<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): September 30, 1997
QUARTERDECK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-19207 95-4320650
(STATE OR OTHER (COMMISSION FILE (I.R.S. EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
13160 Mindanao Way, Marina del Rey, California 90292
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 309-3700
<PAGE> 2
ITEM 5. OTHER EVENTS.
On September 30, 1997, the Company issued 26,025 shares of Series C
Convertible Preferred Stock, stated value $1000 per share (the "Series C
Preferred Stock"), of the Company for $26.025 million in cash. The securities
were issued to various institutional investors in a private placement pursuant
to Regulation D of the Securities Act of 1933, as amended. Ten million dollars
of the proceeds from the private placement were used to repurchase, at par, all
of the Company's outstanding Series B Preferred Stock (and the cancellation of
warrants to purchase 800,000 shares of the Company's Common Stock owned by the
holder of the Series B Preferred Stock).
The holders of the Series C Preferred Stock are not entitled to receive
dividends. The shares of Series C Preferred Stock are convertible into shares of
the Company's Common Stock upon the earlier of December 30, 1997 or the date on
which the registration statement relating to resale of the shares of Common
Stock issuable upon conversion of the Series C Preferred Stock becomes
effective. The shares of Series C Preferred Stock will automatically convert
into Common Stock on September 30, 2002 to the extent any shares of Series C
Preferred Stock remain outstanding at that time. Each share of Series C
Preferred Stock is convertible into the number of shares of Common Stock equal
to the quotient of (i) $1000.00 divided by (ii) the Conversion Price. Up until
March 1, 1998, the Conversion Price will be $5.00. Thereafter, subject to the
maximum Conversion Price specified below, the Conversion Price will be equal to
101% of the average of the three lowest daily trading prices for the 22
consecutive trading days immediately preceding the date of conversion (the
"Conversion Date"). Assuming a Conversion Price of $ 2.525 (based on 101% of the
average of the three lowest daily trading prices for the 22 consecutive trading
days immediately preceding the date of issuance of the Series C Preferred
Stock), each share of Series C Preferred Stock would be convertible into 396
shares of Common Stock, or an aggregate of 10,306,931 shares of Common Stock
upon conversion of all shares of Series C Preferred Stock. The maximum
Conversion Price is $5.125 until March 31, 1999, and thereafter will be the
lesser of (i) $5.125, (ii) 101% of the average daily low trade prices of the
Common Stock for all trading days in March 1999, (ii) 101% of the average daily
low trade prices of the Common Stock for all trading days in September 1999 and
(iii) 101% of the average daily low trade prices of the Common Stock for all
trading days in March 2000.
The Company will not be obligated to issue shares of Common Stock upon
conversion of shares of Series C Preferred Stock in excess of 20% of the number
of shares of Common Stock outstanding on September 30, 1997 (the "Share Limit")
without obtaining shareholder approval in accordance with NASD rules. If such
stockholder approval is not obtained on or before February 28, 1998, the Company
will be required to redeem, at a premium, the number of shares of Series C
Preferred Stock that would be convertible into shares of Common Stock in excess
of the Share Limit.
<PAGE> 3
In connection with the issuance of the Series C Preferred Stock, the
Company amended the Rights Agreement dated August 11, 1992 (the "Rights
Agreement") between the Company and American Stock Transfer & Trust Company, as
rights agent, to provide that the institutional investors that acquired the
Series C Preferred Stock will not be deemed to be an Acquiring Person (as
defined in the Rights Agreement) as a result of its acquisition of the Series C
Preferred Stock or any shares of Common Stock received upon conversion of the
Series C Preferred Stock, subject to compliance by such investors with certain
covenants contained in the Preferred Stock Investment Agreement.
Copies of the form of Preferred Stock Investment Agreement, the
Certificate of Designations of the Series C Preferred Stock and the Form of
Amendment to the Rights Agreement are filed as exhibits to this Current Report
on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
The following are filed as exhibits to this Current Report on Form 8-K:
99.1 Press Release dated October 2, 1997.
99.2 Certificate of Designations of Series C Convertible Preferred Stock.
99.3 Form of Preferred Stock Investment Agreement dated as of September 30,
1997 between Quarterdeck Corporation and investors.
99.4 Form of Amendment to the Rights Agreement between Quarterdeck Corporation
and American Stock Transfer & Trust Company, as Rights Agent.
<PAGE> 4
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
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
99.1 Press Release dated October 2, 1997.
99.2 Certificate of Designations of Series C Convertible Preferred Stock.
99.3 Form of Preferred Stock Investment Agreement dated as of September 30, 1997 between Quarterdeck
Corporation and investors.
99.4 Form of Amendment to the Rights Agreement between Quarterdeck Corporation and American Stock
Transfer & Trust Company, as Rights Agent.
</TABLE>
<PAGE> 1
Exhibit 99.1
FOR IMMEDIATE RELEASE
OCTOBER 2, 1997
CONTACTS:
Frank Greico
Quarterdeck Corporation
310-309-4232
[email protected]
Ana Thorne
Quarterdeck Corporation
310-309-3767
[email protected]
Luke Hoyne
Financial Relations Board
310-442-0599
[email protected]
QUARTERDECK ANNOUNCES PREFERRED STOCK FINANCING AND
REPURCHASE AND COMPLETES FISCAL YEAR 1997
RESTRUCTURING PROGRAM
MARINA DEL REY, CA - OCTOBER 2, 1997 -- Quarterdeck Corporation (Nasdaq:QDEK),
substantially completing its fiscal 1997 restructuring program, today announced
a convertible preferred stock financing to strengthen the Company's balance
sheet and to repurchase all the outstanding Series B convertible preferred
stock. The Company expects that its results for the quarter ended September 30,
1997 will include approximately $14 million in charges, which are primarily
non-cash, associated with recent restructuring activities. Quarterdeck also
expects an operating loss of several million dollars, largely reflecting higher
return reserves in the U.S. market for end-of-life products in advance of new
product launches that began over the past week with CleanSweep Deluxe, Zip-It
4.0 and TuneUp/TuneUp.com, and will continue through fiscal 1998.
<PAGE> 2
-MORE -
QUARTERDECK ANNOUNCES PREFERRED STOCK FINANCING AND REPURCHASE
AND COMPLETES FISCAL YEAR 1997 RESTRUCTURING PROGRAM
PAGE 2 OF 3
"The restructuring and new financing have successfully positioned Quarterdeck to
direct all its fiscal 1998 energies on growing revenue and profit behind its new
strategy," said Curt Hessler, president and CEO of Quarterdeck Corporation.
"With a strengthened balance sheet, and exciting products in the pipeline, the
new management team is ready to mount a focused attack on the fast-expanding
market for helpware - self-help, remote-help, and automatic help software
technologies - for PC network users in small office/home office, small business
and corporate environments."
The financing involved the private placement, under Regulation D of the
Securities Act of 1933, of approximately $26 million in zero-dividend Series C
convertible preferred stock to a number of investor groups. Simultaneously, for
$10 million, the Company repurchased, at par, all of the outstanding shares of
the Series B convertible preferred stock previously issued under Regulation S of
the Securities Act of 1933, and canceled 800,000 of the approximately 1.7
million warrants associated with that issue. The transactions provide net cash
proceeds for the Company of approximately $14.5 million, resulting in an
expected cash balance for the quarter ended September 30, 1997 of approximately
$23 million. The weighted average number of shares of the Company's common stock
outstanding for the quarter ended September 30, 1997 were approximately 43
million shares.
The charges forecast for the quarter ended September 30, 1997 will include a
write-down of the former DataStorm building in Missouri which the Company has
listed for sale, a write-off of miscellaneous operating assets rendered
non-performing by restructuring activities, and severance and other obligations
associated with recent downsizing decisions and divestiture activities. The
<PAGE> 3
Company continues to examine several divestment opportunities and does not
currently expect that these divestments will adversely affect net income.
-MORE -
QUARTERDECK ANNOUNCES PREFERRED STOCK FINANCING AND REPURCHASE
AND COMPLETES FISCAL YEAR 1997 RESTRUCTURING PROGRAM
PAGE 3 OF 3
ABOUT QUARTERDECK
Quarterdeck Corporation develops, markets and supports software that enhances
the performance, user productivity and cost effectiveness of personal computing
in both stand-alone and networked environments. Current products address
anti-virus protection, diagnosis and resolution of software and hardware
conflicts, PC-based communications and Internet connectivity, storage and hard
disk management, system performance and Internet/intranet information search and
content management. The Company provides its software solutions worldwide to
individual, business, and government/education users through retail
distribution, resellers, direct marketing operations and Internet downloads.
Founded in 1983 and traded on Nasdaq under the symbol QDEK, Quarterdeck's
worldwide headquarters are in Marina del Rey, California, with Dublin, Ireland,
serving as its European headquarters. Further information on the Company and its
products may be obtained by calling 800-683-6696 toll free, or 813-523-9700,
accessing Quarterdeck's Web site at http://www.quarterdeck.com/ or by sending an
email request to [email protected].
# # #
NOTE TO EDITORS: If you would like more information on Quarterdeck Corporation
and its products, please view the Quarterdeck Press Center at
http://www.quarterdeck.com/qdeck/press.
This press release contains forward-looking statements which are made pursuant
to the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995. Expressions of future goals and similar expressions such as "expects",
"expected", "does not currently expect" and "forecast", reflecting something
other than historical fact are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of products and
<PAGE> 4
technologies, successful integration of acquisitions and divestitures of
non-core assets, and other factors described in the Company's filings with the
Securities and Exchange Commission. The actual results may differ materially
from any forward-looking statements due to such risks and uncertainties. The
Company undertakes no obligations to revise or update any forward-looking
statements in order to reflect events or circumstances that may arise after the
date of this release.
Quarterdeck is a registered trademark of Quarterdeck Corporation or its
subsidiaries. All other brand and product names are trademarks or registered
trademarks of their respective holders.
<PAGE> 1
Exhibit 99.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
QUARTERDECK CORPORATION
(Pursuant to Section 151 of the Delaware General Corporation Law)
Quarterdeck Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware, (the "Corporation"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Corporation as required by Section 151 of the Delaware General Corporation
Law at a meeting duly called and held on September 26, 1997:
RESOLVED that there shall be a series of shares of the Preferred Stock of
the Corporation designated "Series C Convertible Preferred Stock"; that the
number of shares of such series shall be 40,000 and that the rights and
preferences of such series (the "Series C Preferred") and the limitations or
restrictions thereon, shall be as follows:
1. Dividends.
The holders of the Series C Preferred shall not be entitled to receive
dividends.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, subject to payment in full of
the liquidation preference of the Series B Convertible Preferred Stock if any
shares thereof are outstanding, the holders of the Series C Preferred shall be
entitled to receive, prior and in preference to any distribution of any assets
of the Corporation to the holders of the Common Stock or any other class or
series of shares except any class or series which is entitled to priority over
the Series C Preferred, the amount of $1000 per share plus any amounts accrued
but unpaid under Section 1.4(b)(iv) of the Preferred Stock Investment Agreement
under which shares of the Series C Preferred were originally issued (the
"Liquidation Preference").
(b) Except for a transaction which is accounted for as a "pooling
of interests" under generally accepted accounting principles as applied in the
United States, or a stock-for-stock reorganization in which the Common Stock of
the Corporation is converted into or exchanged solely for voting common stock
which is listed on the NASDAQ National Market, the American Stock Exchange or
the New York Stock Exchange, a consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, shall, at the option of the holders of the
Series C Preferred, be deemed a liquidation, dissolution or winding up within
the meaning of this Section 2 if the shares of stock of the Corporation (along
with all derivative securities) outstanding immediately prior to such
transaction represent immediately after such transaction less than a majority of
the voting power of the surviving corporation (or of the acquirer of the
Corporation's assets in the case of a sale of assets). Such option may be
exercised by the vote or written consent of holders of a majority of the Series
C Preferred at any time within thirty calendar days after written notice of the
essential terms of such transaction shall have been given to the holders of the
Series C Preferred as provided in Section 5 hereof. Such notice shall be given
by the Corporation immediately following determination of such essential terms.
If such option is exercised, the
<PAGE> 2
holders of the Series C Preferred shall be entitled to receive, in cash,
immediately upon the occurrence of such transaction, an amount per share equal
to 100% of the Liquidation Preference.
3. Forced Conversion.
(a) If at any time during the Conversion Period (as defined below)
an underwritten public offering of outstanding shares of Common Stock of the
Corporation is anticipated, the Corporation may give not less than twenty (20)
calendar days notice ("Forced Conversion Notice") of a required conversion
pursuant to this Section. If such notice has been given and if the contemplated
underwritten public offering occurs within sixty (60) days thereafter, all then
outstanding Series C Preferred shares shall be automatically converted into
Common Stock on the date that the underwriters execute an agreement agreeing to
purchase all such Common Stock, and the Common Stock issued upon such conversion
shall be purchased by the underwriters and sold through the public offering at
the same price and subject to the same underwriting discount and otherwise on
the same terms as the other shares of Common Stock purchased by the underwriters
and sold publicly in such offering, except that the holders of Series C
Preferred shall not be required to undertake any obligations to the underwriters
other than an obligation to deliver Common Stock to the underwriters pursuant to
this Section. In the event of Forced Conversion, the Conversion Price shall be
82% of the Conversion Price determined pursuant to Section 4 hereof on the day
prior to the effectiveness of the registration statement for the public offering
or, if later, the day prior to the execution by the underwriters of the
agreement fixing the price to be paid by the Underwriters. Upon the giving of a
Forced Conversion Notice, the Conversion Restrictions set forth in Section 4
hereof shall immediately terminate. If for any reason whatsoever the
underwritten public offering contemplated at the time the Forced Conversion
Notice was given shall not be carried out, then upon abandonment or termination
thereof, and in any event at the close of business on the sixtieth (60th) day
after the Notice Date, the holders of the Series C Preferred shares shall have
no further obligations with respect to the proposed Forced Conversion and the
Corporation shall not for a period of one hundred twenty (120) days thereafter
give another Notice of Forced Conversion. Any such Notice shall specify the date
when it is given (the "Notice Date") and shall be given as provided in Section 5
hereof. On or within three business days after the effective date of the
registration statement each holder of Series C Preferred shall surrender to the
Corporation the certificate or certificates representing the Series C Preferred
shares held by such holder for conversion into Common Stock in accordance with
the provisions of this Section. The Corporation shall deliver the certificates
representing such Common Stock to the underwriters for the account of such
holder, against payment to or for the account of such holder, by the
underwriters, of the purchase price of such Common Stock. If for any reason
whatsoever the underwriters fail to pay the purchase price for such shares of
Common Stock not later than eight (8) business days after the effective date of
the registration statement, the conversion shall be rescinded and the holder
shall be entitled to receive from the Corporation a replacement certificate
representing the Series C Preferred shares which the holder had surrendered for
conversion as provided herein.
(b) On the fifth anniversary of the date of issuance, all then
outstanding shares of Series C Preferred shall be automatically converted into
Common Stock at the Conversion Price on such anniversary date and otherwise
pursuant to the applicable provisions set forth in Section 4(d) and (e) hereof.
4. Conversion. The holders of the Series C Preferred shall have
optional conversion rights as follows:
(a) Accrual of Conversion Rights. The Conversion Period shall
commence 91 days after the date of issuance, or (if earlier) the date that a
Registration Statement covering the resale of the underlying shares of Common
Stock has been declared effective by the Securities and Exchange Commission, and
shall continue thereafter for the life of the issue. Each holder of record of
Series C Preferred shares on the date of commencement of the Conversion Period
(an "Original Holder") shall be entitled to convert in any calendar month the
following percentage of the Series C Preferred shares held by such holder on the
date of commencement of the Conversion Period, on a cumulative basis following
commencement of the Conversion Period, (the "Conversion Restriction"). The
percentage for each calendar month will be determined based on the highest of
the daily low trading prices of the Common Stock during such month, as follows:
<PAGE> 3
<TABLE>
<CAPTION>
Highest of daily low trading Percentage becoming
prices during month convertible for such month
<S> <C>
$3.50 or less 12.5%
$3.51 to $4.00 15.0%
$4.01 to $4.50 17.5%
$4.51 to $5.00 20.0%
$5.01 to $5.50 22.5%
$5.51 or more 25.0%
</TABLE>
The number of shares which may be converted in any calendar month shall include
the number of shares which might have been but were not converted during earlier
calendar months. In the case of transfers of shares by an Original Holder the
Corporation shall make such notations on its stock ownership records and on the
certificates for shares issued upon transfer so as to reflect the portion (if
any) of the transferred shares which have become convertible pursuant to this
provision, or the Corporation may at its election issue certificates
representing the Series C Preferred shares in such form, or with such
annotations, as to reflect the time or times at which the shares represented by
such certificates will become convertible.
(b) Removal of Limitations. The Conversion Restrictions shall
terminate and after the commencement of the Conversion Period and subject to the
other restriction set forth herein, all the Series C Preferred shares shall
thereafter be fully convertible if any of the following events or conditions
shall occur or exist: (i) the Corporation gives a Forced Conversion Notice
pursuant to Section 3 hereof: (ii) an event described in Section 2(b) shall
occur, whether or not the holders of Series C Preferred deem such event to be a
liquidation; (iii) proceedings for relief under any bankruptcy or similar law
for the relief of debtors are instituted by or against the Corporation or any of
its significant subsidiaries and, if instituted against the Corporation or such
subsidiary, are consented to or not dismissed within 30 days; (iv) the
independent auditors of the Corporation shall fail or be unwilling to express
within 90 days after the end of the Corporation's fiscal year a customary
opinion on the financial statements of the Corporation, or shall express such
opinion subject to a "going concern" qualification; (v) the Common Stock of the
Corporation shall cease to be listed on either the NASDAQ National Market or a
national securities exchange; or (vi) there shall be a material breach by the
Corporation of any of its obligations hereunder or under the Preferred Stock
Investment Agreements pursuant to which the Series C Preferred was originally
issued.
(c) Right to Convert. Subject to the provisions of Section 10
hereof so long as such provisions remain in effect, at and after the time it has
become convertible, each share of Series C Preferred shall be convertible, at
the option of the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (i) the
liquidation preference of the Series C Preferred share determined pursuant to
Section 2 hereof on the date the notice of conversion is given, by (ii) the
Conversion Price determined as hereinafter provided in effect on said date,
provided however, that a share of Series C Preferred shall not be converted into
Common Stock if following such conversion the holder thereof together with
affiliates of such holder would be the beneficial owners (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of 10% or more of the Common
Stock of the Corporation.
(d) Mechanics of Conversion. To convert shares of Series C
Preferred into shares of Common Stock, the holder shall give written notice to
the Corporation (which notice may be given by facsimile transmission) that such
holder elects to convert the same and shall state therein the number of shares
to be converted and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. Promptly
thereafter the holder shall surrender the certificate or certificates
representing the shares to be converted, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares, or at such other place
designated by the Corporation. The Corporation shall, immediately upon receipt
of such notice, issue and deliver to or upon the order of such holder, against
delivery of the certificates representing the shares which have been converted,
a certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, and a certificate representing the shares of
Series C Preferred not so converted, if any. The Corporation shall effect such
issuance immediately and shall
<PAGE> 4
transmit the certificates by messenger or overnight delivery service to reach
the address designated by such holder within three trading days after the
receipt of such notice. Notice of conversion may be given by a holder at any
time of day up to 5:00 pm Los Angeles time, and such conversion shall be deemed
to have been made immediately prior to the close of business on the date such
notice of conversion is given (the "Conversion Date"). The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock at the close of business on the Conversion Date.
(e) Determination of Conversion Price.
(i) On any Conversion Date prior to the first day of the
sixth calendar month after the Closing the Conversion Price shall be $5.00, and
thereafter, subject to the provisions of subsections (e)(ii) and (f) of this
Section, the Conversion Price shall be 101% of the Average Low Trading Price.
The Average Low Trading Price shall be the average of the three lowest daily
trading prices for the 22 consecutive trading days immediately preceding the
Conversion Date.
(ii) The maximum Conversion Price ("Conversion Cap") shall be
(A) $5.125 until the end of March, 1999; (B) thereafter until the end of
September, 1999, the lesser of (i) $5.125 or (ii) 101% of the average daily low
trade prices of the Common Stock for all trading days in March, 1999; (C)
thereafter until the end of March, 2000, the lesser of (i) $5.125, (ii) the
amount determined in (ii) above, or (iii) 101% of the average daily low trade
prices of the Common Stock for all trading days in September, 1999; and (D)
thereafter the lesser of (i) $5.125, (ii) the amount determined in (ii) above,
(iii) the amount determined in (iii) above, or (iv) 101% of the average daily
low trade prices of the Common Stock for all trading days in March, 2000.
(iii) The term "low trading price" and "low trade price" of
the Common Stock on any day shall mean (A) the lowest reported sale price of the
Common Stock on the principal stock exchange on which the Common Stock is
listed, or (B) if the Common Stock is not listed on a stock exchange, the lowest
reported sale price of the Common Stock on the principal automated securities
price quotation system on which sale prices of the Common Stock are reported, or
(C) if the Common Stock is not listed on a stock exchange and sale prices of the
Common Stock are not reported on an automated quotation system, the lowest bid
price for the Common Stock as reported by National Quotation Bureau
Incorporated. If none of the foregoing provisions are applicable, the "low
trading price" of the Common Stock on a day will be the fair market value of the
Common Stock on that day as determined by a member firm of the New York Stock
Exchange, Inc., selected by the Board of Directors of the Corporation. The term
"trading day" means (x) if the Common Stock is listed on at least one stock
exchange, a day on which there is trading on the principal stock exchange on
which the Common Stock is listed, (y) if the Common Stock is not listed on a
stock exchange but sale prices of the Common Stock are reported on an automated
quotation system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, or (z) if the
foregoing provisions are inapplicable, a day on which quotations are reported by
National Quotation Bureau Incorporated. (iv) In the event that during any period
of consecutive trading days provided for above, the Corporation shall declare or
pay any dividend on the Common Stock payable in Common Stock or in rights to
acquire Common Stock, or shall effect a stock split or reverse stock split, or a
combination, consolidation or reclassification of the Common Stock, then the
Conversion Price and the Conversion Cap shall be proportionately decreased or
increased, as appropriate, to give effect to such event, and like adjustment
shall be made in the price specified in Section 4(f).
(f) Depressed Price Condition ("Green Floor"). A "Depressed Price
Condition" shall be deemed to exist on any date if during the period of three
consecutive trading days immediately prior to such date the Conversion Price
shall have been less than $3.00 per share (subject to adjustment for stock
splits, stock dividends and like capital adjustments). If and so long as a
Depressed Price Condition exists, the Corporation may at its option, exercised
by written notice ("Cash Conversion Notice") given to the holders of the Series
C Preferred twenty (20) days prior to the effective date specified in such
Notice (the "Effective
<PAGE> 5
Date") require that any Series C Preferred shares converted on the Effective
Date or thereafter while such Cash Conversion Notice remains in effect shall
receive, in lieu of Common Stock, cash in an amount equal to the proceeds that
would otherwise have been received by the holder of the converted shares if
Common Stock had been delivered upon such conversion and sold at the highest
reported sale price of the Common Stock on the Conversion Date (the "Cash
Conversion Price"). A Cash Conversion Notice may not be given and shall not be
effective on any date unless the Depressed Price Condition exists on such date.
The Cash Conversion Notice may (but need not) specify a price range within which
such Notice shall be effective. If a price range is so specified, then the Cash
Conversion Notice shall be effective on any date only if the average of the
Conversion Prices for the three consecutive trading days prior to such date
falls within the specified range. The upper limit of the range so specified
shall not exceed the dollar amount stated in the first sentence of this
subsection, as adjusted. If notice of conversion shall be given by a holder of
Series C Preferred shares on a date that a Cash Conversion Notice is in effect,
the Corporation shall within three business days following surrender of the
share certificate as provided in Section 4(d) hereof make payment of the Cash
Conversion Price to such holder by wire transfer of immediately available funds
in U.S. dollars pursuant to such wire transfer instructions as may have been
given by such holder, or otherwise by mailing by certified mail a bank cashiers'
or certified check for the Cash Conversion Price to the record address of such
holder. A Cash Conversion Notice shall cease to be effective (i) if the
Depressed Price Condition ceases to exist, or (ii) if the Corporation fails to
make payment of the Cash Conversion Price to any holder entitled thereto in the
manner and within the time specified in the foregoing sentence, time being of
the essence. If a Cash Conversion Notice ceases to be effective pursuant to
clause (ii) of the foregoing sentence, it shall not thereafter be effective as
to any holder and no Cash Conversion Notice may thereafter be given by the
Corporation. The number of shares that a holder is entitled to convert,
determined pursuant to subsection (a) of this Section 4, shall not be affected
by the giving or effectiveness of a Cash Conversion Notice. Any Cash Conversion
Notice shall be given as provided in Section 5 hereof.
(g) Distributions. In the event the Corporation shall at any time
or from time to time make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation or any of its subsidiaries or other
property, other than cash dividends from earnings or dividends of additional
shares of Common Stock, then in each such event provision shall be made so that
the holders of Series C Preferred shall receive, upon the conversion thereof,
the securities or other property which they would have received had they been
the owners on the date of such event of the number of shares of Common Stock
issuable to them upon conversion.
(h) Certificates as to Adjustments. Upon the occurrence of any
adjustment or readjustment of the Conversion Price or the Conversion Cap
pursuant to this Section 4, or any adjustment of the price specified in Section
4(f), the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series C Preferred a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. If any holder of Series C Preferred disputes the
computation of such adjustment the Corporation shall cause independent public
accountants selected by the Corporation to verify and, if necessary, correct
such computation. The Corporation shall, upon the written request at any time of
any holder of Series C Preferred, furnish or cause to be furnished to such
holder a like certificate prepared by the Corporation setting forth (i) such
adjustments and readjustments, and (ii) the number of other securities and the
amount, if any, of other property which at the time would be received upon the
conversion of Series C Preferred with respect to each share of Common Stock
issuable upon such conversion.
(i) Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, the Corporation shall give notice to each holder of
Series C Preferred at least 10 days prior to such date specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution, security or right and the amount and character of such dividend,
distribution, security or right.
<PAGE> 6
(j) Issue Taxes. The Corporation shall pay any and all issue and
other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series C Preferred pursuant hereto; provided, however,
that the Corporation shall not be obligated to pay any transfer taxes resulting
from any transfer requested by any holder in connection with any such
conversion.
(k) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series C Preferred, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series C Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval.
(l) Fractional Shares. No fractional shares shall be issued upon
the conversion of any share or shares of Series C Preferred. All shares of
Common Stock (including fractions thereof) issuable upon conversion at one time
of more than one share of Series C Preferred by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors of the Corporation).
(m) Reorganization or Merger. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any consolidation or
merger of the Corporation with or into any other corporation or corporations or
a sale of all or substantially all of the assets of the Corporation to any other
person, and the holders of Series C Preferred do not elect to treat such
transaction as a liquidation, dissolution or winding up as provided in Section
2, then, as part of such reorganization, consolidation, merger or sale,
provision shall be made so that each share of Series C Preferred shall
thereafter be convertible into the number of shares of stock or other securities
or property (including cash) to which a holder of the number of shares of Common
Stock deliverable upon conversion of such share of Series C Preferred would have
been entitled upon the record date of (or date of, if no record date is fixed)
such event and, in any case, appropriate adjustment (as determined by the Board
of Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the holders of the
Series C Preferred, to the end that the provisions set forth herein shall
thereafter be applicable, as nearly as equivalent as is practicable, in relation
to any shares of stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of Series C Preferred.
5. Notices. Any notice to be given to the holders of the Series C
Preferred shall be (i) mailed by first class mail postage prepaid to each holder
of Series C Preferred at the address shown on the records of the Corporation for
such holder, (ii) transmitted by telecopy or facsimile transmission to any
holder which has supplied a telecopy or facsimile address to the Corporation,
and (iii) unless receipted for by telecopy or facsimile on the date such notice
is given, shall be transmitted by an overnight delivery service or courier
service for delivery at the address shown on the records of the Corporation for
such holder on the first business day following the date such notice is given,
or if delivery in one business day to such address cannot be effected by such
delivery service, then on the earliest day on which such delivery can be made.
6. Other Provisions. For all purposes of this Resolution, the term
"date of issuance" or "closing" shall mean the day on which shares of the Series
C Preferred are first issued by the Corporation, and the terms "trading price",
"low trading price", "last trade price", and "trading days" shall have the
meanings
1
<PAGE> 7
given them in Section 4(e) hereof. Any provision herein which conflicts with or
violates any applicable usury law shall be deemed modified to the extent
necessary to avoid such conflict or violation.
7. Restrictions and Limitations. The Corporation shall not undertake
the following actions without the consent of the holders of a majority of the
Series C Preferred: (i) modify its Certificate of Incorporation or Bylaws so as
to amend or change any of the rights, preferences, or privileges of the Series C
Preferred, (ii) authorize or issue any other equity security senior to or
ranking on parity with the Series C Preferred with respect to liquidation rights
or redemption rights (if any) or any equity security the terms of which provide
that it is senior or superior to the Series C Preferred in any respect (other
than dividend and voting rights), (iii) purchase or otherwise acquire for value
any Common Stock (other than Common Stock purchased from terminated employees in
an amount not greater than $250,000) or other equity security of the Corporation
junior to or on a parity with the Series C Preferred except from the net
proceeds of sale of its equity securities by the Corporation, or (iv) issue any
shares of Common Stock (otherwise than pursuant to existing commitments) or any
rights, options, convertible securities or other contract obligations to issue
Common Stock unless the number of shares of authorized Common Stock of the
Corporation which is thereafter reserved exclusively for issuance upon
conversion of the Series C Preferred is not less than 150% of the number of
shares of Common Stock which would be issuable upon conversion of the number of
Series C Preferred shares then outstanding at the Conversion Price then in
effect.
8. Voting Rights. Except as provided herein or as provided for by law,
the Series C Preferred shall have no voting rights.
9. Attorneys' Fees. Any holder of Series C Preferred shall be entitled
to recover from the Corporation the reasonable attorneys' fees and expenses
incurred by such holder in connection with enforcement by such holder of any
obligation of the Corporation hereunder.
10. Limitation on Number of Conversion Shares. The Corporation shall not
be obligated to issue, in the aggregate, more than 8,300,000 shares of Common
Stock as presently constituted (the "Nasdaq Cap") upon conversion of the Series
C Preferred, if issuance of a larger number of shares would constitute a breach
of the Rules or Designation Criteria of the NASDAQ Stock Market (the "NASDAQ
Rules"). Subject to the obligation to effect certain redemptions pursuant to
this Section, if further issuances of shares of Common Stock upon conversion of
the Series C Preferred would constitute a breach of the NASDAQ Rules (i.e., all
of the shares permitted to be issued under the Nasdaq Cap shall have been so
issued), then so long thereafter as such limitation shall continue to be
applicable and any shares of Series C Preferred are submitted for conversion
such shares shall receive in cash an amount equal to the Cash Conversion Price
determined as provided in Section 4(f) hereof, in lieu of the Common Stock which
such shares would otherwise be entitled to receive upon conversion. Payment of
the Cash Conversion Price shall be made no later than as specified in Section
4(f) and shall bear daily interest thereafter at the rate of one-tenth of one
percent per day until paid. The NASDAQ Cap shall be proportionately and
equitably adjusted in the event of stock splits, stock dividends, reverse stock
splits, reclassifications or other such events, in such manner as the Board of
Directors of the Corporation shall reasonably determine. If (A) the Corporation
is unable to obtain the requisite shareholder approval concerning the issuance
of shares of Common Stock upon conversion of the Series C Preferred to satisfy
the NASDAQ Rules on or prior to February 28, 1998, then (B) the Corporation
shall immediately redeem, at a "Special Redemption Price" equal to 110% of the
liquidation preference of such shares, the smallest number of Series C shares
which is sufficient, in the Corporation's reasonable judgment, such that
following such redemption, conversion of the remaining shares of Series C
Preferred would not constitute a breach of the Corporation's obligations under
the NASDAQ Rules. Any redemption effected pursuant to the preceding sentence
shall require 15 days' notice and the Redemption Date shall be not more than 15
days after the date specified in Clause A of the preceding sentence. Such
redemption shall be made pro-rata. If there shall be a default in payment of the
Special Redemption Price, the amount so payable shall bear daily interest from
and after the Redemption Date at the rate of one-tenth of one percent per day
until paid. The obligation to effect such redemption is subject to compliance
with applicable law, but the foregoing condition shall not reduce or modify the
obligations of the Corporation hereunder which are absolute and continuing to
effect such redemption whenever permitted by applicable law. If by reason of the
foregoing
2
<PAGE> 8
sentence, or for any other reason, the Corporation shall fail or be unable to
effect the redemption provided for in this Section, then the holders of the
outstanding shares of Series C Preferred, voting as a class, shall have the
right to elect a majority of the directors of the Corporation at any annual or
special meeting of the shareholders of the Corporation, and shall have the right
to require that the Corporation immediately call and hold a special meeting of
its shareholders to permit the exercise of such right of election by the holders
of the Series C Preferred. At such time as the redemption obligations of the
Corporation provided for in this Section are fully complied with, (i) the right
of the holders of Series C Preferred as a class to elect directors shall cease,
and (ii) the term of the directors elected by the holders of Series C Preferred
as a class shall terminate. The Corporation may, but shall not be required to,
increase the authorized number of its directors so that the directors elected by
the Series C Preferred shares shall occupy the vacancies created by such
increase, constituting a majority of the whole Board.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by the Vice President of the Corporation this 30th day of
September, 1997.
/s/ Frank R. Greico
-----------------------------------------
Frank R. Greico,
Senior Vice President
<PAGE> 1
Exhibit 99.3
PREFERRED STOCK INVESTMENT AGREEMENT
AGREEMENT dated as of September 30, 1997 between Quarterdeck Corporation
(the "Company") and the investor whose name is set forth at the foot of this
Agreement (the "Investor").
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Preferred Stock
Section I.1 Purchase and Sale of Preferred Stock. Upon the following terms
and conditions, the Company shall issue and sell to the Investor shares of the
Company's Series C Convertible Preferred Stock (the "Shares") having the rights,
designations and preferences set forth in Schedule I hereto, and the Investor
shall purchase from the Company the number of Shares designated on the signature
page hereof, subject to adjustment as set forth in Section 3.8.
Section I.2 Purchase Price. The purchase price for the Shares (the
"Purchase Price") shall be $1,000 per share.
Section I.3 The Closing.
(a) The closing of the purchase and sale of the Shares (the
"Closing"), shall take place at the offices of the Company, at 10:00 a.m., local
time on the later of the following: (i) the date on which the last to be
fulfilled or waived of the conditions set forth in Article IV hereof and
applicable to the Closing shall be fulfilled or waived in accordance herewith,
or (ii) such other time and place and/or on such other date as the Investor and
the Company may agree. The date on which the Closing occurs is referred to
herein as the "Closing Date."
(b) On the Closing Date, the Company shall deliver to the Investor
certificates representing the number of Shares being purchased by the Investor,
registered in the name of the Investor, or deposit such Shares into accounts
designated by the Investor, and the Investor shall deliver to the Company the
Purchase Price for such Shares by cashier's check or wire transfer in
immediately available funds to such account as shall be designated in writing by
the Company. In addition, each party shall deliver all documents, instruments
and writings required to be delivered by such party pursuant to this Agreement
at or prior to the Closing.
Section I.4 Covenant to Register.
(a) For purposes of this Section, the following definitions shall
apply:
(i) The terms "register," "registered," and "registration"
refer to a registration under the Securities Act of 1933, as amended (the
"Act"), effected by preparing and filing a registration statement in compliance
with the Act, and the declaration or ordering of effectiveness of such
registration statement, document or amendment thereto.
(ii) The term "Registrable Securities" means (A) the shares
of common stock issued or issuable upon conversion of the Shares, or (B) any
securities of the Company or securities of any successor corporation issued
pursuant to the provisions of Schedule I hereto or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as a dividend
or other distribution with respect to,
<PAGE> 2
or in exchange for or in replacement of the Shares, which in either case (i)
have not been resold pursuant to an effective registration statement or pursuant
to Rule 144 under the Act or (ii) may not be resold pursuant to Rule 144(k)
under the Act. For purposes of this Agreement, securities will be considered
ineligible for resale pursuant to Rule 144(k) under the Act unless the Company's
transfer agent has accepted an instruction from the Company specifying that such
securities are eligible for sale pursuant to Rule 144(k).
(iii) The term "holder of Registrable Securities" includes any
person who holds Shares which are convertible into Registrable Securities.
(b) (i) The Company shall, as expeditiously as possible following
the Closing, file a registration statement on Form S-3, or if Form S-3 is not
then available, another appropriate form, covering the resale of all the
Registrable Securities under Rule 415 and 416. The number of shares of Common
Stock initially included in such registration statement shall be not less than
the number which would be issuable upon conversion of the Shares including
Shares subject to the Placement Agents' warrants if all thereof were to be
converted at a conversion price of $2 per share. The Company shall use its best
efforts to cause such registration statement to become effective by the 105th
calendar day after the Closing Date (the "Initial Registration"). In the event
such registration is not so declared effective or if at any time thereafter it
does not include at least 120% of the number of Registrable Securities which
would then be issuable upon conversion of the Series C Preferred (or any
successor security) at the conversion price then in effect, any holder of
Registrable Securities shall have the right to require by notice in writing that
the Company register all or any part of the Registrable Securities held by such
holder (a "Demand Registration") and the Company shall thereupon effect such
registration in accordance herewith (which may include adding such shares to an
existing shelf registration). The parties agree that if the holder of
Registrable Securities demands registration of less than all of the Registrable
Securities, the Company, at its option, may nevertheless file a registration
statement covering all of the Registrable Securities. If such registration
statement is declared effective with respect to all Registrable Securities, then
so long as the Company is in compliance with its obligations under Subsection
(d)(i) through (v) hereof, the demand registration rights granted pursuant to
this Subsection (b) (i) shall not be applicable. If such registration statement
is not declared effective with respect to all Registrable Securities, or if the
Company is not in compliance with said obligations, the demand registration
rights described herein shall remain in effect. The Company shall provide
holders of Registrable Securities reasonable opportunity to review any such
registration statement or amendment or supplement thereto prior to the filing
thereof. If the Registrable Securities are registered initially on a form other
than Form S-3, the Company shall register the Registrable Securities on Form S-3
as soon as use of such form is permissible.
(ii) The Company shall not be obligated to effect Demand
Registration under Subsection (b)(i) if all of the Registrable Securities held
by the holder of Registrable Securities which are demanded to be covered by the
Demand Registration are, at the time of such demand, included in an effective
registration statement and the Company is in compliance with its obligations
under Subsection (d) (i) through (v) hereof.
(iii) The Company may suspend the effectiveness of any such
registration effected pursuant to this Subsection (b) in the event, and for such
period of time as, such a suspension is required by the rules and regulations of
the Securities and Exchange Commission ("SEC"), and may suspend use of the
prospectus included in the Registration Statement if such prospectus ceases to
meet the requirements of Section 10 of the Act. The Company will immediately
advise the holders of the registered securities of any such suspension, and will
use its best efforts to cause such suspension to terminate at the earliest
possible date. The Investor agrees that following receipt of any such notice,
and until such suspension is terminated, the Investor will not make use of the
suspended prospectus and will make no sales requiring delivery of such
prospectus.
(iv) If the registration statement covering all Registrable
Securities is not effective by the 106th calendar day after the Closing Date,
then the Company shall pay the Investor in cash an amount equal to 2% of the
total Purchase Price of the Shares purchased by the Investor. If such
registration statement is not effective by the 135th day after the Closing Date,
the Company shall pay the Investor in cash
<PAGE> 3
an amount equal to 3% of the total Purchase Price of the Shares purchased by the
Investor for each 30 day period thereafter until such registration statement is
effective (pro-rata as to a period of less than 30 days). An amount equal to 3%
of the total Purchase Price of Shares and any Registrable Securities then held
by Investor shall also be paid to the Investor in cash with respect to any
number of days in excess of 30 days in any calendar year that the effectiveness
of the Registration Statement or use of the prospectus is suspended as set forth
in Section 1.4 (b)(iii) or the prospectus is otherwise unavailable for use by
sellers of Registrable Securities (pro-rata as to a number of days less than
30). Any payment hereunder shall be made not later than five business days after
the end of the period with respect to which such payment is due. The "Purchase
Price" of Registrable Securities shall be, in the case of Registrable Securities
derived from conversion or substitution of Shares, the Purchase Price of such
Shares. This subsection is in addition to the provisions of Section 7.2(a)
hereof.
(c) If the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Investor) any of its stock or other securities under the Act in connection with
a public offering of such securities (other than a registration on Form S-4,
Form S-8 or other limited purpose form) and all Registrable Securities have not
theretofore been included in a registration statement under Subsection (b) which
remains effective, the Company shall, at such time, promptly give all holders of
Registrable Securities written notice of such registration. Upon the written
request of any holder of Registrable Securities given within twenty (20) days
after receipt of such notice by the holder of Registrable Securities, the
Company shall use its best efforts to cause to be registered under the Act all
Registrable Securities that such holder of Registrable Securities requests to be
registered. However, the Company shall have no obligation under this Subsection
(c) to the extent that, with respect to a public offering registration, the
managing underwriter of such public offering reasonably notifies such holder(s)
in writing of its determination that the Registrable Securities or a portion
thereof should be excluded therefrom. The rights of the Investor and the
obligations of the Company under this subsection are subject to any prior
registration rights of other shareholders of the Company which are disclosed in
Exhibit A hereto, and the language required by the Company's agreement with
Northwestern Mutual, as follows: In addition, the Investor acknowledges that the
Investor shall not be entitled to participate in the shelf registration
statement (or any successor thereto or replacement thereof) filed by the Company
with respect to the registration of the shares of common stock underlying the 6%
Convertible Senior Subordinated Notes due March 31, 2001 (the "Notes") issued to
Northwestern Mutual Life Insurance Company and that any "piggyback" registration
rights granted to Investor under this Section 1.4(c) shall be subordinated to
the rights of a holder ("Holder") of the Notes and/or the underlying shares to
participate with respect to a registration statement filed upon a request of
Holder relating to the resale of the shares of common stock underlying the
Notes. In addition, Holder shall be permitted to participate in any underwritten
registration requested by the Investor (subordinate to the rights of the
Investors) if in the opinion of the managing underwriter of such underwritten
registration shares to be offered by Holder 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 Investors in such underwritten
registration.
(d) Whenever required under this Section to effect the
registration of any Registrable Securities, including, without limitation, the
Initial Registration, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration to become effective as provided in Section 1.4(b)(i), and keep
such registration statement effective for so long as any holder of Registrable
Securities desires to dispose of the securities covered by such registration
statement, or, if earlier, until such Registrable Securities may be sold under
Rule 144(k) (provided that the Company's transfer agent has accepted an
instruction from the Company to such effect).
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by
<PAGE> 4
such registration statement and notify the holders of the filing and
effectiveness of such Registration Statement and any amendments or supplements.
(iii) Furnish to each holder of Registrable Securities such
numbers of copies of a current prospectus conforming with the requirements of
the Act, copies of the registration statement, any amendment or supplement
thereto and any documents incorporated by reference therein and such other
documents as such holder of Registrable Securities may reasonably require in
order to facilitate the disposition of Registrable Securities owned by such
holder of Registrable Securities.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by a
holder of Registrable Securities and keep such registration or qualification
effective as long as required to permit sale of Registrable Securities
thereunder, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(v) Notify each holder of Registrable Securities immediately
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and use its best efforts to promptly update and/or
correct such prospectus.
(vi) Furnish to each holder of Registrable Securities
included therein if requested not later than 30 days following the Closing (1)
an opinion of counsel to the Company covering compliance of the registration
statement, as to form, with the requirements of the Act and the rules
thereunder, and covering the matters covered in the opinion filed as an exhibit
to the registration statement, and (2) a "cold comfort" letter or letters of
the Company's independent public accountants in the form and of the substance
customarily supplied to underwriters in connection with a public offering.
(vii) Use its best efforts to list the Registrable Securities
covered by such registration statement with any national market or securities
exchange on which the Common Stock is then listed.
(viii) Make available for inspection by the holder of
Registrable Securities, upon request, all SEC Documents (as defined below) filed
subsequent to the Closing and require the Company's representatives to supply
all information reasonably requested by any holder of Registrable Securities in
connection with such registration statement.
(e) Each holder of Registrable Securities will furnish to the
Company in connection with any registration under this Section such information
regarding itself, the Registrable Securities and other securities of the Company
held by it, and the intended method of disposition of such securities as shall
be reasonably required to effect the registration of the Registrable Securities
held by such holder of Registrable Securities. The Investor shall provide such
data as of closing. The intended method of disposition (Plan of Distribution) of
such securities as so provided by Investor shall be included without alteration
in the Registration Statement covering the Registrable Securities and shall not
be changed without written consent of the Investor.
(f) (i) The Company shall indemnify, defend and hold harmless each
holder of Registrable Securities which are included in a registration statement
pursuant to the provisions of Subsections (b) or (c) (each, a "Selling
Shareholder") and each of its officers, directors, employees, agents, partners
or controlling persons (within the meaning of the Act) (each, an "indemnified
party") from and against, and shall reimburse such indemnified party with
respect to, any and all claims, suits, demands, causes of action, losses,
damages, liabilities, costs or expenses ("Liabilities") to which such
indemnified party may become subject under the Act or otherwise, arising from or
relating to (A) any untrue statement or alleged untrue statement of
<PAGE> 5
any material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or (B) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company shall
not be liable in any such case to the extent that any such Liability arises out
of or is based upon an untrue statement or omission so made in strict conformity
with information furnished by such indemnified party in writing specifically for
use in the registration statement; provided further, that the Company shall not
be liable in any such case to the extent that any such Liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus if (i) a Selling Shareholder
under an obligation to send or deliver a copy of the prospectus with or prior to
the delivery of written confirmation of the sale of Registrable Securities to
the person asserting such Liability who purchased such Registrable Securities
which are the subject thereof from such Selling Shareholder failed to do so and
(ii) the prospectus would have corrected such untrue statement or omission; and
provided further, that the Company shall not be liable in any such case to the
extent that any Liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the prospectus, if
such untrue statement or alleged untrue statement, omission or alleged omission
is corrected in an amendment or supplement to the prospectus and if, having
previously been furnished by or on behalf of the Company with copies of the
prospectuses so amended or supplemented and having been obligated to deliver
such prospectuses, the Selling Shareholder thereafter failed to deliver such
prospectus as so amended or supplemented, prior to or concurrently with the sale
of Registrable Securities to the person asserting such Liability who purchased
such Registrable Securities which are the subject thereof from such Selling
Shareholder.
(ii) In the event of any registration under the Act of
Registrable Securities pursuant to Subsections (b) or (c), each holder of such
Registrable Securities hereby severally agrees to indemnify, defend and hold
harmless the Company, and its officers, directors, employees, agents, partners,
or controlling persons (within the meaning of the Act) (each, an "indemnified
party") from and against, and shall reimburse such indemnified party with
respect to, any and all Liabilities to which such indemnified party may become
subject under the Act or otherwise, arising from or relating to (A) any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or (B) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
provided, that such holders will be liable in any such case to the extent, and
only to the extent, that any such Liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, prospectus or amendment or supplement
thereto in reliance upon and in strict conformity with written information
furnished in an instrument duly executed by such holder specifically for use in
the registration statement.
(iii) Promptly after receipt by any indemnified party of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against another party (the "indemnifying
party") hereunder, notify such party in writing thereof, but the omission so to
notify shall not relieve the indemnifying party from any Liability which it may
have to the indemnified party other than under this section and shall only
relieve it from any Liability which it may have to the indemnified party under
this section if and to the extent it is actually prejudiced by such omission. In
case any such action shall be brought against any indemnified party and such
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to the indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to the
indemnified party under this section for any legal expenses subsequently
incurred by the indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that if the defendants in any such action include both the
indemnifying party and such indemnified party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if
<PAGE> 6
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with (subject to the
following sentence) the reasonable expenses and fees of such separate counsel
and other reasonable expenses related to such participation to be reimbursed by
the indemnifying party as incurred. If the Company is the indemnifying party it
shall pay the reasonable expenses and fees of only one separate counsel whose
selection is approved by the largest group of similarly situated indemnified
parties as measured by the aggregate par value of such Registrable Securities
owned by such group. Any indemnified party who chooses not to be represented by
the foregoing separate counsel shall be entitled, at its own expense, to be
represented by counsel of its own selection.
(g) (i) With respect to the inclusion of Registrable Securities in
a registration statement pursuant to Subsections (b) or (c), all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
shall be borne by the Company; provided, however, that any Selling Shareholders
participating in such registration shall bear their own share of the
underwriting discounts and commissions, and transfer taxes if any, incurred by
them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne
by the Company as provided in this Subsection (g) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, and upon reasonable advance notice from the holder or its
counsel, the Company shall make available to counsel for the holders of
Registrable Securities its documents and personnel for due diligence purposes,
and shall pay the reasonable fees and disbursements of one law firm (but not
more than one) acting as counsel for a majority of such holders. Except as
otherwise provided herein, fees and disbursements of counsel and accountants for
the Selling Shareholders shall be borne by the respective Selling Shareholders.
Nothing herein shall require the Company to postpone filing the registration
statement or delay its effectiveness.
(h) The rights to cause the Company to register all or any portion
of Registrable Securities pursuant to this Section may be assigned by Investor
to a transferee or assignee of all or, if such portion is at least $250,000, a
portion equal to 20% or more, in the aggregate, of its Shares or the Registrable
Securities derived from such Shares. Any transferee asserting registration
rights hereunder shall agree to be bound by the applicable provisions of this
Agreement.
(i) From and after the date of this Agreement, the Company shall
not agree to allow the holders of any securities of the Company to include any
of their securities in any registration statement filed by the Company pursuant
to Subsection (b) unless such inclusion will not reduce the amount of the
Registrable Securities included therein.
(j) If the Company gives notice of a Forced Conversion pursuant to
the provisions for such conversion set forth in Schedule I hereto, the
provisions of subsections (a), (d)(ii), (d)(iii), (d)(iv), (d)(vii) and (f) of
this Section 1.4 shall be applicable to the registration of the Registrable
Securities which are to be sold pursuant to such Forced Conversion. In addition,
if the Company gives notice of a Forced Conversion, the Sale Restrictions and
Hedging Restrictions set forth in Sections 3.4 and 3.6 hereof will no longer be
applicable, and the Conversion Restrictions set forth in Schedule I hereto will
not longer be applicable.
<PAGE> 7
ARTICLE II
Representations and Warranties
Section II.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Investor:
(a) Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of Delaware and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company does not have any material
subsidiaries except as listed in Exhibit A hereto or in the SEC Documents (as
hereinafter defined). The Company and each such subsidiary, if any, is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect" means any adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and its
subsidiaries taken as a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and to
issue the Shares in accordance with the terms hereof, (ii) the execution and
delivery of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors or stockholders is required except as contemplated by Section
10 of Schedule I hereto, (iii) this Agreement has been duly executed and
delivered by the Company, and (iv) this Agreement constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application. The Company's
executive officers and directors have studied and fully understand the nature of
the securities being sold hereunder, and recognize that they have a potential
dilutive effect.
(c) Capitalization. The authorized capital stock of the Company
consists of 70,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock; there are approximately 41,500,000 shares of Common Stock and 100,000
shares of Series B preferred stock issued and outstanding; and, upon issuance of
the Shares in accordance with the terms hereof and pursuant to similar
agreements of like tenor, and giving effect to the repurchase or redemption of
the Company's Series B preferred stock as contemplated hereby, there will be
approximately 41, 500,000 shares of Common Stock and approximately 26,025 shares
of Series C preferred stock issued and outstanding. All of the outstanding
shares of the Company's Common Stock have been validly issued and are fully paid
and nonassessable. Except as set forth in Exhibit A hereto or as described in
the SEC Documents, no shares of Common Stock are entitled to preemptive rights
or registration rights and there are no outstanding options, convertible
securities, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, or commitments to purchase or acquire, any
shares, or securities or rights convertible into shares, of capital stock of the
Company. The Company has furnished or made available to the Investor true and
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Charter"), and the Company's By-Laws, as in effect on the date
hereof (the "By-Laws").
(d) Issuance of Shares. The issuance of the Shares has been duly
authorized and, when paid for or issued in accordance with the terms hereof, the
Shares shall be validly issued, fully paid and non-assessable and entitled to
the rights and preferences set forth in Schedule I hereto. The Common Stock
issuable upon conversion of the Shares will be duly authorized and reserved for
issuance and, upon conversion in accordance with the Certificate of Designation
to be filed by the Company to establish the rights and
<PAGE> 8
preferences of the Shares, will be validly issued, fully paid and non-assessable
and not subject to any preemptive rights or adverse claims, and the holders
shall be entitled to all rights and preferences accorded to a holder of Common
Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) result in a violation of the
Company's Charter or By-Laws or (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect); provided that, for purposes of such representation as to
Federal, state, local or foreign law, rule or regulation, no representation is
made herein with respect to any of the same applicable solely to the Investor
and not to the Company. The business of the Company is not being conducted in
violation of any law, ordinance or regulations of any governmental entity,
except for violations which either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under Federal,
state or local law, rule or regulation in the United States to obtain any
consent, authorization or order of, or make any filing (other than the filing of
a Certificate setting forth the terms of the Shares with the Delaware Secretary
of State) or registration with, any court or governmental agency in order for it
to execute, deliver or perform any of its obligations under this Agreement or
issue and sell the Shares in accordance with the terms hereof (other than any
SEC, NASD or state securities filings which may be required to be made by the
Company and any registration statement which may be filed pursuant hereto);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein. The Investors and other
investors in the Shares and the stock issuable upon conversion thereof, and the
Placement Agents as holders of warrants to purchase Shares, are not and will not
become upon conversion or exercise "Acquiring Persons" within the meaning of the
Rights Agreement dated August 11, 1992, as amended, between the Company and Bank
of America as rights agent so long as such holders (including the warrant
holders) comply with the provisions of Section 3.5 hereof.
(f) SEC Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). The Company has
delivered or made available to the Investor true and complete copies of the
quarterly and annual (including, without limitation, proxy information and
solicitation materials) SEC Documents filed with the SEC since December 31,
1995. The Company has not provided to the Investor any information which,
according to applicable law, rule or regulation, should have been disclosed
publicly by the Company but which has not been so disclosed, other than with
respect to the transactions contemplated by this Agreement. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder except as set forth on Exhibit A and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the
<PAGE> 9
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) No Material Adverse Change. Since the date through which the
most recent quarterly report of the Company on Form 10-Q has been prepared and
filed with the SEC, a copy of which is included in the SEC Documents, no event
which would have a Material Adverse Effect has occurred or exists with respect
to the Company or its subsidiaries otherwise than operating losses in the
ordinary course of business, except as otherwise disclosed or reflected in other
SEC Documents prepared through or as of a date subsequent thereto, and except
for write-offs of certain balance sheet assets and one-time charges of
approximately $13 million to $15 million, and the Company has not received any
communication from the SEC or the NASD regarding any possible de-listing of the
Company's Common Stock.
(h) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed.
(i) No General Solicitation. Neither the Company, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf
(including Cappello Capital Corp. and CEA Montgomery (the "Placement Agents")),
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) in connection with the offer or sale
of the Shares.
(j) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Shares under the Act.
(k) Approval Commitments. The Company has received binding
assurance from its executive officers and directors to the effect that such
persons will vote all their shares in favor of such approval of the transactions
contemplated hereby as may be necessary to comply with any rule or regulation of
the NASD or any other regulatory agency, and in favor of an increase in the
authorized stock of the Company, as contemplated by Section 10 of Schedule I
hereto. To the knowledge of the Company, there is no beneficial owner of more
than 5% of the outstanding stock of the Company.
(l) Lender Approvals. The Company has received all consents or
approvals from holders of its debt securities that are necessary to allow the
Company to redeem the Series C Preferred shares if so required pursuant to
Section 10 of Schedule I hereto.
Section II.2 Representations and Warranties of the Investor. The Investor
hereby makes the following representations and warranties to the Company:
(a) Authorization, Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and to
purchase the Shares being sold hereunder, (ii) the execution and delivery of
this Agreement by the Investor and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate or
partnership action, and (iii) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
<PAGE> 10
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Investor of the transactions contemplated
hereby do not and will not (i) result in a violation of the Investor's charter
documents or By-Laws or (ii) conflict with any agreement, indenture or
instrument to which Investor is a party, or (iii) result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to Investor. The business of the Investor is not
being conducted in violation of any law or regulation of any governmental
entity, except for possible violations which either singly or in the aggregate
do not and will not have a Material Adverse Effect. The Investor is not required
to obtain any consent or authorization of any governmental agency in order for
it to perform its obligations under this Agreement. The data to be provided by
the Investor in connection with registering the Registrable Securities under the
Act will be true and correct in all material respects.
(c) Investment Representation. The Investor is purchasing the
Shares for its own account for investment and not with a view to distribution
otherwise than in compliance with the Act. Investor has no present intention to
sell the Shares and Investor has no present arrangement (whether or not legally
binding) to sell the Shares to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not agree
to hold the Shares for any minimum or other specific term and reserves the right
to dispose of the Shares at any time in accordance with Federal and state
securities laws applicable to such disposition.
(d) Accredited Investor. The Investor is an accredited investor as
defined in Rule 501 promulgated under the Act. The Investor has such knowledge
and experience in financial and business matters in general, and investments in
particular, so that the Investor is able to evaluate the merits and risks of an
investment in the Shares and to protect its own interests in connection with
such investment. In addition (but without limiting the effect of the Company's
representations and warranties contained herein), the Investor has received such
information as it considers necessary or appropriate for deciding whether to
purchase the Shares pursuant hereto. The Investor acknowledges that no
representation or warranty is made by the Placement Agents or any persons
representing the Placement Agents with respect to the Company or sale of the
Shares.
(e) Rule 144. The Investor understands that there is no public
trading market for the Shares, that none is expected to develop, and that the
Shares must be held indefinitely unless such Shares or securities into which the
Shares are converted are registered under the Act or an exemption from
registration is available. The Investor has been advised or is aware of the
provisions of Rule 144 promulgated under the Act.
ARTICLE III
Covenants
Section III.1 Securities Compliance.
(a) The Company shall notify the SEC and NASD, in accordance with
their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares and Common Stock issuable upon conversion thereof to the
Investor or subsequent holder.
(b) The Investor understands that the Shares are being offered and
sold in reliance on a transactional exemption from the registration requirements
of Federal and state securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Investor to acquire the Shares.
<PAGE> 11
Section III.2 Registration and Listing. Until one (1) year after all
Shares have been converted into Common Stock, the Company will cause its Common
Stock (or other securities into which the Shares are convertible) to continue to
be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in
all respects with its reporting and filing obligations under said act, will
comply with all requirements related to any registration statement filed
pursuant to this Agreement and will not take any action or file any document
(whether or not permitted by the Act or the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Acts, except as permitted
herein. Until one (1) year after all Shares have been converted into Common
Stock the Company will use commercially reasonable efforts to continue the
listing or trading of its Common Stock (or other securities into which the
Shares are convertible) on the Nasdaq National Market or the Nasdaq Small Cap
Market or a national securities exchange and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD and Nasdaq.
Section III.3 Stockholder Approval. The Company will use its best efforts
to notice and hold a stockholders meeting as promptly as practicable and in any
event not later than February 28, 1998 if, as and when necessary to obtain any
stockholder approvals required by the Company (including those required by all
applicable agreements between the Company and the NASD or Nasdaq, and those
required by Section 10 of Schedule I hereto)) to allow for issuance of Common
Stock upon conversion of the Shares.
Section III.4 Sale Restrictions. Following conversion of the Shares into
Common Stock of the Company, Investor will not on any trading day offer or sell
publicly on NASDAQ or on the principal exchange on which the Common Stock is
traded, or any other securities market or securities exchange, on a net basis,
more than the following number of such shares of Common Stock: the greater of
(i) 10% of the average daily trading volume of the Common Stock for the five
trading days immediately preceding such sale as reported by NASDAQ or by such
principal exchange, (ii) 60,000 shares, or (iii) 10% of the trading volume for
the Common Stock on such day, as reported by NASDAQ or by such principal
exchange.
Section III.5 Conversion Rights. Investor shall not be entitled to convert
any Share into Common Stock of the Company if following conversion of such Share
the Investor and its affiliates (within the meaning of the Exchange Act) shall
be the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of
10% or more of the Common Stock of the Company, or if a lesser percentage is set
forth after the name of the Investor on the signature page hereof, such lesser
percentage. The provisions of this Section cannot be amended.
Section III.6 Hedging Restrictions. Investor agrees not to engage in any
short sales, swaps, purchasing of puts, or other hedging activities that involve
the direct or indirect use of the Common Stock to hedge its investment in the
Shares. This Section shall not apply to transactions not solicited or directed
by Investor and in which Investor has no beneficial interest made on behalf of
third-party clients who are not holders of Shares. This Section shall not apply
to short sales made within 3 days of Conversion of Shares in amounts not greater
than the number of shares issuable upon conversion.
Section III.7 Notice of Conversion Cap. No later than the 15 days after
the end of the 24th, 30th and 36th full calendar months after the Closing Date,
respectively, the Company will deliver notice to the Investor specifying the
amount of the then applicable Conversion Cap (as defined in Schedule I hereto)
and the calculation thereof.
Section III.8 Covenant to Repurchase Series B Preferred. The Company will
use commercially reasonable efforts to repurchase or redeem all of its Series B
Convertible Preferred Stock which has not theretofore been converted immediately
prior to or simultaneously with the Closing hereunder. If the Company is unable
to do so, then the number of shares to be sold by the Company pursuant to this
agreement and other agreements of like tenor shall be reduced pro-rata to a
total of 16,000 shares, the number of Shares to be purchased by Investor
hereunder shall be proportionately reduced, and the remaining terms of this
Agreement shall remain unchanged, but in such event an additional Section will
be added to Schedule I hereto providing that the Series C Preferred shares are
subordinate to the Series B shares.
<PAGE> 12
ARTICLE IV
Conditions
Section IV.1 Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation hereunder of the Company to issue and/or sell the
Shares to the Investor is subject to the satisfaction, at or before the Closing,
of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects.
(b) Performance by the Investor. The Investor shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section IV.2 Conditions Precedent to the Obligation of the Investor to
Purchase the Shares. The obligation hereunder of the Investor to acquire and pay
for the Shares is subject to the satisfaction, at or before the Closing, of each
of the conditions set forth below. These conditions are for the Investor's sole
benefit and may be waived by the Investor at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
particular date).
(b) Performance by the Company. The Company shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Company at or prior to the Closing.
(c) Nasdaq. The Company's Common Stock shall remain listed and
continue to trade on the Nasdaq National Market. Prior to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
or Nasdaq (other than a temporary suspension of not more than one day) and
trading in securities generally as reported by Nasdaq shall not have been
suspended or limited or minimum prices shall not have been established on
securities whose trades are reported by Nasdaq.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) Opinion of Counsel, Etc. At the Closing the Investor shall
have received an opinion of counsel to the Company in the form attached hereto
and such other certificates and documents as the Investor or its counsel shall
reasonably require incident to the Closing.
<PAGE> 13
ARTICLE V
Legend on Stock
Each certificate representing the Shares and securities issued upon
conversion thereof, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR
AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue certificates representing the Shares or, if
applicable, the securities issued upon conversion thereof without the legend set
forth above at such time as (i) the holder thereof is permitted to dispose of
such Shares (or securities issued upon conversion thereof) pursuant to Rule 144
under the Act, (ii) the securities are sold to a purchaser or purchasers who (in
the opinion of counsel to such purchasers, in form and substance reasonably
satisfactory to the Company and its counsel) are able to dispose of such shares
publicly without registration under the Act, or (iii) such securities are
included in an effective registration statement under the Act and the person to
whom such securities are issued shall certify to the Company, in a Notice of
Conversion or in a separate document, that the securities are to be sold
pursuant to such effective registration statement.
ARTICLE VI
Termination
Section VI.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Investor.
Section VI.2 Other Termination. This Agreement may be terminated by action
of the Board of Directors or other governing body of the Investor or the Company
at any time if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement.
Section VI.3 Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth business day following the date of this
Agreement.
ARTICLE VII
Miscellaneous
Section VII.1 Fees and Expenses. Except as otherwise set forth in Section
1.4 hereof, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company will compensate the Placement Agents
and will indemnify them against certain liabilities. The Placement Agents'
compensation includes a cash payment in an amount equal to 5.5% of the Purchase
Price of Shares sold by the Company, and the issuance of warrants to the
Placement Agents to purchase that number of Shares equal to 10% of the number of
Shares sold. The Company shall pay all stamp and other taxes and duties levied
in connection with the issuance of the Shares pursuant hereto.
<PAGE> 14
Section VII.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Investor acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of them may be entitled by
law or equity.
(b) Each of the Company and the Investor (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in California for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement and (ii) hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each of the Company and the
Investor consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.
Section VII.3 Entire Agreement: Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section VII.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
<TABLE>
<S> <C>
to the Company: Quarterdeck Corporation
Curtis Hessler, President
13160 Mindanao Way
Marina del Rey, CA 90292-9705
Fax: (310) 309-3707
with a copy to: Bradley Schwartz, Esq.
Schwartz & Associates
333 South Grand Ave., Suite 3950
Los Angeles, CA 90071
Fax: (213) 621-0982
to the Investor: At the address set forth at the foot of this Agreement, with
copies to Investor's counsel as set forth at the foot of this
Agreement or as specified in writing by Investor
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
with a copy to: Gerard K. Cappello
Cappello Capital Corp.
1299 Ocean Avenue, Suite 306
Santa Monica, California 90401
Fax: (310) 393-4838
</TABLE>
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other party
hereto.
Section VII.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section VII.6 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section VII.7 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. The parties hereto may amend this Agreement
without notice to or the consent of any third party.
Section VII.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section VII.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of California
without regard to such state's principles of conflict of laws.
Section VII.10 Survival. The representations and warranties of the Company
and the Investor contained in Article II and the agreements and covenants set
forth in Articles I, III, V and VII shall survive the Closing.
Section VII.11 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause the manually
executed signature page(s) to be physically delivered to the other party within
five days of the execution hereof.
Section VII.12 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Investor
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.
QUARTERDECK CORPORATION
By:______________________________________
Name: Curtis Hessler
Its: President
Number of Shares THE INVESTOR
________________ By:______________________________________
Name:
Dollar Amount at Its:
$1,000 per share Investor's address:
$_______________ Percentage limitation, if desired ______
Name and address of Investor's counsel:
<PAGE> 1
Exhibit 99.4
AMENDMENT TO RIGHTS AGREEMENT
This Amendment to Rights Agreement (the "Amendment"), dated as of
September 30, 1997 by and between Quarterdeck Corporation, a Delaware
corporation (the "Company"), and American Stock Transfer & Trust Company (the
"Rights Agent"), is an amendment to that certain Rights Agreement, dated as of
August 11, 1992 (the "Rights Agreement"), originally entered into by and between
the Company and Bank of America National Trust and Savings Association as the
rights agent. Capitalized terms used herein but not otherwise defined shall have
the meanings ascribed to them in the Rights Agreement.
WHEREAS, the Company and the Rights Agent are parties to that certain
Rights Agreement;
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may,
prior to the Distribution Date, without the approval of the holders of the
Company's common stock, $.001 par value per share, amend or supplement the
Rights Agreement;
WHEREAS, on September 26, 1997, the Company's Board of Directors acted to
amend the Rights Agreement as set forth in Section 1 below;
NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto agree as follows:
1, AMENDMENT TO RIGHTS AGREEMENT. The last sentence of Section 1(a) of
the Rights Agreement shall be amended to read in full as follows:
"Notwithstanding the foregoing, (A) no Person shall become an
"Acquiring Person" (i) as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an "Acquiring Person" and (ii) if within 8 days after such Person would
otherwise have become an Acquiring Person (but for the operation of this
subclause (A)(ii)), such Person notifies the Board of Directors that such Person
did so inadvertently and, within 2 days after such notification, such Person is
the Beneficial Owner of less than 15% of the outstanding Common Shares," and (B)
none of the Investors or the Placement Agent (as such terms are defined in the
Preferred Stock Investment Agreement entered into between the Company and each
of the Investors on or about September 30, 1997, (the "Investment Agreement"))
shall be deemed to be an Acquiring Person as a result of its acquisition of
shares of the Company's Series C Convertible Preferred Stock pursuant to the
terms of the Investment Agreement, or any Common Shares received upon conversion
of the Series C Convertible Preferred Stock; so long as such persons comply with
Section 3.5 of the Investment Agreement.
2. STATUS OF RIGHTS AGREEMENT. Except as otherwise amended, modified or
supplemented by this Amendment, the Rights Agreement shall continue in full
force and effect.
3. COUNTERPARTS. This Amendment may be executed simultaneously, in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
<PAGE> 2
4. APPLICABLE LAW. This Amendment shall be construed and enforced in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the date first above written.
QUARTERDECK CORPORATION
By: __________________________
Its: __________________________
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: ___________________________
Its: ___________________________
