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EXHIBIT 99.1
CONFIDENTIAL
OCTOBER 9, 1998
QUARTERDECK CORPORATION
CONVERSION AND REDEMPTION AGREEMENT AND RELEASE
To: The holder of Series C Convertible Preferred Stock and/or Warrants of
Quarterdeck Corporation identified on the attached signature page
Ladies and Gentlemen:
We are writing to you ("Securityholder") in your capacity as the holder of
the shares of Series C Convertible Preferred Stock ("Series C Preferred Stock"),
or warrants to purchase shares of Series C Preferred Stock ("Warrants"), of
Quarterdeck Corporation (the "Company") identified on the signature page hereto.
The purpose of this Agreement is to document our agreement regarding (i) the
terms pursuant to which you may convert your shares of Series C Preferred Stock
into shares of the Company's Common Stock and (ii) the Company's right to redeem
your shares of Series C Preferred Stock under certain conditions, as well as
certain related matters. Capitalized but undefined terms shall have the meanings
provided for in the Certificate of Designations of Series C Convertible
Preferred Stock (the "Certificate of Designations") as filed with the Delaware
Secretary of State on September 30, 1997. Further, the Securityholder represents
and agrees that the signature page attached accurately identifies all shares of
Series C Preferred Stock, and all related Warrants, held of record by the
Securityholder on the date hereof (such shares and warrants being referred to
herein as the "Shares"). All agreements contained herein that apply to Shares
apply similarly to shares of Series C Preferred Stock and to the Warrants
exercisable for Series C Preferred Stock.
1. Modified Conversion Terms. For the consideration set forth herein
(including, without limitation, the agreement of the Company to issue additional
shares of Common Stock in accordance with paragraph 2 of this Agreement) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned agrees not to convert any of the Shares of
Series C Preferred Stock at a Conversion Price of less than $0.2650 for a period
of six (6) months commencing on the effective date hereof as set forth on the
signature page to this Agreement (the "Effective Date"). It is also agreed that,
during the first sixty (60) calendar days from the Effective Date, upon
conversion of the Series C Preferred Stock in accordance with the provisions
contained in Section 4(d) of the Certificate of
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Designations, the Company will issue shares of Common Stock at an effective
Conversion Price of $0.2650 per share (i.e., for each share of Series C
Preferred Stock, liquidation preference $1,000, the Company will issue 3,773.585
shares of Common Stock, rounded to the nearest full share), notwithstanding the
actual conversion price then in effect, in complete satisfaction of all rights
of the Securityholder in respect of such converted Shares of Series C Preferred
Stock. The undersigned acknowledges and agrees that upon issuance by the Company
of shares of Common Stock in accordance with the formula set forth above, the
Company shall have satisfied in full all of its obligations of any sort
whatsoever due to Securityholder in respect of Shares of Series C Preferred
Stock so converted under the Certificate of Designations, the Preferred Stock
Investment Agreement between the Securityholder and the Company related thereto
(the "Preferred Stock Investment Agreement"), or otherwise.
2. Consideration. As partial consideration for entering into this
Agreement with the Company, the Company will issue additional shares of Common
Stock (or, at the sole election of the Company, cash) to each Securityholder, up
to an amount equal to five percent (5.0%) of the original purchase price of the
Shares of Series C Preferred Stock owned by the Securityholder identified on the
signature page hereto, to the extent, but only the extent, that the
Securityholder does not realize at least a 50% gross aggregate return upon
resale of the shares of Common Stock received upon conversion of such Shares of
Series C Preferred Stock in bona fide market transactions with one or more
unrelated third party buyers. Such issuance of additional shares of Common Stock
pursuant to this paragraph 2 will occur six (6) months from the Effective Date
or such earlier time as the Securityholder converts all of the Shares of Series
C Preferred Stock into shares of Common Stock, or earlier if elected by the
Company in connection with any Sales Event (as defined below). The shares of
Common Stock issued pursuant to this paragraph 2 will be valued based on the
actual Conversion Price in effect at the time of issuance (subject to the
$0.2650 floor set forth in paragraph 1 hereto and, if the issuance occurs during
the first sixty (60) calendar days from the Effective Date, also subject to the
$0.2650 ceiling set forth in paragraph 1 hereto). The Company may require that
the Securityholder provide reasonable documentation to establish the actual
return received upon resale of the shares of Common Stock.
3. Special Redemption. During the six month period commencing on the
Effective Date, the Company shall have the right (the "Special Redemption
Right"),which may be assigned, to repurchase all of the shares of Series C
Preferred Stock owned by the Securityholder at a price equal to 110% of the
original purchase price (i.e., $1,100 per share of Series C Preferred Stock).
The Special Redemption right provided for in this paragraph 3 may only be
exercised by providing ten (10) days prior notice to all holders, which notice
may be made in the form of a press release disseminated to the Dow Xxxxx
Newswire Service. During the ten (10) days from the date of such notice of
redemption to the effective date of the redemption, conversions of Series C
Preferred Stock may take place in accordance with the terms of the Certificate
of Designations.
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4. Sales Event. The Securityholder agrees that upon a Sales Event (as
defined below) the Company may, at its election, (i) repurchase Shares of Series
C Preferred Stock at a price equal to 110% of the original purchase price (i.e.,
$1,100 per share of Series C Preferred Stock), (ii) require that the
Securityholder convert its Shares of Series C Preferred Stock into shares of
Common Stock (at the then applicable Conversion Price, subject to the $0.2650
floor set forth in paragraph 1 hereto, and the $.2650 ceiling set forth in
paragraph 1 hereto, if then applicable) immediately prior to the consummation of
the transaction or (iii) effect a combination of the foregoing. A "Sales Event"
shall mean (i) the sale of all or substantially all of the assets of the
Company, (ii) a consolidation or merger of the Company with or into any other
entity in which the stockholders of the Company immediately prior to the
consolidation or merger do not retain a majority of the voting power of the
surviving corporation or (iii) the sale of (or the acquisition by a person or
group of) more than 50% of the stock of the Company in any transaction or series
of related transactions. Notice of a Sales Event shall be given to
Securityholders in the form of a press release disseminated to the Dow Xxxxx
Newswire Service.
5. Assignees Bound; Duty to Legend Certificates. This Agreement shall
apply to the Shares of Series C Preferred Stock, whether in the hands of the
Securityholder or any transferee, it being understood that it shall be the sole
responsibility of Securityholder to advise any subsequent transferee of the
terms of this Agreement (including by attaching a copy of this Agreement to the
certificate(s) evidencing such Shares) in order to cause the transferee to have
actual knowledge of this Agreement and be bound hereby in the same manner as the
Securityholder. The Company will refuse to give effect to the direct or indirect
transfer of any of the Shares (including the entry of stop-transfer
instructions) unless and until it receives satisfactory written acknowledgment
by the transferee that it is bound by and subject to this Agreement.
6. Release of the Company. For the consideration set forth herein
(including, without limitation, the agreement of the Company to issue additional
shares of Common Stock in accordance with paragraph 2 hereto) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Securityholder, for itself and its affiliates, heirs, executors,
assigns and personal representatives (collectively, for purposes of this Section
6, the "Derivative Claimants"), knowingly and voluntarily, hereby releases,
waives and forever discharges (for purposes of this Section 6, the "Release")
the Company, and its officers, directors, employees, affiliates, subsidiaries,
agents, representatives, accountants, counsel, shareholders, and the successors
and assigns of each such person (collectively, for purposes of this Section 6,
"Released Parties"), from all claims, demands, damages, liabilities,
obligations, causes of action, suits, debts, sums of money, judgments and
executions, whatsoever, in law or in equity (collectively, for purposes of this
Section 6, "Claims") of any kind, nature or description whatever, whether known
or unknown (and if unknown, regardless of whether knowledge of the same may have
affected the decision to make this Release) relating to (i) the acquisition of
Shares, (ii) the
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ownership of such Shares by Securityholder prior to the Effective Date, or (iii)
the accrual of any obligation to make any payment pursuant to Section I.4(b) of
the Preferred Stock Investment Agreement with respect to any event occurring on
or prior to October 21, 1998. Notwithstanding the foregoing, the obligations of
the parties under the Certificate of Designations shall, except as expressly
modified in this Agreement, continue with respect to outstanding Shares and not
be released hereby.
In furtherance of the foregoing, Securityholder agrees on behalf of itself
and the Derivative Claimants not to use or prosecute any action against any of
the Released Parties with respect to any of the matters within the scope of this
Release and agrees to hold each of the Released Parties harmless with respect to
any such suit or prosecution in contravention of this section.
Securityholder also specifically acknowledges that it is aware of and
familiar with the provisions of California Civil Code Section 1542 which
provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED THIS SETTLEMENT WITH THE
DEBTOR."
Securityholder, being aware of this section hereby expressly waives and
relinquishes all rights and benefits he may have thereunder as well as under any
other statutes or common law principles of similar effect.
7. Release of the Securityholder. For the consideration set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company, for itself and its affiliates, heirs,
executors, assigns and personal representatives (collectively, for purposes of
this Section 7, the "Derivative Claimants"), knowingly and voluntarily, hereby
releases, waives and forever discharges (for purposes of this Section 7, the
"Release") the Securityholder, and its officers, directors, employees,
affiliates, subsidiaries, agents, representatives, accountants, counsel,
shareholders, and the successors and assigns of each such person (collectively,
for purposes of this Section 7, "Released Parties"), from all claims, demands,
damages, liabilities, obligations, causes of action, suits, debts, sums of
money, judgments and executions, whatsoever, in law or in equity (collectively,
for purposes of this Section 7, "Claims") of any kind, nature or description
whatever, whether known or unknown (and if unknown, regardless of whether
knowledge of the same may have affected the decision to make this Release)
relating to (i) the sale of the Shares, or (ii) the ownership of such shares by
Securityholder prior to the Effective Date. Notwithstanding the foregoing, the
obligations of the parties under the Certificate of Designations shall, except
as expressly modified in this Agreement, continue with respect to outstanding
Shares and not be released hereby.
In furtherance of the foregoing, the Company agrees on behalf of itself and
the Derivative Claimants not to use or prosecute any action against any of the
Released
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Parties with respect to any of the matters within the scope of this Release and
agrees to hold each of the Released Parties harmless with respect to any such
suit or prosecution in contravention of this section.
The Company also specifically acknowledges that it is aware of and familiar
with the provisions of California Civil Code Section 1542 which provides as
follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED THIS SETTLEMENT WITH THE DEBTOR."
The Company, being aware of this section hereby expressly waives and
relinquishes all rights and benefits he may have thereunder as well as under any
other statutes or common law principles of similar effect
8. Representation of Securityholder. The Securityholder acknowledges that
the Registration Statement relating to the shares of Common Stock issuable with
respect to Shares has been suspended by the Company. Securityholder is entering
into this Agreement without any representation or warranty from the Company as
to whether or not there is any pending undisclosed positive or negative
development in the Company's business or prospects. The Company has offered to
provide to the Securityholder an update on such matters, but the Securityholder,
being sophisticated and experienced in the investment in securities such as the
Shares, has refused to receive such data. Any claim that the Company failed to
adequately provide an update as to developments at the Company is being
intentionally and knowingly released in Section 6 of this Agreement.
9. Warrants. In the event the Securityholder owns any Warrants, the
Securityholder agrees that such Warrants may only be issued for cash, and that
the cashless exercise provision may not be utilized after the Effective Date.
Any Warrants will be exercised within one (1) business day of the delivery of a
written request by the Company; provided, however, that the Company may not
deliver such a written request unless the shares of Common Stock issuable upon
conversion of the shares of Series C Preferred Stock issuable upon exercise of
such Warrant are covered by a resale registration statement that is effective
under the Securities Act of 1933, as amended, and a current prospectus is
available of delivery to buyers. Once the Securityholder exercises Warrants and
receives shares of Series Preferred Stock (or shares of Common Stock upon
conversion), such shares will be bound by, and entitled to the benefits of, this
Agreement.
10. Effectiveness. This Agreement shall be effective as of the Effective
Date identified below upon acceptance and execution by the Company and the
Securityholder.
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11. Miscellaneous. The miscellaneous provisions contained in Sections
VII.2, 3, 4, 5, 6, 7, 8 and 9 of the Preferred Stock Investment Agreement are
incorporated into this Agreement as if fully set forth herein.
(Signature Page Follows)
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CONVERSION AND REDEMPTION AGREEMENT AND RELEASE
If the foregoing accurately reflects our agreement on this matter, please
so indicate by completing and executing this signature page and returning it to
the Company.
QUARTERDECK CORPORATION
By:
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Name:
Title:
Effective Date:
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Name of Securityholder:
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Number of shares of Series C Preferred Stock owned of Record:
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Certificate Number(s):
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Number of Warrants owned of Record:
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Certificate Number(s):
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By:
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Name:
Title:
