Form PREM14A QAD INC For: Aug 02

August 2, 2021 6:09 AM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.    )
Filed by the Registrant   ☒         Filed by a Party other than the Registrant   ☐
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12
QAD Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
Class A Common Stock, par value $0.001 per share
Class B Common Stock, par value $0.001 per share
(2)
Aggregate number of securities to which transaction applies:
17,662,554 shares of Class A Common Stock, 3,344,775 shares of Class B Common Stock, 950,000 Company SARs which convert to 622,584 shares (assuming a fair market value per share of $87.50 and the weighted average exercise price per share of $30.16), 537,199 Company RSUs, and 231,753 Company PSUs (assuming the maximum achievement of the performance goals applicable to such award, and assuming the satisfaction of all other conditions to such delivery).
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
In accordance with Exchange Act Rule 0-11(c), the filing fee of $213,825.17 was determined by multiplying 0.0001091 by the aggregate Merger Consideration of $1,959,900,687.50 The aggregate Merger Consideration was calculated as the sum of:
(a)
17,662,554 shares of Class A Common Stock multiplied by the Merger Consideration of $87.50 per share;
(b)
3,344,775 shares of Class B Common Stock multiplied by the Merger Consideration of $87.50 per share;
(c)
950,000 shares subject to Company SARs which would convert into 622,584 issued shares (such amount determined using a weighted average exercise price per share of $30.16 and the Merger Consideration of $87.50 per Share) multiplied by the Merger Consideration of $87.50 per share;
(d)
537,199 shares of Class A Common Stock issuable upon settlement of Company RSUs multiplied by the Merger Consideration of $87.50 per share; and
(e)
231,753 shares of Class A Common Stock issuable upon settlement of Company PSUs multiplied by the Merger Consideration of $87.50 per share (assuming the maximum achievement of the performance goals applicable to such award, and assuming the satisfaction of all other conditions to such delivery).
(4)
Proposed maximum aggregate value of transaction:
$1,959,900,687.50
(5)
Total fee paid:
$213,825.17

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:

PRELIMINARY PROXY MATERIALS — SUBJECT TO COMPLETION
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QAD Inc.
100 Innovation Place
Santa Barbara, CA 93108
805-566-6000
[           ], 2021
Dear Stockholders:
You are cordially invited to attend a special meeting (such meeting, including any adjournments or postponements thereof, the “Special Meeting”) of the stockholders of QAD Inc., which we refer to as the Company or QAD, to be held on [           ], 2021, at [     ] at the QAD corporate headquarters located at 100 Innovation Place, Santa Barbara, CA 93108. Details regarding the business to be conducted at the Special Meeting are described in the accompanying proxy statement and the accompanying notice of Special Meeting (the “Notice of Special Meeting”).
At the Special Meeting you will be asked to consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger, dated as of June 27, 2021 (as amended from time to time, the “Merger Agreement”) by and among the Company, Project Quick Parent, LLC, a limited liability company organized under the laws of Delaware (“Parent”), and Project Quick Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub are entities that are affiliated with Thoma Bravo, L.P., (“Thoma Bravo”) a private equity investment firm.
Under the terms of the Merger Agreement, private equity funds affiliated with Thoma Bravo will indirectly acquire QAD in an all-cash transaction with an equity value of approximately $2 billion. QAD stockholders will receive $87.50 per share of Class A Common Stock or Class B Common Stock (subject to certain adjustments, as described further below) in cash upon the closing of the transaction. The QAD Board of Directors (other than Ms. Lopker, who recused herself) believes this transaction, which is the result of a robust, independent process undertaken by a special committee of the QAD Board of Directors, maximizes value for QAD stockholders and is in the best interest of the Company. Upon completion of the transaction, QAD will become a private company with the flexibility to continue investing in the development and deployment of Enterprise Resource Planning (ERP) software and related enterprise software for manufacturing companies around the world. The Merger Agreement and the transactions contemplated thereby, including the Merger are described further in the accompanying proxy statement.
Your vote is very important.   Whether or not you plan to attend the Special Meeting, you are urged to vote your shares as promptly as possible to ensure your representation at the Special Meeting. Please review the instructions in the accompanying Notice of Special Meeting and proxy statement regarding voting.
If the Merger is completed, each share of QAD’s Class A Common Stock, par value $0.001 per share and Class B Common Stock, par value $0.001 per share (Class A Common Stock and Class B Common Stock, together the “Shares”), issued and outstanding immediately prior to the effective time of the Merger (other than the Shares issued and held by the Company or any of the Company’s direct or indirect wholly owned subsidiaries immediately prior to the effective time, the Shares owned by Parent, Merger Sub or any of their respective direct or indirect wholly owned subsidiaries immediately prior to the effective time, the Rollover Shares (as defined in the proxy statement), and the Dissenting Shares (as defined in the proxy statement)) shall be converted automatically into the right to receive from Parent $87.50 per Share in cash (“Merger Consideration”), without interest and less any applicable withholding taxes, subject to and in accordance with the terms and conditions of the Merger Agreement.
The proposed transactions constitute a “going-private transaction” under the rules of the SEC. As of July 23, 2021, Pamela M. Lopker, the Company’s founder and President, and certain entities affiliated with Ms. Lopker, namely, the Lopker

Living Trust dated November 18, 2013, and the Estate of Karl F. Lopker (together with Ms. Lopker, the “Lopker Entities”), who hold approximately 67% of the voting power of the Company’s outstanding capital stock.
The QAD Board of Directors (the “QAD Board”), formed a special committee (the “Special Committee”) consisting solely of independent and disinterested directors of the Company to, among other things, review, evaluate and negotiate the Merger Agreement and the transactions contemplated thereby, including the Merger, and other alternatives available to the Company. The Special Committee, as more fully described in the accompanying proxy statement, evaluated the Merger, in consultation with the Company’s management and its own independent legal and financial advisors and considered various material factors. After careful consideration, the Special Committee unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders, (ii) recommended that the QAD Board approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and declared that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and the Company’s stockholders and (iii) recommended that, subject to approval by the QAD Board, the QAD Board resolve to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger.
Based in part on the unanimous recommendation of the Special Committee, the QAD Board (other than Ms. Lopker, who recused herself), (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders, (ii) adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement be submitted to the holders of Shares for their adoption and approval and (iv) resolved to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger. In evaluating the Merger, the QAD Board (other than Ms. Lopker, who recused herself) also consulted with the Company’s management, legal and other advisors and considered various material factors.
The QAD Board (other than Ms. Lopker, who recused herself) recommends that you vote “FOR” the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger.
Your vote is very important, regardless of the number of Shares you own.   The approval of the proposal to adopt the Merger Agreement requires the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company. The holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date. If you fail to vote on the proposal to adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, the effect will be the same as a vote against the proposal.
Pursuant to rules of the SEC, you will also be asked to vote at the Special Meeting on (i) a non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger, which requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon and (ii) one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement, which requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon, whether or not a quorum is present.
For each of the foregoing proposals, the holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date.
The QAD Board (other than Ms. Lopker, who recused herself), recommends that you vote “FOR” the advisory, non-binding, proposal regarding certain Merger-related executive compensation arrangements, and “FOR” the proposal to adjourn the Special Meeting, if necessary or appropriate.
In considering the recommendations of the QAD Board (other than Ms. Lopker, who recused herself), the Company’s stockholders should be aware that the executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. Those interests are more fully described in the accompanying proxy statement. The Special Committee and the QAD Board were aware of these interests and considered them, among other matters, in making their recommendations.
The Lopker Entities, who hold approximately 67% of the voting power of the Company’s outstanding capital stock, have duly executed and entered into a Support Agreement, pursuant to which they have agreed to vote their Shares in favor of the

adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, subject to and in accordance with the terms and conditions of the Support Agreement. A copy of the Support Agreement is attached as Annex B to the accompanying proxy statement.
On June 27, 2021, the Lopker Entities separately entered into a Contribution and Exchange Agreement, pursuant to which and immediately prior to the effective time, the Lopker Entities will contribute to Ultimate Parent (as defined in the proxy statement) the Rollover Shares and, in exchange for such Rollover Shares, Ultimate Parent will issue to the Lopker Entities the Parent Units (as defined in the proxy statement). The Contribution and Exchange Agreement also includes certain confidentiality, non-competition, non-solicitation and non-disparagement covenants applicable to Ms. Lopker and the other Lopker Entities. A copy of the Contribution and Exchange Agreement is attached as Annex C to the accompanying proxy statement.
Completion of the Merger is subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement.
The accompanying proxy statement provides you with more detailed information about the Special Meeting, the Merger Agreement and the transactions contemplated thereby, including the Merger. A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement. We encourage you to carefully read the entire proxy statement and its annexes, including the Merger Agreement and the documents referred to or incorporated by reference in the accompanying proxy statement in their entirety. You may also obtain additional information about the Company from other documents we have filed with the Securities and Exchange Commission (the “SEC”). In particular, you should read the “Risk Factors” section beginning on page 14 in our annual report on Form 10-K for the fiscal year ended January 31, 2021 and other risk factors detailed from time to time in the Company’s reports filed with the SEC and incorporated by reference in the accompanying proxy statement in their entirety, for risks relating to our business and for a discussion of the risks you should consider in evaluating the proposed transactions and how they may affect you.
If you have any questions or need assistance voting your Shares, please contact the Company’s proxy solicitor in connection with the Special Meeting:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Shareholders may call toll free: (877) 456-3507
Brokers, banks and other nominees may call collect: (212) 750-5833
Thank you in advance for your cooperation and continued support.
Sincerely,
Anton Chilton
Chief Executive Officer and Director
The accompanying proxy statement is dated [           ], 2021, and is first being mailed to the Company’s stockholders on or about [           ], 2021.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT OR THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 
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QAD Inc.
100 Innovation Place
Santa Barbara, CA 93108
805-566-6000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Dear Stockholders:
You are cordially invited to attend a special meeting (such meeting, including any adjournments or postponements thereof, the “Special Meeting”) of the stockholders of QAD Inc., which we refer to as the Company or QAD, to be held on [           ], 2021, at [      ] at the QAD corporate headquarters located at 100 Innovation Place, Santa Barbara, CA 93108. The Special Meeting is being held to consider and vote on the following proposals:
1.
a proposal to approve and adopt the Agreement and Plan of Merger, dated as of June 27, 2021 (as amended from time to time, the “Merger Agreement”) by and among the Company, Project Quick Parent, LLC, a limited liability company organized under the laws of Delaware (“Parent”), and Project Quick Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), and approve the transactions contemplated thereby, including the Merger (the “Merger Agreement Proposal”). A copy of the Merger Agreement is attached as Annex A to the accompanying proxy statement;
2.
a non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger (the “Golden Parachute Proposal”); and
3.
a proposal to approve one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal (the “Adjournment Proposal”).
Under the terms of the Merger Agreement, private equity funds affiliated with Thoma Bravo will indirectly acquire QAD in an all-cash transaction with an equity value of approximately $2 billion. The QAD Board of Directors (other than Ms. Lopker, who recused herself) believes this transaction, which is the result of a robust, independent process undertaken by a special committee of the QAD Board of Directors, maximizes value for QAD stockholders and is in the best interest of the Company.
These items of business are more fully described in the proxy statement accompanying this Notice of Special Meeting.
The record date for the Special Meeting is [      ], 2021. Only stockholders of record at the close of business on that date are entitled to notice of, and to attend and vote at, the Special Meeting or any adjournment or postponement thereof. Any stockholder entitled to attend and vote at the Special Meeting is entitled to appoint a proxy to attend and act on such stockholder’s behalf. Such proxy need not be a
 

 
stockholder of the Company. You may vote on the Internet, by telephone, by mail or by attending the Special Meeting and voting in person.
The QAD Board of Directors (other than Ms. Lopker, who recused herself), has approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and recommends that you vote “FOR” the Merger Agreement Proposal, “FOR” the Golden Parachute Proposal and “FOR” the Adjournment Proposal.
The proposed transactions constitute a “going-private transaction” under the rules of the SEC. As of July 23, 2021, Pamela M. Lopker, the Company’s founder and President, and certain entities affiliated with Ms. Lopker, namely, the Lopker Living Trust dated November 18, 2013, and the Estate of Karl F. Lopker (together with Ms. Lopker, the “Lopker Entities”), who hold approximately 67% of the voting power of the Company’s outstanding capital stock.
Your vote is very important, regardless of the number of Shares you own. The approval of the Merger Agreement Proposal requires the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company, as described in the accompanying proxy statement. If you fail to vote on the Merger Agreement Proposal, the effect will be the same as a vote against the Merger Agreement Proposal.
The approval of the Golden Parachute Proposal requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon. The approval of the Adjournment Proposal requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon, whether or not a quorum is present.
For each of the Merger Agreement Proposal, the Golden Parachute Proposal and the Adjournment Proposal, the holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date.
Your vote is very important. To ensure your representation at the Special Meeting, it is important that you submit a proxy for your Shares promptly, whether or not you plan to attend the Special Meeting in person. As promptly as possible, please complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy over the Internet or by telephone by following the instructions set forth on the enclosed proxy card. Stockholders who attend the Special Meeting may revoke their proxies and vote in person.
By Order of the QAD Board of Directors,
Daniel Lender
Corporate Secretary
Santa Barbara, California
Dated: [           ], 2021
 

 
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DEFINED TERMS
Unless stated otherwise, whenever used in this proxy statement, the following terms have the meanings set forth below:
Adjournment Proposal means the proposal to approve one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal.
Certificate of Merger means a certificate of merger in such form as required by and in accordance with the applicable provisions of the DGCL.
Certificates means certificates that immediately prior to the Effective Time represented outstanding Shares (other than the Excluded Shares), as described in “Special Factors — Payment of Merger Consideration” ​(each, a Certificate).
Class A Common Stock means the Company’s Class A Common Stock, par value $0.001.
Class B Common Stock means the Company’s Class B Common Stock, par value $0.001.
Closing means closing of the Merger, subject to and in accordance with the terms and conditions of the Merger Agreement.
Closing Date means (i) as soon as practicable (but in any event no later than the second (2nd) business day) after the satisfaction or (to the extent permitted by applicable law) waiver in accordance with the Merger Agreement of all of the conditions to Closing set forth in Article VII of the Merger Agreement (other than any such conditions which by their nature cannot be satisfied until the Closing Date of the Merger, which shall be required to be satisfied or, to the extent permitted by applicable law, waived in accordance with the Merger Agreement on the Closing Date) or (ii) such other time, date or place as agreed to in writing by Parent and the Company, see “Special Factors — Effective Time of the Merger.”
Code means the Internal Revenue Code of 1986, as amended.
Company means QAD Inc. (which also includes references to “QAD,” “our”, “us” and “we”).
Company Acquisition Proposal has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company Board Recommendation has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company Change in Recommendation has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company Intervening Event has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company Material Adverse Effect has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company PSU means each restricted share unit granted pursuant to the Company stock incentive plan and whose vesting is conditioned in full or in part based on achievement of performance goals or metrics.
Company RSU means each restricted share unit granted pursuant to the Company stock incentive plan.
Company SAR means each outstanding stock appreciation right granted pursuant to the Company stock incentive plan.
 
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Company Specified Contract has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company Stockholder Approval means the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company.
Company Superior Proposal has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Company Termination Fee means a cash amount equal to $59,000,000.
Compensation Committee means a committee established by the QAD Board that is responsible for designing and administering the Company’s executive compensation programs.
Contribution and Exchange Agreement means the Contribution and Exchange Agreement, dated June 27, 2021, by and among the Lopker Entities and Ultimate Parent, as it may be amended from time to time. A copy of the Contribution and Exchange Agreement is attached as Annex C to the accompanying proxy statement and is incorporated by reference in this proxy statement in its entirety.
COVID-19 means SARS-CoV-2 or COVID-19.
COVID-19 Measures means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive, restrictions, guidelines, responses or recommendations of or promulgated by any Governmental Entity, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19 and any evolutions or mutations thereof or related or associated epidemic, plague, pandemic or outbreak of illness or public health event.
DGCL means the General Corporation Law of the State of Delaware.
Dissenting Shares means Shares that are issued and outstanding immediately prior to the Effective Time and that have not been voted in favor of the adoption of the Merger Agreement or consented thereto in writing and whose holders have properly exercised and validly perfected appraisal rights with respect to such Shares in accordance with, and who have complied with, Section 262 of the DGCL (each, a Dissenting Share).
Effective Time means the time at which the Merger becomes effective, being the time at which the Certificate of Merger is filed with the Office of the Secretary of State of the State of Delaware, or at such later time and date as may be agreed upon in writing by the parties to the Merger Agreement and specified in the Certificate of Merger in accordance with the DGCL, as described in “Special Factors — Effective Time of the Merger” and “The Merger Agreement — Effective Time of the Merger.”
Equity Commitment Letter means the equity commitment letter, dated as of June 27, 2021, entered into by and among TB Fund XIV and Parent.
Excluded Shares means the Shares issued and held by the Company or any of the Company’s direct or indirect wholly owned subsidiaries immediately prior to the Effective Time, the Shares owned by Parent, Merger Sub or any of their respective direct or indirect wholly owned subsidiaries immediately prior to the Effective Time, the Rollover Shares and the Dissenting Shares.
Financing has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
GAAP means U.S. generally accepted accounting principles.
Golden Parachute Proposal means the non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger, as disclosed in the “Potential Change-in-Control Payments to Named Executive Officers” table contained in the section
 
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captioned “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger — Golden Parachute Compensation.”
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a et seq., as amended, and the rules and regulations promulgated thereunder.
Indemnified Party has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Limited Guaranty means the Limited Guaranty, dated as of June 27, 2021, entered into by TB Fund XIV in favor of the Company.
Lopker Entities means Pamela M. Lopker, the Lopker Living Trust dated November 18, 2013 and the Estate of Karl F. Lopker.
Merger means the proposed merger of Merger Sub, Inc. with and into the Company pursuant to the Merger Agreement in accordance with the applicable provisions of the DGCL, with the Company surviving the Merger as the Surviving Corporation and a direct, wholly owned subsidiary of Parent.
Merger Agreement means the Agreement and Plan of Merger, dated as of June 27, 2021, by and among the Company, Parent, and Merger Sub, as it may be amended from time to time.
Merger Agreement Proposal means the proposal to approve and adopt the Merger Agreement, and the transactions contemplated thereby, including the Merger. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference in this proxy statement in its entirety.
Merger Consideration means $87.50 per Share in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions of the Merger Agreement.
Merger Sub means Project Quick Merger Sub, Inc.
Nasdaq means NASDAQ Global Select Market.
Outside Date means January 30, 2022.
Parent means Project Quick Parent, LLC.
Parent Entities means Merger Sub, Parent, Ultimate Parent, Ultimate Parent GP, TB Fund XIV and its affiliates, TB UGP and Thoma Bravo.
Parent Material Adverse Effect has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Parent Related Parties means, collectively, Parent, Merger Sub, TB Fund XIV or any of their respective former, current or future general or limited partners, stockholders, financing sources, managers, members, representatives or affiliates.
Parent Termination Fee means a cash amount equal to $127,000,000.
QAD Board means board of directors of QAD Inc.
Record Date means [      ], 2021, being the record date for the Special Meeting.
Reported Adjusted EBITDA means adjusted EBITDA disclosed in the Company’s reports filed with the SEC.
Required Amount has the meaning set forth in the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Rights means, with respect to any Person, (a) options, warrants, preemptive rights, subscriptions, calls or other rights, convertible securities, exchangeable securities, agreements or commitments of any character obligating such person to issue, transfer or sell any equity interest of such person or any of its subsidiaries
 
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or any securities convertible into or exchangeable for such equity interests or (b) contractual obligations of such person (or the general partner of such person) to repurchase, redeem or otherwise acquire any equity interest in such person or any of its subsidiaries or any such securities or agreements listed in clause (a) of this definition.
Rollover Shares means the Shares held by the Lopker Entities that are subject to the Contribution and Exchange Agreement, which is attached as Annex C to this proxy statement and which is incorporated by reference in this proxy statement in its entirety.
Securities Act means the Securities Act of 1933, 15 U.S.C. § 77a et seq., and the rules and regulations promulgated thereunder.
Shares means the Class A Common Stock and the Class B Common Stock (each, a Share).
Special Committee means a committee established by the QAD Board comprising of the independent and disinterested members of the QAD Board.
Special Meeting means the special meeting of the stockholders of the Company to be held on [      ], 2021, at [      ] at the QAD corporate headquarters located at 100 Innovation Place, Santa Barbara, CA 93108, including any adjournment or postponement thereof.
Support Agreement means the support agreement dated June 27, 2021, by and among the Lopker Entities, the Company and Parent, as it may be amended from time to time. A copy of the Support Agreement is attached as Annex B to the proxy statement and is incorporated by reference in the proxy statement in its entirety.
Surviving Corporation means the surviving corporation in the Merger in accordance with the Merger Agreement, as described in “The Merger Agreement — The Merger.”
TB Fund XIV means Thoma Bravo Fund XIV, L.P., a Delaware limited partnership.
TB UGP means Thoma Bravo UGP, LLC, a Delaware limited liability company and the ultimate general partner of TB Fund XIV.
Thoma Bravo means Thoma Bravo, L.P., a Delaware limited partnership and an affiliate of TB UGP.
Ultimate Parent means Project Quick Ultimate Parent, LP.
Ultimate Parent GP means Project Quick Ultimate Parent GP, LLC, a Delaware limited liability company and the general partner of Ultimate Parent.
Unaffiliated Stockholders means unaffiliated security holders as defined under Rule 13e-3 of the Exchange Act.
Uncertificated Shares means uncertificated Shares that represented outstanding Shares (other than the Excluded Shares), as described in “Special Factors — Payment of Merger Consideration” ​(each, an Uncertificated Share).
Unvested Company RSUs and Unvested Company PSUs means each tranche of Company RSUs and Company PSUs that is outstanding as of immediately prior to the Effective Time of the Merger that is not a Vested Company RSU or Vested Company PSU.
Unvested Company SAR means each outstanding Company SAR award that is unvested as of immediately prior to the Effective Time of the Merger that is not a Vested Company SAR.
Vested Company PSU means each Company PSU that is vested as of immediately prior to the Effective Time or that vests solely as a result of the consummation of the Merger.
Vested Company RSU means each Company RSU that is vested as of immediately prior to the Effective Time of the Merger or that vests solely as a result of the consummation of the Merger.
Vested Company SAR means each Company SAR that is vested immediately prior to the Effective Time of the Merger or that vests solely as a result of the consummation of the Merger.
 
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SUMMARY TERM SHEET
The following summary term sheet highlights selected information in this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement in their entirety. Each item in this summary term sheet includes a page reference directing you to a more complete description of that topic. See “Where You Can Find More Information.”
We are asking our stockholders to consider and vote on the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into the Company with the Company surviving the Merger as a wholly owned subsidiary of Parent. If the Merger is completed, the holders of Shares (other than the holders of the Excluded Shares) will have the right to receive the Merger Consideration of $87.50 per Share in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions set forth in the Merger Agreement.
Since the transactions contemplated by the Merger Agreement, including the Merger, constitute a “going private” transaction under SEC rules, the Company, the Parent Entities and the Lopker Entities and their affiliates have filed with the SEC a Transaction Statement on Schedule 13E-3 with respect to the transactions contemplated by the Merger Agreement, including the Merger. You may obtain any additional information about the Schedule 13E-3 under the caption “Where You Can Find Additional Information.”
Special Factors (page 19)

Background of the Merger.   For a description of the background of the Merger, including our discussions with Thoma Bravo, see “Special Factors — Background of the Merger.”

Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger.   After careful consideration, the Special Committee, pursuant to resolutions adopted at a meeting of the Special Committee held on June 27, 2021, unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders, (ii) recommended that the QAD Board approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and declared that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to and in the best interests of the Company and the Company’s stockholders and (iii) recommended that, subject to approval by the QAD Board, the QAD Board resolve to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger. In evaluating the Merger, the Special Committee consulted with the Company’s management and the Special Committee’s independent legal and financial advisors and considered various material factors.
Based in part on the unanimous recommendation of the Special Committee, the QAD Board (other than Ms. Lopker, who recused herself), pursuant to resolutions adopted at a meeting of the QAD Board (other than Ms. Lopker, who recused herself) held on June 27, 2021, (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders, (ii) adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement be submitted to the holders of Shares for their adoption and approval and (iv) resolved to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger. In evaluating the Merger, the QAD Board (other than Ms. Lopker, who recused herself) also consulted with the Company’s management, legal and other advisors and considered various material factors.
Accordingly, the QAD Board (other than Ms. Lopker, who recused herself) recommends that you vote “FOR” the Merger Agreement Proposal, “FOR” the Golden Parachute Proposal and “FOR” the Adjournment Proposal.
 
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For a description of the material factors considered by the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) in evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations above, see “Special Factors — Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger.”

Opinion of Morgan Stanley & Co. LLC.   In connection with the Merger, Morgan Stanley rendered to the Special Committee its oral opinion, subsequently confirmed in writing, that as of June 27, 2021, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair from a financial point of view to such Company stockholders in the aggregate, as set forth in such opinion as more fully described in the section of this proxy statement captioned “Special Factors — Opinion of Morgan Stanley & Co. LLC.” The full text of the written opinion of Morgan Stanley, dated as of June 27, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex D and incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Special Committee, in its capacity as such, and addresses only the fairness from a financial point of view of the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) in the aggregate pursuant to the Merger Agreement as of the date of the opinion and does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how the Company’s stockholders should vote at the Special Meeting with respect to the Merger or any other matter. For more information, see “Special Factors — Opinion of Morgan Stanley & Co. LLC.”

Position of the Parent Entities as to the Fairness of the Merger.   Under a possible interpretation of the SEC rules governing “going private” transactions, the Parent Entities may be deemed to be affiliates of the Company and engaged in a “going private” transaction and, therefore, may be required to express their beliefs as to the fairness of the Merger to the Company’s Unaffiliated Stockholders. For a description of the Parent Entities’ beliefs as to the fairness of the Merger to the Company’s Unaffiliated Stockholders, see “Special Factors — Position of the Parent Entities as to the Fairness of the Merger.”

Purpose and Reasons of the Parent Entities for the Merger.   Under a possible interpretation of the SEC rules governing “going-private” transactions, each of the Parent Entities may be deemed to be affiliates of the Company and, therefore, required to express their reasons for the Merger to the Company’s Unaffiliated Stockholders. For a description of the Parent Entities’ purposes and reasons for the Merger, see “Special Factors — Purpose and Reasons of the Parent Entities for the Merger.”

Position of the Lopker Entities as to the Fairness of the Merger.   Under a possible interpretation of the SEC rules governing “going private” transactions, the Lopker Entities may be deemed to be affiliates of the Company and engaged in a “going private” transaction and, therefore, may be required to express their beliefs as to the fairness of the Merger to the Company’s Unaffiliated Stockholders. For a description of the Lopker Entities’ beliefs as to the fairness of the Merger to the Company’s Unaffiliated Stockholders, see “Special Factors — Position of the Lopker Entities as to the Fairness of the Merger.”

Purpose and Reasons of the Lopker Entities for the Merger.   Under a possible interpretation of the SEC rules governing “going-private” transactions, the Lopker Entities may be deemed to be affiliates of the Company and, therefore, required to express their reasons for the Merger to the Company’s Unaffiliated Stockholders. For a description of the Lopker Entities’ purposes and reasons for the Merger, see “Special Factors — Purpose and Reasons of the Lopker Entities for the Merger.
 
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Certain Effects of the Merger; Treatment of the Shares.   At the Effective Time of the Merger, each Share outstanding immediately prior to the Effective Time of the Merger (other than the Excluded Shares) will be converted into the right to receive the Merger Consideration of $87.50 per Share in cash, without interest, less any applicable withholding taxes, in accordance with and subject to the terms and conditions set forth in the Merger Agreement, whereupon all such Shares will cease to be outstanding and shall cease to exist, and the holders of such Shares will cease to have any rights with respect thereto, other than the right to receive the Merger Consideration and the right to receive dividends and other distributions, in each case, subject to and in accordance with the terms and conditions of the Merger Agreement. For a further description of certain effects of the Merger, see “Special Factors — Certain Effects of the Merger” and “The Merger Agreement — The Merger Consideration.”

Treatment of Equity Compensation Awards.   Upon completion of the Merger:
Each outstanding Vested Company SAR will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of (A) the aggregate number of Shares subject to such Vested Company SAR multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per Share base price of such Vested Company SAR, subject to any required withholding of taxes. Amounts payable in respect of the cancelled Vested Company SARs will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger).
Each outstanding Unvested Company SAR will be cancelled and replaced with a right to receive an amount in cash, without interest, equal to the product of (A) the aggregate number of Shares subject to such Unvested Company SAR multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per Share base price of such Unvested Company SAR, and such amount will be payable in accordance with such Unvested Company SAR’s original vesting terms, subject to any required withholding of taxes.
Each (i)  Vested Company RSU and (ii)  Vested Company PSU will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of (A) the aggregate number of Shares subject to the Vested Company RSU and/or Vested Company PSU (with Company PSUs granted in 2019 earned based on actual performance achieved through the Effective Time and Company PSUs granted in 2021 deemed earned at 100% of target level of performance), multiplied by (B) the Merger Consideration, subject to any required withholding of taxes. Amounts payable in respect of the cancelled Vested Company RSUs and cancelled Vested Company PSUs will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger).
Each tranche of Unvested Company RSUs and Unvested Company PSUs will be cancelled and replaced with a right to receive an amount in cash, without interest, equal to (A) the amount of the Merger Consideration multiplied by (B) the aggregate number of Shares subject to such Unvested Company RSUs and Unvested Company PSUs immediately prior to the Effective Time of the Merger (with Company PSUs granted in 2019 earned based on actual performance achieved through the Effective Time of the Merger and Company PSUs granted in 2021 deemed earned at 100% of target level of performance) (the “Cash Replacement Company RSU/PSU Amounts”).
For each tranche of cancelled Unvested Company RSUs and Unvested Company PSUs, except as otherwise provided by the terms of the Merger Agreement, 50% of the Cash Replacement Company RSU/PSU Amounts, subject to any required withholding of taxes, will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger). Except as otherwise provided by the terms of the Merger Agreement, the remaining 50% of the Cash Replacement Company RSU/PSU Amounts for each tranche of cancelled Unvested Company RSUs and Unvested Company PSUs will vest, subject to the holder’s continued service with Parent and its affiliates (including the surviving Company and its subsidiaries) through the applicable vesting dates, subject to any required withholding of taxes, at the same time as the Unvested Company RSU and Unvested Company PSUs for which such Cash Replacement Company RSU/PSU Amount were exchanged, would have vested pursuant to their terms or upon an earlier qualifying
 
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termination of employment by the Company without cause or a resignation as a result of a constructive termination.
For a further description of the treatment of equity compensation awards, See “Special Factors — Certain Effects of the Merger,” “The Merger Agreement — Treatment of Equity Compensation Awards” and “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger.

Interests of Executive Officers and Directors of the Company in the Merger.   In considering the recommendations of the QAD Board (other than Ms. Lopker, who recused herself) with respect to the Merger, the Company’s stockholders should be aware that the executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The Special Committee, consisting entirely of independent directors, and the QAD Board were aware of these interests and considered them, among other matters, in evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger and in making its recommendations. These interests include, but are not limited to, the following:

the fees to be received by members of the Special Committee, in connection with their services to the Company with respect to the Merger (which fee is not conditioned on the consummation of the Merger);

the accelerated vesting and payment of awards of Vested Company SARs, Vested Company RSUs, Vested Company PSUs and, for Ms. Bellamy, Unvested Company RSUs and Unvested Company PSUs;

certain severance and other separation benefits, including equity award vesting acceleration, that may be payable following termination of employment after the Effective Time of the Merger under the named executive officer’s change in control agreement with the Company or the Company’s change in control severance policy, as applicable;

the provision of indemnification and insurance arrangements pursuant to the Merger Agreement; and

the Contribution and Exchange Agreement separately entered into by the Lopker Entities, 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.
For a more detailed description of the interests of executive officers and directors of the Company in the Merger, see “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger.”

Intent of the Directors and Executive Officers to Vote in Favor of the Merger.   Our directors and executive officers have informed us that, as of the date of this proxy statement, they intend to vote all of the Shares owned directly by them in favor of the approval of the Merger Agreement Proposal and each of the other proposals. As of [      ], 2021, the Record Date for the Special Meeting, our directors and executive officers directly owned, in the aggregate, [      ] shares of Class A Common Stock and [      ] shares of Class B Common Stock entitled to vote at the Special Meeting, or collectively approximately [      ]% of the total voting power entitled to vote at the Special Meeting. For purposes of clarity, the Shares directly owned by the directors and executive officers shall be (i) included in determining whether the Merger Agreement has been approved by the affirmative vote of holders of a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class, but (ii) excluded from determining whether the Merger Agreement has been approved by affirmative vote of holders of a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company. For a further description of the voting intentions of the Company’s directors and executive officers, see “Special Factors — Intent of the Directors and Executive Officers to Vote in Favor of the Merger.”

Intent of the Lopker Entities to Vote in Favor of the Merger.   The Lopker Entities, who hold approximately 67% of the voting power of the Company’s outstanding capital stock, have duly
 
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executed and entered into a Support Agreement, pursuant to which they have agreed to vote their Shares in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, subject to and in accordance with the terms and conditions of the Support Agreement. A copy of the Support Agreement is attached as Annex B to the proxy statement and is incorporated by reference in the proxy statement in its entirety. For more information about the Support Agreement and the voting intentions of the Lopker Entities, see “Special Factors — Intent of the Lopker Entities to Vote in Favor of the Merger” and “Special Factors — Support Agreement.”

Material U.S. Federal Income Tax Consequences of the Merger.   The exchange of the Shares for cash in the Merger will be a taxable transaction to U.S. Holders (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”) for U.S. federal income tax purposes and may also be taxable under state, local, and non-U.S. tax laws. A U.S. Holder who solely receives cash in exchange for Shares pursuant to the Merger will generally recognize gain or loss in an amount equal to the difference, if any, between the cash received by such holder in the Merger and the adjusted tax basis in the Shares surrendered in exchange therefor. Stockholders who are Non-U.S. Holders (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”) will generally not be subject to U.S. federal income tax on any gain recognized in connection with the Merger unless such Non-U.S. Holder has certain connections to the United States. However, the tax consequences of the Merger to a stockholder will depend on the stockholder’s particular circumstances, and stockholders should consult their own tax advisors to determine the particular tax consequences to them (including the application of any U.S. federal non-income, state, local and non-U.S. tax laws) of the Merger. For further information about the material U.S. Federal Income Tax Consequences of the Merger, see “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger.”

Financing of the Merger.   The Merger is not subject to any financing condition. Parent estimates that the total amount of funds necessary to complete the Merger and the related transactions will be approximately $1.6 billion. Parent expects this amount to be funded via approximately $0.9 billion from equity investments by TB Fund XIV and approximately $0.7 billion from debt financing by specified lenders.
Parent has delivered to the Company the Equity Commitment Letter, pursuant to which TB Fund XIV has committed, subject to the terms and conditions contained therein, to provide equity financing in an aggregate amount of up to $1,626,900,000 to Parent on or prior to the closing of the Merger in connection with the funding of the transaction. The Company is a third party beneficiary of the rights granted to Parent under the Equity Commitment Letter (if and only if the Company is entitled to specific performance of Parent and Merger Sub’s obligations to consummate the Merger) solely for the purpose of seeking specific performance of Parent’s right to cause the commitment to be funded in accordance with the terms of the Equity Commitment Letter (solely to the extent that Parent can cause the commitment to be funded pursuant to the terms of the Equity Commitment Letter). For further information about the financing of the Merger, see “Special Factors — Financing of the Merger.”

Limited Guaranty.   Concurrently with the execution of the Merger Agreement, Parent has delivered to the Company a Limited Guaranty, dated as of June 27, 2021 (the “Limited Guaranty”), entered into by TB Fund XIV in favor of the Company. Pursuant to the terms of the Limited Guaranty and subject to the terms and conditions set forth therein, TB Fund XIV has agreed to guarantee Parent’s obligations under the Merger Agreement, capped at $133,000,000, with respect to payment of the Parent Termination Fee and certain interest payments and reimbursement obligations of Parent. For a further description of the Limited Guaranty, see Special Factors — Limited Guaranty.”

Regulatory Approvals.   Under the HSR Act and the antitrust laws of certain other foreign jurisdictions, certain transactions, including the Merger, may not be completed until notifications have been given and information furnished to the Antitrust Division of the Department of Justice, and the Federal Trade Commission, and similar filings have been made under the antitrust laws of certain other foreign jurisdictions, and all statutory waiting period requirements have been satisfied. Expiration or termination of the applicable waiting period (and any extension thereof) under the
 
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HSR Act and the antitrust laws of certain other foreign jurisdictions, and the making of and receipt of, certain other specified regulatory filings and consents, are conditions to completion of the Merger. For a further description of the regulatory approvals required for the Merger, see “Special Factors — Regulatory Approvals” and “The Merger Agreement — Regulatory Approvals; Third Party Consents.

Litigation Relating to the Merger.   Currently, the Company is aware of one (1) pending case related to the Merger, seeking, among other things, to enjoin the Closing of the Merger, or, in the alternative, damages, including rescissory damages. 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 the Company, 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 and adopt the Merger Agreement. 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. The court has ordered that the case proceed on an expedited basis. The Company believes the claims are without any merit. For a further description of litigation relating to the Merger, see “Special Factors — Litigation Relating to the Merger.
The Merger Agreement (page 74)

A summary of the material provisions of the Merger Agreement, which is attached as Annex A to this proxy statement and which is incorporated by reference in this proxy statement in its entirety, is included in “The Merger Agreement.”

Effective Time and Closing of the Merger.   We are working to complete the Merger as promptly as practicable. Assuming timely satisfaction of necessary closing conditions set forth in the Merger Agreement, we anticipate that the Merger will be completed in the fourth (4th) quarter of 2021. If our stockholders vote to adopt the Merger Agreement, the Merger will become effective as promptly as practicable following the satisfaction or written waiver of the other conditions to the Merger as set forth in the Merger Agreement, including the receipt of all required regulatory approvals and consents. The Company, however, cannot assure Closing of the Merger by any particular date, if at all. For more information about the Effective Time and Closing of the Merger, see “The Merger Agreement — Effective Time of the Merger” and “The Merger Agreement — Closing of the Merger.

Conditions to the Completion of the Merger.   The Closing of the Merger depends on a number of conditions being satisfied or waived. These conditions, which are described more fully in “The Merger Agreement — Conditions to the Completion of the Merger,” include:

the Company Stockholder Approval to adopt the Merger Agreement;

the receipt of specified regulatory approvals, or expiration or termination of the applicable waiting period, under the HSR Act and antitrust laws of certain other foreign jurisdictions;

the absence of any order that remains in effect or any action restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions and the absence of any law that otherwise makes such consummation illegal or prohibited;

the accuracy of each party’s representations and warranties in the Merger Agreement (subject to materiality qualifiers);
 
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the performance in all material respects by each party of all obligations required to be performed by it under the Merger Agreement; and

the delivery of an officers’ certificate by each party with respect to representation and warranties and performance of obligations under the Merger Agreement.
For more information about the conditions to completion of the Merger, see “The Merger Agreement — Conditions to the Completion of the Merger.

Solicitation of Company Acquisition Proposals.   Pursuant to the Merger Agreement, the Company was required to cease, and cause its subsidiaries and their respective directors and officers to cease, and instruct and use reasonable best efforts to cause their respective managers, employees, agents and other representatives to cease and cause to be terminated all existing discussions or negotiations with any person with respect to a Company Acquisition Proposal as of June 27, 2021, and request the prompt return or destruction of all non-public information concerning the Company and the Company’s subsidiaries theretofore furnished to any such person, subject to certain exceptions. The Company has agreed that, during the term of the Merger Agreement and subject to certain exceptions, it will not, and will cause its subsidiaries and its and their respective directors and officers not to, and will instruct and use reasonable best efforts to cause its and their respective managers, employees, agents and other representatives not to, directly or indirectly, initiate, solicit, knowingly encourage or knowingly facilitate the making of any Company Acquisition Proposal or any other offer or proposal that would reasonably be expected to lead to a Company Acquisition Proposal.
If the Company receives a bona fide Company Acquisition Proposal after June 27, 2021, and prior to obtaining stockholder approval of the Merger Agreement Proposal (which Company Acquisition Proposal did not result from a breach of the Company’s non-solicitation obligation under the Merger Agreement), and the Special Committee determines in good faith, after consultation with its financial advisor and outside counsel, that (I) such Company Acquisition Proposal constitutes, or could reasonably be expected to lead to, a Company Superior Proposal and (II) the failure to take certain actions would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law, then the Special Committee, the Company and their respective representatives will, subject to compliance with the terms and conditions of the Merger Agreement, be permitted to furnish any information (including non-public information) or access thereto, and participate or engage in negotiations or discussions regarding such Company Acquisition Proposal, subject to and in accordance with the terms and conditions of the Merger Agreement.
The QAD Board and any committee thereof (including the Special Committee) are prohibited from taking certain actions enumerated in the Merger Agreement that would amount to a Company Change in Recommendation unless, prior to obtaining stockholder approval of the Merger Agreement, (i) the Special Committee determines in good faith, after consultation with outside legal counsel, that the failure to make such change would reasonably be expected to be inconsistent with the QAD Board’s fiduciary duties, (ii) the Company has provided Parent with prior written notice before making any Company Change in Recommendation and, if requested by Parent in good faith, the Company has negotiated in good faith with respect to any revisions to the terms of the Merger Agreement so that a Company Change in Recommendation would no longer be necessary, and (iii) after giving effect to clause (ii), as required, after consultation with its financial advisors and outside counsel, the QAD Board, upon the recommendation of the Special Committee, has determined in good faith that failure to make the Company Change in Recommendation would reasonably be expected to be inconsistent with its fiduciary duties.
For more information about the restrictions on the Company’s solicitation of Company Acquisition Proposals and Company Change in Recommendations, see “The Merger Agreement — No Solicitation by the Company.

Termination.   The Merger Agreement contains certain termination rights, including, but not limited to, the right of (i) the Company to terminate the Merger Agreement to accept a Company Superior Proposal, or (ii)  Parent to terminate the Merger Agreement upon a Company Change in Recommendation, in each case, subject to and in accordance with the terms and conditions of the
 
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Merger Agreement, and provides that, upon termination of the Merger Agreement by the Company or Parent under specified conditions, the Company will be required to pay Parent a Company Termination Fee of  $59,000,000 in cash. Upon termination of the Merger Agreement by the Company or Parent under specified conditions, Parent will be required to pay the Company a Parent Termination Fee of $127,000,000 in cash. In addition, subject to specified exceptions and limitations, either party may terminate the Merger Agreement if the Merger is not consummated by January 30, 2022. We refer to January 30, 2022 as the Outside Date. For more information about the termination rights and terminations fees payable under the Merger Agreement, see “The Merger Agreement — Termination” and “The Merger Agreement — Termination Fees.”
Parties to the Merger (page 100)

QAD Inc.   The Company was founded in 1979, incorporated in California in 1986 and reincorporated in Delaware in 1997. The Company believes it is a leader in cloud-based enterprise software solutions for global manufacturing companies. The Company’s solutions, called QAD Adaptive Applications, are designed specifically for automotive suppliers, life sciences, consumer products, food and beverage, high technology and industrial products manufacturers. The Company’s software offers a full set of core manufacturing enterprise resource planning and supply chain management capabilities. The Company’s architecture, called the QAD Enterprise Platform, allows customers to upgrade existing functionality by module; and extend or create new applications, providing manufacturers with the flexibility they need to innovate and rapidly adapt to change. Our principal executive office is located at 100 Innovation Place, Santa Barbara, California 93108, and the telephone number of our principal executive office is (805) 566-6000. For more information about the Company, see “Parties to the Merger — The Company.

Project Quick Parent, LLC.   Parent was formed on June 17, 2021, solely for the purpose of completing the proposed Merger and has conducted no business activities other than those related to the structuring and negotiation of the Merger and arranging financing therefor. Parent is a direct, wholly-owned subsidiary of Ultimate Parent and has not engaged in any business except as contemplated by the Merger Agreement. The principal office address of Parent is c/o Thoma Bravo, L.P., 600 Montgomery Street, 20th Floor, San Francisco, California 94111. The telephone number at the principal office is (415) 263-3660. For more information about Parent, see “Parties to the Merger — Parent.

Project Quick Merger Sub, Inc.   Merger Sub was formed on June 17, 2021, solely for the purpose of completing the proposed Merger and has conducted no business activities other than those related to the structuring and negotiation of the Merger and arranging financing therefor. Merger Sub is a direct, wholly-owned subsidiary of Parent and has not engaged in any business except as contemplated by the Merger Agreement. The principal office address of Merger Sub is c/o Thoma Bravo, L.P., 600 Montgomery Street, 20th Floor, San Francisco, California 94111. The telephone number at the principal office is (415) 263-3660. For more information about Merger Sub, see “Parties to the Merger — Merger Sub.
The Special Meeting (page 101)

Date, Time, Place and Purpose of the Special Meeting.   The Special Meeting of stockholders of the Company will be held on [     ], 2021, at [     ] at the QAD corporate headquarters located at 100 Innovation Place, Santa Barbara, CA 93108. At the Special Meeting, Company stockholders will be asked to consider and vote upon:

the Merger Agreement Proposal;

the Golden Parachute Proposal; and

the Adjournment Proposal.
For more information about the Special Meeting, see “The Special Meeting — Date, Time, Place and Purpose of the Special Meeting.”
 
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Record Date and Quorum.   Stockholders of record as of the close of business on [      ], 2021, the Record Date for the Special Meeting, are entitled to receive notice of, and to attend and vote at, the Special Meeting, or any adjournment or postponement thereof.
The holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date on each matter properly brought before the Special Meeting.
The representation of the holders of a majority of the voting power of our outstanding Shares as of the Record Date must be present, in person or represented by proxy, at the Special Meeting in order to constitute a quorum, for the purposes of holding the Special Meeting and conducting business. For more information about record date and quorum, see “The Special Meeting — Record Date and Quorum.”

Vote Required.

The Merger Agreement Proposal.   The approval of the Merger Agreement Proposal requires the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company (together the “Company Stockholder Approval”). If you fail to vote on the Merger Agreement Proposal, the effect will be the same as a vote against the Merger Agreement Proposal.

The Golden Parachute Proposal.   The approval of the Golden Parachute Proposal requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon.

The Adjournment Proposal.   The approval of the Adjournment Proposal requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon, whether or not a quorum is present.

For each of the Merger Agreement Proposal, the Golden Parachute Proposal and the Adjournment Proposal, the holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date. For more information about the vote required to approach each of the proposals, see “The Special Meeting — Vote Required.”
Other Important Information Regarding the Company (page 117)

Market Price of Shares and Dividends.   On [      ], 2021, the most recent practicable date before this proxy statement was distributed to our stockholders, the closing price for the Shares on the Nasdaq was $[      ] per share of Class A Common Stock and $[      ] per share of Class B Common Stock. You are encouraged to obtain current market quotations for the Shares in connection with voting your Shares. For more information about the market price of Shares and dividends, see “Other Important Information Regarding the Company — Market Price of Shares and Dividends.”
 
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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS AND THE SPECIAL MEETING
The following questions and answers are intended to address briefly some commonly asked questions regarding the Special Meeting, the Merger Agreement and the transactions contemplated thereby, including the Merger. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, all of which you should read carefully in their entirety. See “Where You Can Find More Information.”
Q.
Why am I receiving this document?
A.
On June 27, 2021, the Company entered into the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company with the Company surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Thoma Bravo, a private equity investment firm and registered investment advisor. If the Merger is completed, the holders of Shares (other than the holders of the Excluded Shares) will have the right to receive the Merger Consideration of $87.50 per Share in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions set forth in the Merger Agreement. A copy of the Merger Agreement is attached to this proxy statement as Annex A and is incorporated by reference in this proxy statement in its entirety.
Based in part on the unanimous recommendation of the Special Committee, the QAD Board (other than Ms. Lopker, who recused herself), among other things, (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders, (ii) adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger, (iii) directed that the Merger Agreement be submitted to the holders of Shares for their adoption and approval, and (iv) resolved to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger.
The Company is holding the Special Meeting so that our stockholders may vote to approve the Merger Agreement Proposal, the Golden Parachute Proposal, and the Adjournment Proposal.
The Company is soliciting proxies for the Special Meeting. You are receiving this proxy statement because you own Shares. This proxy statement contains important information about the Merger and the Special Meeting, and you should read it carefully. The enclosed proxy card allows you to vote your Shares without attending the Special Meeting in person.
Your vote is extremely important, and we encourage you to submit your proxy as soon as possible.   For more information on how to vote your Shares, please see the section of this proxy statement entitled “The Special Meeting.”
Q.
What is the proposed transaction and what effects will it have on the Company?
A.
The proposed transaction is the Merger of Merger Sub with and into the Company, subject to and in accordance with the terms and conditions of the Merger Agreement.
Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into the Company with the Company surviving the Merger as a wholly owned subsidiary of Parent. If the Merger is completed, the holders of Shares (other than the holders of the Excluded Shares) will have the right to receive the Merger Consideration of $87.50 per Share in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions set forth in the Merger Agreement.
In addition, following completion of the Merger, there will be no further market for the Shares and, as promptly as practicable following the Effective Time and in compliance with applicable law, the Company’s securities will be delisted from the Nasdaq and deregistered under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), upon application to the Securities and Exchange Commission (“SEC”). As a result of the Merger, the Company will no longer be an independent public
 
10

 
company, the Shares will no longer be listed on any exchange or quotation system, price quotations will no longer be available and the Company’s registration and reporting obligation under the Exchange Act will cease.
Following completion of the Merger, your Shares will represent only the right to receive the Merger Consideration and the right to receive dividends and other distributions, in each case, subject to and in accordance with the terms and conditions of the Merger Agreement, and you will no longer have any interest in the Company’s future earnings, growth, or value.
For more information about Merger Agreement and the transactions contemplated thereby, including the Merger, see “The Merger Agreement.”
Q.
What happens if the Merger is not completed?
A.
If the Merger Agreement Proposal is not approved by the Company’s stockholders or if the Merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their Shares in connection with the Merger. Instead, unless the Company is sold to a third party, the Company will remain an independent public company, and the Shares will continue to be listed and traded on the Nasdaq, so long as the Company continues to meet the applicable listing requirements. In addition, if the Merger is not completed, the Company expects that management will operate the Company’s business in a manner similar to that in which it is being operated today and that the Company’s stockholders will continue to be subject to the same risks and opportunities to which they are currently subject. There is no assurance as to the effect of these risks and opportunities on the future value of your Shares, including the risk that the market price of Shares may decline to the extent that the current market price of Shares reflects a market assumption that the Merger will be completed. For more information about what happens if the Merger is not completed, see “Special Factors — Certain Effects on the Company if the Merger is Not Completed.”
Under certain circumstances, if the Merger is not completed, the Company would be required to pay Parent a Company Termination Fee of $59,000,000 in cash, or Parent would be required to pay the Company a Parent Termination Fee of $127,000,000. For more information about termination fees, see “The Merger Agreement — Termination Fees.”
Q.
When and where is the Special Meeting?
A.
The Special Meeting of stockholders of the Company will be held on [      ], 2021, at [      ] at the QAD corporate headquarters located at 100 Innovation Place, Santa Barbara, CA 93108. For more information about the Special Meeting, see “The Special Meeting.”
Q.
Who can vote at the Special Meeting?
A.
All record holders of the Shares as of the close of business on [      ], 2021, the Record Date for the Special Meeting, are entitled to notice of, and to attend and vote at, the Special Meeting or any adjournment or postponement thereof. You are entitled to receive notice of, and to attend and vote at, the Special Meeting if you are a record holder of the Shares at the close of business on the Record Date.
The holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date on each matter properly brought before the Special Meeting.
If you are a record holder of Shares, please be prepared to provide proper, government-issued photo identification at the Special Meeting, such as a driver’s license. If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, and you wish to vote in person at the Special Meeting, you will need to provide proof of ownership, such as a recent account statement or letter from your broker, bank or other nominee, along with proper identification. Please note that if you are a beneficial owner and wish to vote in person at the Special Meeting, you
 
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must have a legal proxy from your broker, bank or other nominee naming you as the proxy. You should allow yourself enough time prior to the Special Meeting to obtain this proxy from the holder of record.
For more information about who can vote at the Special Meeting, see “The Special Meeting — Voting.”
Q.
What is the difference between being a “stockholder of record” and a “beneficial owner” of Shares held in “street name”?
A.
If your Shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those Shares, the stockholder of record or record holder. This proxy statement and proxy card have been sent directly to you by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the Special Meeting.
If your Shares are held through a broker, bank or other nominee, you are considered the beneficial owner of those Shares held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those Shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your Shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, since you are not the stockholder of record, you may not vote these Shares in person at the Special Meeting unless you provide a legal proxy from your broker, bank or other nominee.
For more information about the stockholders of record and beneficial owners of shares held “in street name,” see “The Special Meeting — Voting.”
Q.
What am I being asked to vote on at the Special Meeting?
A.
You are being asked to consider and vote on the following:

Merger Agreement Proposal:   A proposal to approve and adopt the Merger Agreement, and the transactions contemplated thereby, including the Merger. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference in this proxy statement in its entirety.

Golden Parachute Proposal:   A non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger, as disclosed in the “Potential Change-in-Control Payments to Named Executive Officers” table contained in the section captioned “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger — Golden Parachute Compensation;” and

Adjournment Proposal:   One or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal.
For more information each of these proposals, see “The Merger (The Merger Proposal — Proposal 1),” “Merger Related Executive Compensation Arrangements (The Golden Parachute Proposal — Proposal 2)” and “Adjournment of the Special meeting (The Adjournment Proposal — Proposal 3).”
Q.
What is a quorum?
A.
The representation of the holders of a majority of the voting power of our outstanding Shares as of the Record Date must be present, in person or represented by proxy, at the Special Meeting in order to constitute a quorum, for the purposes of holding the Special Meeting and conducting business. For more information about the quorum of the Special meeting, see “The Special Meeting — Record Date and Quorum.”
 
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Q.
What vote is required for the Company’s stockholders to approve the Merger Agreement Proposal?
A.
The approval of the Merger Agreement Proposal, requires the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company. The holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date.
As of the close of business on [      ], 2021, which is the Record Date, there were [      ] shares of Class A Common Stock and [      ] shares of Class B Common Stock outstanding.
As of the date of the filing of this proxy statement, none of Parent, Merger Sub or any of their respective affiliates (as defined under Rule 405 of the Securities Act) own any Shares.
The Lopker Entities, who hold approximately 67% of the voting power of the Company’s outstanding capital stock, have duly executed and entered into a Support Agreement, pursuant to which they have agreed to vote their Shares in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, subject to and in accordance with the terms and conditions of the Support Agreement. A copy of the Support Agreement is attached as Annex B to the proxy statement and is incorporated by reference in the proxy statement in its entirety.
For more information, see “The Merger (The Merger Proposal — Proposal 1).
Q.
What vote is required for the Company’s stockholders to approve the Golden Parachute Proposal?
A.
Approval of the non-binding, advisory proposal to approve certain compensation arrangements for the Company’s named executive officers in connection with the Merger requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon.
The holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date.
For more information each of these proposals, see “Merger Related Executive Compensation Arrangements (The Golden Parachute Proposal — Proposal 2).
Q.
What vote is required for the Company’s stockholders to approve the Adjournment Proposal?
A.
Approval of one or more proposals to adjourn the Special Meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt the Merger Agreement Proposal, requires the affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon, whether or not a quorum is present.
The holders of Class A Common Stock and Class B Common Stock vote together as a single class. Each record holder of Class A Common Stock is entitled to 1/20th of one vote for each share of Class A Common Stock owned of record on the Record Date and each record holder of Class B Common Stock is entitled to one (1) vote for each share of Class B Common Stock owned of record on the Record Date.
For more information each of these proposals, see “Adjournment of the Special meeting (The Adjournment Proposal — Proposal 3).”
 
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Q.
How are the votes counted?
A.
For each of the Merger Agreement Proposal, the Golden Parachute Proposal and the Adjournment Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” An abstention will have the same effect as an “AGAINST” vote for these proposals and will count for purposes of determining if a quorum is present at the Special Meeting. For more information, see “The Special Meeting.”
Q.
How does the QAD Board recommend that I vote?
A.
Based in part on the unanimous recommendation of the Special Committee, the QAD Board (other than Ms. Lopker, who recused herself) recommends that you vote:

FOR” the Merger Agreement Proposal;

FOR” the Golden Parachute Proposal; and

FOR” the Adjournment Proposal.
For more information, you should read “Special Factors — Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger” for a discussion of the factors that the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) considered in deciding to recommend the approval of the Merger Agreement. See also “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger.”
Q.
How will the Lopker Entities vote on the Merger Agreement Proposal?
A.
Concurrently with the execution and delivery of the Merger Agreement, the Company and Parent entered into a Support Agreement with the Lopker Entities, who hold approximately 67% of the voting power of the Company’s outstanding capital stock. Under the Support Agreement, the Lopker Entities agreed to vote their Shares in favor of adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, subject to and in accordance with the terms and conditions of the Support Agreement. The obligations of the Lopker Entities under the Support Agreement will automatically terminate upon the earliest to occur of (i) the mutual agreement of the parties thereto to terminate the Support Agreement, (ii) the Effective Time of the Merger, and (iii) the termination of the Merger Agreement in accordance with its terms.
In the event the QAD Board or any committee thereof (including the Special Committee) (x) withdraws (or modifies, amends or qualifies in a manner adverse to Parent), or proposes publicly to withdraw (or modify, amend or qualify in a manner adverse to Parent), the Company Board Recommendation or (y) fails to include the Company Board Recommendation in the proxy statement, in each instance, in compliance with the Merger Agreement, the obligation of the Lopker Entities to vote the Shares listed in the Support Agreement as described above shall be modified such that the Lopker Entities shall only be required to so vote such number of Shares as is equal to the number of Shares that would represent, as at the time of such vote, 35% of the total voting power of the outstanding shares of the Company.
A copy of the Support Agreement is attached as Annex B to the proxy statement and is incorporated by reference in the proxy statement in its entirety. For more information about the voting intentions of the Lopker Entities, see “Special Factors — Intent of the Lopker Entities to Vote in Favor of the Merger” and “Special Factors — Support Agreement.”
Q.
How do I vote?
A.
If you are a stockholder of record as of the Record Date, you may vote your Shares on matters presented at the Special Meeting in any of the following ways:

in person, by attending the Special Meeting and casting your vote in person;

by proxy (stockholders of record have a choice of voting by proxy):

on the Internet, by following the Internet proxy instructions printed on the enclosed proxy card;

by telephone, using the telephone number printed on the enclosed proxy card; or
 
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by mail, by marking the enclosed proxy card, dating and signing it, and returning it in the accompanying prepaid reply envelope.
If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee that you must follow in order to have your Shares voted. Those instructions will identify which of the above choices are available to you in order to have your Shares voted. Please note that if you are a beneficial owner and wish to vote in person at the Special Meeting, you must have a legal proxy from your broker, bank or other nominee naming you as the proxy. You should allow yourself enough time prior to the Special Meeting to obtain this proxy from the holder of record.
The control number located on your proxy card is designed to verify your identity and allow you to submit a proxy for your Shares, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the Internet or by telephone.
Please refer to the instructions on your proxy card or voting instruction form to determine the deadlines for submitting a proxy over the Internet or by telephone. If you choose to submit your proxy by mailing a proxy card, your proxy card must be received by our Corporate Secretary by the time the Special Meeting begins.
Please note that if you attend the Special Meeting in person, cameras, recording devices and certain other electronic devices will not be permitted at the Special Meeting.
For more information about voting, see “The Special Meeting — How to Vote.”
Q.
What is a proxy?
A.
A proxy is your legal designation of another person to vote your Shares. This written document describing the matters to be considered and voted on at the Special Meeting is called a proxy statement. The document used to designate a proxy to vote your Shares is called a proxy card. For more information about voting by proxy, see “The Special Meeting — How to Vote.”
Q.
If I am a stockholder of record, what happens if I do not vote or submit a proxy card?
A.
If you do not attend the Special Meeting and fail to vote, either in person or by proxy, your Shares will not be voted at the Special Meeting and will not be counted for purposes of determining whether a quorum exists.
Additionally, if you do not attend the Special Meeting and fail to vote, either in person or by proxy, your failure to vote will (a) have the effect of counting “AGAINST” the Merger Agreement Proposal with respect to the approval threshold requiring the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company, and (b) have no effect on the Golden Parachute Proposal (so long as a quorum is present) or the Adjournment Proposal (regardless of whether a quorum is present). For more information, see “The Special Meeting.”
Q.
If my Shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee vote my Shares for me?
A.
Your broker, bank or other nominee will only be permitted to vote your Shares if you instruct your broker, bank or other nominee as to how to vote. You should follow the instructions provided by your broker, bank or other nominee regarding the voting of your Shares. Under applicable stock exchange rules, absent your instructions, a broker, bank or other nominee does not have discretionary authority to vote on “non-routine” matters and all of the matters to be considered at the Special Meeting are, under such rules, “non-routine.” As a result, absent specific instructions from the beneficial owner of such Shares, your broker, bank or other nominee is not empowered to vote such Shares.
If you instruct your broker, bank or other nominee how to vote on at least one, but not all of the proposals to be considered at the Special Meeting, your Shares will be voted according to your
 
15

 
instructions on those proposals for which you have provided instructions and will be counted as present for purposes of determining whether a quorum is present at the Special Meeting. In this scenario, a “broker non-vote” will occur with respect to each proposal for which you did not provide voting instructions to your broker, bank or other nominee.
A failure to provide instructions with respect to any of the proposals and a broker non-vote will have (a) the effect of a vote “AGAINST” the Merger Agreement Proposal with respect to the approval threshold requiring the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company, and (b) no effect on the Golden Parachute Proposal (so long as a quorum is present) or the Adjournment Proposal (regardless of whether a quorum is present). For more information, see “The Special Meeting — Voting.”
Q.
If a stockholder gives a proxy, how are the Shares voted?
A. If you vote by proxy, regardless of the method you choose to submit a proxy, the individuals named on the enclosed proxy card, and each of them, with full power of substitution will vote your Shares in the way that you indicate. When completing the Internet or telephone proxy processes or the proxy card, you may specify whether your Shares should be voted “FOR” or “AGAINST,” or to “ABSTAIN” from voting on, all, some or none of the specific items of business to come before the Special Meeting.
If you properly execute your proxy card but do not mark the boxes indicating how your Shares should be voted on a matter, the Shares represented by your properly execute proxy will be voted “FOR” the Merger Agreement Proposal, “FOR” the Golden Parachute Proposal and “FOR” the Adjournment Proposal. For more information, see “The Special Meeting — How to Vote.”
Q.
Can I change or revoke my vote?
A.
Yes. You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by (1) submitting another proxy, including a proxy card, at a later date by telephone or on the Internet or by timely delivery of a validly executed, later-dated proxy, (2) giving written notice of revocation to our Corporate Secretary, which must be filed with our Corporate Secretary before the Special Meeting begins, or (3) attending the Special Meeting and voting in person. If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, please refer to the information forwarded by your broker, bank or other nominee for procedures on revoking your proxy.
Only your last submitted proxy will be considered. Please cast your vote “FOR” each of the proposals, following the instructions set forth on your enclosed proxy card or voting instruction form provided by your broker, bank or other nominee, as promptly as possible. For more information, see “The Special Meeting — Proxies and Revocation.”
Q.
What do I do if I receive more than one proxy or set of voting instructions?
A.
If, as of the Record Date, you hold Shares as the beneficial owner of Shares held in “street name,” or through more than one broker, bank or other nominee, and also directly as the stockholder of record or otherwise, you may receive more than one proxy card or voting instruction forms relating to the Special Meeting. These should each be executed and returned separately in accordance with the instructions provided in this proxy statement in order to ensure that all of your Shares are voted.
Q.
Should I send in my stock certificates or other evidence of ownership now?
A.
No. After the Merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your Shares for the Merger Consideration. If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other Nominee as to what action, if any, you need to take to effect the surrender of your Shares in exchange for the Merger Consideration. Please do not send in your certificates now.
 
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Q.
What happens if I sell my Shares before the Special Meeting?
A.
The Record Date for stockholders entitled to vote at the Special Meeting is prior to both the date of the Special Meeting and the consummation of the Merger. If you transfer your Shares before the Record Date, you will not be entitled to vote at the Special Meeting and will not be entitled to receive the Merger Consideration. If you transfer your Shares after the Record Date but before the Special Meeting you will, unless special arrangements are made, retain your right to vote at the Special Meeting, but will transfer the right to receive the Merger Consideration to the person to whom you transfer your Shares. Unless special arrangements are made, the person to whom you transfer your Shares after the Record Date will not have a right to vote those Shares at the Special Meeting. For more information, see “The Special Meeting — How to Vote.”
Q.
Who will solicit and pay the cost of soliciting proxies?
A.
The Company has engaged Innisfree to assist in the solicitation of proxies for the Special Meeting. The Company has agreed to pay Innisfree a fee of approximately $40,000, and to reimburse Innisfree for certain out-of-pocket fees, charges and expenses. The Company will indemnify Innisfree and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company also will reimburse brokers, banks, other nominees, custodians and fiduciaries representing beneficial owners of the Shares for their expenses in forwarding soliciting materials to beneficial owners of our Shares and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, over the Internet or in person. Our directors, officers and employees will not be paid any additional amounts for soliciting proxies. For more information, see “The Special Meeting — Solicitation of Proxies; Payment of Solicitation Expenses.”
Q.
What is householding and how does it affect me?
A.
The SEC rules permit companies and intermediaries such as brokers, banks and other nominees to satisfy delivery requirements with respect to two or more stockholders sharing the same address by delivering a single proxy statement. This process is commonly referred to as “householding” and can result in significant cost savings for the Company. To take advantage of this opportunity, QAD, brokers, banks and other nominees who hold your Shares may deliver only one proxy statement to multiple stockholders who share an address unless one or more of the stockholders has provided contrary instructions. The Company will deliver promptly, upon written or oral request, a separate copy of the proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered. For more information, see “The Special Meeting — Questions and Additional Information” or “Where You Can Find More Information.”
Q:
What rights do I have to seek an appraisal of my Shares?
A.
Each holder of Shares will have the right to seek appraisal of the fair value of such holder’s Shares as determined by the Delaware Chancery Court if the Merger is completed, but only if such holder does not vote such Shares in favor of the Merger Agreement Proposal and otherwise complies with the statutory requirements and procedures for demanding and perfecting appraisal rights set forth in Section 262 of the DGCL, which is the appraisal rights statute applicable to Delaware corporations. Failure to follow precisely any of the statutory requirements and procedures will result in the loss of appraisal rights. A copy of Section 262 of the DGCL is included as Annex E to this proxy statement and is incorporated by reference in its entirety. The requirements and procedures are also summarized in this proxy statement. For more information about appraisal rights, see “The Special Meeting — Appraisal Rights” and Annex E to this proxy statement.
Q.
What are the material U.S. federal income tax consequences of the Merger to me if I am a U.S. Holder?
A.
If you are a U.S. Holder (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”), receipt of cash in exchange for Shares pursuant to the Merger generally will be a taxable transaction for U.S. federal income tax purposes. Generally, you will recognize gain or loss equal to the difference, if any, between the amount of cash you receive and the adjusted tax basis of your Shares. However, the tax consequences of the Merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the Merger will affect
 
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you. For a more detailed summary of the tax consequences of the Merger, see the section below “Special Factors — Material U.S. Federal Income Tax Considerations of the Merger.”
Q.
What are the material U.S. federal income tax consequences of the Merger to me if I am a Non-U.S. Holder?
A.
If you are a Non-U.S. Holder (as defined below in “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger”), you generally will not be subject to U.S. federal income tax on any gain recognized in connection with the Merger unless you have certain connections to the United States. However, the tax consequences of the Merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the Merger will affect you. For a more detailed summary of the tax consequences of the Merger, see the section below “Special Factors — Material U.S. Federal Income Tax Consequences of the Merger.”
Q.
What do I need to do now?
A.
We urge you to read this proxy statement carefully, including its annexes and the documents referred to as incorporated by reference in this proxy statement, as well as the related Schedule 13E-3, including the exhibits thereto, filed with the SEC, and to consider how the Merger affects you. For more information, see “Where You Can Find More Information.”
Even if you plan to attend the Special Meeting, after carefully reading and considering the information contained in this proxy statement, please submit your proxy promptly to ensure that your Shares are represented at the Special Meeting.
If you are a stockholder of record, please submit your proxy for your Shares:

on the Internet, by following the Internet proxy instructions printed on the enclosed proxy card;

by telephone, using the telephone number printed on the enclosed proxy card; or

by mail, by marking the enclosed proxy card, dating and signing it, and returning it in the accompanying prepaid reply envelope.
If you decide to attend the Special Meeting and vote in person, your vote in person at the Special Meeting will revoke any proxy previously submitted.
If, as of the Record Date, you are the beneficial owner of Shares held in “street name” by your broker, bank or other nominee, please refer to the instructions provided by your broker, bank or other nominee to see which of the above choices are available to you in order to have your Shares voted.
For more information, see “The Special Meeting” and “Where You Can Find More Information.”
Q.
Who can help answer my other questions?
A.
If you have additional questions about the Special Meeting, the Merger, or this proxy statement, need assistance in submitting your proxy or voting your Shares, or need additional copies of the proxy statement or the enclosed proxy card or voting instructions, please contact the Company’s proxy solicitor in connection with the Special Meeting:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Stockholders may call toll free: (877) 456-3507
Brokers, banks and other nominees may call collect: (212) 750-5833
 
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SPECIAL FACTORS
The following, together with the summary of the Merger Agreement set forth under the section titled “The Merger Agreement,” is a description of the material aspects of the Merger. While we believe that the following description covers the material aspects of the Merger, the description may not contain all of the information that is important to you. We encourage you to read carefully this entire document, including the Merger Agreement attached to this proxy statement as Annex A, for a more complete understanding of the Merger. The following description is subject to, and is qualified in its entirety by reference to, the Merger Agreement. You may obtain additional information without charge as described in the section titled “Where You Can Find More Information.”
We are asking our stockholders to consider and vote on the approval and adoption of the Merger Agreement and the transactions contemplated thereby, including the Merger. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into the Company with the Company surviving the Merger as a wholly owned subsidiary of Parent. If the Merger is completed, the holders of Shares (other than the holders of the Excluded Shares) will have the right to receive the Merger Consideration of $87.50 per Share in cash, without interest, less any applicable withholding taxes, subject to and in accordance with the terms and conditions set forth in the Merger Agreement.
Background of the Merger
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 received unsolicited indications of interest from third parties.
During 2019 and 2020, the QAD Board and senior management met from time to time with multiple potential financial advisors, including, among other firms, Morgan Stanley & Co. LLC, which we refer to as Morgan Stanley, to receive market and industry updates, evaluate the financial advisors’ capabilities, and to discuss a potential review of strategic alternatives for QAD. No financial advisors were engaged.
On December 14, 2020, the QAD Board invited representatives of Morgan Stanley to discuss with the QAD Board the most recent developments in the software industry, equity markets and the general economy.
On February 9, 2021, the QAD Board and its legal counsel, Manatt, Phelps & Phillips, LLP, which we refer to as Manatt, met to discuss, among other things, a potential review of strategic alternatives for QAD. In connection with such discussion, a representative of Manatt provided the QAD Board with an overview of legal considerations in connection with potential transactions, including the potential formation of a special committee. After discussion and deliberation, the independent members of the QAD Board determined to request that senior management of QAD meet with representatives of Morgan Stanley in order for such representatives of Morgan Stanley to provide their views regarding recent developments in the software industry and potential strategic options for the Company.
On February 18, 2021, Ms. Lopker, the President and founder of QAD, Mr. Anton Chilton, the Chief Executive Officer of QAD, and Mr. Daniel Lender, the Chief Financial Officer of QAD, met with representatives of Morgan Stanley to review potential strategic alternatives for QAD. After such meeting, Messrs. Chilton and Lender discussed the meeting with Mr. Peter van Cuylenburg, the chair of the QAD Board.
Over the following days, after discussion and deliberation, the members of the QAD Board executed a unanimous written consent, effective as of February 21, 2021, to form the Special Committee, with Mr. van Cuylenburg, Mr. Scott Adelson, Ms. Kathy Crusco and Mr. Lee Roberts as its members. The QAD Board determined each member of the Special Committee to be unaffiliated with, and otherwise independent from, Ms. Lopker and to be otherwise independent and disinterested with respect to the Special Committee’s mandate. The Special Committee was delegated the full power and authority of the QAD Board to review, evaluate and negotiate potential strategic alternatives, to engage its own advisors and to make a recommendation to the QAD Board regarding any such transaction. The resolution also provided that the
 
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QAD Board would not recommend any potential transaction to QAD stockholders without a prior favorable recommendation by the Special Committee.
During this same period, members of the Special Committee recommended to Ms. Lopker that she retain independent financial and legal advisors. Ms. Lopker also expressed to such members her willingness to pursue a process, her openness to consider any type of transaction, and her preference for retaining an ongoing stake in the Company.
On February 23, 2021, the Special Committee met with representatives of Morgan Stanley to further evaluate Morgan Stanley’s capabilities and to review Morgan Stanley’s tentative proposed plan to reach out to third parties potentially interested in a transaction with QAD.
On February 24, 2021, Ms. Lopker retained Paul Hastings LLP, which we refer to as Paul Hastings, as legal counsel to the Lopker Entities in connection with a potential transaction.
On March 1, 2021, the Special Committee held a meeting, at which the members discussed their review of, and meetings with, various potential law firms that the Special Committee was considering for engagement as legal counsel to the Special Committee.
On March 8, 2021, the Special Committee met and, after discussion and deliberation, approved the selection of Paul, Weiss, Rifkind, Wharton & Garrison LLP, which we refer to as Paul, Weiss, as legal counsel to the Special Committee. The Special Committee selected Paul, Weiss based, in part, on its experience representing special committees in circumstances similar to that of the Special Committee. At this meeting, the Special Committee also appointed Messrs. van Cuylenburg and Adelson as co-chairs of the Special Committee.
On March 9, 2021, the Special Committee provided Paul, Weiss an executed engagement letter formalizing Paul, Weiss’s engagement as legal counsel to the Special Committee.
On March 15, 2021, the Special Committee held a meeting, attended by representatives of Paul, Weiss and Morgan Stanley, to discuss, among other topics, organizational matters to facilitate the Special Committee’s review and process. During this meeting, representatives of Morgan Stanley provided the Special Committee a preliminary overview of potential strategic alternatives for QAD. Morgan Stanley also disclosed its relationships with respect to several potential counterparties. Also during such meeting, representatives of Morgan Stanley confirmed that it had not performed any work or services for Ms. Lopker, nor had it provided any financial analysis regarding QAD to any third party. The members of the Special Committee and representatives of Paul, Weiss had further discussions in an executive session.
Thereafter, and after further discussion and deliberation, the Special Committee determined to engage Morgan Stanley as its financial advisor, based in part, on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in QAD’s industry, and its knowledge of QAD’s business and affairs, with such engagement being formalized in a written engagement letter dated March 30, 2021.
During the period from mid-March 2021 to early May 2021, at the direction of the Special Committee, representatives of Morgan Stanley contacted over 25 potential counterparties, including both potential strategic counterparties and financial sponsors, to gauge their interest in potential transactions with QAD. During this period, QAD entered into 18 confidentiality agreements with interested parties. None of these confidentiality agreements included any standstill provisions.
Representatives of Morgan Stanley, along with Messrs. Chilton and Lender, met with representatives of all 18 parties that signed confidentiality agreements to provide background regarding QAD and its financial performance.
During the period from mid-March 2021 to early May 2021, the Special Committee held regular weekly meetings with its advisors, including on March 22, March 29, April 5, April 12, April 19 and April 26, 2021. All meetings included discussion among the members of the Special Committee with representatives of Paul, Weiss during an executive session. The Special Committee invited Messrs. Chilton and Lender to participate in certain portions of such meetings, and instructed Messrs. Chilton and Lender not
 
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to have any discussions relating to information learned in a Special Committee meeting with anyone, including Ms. Lopker, without the permission of the Special Committee.
On May 3, 2021, the Special Committee met with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee), to discuss status of the process and timeline for requesting preliminary indications of interest from the eight potential counterparties who continued to show engagement in the process. After review and deliberation, the Special Committee directed representatives of Morgan Stanley to send a process letter to such parties containing bid instructions and procedures (the form of which was approved by the Special Committee) and to request preliminary indications of interest by May 11, 2021. Over the course of the following weeks, representatives of Morgan Stanley, together with Messrs. Chilton and Lender, continued to participate in due diligence discussions upon the request of the potential counterparties involved in the process.
Also on May 3, 2021, the Special Committee discussed with its advisors outreach to additional potential counterparties. At the direction of the Special Committee, representatives of Morgan Stanley then proceeded to contact two additional potential counterparties, which we refer to as Party C and Party D, to gauge their interest in participating in the process.
On May 10, 2021, QAD entered into a confidentiality agreement with Party C. Such confidentiality agreement did not include any standstill provisions.
On May 11, 2021, on behalf of the Special Committee, representatives of Morgan Stanley received written preliminary, non-binding indications of interest from two of the eight parties who had been sent a process letter, which indications were promptly provided to the Special Committee and its advisors. The two parties who submitted preliminary indications of interest were Thoma Bravo and a party we refer to as Party B. Thoma Bravo’s indication of interest outlined a potential transaction in which QAD stockholders would receive up to $90 per share in cash, subject to further due diligence and negotiations, which cash consideration would be financed with a mixture of debt and equity. Thoma Bravo’s indication of interest independently raised the possibility of Ms. Lopker continuing to hold a portion of her interests in QAD by rolling over a percentage of her holdings and also expressly stated that, in connection with its diligence, Thoma Bravo representatives would require discussions with Ms. Lopker regarding her involvement in the Company following the closing of the proposed transaction. Party B’s indication of interest outlined a potential transaction in which QAD stockholders would receive approximately $86 per share in cash, subject to further due diligence and negotiations, which cash consideration would be financed with a mixture of debt and equity. Party B also verbally indicated to representatives of Morgan Stanley its request to meet with Ms. Lopker to discuss her involvement in the Company following the closing of the proposed transaction. Both Thoma Bravo and Party B indicated to representatives of Morgan Stanley that they would each require a support agreement in connection with any transaction, which would require, among other things, that the Lopker Entities vote in favor of the contemplated transaction (subject to certain exceptions) with the relevant counterparty.
Four of the eight parties that received the process letter expressed to representatives of Morgan Stanley potential interest in a transaction with QAD at a “low-to-no premium” value over the then-current publicly traded price per share, but did not submit any indications of interest. The remaining two parties who had received a process letter expressed to representatives of Morgan Stanley potential interest in a private investment in public equity transaction with QAD, but did not submit indications of interest. On May 11, 2021, QAD’s closing share price of Class A Common Stock was $67.30.
On May 12, 2021, representatives of Morgan Stanley provided to the Special Committee an updated relationship disclosure letter with respect to Thoma Bravo and Party B, the two parties who submitted preliminary indications of interest.
Also on May 12, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee), to discuss the preliminary indications of interest received, the status of the process and potential next steps.
The Special Committee reiterated that Messrs. Chilton and Lender were not to have any discussions relating to information learned in a Special Committee meeting with anyone, including Ms. Lopker, without
 
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the permission of the Special Committee, and added that no one other than members of the Special Committee were to discuss the process or preliminary indications of interest with Ms. Lopker at that stage. The members of the Special Committee and representatives of Paul, Weiss had further discussion during an executive session of the meeting. After review and deliberation, the Special Committee determined to seek additional details from each of Thoma Bravo and Party B regarding their respective preliminary indications of interest.
On May 13, 2021, Morgan Stanley, along with Messrs. Chilton and Lender met with representatives of Party C.
On May 14, 2021, QAD entered into a confidentiality agreement with Party D. Such confidentiality agreement did not include any standstill provisions.
Also on May 14, 2021, Messrs. van Cuylenburg and Adelson met with Ms. Lopker to provide her with the high-level terms of the preliminary indications of interest received from each of Thoma Bravo and Party B. Ms. Lopker indicated that she was interested in continuing to have a role in QAD following the closing of a potential transaction if one were to occur, and that she was open to discussions with each of Thoma Bravo and Party B about such role. Ms. Lopker indicated that she had not yet decided whether she would seek a rollover of a portion of her shares in QAD.
On May 17, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee) to discuss the overall status of the process, as well as a potential process for involving Ms. Lopker in certain discussions with Thoma Bravo, Party B, or other potential counterparties that may submit indications of interest. Representatives of Morgan Stanley confirmed that, at the direction of the Special Committee, they would schedule additional calls with Thoma Bravo and Party B to discuss further details of their respective indications of interest. At that same meeting, the Special Committee and its advisors discussed status and feedback received from the other potential counterparties involved in the process that did not submit indications of interest. After discussion and deliberation, representatives of Morgan Stanley confirmed that, at the direction of the Special Committee, they would request that any remaining parties in the process submit indications of interest by May 25, 2021. The members of the Special Committee and representatives of Paul, Weiss had further discussion during an executive session of the meeting.
Over the course of the week of May 17, 2021, Messrs. Chilton and Lender, together with representatives of Morgan Stanley, continued to participate in due diligence discussions upon the request of potential counterparties.
On May 19, 2021, and on May 21, 2021, Ms. Lopker had initial discussions with each of Party B and Thoma Bravo, respectively, with representatives of Morgan Stanley present, to discuss Ms. Lopker’s potential involvement in QAD following the closing of a potential transaction with each such counterparty. No discussion of any specific terms of such an arrangement, or a potential rollover of a portion of Ms. Lopker’s shares in QAD, took place. Following these meetings, Ms. Lopker indicated to Messrs. Adelson and van Cuylenburg that she was open to further discussion with both of Thoma Bravo and Party B.
On May 21, 2021, Morgan Stanley, along with Messrs. Chilton and Lender met with representatives of Party D.
On May 25, 2021, of the seven potential counterparties who had been sent a process letter, Morgan Stanley received one additional written non-binding preliminary indication of interest, from two parties who partnered together, which we refer to collectively as Party E. Such indication of interest included a range of $80 to $82.50 per share, as well as a list of outstanding diligence items, and stated that any transaction would be financed with a mix of debt and equity. Such indication of interest was promptly provided to the Special Committee and its advisors. On May 25, 2021, QAD’s closing share price of Class A Common Stock was $67.98.
On May 26, 2021, the Special Committee held a meeting, with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee). The Special Committee discussed with its advisors the preliminary indication of interest received from Party E, and, after deliberation and discussion, the Special Committee directed representatives of
 
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Morgan Stanley to inform Party E that the price included in its indication of interest was too low and it would need to increase its offer price per share in order to proceed in the process.
At that same meeting, the Special Committee and its advisors also discussed feedback representatives of Morgan Stanley received from the five other parties who had been sent a process letter and requested to submit an indication of interest by May 25, 2021, but who did not submit an indication of interest. Representatives of Morgan Stanley advised that certain of such parties indicated that they may be interested in an at-market transaction with QAD, and were not willing to offer any premium to the then-current publicly-traded market price. On May 26, 2021, QAD’s closing share price of Class A Common Stock was $67.64.
Also at that meeting, the Special Committee discussed with its advisors outreach to additional potential counterparties. At the direction of the Special Committee, representatives of Morgan Stanley then proceeded to contact two additional potential counterparties, which we refer to as Party F and Party G, to gauge their interest in participating in the process.
On May 27, 2021, representatives of Morgan Stanley delivered to the Special Committee its relationship disclosure letter with respect to Party E and updated its prior disclosures with respect to each of Thoma Bravo and Party B.
On May 28, 2021, at the direction of the Special Committee, representatives of Morgan Stanley followed-up with Party D, which had not submitted any indication of interest, and encouraged Party D to continue considering a potential transaction with QAD. Party D indicated that it would no longer be participating in the process.
Later that week and over the course of the week of May 31, 2021, Messrs. Chilton and Lender, together with representatives of Morgan Stanley, continued to participate in due diligence discussions upon the request of potential counterparties.
On June 1, 2021, QAD entered into a confidentiality agreement with Party F. Such confidentiality agreement did not include any standstill provisions.
On June 2, 2021, Party C notified representatives of Morgan Stanley that it would no longer be participating in the process.
On June 3, 2021, Morgan Stanley, along with Messrs. Chilton and Lender met with representatives of Party F to provide background regarding QAD and its financial performance.
On June 7, 2021, the Special Committee met with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee), to discuss the status of the process and next steps. Representatives of Morgan Stanley stated that, after they had contacted Party E to relay the Special Committee’s message that Party E would need to increase its price in order to proceed in the process, Party E had responded that it would not increase its price, and that representatives of Morgan Stanley should notify it if circumstances change and there would be an opportunity to move forward in Party E’s proposed price range of $80 to $82.50 per share.
At that same meeting, the Special Committee and its advisors further discussed the status of Thoma Bravo, Party B and the other two remaining parties in the process. After discussion and deliberation, the Special Committee directed representatives of Morgan Stanley to communicate to all parties remaining in the process to submit final proposals with respect to a potential transaction with QAD by June 15, 2021.
Also during that same meeting, the Special Committee and its advisors discussed the potential terms of a draft merger agreement that was to be provided to bidders in connection with soliciting bids. The draft expressly stated that if Ms. Lopker seeks to participate in a rollover of any of her shares, then, in addition to the stockholder vote required by Delaware law, the Special Committee would further require that the majority of QAD’s disinterested stockholders also approve the transaction. The Special Committee and its advisors discussed that this “majority of the minority” vote would be a non-waivable condition for the transaction, and that such vote requirement would also be communicated to Ms. Lopker in the event she sought to roll over any of her shares of QAD. The Special Committee and its advisors also discussed the terms of a support agreement, which would require, among other things, that the Lopker Entities vote in favor of
 
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the contemplated transaction with the relevant counterparty (subject to certain exceptions), which the parties participating in the process had continued to indicate they would require in connection with a potential transaction. The members of the Special Committee and representatives of Paul, Weiss had further discussion during an executive session of the meeting.
On June 7, 2021, Party F notified representatives of Morgan Stanley that it would no longer be participating in the process.
On June 8, 2021, representatives of Morgan Stanley provided a draft of the merger agreement to the potential counterparties remaining in the process.
On June 9, 2021, QAD entered into a confidentiality agreement with Party G. Such confidentiality agreement did not include any standstill provisions.
On June 11, 2021, Morgan Stanley, along with Messrs. Chilton and Lender met with representatives of Party G to provide background on QAD and its financial performance.
On June 12, 2021, representatives of Paul, Weiss sent a draft support agreement to Paul Hastings, legal counsel to Ms. Lopker.
On June 14, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, as well as Mr. Chilton (who was present until excused by the Special Committee), to discuss the status of the process and potential next steps. Representatives of Morgan Stanley relayed that Thoma Bravo had communicated that, as a result of its further diligence, Thoma Bravo’s final proposal that it would submit the next day on June 15, 2021 would likely be at a lower price per share than the initial price of $90 per share set forth in its preliminary indication of interest submitted on May 11, 2021. After discussion and deliberation, the Special Committee determined that it would review any proposals received with its advisors, and would seek to ensure the highest price possible.
The Special Committee and its advisors also discussed an approach regarding the Special Committee’s review of any proposals submitted on June 15, 2021, and determined that no terms should be shared with Ms. Lopker until the Special Committee has reviewed such proposals with its advisors and has formed an independent view on the proposals. The Special Committee also confirmed that it had made clear to Ms. Lopker and the potential counterparties that the Special Committee must first agree to a price per share and any other terms that are fair to all stockholders with a potential counterparty before any negotiations may take place between such counterparty and Ms. Lopker and that, if Ms. Lopker sought a rollover of any shares, then a vote of the majority of the minority of QAD stockholders would be required.
On June 15, 2021, representatives of Morgan Stanley received a proposal, including a revised draft merger agreement from Thoma Bravo, which it promptly shared with the Special Committee and its advisors. Thoma Bravo’s proposal lowered its offer price as compared to its earlier preliminary indication of interest — from $90 per share to $85 per share, due to its view of findings in its recent diligence. Thoma Bravo’s offer proposed that Ms. Lopker may roll $150 million of her shares (valued at $85 per share) and explicitly stated that its proposal, including the price per share in connection with the merger, was not premised or conditioned on any rollover or the terms of such rollover. Thoma Bravo indicated that it was ready to execute a definitive agreement in as soon as 72 hours and only had confirmatory due diligence left to complete. On June 15, 2021 QAD’s closing share price of Class A Common Stock was $77.00.
On June 16, 2021, representatives of Morgan Stanley received a proposal and representatives of Paul, Weiss received a revised draft merger agreement, each from Party B, which were promptly shared with the Special Committee and its advisors. Party B’s proposal included an offer price of approximately $86 per share, just as it had in its preliminary indication of interest. Party B’s offer invited Ms. Lopker to roll a portion of her shares, stating that Party B proposed a minimum rollover of 30% and a maximum of 50% of Ms. Lopker’s shares, and included a term sheet that described certain stockholder rights in connection with the securities Ms. Lopker would receive in a rollover. Party B’s proposal indicated that it had due diligence left to complete and would likely require about three more weeks before it would be in a position to execute a definitive agreement, and that the terms of its offer remain subject to ongoing diligence. On June 16, 2021, QAD’s closing share price of Class A Common Stock was $78.03.
 
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Also on June 16, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee), to discuss the latest proposals received. After discussion and deliberation, the Special Committee directed representatives of Morgan Stanley to communicate to Thoma Bravo and Party B that they would need to increase their respective offer prices, and also that Party B should proceed more quickly than communicated in its proposal and that, subject to any future discussions with Ms. Lopker, Thoma Bravo may need to consider altering the terms of their rollover proposal, and to reiterate to both that a rollover of any of Ms. Lopker’s shares would require a “majority of the minority” stockholder vote, and such vote would be a non-waivable condition for the merger. The members of the Special Committee and representatives of Paul, Weiss had further discussion during an executive session of the meeting.
Over the course of the period from June 16, 2021 to June 21, 2021, and at the direction of the Special Committee, representatives of Morgan Stanley had a number of discussions with each of Thoma Bravo and Party B, communicating that such parties should increase their respective offer prices and that Party B should expedite timing to get to a definitive agreement.
On June 18, 2021, at the direction of the Special Committee, representatives of Morgan Stanley 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. On June 18, 2021, QAD’s closing share price of Class A Common Stock was $72.93.
On June 18, 2021, Paul, Weiss sent the Company’s disclosure letter and a revised draft of the merger agreement to legal counsel to Party B.
On June 19, 2021, Paul, Weiss sent the Company’s disclosure letter and a revised draft of the merger agreement to Kirkland & Ellis LLP, legal counsel to Thoma Bravo, which we refer to as Kirkland & Ellis.
On June 19, 2021, after further discussion with representatives of Morgan Stanley, Thoma Bravo informed representatives of Morgan Stanley that it was willing to increase its offer price to $87.50 per share, and indicated that this represented Thoma Bravo’s best and final offer. Such revised offer was promptly shared with the Special Committee and its advisors. On June 18, 2021, the last full trading day prior to June 19, 2021, QAD’s closing share price of Class A Common Stock was $72.93.
On June 19, 2021, Ms. Lopker informed the Special Committee that she had retained Moelis & Company as her financial advisor.
On June 21, 2021, as disclosed in a Form 8-K filed by the Company with the SEC on April 29, 2021, Mr. Roberts’s term on the QAD Board (and therefore Special Committee) ended pursuant to the term set forth in the bylaws of the Company, and he did not stand for reelection.
On June 21, 2021, Party B communicated to representatives of Morgan Stanley that it was withdrawing its offer as it would not increase its price, which was still at approximately $86 per share, and nor would it expedite the timeline for diligence. Such communication was promptly provided to the Special Committee and its advisors.
On June 21, 2021, Paul Hastings sent Paul, Weiss a revised draft of the support agreement. Later that day, Paul, Weiss sent a revised draft of the support agreement to Paul Hastings and to Kirkland & Ellis.
Also on June 21, 2021, Kirkland & Ellis sent a revised Company disclosure letter to Paul, Weiss.
Later on June 21, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, as well as Messrs. Chilton and Lender (who were present until excused by the Special Committee), to discuss the status of the process. The Special Committee discussed potential steps it might take to persuade Party B to change its decision and re-engage in the process. Representatives of Morgan Stanley provided an update regarding Party G, the one additional potential counterparty still engaged in the process, noting that such party had not submitted an offer and had not indicated that it was interested in moving forward. Later that day, representatives of Morgan Stanley, at the direction of the Special Committee, again contacted Party G to encourage it to submit a bid.
 
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In that same meeting, the Special Committee and its advisors discussed Thoma Bravo’s revised offer at $87.50 per share, including whether there was an opportunity to further increase the price given the negotiations over the prior week and Thoma Bravo’s statement that this was its “best and final” offer. The Special Committee and its advisors also discussed the fairness of the Thoma Bravo proposal’s price and terms to stockholders not affiliated with the Lopker Entities, and that it was an attractive offer. After further discussion and deliberation with its advisors, the Special Committee directed representatives of Morgan Stanley to communicate to Thoma Bravo, that subject to other terms and conditions, the Special Committee would be willing to recommend a transaction at $87.50 per share if such transaction included Thoma Bravo providing a full equity commitment in connection with the financing of the transaction, and no financing contingency. The members of the Special Committee and representatives of Paul, Weiss had further discussion during an executive session of the meeting.
Later on June 21, 2021, a representative of Paul, Weiss communicated to representatives of Paul Hastings and Kirkland & Ellis that they could now engage in discussions regarding a potential rollover and post-deal arrangements.
On June 22, 2021, Kirkland & Ellis sent a revised draft of the merger agreement to Paul, Weiss.
Later on June 22, 2021, Kirkland & Ellis sent a proposed contribution and exchange agreement and equity term sheet to Paul Hastings which was also shared with the Special Committee and its advisors. Such documents were intended to provide the terms and conditions of Ms. Lopker’s rollover of certain of her QAD shares.
On June 23, 2021, representatives of Morgan Stanley, at the direction of the Special Committee, contacted Party G again to encourage it to submit a bid.
On June 24, 2021, Party G indicated to representatives of Morgan Stanley that it would no longer be participating in the process.
On June 24, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, to discuss the status of the process. The Special Committee also discussed Ms. Lopker’s role at QAD following the closing of the potential transaction with Thoma Bravo, and terms being negotiated between her and Thoma Bravo, including Ms. Lopker seeking that a certain amount of her shares participate in a rollover. The Special Committee and its advisors discussed such topics as well as status of the draft merger agreement, key terms and other open issues.
On June 25, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, to discuss the status of the process and open issues in the draft merger agreement and other transaction documents. Representatives of Morgan Stanley stated that, after extensive negotiations, Thoma Bravo indicated that it would agree to provide a full equity commitment in connection with the financing of the transaction which would eliminate the need for Thoma Bravo to secure debt financing and enhance the certainty of closing the proposed transaction. The Special Committee and its advisors discussed the same, and the Special Committee directed Paul, Weiss to revise the documents to reflect, among other terms, such full equity commitment and a supporting guarantee from TB Fund XIV L.P., an affiliate of Thoma Bravo, L.P.
At that same meeting, the Special Committee and its advisors discussed other developments in the market, including the recently announced proposed acquisition of Plex Systems by Rockwell Automation, including the revenue multiple and other terms obtained in the Plex Systems transaction and discussed factors that differentiated Plex Systems from QAD, including, among other factors, Plex System’s business in Industrial IOT, growth and margin profile, the fact that Plex Systems has 500 employees and its operations are U.S.-based, and the synergies created through acquisition by a strategic counterparty. The members of the Special Committee and representatives of Paul, Weiss had further discussion during an executive session of the meeting.
On June 27, 2021, representatives of Morgan Stanley delivered to the Special Committee an updated relationship disclosure letter with respect to Thoma Bravo.
 
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During the course of the day on June 27, 2021, the Special Committee, the Company and Thoma Bravo and their respective representatives exchanged multiple drafts of the merger agreement and related transaction documents and schedules, and engaged in related negotiations.
Also during the course of the day on June 27, 2021, the Special Committee, the Company, Thoma Bravo and Ms. Lopker and their respective representatives exchanged multiple drafts of the support agreement and engaged in related negotiations.
Separately, during the day on June 27, 2021, Ms. Lopker and Thoma Bravo and their respective representatives exchanged multiple drafts of the contribution and exchange agreement and related documents, which were also shared with the Special Committee and its advisors.
Later in the day on June 27, 2021, the Special Committee met, along with representatives of Paul, Weiss and Morgan Stanley, and Mr. Chilton. At the meeting, the representatives of Paul, Weiss reviewed the fiduciary duties of the directors and provided a summary of the latest terms of the transaction agreements. Representatives of Morgan Stanley reviewed Morgan Stanley’s financial analysis of the transactions and rendered its oral opinion, subsequently confirmed in writing, that, as of June 27, 2021, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in its written opinion, the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair from a financial point of view to such stockholders in the aggregate. Following discussion, the Special Committee unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders; (ii) recommended that the QAD Board approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair to and in the best interests of the Company and the Company’s stockholders; and (iii) recommended that, subject to approval by the QAD Board, the QAD Board resolve to recommend that the holders of shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger.
Immediately following the meeting of the Special Committee on June 27, 2021, the QAD Board (other than Ms. Lopker, who recused herself) met, along with representatives of Paul, Weiss and Morgan Stanley. The Special Committee delivered its recommendation to the QAD Board. Following discussion, based on the unanimous recommendation of the Special Committee, the QAD Board (other than Ms. Lopker, who recused herself), among other things (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders; (ii) adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger; (iii) directed that the Merger Agreement be submitted to the holders of shares for their adoption and approval; and (iv) resolved to recommend that the holders of shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger.
Later in the evening on June 27, 2021, the Special Committee, the Company and Thoma Bravo and their respective representatives put into execution form the Merger Agreement and related transaction documents, and, such parties along with Ms. Lopker and representatives of Paul Hastings, put into execution form the Support Agreement. Also during this time, Ms. Lopker and Thoma Bravo and their respective representatives, put into execution form the Contribution and Exchange Agreement and related documents. Thereafter, the Support Agreement, Merger Agreement and related transaction documents and Contribution and Exchange Agreement and related documents were executed and delivered by the relevant parties. For additional information regarding the final terms of the Merger Agreement, see the section entitled “The Merger Agreement” and the copy of the Merger Agreement attached as Annex A to this proxy statement. For additional information regarding the final terms of the Support Agreement, see the section entitled “Support Agreement” and the copy of the Support Agreement attached as Annex B to this proxy statement. For additional information regarding the final terms of the Contribution and Exchange Agreement, see the section entitled “Contribution and Exchange Agreement” and the copy of the Contribution and Exchange Agreement attached as Annex C to this proxy statement.
 
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Prior to the opening of equity trading markets in the United States on June 28, 2021, QAD issued a press release announcing the signing of the Merger Agreement with an affiliate of Thoma Bravo.
Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger
As described in the section entitled “Background of the Merger,” the QAD Board duly established the Special Committee and delegated to it the exclusive power and authority, among other things, to (i) review and evaluate the terms and conditions, and determine the advisability of any potential transactions with respect to the Company and any alternatives thereto, (ii) negotiate with the counterparties to any such potential transaction or any other party the Special Committee deems appropriate with respect to the terms and conditions of any such potential transaction or any alternatives thereto and, if the Special Committee deems appropriate, but subject to the limitations of applicable law, approve the execution and delivery of documents pertaining to a given transaction or any alternative transaction on behalf of the Company, (iii) determine whether such proposed transaction or any alternative thereto negotiated by the Special Committee is fair to, and in the best interests of, the Company and all of its stockholders (and to the extent Ms. Lopker is determined to have an interest in such proposed transaction different from the interests of the other shareholders, other than Ms. Lopker), (iv) recommend to the full QAD Board what action, if any, should be taken by the QAD Board with respect to such proposed transaction or any alternative thereto, and (v) retain independent legal counsel and such other consultants and agents, including, without limitation, independent investment bankers, as the Special Committee deems necessary or appropriate to perform such services and render such opinions as may be necessary or appropriate in order for the Special Committee to discharge its duties.
The Special Committee, acting with the advice and assistance of its independent legal and financial advisors, evaluated and negotiated the Merger Agreement and the transactions contemplated thereby, including the Merger, and after careful consideration, at a meeting of the Special Committee held on June 27, 2021, the Special Committee, among other things, unanimously:

determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders;

recommended that the QAD Board approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and declare the Merger Agreement and the transactions contemplated thereby, including the Merger, advisable, fair to and in the best interests of the Company and the Company’s stockholders; and

recommended that, subject to approval by the QAD Board, the QAD Board resolve to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger.
On June 27, 2021, after careful consideration, based in part on the unanimous recommendation of the Special Committee, the QAD Board (other than Ms. Lopker, who recused herself), pursuant to resolutions adopted at a meeting of the QAD Board (other than Ms. Lopker, who recused herself), among other things:

determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders;

adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger;

directed that the Merger Agreement be submitted to the holders of Shares for their adoption and approval; and

resolved to recommend that the holders of Shares vote to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Merger.
Accordingly, the QAD Board (other than Ms. Lopker, who recused herself) recommends that you vote “FOR” the Merger Agreement Proposal, to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, at the Special Meeting.
 
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In considering the recommendations of the QAD Board (other than Ms. Lopker, who recused herself) with respect to the Merger, you should be aware that executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The Special Committee, consisting entirely of independent directors, and the QAD Board were aware of these interests and considered them, among other matters, in evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger and in making its decision to recommend that the QAD Board adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger. For more information about these interests, refer to the section entitled “Interests of Executive Officers and Directors of the Company in the Merger.” The Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) believe that the Merger Agreement and the transactions contemplated thereby, including the Merger, are fair to the Company’s Unaffiliated Stockholders.
The Special Committee engaged its own independent legal and financial advisors and received advice throughout the negotiations from such advisors. Since the members of the Special Committee are disinterested with respect to the transactions contemplated by the Merger Agreement, independent of, and not affiliated with, the Parent Entities or the Lopker Entities, the Special Committee believed that it could effectively represent the interests of the Unaffiliated Stockholders in negotiating the terms of the Merger Agreement and the transactions contemplated thereby, including the Merger and in making its decision to recommend that the QAD Board adopt and approve the Merger Agreement and the transactions contemplated thereby, including the Merger.
In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations described above, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) considered, among other things, the following potentially positive factors, which are not intended to be exhaustive and are not presented in any relative order of importance:

the current and historical market prices of the Shares, including as set forth in the table under “Other Important Information Regarding the Company — Market Price of Common Stock and Dividends,” taking into account the market performance of the Shares relative to the common stock of other participants in the industry in which the Company operates and general market indices;

certain factors related to the Company’s business, financial condition and results of operations, and the Company’s prospects and plans, including:

the reviews undertaken by, and understandings of, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) with respect to the Company’s business, operations, assets, financial condition, earnings, ownership structure, management, strategy, competitive position, current, historical and projected financial performance, prospects and plans, as well as the associated risks involved achieving such projections, prospects and plans;

the reviews undertaken by, and understandings of, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) with respect to economic and market conditions and trends, as well as the challenges and uncertainty surrounding such conditions and trends, both on a historical and prospective basis, in the near term and the long term, such as:

the nature of the industry in which the Company operates, including anticipated industry trends and changing competitive dynamics;

the risks and uncertainties relating to the ongoing industry transition to a cloud-based business, including to be able to compete effectively in the markets in which the Company operates or may operate in the future;

the risks and uncertainties relating to anticipated structural changes in the Company’s industry due to technological changes and geopolitical uncertainties;

the potential risks to the Company of continuing to have publicly traded common stock, including the risks of market volatility and the risks relating to the Company’s dual-class stock structure, including:
 
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the potentially adverse impact of the dual-class stock structure on the market for the Company’s Shares, because each class has less of a public float than it would if there was a single class of Shares;

the fact that there are fewer shares of Class B Common Stock than shares of Class A Common Stock and the Class B Common Stock may be less desirable to the public due to the 20% higher dividend on the Class A Common Stock; and

the risk that the holding of lower voting Class A Common Stock may not be permitted by the investment policies of certain institutional investors or may be less attractive to managers of certain institutional investors.

certain compliance costs and obligations imposed on the Company as a result of having publicly traded common stock;

the risks and uncertainties relating to the Company’s concentrated stock ownership;

the management forecasts prepared by the Company’s management for, or otherwise made available to, the Special Committee and the QAD Board;

certain challenges and limitations on the Company of continuing as a stand-alone public company, including:

the execution risk associated with, and potential for business disruption and negative stock price reaction in connection with, carrying out a world-wide organizational restructuring for expense reduction and margin improvement;

the fact that the Merger Consideration consists solely of cash, providing the Company’s stockholders with certainty of value and immediate liquidity at an attractive per Share equity value without the market or execution risks associated with continued independence;

the beliefs of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) that the Merger represents the best transaction reasonably available for Company stockholders in light of the foregoing factors as well as, among other things:

the views of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) that the Merger Consideration to be paid to the holders of Shares in accordance with the Merger Agreement represented the highest per Share consideration that could reasonably be obtained;

the beliefs of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) that the per Share Merger Consideration to be paid to the holders of Shares, was more favorable to such holders than the potential value that might result from other alternatives reasonably available to the Company, including the alternative of remaining an independent company and pursuing the Company’s current strategic plan, and other strategic or financial alternatives that might be undertaken as an independent company, in light of a number of factors, including the risks and uncertainties associated with those alternatives, and the administrative and compliance costs associated with operating the Company as a publicly traded company;

that the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself), with the assistance of their respective independent legal and other advisors, had considered alternatives, including continuing to operate the Company on a standalone basis, other potential value creating options or a sale to an alternative buyer, and considered the risks and uncertainties associated with such alternatives, and each respectively formed the view that no other alternatives were reasonably likely to create greater value for the Company’s stockholders than the Merger, taking into account the alternatives reasonably available to the Company and the risk of execution, as well as business, competitive, industry and market risks (as more fully described under “Special Factors — Background of the Merger”);

the beliefs of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) that, after such extensive negotiations conducted at the direction of the Special Committee, with the assistance of experienced independent legal and financial advisors, the Company
 
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obtained the best terms and highest price that Parent is willing to pay for the Company, pursuant to a thorough process and that further negotiations would have created a risk of causing Parent to abandon the Merger altogether or materially delay the entry into definitive transaction agreements with respect to the Merger;

the fact that since the public announcement of the Merger Agreement, none of the Company, Parent, the Special Committee, the QAD Board, nor any of their respective independent legal and financial advisors, as applicable, have received any inbound inquiries from third parties related to potential alternative acquisition proposals;

the reviews undertaken by the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) of the Merger Agreement and the structure of the transactions contemplated thereby, including, among others, the specific financial and other terms and conditions set out below;

the terms of the Merger Agreement permitting the Company to receive unsolicited Company Acquisition Proposals (as defined in the Merger Agreement) that do not result from any breach of the non-solicitation obligations in the Merger Agreement, and the other terms and conditions of the Merger Agreement, including:

that the Company may, in certain circumstances (i) furnish any information or access thereto to any third party making such a Company Acquisition Proposal and its representatives and potential financing sources and (ii) participate or engage in negotiations or discussions with such third party and its representatives and potential financing sources regarding such Company Acquisition Proposal, provided, in each case, the Company Acquisition Proposal is received prior to obtaining the requisite Company Stockholder Approval with respect to the Merger Agreement Proposal;

that the Merger Agreement may be terminated, in certain circumstances, including, among others, by the Company to accept and enter into a definitive agreement with respect to a Company Superior Proposal, provided that the Company pay Parent a Company Termination Fee of $59,000,000 in cash, which amount the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) believe to be reasonable under the circumstances and taking into account the range of such termination fees in similar transactions, and the unlikelihood that a fee of such size would be a meaningful deterrent to other acquisition proposals; and

that the QAD Board may, upon the recommendation of the Special Committee, in certain circumstances, make a Company Change in Recommendation, including in response to (i) a Company Intervening Event, or (ii) a bona fide written Company Acquisition Proposal that the QAD Board determines constitutes a Company Superior Proposal,
in each case, subject to and in accordance with the terms and conditions of the Merger Agreement;

the likelihood of the Merger being completed, based on, among other matters:

Parent having delivered to the Company a true, complete and correct copy of the executed Equity Commitment Letter to which the Company is a third-party beneficiary, pursuant to which the Ultimate Parent has committed to provide, subject to and in accordance with the terms and conditions of the Equity Commitment Letter, equity financing in an aggregate amount of up to $1,626,900,000 to be used solely for the purpose of providing the financing for the transactions contemplated by the Merger Agreement at the Closing of the Merger, including the fees and expenses related thereto, noting that the aggregated amount represents the amount estimated to be required to fund the Required Amount, as defined in the Merger Agreement, at the Closing;

the absence of a financing condition in the Merger Agreement;

the Company’s ability, under circumstances specified in the Merger Agreement, to seek specific performance of Parent’s obligation to cause the Merger to occur;

the requirement that, in the event of a failure of the Merger to be consummated under certain circumstances, Parent pay the Company a Parent Termination Fee of $127,000,000 in cash, subject to and in accordance with the terms and conditions of the Merger Agreement (as more fully described under “The Merger Agreement — Termination Fees”);
 
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the Limited Guaranty, provided by TB Fund XIV, in favor of the Company, pursuant to which TB Fund XIV has agreed to guarantee Parent’s obligations under the Merger Agreement, capped at $133,000,000, with respect to payment of the Parent Termination Fee and certain interest payments and reimbursement obligations of Parent;

the requirement that Parent and Merger Sub use their respective reasonable best efforts to obtain the regulatory approvals required to consummate the Merger, subject to and in accordance with the terms and conditions of the Merger Agreement; and

the likelihood and anticipated timing of completing the proposed Merger in light of the scope of the conditions to completion, including that there were no anticipated substantive issues expected in connection with the required regulatory approvals;

other terms and conditions of the Merger Agreement, including:

the beliefs of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) that the Company Termination Fee is reasonable in light of, among other matters, the benefit of the Merger to the Company’s stockholders, the size of such termination fee in similar transactions and the enterprise value of the Company;

the terms of the Merger Agreement providing the Company sufficient operating flexibility to conduct its business in the ordinary course until the earlier of the consummation of the Merger or the termination of the Merger Agreement;

the Company’s ability, under circumstances specified in the Merger Agreement, to seek specific performance to prevent certain breaches of the Merger Agreement by Parent and Merger Sub; and

the scope of the representations, warranties and covenants being made by the Company and Parent;

the fact that Morgan Stanley rendered to the Special Committee its oral opinion, subsequently confirmed in writing, that as of June 27, 2021, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair from a financial point of view to such Company stockholders in the aggregate (as more fully described under “Special Factors — Opinion of Morgan Stanley & Co. LLC”);

the beliefs of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) that they were fully informed about the extent to which the interests of the Lopker Entities in the Merger differ from those of the Company’s other stockholders;

the fact that the Lopker Entities, who hold approximately 67% of the voting power of the Company’s outstanding capital stock, have duly executed and entered into a Support Agreement, pursuant to which they have agreed to vote their Shares in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, subject to and in accordance with the terms and conditions of the Support Agreement;

the fact that the Support Agreement terminates in the event that the Merger Agreement is validly terminated in accordance with its terms, as more fully described in the section titled “Special Factors — Support Agreement”;

the fact that the Merger Agreement is subject to approval and adoption by the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company; and

the right of Company stockholders to exercise their statutory appraisal rights under the Section 262 of the DGCL and receive payment of the fair value of their Shares in lieu of the Merger Consideration to be paid per Share, subject to and in accordance with the terms and conditions of the Merger
 
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Agreement and the DGCL, unless and until any such Company stockholder fails to perfect or effectively withdraws or loses his, her, its or their rights to appraisal and payment under the DGCL.
In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations described above, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) considered, among other things, a number of procedural safeguards that they believed were and are present to ensure the fairness of the Merger Agreement and the transactions contemplated thereby, including the Merger, and to permit the Special Committee to represent effectively the interests of the Company’s Unaffiliated Stockholders and in light of such procedural safeguards the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) did not consider it necessary to retain an unaffiliated representative to act solely on behalf of the Company’s Unaffiliated Stockholders for purposes of negotiating the terms of the Merger Agreement or preparing a report concerning the fairness of the Merger Agreement and transactions contemplated thereby, including the Merger. These procedural safeguards include, among other things, the following, which are not intended to be exhaustive and are not presented in any relative order of importance:

that the Special Committee was formed at the outset of Company’s consideration of a potential transaction and prior to any consideration of the Merger Agreement and the transactions contemplated thereby, including the Merger;

that the Special Committee consists entirely of directors who are independent of, and not affiliated with, the Parent Entities or the Lopker Entities or any of their respective affiliates, and who are not members of the Company’s management;

that the members of the Special Committee are disinterested with respect to the transactions contemplated by the Merger Agreement, including the Merger and had no financial interest in the Merger different from, or in addition to, the Company’s Unaffiliated Stockholders generally (other than as described in “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger”);

that the members of the Special Committee were adequately compensated for their services and that their compensation was in no way contingent on their approving the Merger Agreement and taking the other actions described in this proxy statement;

that the Special Committee had exclusive authority to decide whether or not to proceed with a transaction or any alternative thereto, subject to the QAD Board’s approval of the transactions;

that the Special Committee retained and was advised by its own experienced and independent legal and financial advisors;

that the Special Committee had the exclusive power and authority, among other things, to (i) review and evaluate the terms and conditions, and determine the advisability of any potential transactions with respect to the Company and any alternative thereto, (ii) negotiate with the counterparties to any such potential transaction or any other party the Special Committee deems appropriate with respect to the terms and conditions of any such potential transaction or any alternatives thereto and, if the Special Committee deems appropriate, but subject to the limitations of applicable law, approve the execution and delivery of documents pertaining to a given transaction or any alternative transaction on behalf of the Company, (iii) determine whether such proposed transaction or any alternative thereto negotiated by the Special Committee is fair to, and in the best interests of, the Company and all of its stockholders (and to the extent Ms. Lopker is determined to have an interest in such proposed transaction different from the interests of the other shareholders, other than Ms. Lopker) and (iv) recommend to the full QAD Board what action, if any, should be taken by the QAD Board with respect to such proposed transaction or any alternative thereto;

that the QAD Board was not permitted to recommend any potential transaction or any alternative thereto for approval by the Company’s stockholders or otherwise approve any proposed transaction or any alternative thereto without a prior favorable recommendation of such proposed transaction or alternative thereto by the Special Committee;

that the Special Committee had no obligation to recommend any transaction, including a transaction with Parent, and that the Special Committee had the authority to reject any proposals made by Parent or any other person;
 
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that prior to the entry into the Merger Agreement, the Special Committee and its independent advisors were permitted to solicit, initiate, propose or introduce the making, submission or announcement of, or encourage, facilitate or assist, any proposal or offer that could constitute a potential transaction with respect to the Company from any person;

that the Special Committee, together with its independent financial and legal advisors, conducted an extensive process, involving frequent and extensive deliberations and negotiations over a period of time, to consider:

potential transactions and alternatives thereto, including engaging with potential counterparties; and

the Merger Agreement and the transactions contemplated thereby, including the Merger,
and, in each case, each member of the Special Committee was actively engaged in that process on a regular basis and was provided with full access to the Company’s management and its advisors in connection with the evaluation process (as more fully described under “Special Factors — Background of the Merger”);

the consummation of the transactions contemplated by the Merger Agreement is subject to Company Stockholder Approval, which includes a “majority-of-the-minority” voting requirement, pursuant to which the Merger Agreement must be approved and adopted by the affirmative vote of holders of a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company, in addition to approval and adoption by the affirmative vote of a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class;

that, the terms of the Merger Agreement, including the Merger Consideration, were the product of extensive negotiations between the Special Committee and its legal and financial advisors, on the one hand, and Parent, Merger Sub and their affiliates and advisors, on the other hand, that resulted, among other things, in an increase in the Merger Consideration during the course of negotiations as compared to Parent’s purported final proposal, and the improvement, from the perspective of the Company, of other terms of the Merger and the Merger Agreement, including the Ultimate Parent’s commitment, pursuant to the Equity Commitment Letter, to invest in Parent $1,626,900,000, to be used solely for the purpose of funding the Required Amount, the operating covenants and the amount of the termination fees, relative to Parent’s initial proposed terms;

the various terms of the Merger Agreement that are intended to help ensure that the Company’s stockholders receive the highest price per Share reasonably available, including:

that the Merger Agreement may be terminated, in certain circumstances, including, among others, by the Company to accept and enter into a definitive agreement with respect to a Company Superior Proposal (as more fully described under “The Merger Agreement”), provided that the Company pay Parent the Parent Termination Fee;

that the QAD Board may, upon the recommendation of the Special Committee, in certain circumstances, make a Company Change in Recommendation, including in response to (i) a Company Intervening Event, or (ii) a bona fide written Company Acquisition Proposal that the QAD Board determines constitutes a Company Superior Proposal;
in each case, subject to and in accordance with the terms and conditions of the Merger Agreement; and

that the Special Committee made its evaluation of the Merger Agreement and the transactions contemplated thereby, including the Merger, based upon the factors discussed in this proxy statement and with the full knowledge of the interests of the Lopker Entities in the Merger.
In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations described above, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) also considered, among other things, certain countervailing factors, including the following uncertainties, risks and other potentially negative factors, which are not intended to be exhaustive and are not presented in any relative order of importance:
 
34

 

that, following the completion of the Merger, the Company will no longer exist as an independent public company and that the consummation of the Merger and receipt of the Merger Consideration, while providing relative certainty of value, will not allow the Company’s stockholders (other than the Lopker Entities) to participate in potential further growth in the Company’s assets, future earnings growth, future appreciation in value of the Shares or any future dividends after the Merger;

the risk that the transactions contemplated by the Merger Agreement, including the Merger may not be consummated in a timely manner or at all, for a variety of reasons, and the consequences thereof, including (i) the potential loss of value to the Company’s stockholders, including the reduction of the trading price of the Shares (ii) the potential negative impact on the operations and prospects of the Company, including the risk of loss of key personnel and certain key members of senior management, and (iii) the market’s perception of the Company’s prospects could be adversely affected if such transactions were delayed or were not consummated;

the possible effects of the pendency or consummation of the transactions contemplated by the Merger Agreement, including the potential for suits, actions or proceedings in respect of the Merger Agreement or the transactions contemplated by the Merger Agreement, the risk of any loss or change in the relationship of the Company and its subsidiaries with their respective employees, agents, customers and other business relationships, and any possible effect on the Company’s ability to attract and retain key employees, including that certain key members of senior management might choose not to remain employed with the Company prior to the completion of the Merger;

the risk of incurring substantial expenses related to the Merger, including in connection with any litigation that may arise in the future;

the risks and potentially negative factors described in “Special Factors — Certain Effects of the Merger” and “Special Factors — Certain Effects on the Company if the Merger is not Completed,” respectively;

that the Company’s directors, officers and employees have expended and will expend extensive efforts attempting to complete the transactions contemplated by the Merger Agreement and such persons have experienced and will experience significant distractions from their work during the pendency of such transactions and that the Company has incurred and will incur substantial costs in connection with such transactions, even if such transactions are not consummated;

that the receipt of the Merger Consideration in exchange for Shares pursuant to the Merger Agreement will be a taxable transaction for U.S. federal income tax purposes;

the restrictions imposed by the Merger Agreement on the Company’s solicitation of acquisition proposals from third parties, and that prospective bidders may perceive Parent’s right under the Merger Agreement to negotiate with the Company to match the terms of any Company Superior Proposal prior to the Company being able to terminate the Merger Agreement and accept a Company Superior Proposal to be a deterrent to making alternative proposals;

that the Lopker Entities’ existing ownership interest in the Company and obligations under the Support Agreement would likely be taken into account by third parties considering whether to make alternative proposals;

the possibility that the Company may be required to pay Parent a Company Termination Fee of $59,000,000 in cash under certain circumstances, including upon termination of the Merger Agreement to accept a Company Superior Proposal (as more fully described under “The Merger Agreement — Termination Fees”);

the possibility that the Parent Termination Fee of $127,000,000 in cash payable by Parent to the Company, together with other specified amounts, may be the Company’s sole and exclusive remedy in the event that the Merger Agreement is terminated by the Company due to (a) Parent’s breach of, or failure to perform its representations, warranties or obligations under the Merger Agreement or (b) Parent’s failure to consummate the Merger at such time at which all of the applicable conditions to Closing have been satisfied (subject to certain conditions) or (ii) by Parent or the Company if the transaction fails to close on or before January 30, 2022 and such failure is not caused by the party seeking termination, and the Company would have been otherwise entitled to terminate the Merger Agreement for either of the reasons set forth in clauses (a) and (b) above;
 
35

 

that Parent and Merger Sub are newly formed entities with essentially no assets and the Limited Guaranty, provided by TB Fund XIV, is capped at $133,000,000, with respect to payment of the Parent Termination Fee and certain interest payments and reimbursement obligations of Parent;

that, if the Merger Agreement is terminated in connection with the Company’s entry into a definitive agreement with respect to a Company Superior Proposal, the Lopker Entities have not agreed to vote their Shares in favor of such Company Superior Proposal;

in the event that the QAD Board or any committee thereof (including the Special Committee) (i) withdraws or changes its recommendation that the stockholders of the Company adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, or publicly proposes to do so, or (ii) fails to include in the proxy statement (or any amendment or supplement thereto) the recommendation that the stockholders of the Company adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, in compliance with the Merger Agreement, the Lopker Entities may still be required to vote such Shares equal to 35% of the total voting power of the outstanding Shares (a) in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (b) against any Company Acquisition Proposal and any action, agreement or transaction that would reasonably be expected to materially impede, interfere with, delay or postpone the consummation of the Merger, and (c) in favor of any other matter necessary to the consummation of the transactions contemplated by the Merger Agreement and considered and voted upon by the stockholders of the Company, in each case, subject to and in accordance with the terms and conditions of the Support Agreement;

the understanding that the Lopker Entities, their affiliates and various executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of the Company’s stockholders generally (as discussed under “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger”); and

the restrictions placed on the conduct of the Company’s business prior to the completion of the Merger pursuant to the terms of the Merger Agreement, which could delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company absent the pending completion of the Merger.
The Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) concluded that, overall, the potentially positive factors outweighed the uncertainties, risks and potentially negative factors relevant to the Merger Agreement and the transactions contemplated thereby, including the Merger. Accordingly, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders.
Accordingly, the QAD Board (other than Ms. Lopker, who recused herself) recommends that you vote “FOR” the Merger Agreement Proposal, to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, at the Special Meeting.
In the course of evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations described above, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) did not consider the liquidation value of the Company because (i) they considered the Company to be a viable, going concern, (ii) they believed that liquidation sales generally result in proceeds substantially less than sales of going concerns, (iii) they considered determining a liquidation value to be impracticable given the significant execution risk involved in any breakup of the Company and (iv) the Company will continue to operate its business following the Merger. For the foregoing reasons, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) did not consider liquidation value to be a relevant methodology. Further, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) did not consider net book value, which is an accounting concept, as a factor because they believe that net book value is not a material indicator of the value of the Company as a going concern but rather is indicative of historical costs and because net book value does not take into account the prospects of the Company, market conditions, trends in the industry in which the Company operates or the business risks inherent in that industry. The Special
 
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Committee and the QAD Board (other than Ms. Lopker, who recused herself) did not seek to determine a pre-Merger going concern value for the Shares to determine the fairness of the Merger Consideration to the Company’s stockholders. The Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) believe that the trading price of the Shares at any given time represents the best available indicator of the Company’s going concern value at that time so long as the trading price at that time is not impacted by speculation regarding the likelihood of a potential transaction. The Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) carefully considered the advice and opinion of Morgan Stanley. Although the reference to the Company’s stockholders in the opinion of Morgan Stanley did not exclude the Company’s directors and officers (other than those affiliated with the Lopker Entities) notwithstanding that such persons are deemed affiliates of the Company, such reference did not affect the determination of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) in respect of the Merger Agreement and the transactions contemplated thereby, including the Merger, because such directors and officers will receive the same Merger Consideration as Unaffiliated Stockholders.
The Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) are not aware of any firm offer for a merger, sale of all or a substantial part of the Company’s assets, or a purchase of a controlling amount of the Company securities having been received by the Company from anyone other than a filing person in the two (2) years preceding the signing of the Merger Agreement
The foregoing discussion is not exhaustive, but is intended to summarize the material information and factors considered by the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) in their consideration of the Merger Agreement and the transactions contemplated thereby, including the Merger. The Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) reached the decision to approve the entry into the Merger Agreement and recommend its adoption by the Company’s stockholders in light of the factors described above and other factors that the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) believed were appropriate. In view of the variety of factors and the quality and amount of information considered, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching their determinations. In addition, each of the directors of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) may have given different weight to different factors. The Special Committee and the QAD Board conducted an overall review of the factors described above, including through discussions with the Company’s management and their respective legal and financial advisors, and considered the factors overall to be favorable to, and to support, their decisions, determinations and recommendations. It should be noted that this explanation of the reasoning of the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the section entitled “Cautionary Statement Concerning Forward-Looking Information.”
Opinion of Morgan Stanley & Co. LLC
The Special Committee retained Morgan Stanley to provide it with financial advisory services and a financial opinion in connection with the possible sale of QAD. The Special Committee selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in QAD’s industry, and its knowledge of QAD’s business and affairs. At the meeting of the Special Committee on June 27, 2021, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of June 27, 2021, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) pursuant to the Merger Agreement was fair from a financial point of view to such Company stockholders in the aggregate.
The full text of the written opinion of Morgan Stanley, dated as of June 27, 2021, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex D and incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of
 
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the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Special Committee, in its capacity as such, and addresses only the fairness from a financial point of view of the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) in the aggregate pursuant to the Merger Agreement as of the date of the opinion and does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how the Company’s stockholders should vote at the Special Meeting with respect to the Merger or any other matter.
In connection with rendering its opinion, Morgan Stanley, among other things:

reviewed certain publicly available financial statements and other business and financial information of QAD;

reviewed certain internal financial statements and other financial and operating data concerning QAD;

reviewed certain financial projections prepared by the management of QAD (as more fully defined herein, the “Management Case”) and certain extrapolations prepared with guidance from the management of QAD (which were reviewed and approved for Morgan Stanley’s use by the management of QAD) (as more fully defined herein, the “Financial Projections”);

discussed the past and current operations and financial condition and the prospects of QAD with senior executives of QAD;

reviewed the reported prices and trading activity for Class A Common Stock;

compared the financial performance of QAD and the prices and trading activity of the Shares with that of certain other publicly traded companies comparable with QAD, and their securities;

reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

participated in certain discussions and negotiations among representatives of QAD, Parent and their respective financial and legal advisors;

reviewed a draft of the Merger Agreement dated as of June 27, 2021, a draft of the Equity Commitment Letter, substantially in the form of the drafted June 26, 2021, and certain related documents; and

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.
In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by QAD and formed a substantial basis for its opinion. With respect to the Financial Projections, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of QAD’s management of the future financial performance of QAD. Morgan Stanley expressed no view as to such Financial Projections or the assumptions on which they were based. In addition, Morgan Stanley assumed that the Merger will be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including among other things, that Parent will obtain financing in accordance with the terms set forth in the Equity Commitment Letter, and that the definitive Merger Agreement would not differ in any material respect from the draft thereof furnished to Morgan Stanley. In addition, Morgan Stanley understood from QAD that, pursuant to Article IV of QAD’s Certificate of Incorporation, the holders of Class A Common Stock must receive an amount and form of consideration per share that is no less favorable than the consideration per share received by the holders of the Class B Common Stock in the event of a merger, business combination or consolidation of QAD, including the Merger. Morgan Stanley expressed no view as to the allocation of Merger Consideration between the Class A Common Stock and the Class B Common Stock, or the relative fairness of any portion of the Merger Consideration to holders of any Shares. Morgan Stanley assumed that, in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Merger, no delays, limitations, conditions or
 
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restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed Merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of QAD and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley’s opinion does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of QAD’s officers, directors or employees, or any class of such persons, relative to the Merger Consideration to be received by the holders of Shares (other than the holders of the Excluded Shares) in the Merger. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of QAD, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of June 27, 2021. Events occurring after June 27, 2021 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley has not assumed any obligation to update, revise or reaffirm its opinion.
Summary of Financial Analyses
The following is a brief summary of the material analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated June 27, 2021 to the Special Committee. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and of the factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion.
In performing the financial analyses summarized below and in arriving at its opinion, Morgan Stanley utilized and relied upon (i) the Management Case and (ii) the consensus estimates of equity research analysts (the “Street Case”). The Management Case is more fully described below in the sections of this proxy statement captioned “— Public Trading Comparables Analysis,” “— Discounted Equity Value Analysis” and “— Discounted Cash Flow Analysis.” In accordance with direction from the Special Committee, Morgan Stanley utilized the Street Case and Management Case in its financial analyses described below.
Public Trading Comparables Analysis
Morgan Stanley performed a public trading comparables analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial estimates for QAD with comparable publicly available consensus equity analyst research estimates for companies, selected based on Morgan Stanley’s professional judgment and experience, that share similar business characteristics and have certain comparable operating characteristics, including, among other things, similarly sized revenue and/or revenue growth rates, market capitalizations, profitability, scale and/or other similar operating characteristics (these companies are referred to as the “comparable companies”). These companies were the following:
ERP Business Model Peer Companies
Oracle Corporation
SAP SE
Sage Group plc
Financial Profile Peer Companies
Vertex Software, LLC
Zuora Inc.
Alarm.com
New Relic, Inc.
 
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8x8, Inc.
Box, Inc.
GoDaddy Inc. Yext Inc.
Vonage Holdings Corp.
Teradata Corporation
Global Supply Chain Peer Companies
Manhattan Associates, Inc.
Descartes Systems Group Inc.
Kinaxis Inc.
SPS Commerce, Inc.
E2open, LLC
For purposes of this analysis, Morgan Stanley analyzed the ratio of aggregate value to (i) estimated revenue and (ii) EBITDA, both of which, for purposes of this analysis, (a) for QAD, (x) were provided to Morgan Stanley, and approved for Morgan Stanley’s use, by QAD’s management for calendar years 2021 and 2022 for the Management Case, and (y) were based on the median of publicly available equity analyst research estimates for calendar years 2021 and 2022 for the Street Case; and (b) for each of the comparable companies, were based on publicly available consensus equity analyst research estimates for comparison purposes. For purposes of its analyses, Morgan Stanley defined “aggregate value” as a company’s fully diluted equity value plus total debt, plus non-controlling interest, less cash and cash equivalents, and “EBITDA” as earnings before interest, taxes, depreciation and amortization of intangible assets.
Based on its analysis of the relevant metrics for each of the comparable companies and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of (i) aggregate value to estimated revenue multiples and (ii) aggregate value to estimated EBITDA multiples, and applied these ranges of multiples to the estimated relevant metric for QAD. For purposes of this analysis, Morgan Stanley utilized publicly available financial information, available as of June 25, 2021 (the last full trading day prior to the meeting of the QAD Board (other than Ms. Lopker, who recused herself) to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger).
Based on the outstanding Shares on a fully diluted basis as provided by QAD’s management, Morgan Stanley calculated the estimated implied value per Share as follows:
Public Trading Multiples
Selected Comparable
QAD Multiple
Ranges
Implied Value Per
Share ($)
CY 2021E AV / Revenue
Street Case
3.0x – 6.0x
51.56 – 95.79
Management Case
3.0x – 6.0x
51.71 – 96.10
CY 2022E AV / Revenue
Street Case
3.0x – 5.5x
55.31 – 95.28
Management Case
3.0x – 5.5x
56.50 – 97.47
CY 2021E AV / EBITDA
Street Case
15.0x – 30.0x
30.63 – 54.30
Management Case
15.0x – 30.0x
31.28 – 55.59
CY 2022E AV / EBITDA
Street Case
15.0x – 25.0x
36.64 – 56.40
Management Case
15.0x – 25.0x
32.74 – 49.93
No company utilized in the public trading comparables analysis is identical to QAD. In evaluating the comparable companies, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond QAD’s control. These include, among other things, the impact of competition on QAD’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of QAD and the industry, and in the financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.
 
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Discounted Equity Value Analysis
Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into the potential future equity value of a company as a function of such company’s estimated future revenue and EBITDA. The resulting equity value is subsequently discounted to arrive at an estimate of the implied present value. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per Share on a standalone basis for each of the Street Case and Management Case.
To calculate these discounted fully diluted equity values, Morgan Stanley utilized (i) calendar year 2023 revenue estimates and (ii) calendar year 2023 EBITDA estimates under each of the Street Case and Management Case, respectively. Based upon the application of its professional judgment and experience, Morgan Stanley applied a forward range of aggregate value to (i) estimated revenue multiples, and (ii) EBITDA multiples (based on the range of aggregate value to revenue and EBITDA multiples for the comparable companies) to these revenue and EBITDA estimates, respectively, in order to reach a future implied fully diluted equity value.
In each case, Morgan Stanley then added net cash to QAD’s future implied aggregate value to reach a future implied fully diluted equity value. In each case, Morgan Stanley then divided the future implied fully diluted equity value by estimated fully diluted shares outstanding (with such estimates provided by QAD management) to calculate a per share price. Morgan Stanley then discounted the resulting implied future share price to June 30, 2021, at a discount rate of 8.1%, which rate was selected based on QAD’s estimated cost of equity, which was arrived at by applying the capital asset pricing model, to calculate the discounted fully diluted equity value.
Based on Calendar Year 2023
Selected AV /
Estimated Revenue
Multiple Ranges
Implied Value Per
Share ($)
Estimated Revenue
Street Case
3.0x – 6.0x
53.26 – 97.33
Management Case
3.0x – 6.0x
55.11 – 101.21
Estimated EBITDA
Street Case
15.0x – 30.0x
38.68 – 68.46
Management Case
15.0x – 30.0x
38.02 – 67.14
Discounted Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. Morgan Stanley calculated a range of fully diluted equity values per Share based on a discounted cash flow analysis to value QAD as a standalone entity. Morgan Stanley utilized estimates from the Street Case and Management Case for purposes of its discounted cash flow analysis, as more fully described below.
Morgan Stanley first calculated the estimated unlevered free cash flow, which is defined as EBITDA less (1) stock-based compensation expense, (2) cash taxes, (3) capital expenditures, and plus or minus changes in net working capital. Each of the Street Case and Management Case included extrapolations through calendar year 2030 prepared by Morgan Stanley and approved for Morgan Stanley’s use by QAD’s management. The free cash flows and terminal values were discounted, using a mid-year convention, to present values as of June 30, 2021, at a discount rate ranging from 7.1% to 9.1%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect an estimate of QAD’s weighted average cost of capital determined by the application of the capital asset pricing model. Morgan Stanley utilized perpetual growth rates of 2.0% to 3.0% as part of its analyses, with such rates selected upon the application of Morgan Stanley’s professional judgment and experience. The resulting aggregate value was then adjusted for net cash and further adjusted for the net present value of net operating losses.
 
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Based on the outstanding Share on a fully diluted basis as provided by QAD’s management, Morgan Stanley calculated the estimated implied value per Share as follows:
Implied Value Per
Share ($)
Street Case
53.41 – 88.61
Management Case
66.06 – 109.92
Precedent Transactions Multiples Analysis
Morgan Stanley performed a precedent transactions multiples analysis, which is designed to imply a value of a company based on publicly available financial terms. Morgan Stanley selected such comparable transactions because they shared certain characteristics with the Merger, most notably because they were similar software transactions. For such transactions, Morgan Stanley noted the multiple of aggregate value of the transaction to (i) the estimated next twelve (12) months’ (which we refer to as “NTM”) revenue, and (ii) the NTM EBITDA, each based on publicly available information at the time of announcement of each such transaction.
The following is a list of the selected software transactions reviewed, together with the applicable multiples:
Selected Software Transactions (Target/Acquiror)
AV / NTM
Revenue
AV / NTM
EBITDA
Athenahealth, Inc. / Veritas Capital and Evergreen Coast Capital
3.9x
14.1x
AVG Technologies N.V. / Avast Software
3.3x
9.0x
Barracuda Networks, Inc. / Thoma Bravo, L.P.
3.8x
19.6x
CA Technologies / Broadcom Inc.
4.3x
10.8x
Callidus Software Inc. / SAP SE
8.3x
52.0x
Carbon Black, Inc. / VMware, Inc.
8.0x
N.M.
Carbonite, Inc. / Open Text Corp.
2.7x
9.9x
Cision Ltd. / Platinum Equity, LLC
3.5x
9.9x
Cloudera, Inc. / Clayton, Dubilier & Rice LLC and KKR & Co.
5.3x
20.1x
Ellie Mae Inc. / Thoma Bravo, L.P.
6.8x
24.5x
Endurance International Group Holdings, Inc. / Clearlake Capital Group LP
2.7x
9.9x
Forescout Technologies / Advent International Corporation and Crosspoint Capital Partners LP
4.9x
N.M.
Gigamon Inc. / Elliot Management Corporation
3.7x
17.1x
Imperva, Inc. / Thoma Bravo, L.P.
4.7x
41.1x
Infoblox Inc. / Vista Equity Partners, LLC
3.6x
26.2x
LifeLock, Inc. / NortonLifeLock Inc. (formerly known as Symantec Corporation)
3.2x
23.9x
LogMeIn, Inc. / Francisco Partners and Evergreen Coast Capital (Elliott Management Corp.)
3.4x
10.6x
Proofpoint, Inc. / Thoma Bravo, L.P.
9.3x
52.0x
RealPage, Inc. / Thoma Bravo, L.P.
8.2x
29.2x
Red Hat, Inc. / International Business Machines Corporation
9.4x
35.0x
Sophos Group plc / Thoma Bravo, L.P.
5.1x
31.3x
Talend S.A. / Thoma Bravo, L.P.
7.3x
N.M.
Based on its analysis of the relevant metrics and time frame for each of the transactions listed above and upon the application of its professional judgment and experience, Morgan Stanley selected representative
 
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ranges of the aggregate value to the (i) estimated NTM revenue multiples of the transactions and (ii) estimated NTM EBITDA multiples of the transactions, and applied these ranges of multiples to the estimated calendar year 2021 NTM revenue and NTM EBITDA, respectively, based on the Street Case. The following table summarizes Morgan Stanley’s analysis:
Precedent Multiples (Street Case)
Representative
Ranges
Implied Value Per
Share ($)
Aggregate Value to Estimated NTM Revenue
4.0x – 7.0x
66.31 – 110.53
Aggregate Value to Estimated NTM EBITDA
12.0x – 30.0x
25.85 – 54.30
No company or transaction utilized in the precedent transactions analysis is identical to QAD or the Merger. In evaluating the precedent transactions, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond QAD’s control. These include, among other things, the impact of competition on QAD’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of QAD and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and fully diluted equity value of the transactions to which they are being compared. The fact that points in the range of implied present value per share of QAD derived from the valuation of precedent transactions were less than or greater than the Merger Consideration is not necessarily dispositive in connection with Morgan Stanley’s analysis of the consideration for the Merger, but is one of many factors Morgan Stanley considered.
Other Information
Morgan Stanley observed additional factors that were not considered part of Morgan Stanley’s financial analysis with respect to its opinion, but which were noted as reference data for the Special Committee, including the following information described under the sections of this proxy statement captioned “— Illustrative Precedent Premiums,” “— Historical Trading Ranges” and “— Equity Research Analysts’ Future Price Targets.”
Illustrative Precedent Premiums
Morgan Stanley performed an illustrative precedent premiums analysis by reviewing the same sets of comparable transactions as under the Precedent Transactions Multiples Analysis. For these transactions, Morgan Stanley noted the distributions of the following financial statistics, where available: (1) the implied premium to the acquired company’s closing share price on the last trading day prior to announcement (or the last trading day prior to the share price being affected by acquisition rumors or similar merger-related news); (2) the implied premium to the acquired company’s thirty (30)-trading-day average closing share price prior to announcement (or the last thirty (30)-trading-day average closing share price prior to the share price being affected by acquisition rumors or similar Merger-related news); and (3) the implied premium to the acquired company’s fifty two (52)-week high closing share price prior to announcement.
Based on its analysis of the premia for such transactions and based upon the application of its professional judgment and experience, Morgan Stanley selected a representative range of premia and applied such range to QAD’s closing share price of Class A Common Stock on June 25, 2021 (the last full trading day prior to the meeting of the QAD Board (other than Ms. Lopker, who recused herself) to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger).
The following table summarizes such calculation:
Premia
Representative
Ranges
Implied Value Per
share of Class A
Common Stock ($)
Premia to 1-Day Unaffected Share Price
20% – 40%
87.48 – 102.06
Premia to 30-Day Unaffected Average Share Price
20% – 40%
86.54 – 100.97
Premia to 52-Week High Unaffected Share Price
(15)% – 18%
66.80 – 93.10
 
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Historical Trading Ranges
Morgan Stanley noted certain trading ranges with respect to the historical share prices of Class A Common Stock. Morgan Stanley reviewed a range of closing prices of the Class A Common Stock for various periods ending on June 25, 2021 (the last full trading day prior to the meeting of the QAD Board (other than Ms. Lopker, who recused herself) to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger). Morgan Stanley observed the following:
Periods Ended June 25, 2021
Range of Trading Prices Per share of Class A
Common Stock ($)
Last 30 Days
63.86 – 79.00
Last 90 Days
59.98 – 79.00
Last 365 Days
38.98 – 79.00
Equity Research Analysts’ Future Price Targets
Morgan Stanley noted certain future public market trading price targets for Class A Common Stock prepared and published by equity research analysts prior to June 25, 2021 (the last full trading day prior to the meeting of the QAD Board (other than Ms. Lopker, who recused herself) to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger). These targets reflected each analyst’s estimate of the future public market trading price of Class A Common Stock. The range of undiscounted analyst price targets for the Class A Common Stock was $75.00 to $82.00 per share as of May 26, 2021 to May 27, 2021. Morgan Stanley discounted the range of analyst price targets per share of Class A Common Stock by one (1) year at a rate of 8.1%, which discount rate was selected by Morgan Stanley, upon the application of its professional judgment and experience, to reflect QAD’s cost of equity. This analysis indicated an implied range of fully diluted equity values for shares of Class A Common Stock of $69.38 to $75.85 per share, as discounted by one (1) year based on undiscounted analyst price targets, as of June 25, 2021 (the last full trading day prior to the meeting of the QAD Board (other than Ms. Lopker, who recused herself) to approve and adopt the Merger Agreement, declare the advisability of the Merger Agreement and approve the transactions contemplated thereby, including the Merger).
The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the Shares, and these estimates are subject to uncertainties, including the future financial performance of QAD and future financial market conditions.
Preliminary Presentations by Morgan Stanley
In addition to its June 27, 2021 opinion and presentation to the Special Committee and the underlying financial analyses performed in relation thereto, Morgan Stanley also delivered preliminary presentation materials to the Special Committee on June 25, 2021 (the “Preliminary Presentation Materials”). The preliminary financial considerations and other information in the Preliminary Presentation Materials were based on information and data that was available as of the date of such presentation. The Preliminary Presentation Materials delivered at the QAD Board meeting on June 25, 2021 substantively reflected the analyses described above under “— Summary of Financial Analyses.” A copy of such Preliminary Presentation Materials has been filed as an exhibit to the Schedule 13E-3 filed with the SEC in connection with the Merger, will be made available for inspection and copying at the principal executive offices of QAD during its regular business hours by any interested holder of Shares, and may be obtained by requesting it in writing from QAD at the address described in the section titled “Where You Can Find More Information.”
The Preliminary Presentation Materials were for discussion purposes only and did not present any findings or make any recommendations or constitute an opinion of Morgan Stanley with respect to the fairness of the Merger Consideration or otherwise. The financial analyses performed by Morgan Stanley in relation to its opinion dated June 27, 2021, as described above under “— Summary of Financial Analyses,” superseded all analyses and information presented in the Preliminary Presentation Materials.
 
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General
In connection with the review of the Merger by the Special Committee, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of QAD.
In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond QAD’s control. These include, among other things, the impact of competition on QAD’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of QAD and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.
Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness from a financial point of view of the Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) in the aggregate pursuant to the Merger Agreement and in connection with the delivery of its opinion dated as of June 27, 2021 to the Special Committee. These analyses do not purport to be appraisals or to reflect the prices at which Shares might actually trade.
The Merger Consideration to be received by the Company’s stockholders (other than the holders of the Excluded Shares) in the aggregate pursuant to the Merger Agreement was determined through arm’s-length negotiations between QAD and Parent and was approved by the Special Committee. Morgan Stanley provided advice to the Special Committee during these negotiations but did not, however, recommend any specific consideration to QAD or the Special Committee, nor did Morgan Stanley opine that any specific consideration constituted the only appropriate consideration for the Merger. Morgan Stanley’s opinion did not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley’s opinion was not intended to, and does not, constitute an opinion or a recommendation as to how the Company’s stockholders should vote at the Special Meeting.
Morgan Stanley’s opinion and its presentation to the Special Committee was one of many factors taken into consideration by the Special Committee to recommend that the QAD Board approve and adopt the Merger Agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Special Committee with respect to the consideration pursuant to the Merger Agreement or of whether the Special Committee would have been willing to agree to a different consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.
The Special Committee selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in QAD’s industry, and its knowledge of QAD’s business and affairs. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of their customers, in debt or equity securities or loans of QAD, Parent, TB UGP and their respective affiliates, or
 
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any other company, or any currency or commodity, that may be involved in the Merger, or any related derivative instrument.
Under the terms of its engagement letter, Morgan Stanley provided the Special Committee financial advisory services and an opinion, described in this section and attached to this proxy statement as Annex D, in connection with the Merger, and QAD has agreed to pay Morgan Stanley a fee of approximately $27 million for its services, $3 million of which has been paid following delivery of the opinion described in this section and attached to this proxy statement as Annex D and the remainder of which is contingent upon the consummation of the Merger. QAD has also agreed to reimburse Morgan Stanley for its expenses, including fees of outside counsel and other professional advisors, incurred in connection with its engagement. In addition, QAD has agreed to indemnify Morgan Stanley and its affiliates, its and their respective officers, directors, employees and agents and each other person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses related to, arising out of or in connection with Morgan Stanley’s engagement, including certain liabilities under the federal securities laws.
In the two (2) years prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have provided financial advisory and financing services for TB UGP and certain of its affiliates and their affiliated funds’ respective portfolio companies (collectively, the “Thoma Bravo Related Entities”), and have received aggregate fees of approximately $25 to $35 million in connection with such services. Neither Morgan Stanley nor any of its affiliates have been engaged in any financial advisory or financing assignments for QAD, and have received any fees for such services from QAD during the two (2) years prior to the date of Morgan Stanley’s opinion. Morgan Stanley may also seek to provide financial advisory and financing services to QAD, Parent, TB UGP and Thoma Bravo Related Entities and their respective affiliates in the future and would expect to receive fees for the rendering of these services.
Position of the Parent Entities as to the Fairness of the Merger
Under a possible interpretation of the SEC rules governing “going private” transactions, the Parent Entities may be deemed to be affiliates of the Company and engaged in a “going private” transaction and, therefore, may be required to express their beliefs as to the fairness of the Merger to the Company’s Unaffiliated Stockholders. The Parent Entities are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules and regulations under the Exchange Act. However, the view of the Parent Entities as to the fairness of the Merger should not be construed as a recommendation to any Company stockholder as to how that stockholder should vote on the proposal to adopt the Merger Agreement. The Parent Entities have interests in the Merger that are different from, and in addition to, those of the other stockholders of the Company.
The Parent Entities did not participate in the deliberations of the Special Committee or the QAD Board (other than Ms. Lopker, who recused herself) regarding, nor receive advice from the respective legal or other advisors of the Special Committee or the QAD Board (other than Ms. Lopker, who recused herself) as to, the fairness of the Merger. The Parent Entities have not performed, or engaged a financial advisor to perform, any valuation or other analysis for the purposes of assessing the fairness of the Merger to the Company’s Unaffiliated Stockholders. Based on, among other things, the factors considered by, and the analysis and resulting conclusions of, the QAD Board (other than Ms. Lopker, who recused herself) and the Special Committee discussed in “— Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger” ​(which analysis and resulting conclusions the Parent Entities adopt), the Parent Entities believe that the Merger is substantively fair to the Company’s Unaffiliated Stockholders. In particular, the Parent Entities considered the following:

the fact that no member of the Company’s senior management other than Ms. Lopker, Mr. Chilton and Mr. Lender has a substantial financial interest in the Merger that is different from, or in addition to, the interests of the Company’s Unaffiliated Stockholders generally, although the Merger Agreement does include customary provisions for indemnity and the continuation of liability insurance for the Company’s officers and directors;

the fact that the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, the Company and the Company’s stockholders;
 
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the fact that the Merger Consideration is all cash, thus allowing stockholders (other than the Lopker Entities) to immediately realize a certain and fair value for their Shares, which value represents a significant premium over the closing price of the Shares on the last trading day before the Company publicly announced the Merger;

the fact that the Merger will provide liquidity for the Company’s Unaffiliated Stockholders without the delays that would otherwise be necessary in order to liquidate the positions of larger holders, and without incurring brokerage and other costs typically associated with market sales; and

the fact that there are no unusual requirements or conditions to the Merger and that the Merger is not conditioned on any financing being obtained by Parent, increasing the likelihood that the Merger will be consummated and that the consideration to be paid to the Company’s Unaffiliated Stockholders in the Merger will be received.
The Parent Entities further believe that the Merger is procedurally fair to the Company’s Unaffiliated Stockholders based upon, among other things, the following factors:

the fact that the Special Committee, consisting solely of directors who are not officers or employees of the Company and who are not affiliated with the Parent Entities or the Lopker Entities, and who have no financial interest in the Merger different from, or in addition to, the Company’s Unaffiliated Stockholders generally (other than as described in “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger”), was given exclusive authority to, among other things, review, evaluate and negotiate the terms of the Merger, to determine the advisability of the Merger, to decide not to engage in the Merger, and to consider alternatives to the Merger;

the fact that the Special Committee was formed at the outset of Company’s consideration of a potential transaction and prior to any consideration of the Merger Agreement and the transactions contemplated thereby, including the Merger;

the fact that the Special Committee was fully informed about the extent to which the interests of the Lopker Entities in the Merger differed from those of the Company’s Unaffiliated Stockholders;

the fact that the Special Committee conducted an extensive process, including frequent and extensive deliberations and negotiations, and retained and was advised by independent, nationally recognized financial and legal advisors;

the fact that the QAD Board was not permitted to recommend any potential transaction or any alternative thereto for approval by the Company’s stockholders or otherwise approve any proposed transaction or any alternative thereto without a prior favorable recommendation of such proposed transaction or alternative thereto by the Special Committee;

the fact that the Special Committee was deliberate in its process and ran a thorough, open and competitive process and evaluated various alternatives;

that the Special Committee had no obligation to recommend any transaction, including a transaction with Parent, and that the Special Committee had the authority to reject any proposals made by Parent or any other person;

the fact that representatives of the Company contacted a large number of potential financial and strategic acquirors in the sale process;

the fact that the Merger Consideration was the result of the Special Committee’s extensive arm’s-length negotiations with Parent;

the fact that the closing of the Merger is conditioned on the approval and adoption of the Merger Agreement by the affirmative vote of holders of (i) a majority of the voting power of all outstanding Shares entitled to vote, voting as a single class and (ii) a majority of the voting power of all outstanding Shares, voting as a single class, that are not owned, beneficially or of record, by the Lopker Entities, their respective affiliates, or any executive officer or director of the Company;

the Company’s ability, under certain circumstances as set out in the Merger Agreement, to provide information to, or participate in discussions or negotiations with, third parties regarding other proposals;
 
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the Company’s ability, under certain circumstances as set out in the Merger Agreement, to terminate the Merger Agreement to enter into a definitive agreement related to a Company Superior Proposal, subject to paying Parent a Company Termination Fee of  $59,000,000 in cash, subject to and in accordance with the terms and conditions of the Merger Agreement; and

the availability of appraisal rights to the Company’s stockholders (other than the Lopker Entities) who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their Shares.
The Parent Entities also considered a variety of risks and other countervailing factors related to the substantive and procedural fairness of the proposed Merger, including:

that the stockholders of the Company (other than the Lopker Entities) will not participate in any future earnings or growth of the Company’s business and will not benefit from any potential sale to a third party in the future, or from any appreciation in the Company’s value;

the risk that the Merger might not be completed in a timely manner or at all;

that Parent and Merger Sub are newly formed corporations with essentially no assets other than the equity and funding commitments of TB Fund XIV;

the restrictions on the conduct of the Company’s business prior to the completion of the Merger, which may delay or prevent the Company from undertaking business opportunities that may arise and certain other actions it might otherwise take with respect to the operations of the Company pending completion of the Merger;

the potential negative effect that the pendency of the Merger, or a failure to complete the Merger, could have on the Company’s business and relationships with its employees, vendors and customers;

that the Company and its subsidiaries are restricted from soliciting, initiating, or encouraging the submission of alternative acquisition proposals from third parties or the making of any inquiry, proposal or offer that would reasonably be expected to lead to an alternative acquisition proposal;

the possibility that the amounts that may be payable by the Company upon the termination of the Merger Agreement, including payment to Parent of a Company Termination Fee of $59,000,000 in cash, and the processes required to terminate the Merger Agreement, including the opportunity for Parent to make revisions to its Merger proposal, could discourage other potential acquirors from making a competing bid to acquire the Company; and

the fact that an all cash transaction would be taxable to the Company’s stockholders (other than the Lopker Entities with respect to their Rollover Shares) that are U.S. holders for U.S. federal income tax purposes.
The Parent Entities did not consider the liquidation value of the Company because they considered the Company to be a viable, going concern that will continue to operate its business following the Merger. Therefore, the Parent Entities did not consider liquidation value to be a relevant methodology. The Parent Entities did not seek to determine a pre-Merger going concern value for the Shares to determine the fairness of the Merger Consideration to the Company’s Unaffiliated Stockholders because, following the Merger, the Company will have a significantly different capital structure. The Parent Entities note that the Merger Consideration of $87.50 in cash per Share is higher than the net book value of the Company per Share of $6.43 as of April 30, 2021. However, to the extent the pre-Merger going concern value was reflected in the pre-announcement per Share price of the Shares, the per Share Merger Consideration of $87.50 represented a premium to the going concern value of the Company. The Parent Entities were not aware of any firm offer for a merger, sale of all or a substantial part of the Company’s assets, or a purchase of a controlling amount of the Company securities having been received by the Company from anyone other than a filing person in the two (2) years preceding the signing of the Merger Agreement.
The foregoing discussion of the information and factors considered and given weight by the Parent Entities in connection with the fairness of the Merger is not intended to be exhaustive but is believed to include all material factors considered by them. The Parent Entities did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their conclusion as to
 
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the fairness of the Merger. Rather, the Parent Entities reached their position as to the fairness of the Merger after considering all of the foregoing as a whole. The Parent Entities believe these factors provide a reasonable basis upon which to form their position regarding the fairness of the Merger to the Company’s Unaffiliated Stockholders. This position should not, however, be construed as a recommendation to any Company stockholder to approve the Merger Agreement. The Parent Entities make no recommendation as to how stockholders of the Company should vote their Shares relating to the Merger.
None of the Parent Entities participated in the deliberations of the Special Committee or the QAD Board (other than Ms. Lopker, who recused herself) regarding, nor received advice from the respective legal or other advisors of the Special Committee or the QAD Board (other than Ms. Lopker, who recused herself) as to, the fairness of the Merger to the Company’s Unaffiliated Stockholders. Based on the Parent Entities’ knowledge and analysis of available information regarding the Company, as well as discussions with members of the Company’s senior management regarding the Company and its business and the factors considered by, and findings of, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself) and discussed in this proxy statement in the section entitled “— Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger,” the Parent Entities believe that the Merger is fair to the Company’s Unaffiliated Stockholders.
The Parent Entities believe that these factors provide a reasonable basis for their belief that the Merger is fair to the Company’s Unaffiliated Stockholders. This belief should not, however, be construed as a recommendation to any of the Company stockholders to approve the Merger Agreement. The Parent Entities do not make any recommendation as to how stockholders of the Company should vote their Shares relating to the Merger. Parent and Merger Sub attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the stockholders of the Company, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such stockholders. None of the Parent Entities believes that it has or had any fiduciary duty to the Company or its stockholders, including with respect to the Merger and its terms.
Purpose and Reasons of the Parent Entities for the Merger
Under a possible interpretation of the SEC rules governing “going-private” transactions, each of the Parent Entities may be deemed to be affiliates of the Company and, therefore, required to express their reasons for the Merger to the Company’s Unaffiliated Stockholders, as defined in Rule 13e-3 of the Exchange Act. The Parent Entities are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. For the Parent Entities, the primary purpose of the Merger is to allow Parent to own equity interests in the Company and to bear the rewards and risks of such ownership after the Merger is completed and the Shares cease to be publicly traded. The Parent Entities believe that structuring the transaction in such manner is preferable to other transaction structures because it (i) will enable Parent to acquire all of the Shares at the same time, (ii) will allow the Company to cease to be a publicly registered and reporting company, and (iii) represents an opportunity for the Company’s Unaffiliated Stockholders (other than the holders of the Excluded Shares) to receive the Merger Consideration of $87.50 per Share in cash, without interest and less any applicable withholding taxes, subject to and in accordance with the terms and conditions of the Merger Agreement. The Parent Entities did not consider any other alternative transaction structures or other alternative means to accomplish the foregoing purposes.
Position of the Lopker Entities as to the Fairness of the Merger
Under the SEC rules governing “going-private” transactions, Pamela M. Lopker and the other Lopker Entities may be deemed to be affiliates of the Company and, therefore, required to express their beliefs as to the fairness of the proposed Merger to the Unaffiliated Stockholders of the Company. The Merger is the Rule 13e-3 transaction for which a Schedule 13E-3 Transaction Statement has been filed with the SEC. As described below, the Lopker Entities believe that the Merger is fair to the Company’s Unaffiliated Stockholders on the basis of the factors described under “Special Factors — Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger”; “Special Factors — Position of the Parent Entities as to the Fairness of the Merger.” Ms. Lopker did not participate in the deliberations of the Special Committee or the QAD Board regarding the Merger, and did not receive
 
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advice from the legal or other advisors of the Company or the Special Committee as to the fairness of the Merger. As disclosed under “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger,” the Lopker Entities have interests in the Merger both the same as those of the Unaffiliated Stockholders of the Company by virtue of the expected receipt of the per Share Merger Consideration for a portion of the Lopker Entities’ equity interests in the Company upon completion of the Merger, and not identical to those of the Unaffiliated Stockholders of the Company by virtue of the Lopker Entities’ ability to rollover a portion of their ownership stake in the Company (such rollover being valued with the same per Share valuation of the Company’s Shares used to determine the Merger Consideration) in exchange for a continuing ownership stake in Parent and a right for Ms. Lopker to serve as one of its directors.
The Unaffiliated Stockholders of the Company were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement on their behalf, with the assistance of the Special Committee’s independent legal and financial advisors. Although Ms. Lopker engaged Moelis & Company LLC as her financial advisor in connection with the Merger, Moelis has not performed any valuation or other analysis for the purpose of assessing the fairness of the Merger to the Company’s Unaffiliated Stockholders. The Merger was approved by the directors of the QAD Board (other than Ms. Lopker, who recused herself). Based on the knowledge and analysis of the Lopker Entities of available information regarding the Company, as well as discussions with the Company’s management regarding the Company and its business and the factors considered by, and the analysis and resulting conclusions of, the Special Committee and the QAD Board (other than Ms. Lopker, who recused herself), the Lopker Entities believe that the Merger is substantively and procedurally fair to the Unaffiliated Stockholders of the Company based upon substantially the same factors considered by the Parent Entities with respect to the substantive and procedural fairness of the proposed Merger to such Unaffiliated Stockholders. See “Special Factors — Position of the Parent Entities as to the Fairness of the Merger” The Lopker Entities agree with the analyses, determinations and conclusions described under “Special Factors — Position of the Parent Entities as to the Fairness of the Merger,” and “Special Factors — Purpose and Reasons of the Company for the Merger; Recommendation of the QAD Board and the Special Committee; Fairness of the Merger.”
While Ms. Lopker is an officer and director of the Company, because of the interests described under the section captioned “Special Factors — Interests of Executive Officers and Directors of the Company in the Merger,” she did not serve on the Special Committee or participate in the Special Committee’s evaluation of the Merger Agreement and the transactions contemplated thereby, including the Merger, and she recused herself from and did not participate in, or vote in connection with, the QAD Board’s evaluation or approval of the Merger Agreement and the transactions contemplated thereby, including the Merger. For these reasons, the Lopker Entities do not believe that their interests in the Merger influenced the decisions or recommendations of the Special Committee or the QAD Board with respect to the Merger Agreement or the Merger.
In their consideration of the fairness of the proposed Merger, the Lopker Entities did not find it practicable to, and did not: (i) appraise the assets of the Company to determine the liquidation value for the Company’s Unaffiliated Stockholders, (ii) consider the net book value as a basis to evaluate per Share consideration, (iii) consider that liquidation sales generally result in proceeds substantially less than sales of a going concern, (iv) consider the impracticability of determining a liquidation value given the significant execution risk involved in any breakup, or (v) consider the Company’s viability as a going concern. The Lopker Entities did consider the benefits for the Company’s continued operation of its business following the Merger, as described below in “— Special Factors; Purposes and Reasons of the Lopker Entities for the Merger.” The Lopker Entities did not consider net book value, which is an accounting concept, for purposes of determining the fairness of the per Share Merger Consideration to the Company’s Unaffiliated Stockholders because, in their view, it does not reflect, or have any meaningful impact on, either the market trading prices of Shares or the Company’s value as a going concern. Ms. Lopker is not aware of any firm offer for a Merger, sale of all or a substantial part of the Company’s assets, or a purchase of a controlling amount of the Company securities having been received by the Company from anyone other than a filing person in the two years preceding the signing of the Merger Agreement.
The foregoing discussion of the information and factors considered and given weight by the Lopker Entities in connection with the fairness of the Merger Agreement and transactions contemplated thereby, including the Merger is not intended to be exhaustive but is believed to include all material factors considered
 
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by the Lopker Entities. The Lopker Entities did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the fairness of the Merger Agreement and transactions contemplated thereby, including the Merger. Rather, the Lopker Entities made the fairness determinations after considering all of the foregoing as a whole. The Lopker Entities believe these factors provide a reasonable basis upon which to form the belief that the Merger is fair to the Company’s Unaffiliated Stockholders. This belief should not, however, be construed as a recommendation to any Company stockholder to adopt the Merger Agreement. The Lopker Entities do not make any recommendation as to how stockholders of the Company should vote their Shares relating to the Merger.
Purpose and Reasons of the Lopker Entities for the Merger
Under the SEC rules governing “going private” transactions, Ms. Lopker and the other Lopker Entities may be deemed to be affiliates of the Company, and, therefore, required to express their purposes and reasons for the Merger to the Unaffiliated Stockholders of the Company. The Lopker Entities are making the statements in this section solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the Lopker Entities do not make any recommendations as to how stockholders of the Company should vote their Shares relating to the Merger.
Ms. Lopker founded the Company in 1979 and served as an employee, executive officer, director and significant stockholder of the Company for more than 40 years. When approached by members of the QAD Board about the possibility of the Company pursuing a potential sale of the Company, Ms. Lopker considered favorable current market conditions, and concluded that her facilitating a take-private transaction that would provide fair value to all of the Company’s stockholders could be attractive. Ms. Lopker expressed to members of the QAD Board her willingness to pursue a process, her openness to consider any type of transaction, and her preference for retaining an ongoing stake in the Company. Ms. Lopker ultimately was interested in selling only a portion of the Lopker Entities’ Shares and informed the Special Committee and its advisors of the Lopker Entities’ desire to rollover a portion of Lopker Entities’ Shares as part of proposed transactions. Moreover, Ms. Lopker indicated that she was interested in continuing to have a role in the Company following closing of a potential transaction if one were to occur, and that she was open to discussions about such role.
The Lopker Entities believe that it is in the best interests of the Company’s stockholders to effect a liquidity transaction while market conditions remain favorable, as well as in the best interests of the Company to operate as a privately held entity. The Lopker Entities believe that, as a privately held entity, the Company will have greater operational flexibility to pursue alternatives than it would have as a public company, and management will be able to concentrate on long-term growth, reducing the focus on the quarter-to-quarter performance often emphasized by the public equity market’s valuation of the Shares. Although the Lopker Entities believe that there will be significant opportunities associated with their contribution to Ultimate Parent of the Rollover Shares, the Lopker Entities recognize that there are also substantial risks (including the risks and uncertainties relating to the prospects of the Company) and that such opportunities may not ever be fully realized.
If the Merger is completed, the Company will become a wholly owned subsidiary of Parent, and the Shares will cease to be publicly traded. For the Lopker Entities, the purpose of the Merger is to effectuate the transactions contemplated by the Merger Agreement and the separate Contribution and Exchange Agreement, which will allow the Lopker Entities to realize the value of a portion of their Shares by receiving $87.50 per Share in cash for a portion of their investment in the Company and own equity interests of Parent and to bear the rewards and risks of such ownership after the Merger is completed and the Shares ceases to be publicly traded. The Lopker Entities believe that structuring the transaction in such manner is preferable to other alternative transaction structures because (i) it will enable Parent to acquire all of the outstanding Shares of the Company at the same time, (ii) it represents an opportunity for the Company’s Unaffiliated Stockholders to immediately realize the value of their investment in the Company and for the Lopker Entities to immediately realize the value of a significant portion of their investment in the Company at a price of $87.50 per Share in cash, without interest, less any applicable withholding taxes, in accordance with and subject to the terms and conditions set forth in the Merger Agreement and (iii) it allows the Lopker Entities to continue to own indirect equity interests in the Company after the Merger and to bear the rewards and risks of such ownership after the Merger. The Lopker Entities did not consider any other
 
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alternative transaction structures or other alternative means to accomplish the purposes set forth above because no other alternatives would enable them to achieve the same objectives.
Plans for the Company After the Merger
Following completion of the Merger, Merger Sub will have been merged with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent. The Shares of the Company are currently listed on the Nasdaq and registered under the Exchange Act. Following completion of the Merger, there will be no further market for the Shares and, as promptly as practicable following the Effective Time and in compliance with applicable law, the Company’s securities will be delisted from the Nasdaq and deregistered under the Exchange Act.
The Parent Entities currently anticipate that the Company’s operations initially will be conducted following completion of the Merger substantially as they are currently being conducted (except that the Company will cease to be a public company and will instead be a wholly owned subsidiary of Parent). The Parent Entities are currently conducting a review of the Company and its business and operations with a view towards determining how to redirect the Company’s operations to improve the Company’s long-term earnings potential as a private company (including by reducing the Company’s costs and expenses following the Merger) and expect to complete such review following completion of the Merger. Further, following completion of the Merger, the Parent Entities will continue to assess the Company’s assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what additional changes, if any, would be desirable following the Merger to enhance the business and operations of the Company. In addition, Parent may seek to buy or combine the Company with target companies that provide earnings and growth synergies; however, no such contracts, arrangements, plans, proposals, commitments or understanding currently exist. Although presently there are no such contracts, arrangements, plans, proposals, commitments or understandings regarding any such transactions, the Parent Entities and certain of their affiliates may seek, from and after the Effective Time, to acquire target companies or assets that operate in the Company’s industry.
From and after the Effective Time of the Merger, (a) the directors of Merger Sub will become and constitute the only directors of the Surviving Corporation, and such directors will serve until their successors have been duly elected or appointed and qualified or until their death, resignation or removal in accordance with the organizational documents of the Surviving Corporation, and (b) the officers of the Company will constitute the only officers of the Surviving Corporation, and such officers will serve until their successors have been duly elected or appointed and qualified or until their death, resignation or removal in accordance with the organizational documents of the Surviving Corporation.
Certain Effects of the Merger
If the Merger Agreement is approved and adopted by the requisite votes of the Company’s stockholders and all other conditions to the Closing of the Merger are either satisfied or waived, Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent and the following will occur.
Treatment of the Shares
At the Effective Time of the Merger, each Share outstanding immediately prior to the Effective Time of the Merger (other than the Excluded Shares) will be converted into the right to receive the Merger Consideration, without interest, less any applicable withholding taxes, in accordance with and subject to the terms and conditions set forth in the Merger Agreement, whereupon all such Shares will cease to be outstanding and shall cease to exist, and the holders of such Shares will cease to have any rights with respect thereto, other than the right to receive the Merger Consideration and the right to receive dividends and other distributions, in each case, subject to and in accordance with the terms and conditions of the Merger Agreement.
Treatment of Equity Compensation Awards
Vested Company SARs. At the Effective Time of the Merger, each Vested Company SAR, will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of
 
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(A) the aggregate number of Shares subject to such Vested Company SAR multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per Share base price of such Vested Company SAR, subject to any required withholding of taxes. Amounts payable in respect of the cancelled Vested Company SARs will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger).
Unvested Company SARs.   At the Effective Time of the Merger, each outstanding Unvested Company SAR will be cancelled and replaced with a right to receive an amount in cash, without interest, equal to the product of (A) the aggregate number of Shares subject to such Unvested Company SAR multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per Share base price of such Unvested Company SAR, and such amount will be payable in accordance with such Unvested Company SAR’s vesting terms, subject to any required withholding of taxes.
Vested Company RSUs and Vested Company PSUs.   At the Effective Time of the Merger, each (i) Vested Company RSU and (ii) Vested Company PSU will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of (A) the aggregate number of Shares subject to the Vested Company RSU and/or Vested Company PSU (with Company PSUs granted in 2019 earned based on actual performance achieved through the Effective Time and Company PSUs granted in 2021 deemed earned at 100% of target level of performance), multiplied by (B) the Merger Consideration, subject to any required withholding of taxes. Amounts payable in respect of the cancelled Vested Company RSUs and cancelled Vested Company PSUs will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger).
Unvested Company RSUs and Unvested Company PSUs.   At the Effective Time of the Merger, each tranche of Unvested Company RSUs and Unvested Company PSUs will be cancelled and replaced with a right to receive an amount in cash, without interest, equal to (A) the amount of the Merger Consideration multiplied by (B) the aggregate number of Shares subject to such Unvested Company RSUs and Unvested Company PSUs immediately prior to the Effective Time of the Merger (with Company PSUs granted in 2019 earned based on actual performance achieved through the Effective Time of the Merger and Company PSUs granted in 2021 deemed earned at 100% of target level of performance) (the “Cash Replacement Company RSU/PSU Amounts”).
For each tranche of cancelled Unvested Company RSUs and Unvested Company PSUs, except as otherwise provided by the terms of the Merger Agreement, 50% of the Cash Replacement Company RSU/PSU Amounts, subject to any required withholding of taxes, will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger). Except as otherwise provided by the terms of the Merger Agreement, the remaining 50% of the Cash Replacement Company RSU/PSU Amounts for each tranche of cancelled Unvested Company RSUs and Unvested Company PSUs will vest, subject to the holder’s continued service with Parent and its affiliates (including the surviving Company and its subsidiaries) through the applicable vesting dates, subject to any required withholding of taxes, at the same time as the Unvested Company RSU and Unvested Company PSUs for which such Cash Replacement Company RSU/PSU Amount were exchanged, would have vested pursuant to their terms or upon an earlier qualifying termination of employment by the Company without cause or a resignation by the holder for good reason (as described in the Merger Agreement).
Benefits of the Merger for the Company’s Unaffiliated Stockholders
The primary benefit of the Merger to the Unaffiliated Stockholders (other than the holders of the Excluded Shares) will be their right to receive the Merger Consideration of $87.50 per Share in cash, without interest, less any applicable withholding taxes, in accordance with and subject to the terms and conditions set forth in the Merger Agreement, representing a premium of (i) 20.0% over the closing price of the shares of Class A Common Stock and 82.3% over the closing price of the shares of Class B Common Stock on June 25, 2021, the last trading day before the Company publicly announced the Merger. Additionally, such security holders will avoid the risk after the Merger of any possible decrease in our future earnings, growth or value.
 
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Detriments of the Merger to the Company’s Unaffiliated Stockholders
The primary detriments of the Merger to our Unaffiliated Stockholders include the lack of an interest of such security holders in the potential future earnings, growth, or value realized by the Company after the Merger.
Certain Effects of the Merger for Thoma Bravo
Following the Merger, all of the equity interests in the Company will be beneficially owned, indirectly through Parent, by the Parent Entities, the Lopker Entities and their affiliates. If the Merger is completed, the Parent Entities and their other equity investors will be the sole beneficiaries of our future earnings and growth, if any, and they will be the only ones entitled to vote on corporate matters affecting the Company following the Merger.
Certain Effects on the Company if the Merger is Not Completed
If the Merger Agreement Proposal is not approved by the Company’s stockholders or if the Merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their Shares in connection with the Merger. Instead, unless the Company is sold to a third party, the Company will remain an independent public company, and the Shares will continue to be listed and traded on the Nasdaq, so long as the Company continues to meet the applicable listing requirements. In addition, if the Merger is not completed, the Company expects that management will operate the Company’s business in a manner similar to that in which it is being operated today and that the Company’s stockholders will continue to be subject to the same risks and opportunities to which they are currently subject. There is no assurance as to the effect of these risks and opportunities on the future value of your Shares, including the risk that the market price of Shares may decline to the extent that the current market price of Shares reflects a market assumption that the Merger will be completed.
Under certain circumstances, if the Merger is not completed, the Company would be required to pay Parent a Company Termination Fee of $59,000,000 in cash, or Parent would be required to pay the Company a Parent Termination Fee of $127,000,000. See “The Merger Agreement — Termination Fees.”
Certain Unaudited Prospective Financial Information
Except for annual and quarterly guidance, the Company does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent uncertainty, unpredictability and subjectivity of the underlying assumptions, estimates and projections. In connection with its consideration of the Company’s stand-alone prospects and potential strategic transactions available to the Company, management of the Company prepared and provided to the Special Committee and Morgan Stanley financial forecasts (the “projections”). The Company’s management subsequently directed Morgan Stanley to use the projections in connection with rendering its fairness opinion to the Special Committee and performing its related financial analysis, as described above under the heading “— Opinion of Morgan Stanley & Co. LLC.” The summary of the projections is included in this proxy statement solely to give the Company’s stockholders access to certain financial projections that were made available to the Special Committee and Morgan Stanley. The summary of the projections may not be appropriate for other purposes and is not being included in this proxy statement to influence a Company stockholder’s decision whether to vote to adopt the Merger Agreement and approve the Merger.
The projections were prepared by our management for internal use. The projections were not prepared with a view toward public disclosure or with a view toward complying with GAAP (as detailed below), the published guidelines of the SEC regarding projections, the use of non-GAAP financial measures or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of the Company’s management, were prepared on a reasonable basis, reflected the best available estimates and judgments at the time of preparation and presented as of the time of preparation, to the best of the Company’s management’s knowledge and belief, the reasonable projections of the future financial performance of the Company.
Neither the Company’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained
 
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herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.
The projections, while presented with numerical specificity, necessarily were based on numerous variables and assumptions that are inherently uncertain and many of which are beyond the control of the Company’s management. Because the projections cover multiple years, by their nature, they also become subject to greater uncertainty with each successive year. A number of important factors with respect to the Company’s business and the industry in which it participates may affect actual results and result in the projections not being achieved. For a description of some of these factors, the Company’s stockholders are urged to review the Company’s most recent SEC filings as well as the discussion entitled “Note Regarding Forward-Looking Statements” and other risk factors described in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. In addition, the projections may be affected by the Company’s inability to achieve strategic goals, objectives and targets over the applicable period. Accordingly, there can be no assurance that the prospective results are indicative of the future performance of the Company or that actual results will not differ materially from those presented in the prospective financial information.
The inclusion of the projections in this proxy statement should not be regarded as an indication that the Company or any of its affiliates, advisors, officers, directors or representatives considered or considers the projections to be necessarily predictive of actual future events, and the projections should not be relied upon as such. Neither the Company nor any of its respective affiliates, advisors, officers, directors or representatives has made or makes any representation to any of the Company’s stockholders or any other person regarding the ultimate performance of the Company compared to the information contained in the projections or can give any assurance that actual results will not differ materially from the projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the projections to reflect circumstances existing after the date the projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the projections are shown to be in error. The Company does not intend to make publicly available any update or other revision to the projections, except as otherwise required by law.
The projections include non-GAAP financial measures, and they were presented because management believed they could be useful indicators of the Company’s projected future operating performance. The Company prepared the projections on a non-GAAP basis. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. As used herein, “GAAP” means generally accepted accounting principles.
All financial projections are forward looking statements. These and other forward looking statements are expressly qualified in their entirety by the risks and uncertainties identified above and the cautionary statements contained in the Company’s Annual Report on Form 10-K for the year ended January 31, 2021, and subsequent quarterly and current reports on Form 10-Q and 8-K. Please consider carefully the discussion entitled “Cautionary Statement Concerning Forward Looking Information” elsewhere in the proxy statement.
In light of the foregoing factors and the uncertainties inherent in the projections, the Company’s stockholders are cautioned not to place undue, if any, reliance on the projections.
The following is a summary of the projections (unaudited):
(Dollars in millions)
FY2022E(1)
FY2023E
FY2024E
FY2025E
FY2026E
FY2027E
FY2028E
FY2029E
FY2030E
FY2031E
Revenue
$ 336 $ 373 $ 421 $ 491 $ 584 $ 707 $ 824 $ 924 $ 997 $ 1,032
Adjusted EBITDA(2)
$ 37 $ 39 $ 53 $ 76 $ 109 $ 146 $ 173 $ 197 $ 216 $ 227
(1)
For the purposes of the financial analyses as described above under the heading “— Opinion of Morgan Stanley & Co. LLC,” fiscal year projections are treated as the prior calendar year projections (e.g., FY2022E (ended January) is equivalent to CY2021E (ended December)).
 
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(2)
Adjusted EBITDA is a non-GAAP measure. Our calculation of Adjusted EBITDA may differ from other companies and excludes the following items: interest, income taxes, depreciation and amortization, restructuring, separation, transaction and integration-related cost and other non-recurring items. Adjusted EBITDA differs from Reported Adjusted EBITDA because Reported Adjusted EBITDA does not include expenses associated with stock-based compensation.
Interests of Executive Officers and Directors of the Company in the Merger
In considering the recommendations of the QAD Board (other than Ms. Lopker, who recused herself) with respect to the Merger, the Company’s stockholders should be aware that the executive officers and directors have certain interests in the Merger that may be different from, or in addition to, the interests of the Company’s stockholders generally. The Special Committee, consisting entirely of independent directors, and the QAD Board were aware of these interests and considered the interests described below, among other matters, in evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger and in making its recommendations.
Special Committee Fees
Each of the members of the Special Committee, consisting of directors who are not directly or indirectly affiliated with, and who are otherwise independent from, Ms. Lopker and who are not members of the Company’s management or otherwise interested in the Merger, will receive a fee of $20,000 per month for each month that the Special Committee is in effect, beginning in March 2021, in connection with their services to the Company with respect to the Merger (which fee is not conditioned on the consummation of the Merger). The fees to members of the Special Committee are expected to total between $500,000 and $600,000.
Payments to Executive Officers in Respect of Equity Awards
Upon the Effective Time of the Merger, each Company SAR, Company RSU and Company PSU will be converted into the right to receive cash payments based upon the Merger Consideration as described below. As of July 23, 2021, the Company’s executive officers hold 902,500 vested Company SARs, 47,500 unvested Company SARs, 199,374 Company RSUs, and 94,872 Company PSUs. For certain named executive officers, 50% of the previously granted, unvested, equity-based compensation for such named executive shall vest immediately upon a change in control.
Vested Company SARs.   At the Effective Time of the Merger, each Vested Company SAR, will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of (A) the aggregate number of Shares subject to such Vested Company SAR multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per Share base price of such Vested Company SAR, subject to any required withholding of taxes. Amounts payable in respect of the cancelled Vested Company SARs will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger).
Unvested Company SARs.   At the Effective Time of the Merger, each outstanding Unvested Company SAR will be cancelled and replaced with a right to receive an amount in cash, without interest, equal to the product of (A) the aggregate number of Shares subject to such Unvested Company SAR multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per Share base price of such Unvested Company SAR, and such amount will be payable in accordance with such Unvested Company SAR’s vesting terms.
Vested Company RSUs and Vested Company PSUs.   At the Effective Time of the Merger, each (i) Vested Company RSU and (ii) Vested Company PSU will be cancelled and automatically converted into the right to receive an amount in cash equal to the product of (A) the aggregate number of Shares subject to the Vested Company RSU and/or Vested Company PSU (with Company PSUs granted in 2019 earned based on actual performance achieved through the Effective Time and Company PSUs granted in 2021 deemed earned at 100% of target level of performance), multiplied by (B) the Merger Consideration, subject to any required withholding of taxes. Amounts payable in respect of the cancelled Vested Company RSUs and cancelled Vested Company PSUs will be paid promptly following the Effective Time of the Merger (and
 
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in no case later than five (5) days following the Effective Time of the Merger). For purposes of clarity, 50% of the Company RSUs and Company PSUs held by each of Anton Chilton, Pamela M. Lopker and Daniel Lender that are outstanding as of immediately prior to the Effective Time of the Merger will vest in accordance with the terms of their respective CIC Agreement (as defined below) and will be treated as Vested Company RSUs and Vested Company PSUs and payable promptly following the Effective Time of the Merger.
Unvested Company RSUs and Unvested Company PSUs.   At the Effective Time of the Merger, each tranche of Unvested Company RSUs and Unvested Company PSUs will be cancelled and replaced with a right to receive an amount in cash, without interest, equal to (A) the amount of the Merger Consideration multiplied by (B) the aggregate number of Shares subject to such Unvested Company RSUs and Unvested Company PSUs immediately prior to the Effective Time of the Merger (with Company PSUs granted in 2019 earned based on actual performance achieved through the Effective Time of the Merger and Company PSUs granted in 2021 deemed earned at 100% of target level of performance) (the “Cash Replacement Company RSU/PSU Amounts”).
For each tranche of cancelled Unvested Company RSUs and Unvested Company PSUs, except as otherwise provided by the terms of the Merger Agreement, 50% of the Cash Replacement Company RSU/PSU Amounts, subject to any required withholding of taxes, will be paid promptly following the Effective Time of the Merger (and in no case later than five (5) days following the Effective Time of the Merger). Except as otherwise provided by the terms of the Merger Agreement, the remaining 50% of the Cash Replacement Company RSU/PSU Amounts for each tranche of cancelled Unvested Company RSUs and Unvested Company PSUs will vest, subject to the holder’s continued service with Parent and its affiliates (including the surviving Company and its subsidiaries) through the applicable vesting dates, subject to any required withholding of taxes, at the same time as the Unvested Company RSU and Unvested Company PSUs for which such Cash Replacement Company RSU/PSU Amount were exchanged, would have vested pursuant to their terms or upon an earlier qualifying termination of employment by the Company without cause or a resignation by the holder for good reason (as described in the Merger Agreement).
For purposes of clarity and notwithstanding anything to the contrary in the immediately preceding paragraph, 50% of the Company RSUs and Company PSUs held by each of Mr. Chilton, Ms. Lopker and Mr. Lender that are outstanding as of immediately prior to the Effective Time of the Merger will be treated as Unvested Company RSUs and Unvested Company PSUs and will be converted into the Cash Replacement Company RSU/PSU Amounts as described above; however, such amounts will vest and be payable in accordance with the terms of their respective CIC Agreement (i.e., will be paid on the first anniversary of the Closing, or, the earlier of the regular vesting date applicable to such award and the date the named executive officer’s employment is terminated either by the Company without “cause” or a resignation by the named executive officer due to a “constructive termination” ​(in each case, as defined in the CIC Agreements)) and as provided by the terms of the Merger Agreement.
For an estimate of the amount payable to each of the Company’s named executive officers in respect of such unvested equity-based awards on the closing date of the Merger, assuming the closing date of the Merger was July 23, 2021 for these purposes, see “— Interests of Executive Officers and Directors of the Company in the Merger — Golden Parachute Compensation” below.
The table below also sets forth the total number of Shares and number of Shares subject to equity-based awards determined as described above and below, per individual, expected to be held on the closing date of the Merger, assuming (i) the closing date of the Merger was July 23, 2021 and (ii) the number of outstanding Shares and equity-based awards for each director and executive officer on the closing of the Merger were equal to the number of Shares and equity-based awards that were outstanding as of July 23, 2021, the latest practicable date to determine such amounts before the filing of this proxy statement (such numbers do not forecast any grants, any vesting, additional issuances, dividends, additional deferrals or forfeitures of equity-based awards following the date of this proxy statement). For purposes of these estimates, the number of Shares owned and Shares subject to Company RSUs and Company PSUs were multiplied by the per Share Merger Consideration of $87.50, and the number of Shares subject to Company SARs were multiplied by the difference between the per Share Merger Consideration of $87.50 and the applicable per Share base price.
 
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Shares and Equity Awards held by Directors and Executive Officers
Name of Director and/or Executive Officer
Class A
Class B
Shares
Owned
Company
SARs/
Outstanding
Company
RSUs
Outstanding
Company
PSUs
Outstanding(1)
Shares
Owned
Company
RSUs
Outstanding
Total
Payments
Scott J. Adelson
59,672 6,267 $ 5,769,663
Anton Chilton
23,054 94,750 35,376 5 $ 13,403,688
Kathleen M. Crusco
9,534 $ 834,225
Peter R. van Cuylenburg
37,595 $ 3,289,563
Pamela M. Lopker
5,440,353 860,000 57,750 35,376 2,562,775 90,000 $ 762,898,325
Lee. D. Roberts(2)
30,150 2,368 $ 2,845,325
Daniel Lender
122,594 39,062 20,100 8,045 $ 16,607,588
Kara L. Bellamy
8,100 7,812 4,020 1,862 $ 1,906,975
(1)
Number of Shares subject to outstanding Company PSUs is calculated as 0% of the target number of Shares for the third tranche of the 2019 Company PSU grants (based upon anticipated performance achievement in fiscal year 2022), 121.6% of the target number of Shares for the second tranche of the 2020 Company PSU grants (based upon actual performance achievement in fiscal year 2021) and 100% of the target number of Shares for 2021 Company PSU grants.
(2)
On June 21, 2021, as disclosed in a Form 8-K filed by the Company with the SEC on April 29, 2021, Mr. Roberts’s term on the QAD Board (and therefore Special Committee) ended pursuant to the term set forth in the bylaws of the Company, and he did not stand for reelection.
Change in Control Agreements; Change in Control Policy
The Company has previously (i) entered into change in control agreements, approved by the Company’s Compensation Committee, with Mr. Chilton, Ms. Lopker and Mr. Lender (the “CIC Agreements”), which provide certain benefits to such executive officers in the event of a change in control (as defined in the CIC Agreements) and (ii) adopted a Change in Control Policy designed to cover a limited number of Company individuals whose positions and titles are defined as Company President, Chief Executive Officer, Chief Financial Officer, Executive Vice President, other members of the Company’s executive committee, Vice Presidents and other individuals, in each case, as are specifically approved by the Company’s Compensation Committee for inclusion under such policy. Ms. Kara L. Bellamy does not have a CIC Agreement and was not previously approved to be included in the Company’s Change in Control Policy; however, following negotiations among the Parent Entities, the Company and the Special Committee, and pursuant to the terms of the Merger Agreement, the Special Committee approved and the Parent has agreed to cause the Surviving Corporation to provide to all employees with a title of Vice President or above who also do not have a CIC Agreement and were not previously approved to be included in the Company’s Change in Control Policy (including Ms. Bellamy) with change in control severance payments and benefits after a qualifying involuntary termination of employment, as described below, consistent with the terms of the Company’s Change in Control Policy.
The terms of the CIC Agreements are substantially the same, each providing cash severance, accelerated vesting of certain previously granted, unvested, equity-based compensation and cash payments in lieu of continuation of benefits coverage. The CIC Agreements provide a gross-up for any excise taxes that the executive officers may incur under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) if the amounts they receive would constitute “excess parachute payments” ​(within the meaning of Section 280G of the Code and the regulations promulgated thereunder).
The CIC Agreement for each of Mr. Chilton, Ms. Lopker and Mr. Lender provides that 50% of the previously granted, unvested, equity-based compensation for the named executive vests immediately upon a change in control. Subject to the accelerated vesting benefit described below, the remaining unvested equity awards will vest upon the earlier of (i) the original vesting date or (ii) the first anniversary date of the
 
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change in control, provided the named executive remains employed by the Company as of the relevant vesting date. All of the other change in control benefits provided under the CIC Agreements are considered “double trigger,” meaning that the payment of cash severance, accelerated vesting of the remaining 50% of the previously granted, unvested, equity-based compensation prior to the first anniversary date of the change in control and cash in lieu of continuation of benefits require both a “change in control” of the Company and the termination of the named executive’s employment by the Company without “cause” or a resignation by the named executive officer due to a “constructive termination” ​(in each case, as defined in the CIC Agreements) within eighteen (18) months following a change in control. The Merger will constitute a “change in control” as defined in the CIC Agreements. Upon occurrence of such termination of employment, each of the CIC Agreements provides for the following:

a lump sum payment equal to eighteen (18) months times the base monthly salary of the named executive at the greater of: (a) the rate in effect at the time of the change in control or (b) the rate in effect at the time of termination of employment;

a lump sum payment equal to 1.5 times the greater of: (a) the average annual bonus paid in the two (2) fiscal years prior to termination of employment or (b) the target bonus for the year of such termination of employment;

immediate vesting of any unvested equity compensation; and

a cash payment equivalent to the present value of the projected cost of continuation of all employee benefits and perquisites, including life insurance, health benefits, disability insurance, cars and expense reimbursement, and 401(k) matching payments for a period of eighteen (18) months following termination, plus an amount equal to the portion of the named executive’s unvested 401(k) account balance that would vest if the named executive had eighteen (18) additional months of service for vesting purposes under our 401(k) plan.
As a condition to the receipt of the payments and benefits under the CIC Agreements, each of Mr. Chilton, Ms. Lopker and Mr. Lender are required to comply with certain restrictive covenants for the one (1) year period following their termination of employment, which include a non-compete, a non-solicit of employees, non-interference with the Company’s relationship with its employees or customers, and non-disparagement of the Company.
Under the terms of the Merger Agreement and the Company’s Change in Control Policy, Ms. Bellamy would be entitled to receive the payments and benefits outlined below if her employment is terminated by the Company without “cause” or she resigns following a “change in status” ​(in each case, as defined in the Change in Control Policy) during the twelve (12) months following a change in control. The Merger will constitute a “change in control” as defined in the Change in Control Policy. Upon occurrence of such termination of employment, Ms. Bellamy will receive:

a payment equal to twelve (12) months of her base compensation. Under the Change in Control Policy, compensation base is defined as an executive’s highest fiscal year base salary in effect within two (2) years prior to the change in control;

a payment equal to one times her average annual bonus. Under the Change in Control Policy, average annual bonus is defined as an executive’s average annual bonus for the two (2) full fiscal years immediately preceding the change in control;

accelerated vesting of any outstanding equity compensation awards granted under the Company’s equity incentive plans; and

a payment equal to twelve (12) months benefits replacement. The benefits replacement payment is intended to compensate the executive for employee benefits being received at the time of the executive’s termination of employment.
For an estimate of the value of the payments and benefits described above that would become payable under the CIC Agreements and the Change in Control Policy to the named executive officers, see “— Golden Parachute Compensation” below.
 
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Indemnification Benefits
Each of the Company’s executive officers and directors are entitled to the indemnification benefits in favor of the Company’s directors and executive officers, as described in more detail in “The Merger Agreement — Indemnification; Directors’ and Officers’ Insurance.”
Golden Parachute Compensation
The table below, titled “Potential Change-in-Control Payments to Named Executive Officers,” along with its footnotes, sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation payable to the Company’s named executive officers as determined for purposes of our most recent annual proxy statement, which compensation is subject to the non-binding, advisory, affirmative vote of a majority of the Shares present in person or represented by proxy at the Special Meeting and entitled to vote thereon, as described below in “Merger Related Executive Compensation Arrangements (The Golden Parachute Proposal — Proposal 2).” Our named executive officers for our fiscal year ending January 31, 2021, included Anton Chilton, Chief Executive Officer, Pamela M. Lopker, President, Daniel Lender, Executive Vice President and Chief Financial Officer and Kara L. Bellamy, Senior Vice President, Corporate Controller and Chief Accounting Officer. The table assumes the consummation of the Merger occurred on July 23, 2021, and the employment of the named executive officer was terminated by the Company without “cause” or by the named executive officer following a “constructive termination” or “change in status,” applicable, on such date. The value of any equity-based awards was calculated by multiplying the number of the Shares subject to Company RSUs and Company PSUs by the per Share Merger Consideration of $87.50 and by multiplying the number of the Shares subject to Company SARs by the difference between the per Share Merger Consideration of $87.50 and the applicable Company SAR per Share base price.
The calculations in the table below do not include amounts that the Company’s named executive officers were already entitled to receive or vested in as of the date hereof or amounts under contracts, agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation in favor of executive officers and that are available generally to all the Company’s salaried employees.
Potential Change-in-Control Payments to Named Executive Officers
Change in Control and Termination of Employment
Name
Change in
Control Only
Cash ($)(2)
Equity ($)(3)
Perquisites/
Benefits
($)(4)
Tax
Reimbursement
($)(5)
Total ($)(6)
Equity ($)(1)
Anton Chilton, Chief Executive Officer
5,693,013 1,575,000 5,693,012 66,938 3,294,338 16,322,301
Pamela M. Lopker,
President
4,881,763 1,044,048 4,881,762 48,085 10,855,658
Daniel Lender, Executive Vice President and Chief Financial Officer
2,588,338 1,231,521 2,588,337 66,938 6,475,134
Kara L. Bellamy, Senior Vice
President, Corporate
Controller and Chief
Accounting Officer
517,650 421,275 517,650 42,540 1,499,115
(1)
As described above in “The Merger Agreement — Treatment of Equity Compensation Awards,” the equity amounts consist of the accelerated vesting (in the case of Mr. Chilton, Ms. Lopker and Mr. Lender) and/or payment of unvested Company SARs, Company RSUs and Company PSUs. For Ms. Bellamy, the equity amount represents the accelerated payment of 50% of her Cash Replacement Company RSU/PSU Amount in respect of her cancelled unvested Company RSUs and Company PSUs. The amounts shown are based on the number of such equity-based awards held by each named executive officer as of July 23, 2021, the latest practicable date to determine such amounts before the filing of this proxy
 
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statement. Depending on when the Closing Date occurs, certain equity-based awards may vest in accordance with their terms.
The amounts shown in this column represent the portion of the unvested equity awards that are “single-trigger” in nature, which will become vested and/or payable immediately upon the closing date whether or not employment is terminated.
The equity payments described in this column (1) include the following components:
Name
Company
SARs (#)
Company
SARs ($)
Company
RSUs (#)
Company
RSUs ($)
Company
PSUs (#)
Company
PSUs ($)
Anton Chilton
47,375 4,145,313 17,688 1,547,700
Pamela M. Lopker
23,750 807,500 28,875 2,526,563 17,688 1,547,700
Daniel Lender
19,531 1,708,963 10,050 879,375
Kara L. Bellamy