<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
Date of Report (date of earliest event reported): November 25, 1996
Quarterdeck Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-19207 95-4320650
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
13160 Mindanao Way, Marina del Rey, California 90292
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 309-3700
<PAGE> 2
ITEM 5. OTHER EVENTS.
1. SEPTEMBER 30, 1996 FISCAL YEAR-END RESULTS
On November 25, 1996, Quarterdeck Corporation (the "Company") issued
the press release attached as Exhibit 99.1 to this Current Report on Form 8-K
with respect to results for the fiscal year ended September 30, 1996.
2. REGULATION S OFFERING
On September 30, 1996, the Company issued 200,000 shares of Series B
Convertible Preferred Stock, stated value $100 per share (the "Series B
Preferred Stock"), and a warrant (the "Warrant") to acquire shares of Common
Stock, $.001 par value (the "Common Stock"), of the Company for $20 million in
cash. The securities were issued to an institutional investor in an overseas
offering pursuant to Regulation S of the Securities Act of 1933, as amended.
Hambrecht & Quist served as the Company's placement agent in connection with the
Regulation S offering.
The Series B Preferred Stock is convertible into shares of Common Stock
on or after November 15, 1996 (the 46th day following the issuance of the Series
B Preferred Stock), and will automatically convert into Common Stock on
September 30, 2002 to the extent any shares of Series B Preferred Stock remain
outstanding at that time. Each share of Series B Preferred Stock is convertible
into the number of shares of Common Stock equal to the quotient of (i) $100.00
divided by (ii) the Conversion Price. The Conversion Price is the lesser of (i)
101% of the average of the daily volume-weighted average prices of the Common
Stock on the Nasdaq National Market System (or such national securities exchange
or other interdealer quotation system on which the Common Stock is then listed
or quoted) (the "Market Price") during the 40 trading day period ending two
trading days before the date on which the Company receives a notice of
conversion from a holder of the Series B Preferred Stock (the "Conversion
Date"), and (ii) 125% of the average of the Market Price of the Common Stock
during the first five trading days of the 40 trading day period ending two
trading days before the Conversion Date. Assuming a Conversion Price of $ 5.7133
(based on 101% of the average of the Market Price for the 40 trading day periods
ending on November 21, 1996, two trading days before the first date on which the
Series B Preferred Stock may be converted), each share of Series B Preferred
Stock would be convertible into 17.5 shares of Common Stock, or an aggregate of
3,500,604 shares of Common Stock upon conversion of all shares of Series B
Preferred Stock.
If stockholder approval of the issuance of Common Stock pursuant to the
conversion of the Series B Preferred Stock and exercise of the Warrant is
required either because the number of shares so issuable would equal or exceed
20% of the number of shares of Common Stock outstanding on September 30, 1996,
or the number of shares issuable pursuant to conversion or exercise notices
received would exceed the number of then authorized but unissued shares of
Common Stock not reserved for other issuances, the Series B Preferred Stock will
not be convertible with respect to the number of shares of Common Stock that
would cause either (a) the 20% threshold to be exceeded or (b) the number of
authorized but unissued shares to be
<PAGE> 3
exceeded, and the Company will be required to seek the necessary stockholder
approval. If such stockholder approval is not obtained within specified periods
of time, the Company will be required, to the extent permitted by applicable
law, to redeem the number of shares of Series B Preferred Stock that could not
be converted for a redemption price of $100.00 per share as soon as practicable,
but in no event no later than September 30, 2001.
The Warrant may be exercised from and after March 30, 1998 (or earlier
if certain mergers, acquisitions or combinations (a "Combination") occur prior
to that date) for a number of shares of Common Stock determined by dividing (i)
12,666,667 by (ii) the Exercise Price; provided that the number of shares of
Common Stock issuable upon exercise in full of the Warrant shall not be less
than 567,885 nor greater than 1,703,653. The Exercise Price per share will be
equal to 150% of the daily volume-weighted average prices of the Common Stock
for the period from and including September 30, 1996 to and including April 30,
1997, but in any event shall not be less than $7.435 per share nor greater than
$22.305 per share. Notwithstanding the foregoing, if the Warrant becomes
exercisable prior to April 30, 1997 as a result of the occurrence of a
Combination, the Exercise Price shall be $10.037 and the number of shares of
Common Stock to be issued upon exercise of the Warrant shall be 1,200,000
shares.
In connection with the issuance of the Series B Preferred Stock and the
Warrant, the Company amended the Rights Agreement dated August 11, 1992 (the
"Rights Agreement") between the Company and Bank of America, National Trust and
Savings Association, as rights agent, to provide that the institutional investor
that required the Series B Preferred Stock and Warrant will not be deemed to be
an Acquiring Person (as defined in the Rights Agreement) as a result of its
acquisition of the Series B Preferred Stock, the Warrant or any shares of Common
Stock received upon conversion of the Series B Preferred Stock or exercise of
the Warrants; provided, however, if the institutional investor becomes the
Beneficial Owner (as defined in the Rights Agreement) of any additional number
of shares of Common Stock in excess of 5% of the outstanding shares of Common
Stock other than as a result of the conversion of the Series B Preferred Stock
and/or exercise of this Warrant, then the institutional investor will be deemed
to be an Acquiring Person.
Copies of the Subscription Agreement, the Warrant Certificate, the
Certificate of Designations of the Series B Preferred Stock and the Form of
Amendment to the Rights Agreement are filed as exhibits to this Current Report
on Form 8-K.
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
Quarterly Statements of Operations of Quarterdeck
Corporation and Subsidiaries attached as Exhibit
99.6
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The following are filed as exhibits to this Current Report on
Form 8-K:
99.1 Press Release dated November 25, 1996.
99.2 Certificate of Designations of Series B Convertible
Preferred Stock.
99.3 Subscription Agreement dated as of September 30, 1996
between Quarterdeck Corporation and Fletcher
International Limited.
99.4 Warrant Certificate dated as of September 30, 1996
issued by Quarterdeck Corporation to Fletcher
International Limited.
99.5 Form of Amendment to the Rights Agreement between
Quarterdeck Corporation and Bank of America,
National Trust and Savings Association, as Rights
Agent.
99.6 Condensed Consolidated Statements of Operations for
the fiscal quarters of the years ended September 30,
1996 and 1995 for Quarterdeck Corporation and
Subsidiaries.
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
QUARTERDECK CORPORATION, a
Delaware corporation
By: \s\Frank R. Greico
_____________________________________
Name: Frank R. Greico
Title: Senior Vice President and
Chief Financial Officer
November 25, 1996
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S> <C>
99.1 Press Release dated November 25, 1996.
99.2 Certificate of Designations of Series B
Convertible Preferred Stock.
99.3 Subscription Agreement dated as of
September 30, 1996 between Quarterdeck
Corporation and Fletcher International
Limited.
99.4 Warrant Certificate dated as of September
30, 1996 issued by Quarterdeck Corporation
to Fletcher International Limited.
99.5 Form of Amendment to the Rights
Agreement between Quarterdeck Corporation
and Bank of America, National Trust and
Savings Association, as Rights Agent.
99.6 Condensed Consolidated Statements of
Operations for the fiscal quarters of the years
ended September 30, 1996 and 1995 for
Quarterdeck Corporation and Subsidiaries.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
QUARTERDECK CORPORATION
13160 Mindanao Way
Marina del Rey, CA 90292
(310) 309-3700
TRADED: NASDAQ: QDEK
<TABLE>
<CAPTION>
<S> <C> <C>
AT FINANCIAL RELATIONS BOARD:
AT THE COMPANY: Fiona Ross Moira Conlon
Frank Greico General Information Analyst Contact
Chief Financial Officer 11611 San Vicente Blvd., # 700 11611 San Vicente Blvd., # 700
(310) 309-3700 Los Angeles, CA 90049 Los Angeles, CA 90049
(310) 442-0599 (310) 442-0599
</TABLE>
FOR IMMEDIATE RELEASE
MONDAY NOVEMBER 25, 1996
QUARTERDECK ANNOUNCES FOURTH QUARTER AND YEAR END RESULTS
RECENT RESTRUCTURING DESIGNED TO RETURN OPERATIONS TO PROFITABILITY
MARINA DEL REY, CA, NOVEMBER 25, 1996 ... Quarterdeck Corporation (Nasdaq:
QDEK) today reported a loss of $75 million for the fiscal year ended September
30, 1996. As previously announced, the loss was primarily a result of charges
associated with recent acquisitions and restructuring, lower demand for memory
management products, additional return reserves and the delay in the
development of certain Internet markets. Gross revenues for the year were $165
million. The Company believes its current strategic efforts will return the
company to profitability.
FINANCIAL SUMMARY ($000)
<TABLE>
<CAPTION>
Three months ended Twelve months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross Revenues $ 32,067 $ 34,237 $164,988 $126,742
Net Revenues 19,741 31,304 133,100 117,606
Net income (54,808) 277 (74,959) 11,252
</TABLE>
Commenting on the results, King R. Lee, member of the Board of
Directors and Office of the President, said, "During the September Quarter we
took important steps in our restructuring efforts aimed at implementing our new
strategic plan. Additionally, we required higher than anticipated return
reserves which contributed to the negative impact on our bottom line. However,
based upon the review and analysis of our market opportunities, we are
confident that following our restructuring we will see a return to
profitability."
-more-
<PAGE> 2
Quarterdeck Corporation
Outlining details of the loss, Frank R. Greico Chief Financial Officer
said "The loss for the quarter includes approximately $15 million in non-cash
write-offs of in-process R&D relating to acquisitions, $13 million of
restructuring charges and $8.4 million of additional return reserves."
STRATEGIC DIRECTION
Quarterdeck's restructuring positions the Company to re-establish
itself as a leading provider of software products with solid revenue and
earnings growth. The company plans to utilize its leading technology to build
on its core product franchises developing smart tools that enhance computing on
the Internet, intranet and desktop PC. These franchises include automated
performance enhancement, automated application and system conflict resolution,
disk, file and space management, communication and Internet search.
TECHNOLOGY STRATEGY
At the core of the Company's desktop and Internet technology strength
is its knowledge and understanding of the interaction among applications,
hardware and the operating system. This competence is critical to the
development of new products that automatically make the users computing
experience faster, easier, and more trouble-free through the utilization of
intelligent agents. As the Internet comes to the desktop in the next releases
of Microsoft's operating systems and Netscape's further integration of the
browser into the operating system, Quarterdeck is in a good position to take
advantage of the many opportunities that this will generate by having broad
strength in both areas. The Company intends to leverage and integrate these
technologies across its product line through componentized software development
utilizing Java and ActiveX. Componentization will also shorten the product
development cycle through the reuse of previously developed components.
PRODUCT STRATEGY
Combining its strong product franchise with its global brand name,
Quarterdeck plans to further develop and grow its market share in the following
areas:
# Performance Enhancement (QEMM, MagnaRam 97, Speedy Rom)
# Disk, File and Space Management (CleanSweep, Remove-It,
Partition-It)
# Automated User Problem Assistance (Fix-It, WinProbe)
# Communication and Internet Search (ProComm, Web Compass,
Rapid Remote)
# Graphics Conversion (HiJaak)
In the fourth quarter, the Company shipped new versions of MagnaRAM,
HiJaak, ProComm and a recently acquired utility, Vertisoft Fix-It. At Fall
Comdex, the Company released Web Compass 2.0 and so far this current quarter,
the Company has released a new version of CleanSweep for Windows 95 and NT and
a new hard drive optimization utility, Partition-It.
The Company is now divided into three key business units: Utilities,
Communications and Internet Solutions, and Direct Marketing. The Company's new
direct marketing unit will consolidate control over and leverage its
telemarketing and direct mail competencies. In addition, Quarterdeck is
<PAGE> 3
Quarterdeck Corporation
focusing on improving operational efficiencies and continuing the review of its
cost structure. During the fourth quarter the Company consummated a placement
of $20 million of convertible preferred stock and believes it has sufficient
cash for the current business cycle.
Quarterdeck Corporation is a pioneer in the development of PC utilities and
Internet software. The Company leads the industry in bringing utilities
solutions to the Windows and Macintosh environments and offers powerful
Internet and communications software tools. Quarterdeck Corporation is
headquartered at 13160 Mindanao Way, Marina del Rey, CA 90292. Its European
headquarters are in Dublin, Ireland. Further product availability and pricing
information may be obtained by calling 310/ 309-3755 and by accessing
Quarterdeck's Internet website at http://www.quarterdeck.com.
For more information about Quarterdeck Corporation via facsimile at no
cost, simply call 1-800-PRO-INFO and dial client code 304.
When used in the preceding discussion, the words "believes, designed
to or intended to" and similar conditional expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties and actual results could differ materially from those expressed
in any of the forward-looking statements. Such risks and uncertainties
include, but are not limited to, conditions in the general economy or the
software industry, the timely development and market acceptance of products and
technologies, competitive factors, demand for memory-management software
products, sell-through of products in the sales channels, successful
integration of acquisitions, the ability to secure additional sources of
financing and other risks described from time to time in Quarterdeck's SEC
reports and filings.
Quarterdeck, HiJaak are registered trademarks of Quarterdeck Corporation or its
subsidiaries. MagnaRAM, CleanSweep, Vertisoft Fix-It and Partition-It are
trademarks of Quarterdeck Corporation or its subsidiaries. All other brand and
product names are trademarks or registered trademarks of their respective
companies.
[FINANCIAL DATA TO FOLLOW]
<PAGE> 4
Quarterdeck Corporation
QUARTERDECK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Twelve months ended
September 30, September 30,
1996 1995 1996 1995
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Gross Revenues $32,067 $34,237 $164,988 $126,742
Provision for returns 12,326 2,933 31,888 9,136
-------------------------- --------------------------
Net Revenues 19,741 31,304 133,100 117,606
Cost of Revenues 11,269 9,876 49,600 34,884
-------------------------- --------------------------
Gross Margin 8,472 21,428 83,500 82,722
Operating expenses:
Research and development 5,363 3,746 21,314 14,286
Sales and marketing 13,859 9,304 66,355 30,624
General and administrative 8,824 4,924 32,128 20,704
-------------------------- --------------------------
Total operating expenses 28,046 17,974 119,797 65,614
Operating income before one-time charges (19,574) 3,454 (36,297) 17,108
Interest income (expense), net (1,830) 605 (67) 1,884
-------------------------- --------------------------
Income before income taxes and one-time charge (21,404) 4,059 (36,364) 18,992
Provision for income taxes 4,745 (24) 806 331
-------------------------- --------------------------
Income before one-time charges (26,149) 4,083 (37,170) 18,661
-------------------------- --------------------------
Acquisition, restructuring and other one-time 28,659 3,806 37,789 7,409
charges
Net income (54,808) 277 (74,959) 11,252
========================== ==========================
Income per share before one-time charges $(0.73) $0.12 $(1.07) $0.52
========================== ==========================
Net income per share $(1.53) $0.01 $(2.15) $0.32
========================== ==========================
Shares used for per share calculations 35,856 33,905 34,894 35,557
========================== ==========================
</TABLE>
<PAGE> 5
Quarterdeck Corporation
QUARTERDECK CORPORATION
COMPARATIVE BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
ASSETS:
Cash & cash equivalents $25,554 $39,669
Accounts receivable, net 9,265 13,621
Inventory, net 2,151 2,281
Deferred income taxes - 2,178
Other current assets 5,594 4,006
-------------- --------------
TOTAL CURRENT ASSETS 42,564 61,755
Note rec.- related party - building - 469
Property, plant & equipment, net 21,252 8,335
Capitalized software, net 3,448 2,807
Other noncurrent assets 9,517 3,333
-------------- --------------
TOTAL ASSETS $76,781 $76,699
============== ==============
LIABILITIES:
Current inst. - capital lease obligations $111 $255
Trade accounts payable 10,685 13,582
Loan payable to bank 8,280 -
Accrued expenses 17,935 13,880
Accrued acquisition, restructuring 10,237 3,455
Note payable to related parties - 1,093
-------------- --------------
TOTAL CURRENT LIABILITIES 47,248 32,265
Other long term liabilities 70 164
Convertible debentures 25,000 -
Obligations under capital lease 38 -
-------------- --------------
TOTAL LIABILITIES 72,356 32,429
STOCKHOLDERS' EQUITY:
Preferred stock 18,725 -
Common stock 37 31
Treasury stock (560) (560)
Notes rec. on sale of stock (18) (70)
Additional paid in capital 66,096 39,877
Foreign currency translation adjustment (468) (562)
Unreal. gain on marketable securities 379 195
Retained earnings/(accumulated deficit) (79,766) 5,359
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 4,425 44,270
-------------- --------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $76,781 $76,699
============== ==============
</TABLE>
# # #
<PAGE> 1
EXHIBIT 99.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
QUARTERDECK CORPORATION
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
Quarterdeck Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the Delaware General
Corporation Law at a meeting duly called and held on September 20, 1996:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation (the "Board of Directors") in accordance
with the provisions of the Corporation's Certificate of Incorporation (the
"Certificate of Incorporation"), the Board of Directors hereby creates a series
of Preferred Stock, stated value $100.00 per share, of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
SERIES B CONVERTIBLE PREFERRED STOCK:
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series B Convertible Preferred Stock" ("Series B Preferred
Stock") and the number of shares constituting Series B Preferred Stock shall be
200,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors, provided that no decrease shall reduce the number of
shares of Series B Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series B
Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS. No dividends shall be
payable with respect to the Series B Preferred Stock.
SECTION 3. VOTING RIGHTS. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Except as otherwise provided in Section 3(B) or Section 10 or
as required by applicable law, the holders of shares of Series B Preferred
Stock shall not be entitled to vote on any matter submitted to a vote of
stockholders of the Corporation.
(B) If a Required Consent (as defined in Section 4(b)) is not
obtained within 90 days (or 120 days, in the event a proxy or information
statement is provided by the Corporation to its stockholders and the Securities
and Exchange Commission provides comments to the
<PAGE> 2
Corporation with respect thereto) after the occurrence of an event of the type
described in Section 4(b)(i) or Section 4(B)(ii) and unless prohibited by
applicable law, the holders of the outstanding shares of Series B Preferred
Stock, voting as a class, shall have the right to elect a number of directors
to the Board of Directors equal to the greater of (i) the product (rounded down
to the next largest whole number) of (a) the number of authorized directors
immediately prior to such time (excluding any directors that any other series
of the Corporation's preferred stock then have the right to elect) multiplied
by (b) a fraction the numerator of which is the number of shares of the
Corporation's Common Stock, $.001 par value per share (the "Common Stock") then
issued or issuable upon conversion of all outstanding shares of Series B
Preferred Stock and upon exercise of that certain Warrant (the "Warrant")
issued by the Corporation to Fletcher International Limited ("Fletcher") on the
date of the original issuance of the Series B Preferred Stock to the extent the
Warrant is then held by Fletcher and the denominator of which is the number of
shares of Common Stock, that would have then been outstanding if such shares of
Series B Preferred Stock had been converted into shares of Common Stock or (ii)
one director. The director(s) elected pursuant to this Section 3(B) shall be
in addition to, and not in lieu of, the then authorized number of directors
(including any directors that any other series of the Corporation's preferred
stock then have the right to elect). At such time that Excess Preferred Shares
cease to be outstanding (whether due to conversion pursuant to the last
sentence of Section 4(B) or due to redemption pursuant to Section 8(B) or
Section 8(C)), (1) the right of the holders of Series B Preferred Stock as a
class to elect director(s) shall cease, (2) the term of the director(s) elected
by the holders of Series B Preferred Stock as a class shall terminate, and (3)
the number of authorized directors shall be such number as would then have been
in effect but for the election of director(s) by the holders of Series B
Preferred Stock.
(C) (i) At such time as any Excess Preferred Shares are
outstanding and the holders of Series B Preferred Stock shall not yet have
exercised the voting right granted pursuant to Section 3(B), such right may be
exercised at a special meeting called pursuant to Section 3(C)(ii) or any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised unless the
holders of at least a majority of the outstanding shares of Series B Preferred
Stock shall be present in person or by proxy. The absence of a quorum of the
holders of Common Stock shall not affect the exercise by the holders of Series
B Preferred Stock of such voting right.
(ii) Unless the holders of Series B Preferred Stock shall
have previously exercised their right to elect director(s), any holder or
holders owning in the aggregate not less than 10% of the total number of shares
of Series B Preferred Stock outstanding may request the calling of a special
meeting of the holders of Series B Preferred Stock, which meeting shall
thereupon be called by the President, a Vice- President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Series B Preferred Stock are entitled to vote shall be given to each holder
of record of Series B Preferred Stock by mailing a copy of such notice to such
holder at such holder's last address as the same appears on the books of the
Corporation. Any such special meeting shall be called for a time not earlier
than ten days and not later than 120 days after such order or request.
Notwithstanding the provisions of this Section (C)(ii), no such special meeting
shall be called during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the stockholders.
2
<PAGE> 3
(iii) Each director(s) elected by the holders of Series B
Preferred Stock shall continue in office until his or her successor shall have
been elected by such holders or until there cease to be Excess Preferred Shares
outstanding, whichever occurs first. Any vacancy with respect to a director
elected by the holders of Series B Preferred Stock may be filled by vote of a
majority of the remaining directors theretofore elected by the holders of
Series B Preferred Stock. References in this Section 3(C)(iii) to directors
elected by the holders of Series B Preferred Stock shall include directors
elected by such directors to fill vacancies as provided in the foregoing
sentence.
SECTION 4. CONVERSION.
(A) Subject to Section 4(B) and Section 4(C), at any time on or
after the 46th day following the first issuance of shares of Series B Preferred
Stock, a holder of a share of Series B Preferred Stock may convert such share
into the number of shares of the Corporation's Common Stock equal to (i)
$100.00 divided by (ii) the Conversion Price (as defined in Section 4(D)) by
delivering to the Corporation a written notice of conversion (a "Conversion
Notice"); provided that any shares of Series B Preferred Stock outstanding on
September 30, 2002 shall automatically convert into Common Stock in accordance
with the terms hereof but without the delivery of a Conversion Notice. From
and after the date on which the Corporation receives a Conversion Notice from a
holder of a share of Series B Preferred Stock (or if such date is not a
business day in the State of California, the next succeeding business day) (the
"Conversion Date"), such share shall cease to be outstanding and the converting
holder shall be deemed the owner of the number of shares of Common Stock into
which such share of Series B Preferred Stock was converted. The Corporation
shall deliver to such holder a stock certificate evidencing such shares of
Common Stock within three business days following the Conversion Date.
Notwithstanding the foregoing, a holder of a share of Series B Preferred Stock
may convert such share only if the aggregate number of shares of Series B
Preferred Stock then being converted by such holder would result in the
issuance of at least 100,000 shares of Common Stock at that time (or such
lesser number of shares of Common Stock as would be issued upon conversion of
all shares of Series B Preferred Stock held beneficially or of record by such
holder).
(B) If either at the time that the Corporation receives a
Conversion Notice or at September 30, 2002, either
(i) the aggregate number of shares of Common Stock
issuable pursuant to such Conversion Notice and all other Conversion Notices
received at that time (the "Subject Conversion Notices"), when added to the
aggregate number of shares of Common Stock (a) previously issued pursuant to
the conversion of shares of Series B Preferred Stock and the exercise of that
certain Warrant (the "Warrant") issued by the Corporation to Fletcher
International Limited on the date of the first issuance of shares of Series B
Preferred Stock, and (b) issuable upon conversion of all remaining outstanding
shares of Series B Preferred Stock (determining such number as if such Series B
Preferred Stock were converted as of the Conversion Date relating to such
Conversion Notice) and (c) issuable upon exercise in full of the Warrant
(provided that if any such Conversion Notice is on or before April 30, 1997,
such number of shares of Common Stock shall be assumed to be 1,200,000), equals
or exceeds
3
<PAGE> 4
7,263,750 and such circumstance would require the approval of the holders of
the Common Stock pursuant to the listing requirements or rules of the NASDAQ
National Market System (or such stock exchange or other interdealer quotation
system on which the Common Stock is then listed or quoted), or
(ii) on or before the earlier of (a) February 15, 1997 and
(b) the first annual meeting of stockholders of the Corporation held subsequent
to the initial issuance of the Series B Preferred Stock, the aggregate number of
shares of Common Stock issuable pursuant to the Subject Conversion Notices would
exceed the number of then authorized but unissued shares of Common Stock not
reserved for other issuances, then the number of shares of Series B Preferred
Stock identified in the Subject Conversion Notices that, if converted into
shares of Common Stock, would equal or exceed the limit referred to in Section
4(B)(i), or would exceed the number of authorized and unissued and otherwise
unreserved shares of Common Stock referred to in Section 4(B)(ii), as the case
may be (the "Excess Preferred Shares"), shall not be converted unless and until
the stockholder approval referred to in Section 5(A) or Section 5(B), as the
case may be (the "Required Consent"), is obtained or is no longer required. The
Excess Preferred Shares will be allocated among the holders delivering Subject
Conversion Notices on a pro rata basis based on the relative number of shares of
Series B Preferred Stock identified in each such Subject Conversion Notice. Any
Excess Preferred Shares shall not be converted into shares of Common Stock until
the later of the date on which (X)(1) the Required Consent is obtained in the
case of Section 4(B)(i) or (2) the date on which an amendment to the Certificate
of Incorporation increasing the authorized number of shares of Common Stock to a
number sufficient to permit conversion of the Excess Preferred Shares, is filed
with the Delaware Secretary of State in the case of Section 4(B)(ii), and (Y)
the Corporation receives a subsequent Conversion Notice with respect thereto.
(C) If, at the time the Corporation receives a Conversion Notice
from any holder of record of Series B Preferred Stock, the number of shares of
Common Stock issuable pursuant to such Conversion Notice, when added to the
aggregate number of shares of Common Stock (i) issued within the 12 month
period prior to the date of the Conversion Notice to such holder and to any
affiliates of such holder upon conversion of shares of Series B Preferred Stock
and upon exercise of the Warrant and (ii) issuable to such holder and to any
affiliates of such holder within 60 days from the date of the Conversion Notice
upon conversion of Series B Preferred Stock and upon exercise of the Warrant,
would exceed 9.9% of the total number of shares of Common Stock outstanding on
the date that would otherwise be the Conversion Date (the "Annual Limit"), then
the Conversion Notice shall be deemed to relate only to the number of shares of
Common Stock that would not cause the Annual Limit to be exceeded. Any holder
of Series B Preferred Stock whose ownership would exceed the Annual Limit upon
a subsequent conversion of Series B Preferred Stock shall provide written
notice thereof (the "Annual Limit Notice") to the Corporation. Thereafter,
such holder of Series B Preferred Stock shall not convert shares of Series B
Preferred Stock into Common Stock until after the sixty-fifth day following the
date of such Annual Limit Notice (or if such day is not a business day in the
State of California, the next succeeding business day). The Corporation shall
be required to issue shares of Common Stock upon any subsequent conversion of
Series B Preferred Stock by a holder that has provided an
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<PAGE> 5
Annual Limit Notice only if, upon such conversion, the Annual Limit for the
immediately preceding 12 month period would not be exceeded.
(D) As used herein, "Conversion Price" means the lesser of the
following:
(i) 101% of the average of the daily volume-weighted
average prices of the Common Stock on the NASDAQ National Market System (or
such national securites exchange or other interdealer quotation system for
which the Common Stock is then listed or quoted) as reported by Bloomberg L.P.
or, if Bloomberg L.P. is not then publishing such reports, as reported by
another comparable service determined by the Corporation (the "Market Price")
during the forty trading days ending two trading days before the Conversion
Date; or
(ii) 125% of the average of the Market Price of the Common
Stock on the NASDAQ National Market System (or such national securities
exchange or other interdealer quotation system on which the Common Stock is
then listed or quoted) during the first five trading days of the forty trading
day period referred to in Section 4(D)(i).
(E) Fractional shares of Common Stock shall not be issued upon
conversion of shares of Series B Preferred Stock. In lieu of issuance of a
fractional share, the Corporation shall pay to the holder of the share of
Series B Preferred Stock being converted a cash amount equal to such fraction
multiplied by the Conversion Price.
SECTION 5. STOCKHOLDER APPROVAL.
(A) If an event of the type described in Section 4(B)(i) shall
occur, the Corporation shall use its best efforts to obtain the stockholder
approval required pursuant to the listing requirements or rules of the NASDAQ
National Market System (or such stock exchange or other interdealer quotation
system on which the Common Stock is then listed or quoted).
(B) If an event of the type described in Section 4(B)(ii) shall
occur, the Corporation shall use its best efforts to obtain the approval of its
stockholders to amend the Certificate of Incorporation to increase the
authorized number of shares of Common Stock to a number sufficient to permit
the issuance of the Excess Preferred Shares.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior to Series B Preferred Stock as to liquidation,
dissolution or winding up unless, prior thereto, the holders of shares of
Series B Preferred Stock shall have received $100.00 per share (the "Series B
Liquidation Preference"). Following the payment of the full amount of Series B
Liquidation Preference, no additional distributions shall be made to the
holders of shares of Series B Preferred Stock.
(B) In the event that there are not sufficient assets available to
permit payment in full of Series B Liquidation Preference and the liquidation
preferences of all other series of preferred
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<PAGE> 6
stock of the Corporation, if any, which rank on a parity with Series B
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such other preferred stock and the holders of Series B Preferred in
proportion to their respective liquidation preferences.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share equal to the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, to which the holder thereof would have been entitled to receive had such
holder converted such share of Series B Preferred Stock into shares of Common
Stock immediately prior to such transaction.
SECTION 8. REDEMPTION.
The shares of Series B Preferred Stock shall not be redeemable, except
as provided in this Section 8. If a Required Consent is not obtained within
the time period specified in Section 3(B), the Corporation shall redeem the
Excess Preferred Shares unless prohibited by applicable law or any indenture,
credit agreement or other agreement to which the Corporation is then a party or
by which it is then bound. To the extent permitted by applicable law, the
Corporation shall make such redemption as soon after the expiration of such
time period as practicable, but in no event shall such redemption occur after
September 30, 2001. The redemption price for each Excess Preferred Share shall
equal $100.00 and shall be paid in cash.
SECTION 9. RANK. Series B Preferred Stock shall rank senior, in all
respects other than with respect to voting and cash dividend payments payable
to holders of Series B Preferred Stock in their capacities as such, to all
series of any other class of the Corporation's preferred stock issued after the
date of the filing of this Certificate of Designation.
SECTION 10. AMENDMENT. The Certificate of Incorporation shall not be
amended in any manner that would materially alter or change the powers,
preferences or special rights of the Series B Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series B Preferred Stock, voting as a class.
SECTION 11. REACQUIRED SHARES. Any shares of Series B Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of preferred stock of the Corporation and may be reissued as
part of a new series of preferred stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation,
or in any other Certificate of Designations creating a series of preferred
stock of the Corporation or any similar stock or as otherwise required by
applicable law.
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<PAGE> 7
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by the Vice President of the Corporation this 30th
day of September, 1996.
/s/ FRANK R. GREICO
----------------------------------------
Frank R. Greico, Senior Vice-President
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<PAGE> 1
AS EXECUTED SEPTEMBER 30, 1996
Quarterdeck Corporation
and
Fletcher International Limited
Subscription Agreement
Dated as of September 30, 1996
<PAGE> 2
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement") dated September 30, 1996 is
entered into by and between Quarterdeck Corporation, a Delaware corporation
("Quarterdeck"), and Fletcher International Limited, a company organized under
the laws of the Cayman Islands ("Fletcher").
Unless otherwise defined herein, capitalized terms used herein and not defined
herein shall have the meanings given to them in Regulation S ("Regulation S")
under the United States Securities Act of 1933, as amended (the "Securities
Act").
The parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the
basis of the representations, warranties and agreements and subject to the
terms and conditions set forth in this Agreement:
a. Preferred Stock. Quarterdeck agrees to sell to
Fletcher, and Fletcher agrees to purchase from Quarterdeck, on the
Closing Date specified in Section 2 hereof, 200,000 shares of
Preferred Stock, stated value $100.00 per share, having the terms and
conditions set forth in Annex A hereto (the "Preferred Shares") at a
purchase price per share equal to the stated value thereof.
b. Warrant. Quarterdeck agrees to sell to Fletcher,
and Fletcher agrees to purchase from Quarterdeck, on the Closing Date
specified in Section 2 hereof, a warrant having the terms set forth in
Annex B hereto (the "Warrant") to purchase shares of Quarterdeck's
Common Stock, par value $0.001 per share (the "Common Stock"), which,
in accordance with the terms and conditions of this Agreement, will be
freely tradable. The shares of Common Stock issuable pursuant to the
Warrant are referred to herein as the "Warrant Shares."
2. Closing Date. The delivery of the Preferred Stock
referred to in Section 1(a) and the Warrant referred to in Section 1(b) (the
"Closing") shall take place at 1:00 p.m. (New York time) on September 30 1996,
or at such other date and time as Fletcher and Quarterdeck may agree in writing
(such date and time being referred to herein as the "Closing Date").
On the Closing Date, the following deliveries shall be made:
a. Preferred Shares. Quarterdeck shall deliver the
certificate representing the Preferred Shares, duly registered on the
books of Quarterdeck in the name of Fletcher, against payment by
Fletcher of the purchase price specified in Section 1(a) hereof in
immediately available funds to the following account:
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<PAGE> 3
Quarterdeck Corporation, Wells Fargo Bank, Account No. 4159378132 ABA
# 121000248.
b. Warrant. Quarterdeck shall deliver the
certificate representing the Warrant to Fletcher. Such certificate
shall be substantially in the form attached hereto as Annex B.
c. Officers' Certificate. The officers' certificates
required by Sections 8(a) and 9(a) shall be delivered to Fletcher and
Quarterdeck, respectively.
d. Legal Opinions. The legal opinions required by
Sections 8(b) and 9(b) shall be delivered to Fletcher and Quarterdeck,
respectively.
The foregoing deliveries shall be deemed to occur
simultaneously as part of a single transaction, and no delivery shall be deemed
to have been made until all such deliveries have been made.
3. Representations and Warranties of Quarterdeck.
Quarterdeck hereby represents and warrants to Fletcher on the date hereof, on
the Closing Date, on the date any Preferred Share is converted (each a
"Conversion Date") and on each Warrant Exercise Date (as defined in Annex B
hereto) as follows:
a. Quarterdeck has been duly incorporated and is
validly existing in good standing under the laws of Delaware.
b. This Agreement has been duly authorized,
executed and delivered by Quarterdeck and, when duly authorized,
executed and delivered by Fletcher, will be a valid and binding
agreement enforceable against Quarterdeck in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights generally and to general
principles of equity.
c. Quarterdeck has full corporate power and
authority necessary to enter into this Agreement and to perform its
obligations hereunder.
d. Assuming the accuracy of the representations
and warranties of Fletcher herein made as of such date, no consent,
approval, authorization or order of any court, governmental agency or
other body is required for the execution by Quarterdeck of this
Agreement or the performance by Quarterdeck of any of its obligations
hereunder, other than such as have been obtained.
e. Except as set forth in Schedule 3(e) herein,
neither the execution by Quarterdeck of this Agreement nor the
performance by Quarterdeck of any of its obligations hereunder will:
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<PAGE> 4
(1) violate, conflict with, result in a
breach of, or constitute a default (or an event which with the
giving of notice or the lapse of time or both would be
reasonably likely to constitute a default) under (A) the
Certificate of Incorporation or by-laws of Quarterdeck or any
of its subsidiaries, (B) any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to
Quarterdeck of which Quarterdeck is aware (after due inquiry)
of any court, governmental agency or body, or arbitrator
having jurisdiction over Quarterdeck or any of its
subsidiaries or any of their respective properties or assets,
(C) the terms of any material bond, debenture, note or any
other evidence of indebtedness, or any material agreement,
stock option or other similar plan, indenture, lease,
mortgage, deed of trust or other instrument to which
Quarterdeck or any of its subsidiaries is a party, by which
Quarterdeck or any of its subsidiaries is bound, or to which
any of the properties or assets of Quarterdeck or any of its
subsidiaries is subject, or (D) the terms of any "lock-up" or
similar provision of any underwriting or similar agreement to
which Quarterdeck or any of its subsidiaries is a party; or
(2) result in the creation or imposition
of any lien, charge or encumbrance upon (A) any Preferred
Share, the Warrant or any Common Stock or (B) any of the
properties or assets of Quarterdeck or any of its
subsidiaries.
f. When issued to Fletcher against payment
therefor in accordance with the terms of this Agreement, any Preferred
Share or the Warrant, each share of Common Stock:
(1) will have been duly and validly
authorized, duly and validly issued, fully paid and
non-assessable;
(2) will be free and clear of any
security interests, liens, claims or other encumbrances; and
(3) will not have been issued or sold in
violation of any preemptive or other similar rights of the
holders of any securities of Quarterdeck.
g. When any share of Common Stock is issued to
Fletcher pursuant to the terms of this Agreement, any Preferred Share
or the Warrant, the Common Stock will be quoted on the Nasdaq National
Market ("NASDAQ") or listed and registered on a national securities
exchange (as defined in the United States Securities Exchange Act of
1934, as amended (the "Exchange Act")).
h. Quarterdeck is a Reporting Issuer within the
meaning of Regulation S.
i. There is no pending or, to the best knowledge
of Quarterdeck,
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<PAGE> 5
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over
Quarterdeck or any of its affiliates that would materially affect the
execution by Quarterdeck of, or the performance by Quarterdeck of its
obligations under, this Agreement, provided, however, that the
representations and warranties contained in this Section 3(i) shall
not apply to any action, threatened action, suit, proceeding or
investigation initiated by Fletcher and shall not be required to be
given in respect of any Conversion Date or Warrant Exercise Date.
j. None of Quarterdeck's filings with the United
States Securities and Exchange Commission (the "SEC") under the
Securities Act or under Section 13(a) or 15(d) of the Exchange Act
(each, an "SEC Filing"), as of their respective dates, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
k. Except as previously disclosed to Fletcher,
since the date of Quarterdeck's most recent SEC Filing, there has not
been, and Quarterdeck is not aware of any development that might
result in, any material adverse change in the condition, financial or
otherwise, or in the business affairs or business prospects of
Quarterdeck, whether or not arising in the ordinary course of
business, except as disclosed in such SEC Filing, provided, however,
that the representations and warranties contained in this Section 3(k)
shall not to be required to be given in respect of any Conversion Date
or Warrant Exercise Date.
l. The offer and sale of the Preferred Shares,
the Common Stock, the Warrant and the Warrant Shares to Fletcher
pursuant to this Agreement will, subject to compliance by Fletcher
with the applicable representations and warranties contained in
Section 4 hereof and with the applicable covenants and agreements
contained in Section 6 hereof, be made in accordance with the
provisions and requirements of Regulation S and any applicable state
law.
m. Neither Quarterdeck nor any of its affiliates
nor any person acting on its or their behalf has engaged or will
engage in any Directed Selling Efforts with respect to the Preferred
Shares, the Common Stock, the Warrant or the Warrant Shares, and all
such persons understand and have complied and will otherwise comply
with the requirements of Regulation S.
n. The transactions contemplated by this
Agreement are not part of a plan or scheme on the part of Quarterdeck,
any of its affiliates or any person acting on its or their behalf to
evade the registration provisions of the Securities Act.
o. Quarterdeck has not issued, and after the
Agreement Date will not issue, any stop transfer order or other order
impeding the sale and delivery of the
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<PAGE> 6
Preferred Shares, the Common Stock, the Warrant or the Warrant Shares
issuable hereunder except for a stop order restricting the sale of any
of the foregoing securities to any person in the United States or to or
for the account or benefit of any U.S. person during an applicable
Restricted Period or otherwise not in compliance with Regulation S.
Notwithstanding the foregoing provision, Quarterdeck shall place the
following legend on the certificate representing any security issued
hereunder prior to the expiration of the Restricted Period (as defined
herein) applicable to such security:
The securities represented by this certificate were issued on
[insert original issue date] (the "Original Issue Date")
pursuant to the Subscription Agreement dated September 30,
1996 between Quarterdeck Corporation ("Quarterdeck") and
Fletcher International Limited. The securities represented by
this certificate have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and have been
sold in reliance on the exemption from registration provided
by Regulation S under the Securities Act ("Regulation S").
Prior to the expiration of a 40-day restricted period
beginning on the Original Issue Date (the "Restricted
Period"), the securities represented by this certificate may
not be offered or sold, directly or indirectly, within the
United States (as defined in Regulation S under the Act), to a
U.S. Person (as defined in Regulation S under the Act) or for
the account or benefit of a U.S. Person. Neither Quarterdeck
nor its transfer agent shall be obligated to remove this
legend unless it shall have received an opinion of counsel
stating that such removal complies with the requirements of
Regulation S.
provided, however, that as used in this Agreement and as reflected in
such legend, the term "Restricted Period," with respect to any
security, shall mean the Restricted Period then applicable to such
security pursuant to Regulation S (or any applicable successor
thereto).
p. Neither Quarterdeck nor any of its affiliates
has offered to sell or sold any Common Stock or any securities
convertible or exchangeable into or exercisable for Common Stock in
reliance upon Regulation S at any time during the 12 months prior the
date of this Agreement; and there are no such outstanding convertible
or exchangeable securities that have been offered or sold in reliance
upon Regulation S, except, in each case the Warrant and the Preferred
Shares sold pursuant hereto.
4. Representations and Warranties of Fletcher. Fletcher
hereby represents and warrants to Quarterdeck as follows:
a. Fletcher has been duly incorporated and is
validly existing in good standing under the laws of the Cayman
Islands.
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<PAGE> 7
b. This Agreement has been duly authorized,
executed and delivered by Fletcher and, when duly authorized, executed
and delivered by Quarterdeck, will be a valid and binding agreement
enforceable against Fletcher in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of
equity.
c. Assuming the accuracy of the representations
and warranties of Quarterdeck herein made as of such date, no consent,
approval, authorization or order of any court, governmental agency or
other body is required for the execution by Fletcher of this Agreement
or the performance by Fletcher of any of its obligations hereunder,
other than such as have been obtained.
d. Neither the execution by Fletcher of this
Agreement nor the performance by Fletcher of any of its obligations
hereunder will violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a
default) under the Memorandum or Articles of Association or any other
constitutive document of Fletcher or any of its subsidiaries.
e. Fletcher understands that no United States
federal or state agency has passed on, reviewed or made any
recommendation or endorsement of the Preferred Shares, the Common
Stock, the Warrant or the Warrant Shares;
f. In making the decision to purchase the
Preferred Shares, the Common Stock, the Warrant and the Warrant Shares
in accordance with this Agreement, Fletcher has relied solely upon
independent investigations made by it and not upon any representations
made by Quarterdeck other than those made pursuant to this Agreement.
g. Fletcher understands that the Preferred
Shares, the Common Stock, the Warrant and the Warrant Shares have not
been and will not be registered under the Securities Act and may not
be reoffered or resold other than pursuant to such registration or an
available exemption therefrom.
h. Fletcher is not a U.S. Person and is not
acquiring the Preferred Shares, the Common Stock, the Warrant or any
Warrant Shares for the account or benefit of any U.S. Person, and
Fletcher is not an affiliate (within the meaning of Rule 144 under the
Securities Act) of Quarterdeck.
i. At the time the buy orders for the Preferred
Shares and the Warrant (and any Common Stock and Warrant Shares issued
during the applicable Restricted Period) were originated, Fletcher was
located outside the United States.
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<PAGE> 8
j. Neither Fletcher nor any of its affiliates
nor anyone acting on its or their behalf has engaged or will engage in
any Directed Selling Efforts with respect to the Preferred Shares, the
Common Stock, the Warrant or any Warrant Shares, and all such persons
understand and have complied and will otherwise comply with the
requirements of Regulation S.
k. Fletcher:
(1) will not, during the Restricted
Period applicable to the Preferred Shares, the Common Stock,
the Warrant and the Warrant Shares, offer or sell any of the
foregoing securities (or create or maintain any derivative
position equivalent thereto) in the United States, to or for
the account or benefit of a U.S. Person or other than in
accordance with Regulation S. Without limiting the foregoing,
Fletcher covenants that neither it nor any of its affiliates
nor any person acting on its or their behalf, will enter into
or maintain, during any applicable Restricted Period, any put
option, short position or similar instrument or position with
respect to Quarterdeck's Common Stock or securities of the
same class as, or convertible or exchangeable into, such
Common Stock; and
(2) will, after the expiration of the
applicable Restricted Period, offer, sell, pledge or otherwise
transfer the Preferred Shares, the Common Stock, the Warrant
or any Warrant Shares (or create or maintain any derivative
position equivalent thereto) only pursuant to registration
under the Securities Act or an available exemption therefrom
and, in any case, in accordance with applicable state
securities laws.
l. Fletcher is purchasing the Preferred Shares,
the Warrant and the Warrant Shares for its own account, for the
purpose of investment and not with a view to a distribution thereof.
m. The transactions contemplated by this
Agreement are not part of a plan or scheme on the part of Fletcher,
any of its affiliates or any person acting on its or their behalf to
evade the registration requirements of the Securities Act.
n. As of the date of this Agreement, prior to
the consummation of the transactions contemplated hereby, neither
Fletcher nor any of its affiliates is the owner, directly or
indirectly, of any Common Stock of Quarterdeck.
5. Covenants of Quarterdeck. Quarterdeck covenants and
agrees with Fletcher as follows:
a. For so long as any Preferred Share is
outstanding or any portion of the Warrant remains outstanding, and in
either case for a period of 40 days thereafter, Quarterdeck will
continue to be a Reporting Issuer within the meaning of
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<PAGE> 9
Regulation S and will maintain the eligibility of the Common Stock for
quotation on NASDAQ or listing on a national securities exchange (as
defined in the Exchange Act).
b. For so long as any Preferred Share is
outstanding or any portion of the Warrant remains outstanding, and in
either case for a period of 40 days thereafter, neither Quarterdeck
nor any of its affiliates nor any person acting on its or their behalf
will engage in any Directed Selling Efforts with respect to the
Preferred Shares, the Warrant, or the Common Stock issuable pursuant
to this Agreement. Without limiting the generality of the foregoing,
Quarterdeck agrees that, to the extent it or any of its affiliates or
any person acting on its or their behalf issues a press release or
similar written public statement that includes any reference to the
transactions contemplated by this Agreement, such press release or
other similar public written statement shall not be issued solely with
respect to the transactions contemplated by this Agreement, such
reference shall not include any reference to Fletcher or Regulation S,
and Quarterdeck shall provide Fletcher and Rogers & Wells the right to
review and approve such press release prior to dissemination.
c. For so long as any Preferred Share is
outstanding or any portion of the Warrant remains outstanding, and in
either case for a period of 40 days thereafter, Quarterdeck will
ensure that all applicable Offering Restrictions with respect to the
Preferred Shares, the Common Stock issuable pursuant to this
Agreement, the Warrant and the Warrant Shares are thoroughly complied
with and satisfied.
d. At any time after the expiration of any
Restricted Period with respect to the Preferred Shares, the Common
Stock, the Warrant or any Warrant Shares, upon the request of Fletcher
accompanied by an opinion of Rogers & Wells (or such other counsel as
shall be reasonably satisfactory to Quarterdeck and its transfer agent
(if any)) to the effect that the removal of the legend referred to in
Section 3(o) would then be permitted under Regulation S and that the
resale of any such security would not require registration under the
Securities Act, Quarterdeck shall, or shall cause its transfer agent
(if any) to, accept from Fletcher the legended certificates
representing such securities and deliver in their place unlegended
certificates therefor.
e. Quarterdeck will comply with the terms and
conditions of the Preferred Stock and the Warrant as set forth in
Annex B hereto, (as duly amended from time to time by the parties
hereto), and when issued, each Preferred Share will be substantially
in the form of Annex A hereto.
f. Except as provided in the following sentence,
so long as any Preferred Share is outstanding or any portion of the
Warrant remains outstanding, Quarterdeck shall at all times reserve
and keep available, free from pre-emptive rights, out of its
authorized but unissued Common Stock, for issuance upon conversion of
such Preferred Shares and exercise of such Warrant, the maximum number
of shares of Common Stock then so issuable. Notwithstanding the
preceding sentence, until the earlier of (i) the Business Day
immediately following the date of Quarterdeck's 1997
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<PAGE> 10
Annual Meeting of Stockholders and (ii) February 15, 1997, Quarterdeck
shall at all times reserve and keep available, free from pre- emptive
rights, out of its authorized but unissued Common Stock, for issuance
upon conversion of Preferred Shares and exercise of Warrants, not less
than 4,400,000 shares of Common Stock.
g. For a period of six months from the Closing
Date, Quarterdeck will not offer or sell any of its or its affiliates'
securities pursuant to Regulation S.
h. For a period of one year following the
Closing Date, Quarterdeck will not offer to sell to any person any of
its or its subsidiaries' Common Stock (or any securities convertible
into or exchangeable for such common stock) (other than a sale of 50%
or more of the outstanding common stock of a subsidiary) in reliance
upon Section 4(2) of the Securities Act, or Regulation D promulgated
thereunder, unless Quarterdeck shall have (1) given Fletcher written
notice of its intention to make such offer and (2) offered to sell
such securities to Fletcher at least 5 Business Days prior to the date
on which, and on the same terms and conditions as, such securities are
offered to any such other person. In any event, Fletcher shall be
entitled, but not obligated, to participate in any such Equity Private
Placement on the same terms as other purchasers, to the extent
necessary to maintain Fletcher's pro rata ownership of Quarterdeck
Common Stock (including its ownership of shares of Common Stock and
its equivalent ownership of Preferred Shares and Warrant Shares)
immediately prior to the closing of such Equity Private Placement;
provided, however, that Fletcher provides written notification to
Quarterdeck of its commitment to so participate not later than 5
Business Days after such securities were offered to Fletcher pursuant
to clause (2) of this Section 5(h). Notwithstanding the above, the
restrictions in Sections 5(g) and 5(h) will not apply to the extent
that any issuance of securities is not a capital-raising transaction.
i. Quarterdeck will furnish promptly to Fletcher
any information that it files with the SEC or to NASDAQ.
j. Notwithstanding any other provision of this
Agreement, for so long as any Preferred Share or portion of the
Warrant remains outstanding, if on any Conversion Date or Warrant
Exercise Date (for purposes of this Section 5(l), a "Limitation Date")
(i) prior to the earlier of February 15, 1997 or the date of
Quarterdeck's 1997 Annual Meeting of Stockholders, the number of
shares of Common Stock issuable upon such Conversion Date or Warrant
Exercise Date shall exceed the number of authorized but unissued
shares of Common Stock not reserved for other issuances, Quarterdeck
shall seek stockholder approval to amend its Certificate of
Incorporation to increase the authorized number of shares of Common
Stock, or (ii) at any time after the date of this Agreement, Rule
4460(i)(1)(D) (or any applicable successor provision) of the National
Association of Securities Dealers, Inc. would require the approval of
the stockholders of Quarterdeck for the issuance of any shares of
Common Stock to Fletcher pursuant to this Agreement, then (a)
Quarterdeck shall immediately take such action as may be required to
obtain such stockholder approval as
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<PAGE> 11
promptly as practicable and shall continue to use its best efforts to
obtain such approval until such approval has been obtained or is no
longer required, (b) until such stockholder approval has been obtained
or is no longer required, no Preferred Shares may be converted and the
Warrant may not be exercised by Fletcher and (c) if such stockholder
approval shall not have been obtained within (i) 90 days after such
Limitation Date, if Quarterdeck's proxy solicitation materials are not
subjected to SEC review, and (ii) 120 days after such Limitation Date,
if Quarterdeck's proxy solicitation materials are subjected to SEC
review, then as soon as the same is permitted pursuant to the
Restrictive Agreements (as defined in Schedule 3(e) hereto), but not
later than September 30, 2001, and to the extent permitted by
applicable law, on each subsequent Warrant Exercise Date (x) if the
applicable Exercise Price is less than the volume-weighted average
price of the Common Stock on such date, then such Exercise Price shall
be reduced by an amount which, when multiplied by the Maximum Warrant
Amount (as defined in the Warrant) on such date, is equal to (1) the
stated value of such Preferred Shares as may not be so converted times
(2) the rate of 10% per annum, accrued from and including such
Limitation Date or the immediately preceding Warrant Exercise Date, as
the case may be, to but excluding the earlier of the date on which
such stockholder approval has been obtained or is no longer required
and such Warrant Exercise Date, and (y) if the applicable Exercise
Price is equal to or greater than the volume-weighted average price of
the Common Stock on such date, then the Exercise Price shall be
reduced in accordance with the following sentence such that the
increase in the Black-Scholes value of the Warrant as a result of such
reduction is equal to (1) the stated value of such Preferred Shares as
may not be so converted times (2) the rate of 10% per annum, accrued
from and including such Limitation Date or the immediately preceding
Warrant Exercise Date, as the case may be, to but excluding the
earlier of the date on which such stockholder approval has been
obtained or is no longer required and such Warrant Exercise Date.
6. Covenants of Fletcher. Fletcher hereby covenants and
agrees with Quarterdeck as follows:
a. During any Restricted Period applicable to
the Preferred Shares, the Common Stock, the Warrant or the Warrant
Shares, neither Fletcher nor any of its affiliates nor any person
acting on its or their behalf will:
(1) offer or sell such Preferred Shares,
Common Stock, Warrant or Warrant Shares other than in an
Offshore Transaction;
(2) engage in any Directed Selling
Efforts with respect to such Preferred Shares, Common Stock,
Warrant or Warrant Shares;
(3) offer or sell such Preferred Shares,
Common Stock, Warrant or Warrant Shares other than: (A) in
accordance with Rule 903 or Rule 904 of Regulation S; (B)
pursuant to registration under the Securities Act or (C)
pursuant to an available exemption therefrom; and
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<PAGE> 12
(4) offer or sell such Preferred Shares,
Common Stock, Warrant or Warrant Shares to any U.S. Person or
for the account or benefit of any U.S. Person.
b. Fletcher will not engage in short-selling of
Quarterdeck Common Stock during the seven-month period following the
Closing Date or during any Pricing Period (as defined in Annex A
hereto).
7. Registration Rights.
(a) If, at any time after the date hereof, the SEC has
reinterpreted Regulation S or has promulgated, or the United States
Congress has legislated, a successor or revision to Regulation S, and
such reinterpretation, successor provision or revision imposes a
Restricted Period applicable to any security issued or issuable
hereunder that is greater than that in effect on the date of this
Agreement, or would materially impair the ability of Fletcher or any of
its affiliates (as defined in Rule 144(a) under the Securities Act) to
offer, sell or otherwise dispose of any such security pursuant to
Regulation S as contemplated hereby, or requires any such offer, sale
or other disposition to be registered under the Securities Act, then
upon the written request of Fletcher (a "Registration Request"),
Quarterdeck shall, as promptly as practicable thereafter and at its own
expense, file a registration statement on Form S-3 (the "Registration
Statement") under the Securities Act covering the sale or resale of all
such securities (each a "Covered Security") and shall use its best
efforts to cause such Registration Statement to be declared effective;
provided, however, that Quarterdeck shall not be required to file a
Registration Statement or comply with any other obligations arising
under this Section 7 if the limitations imposed by any such
reinterpretation, successor provision or revision are imposed solely as
a result of actions taken or omitted to be taken by Fletcher. Fletcher
acknowledges and agrees that Quarterdeck has granted to other holders
of Quarterdeck securities certain registration rights that would permit
such holders to include such securities in the Registration Statement
in accordance with the terms of the various agreements governing such
registration rights. Fletcher further acknowledges and agrees that (i)
it shall not be entitled to participate in a demand registration
requested by the holders of Quarterdeck's 6% Convertible Senior
Subordinated Notes (the "Notes") and (ii) upon the request of Fletcher
and with the consent of Quarterdeck (such consent not to be
unreasonably withheld) the Registration Statement shall cover an
underwritten offering of the Covered Securities, the holders of the
Notes shall be entitled to include in the Registration Statement shares
of Common Stock issuable in accordance with the terms of the Notes,
subordinate to the rights of Fletcher, if, in the opinion of the
managing underwriter, such shares may be included in such registration
without having an adverse effect on the marketability or the price of
the Covered Securities. Upon the effectiveness of such Registration
Statement (A) Quarterdeck shall issue such Covered Securities to
Fletcher in accordance with the terms hereof and (B) the provisions of
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<PAGE> 13
Sections 3(l), (m), (o) and (p), 4(e), (f), (g), (h), (i) and (j),
5(a), (b), (c) and (d), 6 (collectively, the "Specified Provisions"),
8(a) and (b) (to the extent applicable to the Specified Provisions),
9(b), (c) and (d) (to the extent applicable to the Specified
Provisions) shall thereafter be of no force and effect with respect to
the issuance of such Covered Securities; provided, however, that, if
such Registration Statement has not been declared effective before the
180th day following the date of such Registration Request, if such
Registration Statement is subjected to review by the SEC, Quarterdeck
shall continue to use its best efforts to cause such Registration
Statement to be declared effective, and provided, further, however,
that as soon as the same is permitted pursuant to the Restrictive
Agreements, but not later than September 30, 2001. Quarterdeck shall,
to the extent permitted by applicable law, repurchase such Covered
Securities as may not be resold in the United States without
restriction pursuant to the Securities Act for cash in an amount
equal to (i) the per share liquidation value of the Preferred Shares,
(ii) the market value of the Common Stock acquired upon conversion of
the Preferred Shares or exercise of the Warrant, based on the average
of the daily volume weighted average prices of the Common Stock for
the ten Trading Days prior to September 30, 2001, as reported by
Bloomberg L.P. or, if Bloomberg L.P. is not then publishing such
reports, as reported by such service as is mutually agreed upon by
Quarterdeck and Fletcher (the "Common Stock Market Value"), and (iii)
the Common Stock Market Value of the Warrant Shares into which the
Warrant is then convertible, as the case may be. As used herein, the
term "Trading Day" means any day on which Quarterdeck's Common Stock
is quoted on NASDAQ or such other national securities exchange on
which the Common Stock is then traded.
(b) In the case of the registration effected by
Quarterdeck pursuant to this Section 7, Quarterdeck will use its best
efforts to: (i) keep such registration effective until the earlier of
(A) the second anniversary of the issuance of each Covered Security,
(B) such date as all of the Covered Securities have been sold by
Fletcher or (C) such time as all of the Covered Securities held by
Fletcher can be sold by Fletcher or any of its affiliates (within the
meaning of Rule 144(a) under the Securities Act) within a given
three-month period without compliance with the registration
requirements of the Securities Act pursuant to Rule 144 under the
Securities Act ("Rule 144"); (ii) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement (as so
amended and supplemented from time to time, the "Prospectus") as may
be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Covered Securities by Fletcher or
any of its affiliates (within the meaning of Rule 144(a) under the
Securities Act); (iii) furnish such number of Prospectuses and other
documents incident thereto, including any amendment of or supplement
to the Prospectus, as Fletcher from time to time may reasonably
request; (iv) cause all Covered Securities that are Common Stock to be
listed on each securities exchange and quoted on each quotation
service on which similar securities issued by Quarterdeck are then
listed or quoted; (v) provide a transfer agent and registrar for all
Covered Securities and a CUSIP number for all Covered Securities; (vi)
otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC; and (vii)
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<PAGE> 14
file the documents required of Quarterdeck and otherwise use its best
efforts to obtain and maintain requisite blue sky clearance in (A) all
jurisdictions in which any of the Covered Securities are originally
sold and (B) all other states specified in writing by Fletcher,
provided that Quarterdeck shall not be required to qualify to do
business or consent to service of process or subject itself to
taxation in any state in which it is not now so qualified or has not
so consented.
(c) Quarterdeck shall furnish to Fletcher upon
request a reasonable number of copies of a supplement to or an
amendment of such Prospectus as may be necessary in order to
facilitate the public sale or other disposition of all or any of the
Covered Securities by Fletcher or any of its affiliates (within the
meaning of Rule 144(a) under the Securities Act); pursuant to the
Registration Statement.
(d) With a view to making available to Fletcher
and its affiliates (within the meaning of Rule 144(a) under the
Securities Act) the benefits of Rule 144 and Form S-3 under the
Securities Act, Quarterdeck covenants and agrees to: (i) make and keep
available adequate current public information (within the meaning of
Rule 144(c)) concerning Quarterdeck, until the earlier of (A) the
second anniversary of the issuance of each Covered Security or (B)
such date as all of the Covered Securities shall have been resold by
Fletcher or any of its affiliates (within the meaning of Rule 144(a)
under the Securities Act); (ii) maintain its status as a Reporting
Issuer and file with the SEC in a timely manner all reports and other
documents required of Quarterdeck for use of Form S-3; and (iii)
furnish to Fletcher upon request, as long as Fletcher owns any Covered
Securities, (A) a written statement by Quarterdeck that it has
complied with the reporting requirements of the Securities Act and the
Exchange Act, (B) a copy of the most recent annual or quarterly report
of Quarterdeck, and (C) such other information as may be reasonably
requested in order to avail Fletcher and its affiliates (within the
meaning of Rule 144(a) under the Securities Act) of Rule 144 or Form
S-3 with respect to such Covered Securities.
(e) Notwithstanding anything else in this Section
7, if, at any time during which a Prospectus is required to be
delivered in connection with the sale of any Covered Securities, if a
Blackout Event (as defined below) exists, Quarterdeck will, as
promptly as practicable, notify Fletcher thereof by telephone and in
writing. Upon receipt of such notification, Fletcher and its
affiliates (within the meaning of Rule 144(a) under the Securities
Act) will immediately suspend all offers and sales of any Covered
Securities pursuant to the Registration Statement (the period of such
suspension being referred to herein as a "Blackout Period"). A
"Blackout Event" shall exist at such times (i) that Quarterdeck is not
eligible to use Form S-3 for the registration contemplated by this
Section 7, or (ii) as circumstances exist that Quarterdeck determines
in good faith make it impractical or inadvisable for Quarterdeck to
amend or supplement the Registration Statement or the Prospectus or to
cause the Registration Statement or the Prospectus to become or remain
effective (such circumstances to include, without limitation, (A)
Quarterdeck conducting an underwritten primary offering and being
advised by the underwriters that sale of
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<PAGE> 15
Covered Securities under the Registration Statement would have a
material adverse effect on such underwritten primary offering or (B)
pending negotiations relating to, or consummation of, a transaction or
the occurrence of some other event (x) where any of the foregoing
would require disclosure under applicable securities laws of material
information in the Registration Statement (or any other document
incorporated by reference into the Registration Statement) or state
securities filings and (y) as to which Quarterdeck has a bona fide
business purpose for preserving confidentially). Quarterdeck will
promptly notify Fletcher after it has determined in good faith that
such sales have become permissible in such manner and will promptly
deliver copies of the Registration Statement and the Prospectus (as so
amended or supplemented) to Fletcher in accordance with paragraph (ii)
of this Section 7. Notwithstanding the foregoing, (i) in no
circumstances shall Quarterdeck impose more than two Blackout Periods
of up to thirty days each or one Blackout Period of up to sixty days
during any twelve-month period and (ii) in no circumstances shall any
Blackout Period commence less than thirty days following the end of
the previous Blackout Period.
Upon the commencement of a Blackout Period pursuant to this
Section 7, Fletcher will immediately notify Quarterdeck of any
contracts to sell any Covered Securities (each a "Sales Contract")
that Fletcher or any of its affiliates (within the meaning of Rule
144(a) under the Securities Act) has entered into prior to the
commencement of such Blackout Period and that would require delivery
of such Covered Securities during such Blackout Period, which notice
will contain the aggregate sale price and volume of Covered Securities
pursuant to such Sales Contract. Upon receipt of such notice,
Quarterdeck will immediately notify Fletcher of its election either
(i) to terminate the Blackout Period and, as promptly as practicable,
amend or supplement the Registration Statement or the Prospectus in
order to correct the material misstatement or omission or otherwise to
comply with the Securities Act and deliver to Fletcher copies of such
amended or supplemented Registration Statement and Prospectus in
accordance with paragraph (ii) of this Section 7 or (ii) to continue
the Blackout Period in accordance with this paragraph. If Quarterdeck
elects to continue the Blackout Period, and Fletcher or any of its
affiliates (within the meaning of Rule 144(a) under the Securities
Act) is therefore unable to consummate the sale of Covered Securities
pursuant to the Sales Contract (such unsold Covered Securities being
hereinafter referred to herein as the "Unsold Securities"),
Quarterdeck will promptly indemnify each Fletcher Indemnified Party
(as such term is defined in Section 12(a) below) against any
Proceeding (as such term is defined in Section 12(a) below) that each
Fletcher Indemnified Party may incur arising out of or in connection
with Fletcher's breach or alleged breach of any such Sales Contract,
and Quarterdeck shall reimburse each Fletcher Indemnified Party for
any reasonable costs or expenses (including reasonable legal fees)
incurred by such party in investigating or defending any such
Proceeding (collectively, the "Indemnification Amount"); provided,
however, that each Fletcher Indemnified Party shall take all actions
reasonably necessary or appropriate to mitigate such Indemnification
Amount; and provided further, however, that the Indemnification Amount
shall be reduced by an amount equal to the number of Unsold Securities
multiplied by the difference between (x) the actual per share price
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<PAGE> 16
received by Fletcher or any of its affiliates (within the meaning of
Rule 144(a) under the Securities Act) upon the sale of the Unsold
Securities (if such sale occurs within three Trading Days of the end
of the Blackout Period) or the closing sale price of the Common Stock
on NASDAQ or other national securities exchange on which the Common
Stock is then listed on the third Trading Day after the end of the
Blackout Period (if the Unsold Securities are not sold by Fletcher or
any of its affiliates (within the meaning of Rule 144(a) under the
Securities Act) within three Trading Days of the end of the Blackout
Period), and (y) the per share sale price for the Unsold Securities
provided in the Sales Contract.
8. Conditions Precedent to Fletcher's Obligations. The
obligations of Fletcher hereunder are subject to the performance by Quarterdeck
of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
a. The representations and warranties made by
Quarterdeck in this Agreement shall, unless expressly waived in
writing by Fletcher, be true and correct as of the date hereof, on the
Agreement Date, on each Conversion Date and on each Warrant Exercise
Date (as defined in Annex B hereto), and Fletcher shall have received
on each such date a certificate of the Chief Executive Officer and the
Chief Financial Officer of Quarterdeck dated such date and to such
effect.
b. On the Closing Date and on each Conversion
Date in respect of the issuance of at least 175,000 shares of Common
Stock and each Warrant Exercise Date (as defined in Annex B hereto) in
respect of the issuance of at least 175,000 Warrant Shares Quarterdeck
shall have delivered to Fletcher an opinion of counsel reasonably
satisfactory to Fletcher, dated the date of delivery, confirming in
substance the matters covered in paragraphs (a), (b), (c), (d), (e),
(f), (g), (h) and (i) of Section 3 hereof; provided, however, that no
such opinion delivered in respect of any Conversion Date or Warrant
Exercise Date shall be required to cover the matters set forth in
paragraph (i) of Section 3 hereof.
As used herein the term "Business Day" means any day on which
banks in The City of New York are open for business.
9. Conditions Precedent to Quarterdeck's Obligations.
The obligations of Quarterdeck hereunder are subject to the performance by
Fletcher of its obligations hereunder and to the satisfaction of the following
additional conditions precedent:
a. The representations and warranties made by
Fletcher in this Agreement shall, unless expressly waived in writing
by Quarterdeck, be true and correct as of the date hereof, on the
Agreement Date, on each Conversion Date, and on each Warrant Exercise
Date, and Quarterdeck shall have received on each such date a
certificate of the Chairman and Chief Financial Officer of Fletcher
dated such date and to such effect.
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b. On the Closing Date, Fletcher shall have
delivered to Quarterdeck a legal opinion of Rogers & Wells, counsel to
Fletcher, dated the date of delivery stating that:
(i) Fletcher is not a U.S. Person; and
(ii) The offer and sale of the Warrant by
Quarterdeck to Fletcher on the
Agreement Date does not require
registration under the Securities
Act in reliance upon Regulation S
thereunder;
c. On each Conversion Date, in respect of at
least 175,000 shares of Common Stock Fletcher shall have delivered to
Quarterdeck a legal opinion of Rogers & Wells, counsel to Fletcher,
dated the date of delivery, stating that:
(i) Fletcher is not a U.S. Person; and
(ii) the offer and sale of the Common
Stock issuable by Quarterdeck to
Fletcher on such date does not
require registration under the
Securities Act in reliance upon
Regulation S thereunder.
d. On each Warrant Exercise Date, in respect of
at least 175,000 Warrant Shares Fletcher shall have delivered to
Quarterdeck a legal opinion of Rogers & Wells, counsel to Fletcher,
dated the date of delivery, stating that:
(i) Fletcher is not a U.S. Person; and
(ii) the offer and sale of the Warrant
Shares issuable by Quarterdeck to
Fletcher on such date does not
require registration under the
Securities Act in reliance upon
Regulation S thereunder.
e. On the date of any transfer by Fletcher of
any Preferred Share or the Warrant or any Common Stock during the
applicable Restricted Period, Fletcher shall have delivered to
Quarterdeck or its transfer agent, as the case may be, a legal opinion
of Rogers & Wells, dated the date of such transfer, stating that such
transfer complies with the requirements of Regulation S.
10. Fees and Expenses. Each of Fletcher and Quarterdeck
agrees to pay its own expenses incident to the performance of its obligations
hereunder, including, but not limited to, the fees, expenses and disbursements
of such party's counsel.
11. Non-Performance.
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a. If, on the Agreement Date, on any Conversion
Date (as defined in Annex A hereto) or any Warrant Exercise Date (as
defined in Annex B hereto), Quarterdeck shall fail to deliver the
Warrant Shares, the Preferred Shares or Common Stock to Fletcher
required to be delivered pursuant to this Agreement for any reason
other than the failure of any condition precedent to Quarterdeck's
obligations hereunder or the failure by Fletcher to comply with its
obligations hereunder, then Quarterdeck shall:
(1) hold Fletcher harmless against any
loss, claim or damage arising from or as a result of such
failure by Quarterdeck; and
(2) reimburse Fletcher for all of its
out-of-pocket expenses, including fees and disbursements of
its counsel, incurred by Fletcher arising from or as a result
of such failure by Quarterdeck;
provided, however, that Quarterdeck shall then be under no further liability to
Fletcher except as provided in this Section 11 and Section 12 hereof.
b. If, on the Agreement Date Fletcher shall fail
to purchase the Warrant, the Preferred Shares or any Common Stock
required to be purchased pursuant to this Agreement for any reason
other than the failure of any condition precedent to Fletcher's
obligations hereunder or the failure by Quarterdeck to comply with its
obligations hereunder, then Fletcher shall:
(1) hold Quarterdeck harmless against
any damage arising from or as result of such failure by
Fletcher;
(2) reimburse Quarterdeck for all of its
out-of-pocket expenses, including fees and disbursements of
its counsel, incurred by Quarterdeck arising from or as a
result of such failure by Fletcher; and
(3) surrender to Quarterdeck for
cancellation any portion of the Warrant not exercised prior to
the date of such default by Fletcher;
provided, however, that Fletcher shall then be under no further liability to
Quarterdeck except as provided in this Section 11 and Section 12 hereof.
12. Indemnification.
a. Indemnification of Fletcher. Quarterdeck
hereby agrees to indemnify Fletcher and each of its officers,
directors, employees, agents and affiliates and each person that
controls (within the meaning of Section 20 of the Securities Exchange
Act of 1934, as amended) any of the foregoing persons (each a
"Fletcher Indemnified Party") against any claim, demand, action,
liability, damages, loss, cost or expense (including, without
limitation, reasonable legal fees) (a "Proceeding"), that it
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<PAGE> 19
may incur in connection with any of the transactions contemplated
hereby arising out of or based upon:
(1) any of the representations or
warranties made by Quarterdeck herein being untrue or
incorrect; and
(2) any breach or non-performance by
Quarterdeck of any of its covenants, agreements or obligations
under this Agreement;
and Quarterdeck hereby agrees to reimburse each Fletcher Indemnified
Party for any reasonable legal or other expenses incurred by such
Fletcher Indemnified Party in investigating or defending any such
Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the
gross negligence of Fletcher in connection therewith.
b. Indemnification of Quarterdeck. Fletcher
hereby agrees to indemnify Quarterdeck and each of its officers,
directors, employees, agents and affiliates and each person that
controls (within the meaning of Section 20 of the Securities Exchange
Act of 1934, as amended) any of the foregoing persons (each a
"Quarterdeck Indemnified Party") against any Proceeding, that it may
incur in connection with any of the transactions contemplated hereby
arising out of or based upon:
(1) any of the representations or
warranties made by Fletcher herein being untrue or incorrect;
and
(2) any breach or non-performance by
Fletcher of any of its covenants, agreements or obligations
under this Agreement;
and Fletcher hereby agrees to reimburse each Quarterdeck Indemnified
Party for any reasonable legal or other expenses incurred by such
Quarterdeck Indemnified Party in investigating or defending any such
Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the
gross negligence of Quarterdeck in connection therewith.
c. Conduct of Claims.
(1) Whenever a claim for indemnification
shall arise under this Section, the party seeking
indemnification (the "Indemnified Party"), shall notify the
party from whom such indemnification is sought (the
"Indemnifying Party") in writing of the Proceeding and the
facts constituting the basis for such
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<PAGE> 20
claim in reasonable detail;
(2) Upon delivery of such notice, such
Indemnified Party shall have a duty to take all reasonable
steps to mitigate any losses, liabilities, costs, charges and
expenses relating to any such Proceeding;
(3) Such Indemnifying Party shall direct
the defense of any such Proceeding, provided, however, that
any such Indemnified Party shall have the right to retain the
counsel of its choice in connection with such Proceeding and
to participate at its own expense in the defense of any such
Proceeding; provided further, however, that counsel to the
Indemnifying Party shall not (except with the consent of the
relevant Indemnified Party) also be counsel to such
Indemnified Party. In no event shall the Indemnifying Party
be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from its own counsel
for all Indemnified Parties in connection with any one action
or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances; and
(4) No Indemnifying Party shall,
without the prior written consent to the Indemnified Parties
(which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened,
or any claim whatsoever in respect of which indemnification
could be sought under this Section unless such settlement,
compromise or consent (A) includes an unconditional release of
each Indemnified Party from all liability arising out of such
litigation, investigation, proceeding or claim and (B) does
not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any
Indemnified Party.
13. Survival of the Representations, Warranties, etc. The
respective representations, warranties, and agreements made herein by or on
behalf of the parties hereto shall remain in full force and effect, regardless
of any investigation made by or on behalf of the other party to this Agreement
or any officer, director or employee of, or person controlling or under common
control with, such party and will survive delivery of and payment for the
Preferred Shares, the Warrant and any Common Stock issuable hereunder.
14. Notices. All communications hereunder shall be in writing, and
a. if sent to Fletcher, shall be delivered by
hand, sent by registered mail or transmitted and confirmed by telecopy
to Fletcher at:
Fletcher International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
P.O. Box 1109, Mary Street
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Grand Cayman, Cayman Islands
British West Indies
Telephone: (809) 949-7755
Facsimile: (809) 949-7634
with a copy to:
Rogers & Wells
200 Park Avenue
New York, NY 10166
Attention: Sara P. Hanks, Esq.
Telephone: (212) 878 8000
Facsimile: (212) 878 8375
b. if sent to Quarterdeck, shall be delivered by
hand, sent by registered mail or transmitted and confirmed by telecopy
to Quarterdeck at:
Quarterdeck Corporation
13160 Mindanao Way, Third Floor
Marina del Ray, CA 90292
Attention: Chief Financial Officer
Telephone: (310) 309-3700
Facsimile: (310) 309-4218
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Attention: Karen E. Bertero
Telephone: (213) 229-7000
Facsimile: (213) 229-7520
15. Miscellaneous.
a. This Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
b. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and, with
respect to Section 12 hereof, their respective officers, directors and
affiliates, and no other person shall have any right or obligation hereunder.
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c. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York, and
each of the parties hereto hereby submits to the non-exclusive jurisdiction of
any State or Federal court in the Borough of Manhattan in the City and State of
New York and any court hearing any appeal therefrom, over any suit, action or
proceeding against it arising out of or based upon this Agreement (a "Related
Proceeding"). Each of the parties hereto hereby waives any objection to any
Related Proceeding in such courts whether on the grounds of venue, residence or
domicile or on the ground that the Related Proceeding has been brought in an
inconvenient forum.
d. The provisions of this Agreement are
severable, and if any clause or provision hereof shall be held invalid, illegal
or unenforceable in whole or in part, such invalidity or unenforceability shall
not in any manner affect any other clause or provision of this Agreement.
e. This Agreement (including the Warrant and the
terms and conditions of the Certificate of Designations relating to the
Preferred Shares) represents the entire agreement between the parties hereto
and supersedes all other agreements, understandings and term sheets between
such parties.
f. The headings of the sections of this document
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
16. Time of Essence. Time shall be of the essence in
this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
QUARTERDECK CORPORATION
By: ____________________________________
Name:
Title:
FLETCHER INTERNATIONAL LIMITED
By: ____________________________________
Name:
Title:
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<PAGE> 23
SCHEDULE 3(e)
The terms of the following agreements (collectively, the
"Restrictive Agreements") to which Quarterdeck is a party prohibit the
redemption of, or any payment or distribution with respect to, the capital
stock of Quarterdeck:
1. Note Agreement dated as of March 1, 1996 between
Quarterdeck Corporation and the Purchaser named on
Schedule 1 thereto
2. Credit Agreement with Bank of America National Trust
& Savings Association dated February 14, 1996, as
amended to the date of the Agreement
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<PAGE> 1
AS EXECUTED SEPTEMBER 30, 1996
The Warrant represented by this certificate was issued on
September 30, 1996 (the "Original Issue Date") pursuant to the
Subscription Agreement dated September 30, 1996 between
Quarterdeck Corporation and Fletcher International Limited.
Neither the Warrant represented by this certificate nor the
securities issuable upon exercise hereof have been registered
under the Securities Act of 1933, as amended (the "Act"), and
the Warrant may not be exercised by a U.S. Person (as defined
in Regulation S under the Act ("Regulation S")) unless
pursuant to a transaction registered under the Act or exempt
from such registration. The Warrant represented hereby has
been sold in reliance on the exemption from registration
provided by Regulation S under the Act. Prior to the
expiration of a 40-day restricted period beginning on the
Original Issue Date (the "Restricted Period"), the Warrant
represented by this certificate may not be exercised, offered
or sold, directly or indirectly, within the United States (as
defined in Regulation S under the Act), to a U.S. Person (as
defined in Regulation S under the Act) or for the account or
benefit of a U.S. Person. Neither Quarterdeck Corporation nor
its transfer agent shall be obligated to remove this legend
unless it shall have received an opinion of counsel stating
that such removal complies with the requirements of Regulation
S.
WARRANT NO. 1 UP TO 1,703,653 WARRANT SHARES
WARRANT CERTIFICATE
QUARTERDECK CORPORATION
This Warrant Certificate certifies that FLETCHER INTERNATIONAL
LIMITED, or registered assigns, is the registered holder of one Warrant (the
"Warrant") expiring on the Termination Date (as defined below) to purchase up
to 1,703,653 shares (the "Maximum
1
<PAGE> 2
Warrant Amount") of common stock, par value $.001 per share (the "Common
Stock"), of Quarterdeck Corporation, a Delaware corporation (the "Issuer"), at
the Exercise Price (as defined below); provided, however, that the Maximum
Warrant Amount shall be an amount equal to:
12,666,667
--------------
1.5 * X
where X means the average of the daily volume weighted average
prices of the Common Stock as reported by Bloomberg or other
mutually agreeable source for the period from and including
September 30, 1996 to and including April 30, 1997; provided
further, however, that the Maximum Warrant Amount shall never
be greater than 1,703,653 and shall never be lower than
567,885.
Notwithstanding the foregoing, if the Warrant represented hereby
becomes exercisable prior to April 1, 1997 in accordance with the provisions of
paragraph 10(d) hereof, the Maximum Warrant Amount shall be 1,200,000 shares
("Accelerated Warrant Amount").
The Warrant represented hereby was issued on September 30, 1996 (the
"Original Issue Date") pursuant to the Subscription Agreement dated September
30, 1996 (the "Subscription Agreement"), between the Issuer and Fletcher
International Limited ("Fletcher"), and is subject to the terms and conditions
thereof. Unless otherwise defined herein, capitalized terms used herein shall
have the meanings set forth in the Subscription Agreement. A copy of the
Subscription Agreement may be obtained by the registered holder hereof upon
written request to the Issuer.
The Warrant represented hereby may be exercised on any Business Day (a
"Warrant Exercise Date") from and including March 31, 1998 (or such earlier
date as shall be provided for in paragraph 10(d) hereof) to and including
September 30, 2002 (the "Termination Date"). The Warrant entitles the
registered holder hereof to receive from the Issuer upon exercise up to the
Maximum Warrant Amount upon surrender of this Warrant Certificate as provided
on the reverse hereof and payment of the Exercise Price defined below (the
"Exercise Price") (plus transfer taxes, if applicable) to the Issuer in cash or
by certified or official bank check.
The Exercise Price per Warrant Share shall be 1.50 x X (as defined
above), but in any event not less than $7.435 or more than $22.305; provided,
however, that if the Warrant represented hereby becomes exercisable prior to
April 30, 1997 in accordance with the provisions of paragraph 10(d) hereof, the
Exercise Price shall be $10.037 (the "Accelerated Exercise Price"). In
addition, the Exercise Price may be subject to further adjustment in certain
circumstances as provided in Section 5(j) of the Subscription Agreement.
The Warrant represented hereby shall have the following additional
terms:
2
<PAGE> 3
1. The Warrant represented hereby may be exercised upon surrender of this
Warrant Certificate by the registered holder hereof to the Issuer at
its principal office on any Exercise Date with the Exercise Notice
attached hereto (an "Exercise Notice") duly completed and signed by
the registered holder hereof and upon tender by such holder to the
Issuer of the Exercise Price (plus transfer taxes, if applicable) for
the total number of shares of Common Stock issuable upon exercise of
the Warrant (the "Warrant Shares") in respect of which such Warrant is
then exercised. The Warrant represented hereby shall be exercisable
only in the minimum amount of 50,000 Warrant Shares and in such
amounts in excess thereof as determined by Fletcher (or such lesser
amount as shall then constitute the full number of Warrant Shares
represented). The Warrant represented hereby may not be transferred
except as an entirety, and there shall at no time be more than one
registered holder hereof.
2. On the third Business Day following a Warrant Exercise Date (an "Issue
Date") the Issuer shall issue and cause to be delivered to the
registered holder hereof at such address as such holder shall specify
in the Exercise Notice a certificate or certificates for the number of
full Warrant Shares issuable upon the exercise of such Warrant,
registered in such holder's name, together with cash (if any) as
provided in paragraph 4. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such
Warrant Shares as of such Exercise Date.
3. If on such Issue Date the number of Warrant Shares to be delivered
shall be less than the total number of Warrant Shares deliverable
hereunder, there shall be issued to the holder hereof or his assignee
on such Issue Date a new warrant certificate substantially identical
to this Warrant Certificate, except that such new warrant certificate
shall evidence the right to purchase the number of Warrant Shares
equal to (x) the total number of Warrant Shares deliverable hereunder
less (y) the number of Warrant Shares so delivered.
4. The Issuer shall not be required to issue fractional Warrant Shares on
the exercise of the Warrant represented hereby. The number of full
Warrant Shares which shall be issuable upon the exercise of the
Warrant shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrant so presented.
If any fraction of a Warrant Share would, except for the provisions of
this paragraph 4, be issuable on the exercise of the Warrant, the
Issuer shall pay an amount in cash equal to the closing sale price of
the Common Stock per Warrant Share on the day immediately preceding
the Warrant Exercise Date, multiplied by such fraction.
5. For so long as the Warrant represented hereby has not been exercised
in full, the Issuer shall at all times reserve and keep available,
free from pre-emptive rights, out of its authorized but unissued
Common Stock, for issuance upon exercise of the Warrant represented
hereby, the maximum number of Common Stock then so issuable (as
adjusted from time to time pursuant to paragraph 10). Notwithstanding
the preceding sentence, until the earlier of (i) the Business Day
immediately following the date of
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<PAGE> 4
Quarterdeck's 1997 Annual Meeting of Stockholders and (ii) February
15, 1997, Quarterdeck shall at all times reserve and keep available,
free from pre-emptive rights, out of its authorized but unissued
Common Stock, for issuance upon conversion of Preferred Shares and
exercise of Warrants, not less than 4,400,000 shares of Common Stock.
6. By accepting delivery of this Warrant Certificate, the registered
holder hereof covenants and agrees with the Issuer not to exercise the
Warrant or transfer the Warrant or the Warrant Shares represented
hereby except in compliance with the terms of the Subscription
Agreement and this Warrant Certificate.
7. By accepting delivery of this Warrant Certificate, the registered
holder hereof covenants and agrees with the Issuer that no Warrant may
be sold, assigned, conveyanced, pledged, hypothecated or in any other
manner disposed of or transferred unless and until such holder shall
deliver to the Issuer (i) written notice of such transfer and of the
name and address of the transferee has been received by the Issuer;
(ii) a written agreement of the transferee to comply with the terms of
the Subscription Agreement and this Warrant Certificate and (iii) in
the case of a transfer hereof prior to the expiration of the
Restricted Period (if any) specified on the first page hereof, an
opinion of counsel stating that such transferee is not a "U.S. person"
as defined in Regulation S under the Securities Act of 1933, as
amended, and that such transfer is otherwise exempt from any
registration requirements and in the case of a transfer hereof after
the expiration of the Restricted Period, that such transfer is exempt
from registration requirements.
8. The Issuer will pay all documentary stamp taxes (if any) attributable
to the issuance of Warrant Shares upon the exercise of the Warrant by
the registered holder hereof; provided, however, that the Issuer shall
not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the registration of the Warrant
Certificate or any certificates for Warrant Shares in a name other
than that of the registered holder of the Warrant Certificate
surrendered upon the exercise of a Warrant, and the Issuer shall not
be required to issue or deliver the Warrant Certificate or
certificates for Warrant Shares unless or until the person or persons
requesting the issuance thereof shall have paid to the Issuer the
amount of such tax or shall have established to the satisfaction of
the Issuer that such tax has been paid.
9. In case this Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Issuer may in its discretion issue in exchange and
substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor, but only upon receipt of evidence reasonably satisfactory
to the Issuer of such loss, theft or destruction of such Warrant
Certificate and indemnity, if requested, satisfactory to it.
Applicants for a substitute Warrant Certificate shall also comply with
such other reasonable regulations and pay such other reasonable
charges as the Issuer may prescribe.
4
<PAGE> 5
10. The number of Warrant Shares issuable upon the exercise of the Warrant
(the "Exercise Rate"), the Maximum Warrant Amount, and the terms and
conditions of the Warrant are subject to adjustment by the Issuer, in
consultation with the holder hereof, from time to time as follows :
(a) If the Issuer:
1. subdivides its outstanding shares of Common Stock
into a greater number of shares;
2. combines its outstanding shares of Common Stock into
a smaller number of shares; or
3. issues by reclassification of its Common Stock any
shares of its Capital Stock (as defined below);
then the Exercise Rate in effect immediately prior to such
action shall be adjusted so that the registered holder hereof
shall thereafter be entitled to receive upon exercise the
number of shares of Common Stock or other Capital Stock of the
Issuer which such holder would have owned immediately
following such action if such holder had exercised the Warrant
immediately prior to such action.
As used herein, the term "Capital Stock" means, with respect
to any corporation, any and all shares, interests, rights to
purchase, warrants, options, participations or other
equivalents of or interests (however designated) in stock
issued by that corporation.
Such adjustment shall become effective simultaneously with the
effective date of any subdivision, combination or
reclassification.
If, after an adjustment, the registered holder hereof would
receive upon exercise shares of two or more classes of Capital
Stock of the Issuer, the Exercise Rate shall thereafter be
subject to adjustment upon the occurrence of an action taken
with respect to each such class of Capital Stock as is
contemplated hereby with respect to the Common Stock, on terms
comparable to those applicable to Common Stock hereunder.
(b) Whenever the Exercise Rate is adjusted, the Issuer shall
provide the notices required by paragraph 12 hereof.
(c) If:
1. the Issuer takes any action that would require an
adjustment in the Exercise Rate pursuant to subparagraph (a) above; or
5
<PAGE> 6
2. there is a liquidation or dissolution of the Issuer;
then the Issuer shall mail to the registered holders hereof a
notice stating the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger,
transfer, lease, liquidation or dissolution, as the case may
be. The Issuer shall mail the notice at least 15 days before
such date [provided that failure to do so shall not affect the
validity of the action].
(d) The Issuer covenants and agrees with the registered holder
hereof not to consolidate or merge with or into, or transfer
or lease all or substantially all its assets to (a
"Combination"), any person (a "Third Party") unless, at the
option of the holders of a majority in interest of Warrants
all of the following conditions are met (as applicable):
1. If the common stock of such Third Party (A) is quoted
on the NASDAQ Stock Market or listed on any national
securities exchange (as defined in the Securities
Exchange Act of 1934 (as amended)) (a "Listed
Company"), and (B) as of the date of the announcement
of such Combination (the "Announcement Date"), such
Third Party had a market capitalization of at least
80% of the Issuer's market capitalization as of the
Announcement Date, and (C) had a ratio (the "Trading
Ratio") of (x) average weekly trading volume of its
common stock, as reported by Bloomberg or other
mutually agreeable source during the six months prior
to the Announcement Date, divided by (y) the total
number of shares of its common stock then
outstanding, equal to at least 80% of the Trading
Ratio of Quarterdeck during such six-month period,
then such Third Person shall expressly assume in
writing, on the closing date or effective date (as
the case may be) of such Combination, all of the
obligations of the Issuer under the Subscription
Agreement and under the Warrant represented hereby
(and shall deliver written notice thereof to the
registered holder hereof), subject to the following
modifications to the terms of the Warrant represented
hereby:
a. the Maximum Warrant Amount shall be the
number of the then unexercised Warrant Shares
multiplied by (i) to the extent that the
Combination is a, in whole or in part,
stock-for-stock merger, the ratio of the
number of shares of such Third Party's stock
offered to Quarterdeck's stockholders for
each share of Quarterdeck's common stock or
(ii) to the extent that the Combination
involves, in whole or in part, the
acquisition of Quarterdeck's Common stock or
assets for cash, the ratio of the cash
offered per share of Common Stock divided by
the average volume-weighted price of the
common stock as reported by Bloomberg or
other mutually agreeable source of such Third
6
<PAGE> 7
Party on the closing date or effective date
(as the case may be) of such Combination); and
b. the Exercise Price shall be (i) the Exercise
Price in effect immediately prior to the
closing or effective date (as the case may
be) of such Combination multiplied by (ii)
the number of Warrant Shares then covered by
the Warrant, divided by (iii) the Maximum
Warrant Amount computed in accordance with
the immediately preceding paragraph hereof;
provided, however, that if the closing date or
effective date (as the case may be) of such
Combination is prior to April 1, 1997, the Maximum
Warrant Amount shall be the Accelerated Warrant
Amount, and the Exercise Price shall be the
Accelerated Exercise Price.
2. In the event of a merger or acquisition by a Listed
Company that does not meet either one of the
qualifications listed in clauses (B) or (C) of
paragraph 10(d)(1) above, then, at the option of the
holders of a majority in interest of Warrants, either
(a) the provisions of paragraph 10(d)(1) above shall
apply, or (b) the registered holders hereof shall
exercise the Warrant on the closing date or effective
date (as the case may be) of such Combination and the
Issuer shall pay to the registered holder hereof on
the closing date or effective date (as the case may
be) of such Combination an amount in cash equal to
the Black-Scholes time value (the total Black-Scholes
value of the Warrant minus the intrinsic value of the
Warrant) of the Warrant as measured as of such date
for the time period remaining until the Termination
Date of the Warrant.
For purposes of this paragraph 10(d)(2), the
Black-Scholes time value of the Warrant shall be
computed as follows. Computations shall be solicited
from two nationally recognized investment banks as
agreed between the Issuer and the holders of a
majority in interest of Warrants. If such
computations differ by less than ten percent of the
lower of the two, then such Black-Scholes time value
shall be equal to the average of such computations.
If such computations differ by more than ten percent
of the lower of the two, then such Black-Scholes time
value shall be determined by a third nationally
recognized investment bank selected by such two
previous investment banks.
3. If such Third Party is not a Listed Company then, at
the option of the holders of a majority in interest
of Warrants, either (x) such Third Party shall pay to
the registered holder hereof, on the closing date or
effective date (as the case may be) of such
Combination, an amount in cash equal to the appraised
value (determined using the procedure set forth in
7
<PAGE> 8
paragraph 10(d)(2) above) of the unexercised portion
of the Maximum Warrant Amount as of such date or (y)
such Third Party shall pay to the registered holder
hereof on the Termination Date an amount in cash
equal to the appraised value of the unexercised
portion of the Maximum Warrant Amount on such date in
satisfaction of such Third Party's obligations under
the Warrant.
(e) After an adjustment to the Exercise Rate hereunder, any
subsequent event requiring an adjustment hereunder shall cause
an adjustment to the Exercise Rate as so adjusted.
11. Upon the issuance of any stock dividend or distribution of Common
Stock pro rata to all holders of Common Stock, the registered holder
hereof on the record date for such distribution shall be entitled to
receive such dividend or distribution on the same terms as the holders
of Common Stock upon exercise hereof.
12. Upon any adjustment of the Exercise Rate pursuant to paragraph 10,
the Issuer shall promptly thereafter but in any event within 15 days
following such adjustment (i) cause to be delivered to the registered
holder hereof a certificate of its Chief Financial Officer setting
forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which
such calculations are based, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, and (ii)
cause to be delivered to the registered holder hereof at his or her
address appearing on the Warrant Register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate,
such notice may be given in advance and included as part of the notice
required to be mailed under the other provisions of this paragraph 12.
Failure to provide such notice shall not affect the validity of the
action causing such adjustments.
In case:
(a) the Issuer shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to
subscribe for or purchase shares of Common Stock or of any
other subscription rights or warrants; or
(b) of any consolidation or merger to which the Issuer is a party
and for which approval of any shareholders of the Issuer is
required, or of the conveyance or transfer of the properties
and assets of the Issuer substantially as an entirety, or of
any reclassification or change of Common Stock issuable upon
exercise of the Warrant (other than a change in par value, or
from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or of
a tender offer or exchange offer for shares of Common Stock;
or
8
<PAGE> 9
(c) of the voluntary or involuntary dissolution, liquidation or
winding up of the Issuer; or
(d) the Issuer proposes to take any action which would require an
adjustment of the Exercise Rate pursuant to paragraph 10;
then the Issuer shall cause to be given to the registered holder
hereof at his or her address appearing on the Warrant Register, at
least 20 days (or 10 days in any case specified in clauses (a) or (b)
above) prior to the applicable record date hereinafter specified, or
promptly in the case of events for which there is no record date, by
first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of
Common Stock, or (iii) the date on which any such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up is expected to become effective or consummated, and the
date as of which it is expected that holders of record of shares of
Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up.
13. The Issuer shall serve as warrant agent (the "Warrant Agent") under
this Agreement. The Warrant Agent hereunder shall at all times
maintain a register (the "Warrant Register") of the holders of
Warrants. Upon 30 days' notice to the registered holder hereof, the
Issuer may appoint a new Warrant Agent. Such new Warrant Agent shall
be a corporation doing business under the laws of the United States
or any state thereof, in good standing and having a combined capital
and surplus of not less than $50,000,000. The combined capital and
surplus of any such new Warrant Agent shall be deemed to be the
combined capital and surplus as set forth in the most recent annual
report of its condition published by such Warrant Agent prior to its
appointment; provided that such reports are published at least
annually pursuant to law or to the requirements of a federal or state
supervising or examining authority. After acceptance in writing of
such appointment by the new Warrant Agent, it shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be
reasonably necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the
expense of the Issuer and shall be legally and validly executed and
delivered by the Issuer.
Any corporation into which the Issuer or any new Warrant Agent may be
merged or any corporation resulting from any consolidation to which
the Issuer or any new Warrant Agent shall be a party or any
corporation to which the Issuer or any new Warrant Agent transfers
substantially all of its corporate trust or shareholders services
business shall be a successor Warrant Agent under this Agreement
without any further
9
<PAGE> 10
act; provided that such corporation (i) would be eligible for
appointment as successor to the Warrant Agent under the provisions of
this paragraph 13 or (ii) is a wholly owned subsidiary of the Warrant
Agent. Any such successor Warrant Agent shall promptly cause notice
of its succession as Warrant Agent to be mailed (by first class mail,
postage prepaid) to the registered holder hereof at such holder's last
address as shown on the Warrant Register.
This Warrant Certificate shall not be valid unless signed by the
Issuer.
IN WITNESS WHEREOF, Quarterdeck Corporation has caused this Warrant
Certificate to be signed by its duly authorized officer.
Dated: September 30, 1996
QUARTERDECK CORPORATION
By: /s/ FRANK R. GREICO
--------------------------------
Name: Frank R. Greico
Title: Senior Vice President and
Chief Financial Officer
10
<PAGE> 11
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise Of the Warrant)
[DATE]
Quarterdeck Corporation
[Address]
[Address]
Attention: .
Re: Warrant No.
Ladies and Gentlemen:
The undersigned is not a U.S. Person (as defined in Regulation S under
the Securities Act of 1933, as amended) and is the registered holder of the
above-referenced warrant (the "Warrant") issued by Quarterdeck Corporation,
evidenced by the Warrant Certificate attached hereto, and hereby elects to
exercise the Warrant to purchase ____________ shares of Warrant Shares (as
defined in such Warrant Certificate) and herewith tenders $____________ by
certified or official bank check to the order of Quarterdeck Corporation as
payment for such Warrant Shares in accordance with the terms of such Warrant
Certificate.
In accordance with the terms of the attached Warrant Certificate, the
undersigned requests that certificates for such shares be registered in the
name of and delivered to the undersigned at the following address:(1)
_____________________________
_____________________________
_____________________________
[If the number of Warrant Shares to be delivered is less than the
total number of Warrant Shares deliverable under the Warrant, insert the
following -- The undersigned requests that a new warrant certificate
substantially identical to the attached Warrant Certificate be issued to the
undersigned evidencing the right to purchase the number of Warrant Shares equal
to (x) the total number of Warrant Shares deliverable under the Warrant less
(y) the number of Warrant Shares to be delivered in connection with this
exercise.]
________________________
(1) The Warrant Shares issuable thereunder shall not be delivered within
the United States or to or for the benefit of a U.S. Person (as
defined in Regulation S under the Securities Act of 1933, as amended
(the "Securities Act")) unless registered under the Securities Act or
pursuant to an available exemption from such registration, as set
forth in an opinion of counsel, where applicable.
11
<PAGE> 12
NAME OF REGISTERED HOLDER
[ADDRESS]
[ADDRESS]
[ADDRESS]
By: ____________________________________
Name:
Title:
12
<PAGE> 1
EXHIBIT 99.5
Form of
AMENDMENT TO RIGHTS AGREEMENT
This Amendment to Rights Agreement (this "Amendment"), dated as of
November 7, 1996 and effective as of October 24, 1996, by and between
Quarterdeck Corporation, a Delaware corporation (the "Company"), and Bank of
America National Trust and Savings Association (the "Rights Agent"), is an
amendment to that certain Rights Agreement, dated as of August 11, 1992 (the
"Rights Agreement"), made by and between the Company and the Rights Agent.
Capitalized terms used herein but not otherwise defined shall have the meanings
ascribed to them in the Rights Agreement.
WHEREAS, the Company and the Rights Agent are parties to that certain
Rights Agreement;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company
may, prior to the Distribution Date, without the approval of the holders of the
Company's Common Stock, $.001 par value per share (the "Common Stock"), amend
or supplement the Rights Agreement;
WHEREAS, on October 24, 1996, the Company's Board of Directors acted to
amend the Rights Agreement as set forth in Section 1 below;
WHEREAS, Section 27 of the Rights Agreement provides that after such
Board action, the Company shall give notice of such amendment to the Rights
Agent and the holders of the then outstanding Rights by mailing such notice to
all such holders at their addresses as they appear on the registry of the
Transfer Agent for the Common Stock;
WHEREAS, Section 27 also provides that upon delivery of a certificate
from an appropriate officer of the Company that states that the proposed
amendment to the Rights Agreement is in compliance with Section 27 (the
"Officer's Certificate"), the Rights Agent shall execute an amendment to the
Rights Agreement reflecting such amendments and
WHEREAS, the Officer's Certificate has been delivered by the Company to
the Rights Agent;
NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto agree as follows:
1. AMENDMENT TO RIGHTS AGREEMENT. The last sentence of Section
1(a) of the Rights Agreement shall be amended to read in full as follows:
"Notwithstanding the foregoing, (A) no Person shall become an
"Acquiring Person"(i) as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; provided, however, that
if a Person shall become the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding by reason of share purchases by the
Company
<PAGE> 2
and shall, after such share purchases by the Company, become the Beneficial
Owner of any additional Common Shares of the Company, then such Person shall be
deemed to be an "Acquiring Person" and (ii) if within 8 days after such Person
would otherwise have become an Acquiring Person (but for the operation of this
subclause (A)(ii)), such Person notifies the Board of Directors that such
Person did so inadvertently and, within 2 days after such notification, such
Person is the Beneficial Owner of less than 15% of the outstanding Common
Shares," and (B) Fletcher International Limited, a company organized under the
laws of the Cayman Islands ("Fletcher"), shall not be deemed to be an Acquiring
Person as a result of its acquisition of 200,000 shares of the Company's Series
B Convertible Preferred Stock, the Company's Warrant dated September 30, 1996
(the "Warrant"), or any Common Shares received upon conversion of the Series B
Convertible Preferred Stock or exercise of the Warrant; provided, however, that
if Fletcher is the Beneficial Owner of any additional Common Shares in excess
of an additional 5.0% of the Common Shares outstanding, then Fletcher shall be
deemed to be an "Acquiring Person."
2. STATUS OF RIGHTS AGREEMENT. Except as otherwise amended, modified
or supplemented by this Amendment, the Rights Agreement shall continue in full
force and effect.
3. COUNTERPARTS. This Amendment may be executed simultaneously, in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
4. APPLICABLE LAW. This Amendment shall be construed and enforced in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
QUARTERDECK CORPORATION
/s/ Bradley D. Schwartz
--------------------------
By: Bradley D. Schwartz
Its: Senior Vice President
and General Counsel
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
-----------------------------
By:
Its:
2
<PAGE> 1
Exhibit 99.6
Basis of presentation of accompanying financial statements:
During fiscal 1996, Quarterdeck acquired Inset Systems, Inc. ("Inset"),
Datastorm Technologies, Inc. ("Datastorm"), Future Labs, Inc. ("Future Labs"),
Vertisoft Systems, Inc. ("Vertisoft"), and Limbex Corporation ("Limbex"). The
Inset and Datastorm acquisitions were accounted for as poolings of interest and
accordingly all financial information presented includes the combined operations
of Quarterdeck, Inset, and Datastorm. The Future Labs and Vertisoft acquisitions
were accounted for as immaterial poolings of interest and accordingly the
financial information presented includes the combined operations of Future Labs
and Vertisoft commencing October 1, 1995. However, the shares issued in the
Vertisoft acquisition were material to Quarterdeck and accordingly the amount of
shares outstanding have been restated for this issuance for all periods
presented. The Limbex acquisition was accounted for as a purchase and
accordingly the financial results for Limbex are included from the date of
acquisition, August 14, 1996.
During fiscal 1995, Quarterdeck acquired Landmark Research
International Corporation ("Landmark"), Internetware, Inc. ("Internetware") and
StarNine Technologies, Inc. ("Starnine") in transactions accounted for as
poolings of interests. All financial information presented has been restated to
include the combined operations of Landmark, StarNine and Internetware.
The accompanying consolidated condensed statements of operations of
Quarterdeck Corporation and Subsidiaries have been prepared by the Company to
provide supplemental quarterly information to the reader. Accordingly, they do
not include all of the information or footnotes required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the consolidated financial statements and notes thereto
included in Quarterdeck's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, and in the Company's Form S-4 and Form 8-K regarding the
Company's acquisition of Inset, and in the Company's Form S-3 and Form 8-K
regarding the Company's acquisition of Datastorm and in the Company's Form 8-K
regarding the Company's acquisition of Future Labs, and Form 8-K/A regarding the
Company's acquisitions of Vertisoft and Limbex. In the opinion of management,
the accompanying consolidated unaudited quarterly, condensed statements of
operations include all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair presentation.
<PAGE> 2
QUARTERDECK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL QUARTERS FOR YEAR ENDED SEPTEMBER 30, 1996
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
==================================================
<S> <C> <C> <C> <C>
Gross Revenues $ 49,010 $ 55,966 $ 27,945 $ 32,067
Provision for returns 4,336 6,888 8,338 12,326
--------------------------------------------------
Net revenues 44,674 49,078 19,607 19,741
Cost of revenues 12,086 13,726 12,519 11,269
--------------------------------------------------
Gross Margin 32,588 35,352 7,088 8,472
OPERATING EXPENSES
Research & Development 4,804 5,736 5,411 5,363
Sales & Marketing 15,957 17,547 18,992 13,859
General & Administrative 6,114 6,989 10,201 8,824
--------------------------------------------------
Total Operating Expenses 26,875 30,272 34,604 28,046
--------------------------------------------------
Operating Income (loss) before acquisition
and restructuring charges 5,713 5,080 (27,516) (19,574)
Interest and other income/(expense), net 392 66 1,305 (1,830)
--------------------------------------------------
Income (loss) before taxes, acquisition
and restructuring charges 6,105 5,146 (26,211) (21,404)
Provision (benefit) for income taxes 753 (139) (4,553) 4,745
--------------------------------------------------
Income (loss) before acquisition
and restructuring charges 5,352 5,285 (21,658) (26,149)
Acquisition and restructuring charges 2,552 4,919 1,659 28,659
--------------------------------------------------
Net Income (loss) $ 2,800 $ 366 ($23,317) ($54,808)
==================================================
Net Income (loss) per share before
acquisition and restructuring charges $ 0.14 $ 0.14 ($ 0.62) ($ 0.73)
==================================================
Net Income (loss) per share $ 0.07 $ 0.01 ($ 0.67) ($ 1.53)
==================================================
Shares used to compute net
income (loss) per share 38,107 37,924 34,697 35,856
==================================================
</TABLE>
<PAGE> 3
QUARTERDECK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL QUARTERS FOR YEAR ENDED SEPTEMBER 30, 1995
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
==================================================
<S> <C> <C> <C> <C>
Gross Revenues $ 30,053 $ 32,867 $ 29,585 $ 34,237
Provision for returns 2,397 2,312 1,494 2,933
--------------------------------------------------
Net revenues 27,656 30,555 28,091 31,304
Cost of revenues 7,706 9,182 8,120 9,876
--------------------------------------------------
Gross Margin 19,950 21,373 19,971 21,428
OPERATING EXPENSES
Research & Development 3,261 3,342 3,937 3,746
Sales & Marketing 6,576 7,045 7,699 9,304
General & Administrative 4,885 5,982 4,913 4,924
--------------------------------------------------
Total Operating Expenses 14,722 16,369 16,549 17,974
--------------------------------------------------
Operating Income (loss) before acquisition
and restructuring charges 5,228 5,004 3,422 3,454
Interest and other income/(expense), net 241 438 600 605
--------------------------------------------------
Income (loss) before taxes, acquisition
and restructuring charges 5,469 5,442 4,022 4,059
Provision (benefit) for income taxes 323 (1) 33 (24)
--------------------------------------------------
Income (loss) before acquisition
and restructuring charges 5,146 5,443 3,989 4,083
Acquisition and restructuring charges (16) 160 3,459 3,806
--------------------------------------------------
Net Income (loss) $ 5,162 $ 5,283 $ 530 $ 277
==================================================
Net Income (loss) per share before
acquisition and restructuring charges $ 0.15 $ 0.16 $ 0.12 $ 0.12
==================================================
Net Income (loss) per share $ 0.15 $ 0.15 $ 0.02 $ 0.01
==================================================
Shares used to compute net
income (loss) per share 33,924 34,531 34,149 33,905
==================================================
</TABLE>
