Item 8.01. OTHER EVENTS.
Adjournment
of Special Meeting
On
October 12, 2021, QAD Inc. (“QAD” or the “Company”) issued a press release regarding the adjournment of the special
meeting of its stockholders, scheduled to be held on October 15, 2021 in connection with the Company’s previously announced Merger
Agreement (as defined below). A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and incorporated
herein by reference.
Additional
Supplemental Disclosures
These
additional supplemental disclosures are being filed on October 12, 2021 (“Additional Supplemental Disclosures”). The following
information amends and supplements, and should be read in conjunction with the Company’s definitive proxy statement, dated September
9, 2021 (as previously supplemented on September 27, 2021, the “Proxy Statement”) relating to the proposed merger of the Company
with and into Project Quick Merger Sub, Inc. (“Merger Sub”), with the Company surviving the merger as a direct, wholly owned
subsidiary of Project Quick Parent, LLC (“Parent”), pursuant to that certain Agreement and Plan of Merger, dated June 27,
2021 (“Merger Agreement”) (such transaction, the “Merger”). The information contained in the Additional Supplemental
Disclosures modifies and supersedes any inconsistent information contained in the Proxy Statement, as supplemented to date.
Except
as supplemented or amended by the information contained in the Additional Supplemental Disclosures, all information set forth in the Proxy
Statement, as previously supplemented on September 27, 2021,
remains unchanged. We urge you to read the Additional Supplemental Disclosures carefully and in their entirety together with the Proxy
Statement and the previous supplement to the Proxy Statement, all of which are available on the Internet
site maintained by the SEC at http://www.sec.gov, along with other information the Company and Parent file with the SEC. All page references
are to pages in the Proxy Statement, and terms used below, unless otherwise defined, have the meanings set forth in the Proxy Statement.
QAD
generally denies the allegations in the litigations described in the section entitled “Litigation Related to the Merger” under
the heading “Special Factors” beginning on page 72 of the Proxy Statement. Pursuant to the Delaware Chancery Court ruling,
as described below, QAD is supplementing its disclosures with the Additional Supplemental Disclosures set forth below.
The
following information amends and supplements the information disclosed in the Proxy Statement,
as previously supplemented on September 27, 2021. For clarity, new text within amended and restated paragraphs
from the Proxy Statement, is highlighted with bold, underlined text and deleted text within restated paragraphs from the
Proxy Statement, is highlighted with strikethrough text.
The
disclosure in the section entitled “Background of the Merger” under the heading “Special
Factors” beginning on page 21 of the Proxy Statement, as previously supplemented on September 27, 2021, is hereby amended
by deleting the third paragraph on page 21 and replacing it with:
QAD
regularly evaluates strategies for improving its competitive position and enhancing stockholder value. As part of these evaluations, the
QAD Board has, from time to time, considered various strategic alternatives, such as public offerings, joint ventures, collaborations
and business combinations, including a possible merger or sale of QAD. From time to time, prior to 2021, QAD directors and
senior management, including Ms. Lopker, the President and founder of QAD, met with representatives of potential financial advisors with
relevant industry expertise and various private equity firms, including Thoma Bravo. QAD also received unsolicited
indications of interest from third parties.
The disclosure in the section entitled
“Background of the Merger” under the heading “Special Factors” beginning on page
21 of the Proxy Statement, as previously supplemented on September 27, 2021, is hereby amended by inserting the following as a
new paragraph immediately after the last full paragraph on page 21:
On
or about February 18, 2021, after discussion with the independent directors of the QAD Board, Mr. Adelson spoke with Mr. Paul Zuber, an
operating partner at Thoma Bravo, who had a meeting with Ms. Lopker in 2019 to discuss private equity transactions and the industry generally.
Mr. Adelson discussed with Mr. Zuber that QAD was now preparing to start a process to review strategic alternatives,
and that QAD’s financial advisor would be in touch with potentially interested counterparties in the coming weeks. Mr. Adelson
said that he and the other independent directors were encouraging Ms. Lopker to be open to the strategic review process, including in
connection with her estate planning; that current management was open to potential changes; and that Ms. Lopker may not be interested
in selling her stake in QAD unless a bidder paid a significant premium, such that her stake would be worth no less than $1 billion.
The disclosure in the section entitled
“Directors and Executive Officers of the Company” under the heading “Other Important Information Regarding the Company”
beginning on page 120 of the Proxy Statement, as previously supplemented on September 27, 2021, is hereby amended by revising the penultimate
paragraph on page 4 of the Supplemental Disclosures as follows:
One of the operating partners at Thoma Bravo,
Mr. Paul Zuber, also serves as a director of Houlihan Lokey with Mr. Adelson. While Mr. Adelson and Mr. Zuber at times discussed
QAD together, Mr. Adelson did not share material information or discuss material deal terms with While Mr. Zuber
was , who, while involved in discussions surrounding the Merger as an operating partner, he
was not part of the Thoma Bravo deal team negotiating the Merger.
The disclosure in the section entitled
“Background of the Merger” under the heading “Special Factors” beginning on page 21 of the Proxy Statement, as
previously supplemented on September 27, 2021, is hereby amended by revising the second full paragraph on page 4 of the Supplemental Disclosures
as follows:
On June 18, 2021, at the direction of the Special Committee,
representatives of Morgan Stanley discussed Thoma Bravo’s latest offer with representatives of Thoma Bravo. During these
discussions, and consistent with the direction of the Special Committee, representatives of Morgan Stanley countered and discussed that
communicated to Thoma Bravo that the Special Committee requested that it increase its offer price to
$92 per share, which Thoma Bravo stated it was not willing to do, and that Thoma Bravo remain competitive on Ms. Lopker’s
non-price terms by offering Ms. Lopker a rollover of up to $300 million and a board seat. On June 18, 2021, QAD’s
closing share price of Class A Common Stock was $72.93. Morgan Stanley also relayed Ms. Lopker’s preference for a higher
rollover and a board seat to Thoma Bravo, and suggested that Thoma Bravo remain competitive on these non-price issues.
The disclosure in the section entitled “Litigation Related
to the Merger” under the heading “Special Factors” beginning on page 72 of the Proxy Statement, as previously supplemented
on September 27, 2021, is hereby amended by deleting the two paragraphs on pages 72-73 and replacing them with:
Currently,
the Company is aware of four (4) cases filed in connection with the Merger. In Nantahala Capital Partners II L.P.
v. QAD Inc., et al., a purported stockholder class action filed in Delaware Chancery Court on July 2, 2021, the plaintiff alleges breaches
of contract and fiduciary duty against directors Anton Chilton, Scott Adelson, Kathleen Crusco, and Peter van Cuylenburg (the “Director
Defendants”), and Pamela M. Lopker, as well as a claim for aiding and abetting a breach of fiduciary duty against Thoma Bravo and
certain affiliates of Thoma Bravo relating to the QAD Board’s vote to approve the Merger Agreement. The complaint names the Company
as a defendant to the extent necessary for any of the relief requested. Plaintiff is seeking, among other things, to enjoin the Closing
of the Merger or, in the alternative, damages, including rescissory damages. The plaintiff claims that the Contribution and Exchange Agreement
(pursuant to which and immediately prior to the Effective Time, the Lopker Entities will contribute to Ultimate Parent the Rollover Shares
and, in exchange for such Rollover Shares, Ultimate Parent will issue to the Lopker Entities the Parent Units) and the Merger Agreement
violate Article IV, Section 2.B(d) of QAD’s corporate charter, which provides that holders of Class A Common Stock receive per Share
consideration no less favorable than that received by any holders of Class B Common Stock in any merger. The plaintiff alleges that Ms.
Lopker and the Director Defendants breached Article IV, Section 2.B(d) of QAD’s corporate charter, that Ms. Lopker’s participation
in the separate Contribution and Exchange Agreement with Thoma Bravo breached her fiduciary duties to the Company, that the Director Defendants’
approval of the Merger breached their fiduciary duties to the Company, and that Thoma Bravo and its affiliates aided and abetted those
breaches. In a supplement to their complaint, filed on August 16, 2021, plaintiff alleges that the Director Defendants and
Ms. Lopker breached their fiduciary duties by disseminating a false, misleading, and materially incomplete Proxy, and that Thoma Bravo
aided and abetted those breaches. Specifically, plaintiff claims that the Proxy, issued on August 2, 2021, provides an inaccurate
description of the events leading to the Merger and the consideration that Ms. Lopker will receive in connection with the Merger. The
Court ordered that the case proceed on an expedited basis, and, on October 1, 2021, held a hearing on plaintiff’s motion for a preliminary
injunction. On October 8, 2021, the Court ordered a limited injunction for at least twenty days after the Company issued two corrective
disclosures, which the Company made on Form 8-K filed on October 12, 2021, and otherwise denied plaintiff’s motion. The
Company believes the plaintiff’s claims are without any merit.
On August 5 and 6, 2021, purported shareholders of the Company
filed two complaints in the District Court of the Southern District of New York, captioned Stein v. QAD Inc., et. al., 1:21-cv-06856 and
Whitfield v. QAD, Inc., et. al., 1:21-cv-06674, both naming the Company and members of its board of directors as defendants. On September
3, 2021, a purported shareholder of the Company filed a complaint in the District Court of the Eastern District of New York, captioned Parmar
v. QAD Inc., et al., 1:21-cv-04974, naming the Company and members of its board of directors as defendants. All three actions asserted
federal securities claims under Sections 14(a) and 20(a) of the Exchange Act and related provisions for alleged failures to disclose material
information, and seek to enjoin or rescind the Merger with Thoma Bravo and a request for an award of attorneys’ and experts’
fees and damages. On October 4, 2021, plaintiffs in the Stein and Whitfield actions voluntarily dismissed both cases
without prejudice. The Company believes that the remaining Parmar case is without any merit.
Important information for investors and stockholders
This communication is being made in respect
of the Merger involving the Company and Parent, an affiliate of Thoma Bravo, L.P. In connection with the Merger, the Company filed a definitive
proxy statement on September 9, 2021 with the SEC and intends to file any additional relevant materials with the SEC. Promptly after filing
its definitive proxy statement with the SEC, the Company mailed the definitive proxy statement and a proxy card to each stockholder of
the Company entitled to vote at the special meeting relating to the Merger. This communication is not a substitute for the proxy statement
or any other document that the Company may file with the SEC or send to its stockholders in connection with the Merger. The materials
filed and to be filed by the Company will be made available to the Company’s investors and stockholders at no expense to them and
copies may be obtained free of charge on the Company’s website at www.qad.com. In addition, all of those materials will be
available at no charge on the SEC’s website at www.sec.gov. Investors and stockholders of the Company are urged to read the
proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect
to the Merger because they contain important information about the Company and the Merger.
The Company and its directors, executive officers,
other members of its management and employees may be deemed to be participants in the solicitation of proxies of the Company stockholders
in connection with the Merger under SEC rules. Investors and stockholders may obtain more detailed information regarding the names, affiliations
and interests of the Company’s executive officers and directors in the solicitation by reading the Company’s definitive proxy
statement and other relevant materials that will be filed with the SEC in connection with the Merger when they become available. Information
concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of
the Company’s stockholders generally, is set forth in the definitive proxy statement relating to the Merger.
Forward-looking statements
All statements and assumptions in this communication
that do not directly and exclusively relate to historical facts could be deemed “forward-looking statements.” Forward-looking
statements are often identified by the use of words such as “anticipates,” “believes,” “estimates,”
“expects,” “may,” “could,” “should,” “forecast,” “goal,” “intends,”
“objective,” “plans,” “projects,” “strategy,” “target” and “will”
and similar words and terms or variations of such. These statements represent current intentions, expectations, beliefs or projections,
and no assurance can be given that the results described in such statements will be achieved. Forward-looking statements include, among
other things, statements about the potential benefits of the Merger; the prospective performance and outlook of the Company’s business,
performance and opportunities; the ability of the parties to complete the Merger and the expected timing of completion of the Merger;
as well as any assumptions underlying any of the foregoing. Such statements are subject to numerous assumptions, risks, uncertainties
and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside
of the Company’s control. Important factors that could cause actual results to differ materially from those described in forward-looking
statements include, but are not limited to, (i) the ability to obtain the requisite approval from stockholders of the Company, (ii) uncertainties
as to the timing of the Merger; (iii) the risk that the Merger may not be completed in a timely manner or at all; (iv) the possibility
that competing offers or acquisition proposals for the Company will be made; (v) the possibility that any or all of the various conditions
to the consummation of the Merger may not be satisfied or waived; (vi) the occurrence of any event, change or other circumstance that
could give rise to the termination of the Merger Agreement, including in circumstances that would require the Company to pay a Company
Termination Fee or other expenses; (vii) the effect of the pendency of the Merger on the Company’s ability to retain and hire key
personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, its business generally
or its stock price; (viii) risks related to diverting management’s attention from the Company’s ongoing business operations;
(ix) various risks related to health epidemics, pandemics and similar outbreaks, such as the COVID-19 pandemic, which may have material
adverse effects on the Company’s business, financial position, results of operations and/or cash flows; (x) adverse economic, market
or geo-political conditions that may disrupt the Company’s business and cloud service offerings, including defects and disruptions
in the Company’s services, ability to properly manage cloud service offerings, reliance on third party hosting and other service
providers, and exposure to liability and loss from security breaches; (xi) uncertainties as to demand for the Company’s products,
including cloud service, licenses, services and maintenance; (xii) the possibility of pressure to make concessions on pricing and changes
in the Company’s pricing models; (xiii) risks related to the protection of the Company’s intellectual property; (xiv) changes
in the Company’s dependence on third party suppliers and other third party relationships, including sales, services and marketing
channels; (xv) changes in the Company’s revenue, earnings, operating expenses and margins; (xvi) the reliability of the Company’s
financial forecasts and estimates of the costs and benefits of transactions; (xvii) the Company’s ability to leverage changes in
technology; (xviii) risks related to defects in the Company’s software products and services; (xix) changes in third party opinions
about the Company; (xx) changes in competition in the Company’s industry; (xxi) delays in sales; (xxii) timely and effective integration
of newly acquired businesses; (xxiii) changes in economic conditions in the Company’s vertical markets and worldwide; (xxiv) fluctuations
in exchange rates; and (xxv) other factors as set forth from time to time in the Company’s filings with the SEC, including its Annual
Report on Form 10-K for the fiscal year ended January 31, 2021, as may be updated or supplemented by any subsequent Quarterly Reports
on Form 10-Q or other filings with the SEC. Readers are cautioned not to place undue reliance on such statements which speak only as of
the date they are made. The Company does not undertake any obligation to update or release any revisions to any forward-looking statement
or to report any events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events except
as required by law.
