QAD Announces Proposed Recapitalization Plan
September 22 2010 - 8:00AM
Business Wire
QAD Inc. (NASDAQ: QADI), a global provider of enterprise
software and services, today announced that its Board of Directors
has unanimously adopted a recapitalization plan designed to
increase financial flexibility for QAD and its stockholders. The
proposed recapitalization plan is subject to stockholder approval
as well as the receipt of customary regulatory approvals. Karl and
Pamela Lopker, who own a majority of QAD’s common stock, have
notified QAD that they intend to vote their shares in favor of the
recapitalization.
The proposed recapitalization plan would establish two classes
of common stock: Class A common stock with 1/20th of one vote per
share and Class B common stock with one vote per share. As a result
of the recapitalization plan, each ten whole shares of existing
common stock will become four Class A shares and one Class B share.
To illustrate, a hypothetical QAD stockholder who currently owns
1,000 shares of common stock, will own 400 Class A shares, each
with 1/20th of one vote, and 100 Class B shares, each with one
vote, after the recapitalization.
Highlights of the Proposed Recapitalization Plan
- The proposed recapitalization
plan allows QAD greater flexibility to issue Class A common stock
in the future for corporate purposes, including financings,
acquisitions or employee compensation, with limited dilution of
existing stockholder voting rights.
- Holders of Class A common
stock will be entitled to receive a dividend equal to 120% of any
dividend payable on Class B common stock, other than dividends
declared for the purpose of distributing proceeds received by the
Company from any transaction determined by the Board to be a
material transaction not in the ordinary course of business,
dividends effecting a spin-off of a subsidiary of the Company or
dividends payable solely in the Company’s capital stock.
Karl Lopker, QAD’s chief executive officer stated, “We are very
pleased that the recapitalization allows us to pursue our existing
strategy more aggressively while maintaining continuity of
ownership which is important to our customers.”
The recapitalization plan would be effected through the
reclassification of each share of QAD’s outstanding common stock
into one-tenth of a new share of Class B common stock. QAD then
would issue a non-taxable stock dividend of four shares of Class A
common stock on each share of Class B common stock outstanding at
the close of business on the effective date of the
reclassification.
The proposed recapitalization plan would reduce the total number
of shares of QAD stock outstanding by approximately 50%, including
a minimal reduction in the total number of shares outstanding as a
result of the payment of cash in lieu of issuing any fractional
shares which would otherwise result from the reclassification of
the existing common stock to Class B common stock. Therefore, the
recapitalization plan is expected to have the same impact on
earnings per share and market price per share as a 2-to-1 reverse
stock split. However, there can be no assurance that the market
prices of the two classes of stock after the recapitalization will
rise in proportion to the reduction in the number of shares of
stock outstanding resulting from the recapitalization or as to the
relative market prices of the two classes of stock.
The proposed recapitalization plan would not affect the relative
voting or equity interests of existing stockholders because the
reclassification of common stock and issuance of a stock dividend
will affect each stockholder in proportion to the number of shares
currently owned.
It is anticipated that the Class A common stock and Class B
common stock will trade on the Nasdaq Global Select Market. Symbols
will be assigned prior to the effective date of the
recapitalization.
QAD intends to seek stockholder approval of the proposed
recapitalization plan at a special meeting of the stockholders to
be held during the fourth quarter of 2010. The recapitalization
plan is described in greater detail in the preliminary proxy
statement that QAD will be filing with the Securities and Exchange
Commission today.
Additional information and where to find it
QAD has filed a preliminary proxy statement relating to the
proposed recapitalization plan with the SEC today and intends to
file a definitive proxy statement and other relevant materials with
the SEC at a later date. The definitive proxy statement will be
provided to the stockholders of QAD. Before making any voting or
investment decision with respect to the proposed recapitalization
plan, investors and stockholders of QAD are urged to read the proxy
statement and the other relevant materials because they will
contain important information about the recapitalization plan. The
proxy statement, and any other documents filed by QAD with the SEC,
may be obtained free of charge at the SEC’s website at www.sec.gov, or by contacting QAD by
email at investor@qad.com, by phone at 805.566.5117, or by mail at
QAD Inc., 100 Innovation Place, Santa Barbara, California 93108. In
addition, the definitive proxy statement will be available in the
Investor Relations section of the QAD website at www.qad.com.
Participants in the solicitation
QAD and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from QAD stockholders
in connection with the proposed recapitalization plan. Information
about QAD’s directors and executive officers is set forth in QAD’s
proxy statement on Schedule 14A filed with the SEC on May 14, 2010
and QAD’s Annual Report on Form 10-K filed with the SEC on April
15, 2010. Additional information regarding the interests of
participants in the solicitation of proxies in connection with the
proposed recapitalization plan will be included in the definitive
proxy statement that QAD intends to file with the SEC.
About QAD Inc.
QAD is a leading provider of enterprise applications for global
manufacturing companies. QAD applications provide critical
functionality for managing manufacturing resources and operations
within and beyond the enterprise, enabling global manufacturers to
collaborate with their customers, suppliers and partners to make
and deliver the right product, at the right cost and at the right
time. Manufacturers of automotive, consumer products, electronics,
food and beverage, industrial and life science products use QAD
applications in more than 90 countries and in as many as 27
languages. For more information about QAD, telephone +1
805-566-6000, or visit the QAD website at www.qad.com.
“QAD” is a registered trademark of QAD Inc. All other products
or company names herein may be trademarks of their respective
owners.
Cautionary Note Regarding Forward-Looking Statements
This press release contains certain
forward-looking statements made under the “safe harbor” provisions
of the Private Securities Litigation Reform Act of 1995. A number
of risks and uncertainties could cause actual results to differ
materially from those in the forward-looking statements. These
risks include, but are not limited to, the effect of the
recapitalization plan on the Company’s stock price; evolving demand
for the Company’s software products and products that operate with
the Company’s products; the Company’s ability to sustain license
and service demand; the Company’s ability to leverage changes in
technology; the Company’s ability to sustain customer renewal rates
at current levels; the publication of opinions by industry and
financial analysts about the Company, its products and technology;
the reliability of estimates of transaction and integration costs
and benefits; the entry of new competitors or new offerings by
existing competitors and the associated announcement of new
products and technological advances by them; delays in localizing
the Company’s products for new or existing markets; the ability to
recruit and retain key personnel; delays in sales as a result of
lengthy sales cycles; changes in operating expenses, pricing,
timing of new product releases, and the method of product
distribution or product mix; timely and effective integration of
newly acquired businesses; general economic conditions; exchange
rate fluctuations, ability to achieve savings from cost cutting
measures; and the global political environment. In addition,
revenue and earnings in the enterprise resource planning (ERP)
software industry are subject to fluctuations. Software license
revenue, in particular, is subject to variability with a
significant proportion of revenue earned in the last month of each
quarter. Given the high margins associated with license revenue,
modest fluctuations can have a substantial impact on net income.
For a more detailed description of the risk factors associated with
the Company and the industries in which it operates, please refer
to the Company’s Annual Report on Form 10-K for the fiscal year
ended January 31, 2010 and the Company’s other filings with the
SEC.
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