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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): July 18, 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
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 18, 1996, Quarterdeck Corporation (the "Company") consummated
the acquisition of Vertisoft Systems, Inc. ("Vertisoft"), pursuant to the terms
of the Agreement and Plan of Reorganization, dated as of July 15, 1996 (the
"Reorganization Agreement"), by and among the Company, VSI Acquisition
Corporation, a wholly-owned subsidiary of the Company ("Acquisition Sub"),
Vertisoft, Vertisoft Direct, Inc. ("Direct"), and the shareholders of each of
Vertisoft and Direct (the "Shareholders"). The acquisition of Vertisoft was
effectuated by way of a merger (the "Merger") of Acquisition Sub with and into
Vertisoft. Prior to the Merger, Vertisoft acquired all of the outstanding
shares of Direct, and Direct was merged into Vertisoft. As a result of the
Merger, Vertisoft became a wholly-owned subsidiary of the Company. The Merger
is being treated as a "pooling of interests" for accounting purposes. Pursuant
to the Reorganization Agreement, the Shareholders received an aggregate of
3,500,000 shares (the "Shares") of common stock, $.001 par value, of the Company
(or cash in lieu of fractional shares). Pursuant to the terms of the
Reorganization Agreement and the Escrow Agreement, dated as of July 18, 1996, by
and among the Company, American Stock Transfer and Trust Company, as Escrow
Agent, Acquisition Sub and the Shareholders, 349,999 of the Shares were placed
in escrow to satisfy potential indemnification obligations of the Shareholders
under the Reorganization Agreement.
The Shares were issued pursuant to an exemption under the Securities
Act of 1933, as amended. In connection with the Merger, the Company and the
Shareholders entered into a Registration Rights Agreement, dated as of July
18, 1996, pursuant to which the Shareholders are entitled to certain
registration rights with respect to the Shares. Pursuant to the Registration
Rights Agreement, the Company has agreed to file a registration statement with
the Securities and Exchange Commission by August 17, 1996, to register the
resale of the Shares, and to keep such registration statement effective through
July 18, 1997, subject to extension under certain circumstances.
Vertisoft is a developer and publisher of innovative utilities software
and a leading direct mail marketer. Vertisoft markets its utilities software
products through major retailers and direct mail in the United States and
Canada.
A copy of the press release dated July 18, 1996, with respect to the
Merger is filed as Exhibit 99.4.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements and Financial Statement Schedule of
Vertisoft; (b) Pro Forma Financial Information.
It is impracticable to file at this time the financial statements of
Vertisoft and the pro forma financial information required by Item 7 of Form
8-K. Such financial statements and pro forma financial information will be
filed when available, but in any event no later than September 30, 1996.
Page 2 of 4 Pages
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(c) Exhibits.
99.1 Agreement and Plan of Reorganization among
Quarterdeck Corporation, VSI Acquisition
Corporation, Vertisoft Systems, Inc.,
("Vertisoft"), Vertisoft Direct, Inc.
("Direct") and the shareholders of each of
Vertisoft and Direct, dated as of July 15,
1996.
99.2 Escrow Agreement among Quarterdeck
Corporation, American Stock Transfer and
Trust Company, as Escrow Agent, VSI
Acquisition Corporation and the shareholders
of Vertisoft Systems, Inc., dated as of July
18, 1996.
99.3 Registration Rights Agreement among
Quarterdeck Corporation and the shareholders
of Vertisoft Systems, Inc., dated as of July
18, 1996.
99.4 July 18, 1996 press release, relating to the
acquisition of Vertisoft Systems, Inc.
Page 3 of 4 Pages
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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
July 26, 1996
Page 4 of 4 Pages
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EXHIBIT 99.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
QUARTERDECK CORPORATION,
VSI ACQUISITION CORPORATION,
VERTISOFT SYSTEMS, INC.,
VERTISOFT DIRECT, INC.
AND
THE SHAREHOLDERS OF EACH OF
VERTISOFT SYSTEMS, INC. AND VERTISOFT DIRECT, INC.
LISTED ON THE EXECUTION PAGES HERETO
JULY 15, 1996
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TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
- --------
ARTICLE 1. PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Board of Directors' and Shareholders' Approval. . . . . . . . . . . . . . . . . 1
1.2. The Affiliate Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6. Exemption from Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7. Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8. Surrender and Exchange of Outstanding Certificates; Status of
Outstanding Certificates; Fractional Shares. . . . . . . . . . . . . . . . . . . 3
1.9. Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10. Tax-Free Reorganization; Pooling. . . . . . . . . . . . . . . . . . . . . . . . 4
1.11. Articles of Incorporation; Bylaws; Directors and Officers of the
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12. Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, VERTISOFT DIRECT AND THE SHAREHOLDERS 5
2.1. Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4. Authority, Approval and Enforceability. . . . . . . . . . . . . . . . . . . . . 6
2.5. Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7. Material Adverse Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.8. Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.11. Material Agreements and Relationships. . . . . . . . . . . . . . . . . . . . . . 13
2.12. Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.13. Employment Agreements and Employee Benefits. . . . . . . . . . . . . . . . . . . 18
2.14. Labor and Employment Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.15. Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 21
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2.16. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.17. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.20. Compliance with Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.21. Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.22. Pooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.23. No Powers of Attorney or Suretyships. . . . . . . . . . . . . . . . . . . . . . 26
2.24. Banking Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.26. Corporate Books. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.26. Absence of Certain Business Practices. . . . . . . . . . . . . . . . . . . . . . 26
2.27. Disclosure; Accuracy of Documents and Information. . . . . . . . . . . . . . . . 26
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF EACH OF THE SHAREHOLDERS . . . . . . . . . . . . . 27
3.1. Authority, Approval and Enforceability. . . . . . . . . . . . . . . . . . . . . 27
3.2. Pooling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.3. Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4. Representations of Anatoly Tikhman. . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF QUARTERDECK AND ACQUISITION SUB . . . . . . . . . . 28
4.1. Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2. Authority, Approval and Enforceability. . . . . . . . . . . . . . . . . . . . . 28
4.3. Financial Statements and Reports. . . . . . . . . . . . . . . . . . . . . . . . 29
4.4. Quarterdeck Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.5. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.6. Tax-Free Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.7. Quarterdeck Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.9. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10. Absence of Certain Changes of Events. . . . . . . . . . . . . . . . . . . . . . 31
4.11. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . 31
4.12. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.13. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.14. Governmental Authorizations and Licenses. . . . . . . . . . . . . . . . . . . . 32
4.15. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 5. COVENANTS 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.1. Maintenance of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2. Actions Contrary to Pooling and Tax Free Treatment. . . . . . . . . . . . . . . 33
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5.3. Other Discussions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.4. Continuity of Interest and Restrictions on Resale. . . . . . . . . . . . . . . . 34
5.5. Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.6. Shareholder Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.7. Registration Rights; NASDAQ Listing. . . . . . . . . . . . . . . . . . . . . . . 34
5.8. Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.9. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.10. Supplements to Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.11. Tikhman Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.13 Vertisoft, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.14. Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.15. Severance Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 6. CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.1. Conditions to Obligations of Quarterdeck, Acquisition Sub, the
Shareholders, the Company, Vertisoft Direct and VERTISOFT, INC. . . . . . . . . 36
6.2. Conditions to Obligations of Quarterdeck and Acquisition Sub. . . . . . . . . . 36
6.3. Conditions to Obligations of the Company and the Shareholders. . . . . . . . . . 37
ARTICLE 7. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1. Survival of Representations, Warranties, Covenants and Agreements;
Remedies Not Exclusive; No Subrogation . . . . . . . . . . . . . . . . . . . . 37
7.2. Indemnification of Quarterdeck and the Surviving Corporation and the
Escrow Deposit of Quarterdeck Common Stock . . . . . . . . . . . . . . . . . . 39
7.3. Indemnification of the Shareholders. . . . . . . . . . . . . . . . . . . . . . . 42
7.4. Post-Escrow Procedure for Indemnification of Quarterdeck and the
Surviving Corporation with Respect to Non-Third Party Claims . . . . . . . . . . 43
7.5. Procedure for Indemnification of the Shareholders with Respect to
Non-Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.6. Procedure for Indemnification of Quarterdeck with Respect to Third-Party Claims. 44
7.7. Procedure for Indemnification of the Shareholders with Respect to
Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.8. Determination of Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.9. Fraud or Willful Misrepresentation. . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.1. Termination by Mutual Consent. . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.2. Termination by Quarterdeck or Acquisition Sub or the Company. . . . . . . . . . 46
8.3. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.2. Entire Agreement; Modifications; Waiver. . . . . . . . . . . . . . . . . . . . . 48
9.3. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.4. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.6. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.7. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.8. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.9. Consent to Service of Process. . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10. Covenant Not To Compete. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.11 Appointment of Escrow Committee. . . . . . . . . . . . . . . . . . . . . . . . . 50
9.12 Gender and Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.13. Construction of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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EXHIBITS
--------
Exhibit A Agreement of Merger
Exhibit B Affiliates Letter and Continuity of Interest Certificate
Exhibit C Escrow Agreement
Exhibit D Registration Rights Agreement
Exhibit E Opinion of the Company Counsel
Exhibit F Opinion of Quarterdeck Counsel
SCHEDULES
---------
Schedule 2.1 Office & Personnel Locations
Schedule 2.2 Capitalization
Schedule 2.4 Consents
Schedule 2.5 Permits
Schedule 2.6 Financial Statements Exceptions
Schedule 2.7 Material Changes
Schedule 2.8 Returns
Schedule 2.9(a) Assets
Schedule 2.9(b) Real Property Descriptions
Schedule 2.10 Insurance
Schedule 2.11(a) Material Agreements
Schedule 2.11(b) Customers
Schedule 2.11(c) Suppliers
Schedule 2.11(d) Agents
Schedule 2.12 Intellectual Property Rights
Schedule 2.13 Employee Agreements and Employee Benefits
Schedule 2.14 Labor and Employment Matters
Schedule 2.16 Compliance with Laws
Schedule 2.17 Litigation
Schedule 2.18 Brokers
Schedule 2.19 Taxes
Schedule 2.20 Compliance with Instruments
Schedule 2.21 Related Party Transactions
Schedule 2.23 Powers of Attorney
Schedule 2.24 Banking Facilities
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is
entered into as of July 15, 1996 by and among Quarterdeck Corporation, a
Delaware corporation ("Quarterdeck"), VSI Acquisition Corporation, a California
corporation ("Acquisition Sub"), Vertisoft Systems, Inc., a California
corporation (the "Company" or the "surviving corporation"), Vertisoft Direct,
Inc., a California corporation ("Vertisoft Direct"), and the shareholders of
the Company (the "Shareholders") and the sole shareholder of Vertisoft Direct
set forth on the signature page hereto.
RECITALS
The parties hereto intend that, subject to the terms and
conditions hereinafter set forth, (i) Vertisoft Direct will be merged with and
into the Company (the "Affiliate Merger"), and (ii) immediately thereafter,
Acquisition Sub will be merged with and into the Company (the "Merger") in
accordance with the terms of this Agreement, an Agreement of Merger
substantially in the form attached hereto as Exhibit A (the "Agreement of
Merger") and the applicable provisions of the laws of the State of California,
in connection with which all of the outstanding shares of common stock of the
Company (the "Company Common Stock") will be exchanged for shares of common
stock of Quarterdeck ("Quarterdeck Common Stock"). The Company Common Stock
shall be automatically converted into Quarterdeck Common Stock, and
certificates representing Company Common Stock will be exchanged for
certificates representing Quarterdeck Common Stock, as provided in this
Agreement and the Agreement of Merger.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereto, intending to be legally
bound, do hereby agree as follows:
ARTICLE 1.
PLAN OF REORGANIZATION
1.1. BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL. The
respective boards of directors of Quarterdeck, Acquisition Sub, the Company and
Vertisoft Direct have duly adopted and approved this Agreement, and this
Agreement shall be submitted to the shareholders of the Company and Acquisition
Sub for approval in accordance with the applicable provisions of California
Corporations Code (the "California Law"). The Affiliate Merger and agreements
related thereto shall be submitted to the sole shareholder of Vertisoft Direct
for approval in accordance with the applicable provisions of the California
Law.
1.2. THE AFFILIATE MERGER. Prior to the Effective Time
(as defined herein), Vertisoft Direct will be merged with and into the Company
on terms and in a manner reasonably acceptable to Quarterdeck.
1.3. THE MERGER. Subject to the terms and conditions of
this Agreement and the Agreement of Merger, immediately following the Affiliate
Merger, Acquisition Sub shall be
1
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merged with and into the Company pursuant to the Agreement of Merger, with the
Company as the surviving corporation, and the separate existence of Acquisition
Sub shall thereupon cease. At the Effective Time (as hereinafter defined), the
Company, as the surviving corporation in the Merger, shall continue its
corporate existence under the laws of the State of California. As a result of
the Merger, all of the issued and outstanding shares of Company Common Stock
shall be exchanged for Quarterdeck Common Stock in the manner described below;
provided that 10% of the shares of Quarterdeck Common Stock to be so issued to
each holder of Company Common Stock shall be withheld and deposited in the
Escrow (as defined below).
(a) At the Effective Time, each of the issued and
outstanding shares of Company Common Stock (other than shares as to which
dissenters' rights are perfected under Chapter 13 of the California Law, and
any shares of the Company which are owned by the Company or any direct or
indirect wholly-owned subsidiary of the Company) shall by virtue of the Merger
and without any action on the part of Quarterdeck, Acquisition Sub or the
Company be converted automatically into and exchanged for Three Million Five
Hundred Thousand (3,500,000) shares of Quarterdeck Common Stock (the
"Quarterdeck Merger Shares"). Ten percent (10%) of the shares of Quarterdeck
Merger Shares shall be withheld and deposited in the Escrow. Prior to the
Distribution Date (as defined in the Rights Agreement (defined below)), all
references in this Agreement to each Quarterdeck Merger Share shall be deemed
to include the corresponding right (the "Right") to purchase shares of Series A
Junior Participating Preferred Stock of Quarterdeck pursuant to the Rights
Agreement dated as of August 11, 1992, between Quarterdeck and Bank of America
NT&SA, as Rights Agent (the "Rights Agreement"). In the Merger, any shares of
Company Common Stock that are owned by the Company shall be canceled, and no
securities of Quarterdeck or other consideration shall be delivered in exchange
therefor. At the Effective Time, each share of common stock of Acquisition Sub
that is issued and outstanding immediately prior to the Effective Time will be
converted into and be exchangeable for one fully paid and nonassessable share
of common stock of the Company. No other shares of capital stock of the
Company shall be issued in, or outstanding immediately after, the Merger. No
shares of stock of Acquisition Sub shall be issued in, or outstanding after,
the Merger.
(b) If, between the date of this Agreement and
the Effective Time, the outstanding shares of Quarterdeck Common Stock shall
have been changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split, reverse split, stock
dividend or combination, the consideration to be issued to the holders of
Company Common Stock in the Merger shall be correspondingly adjusted.
1.4. THE CLOSING. Upon the satisfaction or satisfactory
waiver of all conditions set forth in Article 6 of this Agreement, the closing
(the "Closing") of the Merger shall take place at the offices of Gibson, Dunn &
Crutcher LLP, 333 S. Grand Avenue, Los Angeles, California 90071 at 9:00 a.m.
on July 18, 1996, or such other place, time and date as Quarterdeck and the
Company may mutually select (with the date of the Closing being referred to
herein as the "Closing Date").
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1.5. EFFECTIVE TIME. Pursuant to California Law, the
Agreement of Merger shall be filed, simultaneously with the Closing, in the
offices of the Secretary of State for the State of California. The Merger
shall become effective immediately upon the filing of the Agreement of Merger
and related certificates with the office of the Secretary of State for the
State of California (the "Effective Time").
1.6. EXEMPTION FROM REGISTRATION. The Quarterdeck Common
Stock to be issued in connection with the Merger will be issued in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and exempt from registration or qualification
under the California Corporate Securities Law (the "California Securities Act")
and any other applicable state securities laws.
1.7. RESTRICTED SECURITIES. The Quarterdeck Merger Shares
will be subject to the restrictions and obligations imposed in connection with
representations and warranties contained in certain Affiliate Letters and
Continuity of Interest Certificates, to be executed by each of the
Shareholders, substantially in the form attached hereto as Exhibit B, as well
as restrictions under applicable securities laws.
1.8. SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES;
STATUS OF OUTSTANDING CERTIFICATES; FRACTIONAL SHARES.
The conversion of shares of Company Common Stock into
Quarterdeck Common Stock as provided for by this Agreement and the Agreement of
Merger shall occur automatically at the Effective Time without further action
by the holders thereof. Until surrendered, each certificate that prior to the
Effective Time represented shares of Company Common Stock will be deemed to
evidence that number of shares of Quarterdeck Common Stock into which such
Company Common Stock has been converted. At the Closing and at any time
thereafter, each holder of a certificate or certificates theretofore
representing a share or shares of Company Common Stock shall be entitled to
receive from Quarterdeck, in exchange for and upon the surrender of all of such
holder's Company Common Stock certificates, the number of shares of Quarterdeck
Common Stock to which the holder of such certificates is entitled pursuant to
Section 1.3. of this Agreement and the Agreement of Merger, less the number of
Escrow Shares (as defined below) attributable thereto. Stock certificates for
fractions of Quarterdeck Common Stock shall not be issued in the Merger and
such fractional interests shall not entitle the owners thereof to vote, to
receive dividends or to exercise any other right of a stockholder. In lieu of
any such fractional interests, each holder of Company Common Stock who would
otherwise have been entitled to a fraction of a share of Quarterdeck Common
Stock upon surrender of stock certificates will be paid cash (rounded to the
nearest cent, 0.5 cents to be rounded to 1 cent) upon such surrender in an
amount equal to such fraction times the closing sale price of a share of
Quarterdeck Common Stock on the Nasdaq National Market on the day of the
Effective Time.
1.9. DISSENTERS' RIGHTS. Holders of Company Common Stock
who have complied with all requirements for perfecting the dissenters' rights
as set forth in Chapter 13 of the California Law are entitled to their rights
under such laws. The Company shall give
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Quarterdeck prompt written notice of any assertions of dissenters' rights or
withdrawals of assertions of dissenters' rights, and any other instrument in
respect thereof received by the Company and the opportunity to participate in
all negotiations and proceedings with respect to demands for appraisal.
1.10. TAX-FREE REORGANIZATION; POOLING. The parties
intend to adopt the Agreement as a plan of reorganization within the meaning of
Section 354 of the Internal Revenue Code of 1986, as amended (the "Code"), and
to consummate the Affiliate Merger in accordance with Section 368(a)(1)(A) of
the Code, and the Merger in accordance with Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code, and that the Affiliate Merger and the Merger be
treated for accounting purposes as a "pooling of interests" under Opinion No.
16 of the Accounting Principles Board.
1.11. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION.
(a) The articles of incorporation and bylaws of
Acquisition Sub, as in effect on the Effective Date, shall be (until amended or
repealed as provided by law) the articles of incorporation and bylaws,
respectively, of the surviving corporation; provided, however, that Article One
of the Articles of Incorporation of the surviving corporation shall be amended
to read in its entirety as follows:
"One: The name of this corporation is Vertisoft Systems, Inc."
(b) The directors and officers of the surviving
corporation immediately following the Effective Time shall be the directors and
officers of Acquisition Sub immediately prior to the Effective Time until their
successors are elected or appointed and qualified.
1.12. ESCROW. Ten percent (10%) of the aggregate number of
Quarterdeck Merger Shares (the "Escrow Shares") shall be held in escrow (the
"Escrow"). The Escrow Shares shall be withheld pro rata from the Quarterdeck
Merger Shares to be received by each holder of Company Common Stock in the
Merger. To the extent that Quarterdeck, Acquisition Sub or any other
indemnified party under Section 7.2 has a claim for indemnification or for a
breach of, or default under this Agreement or the agreements, instruments or
transactions contemplated hereby or thereby, Quarterdeck, Acquisition Sub and
such other indemnified parties shall have recourse against, among other things
as provided in Article 7, the Escrow Shares in seeking satisfaction of such
claims (which recourse shall not be an exclusive remedy after the Escrow
Termination Date or with respect to fraud or willful misconduct) pursuant to
Article 7 of this Agreement and pursuant to the terms of an escrow agreement
("Escrow Agreement") substantially in the form attached hereto as Exhibit C.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
VERTISOFT DIRECT AND THE SHAREHOLDERS
The Company, Vertisoft Direct and the Shareholders, jointly
and severally, represent and warrant to Quarterdeck and Acquisition Sub as
follows, subject to the exceptions set forth in the various schedules
comprising the "Disclosure Schedule" attached hereto which shall be deemed to
qualify all applicable representations and warranties under this Agreement,
whether or not specifically cross-referenced as pertaining thereto:
2.1. ORGANIZATION AND STANDING.
(a) Each of the Company and Vertisoft Direct is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted, and is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the failure to so qualify
would, individually or in the aggregate, have a Material Adverse Effect.
Whenever used in this Article 2, "Material Adverse Effect" shall mean a
material adverse effect on the business, properties, condition (financial or
otherwise) or results of operations of the Company and Vertisoft Direct, taken
as a whole.
(b) Schedule 2.1 sets forth, with respect to each
of the Company and Vertisoft Direct, a complete and accurate list of (i) each
location where such entity maintains an office or personnel or owns or leases
real property, and (ii) each state or other jurisdiction in which such entity
is legally qualified to transact business.
(c) Each of the Company and Vertisoft Direct has
delivered to Quarterdeck complete and accurate copies of its respective
Articles of Incorporation and Bylaws and minutes of all of its respective
directors' and shareholders' meetings. The stock books of the Company and
Vertisoft Direct provided to Quarterdeck are complete and accurate as of the
date hereof.
2.2. CAPITALIZATION.
(a) There are 86,300 outstanding shares of
Company Common Stock and, upon consummation of the Affiliate Merger, there will
be 95,899 shares of Company Common Stock outstanding. Schedule 2.2 accurately
sets forth the record ownership of all issued and outstanding shares of Company
Common Stock and the record addresses of all of the Company's security holders.
Except as set forth in the preceding sentence there are no outstanding shares
of capital stock of the Company and there exist no (i) outstanding options,
warrants or other rights to purchase or subscribe for any equity securities or
other ownership interests of the Company, (ii) indebtedness or securities
directly or indirectly convertible into or exchangeable for any equity
securities of the Company, or (iii) any other obligations, rights,
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agreements or arrangements, whether absolute or contingent, with respect to the
issuance of any equity securities of the Company.
(b) All of the issued and outstanding shares of
Company Common Stock have been duly authorized and validly issued, are fully
paid and non-assessable, and were issued in full compliance with all applicable
federal and state laws, rules and regulations and were not issued in violation
of any preemptive rights. The Company has no obligation, whether absolute or
contingent, to repurchase any of the issued and outstanding shares of Company
Common Stock.
(c) Except for any restrictions imposed by
applicable state and federal securities laws, there is no right of first
refusal, co-sale right, right of participation, right of first offer, option or
other restriction on transfer applicable to any shares of Company Common Stock.
Except as set forth on Schedule 2.2, the Company is not a party to, or subject
to, any agreement that affects or relates to the voting or giving of written
consent with respect to any shares of Company Common Stock, and there is no
agreement between or among any Shareholders to such effect.
(d) There are 10,000 outstanding shares of common
stock of Vertisoft Direct all of which are owned beneficially and of record by
Anatoly Tikhman. Except as set forth in the preceding sentence, there are no
outstanding shares of capital stock of Vertisoft Direct and there exist no (i)
options, warrants or other rights to purchase or subscribe for any equity,
securities or other ownership rights in Vertisoft Direct, (ii) indebtedness or
securities directly or indirectly convertible into or exchangeable for any
equity securities of Vertisoft Direct, or (iii) any other obligations, rights,
agreements or arrangements, whether absolute or contingent, with respect to the
issuance of any equity securities of Vertisoft Direct.
(e) All of the issued and outstanding shares of
common stock of Vertisoft Direct have been duly authorized and validly issued,
are fully paid and non-assessable, and were issued in full compliance with all
applicable federal and state laws, rules and regulations and were not issued in
violation of any preemptive rights; and Vertisoft Direct does not have any
obligation, whether absolute or contingent, to repurchase any of the issued and
outstanding shares of capital stock.
2.3. SUBSIDIARIES. Neither the Company nor Vertisoft
Direct owns, directly or indirectly, an interest in any corporation,
partnership, business, trust or other entity. There exist no obligations of
the Company or Vertisoft Direct, whether absolute or contingent, to purchase or
acquire any equity security or other ownership interest in any other business
entity, except as contemplated by the Affiliate Merger.
2.4. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and the Agreement of Merger, and, subject to obtaining any required
approvals of the holders of Company Common Stock, all
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corporate action on its part necessary for such execution, delivery and
performance has been duly taken.
(b) The execution and delivery by the Company of
this Agreement and the Agreement of Merger do not, and the performance and
consummation of the transactions contemplated by this Agreement and the
Agreement of Merger (collectively, together with the transactions contemplated
by the Escrow Agreement, the "Transactions") will not, result in or give rise
to (with or without the giving of notice or the lapse of time, or both) any
conflict with, breach or violation of, or default, termination, forfeiture or
acceleration of obligations under, any terms or provisions of (i) its Articles
of Incorporation or Bylaws, (ii) any statute, rule or regulation, or any
judicial, governmental, regulatory or administrative decree, order or judgment
applicable to the Company, or (iii) except as set forth on Schedule 2.4, any
material agreement, lease or other instrument to which it is a party or by
which it or any of its assets may be bound.
(c) No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is required on the
part of the Company for the consummation by it of the Transactions, except (i)
the filing of the Agreement of Merger and related officer certificates with the
Secretary of State of the State of California, (ii) for compliance with
applicable federal and state securities laws and (iii) for filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
(d) This Agreement and the Agreement of Merger
are legal, valid and binding obligations of the Company, enforceable against it
in accordance with the respective terms hereof and thereof, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and subject to general equitable principles.
(e) Vertisoft Direct has all requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Affiliate Merger, and, subject to obtaining any required
approvals of the sole shareholder of the common stock of Vertisoft Direct, all
corporate action on the part of Vertisoft Direct necessary for such execution,
delivery and performance has been duly taken.
(f) The execution and delivery by Vertisoft
Direct of this Agreement and documents relating to the Affiliate Merger do not,
and the performance and consummation of the transactions contemplated by this
Agreement, such documents and the Affiliate Merger will not, result in or give
rise to (with or without the giving of notice or the lapse of time, or both)
any conflict with, breach or violation of, or default, termination, forfeiture
or acceleration of obligations under, any terms or provisions of (i) their
respective Articles of Incorporation or Bylaws, (ii) any statute, rule or
regulation, or any judicial, governmental, regulatory or administrative decree,
order or judgment applicable to Vertisoft Direct, or (iii) except as set forth
on Schedule 2.4, any material agreement, lease or other instrument to which
either Vertisoft Direct is a party or by which either Vertisoft Direct or any
of their respective assets may be bound.
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(g) No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental or administrative body is required on the
part of Vertisoft Direct for the consummation by it of the transactions
contemplated by this Agreement, including without limitation the Affiliate
Merger, except (i) the filing of an agreement of merger and related officer
certificates with the Secretary of State of the State of California and (ii)
for compliance with applicable federal and state securities laws.
(h) This Agreement is the legal, valid and
binding obligation of Vertisoft Direct, enforceable against it in accordance
with it terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to general equitable principles.
2.5. LICENSES AND PERMITS. Each of the Company and
Vertisoft Direct has, and at all times has held, all permits, licenses, orders,
authorizations, registrations, qualifications, approvals and other analogous
instruments (collectively, "Permits") (and each is in full force and effect) as
required by applicable law for the purpose of conducting its respective
business or owning its respective properties or both, in each jurisdiction in
which it does business or owns property or in which such Permits are otherwise
required and where the failure to have such Permits would have a Material
Adverse Effect. Each of the Company and Vertisoft Direct is in compliance with
all such Permits. Schedule 2.5 hereto sets forth a complete and correct list
of all such Permits and the expiration dates thereof. There are no
proceedings, pending or threatened, to revoke or terminate any such presently
existing Permits and the Shareholders, the Company and Vertisoft Direct know of
no reason why any such Permit would not be renewed in the ordinary course.
Each of the Company and Vertisoft Direct has made all filings and registrations
and the like necessary or required by law to conduct its respective business,
except where the failure to maintain such permits and other instruments or to
make such filings and registrations would not have a Material Adverse Effect.
2.6. FINANCIAL STATEMENTS.
(a) The Company has delivered to Quarterdeck
complete copies of (y) its unaudited balance sheet as of January 31, 1996 and
the related unaudited statements of income (loss) and retained earnings
(deficit) for the 12 months then ended and (z) the unaudited balance sheet of
Vertisoft Direct as of May 31, 1996 and the related unaudited statement of
income (loss) and retained earnings (deficit) for the period from February 1,
1996, through May 31, 1996 (collectively, the "Company Financials"). Except as
set forth on Schedule 2.6, the Company Financials (i) have been prepared from
the books and records of the Company or Vertisoft Direct, as applicable, in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis with prior periods, (ii) are complete and correct and present
fairly the financial position of the Company or Vertisoft Direct as applicable,
as of the respective dates and the results of its respective operations and
cash flows for the periods then ended, and (iii) contain and reflect adequate
reserves for all liabilities or obligations of any nature, whether absolute,
contingent or otherwise.
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(b) The Company and Vertisoft Direct have
delivered to Quarterdeck complete copies of an unaudited combined balance sheet
of the Company and Vertisoft Direct as of June 30, 1996, and the related
unaudited combined statements of income (loss) and retained earnings (deficit)
for the period from February 1, 1996 through June 30, 1996 (the "Interim
Combined Financial Statements"). Except as set forth on Schedule 2.6, the
Interim Combined Financial Statements (i) have been prepared from the books and
records of the Company and Vertisoft Direct, as applicable, on a consistent
basis with prior periods, (ii) are complete and correct and present fairly the
financial position of the Company and Vertisoft Direct as applicable, as of the
date and the results of combined operations and cash flows for the period then
ended, and (iii) contain and reflect adequate reserves for all liabilities or
obligations of any nature, whether absolute, contingent or otherwise.
(c) Except as set forth on Schedule 2.6, there is
no outstanding claim, liability or obligation of any nature, whether absolute,
accrued, contingent or otherwise, other than the liabilities and obligations
reflected on the Company Financials, except for (i) liabilities and obligations
incurred in the ordinary course of business since the most recent date of the
Company Financials and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under GAAP to be
reflected in the Company Financials.
(d) All of the accounts receivable reflected on
the Company Financials and the Interim Combined Financial Statements and all
accounts receivable incurred since that date are or have been fully collectible
in the normal course of business and there are no known or asserted claims or
other rights of set-off against any thereof, except to the extent of any
reserves set forth therefor on the Company Financials and except as set forth
on Schedule 2.6. Except as set forth on Schedule 2.6, as of May 31, 1996,
there is (i) no account debtor delinquent in its payment by more than 90 days,
(ii) no account debtor that has refused (or, to the best knowledge of the
Company, Vertisoft Direct and the Shareholders, threatened to refuse) to pay
its obligations for any reason, (iii) to the best knowledge of the Company,
Vertisoft Direct and the Shareholders, no account debtor that is insolvent or
bankrupt, and (iv) no account receivable that is pledged to any third party by
the Company or Vertisoft Direct.
(e) All of the accounts payable reflected on the
Company Financials and the Interim Combined Financial Statements and all
accounts payable incurred since that date arose in the ordinary course of
business, and there is no such account payable delinquent in its payment except
those having to do with normal trade disputes, none of which exceed $40,000
individually or $100,000 in the aggregate as of the date hereof. Schedule 2.6
sets forth a complete and accurate aging of all of the Company's accounts
receivable at May 31, 1996.
(f) Except as set forth in Schedule 2.6, since
the date of the Company Financials, each of the Company and Vertisoft Direct
has continued to replenish inventories in a normal and customary manner
consistent with past practices. Neither the Company nor Vertisoft Direct has
received written or oral notice that it will experience in the foreseeable
future any difficulty in obtaining, in the desired quantity and quality and at
a reasonable price and upon reasonable terms and conditions, the raw materials,
supplies or component products required for
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the manufacture, assembly or production of its products. The values at which
inventories are carried reflect the inventory valuation policy of the Company
or Vertisoft Direct, as applicable, that is consistent with its past practice
and in accordance with GAAP applied on a consistent basis.
2.7 MATERIAL ADVERSE CHANGES. Since January 31, 1996,
except as is set forth on Schedule 2.7, there has not occurred:
(a) Any material adverse change in the assets,
liabilities, business, prospects, condition (financial or otherwise), or
operating results of the Company or Vertisoft Direct from that reflected in the
Company Financials or any one or more adverse changes that have resulted or may
result in a loss to the Company or Vertisoft Direct of more than $100,000 in
the aggregate;
(b) Any material increase in the indebtedness or
liabilities of the Company or Vertisoft Direct over the level thereof as
reflected on the most recent balance sheet included in the Company Financials,
or any mortgage, pledge or encumbrance on any of the assets of the Company or
Vertisoft Direct;
(c) Any amendment or modification of any Material
Agreement (as defined below), or any termination of any agreement that would
have been a Material Agreement were such agreement in existence on the date
hereof;
(d) Any creation of any written or oral
agreement, contract, commitment or transaction involving the Company or
Vertisoft Direct that extends beyond the first anniversary of the date hereof
or that involves obligations thereunder in excess of $100,000;
(e) Any increase in the compensation (including,
without limitation, the rate of commissions) payable to, or any payment of a
cash salary bonus to, any officer, director or employee of, or consultant to,
the Company or Vertisoft Direct;
(f) Any transaction by the Company or Vertisoft
Direct, whether or not covered by the foregoing, not in the ordinary course of
business, including, without limitation, any purchase or sale of any asset;
(g) Any material alteration in the manner of
keeping the books, accounts or records of the Company or Vertisoft Direct, or
in the accounting practices therein reflected;
(h) Any declaration or payment of any dividends
or distributions by the Company or Vertisoft Direct, any acquisition or
redemption by the Company or Vertisoft Direct of any of its respective equity
securities or any loan by the Company or Vertisoft Direct to any of its
respective security holders;
(i) Any loss or threatened loss of a material
customer; or
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(j) Any agreement to do any of the things
described in subsections (a) through (i) of this Section 2.7.
2.8. RETURNS. Except as set forth on Schedule 2.8, since
January 31, 1996, neither the Company or Vertisoft Direct has had any of its
products returned by a purchaser or user thereof, other than for minor,
nonrecurring warranty problems, stock balancing, overstock and version changes
and upgrades. Neither the Company nor Vertisoft Direct is aware of any pending
warranty claims other than those that arise in the ordinary course of business
and that are not expected to require a bulk recall of products currently sold
to customers or in the distribution channel.
2.9. PROPERTIES.
(a) Except as set forth in Schedules 2.9(a) or
(b) or Schedule 2.12, each of the Company and Vertisoft Direct has good title
to, valid leasehold interests in, or other right to use all of the assets used
in its operations prior to the date of this Agreement, including, without
limitation, the assets reflected on the Company Financials (except for assets
sold since the date of the balance sheet included in the Company Financials),
free and clear of all liens, mortgages, pledges, security interests,
encumbrances, material restrictions or adverse claims of any nature whatsoever.
Except as set forth in Schedule 2.9(a), all of such assets are in good
operating condition, normal wear and tear excepted, and are adequate and
suitable for the purposes for which they are presently being used.
(b) Except as set forth in Schedule 2.9(a), since
the most recent date of the Company Financials, there has not occurred any
transfer of title from the Company or Vertisoft Direct (other than in the
ordinary course of business), any abandonment, any pilferage or any other
material loss by the Company or Vertisoft Direct with respect to any of its
respective property, plant or equipment.
(c) Set forth on Schedule 2.9(a) is a complete
and correct list of all of the tangible assets (including fixed assets) having
a net book value in excess of $50,000 owned or leased by the Company or
Vertisoft Direct.
(d) Schedule 2.9(b) sets forth a complete and
correct description of each parcel of real property (collectively, the "Real
Property") owned by or leased to the Company or Vertisoft Direct or otherwise
used by the Company or Vertisoft Direct, which description consists of a legal
description for each such parcel, the interest of the Company or Vertisoft
Direct therein and an identification of each lease (a "Lease") of real property
under which the Company or Vertisoft Direct is either a lessee, sublessee,
lessor or sublessor. Except as set forth in Schedule 2.9(b):
(i) Each Lease is a valid and binding
obligation of the Company or Vertisoft Direct, as applicable, and the
Shareholders, the Company and Vertisoft Direct do not have any knowledge that
any of such Leases are not valid and binding obligations of each of the other
parties thereto;
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(ii) Neither the Company nor Vertisoft
Direct, as applicable, nor any other party to a Lease is in default with
respect to any material term or condition thereof, and no event has occurred
that, with the passage of time or the giving of notice or both, would
constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto or the creation of a lien or encumbrance upon
any asset of the Company or Vertisoft Direct;
(iii) All of the buildings, fixtures and
other improvements located on the Real Property are in good operating condition
and repair, and the operation thereof as presently conducted is not in
violation of any applicable code, zoning ordinance or other applicable law or
regulation;
(iv) The Company and Vertisoft Direct
hold valid and effective certificates of occupancy, underwriters' certificates
relating to electrical work, zoning, building, housing, safety, fire and health
approvals and all other permits and licenses required by applicable law
relating to the operation of the Real Property;
(v) Neither the Company nor Vertisoft
Direct has experienced during the two years preceding the date hereof any
material interruption in the delivery of adequate quantities of any utilities
(including, without limitation, electricity, natural gas, potable water, and
fuel oil) or other public services (including, without limitation, sanitary and
industrial sewer service) required by the Company or Vertisoft Direct in the
operation of its business during such period;
(vi) To the best knowledge of the
Company, Vertisoft Direct and the Shareholders, no portion of the Real Property
(A) contains or has been used in any manner at any previous time for the
storage, disposal, treatment, processing, production, refinement, generation or
other handling of waste contamination, PCBs, asbestos, or other hazardous or
toxic substance and there is no contamination, whether of soil, ground water,
or otherwise, or other condition that violates any applicable federal, state,
local, or other law, regulation, code, order, or rule (an "Environmental
Protection Law"), or requires reporting to any governmental authority; (B)
contains underground tanks of any type, or any materials containing PCBs or any
asbestos; or (C) contains any surface or sub-surface conditions that
constitute, or that through the physical effects of the passage of time may
constitute, a public or private nuisance;
(vii) To the best knowledge of the
Company, Vertisoft Direct and the Shareholders, no portion of the Real Property
has been designated, listed, or, identified in any manner by the United States
Environmental Protection Agency (the "EPA") or under and pursuant to any
Environmental Protection Law as a hazardous waste or hazardous substance
disposal or removal site, Superfund or clean-up site or candidate for removal
or closure pursuant to any Environmental Protection Law; and
(viii) Neither the Company nor Vertisoft
Direct has received at any time prior to the date hereof a summons, citation,
notice, directive, letter or other communication, written or oral, from the EPA
or any other federal, state, local or other
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governmental agency or instrumentality, authorized pursuant to an Environmental
Protection Law, concerning any intentional or unintentional action or omission
(except any pertaining to emissions of fugitive dust and other non-hazardous
particulates that are routinely corrected) by the Company or Vertisoft Direct
constituting a violation or potential violation of any Environmental Protection
Law, including, without limitation, violations relating to the releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise
disposing of hazardous waste or hazardous substance into the environment
resulting in damage thereto or to the fish, shellfish, wildfish, biota and
other natural resources, and there exist no facts that would be the basis for a
finding of such a violation.
2.10. INSURANCE. Schedule 2.10 sets forth a list of the
insurance policies held by the Company or Vertisoft Direct. To the best
knowledge of the Company, Vertisoft Direct and the Shareholders, each of the
Company and Vertisoft Direct is in compliance with each of such policies such
that none of the coverages provided under such policies has been invalidated.
2.11. MATERIAL AGREEMENTS AND RELATIONSHIPS.
(a) Except as set forth on Schedule 2.9(b) or
2.11(a), neither the Company or Vertisoft Direct is a party to or subject to
any oral or written:
(i) agreement presently in effect for
the purchase of inventory, supplies, equipment or other real or personal
property, or the procurement of services, except individual purchase orders or
aggregate purchase orders to a single vendor involving payments of less than
$40,000;
(ii) lease presently in effect or
ownership of equipment, machinery or other personal property involving
aggregate annual payments in excess of $40,000;
(iii) agreement presently in effect for
the sale or lease of products or furnishing of its services, except individual
purchase orders or aggregate purchase orders from a single customer involving
payments of less than $25,000;
(iv) joint venture, partnership or other
contract or arrangement presently in effect involving the sharing of profits
other than license agreements;
(v) agreement presently in effect
relating to the purchase or acquisition, by merger or otherwise, of a
significant portion of its business, assets or securities by any other person,
or of any other person by it, other than as contemplated herein;
(vi) agreement presently in effect
containing a covenant or covenants which purport to limit its ability or right
to engage in any lawful business activity material to it or to compete with any
person or entity in a business material to it;
(vii) agreement presently in effect
pursuant to which it has appointed any organization or person to act as its
distributor or sales agent or pursuant to which it
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<PAGE> 20
has been appointed a distributor or sales agent by any third party (and,
except as specified on Schedule 2.11(a), none of such agreements is an
exclusive relationship);
(viii) agreement presently in effect with
any of its officers, directors, shareholders, any family relative of any of the
foregoing, or any business or entity controlled by any of the foregoing or in
which any of the foregoing has a material financial stake (excluding publicly
traded companies in which the foregoing cumulatively hold less than a 5% equity
interest);
(ix) agreement presently in effect for
the license (whether as licensor or licensee) or assignment of any patent,
copyright, trade secret or other proprietary information;
(x) agreement presently in effect
involving payments to or obligations of it in excess of $100,000, not otherwise
described in this Section 2.11;
(xi) agreement of indebtedness or capital
equipment leases presently in effect in excess of $40,000;
(xii) agreement that relates to the
borrowing or lending by the Company or Vertisoft Direct of any money;
(xiii) agreement that creates or continues
any material claim, lien, charge or encumbrance against, or right of any third
party with respect to, any material asset of the Company or Vertisoft Direct;
(xiv) agreement or commitment relating to
commission arrangements with others.
As used in this Section 2.11, the word "agreement" includes both oral and
written contracts, leases, understandings, arrangements and all other
agreements. The term "Material Agreements" means the agreements of the Company
and Vertisoft Direct required to be disclosed on Schedule 2.11(a) and those
that would have been required to be so disclosed but for their being
specifically identified in other Schedules hereto.
(b) To the best knowledge of the Company and
Vertisoft Direct, and the Shareholders, except as set forth on Schedule
2.11(a), no party to any Material Agreement has committed a breach thereof or a
default thereunder or intends to cancel, withdraw, modify or amend such
Material Agreement.
(c) Each of the Company and Vertisoft Direct has
performed all material obligations required to be performed by it on or prior
to the date hereof under each Material Agreement to which it is a part, except
for such failures to perform, defaults, breaches, or violations under such
instruments or obligations that would not have a Material Adverse Effect. The
Shareholders, the Company and Vertisoft Direct have no reason to believe that
the
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<PAGE> 21
Company or Vertisoft Direct will not be able to fulfill, when due, all of their
respective obligations under the Material Agreements that remain to be
performed after the date hereof.
(d) Schedules 2.11(b),(c) and (d) hereto set
forth a complete and correct list of each (i) customer (or related group of
customers) with whom the Company or Vertisoft Direct did $100,000 or more of
business during the last fiscal year, (ii) supplier (or related group of
suppliers) with whom the Company or Vertisoft Direct did $100,000 or more of
business during the last fiscal year, and (iii) agent (or related group of
agents) or representative (or related group of representatives) who was paid
$25,000 or more by the Company or Vertisoft Direct during the last fiscal year,
respectively, which lists itemize the actual dollar amounts.
2.12. INTELLECTUAL PROPERTY RIGHTS.
(a) As used herein, "Intellectual Property" shall
mean any patent, trademark, servicemark, tradename, trade dress, copyright (or
pending application for any patent, trademark, servicemark or copyright),
invention, process, know-how, algorithm, formulae, franchise, database,
computer program, computer software, technology, user interface, source code,
object code, computer program, architecture and structure, display screens,
layouts, development tools and instructions, templates, marketing materials,
logos, designs, trade secret or other intangible asset, intellectual property,
industrial property or proprietary right and all documentation, media or other
tangible embodiment of or relating to any of the foregoing and all proprietary
rights therein.
(b) As used herein, "Third Party Licenses" means
all licenses and other agreements with third parties relating to any
Intellectual Property or products that Vertisoft, Vertisoft Direct or the
Company is licensed or otherwise authorized by such third parties to use,
market, distribute or incorporate into products marketed and distributed by the
Company or Vertisoft Direct.
(c) "Third Party Technology" means all
Intellectual Property and products owned by third parties and licensed to
Vertisoft Direct or the Company pursuant to Third Party Licenses.
(d) Except as set forth on Schedule 2.12:(i)
each of Vertisoft Direct and the Company owns all right, title and interest in
and to all Intellectual Property used in or necessary for, and as to Third
Party Technology has sufficient rights necessary for, the conduct of each of
Vertisoft Direct and the Company's business as presently conducted, or as
planned to be conducted, by each of Vertisoft, Vertisoft Direct and the
Company, including, without limitation, all Intellectual Property developed or
discovered in connection with or contained in or related to each product used
or distributed by the Company or Vertisoft Direct, free and clear of all liens,
mortgages, charges, pledges, claims and encumbrances (including without
limitation any distribution rights and royalty rights) (including Third Party
Technology, the "Specified Rights"); (ii) to the best knowledge of the Company,
Vertisoft Direct and the Shareholders, solely as to Third Party Technology,
each of the Third Party Licenses is valid and enforceable and in full force and
effect; (iii) to the best knowledge of the Company, Vertisoft Direct and the
Shareholders, all Intellectual Property rights in the Specified Rights are
valid, subsisting,
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<PAGE> 22
unexpired, enforceable and have not been abandoned; (iv) to the best knowledge
of the Company, Vertisoft Direct and the Shareholders, each of the Company and
Vertisoft Direct has the exclusive right to use, sell, license and dispose of,
and has the right to bring actions for infringement of, all Specified Rights,
other than Third Party Technology; (v) except for agreements and licenses
entered into in the ordinary course of business, there are no outstanding
options, licenses, liens, encumbrances or agreements of any kind relating to
the foregoing; (vi) neither the Company nor Vertisoft Direct has received any
communications nor is any of the Company, Vertisoft Direct or the Shareholders
aware of any entity alleging that the Company or Vertisoft Direct has infringed
or, by conducting its business as currently conducted, would infringe any
Intellectual Property of any other person or entity; (vii) no claims have been
asserted against the Company or Vertisoft Direct by any person challenging any
of their respective rights to use or distribution (including manufacture,
marketing license, or sale) of any Specified Rights or products utilized or
distributed by the Company or Vertisoft Direct (including, without limitation,
any Third Party Technology) or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto (including, without
limitation, the Third Party Licenses), and to the best knowledge of each of
Company or Vertisoft Direct and the Shareholders, there is no valid basis for
any such claim; (viii) the Company, Vertisoft Direct and the Shareholders are
not aware of any infringement of the Specified Rights; (ix) neither the Company
nor Vertisoft Direct has received any communications from any governmental
agency stating that the Company or Vertisoft Direct is not entitled to
register, or receive patents or trademarks for, any of its Intellectual
Property; (x) neither the Company nor Vertisoft Direct is aware that any of the
employees or consultants of the Company or Vertisoft Direct is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote and secure the Intellectual Property of the Company or
Vertisoft Direct or that would conflict with its business as conducted; (xi) to
the best knowledge of the Company, Vertisoft Direct and the Shareholders, no
Specified Right and no use by the Company or Vertisoft Direct of any Specified
Right in its prior, current or contemplated business (including distribution,
manufacture, marketing, license or sale), violates any rights of any third
party, including infringement of or misappropriation of Intellectual Property,
unfair competition, defamation, contractual rights, or rights of privacy or
publicity; (xii) neither the execution nor delivery of this Agreement or the
Agreement of Merger, nor the carrying on of its business by its employees or
consultants, nor the conduct of its business as currently conducted, will, to
the best knowledge of the Company, Vertisoft Direct and the Shareholders,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees or consultants of the Company or Vertisoft Direct is now
obligated; (xiii) to the best knowledge of the Company, Vertisoft Direct and
the Shareholders, each of the employees and consultants of the Company or
Vertisoft Direct and, to the best knowledge of the Company, Vertisoft Direct
and the Shareholders, each of the employees and consultants of any entities
engaged by the Company or Vertisoft Direct who participate or have participated
in the creation of Intellectual Property, past and present, has executed
written enforceable agreements with the Company or Vertisoft Direct assigning
or licensing his or her rights in any Intellectual Property to the Company or
Vertisoft Direct; (xiv) the Company and Vertisoft Direct do not believe it is
or will be necessary to utilize any inventions of any of its employees or
consultants (or persons it
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currently intends to hire as service providers) made prior to their employment
by it (except for inventions that the Company or Vertisoft Direct currently
owns or has a right to utilize and which are set forth on Schedule 2.11(a) or
Schedule 2.12). Schedule 2.12 also sets forth a complete and correct list of
(x) all material patents, patent applications, copyrights and trademarks
(registered or unregistered) owned or licensed by the Company or Vertisoft
Direct that are necessary for or used in its business as now conducted, and (y)
all independent contractor or consulting agreements pursuant to which the
Company or Vertisoft Direct provided consulting services which agreements
require a consent or waiver to consummate the Transactions. All royalty
obligations of the Company or Vertisoft Direct on current products are listed
on Schedule 2.12.
(e) To the best knowledge of the Company,
Vertisoft Direct and the Shareholders, neither the Company nor Vertisoft Direct
is making unauthorized use of any confidential information of third parties or
any confidential information in which any of its present or past employees or
other service providers has claimed a proprietary interest; and neither the
Company nor Vertisoft Direct is aware of any facts that would give rise to such
a claim.
(f) Without limiting the generality of the
foregoing representations, except as set forth on Schedule 2.12.
(i) to the knowledge of the Company,
Vertisoft Direct and the Shareholders, each of the Company and Vertisoft Direct
has satisfied all material obligations required to be satisfied on or prior to
the date hereof pursuant to any and all consulting agreements pursuant to which
the Company or Vertisoft Direct provided consulting services to any third party
and the Company or Vertisoft Direct are not using any Intellectual Property of
any third party nor has Company or Vertisoft Direct developed or delivered or
made available to any third parties any derivative works or modifications based
on any Intellectual Property of any third party pursuant to such consulting
agreements, except as expressly authorized under such agreements;
(ii) none of the Company, Vertisoft
Direct or the Shareholders is aware of any event that has occurred which would
give rise to any present or future liability under any agreement to provide
indemnification for infringement of any third party rights or otherwise;
(iii) neither the Company nor Vertisoft
Direct is in arrears in the payment of any royalty obligations pursuant to any
license agreements with third parties concerning the Specified Rights;
(iv) There are no royalties, honoraria,
fees of other payments that would be payable by the Company or Vertisoft Direct
to any person by reason of the ownership, use, license, sale, distribution, or
disposition of any Specified Right.
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2.13. EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFITS.
(a) Except as set forth on Schedule 2.13, there
are no employment, consulting, severance pay, continuation pay, termination pay
or indemnification agreements or other similar agreements of any nature
whatsoever (collectively, "Employment Agreements") between the Company or
Vertisoft Direct on the one hand, and any current or former stockholder,
officer, director, employee, consultant, or agent of the Company or Vertisoft
Direct, on the other hand, that are currently in effect. Except as set forth
on Schedule 2.13, there are no Employment Agreements or any other similar
agreements to which the Company or Vertisoft Direct is a party under which the
transactions contemplated by this Agreement (i) will require any payment by the
Company or Quarterdeck, or any consent or waiver from any stockholder, officer,
director, employee, consultant or agent of the Company or Vertisoft Direct or
Quarterdeck, or (ii) will result in any change in the nature of any rights of
any stockholder, officer, director, employee, consultant or agent of the
Company or Vertisoft Direct under any such Employment Agreement or other
similar agreement.
(b) Schedule 2.13 sets forth Employee Benefit
Plans of the Company and Vertisoft Direct. Each of the Company and Vertisoft
Direct has made true and correct copies of all governing instruments and
related agreements pertaining to such benefit plans available to Quarterdeck.
(c) Neither the Company nor Vertisoft Direct, nor
any of their respective ERISA Affiliates sponsors or has ever sponsored,
maintained, contributed to, or incurred an obligation to contribute to, any
Employee Pension Benefit Plan.
(d) No individual shall accrue or receive
additional benefits, service or accelerated rights to payments of benefits
under any Employee Benefit Plan, including the right to receive any parachute
payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a direct result of the
transactions contemplated by this Agreement.
(e) No Employee Benefit Plan has participated in,
engaged in or been a party to any non-exempt Prohibited Transaction, and
neither the Company, Vertisoft Direct nor any of their respective ERISA
Affiliates has had asserted against it any claim for taxes under Chapter 43 of
Subtitle A of the Code Section 5000 of the Code, or for penalties under ERISA
Section 502(c), (i) or (l), with respect to any Employee Benefit Plan nor is
there a basis for any such claim. No officer, director or employee of the
Company or Vertisoft Direct has committed a material breach of any
responsibility or obligation imposed upon fiduciaries by Title I of ERISA with
respect to any Employee Benefit Plan.
(f) Other than routine claims for benefits, there
is no claim pending or to the knowledge of the Company and Vertisoft Direct
threatened, involving any Employee Benefit Plan by any person against such plan
or the Company, Vertisoft Direct, or any ERISA Affiliate. There is no pending
or, to the knowledge of the Company and Vertisoft Direct, threatened proceeding
involving any Employee Benefit Plan before the Internal Revenue Service, the
U.S. Department of Labor or any other governmental authority.
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(g) To the best knowledge of the Company,
Vertisoft Direct and the Shareholders, there is no violation of any reporting
or disclosure requirement imposed by ERISA or the Code with respect to any
Employee Benefit Plan.
(h) Each Employee Benefit Plan has at all times
prior hereto been maintained in all material respects, by its terms and in
operation, in accordance with ERISA and the Code. The Company, Vertisoft
Direct and their respective ERISA Affiliates have made full and timely payment
of all amounts required to be contributed under the terms of each Employee
Benefit Plan and applicable law or required to be paid as expenses under such
Employee Benefit Plan, and the Company, Vertisoft Direct and their respective
ERISA Affiliates shall continue to do so through the Closing. Each Employer
Benefit Plan intended to be qualified under Code Section 401(a) has received a
determination letter to that effect from the Internal Revenue Service and no
event has occurred and no amendment has been made that would adversely affect
such qualified status.
(i) With respect to any group health plans
maintained by the Company, Vertisoft Direct or their respective ERISA
Affiliates, whether or not for the benefit of the employees of the Company,
Vertisoft Direct, the Company, Vertisoft Direct and their respective ERISA
Affiliates have complied in all material respects with the provisions of Part 6
of Title I of ERISA and 4980B of the Code. None of the Company or Vertisoft
Direct is obligated to provide health care benefits of any kind to its retired
employees pursuant to any Employee Benefit Plan, including without limitation
any group health plan, or pursuant to any agreement or understanding.
(j) Each of the Company and Vertisoft Direct has
made available to Quarterdeck a copy of the three (3) most recently filed
Federal Form 5500 series and accountant's opinions, if applicable, for each of
its Employee Benefit Plans and all applicable Internal Revenue Service
determination letters.
(k) For purposes of this Section 2.13, the
following definitions shall apply:
(i) "Benefit Arrangement" means any
material benefit arrangement that is not an Employee Benefit Plan, including
without limitation (i) each employment or consulting agreement, (ii) each
arrangement providing for insurance coverage or workers' compensation benefits,
(iii) each incentive bonus or deferred bonus arrangement, (iv) each arrangement
providing termination allowance, severance or similar benefits, (v) each equity
compensation plan, (vi) each deferred compensation plan, and (vii) each
compensation policy and practice maintained by the Company, Vertisoft Direct or
any ERISA Affiliate covering the employees, former employees, directors and
former directors of the Company or Vertisoft Direct and the beneficiaries of
any of them.
(ii) "COBRA" means the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, as set forth in Section
4980B of the Code and Part 6 of Title I of ERISA.
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(iii) "Code" means the Internal Revenue
Code of 1986, as amended.
(iv) "Employee Benefit Plan" means any
employee benefit plan, as defined in Section 3(3) of ERISA, that is sponsored
or contributed to by the Company or Vertisoft Direct or any ERISA Affiliate
covering employees or former employees of the Company or Vertisoft Direct.
(v) "Employee Pension Benefit Plan"
means any employee pension benefit plan, as defined in Section 3(2) of ERISA,
that is subject to Title IV of ERISA.
(vi) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended.
(vii) "ERISA Affiliate" of any person
means any other person that, together with such person as of the relevant
measuring date under ERISA, was or is required to be treated as a single
employer under Section 414 of the Code.
(viii) "Prohibited Transaction" means a
transaction that is prohibited under Section 4975 of the Code or Section 406 of
ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA,
respectively.
2.14. LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on Schedule 2.14, no
collective bargaining agreement exists that is binding on the Company or
Vertisoft Direct and, except as described on Schedule 2.14, no petition has
been filed or proceedings instituted by an employee or group of employees with
any labor relations board seeking recognition of a bargaining representative.
Schedule 2.14 describes any organizational effort currently being made or
threatened by or on behalf of any labor union to organize any employees of the
Company or Vertisoft Direct.
(b) Except as set forth on Schedule 2.14, (i)
there is no labor strike, dispute, slow down or stoppage pending or,
threatened, against or directly affecting the Company or Vertisoft Direct, (ii)
no grievance or arbitration proceeding arising out of or under any collective
bargaining agreement is pending, and no claims therefor exist; and (iii) none
of the Company or Vertisoft Direct has received notice and has knowledge of any
threatened labor or civil rights dispute, controversy or grievance or any other
unfair labor practice proceeding or breach of contract claim or action with
respect to claims of, or obligations to, any employee or group of employees of
the Company or Vertisoft Direct.
(c) If required under the Workers Adjustment and
Retraining Notification Act or applicable state law regulating plant closing or
mass layoffs, each of the Company and Vertisoft Direct has timely caused there
to be filed or distributed, as appropriate, all required filings and notices
with respect to employment losses occurring through the Closing Date.
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(d) To the best knowledge of the Company,
Vertisoft Direct and the Shareholders, each of the Company and Vertisoft Direct
has complied and is currently complying, in respect of all employees of the
Company and Vertisoft Direct, with all applicable laws respecting employment
and employment practices and the protection of the health and safety of
employees, from whatever source such law may be derived, including, without
limitation, statutes, ordinances, laws, rules, regulations, policies,
standards, judicial or administrative precedents, judgments, orders, decrees,
awards, citations, licenses, official interpretations and guidelines , except
for such instances which are not, in the aggregate, material.
(e) To the best knowledge of the Company,
Vertisoft Direct and the Shareholders, all individuals who are performing or
have performed services for the Company or Vertisoft Direct and are or were
classified by the Company or Vertisoft Direct as "independent contractors"
qualify for such classification under Section 530 of the Revenue Act of 1978 or
Section 1706 of the Tax Reform Act of 1986, as applicable, except for such
instances which are not, in the aggregate, material.
2.15. ENVIRONMENTAL AND SAFETY LAWS. Each of the Company
and Vertisoft Direct has, in all material respects, complied and is in
compliance with all applicable local, state and federal environmental laws,
regulations, ordinances and administrative and judicial orders relating to the
generation, recycling, use, sale, storage, handling, transfer and disposal of
any Hazardous Substances, and none of the Company or Vertisoft Direct has been
alleged to be in violation of, or been subject to any administrative, judicial
or regulatory proceeding pursuant to, such laws or regulations. As used
herein, "Hazardous Substances" shall mean any asbestos, petroleum or any
substance or material defined or designated as hazardous or toxic waste,
hazardous or toxic material, hazardous or toxic substance, or other similar
term, by any federal, state or local environmental statute, regulation or
ordinance presently in effect, including, without limitation, any material or
substance which is designated or defined as a "hazardous substance," "hazardous
waste" or "toxic substance" in (i) the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq., and any amendments thereto, (ii) the Federal
Resource Conservation and Recovery Act 42 U.S.C. Section Section 6901 et
seq., and any amendments thereto, (iii) the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., and
any amendments thereto, or (iv) the Hazardous Material Transportation Act, 49
U.S.C. Section 1801 et seq., and any amendments thereto.
2.16. COMPLIANCE WITH LAWS. To the best knowledge of the
Company, Vertisoft Direct and the Shareholders, except as set forth in Schedule
2.16, each of the Company and Vertisoft Direct has complied in all material
respects with all foreign, federal, state, local and county laws, ordinances,
regulations, judgments, orders, decrees or rules of any court, arbitrator or
governmental, regulatory or administrative agency or entity applicable to its
business. Except as set forth on Schedule 2.16, none of the Company or
Vertisoft Direct has received any governmental notice of any violation by the
Company or Vertisoft Direct of any such laws, rules, regulation or orders.
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2.17. ABSENCE OF LITIGATION. Except as set forth on
Schedule 2.17, neither the Company nor Vertisoft Direct is a party to any
litigation, claim, arbitration, investigation or other proceeding, nor, to the
best knowledge of the Company, Vertisoft Direct or the Shareholders, is there
any such litigation, claim, arbitration, investigation or other proceeding
threatened against the Company or Vertisoft Direct. Neither the Company nor
Vertisoft Direct, nor, to the best knowledge of the Company, Vertisoft Direct,
the Shareholders, or any of their respective officers or directors is bound by
any judgment, decree, injunction, ruling or order of any court, governmental,
regulatory or administrative department, commission, agency or instrumentality,
arbitrator or any other person that relates to the Company or Vertisoft Direct
or their respective businesses.
2.18. NO BROKERS. Except as set forth in Schedule 2.18,
neither the Company nor Vertisoft Direct or any Shareholder is obligated for
the payment of fees or expenses of any broker or finder in connection with the
origin, negotiation or execution of this Agreement or the Agreement of Merger
or in connection with any transaction contemplated hereby or thereby.
2.19. TAXES.
(a) Definitions. For purposes of this Agreement:
(i) the term "Taxes" means (A) all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or
other taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in clause
(A) whether as a result of transferee liability, of being a member of an
affiliated, consolidated, combined or unitary group for any period, or
otherwise through operation of law and (C) liability for the payment of amounts
described in clauses (A) or (B) as a result of any tax sharing, tax indemnity
or tax allocation agreement or any other express or implied agreement to
indemnify any other person; and the term "Tax" means any one of the foregoing
Taxes; and
(ii) the term "Returns" means all
returns, declarations, reports, statements and other documents required to be
filed in respect of Taxes, and the term "Return" means any one of the foregoing
Returns.
(b) Except as set forth in Schedule 2.19, each of
the Company and Vertisoft Direct has completed and filed on a timely basis and
in materially correct form all Returns required to be filed. As of the time of
filing, the filed Returns did not materially misstate the facts regarding the
income, business, assets, operations, activities, status or other matters of
the Company or Vertisoft Direct or any other information required to be shown
thereon and none of such Returns contains (or were required to contain in order
to avoid the imposition of a penalty) a disclosure statement under Section 6662
of the Code (or any predecessor provision or comparable provision of state,
local or foreign law). Each of the Company and Vertisoft Direct will complete
and file on a timely basis and in a materially correct manner all Returns
required to
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be filed after the date of this Agreement and on or prior to the Closing, and
will provide Quarterdeck the reasonable opportunity to review and comment on
any such Return prior to its filing.
(c) Except as set forth in Schedule 2.19, with
respect to all amounts in respect of Taxes imposed upon the Company, Vertisoft
Direct, or for which the Company or Vertisoft Direct is liable, whether to
taxing authorities (as, for example, under law) or to other persons or entities
(as, for example, under tax allocation agreements), with respect to all taxable
periods or portions of periods ending on or before the date of Closing, all
applicable Tax laws and agreements have been complied with in all material
respects, and all such amounts required to be paid by the Company or Vertisoft
Direct to taxing authorities or others have been paid or, if due but remain
payable without penalty or interest, have been adequately reserved for.
Neither of the Company or Vertisoft Direct owes any Taxes on compensation paid
to any of its employees, other than Taxes that are not yet due and payable. No
director, officer employee of the Company or Vertisoft Direct having
responsibility for tax matters is in discussions with tax authorities or has
reason to believe that any tax authority has valid grounds to claim or assess
any additional Tax with respect to the Company or Vertisoft Direct in excess of
the amounts shown on their respective balance sheets dated January 31, 1996.
(d) Except as set forth on Schedule 2.19: (i)
none of the Returns of the Company or Vertisoft Direct have been audited or are
under audit by any tax authority, and neither the Company nor Vertisoft Direct
has received notice of a forthcoming audit of its Returns; (ii) no claim has
been made by a Tax authority in a jurisdiction where the Company or Vertisoft
Direct does not file Returns that such entity is or may be subject to Tax by
that jurisdiction; (iii) no extensions or waivers of statutes of limitations
with respect to the Returns have been given by or requested from the Company or
Vertisoft Direct; and (iv) no power of attorney granted by the Company or
Vertisoft Direct with respect to Taxes is in force.
(e) There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company or
Vertisoft Direct.
(f) Neither the Company nor Vertisoft Direct is a
party to or bound by any tax indemnity, tax sharing or tax allocation
agreement.
(g) Neither the Company nor Vertisoft Direct has
ever been a member of an affiliated group of corporations, within the meaning
of Section 1504 of the Code, or a member of combined, consolidated or unitary
group for state, local or foreign Tax purposes. Neither the Company nor
Vertisoft Direct has made an election under Section 1361 of the Code or any
predecessor provision or any similar provision for state, local or other Tax
purposes. Neither the Company nor Vertisoft Direct has filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the
Code (or any corresponding provision of state, local or foreign income Tax law)
or agreed to have Section 341(f)(2) of the Code (or any corresponding provision
of state, local or foreign income Tax law) apply to any disposition of any
asset owned by it. Neither the Company nor Vertisoft Direct has made or will
make a consent dividend election under Section 565 of the Code.
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(h) Neither the Company nor Vertisoft Direct has
agreed to make, nor are any of them required to make, any adjustment under
Sections 481(a) or 263A of the Code or any comparable provision of state or
foreign tax laws by reason of a change in accounting method or otherwise. Each
of the Company and Vertisoft Direct has always used and continues to use the
accrual method of accounting for federal and state income and franchise Tax
purposes. Except as set forth in Schedule 2.19, neither the Company nor
Vertisoft Direct has taken any action that is not in accordance with past
practice that could defer a liability for Taxes of the Company or Vertisoft
Direct or the Shareholders from any taxable period ending on or before the
Closing Date to any taxable period ending after such date. Neither the Company
nor Vertisoft Direct is a party to or bound by any closing agreement, offer in
compromise or similar agreement with any Taxing authority.
(i) Neither the Company nor Vertisoft Direct is a
party to any agreement, contract, arrangement or plan that has resulted or
would result, separately or in the aggregate, in connection with the Merger,
any change of control of the Company or Vertisoft Direct or any other
transaction contemplated by this Agreement, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(j) Neither the Company nor Vertisoft Direct is,
and none has been, a United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(k) Except as set forth in Schedule 2.19, to the
knowledge of the Company, Vertisoft Direct and the Shareholders, as of the date
hereof, no shareholder of the Company or Vertisoft Direct is other than a
United States person within the meaning of the Code.
(l) Except as set forth in Schedule 2.19, neither
the Company nor Vertisoft Direct has, and neither has had, a permanent
establishment in any foreign country, as defined in any applicable Tax treaty
or convention between the United States and such foreign country, and neither
the Company nor Vertisoft Direct has engaged in a trade or business within any
foreign country. Neither the Company nor Vertisoft Direct has made a
"waters-edge election" pursuant to California Revenue and Tax Code Section
25110.
(m) Neither the Company nor Vertisoft Direct is
party to any joint venture, partnership, or other arrangement or contract which
could reasonably be expected to be treated as a partnership for federal income
tax purposes.
(n) Except as set forth on Schedule 2.19, the
unpaid Taxes of the Company and Vertisoft Direct as of the date hereof are not
materially in excess of the unpaid liability for Taxes reflected on the most
recent accounting books of the Company or Vertisoft Direct, as the case may be,
heretofore provided to Quarterdeck. No material Tax liability of the Company
or Vertisoft Direct has been incurred since January 31, 1996 other than in the
ordinary course of business.
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(o) All material elections with respect to Taxes
affecting the Company and Vertisoft Direct as of the date of this Agreement
that are not readily identifiable on the Returns heretofore provided to or made
available to Quarterdeck and any attachments thereto are set forth in Schedule
2.19. No material election with respect to Taxes will be made after the date
of this Agreement without the prior written consent of Quarterdeck.
(p) Schedule 2.19 sets forth all state, local or
foreign jurisdictions in which the Company and Vertisoft Direct are or at any
time during the past five years have been subject to Tax. Other than in the
states of California (with respect to the Company and Vertisoft Direct) and
South Carolina (with respect to the Company), at no time during the five-year
period ending on the date hereof did the Company or Vertisoft Direct engage in
the following activities in any state, local or foreign jurisdiction: (i)
perform more than an insignificant amount of services or solicit business using
its own employees, or using agents working on its behalf, (ii) engage in or do
business, or (iii) own property.
(q) Schedule 2.19 sets forth all Returns the due
dates for which (including any valid extensions of time currently in effect)
are sixty (60) or fewer days following the Closing, and the Taxes for which
estimated for final payments may, based on current operations of the Company
and Vertisoft Direct, become due sixty (60) or fewer days following the
Closing.
2.20. COMPLIANCE WITH INSTRUMENTS. Except as set forth in
Schedule 2.20, neither the Company nor Vertisoft Direct is (and neither would
be with the giving of notice or the passage of time or both) in violation of,
conflict with, breach of or default under any term or provision of its
respective Articles of Incorporation or Bylaws, or any agreement, arrangement,
contract, lease or other instrument to which it or its properties is subject
except where such would not have a Material Adverse Effect.
2.21. RELATED PARTY TRANSACTIONS. Except for matters
arising in the ordinary course of business or as set forth in Schedule 2.21,
(a) no employee, officer or director of the Company or Vertisoft Direct,
Shareholder, any immediate family member of any of the foregoing, or any
business or entity controlled by any of the foregoing or in which any of the
foregoing has a material financial stake (excluding publicly traded companies
in which the foregoing cumulatively hold less than a 5% equity interest)
(collectively, "Related Parties"), is indebted to the Company or Vertisoft
Direct, (b) neither the Company nor Vertisoft Direct is indebted (or committed
to make loans or extend or guarantee credit) to any Related Party, and (c)
neither the Company nor Vertisoft Direct has engaged in any transaction with
any Related Party since the beginning of the two most recently completed fiscal
years of the Company prior to the date hereof. To the knowledge of the Company
and Vertisoft Direct and the Shareholders, Schedule 2.21 sets forth a complete
and correct list of all businesses and entities constituting Related Parties
with which any of the Company or Vertisoft Direct has either a business
relationship or competes.
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2.22. POOLING. To the best knowledge of the Company,
Vertisoft Direct and the Shareholders, neither the Company nor Vertisoft Direct
has engaged in any transaction that it believes would preclude the Merger from
being accounted for as a pooling of interests.
2.23. NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set
forth on Schedule 2.23 hereto, (a) neither the Company nor Vertisoft Direct has
granted any general or special powers of attorney and (b) neither the Company
nor Vertisoft Direct has any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, consignor, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
2.24. BANKING FACILITIES. Schedule 2.24 hereto sets forth
a complete and correct list of:
(a) Each bank, savings and loan or similar
financial institution in which the Company or Vertisoft Direct has an account
or safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and
(b) The names of all persons authorized to draw
on each such account or to have access to any such safety deposit box, together
with a description of the authority (and conditions thereto, if any) of each
person with respect thereto.
2.25. CORPORATE BOOKS. The corporate minute books of each
of the Company and Vertisoft Direct are complete, each of the minutes contained
therein accurately reflect the actions that were taken at the meeting for which
the minutes were taken, the meetings of directors or shareholders referred to
in the minutes were duly called and held, and the signatures contained on all
documents in the minute books are the true signatures of the persons purporting
to have signed the same.
2.26. ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the
Company nor Vertisoft Direct nor any employee, agent or other person acting on
behalf of the Company or Vertisoft Direct, including, but not limited to, the
Shareholders, has, directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, competitor or governmental employee
or official (domestic or foreign) (a) that would subject the Company or
Vertisoft Direct to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or (b) that, if not given in the past,
would have had a material adverse effect on the assets, liabilities (whether
absolute, accrued, contingent or otherwise), condition (financial or
otherwise), results of operations, business or prospects of the Company or
Vertisoft Direct.
2.27. DISCLOSURE; ACCURACY OF DOCUMENTS AND INFORMATION.
No representation, warranty or statement made by or on behalf of the Company,
Vertisoft Direct or the Shareholders in this Agreement, or any document
furnished by the Company, Vertisoft Direct or the Shareholders pursuant to the
terms of this Agreement, when taken together with this Agreement in its
entirety and all such documents, contains any untrue statement of a material
fact
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or omits to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF EACH OF THE SHAREHOLDERS
Each of the Shareholders severally and not jointly represents
and warrants to Quarterdeck and Acquisition Sub as follows:
3.1. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Such Shareholder has full power and authority
to execute, deliver and perform its obligations under this Agreement and the
Escrow Agreement and to consummate the Transactions, and all action on its part
necessary for such execution, delivery, performance and consummation has been
duly taken.
(b) The execution and delivery by such
Shareholder of this Agreement does not, and the performance and consummation of
the Transactions will not, result in or give rise to (with or without the
giving of notice or the lapse of time, or both) any conflict with, breach or
violation of, or default, termination, forfeiture or acceleration of
obligations under, any statute, rule, regulation, judicial, governmental,
regulatory or administrative decree, order or judgment applicable to such
Shareholder, or any agreement or other instrument to which it is a party or to
which any of its assets is subject.
(c) This Agreement and the Escrow Agreement are
such Shareholder's legal, valid and binding obligation, enforceable against it
in accordance with the respective terms hereof and thereof, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and subject to general equitable principles.
(d) Such Shareholder is the record and beneficial
owner of the shares of Company Common Stock reflected as owned by it on
Schedule 2.2, free and clear of any and all claims, liens, encumbrances or
security interests.
3.2. POOLING. To the best knowledge of such Shareholder,
such Shareholder has not engaged in any transaction which it believes would
preclude the Merger from being accounted for as a pooling of interests.
3.3. INVESTMENT INTENT. Such Shareholder is acquiring the
shares of Quarterdeck Common Stock to be issued in the Merger for investment
purposes for its own account and without a view to distribution or resale
thereof.
3.4. REPRESENTATIONS OF ANATOLY TIKHMAN. Anatoly Tikhman
represents and warrants to Quarterdeck and Acquisition Sub that he is the
record and beneficial owner of all of
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the outstanding shares of capital stock of Vertisoft Direct, free and clear of
any and all claims, liens, encumbrances or security interests.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF
QUARTERDECK AND ACQUISITION SUB
Quarterdeck and Acquisition Sub represent and warrant to the
Company and the Shareholders as follows:
4.1. ORGANIZATION AND STANDING.
Each of Quarterdeck and Acquisition Sub is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to so qualify would have
a Material Adverse Effect. Whenever used in this Article 4, "Material Adverse
Effect" shall mean a material adverse effect on the business, properties,
condition (financial or otherwise) or results of operations of Quarterdeck and
its subsidiaries (on a consolidated basis).
4.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Subject to obtaining the required approval of
Quarterdeck as sole shareholder of Acquisition Sub, which approval shall be
obtained prior to the Closing Date, each of Quarterdeck and Acquisition Sub has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Agreement of Merger, the Escrow Agreement
and the Registration Rights Agreement (as defined herein), as the case may be,
and all corporate action on their respective parts necessary for such
execution, delivery and performance has been duly taken. No vote or consent of
the stockholders of Quarterdeck is required in connection with the transactions
contemplated by this Agreement.
(b) The execution and delivery by each of
Quarterdeck and Acquisition Sub, as the case may be, of this Agreement, the
Agreement of Merger, the Escrow Agreement and the Registration Rights Agreement
do not, and the performance and consummation of the Transactions will not,
result in or give rise to (with or without the giving of notice or the lapse of
time, or both) any conflict with, breach or violation of, or default,
termination, forfeiture or acceleration of obligations under, any terms or
provisions of its (i) Certificate or Articles of Incorporation, as the case may
be, or Bylaws, (ii) any statute, rule, regulation or any judicial,
governmental, regulatory or administrative decree, order or judgment applicable
to them, or (iii) any material agreement, lease or other instrument to which
either is a party or to which it or any of its assets may be bound.
(c) No consent, approval, authorization, order,
registration, qualification or filing of or with any court or any regulatory
authority or any other governmental
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or administrative body is required on the part of Quarterdeck or Acquisition
Sub for the consummation by each of Quarterdeck and Acquisition Sub, as the
case may be, of the Transactions, except any approvals or filings required
under state "blue sky" laws and the HSR Act and the filing of the Agreement of
Merger and related certificates with the Secretary of State of the State of
California.
(d) This Agreement, the Agreement of Merger, the
Escrow Agreement and the Registration Rights Agreement are, and upon execution
and delivery by Quarterdeck and Anatoly Tikhman, the Tikhman Agreements (as
defined in Section 5.11) and the option agreement evidencing the options to be
granted to Anatoly Tikhman pursuant to Section 5.14 will be, the legal, valid
and binding obligations of Quarterdeck and/or Acquisition Sub, as applicable,
enforceable against them in accordance with the respective terms hereof and
thereof, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general equitable principles.
4.3. FINANCIAL STATEMENTS AND REPORTS. Quarterdeck has
timely filed all required forms, reports, statements and documents with the
Securities and Exchange Commission (the "Commission") all of which have
complied in all material respects with all applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Quarterdeck has delivered or made available to the Company
and the Shareholders true and complete copies of (i) Quarterdeck's Annual
Reports on Form 10-K for the fiscal year ended September 30, 1995, (ii) its
proxy statement relating to Quarterdeck's annual stockholders meeting held
February 2, 1996, (iii) all other forms, reports, statements and documents
filed by Quarterdeck with the Commission pursuant to the Exchange Act since
September 30, 1995, and (iv) all reports, statements and other information
provided by Quarterdeck to its stockholders since September 30, 1995
(collectively, the "Quarterdeck Reports"). As of their respective dates, the
Quarterdeck Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The consolidated financial statements of
Quarterdeck included or incorporated by reference in the Quarterdeck Reports
were prepared in accordance with GAAP applied on a consistent basis (except as
otherwise stated in such financial statements or, in the case of audited
statements, the related report thereon of independent certified public
accounts), and present fairly the financial position and results of operations,
cash flows and of changes in stockholders' equity of Quarterdeck and its
consolidated subsidiaries as of the dates and for the periods indicated,
subject, in the case of unaudited interim financial statements, to normal
year-end audit adjustments, none of which either singly or in the aggregate are
or will be material, and except that the unaudited interim financial statements
do not contain all of the disclosures required by GAAP. Since September 30,
1995 and except as otherwise reflected in the Quarterdeck Reports, there has
been no change in any of the significant accounting (including tax accounting)
policies, practices, or procedures of Quarterdeck or any of its consolidated
subsidiaries. Quarterdeck is and has been subject to the reporting
requirements of the Exchange Act and has timely filed with the Commission all
periodic reports required to be filed by it
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pursuant thereto and all reports required to be filed under Sections 13, 14 or
15(d) of the Exchange Act since September 30, 1995.
4.4. QUARTERDECK COMMON STOCK. The shares of Quarterdeck
Common Stock to be issued to the holders of Company Common Stock as
contemplated hereunder are (i) duly authorized, (ii) when issued and exchanged
pursuant to the terms of this Agreement and the Agreement of Merger, will be
validly issued, fully paid, non-assessable and not subject to any preemptive
rights and (iii) will be listed on the Nasdaq National Market at the Effective
Time.
4.5. NO BROKERS. Neither Quarterdeck nor Acquisition Sub
is obligated for the payment of fees or expenses of any broker or finder in
connection with the origin, negotiation or execution of this Agreement or the
Agreement of Merger or in connection with any transaction contemplated hereby
or thereby.
4.6. TAX-FREE REORGANIZATION. Neither Quarterdeck nor
Acquisition Sub has engaged in any transaction which it believes would preclude
the transactions contemplated hereby from constituting a "reorganization"
within the meaning of Section 368 of the Code.
4.7. QUARTERDECK CAPITAL STOCK.
(a) The authorized capital stock of Quarterdeck consists
of 50,000,000 shares of Common Stock, and 2,000,000 shares of Preferred Stock.
As of the date hereof and immediately prior to the Closing Date, approximately
32,000,000 shares of common stock and no shares of Preferred Stock will be
issued and outstanding. All of the issued and outstanding shares of
Quarterdeck Common Stock are duly authorized, validly issued in compliance with
all federal and state securities laws, fully paid and nonassessable.
(b) The authorized capital stock of Acquisition Sub
consists of 1,000 shares of common stock, of which 100 shares, as of the date
hereof, were issued and outstanding. All of such outstanding shares are owned
by Quarterdeck and are validly issued, fully paid and nonassessable.
(c) Except as set forth on Schedule 4.7 and for options
or rights granted under employee or director option plans, (i) there are no
outstanding options, warrants or other rights to purchase or otherwise to
receive from Quarterdeck or Acquisition Sub any of the authorized but unissued
or treasury shares of the capital stock or any other security of Quarterdeck or
Acquisition Sub, (ii) there is no outstanding security of any kind convertible
into or exchangeable for such capital stock, and (iii) there is no voting trust
or other agreement or understanding to which Quarterdeck or Acquisition Sub is
a party or is bound with respect to the voting of the capital stock of
Quarterdeck or Acquisition Sub.
4.8. REGISTRATION RIGHTS. Except as set forth in Schedule
4.8 or as contemplated by this Agreement, Quarterdeck is not a party to any
"registration rights agreement" or any similar agreement pursuant to which any
person or entity would have the right to cause, under any circumstances, the
registration of the Company's securities under the Securities Act.
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4.9. DISCLOSURE. Neither this Agreement, nor any of the
schedules, attachments, exhibits written statements, documents, certificates or
other materials prepared or supplied by Quarterdeck with respect to the
transactions contemplated hereby contain any untrue statements of a material
fact or omit a material fact necessary to make the statements contained herein
or therein not misleading.
4.10. ABSENCE OF CERTAIN CHANGES OF EVENTS. Except as set
forth in the Quarterdeck Reports, since September 30, 1995, there has not been
any fact, event, circumstance or change specifically affecting or relating to
Quarterdeck and its subsidiaries (and not the software industry in general)
which has had or is reasonably likely to have a Material Adverse Effect.
4.11. ABSENCE OF UNDISCLOSED LIABILITIES. Except for (i)
liabilities or obligations which are accrued or reserved against in the
consolidated financial statements of Quarterdeck (or reflected in the notes
thereto), (ii) liabilities and obligations incurred in the ordinary course of
business since the most recent date of the consolidated financial statements of
Quarterdeck, and (iii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under GAAP to be reflected in
the consolidated financial statements of Quarterdeck, Quarterdeck has no
liabilities or obligations or any nature, whether absolute, accrued, contingent
or otherwise, of a nature required by GAAP to be reflected in a balance sheet
(or reflected in the notes thereto) or which would have a Material Adverse
Effect.
4.12. LITIGATION. Except for litigation disclosed in the
notes to the financial statements included in the Quarterdeck Reports, there is
no suit, action, proceeding or investigation pending or, to the best knowledge
of Quarterdeck, threatened against or affecting Quarterdeck or any of its
subsidiaries, the outcome of which, in the reasonable judgment of Quarterdeck,
is likely to have a material adverse effect, nor is there any judgment, decree,
injunction, ruling or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator or
any other person outstanding against Quarterdeck or any of its subsidiaries
having, or which is reasonably likely to have, a Material Adverse Effect.
4.13. TAXES.
(a) All tax returns, statements, reports and
forms (including estimated tax returns and reports and information returns and
reports) required to be filed with any tax authority with respect to any
taxable period ending on or before the consummation of the transactions set
forth herein, by or on behalf of Quarterdeck (collectively, the "Quarterdeck
Returns"), have been or will be filed when due (including any extensions of
such due date), and all amounts shown to be due thereon on or before the
Closing have been or will be paid on or before such date, except to the extent
such failure to file or pay has not had and could not reasonably be expected to
have a Material Adverse Effect.
(b) The consolidated financial statements of
Quarterdeck contained in Quarterdeck's Annual Report to Stockholders for the
year ended September 30, 1995 and in any
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subsequent Quarterdeck Reports fully accrue all actual and contingent
liabilities for taxes with respect to all periods through the date thereof in
accordance with GAAP.
4.14. GOVERNMENTAL AUTHORIZATIONS AND LICENSES.
Quarterdeck has all material licenses, orders, authorizations, permits,
concessions, certificates and other franchises or analogous instruments of any
governmental entity required by applicable law to operate its business
(collectively, the "Quarterdeck Government Licenses") which Quarterdeck
Government Licenses are in full force and effect, and is in compliance with the
terms, conditions limitations, restrictions, standards, prohibitions,
requirements and obligations of such Quarterdeck Government Licenses except to
the extent failure to hold and maintain such Quarterdeck Government Licenses or
to so comply would not be reasonably likely to have a Material Adverse Effect.
There is not now pending, nor to the best knowledge of Quarterdeck is there
threatened, any action, suit, investigation or proceeding against Quarterdeck
before any governmental entity with respect to the Quarterdeck Government
Licenses, nor is there any issued or outstanding notice, order or complaint
with respect to the violation by Quarterdeck of the terms of any Quarterdeck
Government License or any rule or regulation applicable thereto, except to the
extent that any such action would not be reasonably likely to have a Material
Adverse Effect.
4.15. COMPLIANCE WITH LAWS. To the best of its knowledge,
Quarterdeck has complied with all foreign, federal, state, local and county
laws, ordinances, regulations, judgments, orders, decrees or rules of any
court, arbitrator or governmental, regulatory or administrative agency or
entity applicable to its business, except where the failure to so comply would
not have a Material Adverse Effect. Quarterdeck has not received any
governmental notice of any violation by Quarterdeck of any such laws,
ordinances, regulations or orders, which violation has not been cured or
remedied except where the failure to cure or remedy the violation would not
have a Material Adverse Effect.
ARTICLE 5.
COVENANTS
5.1. MAINTENANCE OF BUSINESS. During the period from the
date hereof to the Effective Time, each of the Company and Vertisoft Direct
agrees to carry on its business in the ordinary course and in substantially in
the same manner as it has prior to the date of this Agreement. The
Shareholders, the Company and Vertisoft Direct shall use their best efforts to
preserve the business of the Company and Vertisoft Direct, the services of
their respective current employees, and their respective favorable business
relationships. Each of the Company and Vertisoft Direct agrees not to enter
into any material agreements or take any other significant actions outside the
ordinary course of business without the prior written consent of Quarterdeck,
which shall not be unreasonably withheld. Without limiting the generality of
the foregoing, except as otherwise contemplated by this Agreement, each of the
Company and Vertisoft Direct agrees not to:
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(a) Set aside or pay any dividend or distribution
of assets on its capital stock to, repurchase any of its capital stock from,
make any loan to, or guaranty any debt of, any of the Related Parties or any
shareholders, directors, officers, employees, agents or consultants;
(b) Enter into any agreement or commitment that
would be a Material Agreement if in existence on the date hereof;
(c) Amend, modify or terminate any Material
Agreement;
(d) Increase or commit to increase the
compensation of any director, officer, employee, agent or consultant;
(e) License, assign or transfer any Intellectual
Property, or sell, lease or transfer any other assets outside the ordinary
course of business;
(f) Alter the manner of keeping its books,
accounts or records or the accounting practices therein reflected;
(g) Issue any capital stock or any security
convertible into, or options, warrants or rights to acquire, its capital stock;
(h) Incur any material indebtedness or mortgage,
pledge or encumber any of its properties or assets; or
(i) Agree to do any of the foregoing.
5.2. ACTIONS CONTRARY TO POOLING AND TAX FREE TREATMENT.
Each of Quarterdeck, the Company, Vertisoft Direct, Acquisition Sub and the
Shareholders will use its best efforts to cause the Merger to be eligible for
pooling-of-interests accounting treatment and will not, from the date hereof
through and after consummation of the Merger, knowingly take any action or fail
to take any action inconsistent with such eligibility for pooling treatment or
inconsistent with the treatment of the Merger as a "reorganization" described
in Sections 368(a)(1)(A) and (a)(2)(E) of the Code. Quarterdeck has no plan or
intention to liquidate the Company; to merge the Company with or into another
corporation; to sell or otherwise dispose of the stock of the Company except
for transfers of stock to corporations controlled by Quarterdeck; or to cause
the Company to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business or transfers of assets (by
way of a merger or otherwise) to Quarterdeck or a corporation controlled by
Quarterdeck. Following the Effective Time, Quarterdeck intends to continue the
historic business of the Company and Vertisoft Direct or use a significant
portion of the historic business assets of the Company and Vertisoft Direct in
a business.
5.3. OTHER DISCUSSIONS. From and after the date of this
Agreement until the Closing or this Agreement is terminated in accordance with
its terms, neither the Company nor Vertisoft Direct, nor any of their
respective officers, directors, agents or representatives (including the
Shareholders) will initiate discussions, solicit or negotiate (including
providing
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any non-public information concerning its business), or authorize any person or
entity to discuss, solicit or negotiate on its or their behalf, with any other
party concerning the possible sale or disposition of all or any material
portion of the business, assets or capital stock of the Company or Vertisoft
Direct. Each of the Company and Vertisoft Direct will immediately notify
Quarterdeck, however, if any offer is received from such a potential purchaser
or of any discussions with such a potential purchaser.
5.4. CONTINUITY OF INTEREST AND RESTRICTIONS ON RESALE.
Each of the Shareholders shall on or prior to the Closing execute and deliver
to Quarterdeck the Affiliates Letter and Continuity of Interest Certificate in
the form attached hereto as Exhibit B.
5.5. BEST EFFORTS. Each party will use its best efforts
to cause all conditions to the Closing to be satisfied as soon as practicable.
Each party shall use its best efforts to obtain any consents necessary or
desirable in connection with the consummation of the Transactions.
5.6. SHAREHOLDER VOTE. Until this Agreement has been
terminated in accordance with its terms, (i) the Shareholders agree to vote all
shares of Company Common Stock held by them in favor of the Merger, and (ii)
Anatoly Tikhman agrees to vote all shares of common stock of Vertisoft Direct
in favor of the Affiliate Merger.
5.7. REGISTRATION RIGHTS; NASDAQ LISTING. Quarterdeck
shall provide to the shareholders of the Company registration rights pursuant
to the terms of a registration rights agreement (the "Registration Rights
Agreement") substantially in the form of Exhibit D attached hereto and shall
cause the shares of Quarterdeck Common Stock to be issued in the Merger to be
listed as of the Effective Time on the Nasdaq National Market.
5.8. ACCESS TO INFORMATION. Quarterdeck and the Company
have provided to the other a request list for due diligence materials. The
Company shall be permitted to conduct a full and complete investigation with
respect to Quarterdeck's business and affairs, including, but not limited to,
its review of materials requested under the prior sentence. Quarterdeck shall
be permitted to make a full and complete investigation of the business and
affairs of the Company and Vertisoft Direct, including, but not limited to, its
review of materials requested under the first sentence. Each party will have
access to the facilities, employees, and records of the other party for the
purpose of conducting its due diligence investigation in accordance with this
paragraph; provided, however, in no event shall a party's due diligence
investigation be permitted to interfere with the day to day operations of the
other party.
5.9. CONFIDENTIALITY. Until the Closing, all information
relating to the Company and Vertisoft Direct obtained by Quarterdeck and its
authorized representatives pursuant to this Agreement, and all information
relating to Quarterdeck obtained by the Company, Vertisoft Direct, or any of
the Shareholders and their authorized representatives pursuant to this
Agreement, shall be kept confidential by the obtaining party and shall not be
used by it for any purpose other than in connection with the transactions
contemplated by this Agreement; provided, however, that the foregoing shall not
apply to (i) any information generally available to the public on the date
hereof or that becomes generally available to the public through no fault of
the obtaining party, but only from and after the date such information
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becomes so available, (ii) any information obtained by the obtaining party from
a third party having the right to disclose such information; and (iii) any
information known by the obtaining party prior to May 16, 1996, which
information was not obtained in violation of any Confidentiality Agreement. In
the event of a Termination (as defined below), then promptly thereafter all
documents (including copies and reproductions thereof) obtained from one party
in connection with this Agreement and not theretofore made public shall be
returned to the party that provided such documents. None of Quarterdeck,
Acquisition Sub, the Company, Vertisoft Direct or the Shareholders shall,
unless required by law, disclose to any person the fact that negotiations are
taking place concerning the Merger or issue any statement of communication to
the general public or the press regarding the Merger without the prior written
consent of the other party. The terms of this Section 5.9 shall survive
Termination of this Agreement.
5.10. SUPPLEMENTS TO SCHEDULES. From time to time prior to
the Closing Date, each of Quarterdeck, on one hand, and the Shareholders, the
Company and Vertisoft Direct, on the other hand, will promptly inform the other
party in writing of any matter hereafter arising that, if existing or occurring
on or prior to the date hereof, would have been required to be set forth or
described in the Schedules hereto or as an exception to the representations and
warranties herein. No action or inaction by the other party following receipt
of any such information shall constitute a waiver of any of its rights
hereunder.
5.11. TIKHMAN AGREEMENTS. Quarterdeck and Anatoly Tikhman
shall negotiate in good faith with respect to employment and indemnity
agreements between Quarterdeck and Anatoly Tikhman (the "Tikhman Agreements")
to be entered into on the day after the Effective Date or, if the Effective
Date is not a business day, on the first business day following the Effective
Date.
5.12. FURTHER ASSURANCES. Each party hereto shall execute
and deliver such further instruments and take such further actions as any other
party hereto may reasonably request in order to carry out the intent of this
Agreement.
5.13. VERTISOFT, INC. Promptly following the Closing,
Anatoly Tikhman shall cause Vertisoft, Inc., a California corporation, to amend
its Articles of Incorporation to change its name such that its new name will
have no reference to "Vertisoft."
5.14. STOCK OPTIONS. On the Effective Date, Quarterdeck
shall grant stock options to the employees of the Company who will become
employees of Quarterdeck or Acquisition Sub, in such amounts and on such terms
as are set forth on Schedule 5.14.
5.15. SEVERANCE PLAN. Quarterdeck agrees that any person
who is an employee of the Company at the Closing Date and who becomes an
employee of Acquisition Sub in connection with the transactions contemplated by
the Acquisition shall be entitled to participate in Quarterdeck's severance
plans on the same terms and conditions as other employees of Quarterdeck and
its subsidiaries.
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ARTICLE 6.
CONDITIONS TO MERGER
6.1. CONDITIONS TO OBLIGATIONS OF QUARTERDECK, ACQUISITION
SUB, THE SHAREHOLDERS, THE COMPANY AND VERTISOFT DIRECT. The respective
obligations of Quarterdeck, Acquisition Sub, the Shareholders, the Company and
Vertisoft Direct to consummate the transactions contemplated hereby are subject
to satisfaction (or waiver by each party whose obligation is subject to such
condition) of the following conditions:
(a) The parties hereto shall have obtained all
consents and approvals of shareholders and third parties (including
governmental authorities) required to consummate the Transactions, except for
consents of third parties relating to agreements set forth on Schedule 2.4.
(b) Consummation of the Transactions shall not
violate any order, decree or judgment of any court or governmental body having
jurisdiction.
(c) The Escrow Agreement and the Registration
Rights Agreement shall be executed and delivered by the parties thereto.
(d) Federal and state securities law exemptions
shall be available for the issuance of the Quarterdeck Merger Shares.
6.2. CONDITIONS TO OBLIGATIONS OF QUARTERDECK AND
ACQUISITION SUB. The obligations of Quarterdeck and Acquisition Sub to
consummate the transactions contemplated hereby are subject to satisfaction (or
waiver by them) of the following conditions:
(a) All representations and warranties of the
Company, Vertisoft Direct and the Shareholders made herein shall be true and
correct in all material respects as of the date, and as of the Closing Date as
if made on and as of the Closing Date. Each of the Company, Vertisoft Direct
and the Shareholders shall have performed in all material respects all
obligations and agreements undertaken to be performed by them at or prior to
the Closing.
(b) Quarterdeck and Acquisition Sub shall have
received at the Closing an opinion of counsel to the Company and the
Shareholders substantially in the form of Exhibit E attached hereto.
(c) Quarterdeck and Acquisition Sub shall have
received an Affiliates Letter and Continuity of Interest Certificate in
substantially in the form attached hereto as Exhibit B executed by each of the
Shareholders.
(d) Quarterdeck shall be satisfied that no
holders of Company Common Stock shall exercise dissenters' rights in connection
with the Merger.
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(e) Quarterdeck shall have received from KPMG
Peat Marwick LLP, independent certified public accountants for Quarterdeck, a
letter dated the date of the Effective Time confirming, as of that date, their
prior advice to Quarterdeck that the Merger will be treated for accounting
purposes as a "pooling of interests" under Opinion No. 16 of the Accounting
Principles Board.
(f) The Board of Directors of Quarterdeck shall
have received a written opinion from Punk Zigel & Knoell that the terms of the
Merger are fair, from a financial point of view, to Quarterdeck and its
stockholders.
(g) Quarterdeck shall have received evidence that
Vertisoft Direct has merged with and into the Company in a manner and on terms
and in a manner reasonably acceptable to Quarterdeck and Gibson, Dunn &
Crutcher LLP.
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS. The obligations of the Company and Vertisoft Direct and the
Shareholders to consummate the transactions contemplated hereby are subject to
satisfaction (or waiver by them) of the following conditions:
(a) All representations and warranties of
Quarterdeck and Acquisition Sub made herein shall be true and correct in all
material respects as of the date made and as of the Closing Date. Quarterdeck
and Acquisition Sub shall have performed in all material respects all
obligations and agreements undertaken to be performed by them at or prior to
the Closing.
(b) The Company and the Shareholders shall have
received at the Closing an opinion of counsel to Quarterdeck and Acquisition
Sub substantially in the form of Exhibit F attached hereto.
(c) The shares of Quarterdeck Common Stock to be
issued in the Merger shall be approved for listing on the Nasdaq National
Market.
ARTICLE 7.
INDEMNITY
7.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS; REMEDIES NOT EXCLUSIVE; NO SUBROGATION.
(a) All representations, warranties, covenants
and agreements of Quarterdeck, Acquisition Sub, the Company, Vertisoft Direct
and the Shareholders in this Agreement shall survive the execution, delivery
and performance of this Agreement in accordance with this Article 7. All
representations and warranties of each party set forth in this Agreement shall
be deemed to have been made again by such party at and as of the Closing Date.
(b) The Escrow Shares shall be withheld from all
holders of Company Common Stock in the Merger and shall be delivered into
Escrow on the Effective Date pursuant
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to the Escrow Agreement. Except as set forth in the following sentence, the
liability of the Shareholders under this Agreement shall be limited to the fair
market value of the Escrow Shares (determined pursuant to Section 7.2(c)(iii)
of this Agreement), and through the Escrow Termination Date shall be limited to
the return of the Escrow Shares pursuant to the Escrow Agreement.
Notwithstanding the foregoing, except as limited by Section 7.2(a), the
liability of the Shareholders under this Agreement with respect to any
liability arising out of, involving or relating to any fraud or willful
misrepresentation or a breach of Sections 2.2(a) or 9.10 or Article 3 shall be
full recourse and shall not be limited to the return of Escrow Shares
determined pursuant to the Escrow Agreement, but shall not exceed the fair
market value (determined pursuant to Section 7.2(c)(iii)) of the Quarterdeck
Merger Shares and Quarterdeck's remedies under the Escrow Agreement with
respect thereto shall not be exclusive, but shall be in addition to all other
rights and remedies available to Quarterdeck at law or in equity for such
breaches or defaults, subject to a maximum liability of the Company, Vertisoft
Direct and the Shareholders therefor equal to the fair market value of the
Quarterdeck Merger Shares, determined in accordance with Section 7.2(c)(iii).
Additionally, in the event of a breach of or default under this Agreement by
any party, and if the Closing does not occur, nothing in this Article 7 shall
limit or restrict rights and remedies available to any other party at law or in
equity for such breaches or defaults.
(c) The representations and warranties of
Quarterdeck, Acquisition Sub, the Company, Vertisoft Direct and the
Shareholders set forth in this Agreement, and their indemnity obligations under
this Article 7, shall terminate (absent fraud or willful misrepresentation as
defined herein) at the end of the twelfth month following the month in which
the Closing Date occurs (except to the extent that claims have been made or
notice of a claim has been provided prior thereto) (the "Indemnity Termination
Date"); provided, however, that (i) the representations and warranties set
forth in Sections 2.2, 3.1(d) and 3.4 and the indemnity obligations of the
Shareholders with respect thereto shall terminate at the end of the
forty-eighth month following the month in which the Closing Date occurs (except
to the extent that claims have been made or notice of a claim has been provided
prior thereto), and (ii) the representations and warranties set forth in
Section 2.19 and the indemnity obligations of the Shareholders with respect
thereto shall terminate at the end of the thirty-sixth month following the
month in which the Closing Date occurs (except to the extent that claims have
been made or notice of a claim has been provided prior thereto), except to the
extent that such indemnity obligation arises from the failure to file any tax
return (other than a sales or use tax return, in which case the 36 month period
shall apply) in which case the indemnity obligation shall terminate at the end
of the sixtieth month following the month in which the Closing Date occurs
(except to the extent that claims have been made or notice of a claim has been
provided prior thereto). Notwithstanding the foregoing, in the event of fraud
or willful misrepresentation, the representations and warranties of the parties
hereto and their indemnity obligations under this Article 7 shall not
terminate.
(d) If the Shareholders, or any of them, are
determined to be liable, or make any payment or forfeit Escrow Shares, in
respect of an alleged breach by the Company, Vertisoft Direct or any
Shareholder of, or default by the Company, Vertisoft Direct or any Shareholder
under, this Agreement or any of the agreements or transactions contemplated
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hereby, then (i) the Shareholders shall not be subrogated, and hereby waive any
right of subrogation, to the rights of Quarterdeck and/or Acquisition Sub
against the Company or Vertisoft Direct in respect thereof, and (ii) the
Shareholders hereby waive any right to indemnification or contribution from the
Company or Vertisoft Direct in respect thereof.
7.2. INDEMNIFICATION OF QUARTERDECK AND THE SURVIVING
CORPORATION AND THE ESCROW DEPOSIT OF QUARTERDECK COMMON STOCK.
(a) Joint and Several Indemnity. The
Shareholders agree to indemnify, defend and hold harmless, jointly and
severally, with respect to any claim made on or before the Indemnity
Termination Date or such later date as may be provided in Section 7.1(c) of
this Agreement, Quarterdeck, and, after the Effective Time, the Company, and
each of their respective affiliates, successors, assigns, agents and
representatives (collectively, the "Affiliated Parties") against and in respect
of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, remedies and penalties (including, without limitation,
interest, penalties, settlement costs and any legal, accounting or other fees
and expenses for investigating or defending any claims or threatened actions)
(collectively, "Losses") that Quarterdeck, the Company or the Affiliated
Parties may incur or suffer, together with interest on cash disbursements in
connection therewith at the rate of ten percent (10%) per annum from the date
such cash disbursements were made until paid by the Shareholders, in connection
with each and all of the following:
(i) Any misrepresentation or inaccuracy
of any of the representations or warranties of the Company, Vertisoft Direct
and the Shareholders contained in Article 2 of this Agreement;
(ii) Any inaccuracy of any written
statement or certificate furnished by or on behalf of the Company or Vertisoft
Direct pursuant to this Agreement; or
(iii) Any breach of or default under any
covenant, agreement or obligation of the Company or Vertisoft Direct contained
in this Agreement or any other agreement or instrument contemplated by this
Agreement.
No claim, demand, suit or cause of action shall be
brought against the Shareholders under this Section 7.2(a) unless and until the
aggregate amount of Losses under this Section 7.2(a) exceeds $250,000, in which
event Quarterdeck, the Company and the Affiliated Parties shall be entitled to
indemnification from the Shareholders for all Losses under this Section 7.2(a)
in excess of $250,000. The aggregate liability of the Shareholders under this
Section 7.2(a) for all Losses (other than Losses arising out of, related to or
involving fraud or willful misrepresentation or a breach of Section 2.2(a))
shall not exceed the fair market value at the Closing of the number of Escrow
Shares issued by Quarterdeck at the Closing, determined in accordance with
Section 7.2(c)(iii). The aggregate liability of the Shareholders under this
Agreement for any liability arising out of, related to or involving fraud or
willful misrepresentation or a breach of Section 2.2(a) shall not exceed the
fair market value at the Closing of the Quarterdeck Merger Shares, determined
in accordance with Section 7.2(c)(iii).
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(b) Several Indemnity. Each of the Shareholders
agrees to indemnify, defend and hold harmless Quarterdeck, the Company and the
Affiliated Parties against and in respect of any Losses that Quarterdeck, the
Company or the Affiliated Parties may incur or suffer, together with interest
on cash disbursements in connection therewith at the rate of ten percent (10%)
per annum from the date such cash disbursements were made until paid by such
the Shareholder, in connection with each and all of the following:
(i) Any misrepresentation in or
inaccuracy of any of such Shareholder's representations or warranties contained
in Article 3 of this Agreement;
(ii) Any misrepresentation in or
inaccuracy of any written statement or certificate furnished by such
Shareholder pursuant to this Agreement; or
(iii) Any breach of or default under any
covenant, agreement or obligation of such Shareholder contained in this
Agreement or any other agreement or instrument contemplated by this Agreement.
No claim, demand, suit or cause of action shall be
brought against a Shareholder under this Section 7.2(b) unless and until the
aggregate amount of claims under this Section 7.2(b) exceeds $50,000, in which
event Quarterdeck, Acquisition Sub, the Company and the Affiliated Parties
shall be entitled to indemnification from such Shareholder for all Losses under
this Section 7.2(b) in excess of $50,000, subject to the limitations set forth
under Sections 7.2(a) and 7.2(c).
(c) Escrow.
(i) Through the Escrow Termination Date
(a) with respect to all claims other than claims arising out of, related to or
involving fraud or willful misrepresentation or a breach of Sections 2.2(a) or
9.10 or Article 3, the indemnified parties under Section 7.2 shall not seek
recourse in satisfaction thereof other than against the Escrow Shares, and (b)
with respect to all claims arising out of, related to or involving fraud or
willful misrepresentation or a breach of Sections 2.2(a) or 9.10 or Article 3,
the indemnified parties under Section 7.2 shall first seek recovery against the
Escrow Shares, but shall not be limited in recourse thereto, subject to the
limitations set forth in Section 7.2. After the Escrow Termination Date, the
indemnified parties under Section 7.2 may seek direct recourse against the
Shareholders, provided that (A) with respect to any claims arising out of,
related to or involving fraud or willful misrepresentation or a breach of
Sections 2.2(a) or 9.10 or Article 3, the indemnified parties under Section 7.2
shall be limited to recovering an amount that, when aggregated with the amount
of all claims previously paid from and after the Closing, does not exceed the
fair market value of the Quarterdeck Merger Shares, determined in accordance
with Section 7.2(c)(iii) and (B) with respect to any claims other than those
described in clause (A), the indemnified parties under Section 7.2 shall be
limited to an amount that, when aggregated with the amount of all claims
previously paid from and after Closing, does not exceed the fair market value
of the Escrow Shares, determined in accordance with Section 7.2(c)(iii).
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(ii) The Escrow Shares shall be fully
available for satisfaction of all claims the indemnified parties under Section
7.2(a) and (b) may have thereunder, whether in connection with third party
claims or otherwise; provided, however, that recourse against the Escrow Shares
for a claim against a Shareholder under Section 7.2(b) shall be limited to such
Shareholder's interest in the Escrow Shares and claims against the Escrow
Shares under Section 7.2(b) shall be given effect prior to claims under Section
7.2(a). If any indemnified party under this Section 7.2 elects to make any
claim against the Escrow Shares, it shall promptly give written notice thereof
to the Escrow Agent (as defined in the Escrow Agreement) and the escrow
committee established pursuant to the terms of the Escrow Agreement consisting
of Anatoly Tikhman (the "Committee"), including in such notice a brief
description of the facts upon which such claim is based and the amount thereof.
If the Committee objects to the allowance of any such claims, it shall give
written notice to such indemnified party and the Escrow Agent within twenty
(20) days following receipt of such notice of claim, advising such indemnified
party and the Escrow Agent that it does not consent to the delivery of any or
some of the Escrow Shares out of escrow for application to such claims. If no
such written notice is provided by the Committee and received by such
indemnified party and the Escrow Agent within twenty (20) days following the
Escrow Agent's receipt of such notice of claim, the Escrow Agent shall, within
five business days after the expiration of the prior notice period, deliver out
of Escrow the lesser of: (i) the number of the Escrow Shares (in whole shares)
that have an aggregate market value (determined as provided below) most nearly
equal to the amount of the claim or claims thus to be satisfied, or (ii) all of
the Escrow Shares that are subject to such claim. If the Committee provides
such indemnified party and the Escrow Agent with written notice within the
foregoing twenty (20) day period that the Committee objects to such application
of the Escrow Shares after a claim has been made, the Escrow Agent shall hold
in Escrow the number of the Escrow Shares (in whole shares) that have an
aggregate market value (determined as provided below) most nearly equal to the
amount of the claim or claims then made until the rights of the respective
parties have been agreed upon between the Committee and Quarterdeck in
accordance with the Escrow Agreement and the Escrow Agent receives written
notice accordingly. If any distribution of Escrow Shares out of Escrow in
satisfaction of a claim referred to in this Section 7.2 involves fewer than all
of the Escrow Shares, the number of shares so distributed shall be deducted
from the accounts of each party having an ownership interest in the Escrow
Shares pro rata based on the number of Escrow Shares (other than Escrow Shares
subject to pending claims under Section 7.2(b)) beneficially owned by each
holder of Company Common Stock at the time of such distribution (unless the
claim made is made under Section 7.2(b), in which case the distribution of the
Escrow Shares shall be determined as described above).
(iii) For purposes of the indemnification
set forth in this Article 7 as it relates to the Escrow Shares, the fair market
value of one share of Quarterdeck Common Stock shall be equal to the closing
sales price for Quarterdeck Common Stock on the Nasdaq National Market on the
Closing Date.
(iv) The Escrow shall terminate (except
to the extent that claims against the Escrow Shares have been submitted or
notice of the claim has been provided during such escrow period) upon the
earlier of (i) the date one year from the Closing Date, and (ii) the date upon
which the first audit of Quarterdeck's financial statements including the
results of the
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operations of the Company subsequent to the Merger is completed and Quarterdeck
receives a signed opinion from its independent auditors certifying such
financial statements (with the earlier of such dates being referred to herein
as the "Escrow Termination Date").
(v) Notwithstanding anything to the
contrary herein, no Shareholder shall have any liability for the breach of a
warranty or representation under Article 3 or Section 9.10 by another
Shareholder.
(d) Method of Satisfying Claims. The
Shareholders agree that any claim made against them under Sections 7.2(a) and
(b) by any indemnified party thereunder shall first be satisfied by the Escrow
Shares, if any, then available, second, by delivery by such Shareholder to such
indemnified party of Quarterdeck Common Stock and, third, if such shares are
not adequate to fully satisfy such claims, then by cash payments.
(e) No Waiver. In any case in which claims have
been asserted or are pending prior to the Indemnity Termination Date or such
later date as may be provided in Section 7.1(c) of this Agreement, all parties
agree that the indemnity obligations of the Shareholders with respect to such
matters shall continue in full force and effect until such matters have been
settled by agreement of the parties or by resolution of such matters in
accordance with the terms of this Agreement and/or the Escrow Agreement. No
disclosure by the Company or the Shareholders other than as set forth in this
Agreement or the Schedules hereto nor any investigation made by or on behalf of
Quarterdeck with respect to the Company or the Shareholders nor any disclosure
made to Quarterdeck pursuant to Section 5.10 shall be deemed to affect
Quarterdeck's reliance on the representations and warranties made by the
Company or the Shareholders contained in this Agreement and shall not
constitute a waiver of Quarterdeck's rights to indemnity as herein provided for
the misrepresentations in or inaccuracy of any of the Company's or the
Shareholders' representations or warranties under this Agreement.
7.3. INDEMNIFICATION OF THE SHAREHOLDERS.
(a) Indemnity. Quarterdeck agrees to indemnify,
defend and hold harmless the Shareholders (and their respective successors and
assigns) against and in respect of any Losses that the Shareholders (or their
successors or assigns) may incur or suffer, together with interest on cash
disbursements in connection therewith at the rate of ten percent (10%) per
annum from the date such cash disbursements were made until paid by
Quarterdeck, in connection with each and all of the following:
(i) Any misrepresentation in or any
inaccuracy of any of Quarterdeck's or Acquisition Sub's representations or
warranties contained in Article 4 of this Agreement or in any written statement
or certificate furnished by or on behalf of Quarterdeck or Acquisition Sub
pursuant to this Agreement; or
(ii) Any breach of or default under any
covenant, agreement or obligation of Quarterdeck or Acquisition Sub contained
in this Agreement or any other agreement or instrument contemplated by this
Agreement.
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No claim, demand, suit or cause of action shall be
brought against Quarterdeck under this Section 7.3 unless and until the
aggregate amount of Losses under this Section 7.3 exceeds $250,000, in which
event the Shareholders shall be entitled to indemnification from Quarterdeck
for all Losses under this Section 7.3 in excess of $250,000. Quarterdeck shall
have no obligations under this Agreement for an amount in excess of
$10,000,000, except for (A) claims arising out of, relating to or involving
fraud or willful misrepresentation, for which Quarterdeck shall have no
obligations in excess of the fair market value of the Quarterdeck Merger Shares
determined in accordance with Section 7.2(b)(iii).
(b) No Waiver. In any case in which claims have
been asserted or are pending, all parties agree that the indemnity obligations
of Quarterdeck with respect to such matters shall continue in full force and
effect until such matters have been settled by agreement of the parties or by
resolution of such matters in accordance with the terms of this Agreement. No
disclosure by Quarterdeck or Acquisition Sub other than as set forth in this
Agreement or the schedules hereto nor any investigation made by or on behalf of
the Shareholders with respect to Quarterdeck or Acquisition Sub nor any
disclosure made to the Shareholders pursuant to Section 5.10 shall be deemed to
affect the Shareholders' reliance on the representations and warranties made by
Quarterdeck and Acquisition Sub contained in this Agreement and shall not
constitute a waiver of the Shareholders' rights to indemnity as herein provided
for the misrepresentations in or inaccuracy of any of Quarterdeck's or
Acquisition Sub's representations or warranties under this Agreement.
7.4. POST-ESCROW PROCEDURE FOR INDEMNIFICATION OF
QUARTERDECK AND THE SURVIVING CORPORATION WITH RESPECT TO NON-THIRD PARTY
CLAIMS. Whenever any claim shall arise for indemnification by the Shareholders
pursuant to Section 7.2(a) (but excluding claims resulting from the assertion
of liability by third parties) and such claim is, under the terms hereof, to be
asserted, in whole or in part, against the Shareholders (whether in addition to
claims against, or after exhaustion of, the Escrow Shares) pursuant to Section
7.2(c)(i), Quarterdeck shall promptly give written notice thereof to the
Shareholders, including in such notice a brief description of the facts upon
which such claim is based and the amount thereof. If the Shareholders, within
twenty (20) days after receipt of Quarterdeck's notice of claim, do not give
written notice to Quarterdeck announcing their intent to contest such assertion
of Quarterdeck, such assertion shall be deemed accepted and the amount of claim
shall be deemed a valid claim and the Shareholders shall, within fifteen (15)
days after expiration of the prior notice period, deliver to Quarterdeck, on a
pro rata basis based on the number of shares of Company Common Stock
beneficially owned by each Shareholder as set forth in Schedule 2.2, delivery
to Quarterdeck the amount of the claim in the manner provided in Section 7.2,
subject to the limitations in Section 7.2. In the event, however, that the
Shareholders contest the assertion of a claim by giving such written notice to
Quarterdeck within said period, then the parties shall act in good faith to
reach agreement regarding such claim. The same procedure as the foregoing
shall apply to claims against a particular Shareholder under Section 7.2(b),
except that such Shareholder shall be liable for the full amount of the claim.
With respect to claims made under Section 7.2(a), each of the Shareholders
shall have a right of contribution against the other Shareholders, and each of
the Shareholders agrees to pay such pro rata share to any other Shareholder who
pays more than such Shareholder's fair share.
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7.5. PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS
WITH RESPECT TO NON-THIRD PARTY CLAIMS. Whenever any claim shall arise for
indemnification by Quarterdeck pursuant to Section 7.3(a) (but excluding claims
resulting from the assertion of liability by third parties), the Shareholders
shall promptly give written notice thereof to Quarterdeck, including in such
notice a brief description of the facts upon which such claim is based and the
amount thereof. If Quarterdeck, within twenty (20) days after receipt of the
Shareholders' notice of claim, does not give written notice to the Shareholders
announcing its intent to contest such assertion of the Shareholder, such
assertion shall be deemed accepted and the amount of claim shall be deemed a
valid claim and Quarterdeck shall, within fifteen (15) days after expiration of
the prior notice period, deliver to the Shareholders the amount of the claim,
which, if such claim is brought on behalf of all Shareholders, shall be
allocated on a pro rata basis based on the number of shares of Company Common
Stock beneficially owned by each Shareholder as set forth in Schedule 2.2. In
the event, however, that Quarterdeck contests the assertion of a claim by
giving such written notice to the Shareholders within said period, then the
parties shall act in good faith to reach agreement regarding such claim.
7.6. PROCEDURE FOR INDEMNIFICATION OF QUARTERDECK WITH
RESPECT TO THIRD-PARTY CLAIMS. If Quarterdeck or any other indemnified party
under Section 7.2 determines to seek indemnification with respect to a claim
resulting from the assertion of liability by third parties, and if Quarterdeck
seeks recourse against the Escrow Shares therefor, it shall follow the
procedures set forth in Section 7.2(c). If Quarterdeck does not seek recourse
against the Escrow Shares, it shall promptly give written notice thereof to the
Shareholders, including in such notice a brief description of the facts upon
which such claim is based and the amount thereof. Whether or not it seeks
recourse against the Escrow Shares, Quarterdeck shall select and employ counsel
in such case (which counsel shall be subject to the reasonable approval of the
Shareholders, which approval shall not be unreasonably withheld and shall be
deemed given if such counsel is Gibson, Dunn & Crutcher LLP), and Quarterdeck
shall be reimbursed for the fees and expenses of such counsel as such fees and
expenses accrue, in accordance with procedures set forth in Section 7.2 for the
satisfaction of claims. Quarterdeck shall not, without the Committee's (if any
of the indemnity is to be provided by the Escrow Shares) and/or the
Shareholders'(if any of the indemnity is to be provided by the Shareholders
other than through Escrow Shares) written consent (which consents shall not be
unreasonably withheld), settle or compromise any such claim or consent to entry
of any judgment in respect thereof. In connection with any bona fide written
offer (an "Offer") from any claimant or plaintiff which provides as an
unconditional term thereof the giving by the plaintiff or claimant to
Quarterdeck and all other indemnified parties a release from all liability and
requires only the payment of monetary damages, if the Committee and/or the
Shareholders notify Quarterdeck that it or they wish to accept such offer, and
Quarterdeck does not consent to such settlement, the Shareholders shall not be
liable under this Section 7.6 for the amount by which any Losses from any
subsequent settlement or judgment with respect to such claim exceeds such bona
fide written settlement offer; provided, however, that each of the Shareholders
(i) acknowledges in writing that such party agrees and acknowledges that
Quarterdeck is entitled unconditionally to indemnification under this Agreement
by the Shareholders for such claim and (ii) provides to Quarterdeck evidence
reasonably satisfactory to Quarterdeck that such parties in the aggregate have
the financial ability to satisfy any liability resulting from such claim. Each
of the Shareholders shall have a right of
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<PAGE> 51
contribution against such other parties, and each of such parties agrees to pay
such pro rata share to any other such party who pays more than such party's
fair share.
7.7. PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS
WITH RESPECT TO THIRD-PARTY CLAIMS.
(a) If the Shareholders determine to seek
indemnification under Section 7.3(a) with respect to a claim resulting from the
assertion of liability by third parties, the Shareholders shall promptly give
written notice thereof to Quarterdeck, including in such notice a brief
description of the facts upon which such claim is based and the amount thereof.
In case any such liability is asserted against the Shareholders, and the
Shareholders notify Quarterdeck thereof, Quarterdeck will be entitled, if
Quarterdeck so elects by written notice delivered to the Shareholders within
ten business days after receiving the Shareholders' notice, to assume the
defense thereof with counsel reasonably satisfactory to the Shareholders.
Notwithstanding the foregoing, (i) the Shareholders shall also have the right
to employ their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of the Shareholders unless the Shareholders
shall reasonably determine that there is a conflict of interest between the
Shareholders, on the one hand, and Quarterdeck, on the other, with respect to
such claim, in which case the fees and expenses of such counsel will be borne
by Quarterdeck and (ii) the rights of the Shareholders to be indemnified
hereunder in respect of claims resulting from the assertion of liability by
third parties shall not be adversely affected by their failure to give notice
pursuant to the foregoing unless, and, if so, only to the extent that,
Quarterdeck is materially prejudiced thereby. With respect to any assertion of
liability by a third party that results in an indemnifiable claim, the parties
hereto shall make available to each other all relevant information in their
possession material to any such assertion.
(b) In the event that Quarterdeck, within ten
business days after receipt of the aforesaid notice of a claim, fails to assume
the defense of the Shareholders against such claim, the Shareholders shall have
the right to undertake the defense, compromise, or settlement of such action on
behalf of and for the account, expense, and risk of Quarterdeck.
(c) Notwithstanding anything in this Article 7 to
the contrary, if there is a reasonable probability that a claim may materially
adversely affect the Shareholders, the Shareholders shall have the right to
participate (at the Shareholders' expense) in such defense, compromise, or
settlement and Quarterdeck shall not, without the Shareholders' written consent
(which consent shall not be unreasonably withheld), settle or compromise any
such claim or consent to entry of any judgment in respect thereof unless such
settlement, compromise, or consent includes as an unconditional term thereof
the giving by the claimant or the plaintiff to the Shareholders a release from
all liability in form and substance satisfactory to the Shareholders in respect
of such claim. If Quarterdeck notifies the Shareholders that it wishes to
accept a bona fide written offer from any such claimant or plaintiff (which
offer includes a release of the Shareholders from all liability in respect of
such claim), and the Shareholders do not consent to such settlement,
Quarterdeck shall not be liable under this Section 7.7 for the amount by which
any Losses from any subsequent settlement or judgment with respect to such
claim exceeds such bona fide written settlement offer.
45
<PAGE> 52
7.8. DETERMINATION OF LOSSES. Losses shall be determined
after taking into account (a) the amount of actual tax benefit realized in the
form of a refund or a reduction in taxes otherwise payable or actual tax
detriment inuring to or incurred by the party seeking indemnification hereunder
or any of its affiliates arising from the facts and circumstances giving rise
to such Loss and (b) any insurance proceeds received by a party seeking
indemnification hereunder or its affiliates on account of such Losses.
7.9. FRAUD OR WILLFUL MISREPRESENTATION. With respect to
any fraud or willful misrepresentation claim brought by any party seeking
indemnification against any other party, the party seeking indemnification will
bear the burden of proof of demonstrating that the other party had actual
knowledge of the alleged falsehood and intentionally or recklessly misled such
party with respect to same. Knowledge of a fact or omission on which a fraud
or willful misrepresentation claim is based may not be imputed or attributed to
a party on the basis of his or her position as an officer, director or partner
of Quarterdeck, the Company or Vertisoft Direct, as applicable, or access to
information arising from such position unless it can be demonstrated that in
fact such access was used by such party to obtain such information or any lack
of investigation by such party.
ARTICLE 8.
TERMINATION
8.1. TERMINATION BY MUTUAL CONSENT. At any time prior to
the Closing, this Agreement and the Agreement of Merger may be terminated by
written consent of Quarterdeck, Acquisition Sub and the Company,
notwithstanding approval of the Merger by the shareholders of Acquisition Sub
or the Company.
8.2. TERMINATION BY QUARTERDECK OR ACQUISITION SUB OR THE
COMPANY.
(a) Quarterdeck or Acquisition Sub may terminate
this Agreement and the Agreement of Merger at any time prior to the Closing by
delivery of written notice to the Company, Vertisoft Direct and VERTISOFT, INC.
if: (1) any court having competent jurisdiction or United States body shall
have issued an order, decree or ruling or taken any other action which
prevents, restrain, or enjoin the Merger and such order, decree or ruling shall
have become non-appealable; (2) any of the Company, Vertisoft Direct,
VERTISOFT, INC. or the Shareholders has breached or violated this Agreement in
any material respect and, if such breach or violation is curable, has failed to
cure such violations within ten days of receiving written notice thereof; or
(3) the Closing has not occurred by July 31, 1996.
(b) The Company, Vertisoft Direct and VERTISOFT,
INC. may terminate this Agreement and the Agreement of Merger at any time prior
to the Closing by delivery of written notice from the Company to Quarterdeck
and Acquisition Sub if: (1) any court having competent jurisdiction or United
States body shall have issued an order, decree or ruling or taken any other
action; which prevents, restrains, or enjoins the Merger and such order, decree
or ruling shall have become non-appealable; (2) either Quarterdeck or
Acquisition Sub has breached or violated this Agreement in any material respect
and, if such breach or violation is curable, has
46
<PAGE> 53
failed to cure such violations within ten days of receiving written notice
thereof; or (3) the Closing has not occurred by July 31, 1996.
8.3. EFFECT OF TERMINATION. In the event that this
Agreement is terminated (a "Termination") as provided in this Article 8, all
further obligations of the parties under this Agreement shall terminate without
further liability of any party to any other party or to the stockholders,
directors or officers of any party; provided, that Sections 5.9, 9.1, 9.2,
9.3, 9.4, 9.6, 9.7 and 9.8 of this Agreement shall survive such Termination and
continue in full force and effect. A Termination under this Article 8 shall
not relieve any party of any liability for any breach of this Agreement or for
any intentional misrepresentation or intentional failure to comply with any
agreement or covenant hereunder, and any such Termination shall not be deemed
to be a waiver of any available remedy for any such breach, intentional
misrepresentation or intentional failure to comply with any such agreement or
covenant.
ARTICLE 9.
MISCELLANEOUS
9.1. NOTICES. Unless otherwise provided, all notices or
other communications required or permitted to be given to the parties hereto
shall be in writing and shall be deemed to have been given if personally
delivered, including personal delivery by facsimile, provided that the sender
receives telephonic or electronic confirmation that the facsimile was received
by the recipient and that such facsimile is followed the same day by mailing by
certified or registered mail, return receipt requested, first class postage
prepaid (a "Mailing"), upon receipt of courier delivery or the third day
following a Mailing, addressed as follows (or at such other address as the
addressed party may have substituted by notice pursuant to this Section 9.1):
(a) If to Quarterdeck or Acquisition Sub:
Quarterdeck Corporation
13160 Mindanao Way, 3rd Floor
Marina del Rey, CA 90292-9705
Attention: Bradley D. Schwartz, Esq.
Facsimile: (310) 309-4217
With a copy to:
Karen E. Bertero, Esq.
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071-3197
Facsimile: (213) 229-7520
47
<PAGE> 54
(b) If to the Company or Vertisoft Direct:
c/o Vertisoft Systems, Inc.
Four Embarcadero Center, Suite 3470
San Francisco, CA 94111-5980
Attention: Anatoly Tikhman
Facsimile: (415) 956-5355
With a copy to:
Donald C. Reinke, Esq.
Pezzola & Reinke, APC
1999 Harrison Street, Suite 1300
Oakland, California 94612
Facsimile: (510) 834-7440
(c) If to the Shareholders, to the addresses
set forth on the signature page:
With a copy to:
Donald C. Reinke, Esq.
Pezzola & Reinke, APC
1999 Harrison Street, Suite 1300
Oakland, California 94612
Facsimile: (510) 834-7440
or to such other address as any party may have furnished in writing to the
other parties in the manner provided above.
9.2. ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This
Agreement and the exhibits and schedules hereto and the documents referred to
herein constitute the final, exclusive and complete understanding of the
parties with respect to the subject matter hereof and supersede any and all
prior agreements, understandings and discussions with respect thereto,
including, without limitation, the Letter of Intent dated May 19, 1996 by and
among Quarterdeck, the Company and the Shareholders. No variation or
modification of this Agreement and no waiver of any provision or condition
hereof, or granting of any consent contemplated hereby, shall be valid unless
in writing and signed by the party against whom enforcement of any such
variation, modification, waiver or consent is sought. The rights and remedies
available to Quarterdeck, Acquisition Sub, the Company, Vertisoft Direct and
the Shareholders pursuant to this Agreement and all exhibits hereunder shall be
cumulative.
48
<PAGE> 55
9.3. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed shall constitute an
original copy hereof, but all of which together shall constitute one agreement.
9.4. PUBLICITY. None of Quarterdeck, Acquisition Sub, the
Company, Vertisoft Direct, or the Shareholders, shall, unless required by law,
issue any statement or communication to the general public or the press
regarding the proposed merger or other transactions contemplated by this
Agreement without the prior written consent of the other party.
9.5. SUCCESSORS AND ASSIGNS. None of the Shareholders,
the Company or Vertisoft Direct, without the prior express written consent of
Quarterdeck, may assign this Agreement in whole or in part. Quarterdeck may
assign this Agreement, in whole or in part; provided, that Quarterdeck shall
remain obligated hereunder. This Agreement shall be binding upon and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto.
9.6. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California as applied
to contracts between California residents made and to be performed entirely
within the State of California.
9.7. EXPENSES. Each party hereto shall pay all fees and
expenses incurred by it in connection with the Transactions; provided that (i)
if the Merger is not consummated through no fault of the Company, Quarterdeck
shall pay to the Company a termination fee of $200,000, provided that such fee
shall not be paid if the Merger is not consummated and any of the Company's,
Vertisoft Direct's or the Shareholders' representations and warranties
contained in this Agreement are untrue in any material respect or either the
Company, Vertisoft Direct or any of the Shareholders are in material breach of
this Agreement or the Letter of Intent, and (ii) if the Merger is consummated,
the Company shall pay the actual reasonable counsel, accounting and investment
banking advisory fees and expenses incurred by the Company in connection with
the Transactions, up to a maximum amount of $425,000.
9.8. ATTORNEYS' FEES. In the event of any suit or other
proceeding to construe or enforce any provision of this Agreement or any other
agreement to be entered into pursuant hereto, or otherwise in connection with
this Agreement, the prevailing party's or parties' reasonable attorneys' fees
and costs (in addition to all other amounts and relief to which such party or
parties may be entitled) shall be paid by the other party or parties.
9.9. CONSENT TO SERVICE OF PROCESS. The parties hereto
irrevocably consent to the service of process in, and to the jurisdiction of
the courts of, the State of California and to the jurisdiction of any Federal
court located in such state in connection with any action, suit or other
proceeding arising out of or relating to this Agreement. The parties hereto
acknowledge that service of process may be validly effected by compliance with
the procedures set forth in Section 9.1 hereof.
9.10. COVENANT NOT TO COMPETE. Each of Anatoly Tikhman
and Philip Johnson, severally and not jointly, agree that for a period of three
years from the Closing Date,
49
<PAGE> 56
he shall not, directly or indirectly, as principal, agent, employee, employer,
consultant, stockholder, partner or in any other individual or representative
capacity, engage in the creation, production, marketing or sales of PC
compatible, DOS or MS Windows based Utilities Software (as defined below)
packages (the "Competitive Business") wherever the Company conducts such
business. For purposes of this Section 9.10, "Utilities Software" means
software which is used to (a) enhance the performance or simplify the usage of
a computer system or (b) simplify the setup, configuration or maintenance of a
computer system. Notwithstanding anything to the contrary herein, a
Shareholder may, without violating the provisions of this Section 9.10,
purchase and hold up to 5% of any entity whose shares are publicly traded on
NASDAQ or any U.S. stock exchange, whether or not such entity is engaged in a
Competitive Business. Any provision of this Section 9.10 which is deemed
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction and
subject to this paragraph be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions of this
paragraph in such jurisdiction or rendering that or any other provisions of
this Agreement invalid or unenforceable in any other jurisdiction. If any
covenant should be deemed invalid or unenforceable because of its scope,
geographical area or duration, or any combination thereof, such covenant shall
be modified and reformed so that the scope, geographic area and duration of the
covenant is reduced only to the minimum extent necessary to render the modified
covenant valid and enforceable.
9.11. APPOINTMENT OF ESCROW COMMITTEE. By approval of this
Agreement (by written consent or at a duly authorized Shareholders' meeting),
the Shareholders appoint Anatoly Tikhman as the sole committee member pursuant
to the Escrow Agreement. Such sole committee member shall have all of the
authority granted pursuant to the Escrow Agreement.
9.12. GENDER AND NUMBER. In this Agreement, unless the
context otherwise requires, the masculine, feminine and neuter genders and the
singular and the plural include one another.
9.13. CONSTRUCTION OF AGREEMENT. No party hereto, nor
its respective counsel, shall be deemed the drafter of this Agreement for
purposes of construing the provisions of this Agreement, and all provisions of
this Agreement shall be construed in accordance with their fair meaning, and
not strictly for or against any party hereto.
50
<PAGE> 57
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date first above written.
QUARTERDECK CORPORATION
By: /s/ GASTON BASTIAENS
-----------------------------------
Title: President and Chief Executive
Officer
VSI ACQUISITION CORPORATION
By: /s/ GASTON BASTIAENS
-----------------------------------
Title: President
VERTISOFT SYSTEMS, INC.
By: /s/ ANATOLY TIKHMAN
-----------------------------------
Title: President
VERTISOFT DIRECT, INC.
By: /s/ ANATOLY TIKHMAN
-----------------------------------
Title: President
51
<PAGE> 58
THE SHAREHOLDERS OF VERTISOFT
SYSTEMS, INC.:
/S/ ANATOLY TIKHMAN
--------------------------------------
Anatoly Tikhman
Address:
2501 16th Street
--------------------------------------
San Francisco, CA 94116
--------------------------------------
--------------------------------------
/S/ PHILIP JOHNSON
--------------------------------------
Philip Johnson
Address:
426 Hattie Road
--------------------------------------
Easley, SC 29642
--------------------------------------
--------------------------------------
/S/ JACOB GRAUDENZ
--------------------------------------
Jacob Graudenz
Address:
177 Wingate Street
--------------------------------------
Herzliya Pituach, Israel
--------------------------------------
--------------------------------------
THE SHAREHOLDER OF VERTISOFT
DIRECT, INC.:
/S/ ANATOLY TIKHMAN
--------------------------------------
Anatoly Tikhman
Address:
2501 16th Street
--------------------------------------
San Francisco, CA 94116
--------------------------------------
--------------------------------------
52
<PAGE> 1
EXHIBIT 99.2
ESCROW AGREEMENT
This Agreement is made and entered into as of this 18th day of July,
1996, by and among American Stock Transfer and Trust Company (the "Escrow
Agent"), Quarterdeck Corporation, a Delaware corporation ("Quarterdeck"), VSI
Acquisition Corporation, a California corporation ("Acquisition Sub"), each of
the shareholders of Vertisoft Systems, Inc., a California corporation (the
"Company" or "Surviving Corporation"), listed on the execution pages hereto
(individually, a "Shareholder" and, collectively, the "Shareholders"), and
Anatoly Tikhman in his capacity as the sole member of the Shareholders'
Committee (the "Committee").
W I T N E S S E T H:
WHEREAS, Quarterdeck, Acquisition Sub, the Company, the Shareholders
and Vertisoft Direct, Inc., a California corporation ("Vertisoft Direct"), have
entered into an Agreement and Plan of Reorganization, dated as of July 15, 1996
(collectively, with all amendments, schedules, exhibits and certificates
referred to therein, the "Reorganization Agreement"), which provides for the
merger of Vertisoft Direct with and into the Company and the subsequent the
acquisition of the Company by Quarterdeck by way of a merger (the "Merger");
and
WHEREAS, the Reorganization Agreement provides that on the effective
date of the Merger, certain shares of Quarterdeck's common stock, par value
$.001 per share ("Quarterdeck Common Stock"), to be issued in the Merger and
otherwise distributable to the Shareholders pursuant thereto will be deposited
in escrow with the Escrow Agent pursuant to this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained in the Reorganization Agreement and herein, the parties agree as
follows:
ARTICLE I
Escrow and Escrow Shares
1.1. ESCROW. Pursuant to the Reorganization Agreement and
subject to Sections 2.1 and 2.2 of this Agreement, ten percent (10%) of the
shares of Quarterdeck Common Stock issuable in the Merger shall be withheld pro
rata from all Shareholders in the Merger and shall be delivered into escrow to
the Escrow Agent on the effective date of the Merger (such shares to be
delivered into escrow are referred to herein as the "Escrow Shares"). There
are initially 349,999 Escrow Shares, and the initial number of Escrow Shares
beneficially owned by each Shareholder is set forth in EXHIBIT A attached
hereto. The Escrow Agent shall initially hold in escrow Quarterdeck Common
Stock certificates in the names of each of the Shareholders. The Escrow Shares
shall be held and distributed by the Escrow Agent in accordance with the terms
and conditions of this Agreement.
<PAGE> 2
ARTICLE II
Application of Escrow Shares
2.1. DISTRIBUTION OF ESCROW SHARES. The Escrow Shares
shall be held as a source of satisfaction of indemnification claims made by
Quarterdeck, Acquisition Sub, the Surviving Corporation and other indemnified
parties under Section 7.2 of the Reorganization Agreement (collectively, the
"Indemnified Parties" and, individually, an "Indemnified Party"). Within five
(5) business days after the earlier of (i) the date one year from the Closing
of the Merger, and (ii) the date the first audit of Quarterdeck's financial
statements which include the results of operations of the Company has been
completed and Quarterdeck has received a signed opinion from its independent
auditors certifying such financial statements, the Escrow Agent shall, upon
receipt of written notice from Quarterdeck, distribute to the Shareholders all
of the Escrow Shares then held in escrow pursuant to Article I hereof, less the
number of Escrow Shares (in whole shares) having an aggregate market value
(determined as provided in Article 7 of the Reorganization Agreement) most
nearly equal to the amount of any pending claims asserted by the Indemnified
Parties under the Reorganization Agreement, with the value of such pending
claims determined in good faith by the Board of Directors of Quarterdeck, after
taking into account such factors as the Board of Directors shall deem
appropriate, provided that if the Committee by prompt written notice to the
Escrow Agent does not agree with the Board of Directors' determination of the
amount of any such pending claims, the amount of any such pending claims shall
be finally determined in accordance with Section 2.4 of this Agreement. Each
Shareholder shall receive in such distribution the number of Escrow Shares then
held for his account less the number of his Escrow Shares subject to such
pending claims as determined under Section 2.2.
The Escrow Shares not so distributed pursuant to this Section
2.1 shall be retained in escrow by the Escrow Agent until all such pending
claims are resolved and the Escrow Agent receives written instructions from
Quarterdeck to distribute such Escrow Shares; provided, that upon the
disposition of any such claims prior to the disposition of all such claims, the
Escrow Agent shall, upon receipt of written instructions from Quarterdeck,
deliver to the Shareholders such number of Escrow Shares (in whole shares) as
is indicated in such written notice and as is most nearly equal to the excess
of the aggregate market value of the remaining Escrow Shares (determined as
provided in Article 7 of the Reorganization Agreement) over the amount of the
remaining unresolved and pending aggregate claims as determined above. The
number of Escrow Shares to be so distributed to each Shareholder shall be
determined in the same manner as that for the preceding paragraph.
2.2. PROCEDURE FOR INDEMNIFICATION OF QUARTERDECK AND THE
SURVIVING CORPORATION. If any Indemnified Party shall have any claim pursuant
to Section 7.2(a) of the Reorganization Agreement (including claims resulting
from the assertion of liability by third parties) for which it seeks recourse
against the Escrow Shares, it shall promptly give written notice thereof to the
Escrow Agent and the Committee, including in such notice a brief description of
the facts upon which such claim is based and the amount thereof. If the
Committee objects to the allowance of any such claims, it shall give written
notice to such Indemnified Party and the Escrow Agent within twenty (20) days
following receipt of such
<PAGE> 3
notice of claim, advising such Indemnified Party and the Escrow Agent that it
does not consent to the delivery of any or some of the Escrow Shares out of
escrow for application to such claims. If no such written notice is provided
by the Committee and received by such Indemnified Party and the Escrow Agent
within twenty (20) days following the Escrow Agent's receipt of such notice of
claim, the Escrow Agent shall, within five (5) business days after the
expiration of the prior notice period, deliver out of escrow to such
Indemnified Party the lesser of: (i) the number of the Escrow Shares (in whole
shares) that have an aggregate market value (determined as provided in Article
7 of the Reorganization Agreement) most nearly equal to the amount of the claim
or claims thus to be satisfied, or (ii) all of the Escrow Shares that are
subject to such claim. If the Committee provides such Indemnified Party and
the Escrow Agent with written notice within the foregoing twenty (20) day
period that the Committee objects to such application of the Escrow Shares
after a claim has been made, the Escrow Agent shall hold the number of the
Escrow Shares (in whole shares) that have an aggregate market value (determined
as provided in Article 7 of the Reorganization Agreement) most nearly equal to
the amount of the claim or claims then made in escrow until the rights of such
Indemnified Party and the Shareholders with respect thereto have been agreed
upon between the Committee and Quarterdeck in accordance with this Agreement
and the Escrow Agent receives written notice accordingly. If any distribution
referred to in this Section 2.2 in satisfaction of a claim under Section 7.2(a)
of the Reorganization Agreement involves fewer than all of the Escrow Shares,
the number of shares so distributed shall be deducted from the accounts of each
party having an ownership interest in the Escrow Shares pro rata based on the
number of Escrow Shares beneficially owned by each Shareholder (other than
Escrow Shares subject to pending claims under Section 7.2(b) of the
Reorganization Agreement) at the time of such distribution. The same procedure
as the foregoing shall apply to claims against a particular Shareholder under
Section 7.2(b) of the Reorganization Agreement, except that any distribution of
Escrow Shares in satisfaction of such a claim shall be made solely from Escrow
Shares held for the account of such Shareholder. Claims against the Escrow
Shares under Section 7.2(b) of the Reorganization Agreement shall be given
effect prior to claims under Section 7.2(a) of the Reorganization Agreement.
2.3. OWNERSHIP OF ESCROW SHARES; VOTING RIGHTS. The
Shareholders shall remain the registered owners of Escrow Shares while they are
held in escrow and shall retain the right to vote the Escrow Shares and receive
distributions thereon and the obligations to pay all taxes, assessments, and
charges with respect thereto, but the Shareholders shall not have the right to
sell, transfer, pledge, hypothecate or otherwise dispose of any Escrow Shares;
provided, that any distribution of stock of Quarterdeck on or with respect to
the Escrow Shares and any other shares or securities into which such Escrow
Shares may be changed or for which they may be exchanged pursuant to corporate
action of Quarterdeck affecting holders of Quarterdeck Common Stock generally
shall be delivered to the Escrow Agent and upon such delivery and receipt, held
in escrow and shall be subject to the indemnity and escrow provisions of
Article 7 of the Reorganization Agreement. All amounts earned and received
into escrow on the Escrow Shares (dividends or other distributions) shall be
distributed pro rata to the Shareholders from time to time upon the written
request of the Committee, and the Escrow Agent shall be reimbursed by
Quarterdeck for the reasonable cost of such distribution. The Escrow Agent
shall have no responsibility or liability for shares or property not delivered
and received by it.
<PAGE> 4
2.4 ARBITRATION. Any controversy involving a claim by
Quarterdeck pursuant to Article 7 of the Reorganization Agreement or this
Agreement or a claim by any Shareholder pursuant to Article 7 of the
Reorganization Agreement or this Agreement shall be finally settled by
arbitration in Los Angeles, California, in accordance with the then-current
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Such arbitration shall be conducted by three
arbitrators chosen by mutual agreement of the Committee and Quarterdeck.
Failing such agreement, the arbitration shall be conducted in accordance with
the foregoing rules. There shall be limited discovery prior to the arbitration
hearing, subject to the discretion of the arbitrators, as follows: (a) exchange
of witness lists and copies of documentary evidence and documents related to or
arising out of the issues to be arbitrated, (b) depositions of all party
witnesses, and (c) such other depositions as may be allowed by the arbitrators
upon a showing of good cause. Depositions shall be conducted in accordance
with the California Code of Civil Procedure. The cost and expenses (including
counsel fees) of the prevailing party or parties with respect to any such
arbitration shall be borne by the other party or parties.
ARTICLE III
Authority and Indemnification
3.1 AUTHORITY. Upon consummation of the Merger and in
consideration of issuance of the Escrow Shares, each Shareholder shall be
deemed to have irrevocably appointed the Committee as their attorneys in fact
to contest, settle, compromise or otherwise dispose of any claim made by
Quarterdeck in accordance with this Agreement. No further documentation shall
be required to evidence such appointment, and such power of attorney shall be
coupled with an interest, thereby confirming such appointment as irrevocable.
Anatoly Tikhman, in his capacity as sole member of the Committee, shall be
empowered to act in his sole discretion with respect to all matters arising
under this Agreement.
3.2 INDEMNITY. The Committee member shall not be liable
to anyone whatsoever by reason of any error of judgment or for any act done or
step taken or omitted by him in good faith or for any mistake of fact or law
for anything which he may do or refrain from doing in connection herewith
unless caused by or arising out of his own gross negligence or willful
misconduct. Each Shareholder shall, jointly and severally, indemnify and hold
the Committee member harmless from any and all liability and expense
(including, without limitation, counsel fees) that may arise out of any action
taken or omitted by him as the Committee member in accordance with this
Agreement, as the same may be amended, modified or supplemented, except such
liability and expense as may result from the gross negligence or willful
misconduct of the Committee member.
3.3 RELIANCE. The Committee member shall be entitled to
treat as genuine any letter, paper, facsimile, telex, or other document
furnished or caused to be furnished to it by any party to this Agreement and
believed by him to be genuine and to have been telexed, telegraphed, faxed, or
cabled or signed and presented by any party to this Agreement.
<PAGE> 5
3.4. REPLACEMENT OF MEMBER. If the undersigned Committee
member shall die, become disabled or otherwise be unable or unwilling to
fulfill his responsibilities hereunder, such member or the representative of
such member's estate shall select a replacement member or members. The Escrow
Agent shall be notified in writing of any change in the composition of the
Committee by such replacement member(s).
ARTICLE IV
ESCROW AGENT
4.1. DUTIES AND OBLIGATIONS. The duties and obligations
of the Escrow Agent are exclusively set forth in this Agreement, as each may
from time to time be amended. The Escrow Agent may request and rely upon, and
shall be protected in acting or refraining from acting upon, any written
notice, request, waiver, consent, receipt or other paper or document from
Quarterdeck, the Company, or the Committee member, not only as to its due
execution and the validity and effectiveness of its provisions, but also as to
the truth of any information therein contained, that the Escrow Agent in good
faith believes to be genuine and as to which the Escrow Agent shall have no
actual notice of invalidity, lack of authority or other deficiency.
The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith, or
for any mistake of fact or law, for anything which it may do or refrain from
doing in connection therewith, except for any liability arising from its own
gross negligence or willful misconduct.
The Escrow Agent shall be entitled to consult with competent
and responsible counsel of its choice with respect to the interpretation of the
provisions hereof, and any other legal matters relating hereto, and shall be
fully protected in taking any action or omitting to take any action in good
faith in accordance with the advice of such counsel. The Escrow Agent shall be
entitled to request written instructions from Quarterdeck or the Committee as
the case may be, and shall have the right to refrain from acting until it has
received such written instructions.
No provision in this Agreement or in the Reorganization
Agreement shall require the Escrow Agent to risk or expend its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder; provided that the Escrow Agent will be promptly paid or reimbursed
by Quarterdeck upon request for any and all expenses, fees, costs,
disbursements and/or advances which may be incurred or made by it in accordance
with the provisions hereof (including reasonable compensation, and any expenses
and disbursements of Escrow Agent's counsel, and all agents not regularly in
Escrow Agent's employ).
4.2. RISK OF LOSS. The Escrow Agent acknowledges and
agrees that the Escrow Agent bears the exclusive risk of loss, theft or damage
with respect to the Escrow Shares in its possession.
4.3. ESCROW AGENT'S COMPENSATION. Quarterdeck shall pay
to the Escrow Agent compensation in respect of the Escrow Agent's duties and
obligations under this Agreement. Upon the execution of this Agreement and the
delivery of the Escrow Shares to the Escrow Agent, the Escrow Agent shall be
entitled to a one-time escrow fee of [$1,000]; provided
<PAGE> 6
that in the event that the escrow contemplated by this Agreement remains in
effect after the one (1) year anniversary of the consummation of the Merger,
then the Escrow Agent shall be entitled to receive from Quarterdeck such
additional escrow fees as the parties may agree.
4.4. RESIGNATION. The Escrow Agent may resign at any time
by giving not less than sixty (60) days written notice thereof to each of
Quarterdeck and the Committee.
4.5. SUCCESSOR ESCROW AGENT. Upon receipt of the Escrow
Agent's notice of resignation, Quarterdeck and the Committee may appoint a
successor escrow agent. Upon the acceptance of the appointment as escrow agent
hereunder by a successor escrow agent and the transfer to such successor escrow
agent of the Escrow Shares, the resignation of the Escrow Agent shall become
effective and the Escrow Agent shall be discharged from any future duties and
obligations under this Agreement.
4.6. CONFLICTING DEMANDS. If on or before the close of
escrow the Escrow Agent receives or becomes aware of any conflicting demands or
claims with respect to the Escrow Shares or the rights of any of the parties
hereto to such Escrow Shares, the Escrow Agent shall have the right to
discontinue any or all further acts on the Escrow Agent's part until such
conflict is resolved to the Escrow Agent's satisfaction, and the Escrow Agent
shall have the right to commence or defend any action or proceedings for the
determination of such conflict. In the event any of the above-described events
occur, each of Quarterdeck, on the one hand, and the Shareholders (pro rata
based on the number of shares of Quarterdeck Common Stock issued to the
Shareholders in connection with the Merger), on the other hand, agree to pay
one half of all costs, damages, judgments and expenses, including reasonable
attorneys fees, suffered or incurred by the Escrow Agent in connection with, or
arising out of, such conflicting demands or claims, including, without
limitation, a suit in interpleader brought by the Escrow Agent.
4.7. INDEMNITY. Except with respect to Quarterdeck's
obligation to pay the Escrow Agent's compensation as provided in Section 4.3,
the Shareholders and Quarterdeck hereby agree to jointly and severally
indemnify the Escrow Agent for, and to hold it harmless against, any loss,
liability or expense arising out of or in connection with this Agreement and
carrying out its duties hereunder, including the costs and expenses of
defending itself against any claim or liability, except in those cases where
the Escrow Agent has been guilty of gross negligence or willful misconduct.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Escrow Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including, but not limited to, lost profits),
even if the Escrow Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action.
ARTICLE V
Miscellaneous
5.1. NOTICES. Unless otherwise provided, all notices or
other communications required or permitted to be given to the parties hereto
shall be in writing and shall be deemed to have been given if personally
delivered, including personal delivery by facsimile, provided that the sender
receives telephonic or electronic confirmation that the facsimile was received
by the recipient and that such facsimile is followed the same day by mailing by
certified or registered
<PAGE> 7
mail, return receipt requested, first class postage prepaid (a "Mailing"), upon
receipt of courier delivery or the third day following a Mailing, addressed as
follows (or at such other address as the addressed party may have substituted
by notice pursuant to this Section 5.1):
(a) If to Quarterdeck or Acquisition Sub:
Quarterdeck Corporation
13160 Mindanao Way, 3rd Floor
Marina del Rey, CA 90292
Attention: Bradley D. Schwartz, Esq.
Facsimile: (310) 309-4218
(b) If to the Committee, to their respective addresses
set forth below their respective names on the execution pages hereto.
with a copy to:
Donald C. Reinke, Esq.
Pezzola & Reinke, APC
1999 Harrison Street, Suite 1300
Oakland, California 94612
Facsimile: (510) 834-7440
(c) If to the Escrow Agent:
American Stock Transfer and Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Attention: Ms. Paula Magno
Facsimile: (718) 921-8331
5.2. TERMINATION. This Agreement shall terminate upon the
mutual written express agreement of Quarterdeck and the Committee. In any
event, this Agreement shall terminate when all of the Escrow Shares have been
distributed according to its terms.
5.3. INTERPRETATION. The validity, construction,
interpretation and enforcement of this Agreement shall be determined and
governed by the laws of the State of California. The invalidity or
unenforceability of any provision of this Agreement or the invalidity or
unenforceability of any provision as applied to a particular occurrence or
circumstance shall not affect the validity or enforceability of any of the
other provisions of this Agreement or the applicability of such provision, as
the case may be. In the event of a conflict between the terms of this
Agreement and the Reorganization Agreement, the terms of the Reorganization
Agreement shall govern. All capitalized terms used in this Agreement, unless
otherwise defined herein, shall have the meanings ascribed to them in the
Reorganization Agreement. No party hereto, nor its respective counsel, shall
be deemed the drafter of this Agreement for purposes of
<PAGE> 8
construing the provisions of this Agreement, and all provisions of this
Agreement shall be construed in accordance with their fair meaning, and not
strictly for or against any party hereto.
5.4. COUNTERPARTS. This Agreement may be signed in two or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one agreement.
5.5. TRANSFER OF INTERESTS. None of the Shareholders
shall sell, transfer, pledge, hypothecate or otherwise dispose of any Escrow
Shares, or any interest therein prior to the distribution of such Escrow Shares
in accordance with Section 2.1 above.
5.6. TAXES. For purposes of federal and state income
taxation, the Escrow Shares shall be treated as owned by the Shareholders and
this Agreement shall be interpreted in a manner to effect the Shareholders'
ownership of the Escrow Shares for such tax purposes.
<PAGE> 9
IN WITNESS WHEREOF, the parties have signed this Agreement on the day
and year first above written.
AMERICAN STOCK TRANSFER AND TRUST
COMPANY, as Escrow Agent
By: /s/ HERBERT J. LEMMER
---------------------------------------
Name: Herbert J. Lemmer
Title: Vice President
QUARTERDECK CORPORATION, a Delaware
corporation
By: /s/ BRADLEY D. SCHWARTZ
---------------------------------------
Name: Bradley D. Schwartz
Title: Secretary and Senior Vice
President
VERTISOFT SYSTEMS, INC.
a California corporation
By /s/ ANATOLY TIKHMAN
---------------------------------------
Name: Anatoly Tikhman
Title: President
THE SHAREHOLDERS:
/S/ ANATOLY TIKHMAN
------------------------------------------
Anatoly Tikhman
/S/ PHILIP JOHNSON
-----------------------------------------
Philip Johnson
/S/ JACOB GRAUDENZ
------------------------------------------
Jacob Graudenz
<PAGE> 10
THE COMMITTEE:
/S/ ANATOLY TIKHMAN
------------------------------------------
Anatoly Tikhman
Address: 2501 16th Street
-------------------------------------------
San Francisco, CA 94116
-------------------------------------------
-------------------------------------------
<PAGE> 11
EXHIBIT A
INITIAL ESCROW SHARES OWNED BY SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDERS NO. OF ESCROW SHARES
------------ --------------------
<S> <C>
Anatoly Tikhman 244,221
Philip Johnson 83,221
Jacob Graudenz 22,557
</TABLE>
<PAGE> 1
EXIBIT 99.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of June 18, 1996, by and among Quarterdeck Corporation, a
Delaware corporation (the "Company"), Anatoly Tikhman, an individual, Philip
Johnson, an individual, and Jacob Graudenz, an individual (Messrs. Tikhman,
Johnson and Graudenz are hereinafter referred to as the "Holders").
WHEREAS, each Holder is or will become the owner of Shares (as
defined below) in connection with the acquisition of Vertisoft Systems, Inc.,
California corporation ("Vertisoft") and Vertisoft Direct, Inc., a California
corporation ("Vertisoft Direct"), by the Company, by way of (i) the merger of
Vertisoft Direct and Vertisoft, Inc. into Vertisoft, and (ii) the subsequent
merger (the "Merger") of VSI Acquisition Corporation, a California corporation
("VSI"), into Vertisoft, pursuant to the terms of the Agreement and Plan of
Reorganization, dated as of June __, 1996 (the "Acquisition Agreement"), by and
among the Company, Vertisoft, Vertisoft Direct, VSI and the Holders; and
WHEREAS, pursuant to the terms of the Acquisition Agreement,
the Company has agreed to grant to the Holders the registration rights provided
for below.
NOW, THEREFORE, the parties hereto, in consideration of the
foregoing, the mutual covenants and agreements set forth in the Acquisition
Agreement and hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the
following capitalized defined terms shall have the following meanings:
"Common Shares" shall mean shares of common stock, par value $.001 per share,
of the Company.
"Demand Registration Statement" shall mean a
registration statement filed by the Company pursuant to Section 2(b) of this
Agreement.
"Person" shall mean an individual or a corporation,
partnership, limited liability company, association, trust, or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Prospectus" shall mean any prospectus included in
the Registration Statement, including any resale prospectus and any preliminary
prospectus, and any amendment or supplement thereto, and in each case including
all material incorporated by reference therein.
"Registration Expenses" shall mean any and all
expenses incident to performance of or compliance with this Agreement,
including, without limitation: (i) all applicable registration and filing fees
imposed by the SEC and such securities exchange or exchanges on which Common
Shares are then listed or the National Association of Securities
<PAGE> 2
Dealers, Inc. (the "NASD"); (ii) all fees and expenses incurred in connection
with compliance with state securities or "blue sky" laws (including reasonable
fees and disbursements of counsel for the Company in connection with
qualification of any of the Shares under any state securities or blue sky laws
and the preparation of a blue sky memorandum) and compliance with the rules of
the NASD; (iii) all expenses of any Persons in preparing or assisting in
preparing, printing and distributing the Registration Statement, any
Prospectus, certificates and other documents relating to the performance of and
compliance with this Agreement; (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Shares on any securities
exchange or exchanges pursuant to Section 3(i) hereof; and (v) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses relating to any special
audits or "cold comfort" letters required by or incident to such performance
and compliance. Registration Expenses shall specifically exclude underwriting
discounts and commissions, the fees and disbursements of counsel representing a
Holder and transfer taxes, if any, relating to the sale or disposition of
Shares by a Holder.
"Registration Statement" shall mean the Demand
Registration Statement or the Shelf Registration Statement, as applicable.
"SEC" shall mean the Securities and Exchange
Commission or any successor entity.
"Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
"Shares" shall mean the Common Shares issued to the
Holders in the Merger and any equity securities issued or issuable directly or
indirectly with respect to the Common Shares issued to the Holders in the
Merger by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization.
"Shelf Registration Statement" shall mean the
registration statement filed by the Company pursuant to Section 2(a) of this
Agreement.
2. REGISTRATION UNDER THE SECURITIES ACT.
(a) Shelf Registration.
(i) Subject to Section 6(b) below, the
Company shall file a registration statement on Form S-3 or an amendment to an
existing registration statement on Form S-3 (the "Shelf Registration
Statement"), within 30 days following the closing of the Merger, registering
the resale by the Holders of [UP TO 50% OF] the Shares held by them, and shall
use its best efforts to cause the Registration Statement to be declared
effective by the SEC as soon as practicable thereafter. The Company agrees to
use its best efforts to keep the Registration Statement continuously effective
(and to include a Prospectus at all times meeting the requirements of the
Securities Act) for a period of two years from the closing of the Merger;
provided, however, that if the holding period referred to in Rule 144(d)(1) of
the rules and
2
<PAGE> 3
regulations promulgated under the Securities Act is reduced from two years to
one year, then the Company shall only be required to use its best efforts to
maintain such registration in effect for a period of one year from the closing
of the Merger (such two or one year period is referred to as the "Shelf
Period") .
(ii) If the Holders desire different
methods of distribution of the Shares included in the Registration Statement,
the method of distribution shall be determined by the Holders of a majority of
the Shares then outstanding.
(iii) The Holders acknowledge that the
holders of shares of Common Stock issuable and issued upon conversion of the
Company's 6.0% Convertible Senior Subordinated Notes due 2001 (the "Notes")
shall be entitled to participate in the registration contemplated by Section
2(a), subordinate to the rights of the Holders to participate therein, but pro
rata with all other holders of shares of Common Stock to be included in any
such Registration, if such registration statement relates to an underwritten
offering and if, in the opinion of the managing underwriter of any such
underwritten registration such shares may be included in such registration
without having an adverse effect on the marketability or the price of any
shares of Common Stock proposed to be offered by the Holders in such
underwritten registration. Additionally, the Holders shall not be entitled to
participate in any shelf registration requested by the holders of Common Stock
issued upon conversion of the Notes, as provided in that certain Note Agreement
dated as of March 1, 1996 relating to the Notes.
(b) Demand Registration. The Holders
representing a majority of the Shares may on one occasion request that the
Company effect a registration with respect to all or a part of the Shares at
any time during the Shelf Period if (i) the Company is ineligible to use Form
S-3 or (ii) one or more other events has caused there to be a Suspension Event
for 75 days out of any 180 day period. The Company will promptly give written
notice of the proposed registration to all other Holders and as soon as
practicable, use its best efforts to effect such registration (including,
without limitation, filing pre- and post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with the Securities Act) as would permit or facilitate
the sale and distribution of all or such portion of such Shares as are
specified in such request, together with all or such portion of the Shares of
any Holder or Holders joining in such request as are specified in a written
request received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered. The Company shall file a
registration statement covering the Shares so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
(i) The right of any Holder to
registration pursuant to this Section 2(b) if such is an underwritten public
offering shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Shares in the underwriting to
the extent provided herein. A Holder may elect to include in such underwriting
all or a part of the Shares such Holder holds.
3
<PAGE> 4
(ii) The Company shall (together with all
Holders and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such
underwriting by a majority in interest of the Holders, which underwriters shall
be reasonably acceptable to the Company.
(iii) The Holders acknowledge that the
holders of shares of Common Stock issuable and issued upon conversion of the
Notes shall be entitled to participate in the registration requested pursuant
to this Section 2(b), subordinate to the rights of the Holders to participate
therein, but pro rata with all other holders of shares of Common Stock to be
included in any such Registration
(c) Expenses. The Company shall pay all
Registration Expenses in connection with a registration pursuant to this
Agreement. [Each Holder shall pay all underwriting discounts and commissions
relating to such Holder's Shares, the fees and disbursements of counsel
representing such Holder and transfer taxes, if any, relating to the sale or
disposition of Shares by such Holder.]
3. REGISTRATION PROCEDURES. In connection with the
obligations of the Company under Section 2 hereof, the Company shall:
(a) prepare and file with the SEC, within the
time period set forth in Section 2 hereof, and use its best efforts to have
declared effective by the SEC, the Registration Statement, which shall (i) be
available for public resale of the Shares by the selling Holders, and (ii)
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith;
(b) (i) use its best efforts to prepare and file
with the SEC such amendments to the Registration Statement as may be necessary
to keep it effective for the applicable period; (ii) cause any Prospectus to be
amended or supplemented as required and to be filed as required by Rule 424 or
any similar rule that may be adopted under the Securities Act; (iii) respond as
promptly as practicable to any comments received from the SEC with respect to
the Registration Statement or any amendment thereto; and (iv) comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the
selling Holders;
(c) furnish to each Holder, upon request and
without charge, as many copies of any Prospectus and any amendment or
supplement thereto as such Holder may request in order to facilitate the public
sale or other disposition of the Shares;
(d) use its best efforts to register or qualify
the Shares under all applicable state securities or blue sky laws of such
jurisdictions in the United States and its territories and possessions as any
Holder may reasonably request in writing and keep such registration or
qualification effective during the period the Registration Statement is
required to be kept effective; provided, however, that in connection therewith,
the Company shall not be
4
<PAGE> 5
required to (i) qualify as a foreign corporation to do business or to register
as a broker or dealer in any such jurisdiction where it would not otherwise be
required to qualify or register but for this Section 3(d), (ii) subject itself
to taxation in any such jurisdiction with respect to such registration or
qualification, or (iii) file a general consent to service of process in any
such jurisdiction;
(e) notify each Holder promptly and, if requested
by a Holder, confirm in writing, (i) when the Registration Statement and any
post-effective amendments thereto have become effective, (ii) when any
amendment or supplement to a Prospectus has been filed with the SEC, (iii) of
the issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of the Registration Statement or any part thereof
or the initiation of any proceedings for that purpose, (iv) if the Company
receives any notification with respect to the suspension of the qualification
of the Shares for offer or sale in any jurisdiction or the initiation of any
proceeding for such purpose, and (v) of the happening of any event during the
period the Registration Statement is effective as a result of which (A) the
Registration Statement contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or (B) a Prospectus as then amended
or supplemented contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(f) use best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement by the SEC
or any state securities authority as promptly as possible;
(g) furnish to each Holder upon request, without
charge, at least one conformed copy of the Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Shares to be sold
and not bearing any Securities Act legend and enable certificates for such
Shares to be issued for such numbers of Shares and registered in such names as
the Holders may reasonably request;
(i) use its best efforts to cause all Shares to
be listed on any securities exchange on which the Common Shares are then
listed, or included in the NASD Automatic Quotation System if the Common Shares
are then so included; and
(j) use its best efforts to make available
adequate current public information about the Company as contemplated by Rule
144(c) promulgated under the Securities Act.
4. CERTAIN AGREEMENTS OF HOLDERS.
(a) Each Holder agrees to furnish to the Company
in writing such information regarding the Holder and his proposed distribution
of Shares as the Company may
5
<PAGE> 6
from time to time reasonably request in connection with the preparation of the
Registration Statement or the registration or qualification of the Shares under
state securities or blue sky laws, and report to the Company within ten (10)
days after the end of each month all sales or other dispositions of Shares made
by such Holder during such month.
(b) Each Holder who executes this Agreement
agrees, if requested by the Company in the case of a Company initiated
nonunderwritten offering or if requested by the managing underwriter or
underwriters in an underwritten offering initiated by the Company or by a
shareholder of the Company pursuant to demand registration rights, not to
effect any public sale or distribution of any Shares (including a sale pursuant
to Rule 144 under the Securities Act), except as part of such Company initiated
registration, during the ten (10) day period prior to, and during the ninety
(90) day period beginning on, the date of effectiveness of each Company
initiated offering made pursuant to a registration statement, to the extent
timely notified in writing by the Company or the managing underwriters.
5. INDEMNIFICATION, CONTRIBUTION.
(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Holder and its officers and
directors and partners and each Person, if any, who controls any Holder within
the meaning of Section 15 of the Securities Act, as follows:
(i) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to which such Holder,
partner, officer, director or controlling Person may become subject under the
Securities Act or otherwise (A) that arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or any amendment thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or (B) that arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or alleged untrue
statement, any omission or alleged omission, if such settlement is effected
with the written consent of the Company; and
(iii) subject to the limitations set forth
in Section 5(c), against any and all expense (including reasonable fees and
disbursements of counsel) reasonably incurred in investigating, preparing or
defending against any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether or
not a party, or any claim whatsoever based upon any such untrue statement or
alleged
6
<PAGE> 7
untrue statement, omission or alleged omission that relates to the sale by a
Holder of Shares under a Registration Statement, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section
5(a)(i), (ii) and (iii) shall not apply to any Holder with respect to any loss,
liability, claim, damage or expense that arises out of or is based upon (1) any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by such Holder expressly for use in the Registration Statement or
any amendment thereto or a Prospectus or any amendment or supplement thereto or
(2) trades made by such Holder in violation of Section 6(a) below.
(b) Indemnification by Holders. Each Holder
severally, in proportion of the number of Shares sold and to be sold by the
Holder pursuant to such Registration Statement, agrees to indemnify and hold
harmless the Company and the other Holders, and each of their respective
directors, officers and partners (including each director of the Company and
each officer of the Company who signed any Registration Statement), and each
Person, if any, who controls the Company or any other Holder within the meaning
of Section 15 of the Securities Act, to the same extent as the indemnity
contained in Section 5(a) hereof, but only insofar as such loss, liability,
claim, damage or expense arises out of or is based upon (i) any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement or any amendment thereto or a Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with written
information prepared and furnished to the Company by the indemnifying Holder
expressly for use therein or (ii) trades made by the indemnifying Holder in
violation of Section 6(a) below; provided, that, in the case of the
indemnifying Holder's obligation set forth in this Section 5(b) relating to
Section 5(b)(ii) above, such settlement must be effected with the written
consent of such Holder.
(c) Conduct of Indemnification Proceedings. Each
indemnified party shall give reasonably prompt notice to each indemnifying
party of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party (i) shall not relieve it from any liability that it may have under the
indemnity agreement provided in Section 5(a) or (b) above, unless and to the
extent it did not otherwise learn of such action and the lack of notice by the
indemnified party materially prejudices the indemnifying party or results in
the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) shall not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided under Section 5(a) or (b) above. After receipt of such notice, the
indemnifying party shall be entitled to participate in and, at its option,
jointly with any other indemnifying party so notified, to assume the defense of
such action or proceeding at such indemnifying party's own expense with counsel
chosen by such indemnifying party and approved by the indemnified party or
parties, which approval shall not be unreasonably withheld; provided, however,
that, if the defendants in any such action or proceeding include both an
indemnified party and an indemnifying party and the indemnified party
reasonably determines, upon advice of counsel, that a conflict of interest
exists or that there may be legal defenses available to it or other
7
<PAGE> 8
indemnified parties that are different from or in addition to those available
to the indemnifying parties, then the indemnified parties shall be entitled to
counsel (which shall be limited to a single law firm for all indemnified
parties) the reasonable fees and expenses of which shall be paid by the
indemnifying parties. If none of the indemnifying parties assumes the defense
of any such action or proceeding, after having received the notice referred to
in the first sentence of this paragraph, the indemnifying parties will pay the
reasonable fees and expenses of counsel (which shall be limited to a single law
firm for all indemnified parties) for the indemnified parties. In such event,
however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party, which consent shall not
be unreasonably withheld. If one or more of the indemnifying parties assumes
the defense of any such action or proceeding in accordance with this paragraph,
such indemnifying party shall not be liable for any fees and expenses of
counsel for the indemnified parties incurred thereafter in connection with such
action or proceeding except as set forth in the proviso in the second sentence
of this Section 5(c).
(d) Contribution.
(i) In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in this Section 5 is for any reason held to be unenforceable
although applicable in accordance with its terms, the indemnifying parties
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
indemnified party, in such proportion as is appropriate to reflect the relative
fault of and benefits to each indemnifying party and each indemnified party in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits to the indemnifying parties
and indemnified parties shall be determined by reference to, among other
things, the total proceeds received and to be received by each indemnifying
party and indemnified party in connection with the offering to which such
losses, claims, damages, liabilities or expenses relate. The relative fault of
each indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
access to information and opportunity to correct or prevent such action.
(ii) The parties hereto agree that it
would not be just or equitable if contribution pursuant to this Section 5(d)
were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 5(d)(i) above.
(iii) Notwithstanding the foregoing, no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 5(d), each Person, if any, who controls a Holder within the meaning of
Section 15 of the Securities Act and directors, officers and partners of a
Holder shall have the same rights to contribution as such Holder, and each
director of the Company, each officer of the
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Company who signed the Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
(e) Notwithstanding any term or condition to the
contrary, the liability of any Holder pursuant to this Section 5 shall be
limited to the gross proceeds received by such Holder as a result of the sale
giving rise to the liability.
(f) The obligations of the Company and the
Holders under this Section 5 shall survive the completion of any offering of
the Shares pursuant to any Registration Statement.
6. SUSPENSION OF REGISTRATION REQUIREMENT.
(a) Each Holder agrees that he, she or it will
not effect any sales of Shares pursuant to a Registration Statement after such
Holder has received notice from the Company to suspend sales as a result of the
occurrence or existence of any Suspension Event (as defined in Section 6(b)
below) until the Company provides notice to such Holder that all Suspension
Events have ceased to exist.. The Company shall notify each Holder promptly
after any Suspension Event occurs or ceases to exist. In addition, each Holder
agrees that he, she or it will not effect any sales of Shares pursuant to the
Registration Statement after such Holder has received notice from the Company
to suspend sales because the Registration Statement, any Prospectus or any
supplement thereto contains an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, until
the Company notifies such Holder that the misstatement or omission has been
corrected.
(b) Notwithstanding anything to the contrary set
forth in this Agreement, the Company's obligation to file a Registration
Statement and make any filings with any state securities authority, to use its
best efforts to cause a Registration Statement or any state securities filings
to become effective, or to amend or supplement a Registration Statement or any
state securities filings shall be temporarily suspended in the event of and
during a Suspension Event. A "Suspension Event" shall exist at such times (i)
that the Company is not eligible to use Form S-3 for the registration
contemplated by Section 2(a) hereof or (ii) as circumstances exist that the
Company determines make it impractical or inadvisable for the Company to file,
amend or supplement a Registration Statement or such filings or to cause a
Registration Statement or such filings to become effective (such circumstances
to include, without limitation, (A) the Company conducting an underwritten
primary offering and being advised by the underwriters that sale of Common
Shares under the Registration Statement would have a material adverse effect on
the Company's 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 a Registration Statement (or any other document incorporated
into a Registration Statement by reference) or such state securities filings
and (y) as to which the Company has a bona fide business purpose for preserving
confidentiality or which renders the Company unable to comply with SEC
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requirements). Suspension of the Company's obligations pursuant to this
Section 6(b) shall continue only for so long as a Suspension Event or its
effect is continuing
7. MISCELLANEOUS.
(a) Amendments and Waivers. The provisions of
this Agreement, including the provisions of this sentence, may not be amended,
modified, supplemented or waived, nor may consent to departures therefrom be
given, without the written consent of the Company and the Holders of 50% of the
Shares then held by the Holders.
(b) Notices. Unless otherwise provided, all
notices and other communications required or permitted to be given to the
parties hereto shall be made in writing and shall be deemed to have been given
if personally delivered, including personal delivery by facsimile, provided
that the sender receives telephonic or electronic confirmation that the
facsimile was received by the recipient and that such facsimile is followed the
same day by mailing by certified or registered mail, return receipt requested,
first class postage prepaid (a "Mailing"), or the third day following a
Mailing, (i) if to a Holder, at such Holder's registered address appearing on
the share register of the Company or (ii) if to the Company, at 13160 Mindanao
Way, 3rd Floor, Marina del Rey, California, 90292-9705, Attention: Law
Department.
(c) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and the
respective successors and assigns of the Company. This Agreement shall not be
assignable by the Holders of the Shares without the prior written consent of
the Company, which consent may be withheld at the Company's sole discretion.
Any approved assignee of a Holder of Shares shall be required to agree to be
bound by the terms of this Agreement and shall be entitled to participate in
the Shelf Registration Statement only as of such time after the assignment that
the Company is otherwise amending the Shelf Registration Statement and such
amended Shelf Registration Statement becomes effective.
(d) Counterparts. This Agreement may be executed
in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(e) Headings and Interpretation. The headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof. In construing the meaning of this
Agreement, no party hereto shall be deemed the drafter of this Agreement and
this Agreement shall be construed according to its fair meaning and not
strictly against any person as the drafter hereof.
(f) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California without giving effect to the conflicts of law provisions thereof.
(g) Entire Agreement. This Agreement is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the
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agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior oral and written
agreements and understandings and all contemporaneous written agreements and
understandings between the parties with respect to such subject matter.
(h) Attorneys' Fees. In the event of any suit or
other proceeding to construe or enforce any provision of this Agreement, or
otherwise in connection with this Agreement, the prevailing party's or parties'
reasonable attorneys' fees and costs (in addition to all other amounts and
relief to which such party or parties may be entitled) shall be paid by the
other party or parties.
(i) Default / Specific Performance. If, because
of the Company's breach or default, the registration of the Shares is not
completed pursuant to the provisions hereof, the Holders shall have all
remedies at law or in equity, including, without limitation, specific
performance of the Company's obligations under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
QUARTERDECK CORPORATION
By: /s/ BRADLEY D. SCHWARTZ
----------------------------
Name: Bradley D. Schwartz
Title: Secretary and Senior
Vice President
HOLDERS:
/s/ ANATOLY TIKHMAN
----------------------------------
Anatoly Tikhman
/s/ PHILIP JOHNSON
----------------------------------
Philip Johnson
/s/ JACOB GRAUDENZ
----------------------------------
Jacob Graudenz
<PAGE> 1
EXHIBIT 99.4
QUARTERDECK REINFORCES ITS POSITION IN THE UTILITIES ARENA AND BROADENS ITS
DISTRIBUTION CHANNEL
COMPANY ACQUIRES VERTISOFT, A LEADING UTILITIES DEVELOPER AND MARKETER
MARINA DEL REY, Calif., July 18 /PRNewswire/ -- Quarterdeck
Corporation (Nasdaq: QDEK) today announced the acquisition of Vertisoft
Systems, Inc., a developer and publisher of innovative utility software and a
leading direct mail marketer, for 3.5 million shares of Quarterdeck common
stock. The acquisition will be treated as a "pooling of interest" for
accounting purposes. Vertisoft has a 12 month trailing revenue of
approximately $16 million. The acquisition is expected to be accretive to
Quarterdeck's earnings per share.
"The advanced technology of Vertisoft combined with our own leading
software solutions not only strengthen our position in the utilities category,
but also fuels the growth of the company and helps the return to
profitability," said Gaston Bastiaens, president and CEO of Quarterdeck.
"Adding the direct mail operation of Vertisoft to the telemarketing
capabilities of Quarterdeck Select enhances our distribution by providing a new
channel for selling Internet and utilities products."
Among the products Quarterdeck will acquire is newly-released
Fix-It(R), a feature rich troubleshooting utility that automatically finds
software conflicts and hardware configuration errors in PCs running Windows 95,
and fixes them with a simple click of a button. The product is the first in
its class with a knowledge base of more than 1,000 Windows 95, 3.x and DOS
applications. Fix-It complements WINProbe, Quarterdeck's hardware diagnostic
software, giving users a complete hardware and software troubleshooting system.
Other products Quarterdeck will add to its product line are Remove-It,
a comprehensive application removal utility; Vertisoft Zip-It, a
"drag-and-drop" Windows file compression utility; and Name-It, a seamless
method to use long filenames in Windows 3.x applications running under Windows
95.
"Our dynamic and responsive development staff will be a perfect
complement to Quarterdeck's line of utility and Internet software," said
Anatoly Tikhman, president and co-founder of Vertisoft. "We believe that
Fix-It, in particular, is the best solution for user frustration, lost time and
productivity through crashes and application errors."
Vertisoft and its employees will continue to operate in the San
Francisco Bay area and in South Carolina. Tikhman will assume the role of
senior vice president and general manager of the Utilities Division of
Quarterdeck Corporation and will lead the worldwide direct mail operation.
Alex Eckelberry, current vice president of the Utilities Division, has been
promoted to vice president of World Wide Marketing.
<PAGE> 2
ABOUT VERTISOFT
Vertisoft, formerly a privately-held corporation, markets its
utilities software products through major retailers and direct mail in the U.S.
and Canada. Remove-It and Vertisoft Zip-It have consistently ranked in the top
best-selling utilities products. Last year Vertisoft mailed over 20 million
pieces of direct mail featuring its products as well as a selection from other
software publishers.
ABOUT QUARTERDECK
Quarterdeck Corporation is a pioneer in the development of software
products in two strategic business areas: Utilities and the Internet. The
company has led the industry in bringing utilities solutions to the Windows and
DOS environments. The company also offers an entire line of powerful,
next-generation Internet tools for corporate, small business and individual
users.
Quarterdeck Corporation's headquarters are located at 13160 Mindanao
Way, Marina del Rey, CA 90292. The Dublin, Ireland office serves as its
European headquarters, with offices in England, France, and Australia. For
Investor Relations questions, please call (310) 309-3755. Further product
availability and pricing information can be obtained by calling (310) 309-3700,
by accessing Quarterdeck's Internet Web site at http://www.quarterdeck.com/, or
by sending an e-mail request to [email protected].
FORWARD LOOKING STATEMENT
When used in the preceding discussion, the words "expected," "
anticipates" and similar expressions are intended to identify forward looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those expressed in any of
the forward looking statements. Such risks and uncertainties include, but are
not limited to, general economic conditions and conditions in the software
industry, the timely development and acceptance of new products and upgrades of
existing products, competitive factors, successful integration of the Vertisoft
business and other factors and risks described from time to time in
Quarterdeck's SEC reports and filings.
NOTE: Quarterdeck is a registered trademark. WINProbe is a trademark
of Quarterdeck Corporation. Remove-It is a registered trademark of Vertisoft
Systems, Inc. Vertisoft Zip-It, Fix-It and Name-It are all registered
trademarks of Vertisoft System, Inc.
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