:		/s/ Benjamin Ball
Name: Benjamin Ball
Title:			Manager

Schedule A

List of Investors

Vector Capital III, L.P. and/or
one or more of its Affiliates (the “Investors”)

The Investors will contribute a number of shares of common stock of the Company (valued at $4.25 per share) and/or cash, or a combination thereof, in the amount required by this commitment letter, in return for the same package of securities of Parent that FP receives.

Annex A

Investors would receive the same package of securities of Parent received by FP (as to type, mix, amount, etc.). The stockholders agreement would provide for equal board and committee representation, approval of significant actions (such as debt incurrence, capital expenditures, transactions with affiliates, mergers, etc., all with customary and appropriate baskets and exceptions) and generally equal rights and obligations with respect to public offerings, registration rights, first refusal, pre-emptive rights, and other customary matters. The agreement would have customary termination provisions and provide for the loss of certain rights (such as board representation) in the event a party fell below a specified ownership level.

Under the Securities Exchange Act of 1934 (Amendment No. 3)*

Under the Securities Exchange Act of 1934
(Amendment No. 3)*