-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cmmhn/qd3Ko0rhTfs73oPfKMUsEoX9ke+0e/8QGeIZ6Xjq3x90VCL/oUhBKWpE2C yldCzk9C9qBsW3FSxPpIDg== 0000950148-96-001904.txt : 19960830 0000950148-96-001904.hdr.sgml : 19960830 ACCESSION NUMBER: 0000950148-96-001904 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960814 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960829 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUARTERDECK CORP CENTRAL INDEX KEY: 0000707668 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954320650 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19207 FILM NUMBER: 96623639 BUSINESS ADDRESS: STREET 1: 13160 MINDANAO WAY CITY: MARINA DEL REY STATE: CA ZIP: 90292 BUSINESS PHONE: 3103093700 MAIL ADDRESS: STREET 1: 13160 MINDANAO WAY CITY: MARINA DEL RAY STATE: CA ZIP: 90292 FORMER COMPANY: FORMER CONFORMED NAME: QUARTERDECK OFFICE SYSTEMS INC DATE OF NAME CHANGE: 19940510 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 14, 1996 QUARTERDECK CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 0-19207 95-4320650 (STATE OR OTHER (COMMISSION FILE (I.R.S. EMPLOYER JURISDICTION OF NUMBER) IDENTIFICATION NO.) INCORPORATION) 13160 Mindanao Way, Marina del Rey, California 90292 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 309-3700 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 14, 1996, Quarterdeck Corporation (the "Company") consummated the acquisition of the remaining shares of Limbex Corporation ("Limbex"), pursuant to the terms of an Agreement and Plan of Reorganization, dated as of August 13, 1996 (the "Reorganization Agreement"), by and among the Company, Limbex, and the shareholders of Limbex (the "Shareholders"). Prior to such acquisistion, Quarterdeck owned approximately 20% of the outstanding capital stock of Limbex. Limbex is the developer of the WebCompass product line. The acquisition of Limbex was effectuated by way of a merger (the "Merger") of a wholly-owned subsidiary of the Company with and into Limbex and as a result of the Merger Limbex became a wholly-owned subsidiary of the Company. In connection with the Merger, all of the outstanding shares of common stock of Limbex were converted into 1,309,890 shares of common stock of the Company (all of which is expected to be issued in the quarter ending September 30, 1996) and approximately $150,000 (which is expected to be paid in January of 1997.) In addition, the outstanding shares of preferred stock of Limbex were converted into the right to receive $3,599,753 from the Company on August 14, 1997 (the "Preferred Consideration Date"), which may be paid, at the Company's option, in cash, a number of shares of common stock of the Company equal to $3,599,753 divided by the average closing sales price of common stock of the Company for the period of five trading days ending on the trading day two trading days prior to the Preferred Consideration Date, or a combination of cash and shares of the Company's common stock. The Company also assumed vested options to purchase 102,991 of the shares of the Company's common stock. Pursuant to the terms of the Reorganization Agreement and the Escrow Agreement, dated as of August 13, 1996, by and among the Company, American Stock Transfer and Trust Company, as Escrow Agent, and certain of the Shareholders, a portion of the consideration will be placed in escrow to satisfy potential indemnification obligations of certain of the Shareholders under the Reorganization Agreement. In connection with the Merger, the Company and the Shareholders entered into a Registration Rights Agreement, dated as of August 13, 1996, pursuant to which the Shareholders are entitled to certain registration rights with respect to the shares of the Company's common stock to be issued in the Merger. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements and Financial Statement Schedule of Limbex; (b) Pro Forma Financial Information. It is impracticable to file at this time the financial statements of Limbex and the pro forma financial information required by Item 7 of Form 8-K. Such financial statements and pro forma financial information will be filed when available, but in any event no later than October 28, 1996. 3 (c) Exhibits. 99.1 Agreement and Plan of Reorganization among Quarterdeck Corporation, Limbex Corporation and the shareholders of Limbex Corporation, dated as of August 13, 1996. 99.2 Escrow Agreement among Quarterdeck Corporation, American Stock Transfer and Trust Company, as Escrow Agent and certain of the shareholders of Limbex Corporation, dated as of August 13, 1996. 99.3 Registration Rights Agreement among Quarterdeck Corporation and the shareholders of Limbex Corporation, dated as of August 13, 1996. 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. QUARTERDECK CORPORATION, a Delaware corporation By: \s\ Frank R.Greico ------------------ Name: Frank R. Greico Title: Senior Vice President and Chief Financial Officer August 29, 1996 EX-99.1 2 AGREEMENT AND PLAN OF REORGANIZATION 1 Exhibit _____ AGREEMENT AND PLAN OF REORGANIZATION AMONG QUARTERDECK CORPORATION, LIMBEX CORPORATION AND THE SHAREHOLDERS LISTED ON THE EXECUTION PAGES HERETO August 13, 1996 2 TABLE OF CONTENTS
Page ---- RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 1 PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . 1 1.1 Board of Directors' and Shareholders' Approval . . . . . . 1 1.2 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 The Closing . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 Effective Time . . . . . . . . . . . . . . . . . . . . . . 3 1.5 Exemption from Registration . . . . . . . . . . . . . . . 4 1.6 Surrender and Exchange of Outstanding Certificates; Status of Outstanding Certificates; Fractional Shares . . . . . . . . . . . . . . . . . . . . 4 1.7 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . 4 1.8 Articles of Incorporation; Bylaws; Directors and Officers of the Surviving Corporation . . . . . . . . . . 4 1.9 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 2 REPRESENTATIONS AND WARRANTIES REGARDING LIMBEX . . . . . . . . . . . . . . . . . . . . . 5 2.1 Organization and Standing . . . . . . . . . . . . . . . . 5 2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 6 2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 6 2.4 Authority, Approval and Enforceability . . . . . . . . . . 6 2.5 Financial Statements and Other Financial Information . . . . . . . . . . . . . . . . . . . . . . . 7 2.6 Material Adverse Change . . . . . . . . . . . . . . . . . 7 2.7 Properties . . . . . . . . . . . . . . . . . . . . . . . . 7 2.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 8 2.9 Material Agreements . . . . . . . . . . . . . . . . . . . 8 2.10 Intellectual Property Rights . . . . . . . . . . . . . . . 8 2.11 Employees and Employee Benefit Plans . . . . . . . . . . 10 2.12 Environmental and Safety Laws . . . . . . . . . . . . . 10 2.13 Compliance with Laws . . . . . . . . . . . . . . . . . . 11 2.14 Absence of Litigation . . . . . . . . . . . . . . . . . 11 2.15 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 11 2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.17 Compliance with Instruments . . . . . . . . . . . . . . 13 2.18 Related Party Transactions . . . . . . . . . . . . . . . 13 2.19 Disclosure; Accuracy of Documents and Information . . . 14
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Page ---- ARTICLE 2A REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 14 2A.1 Authority, Approval and Enforceability. . . . . . . . . 14 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF QUARTERDECK . . . . . 15 3.1 Organization and Standing . . . . . . . . . . . . . . . 15 3.2 Authority, Approval and Enforceability . . . . . . . . . 15 3.3 Financial Statements and Reports . . . . . . . . . . . . 16 3.4 Quarterdeck Common Stock . . . . . . . . . . . . . . . . 17 3.5 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 4 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 17 4.1 Maintenance of Business . . . . . . . . . . . . . . . . 17 4.2 Tax Treatment . . . . . . . . . . . . . . . . . . . . . 17 4.3 Other Discussions . . . . . . . . . . . . . . . . . . . 17 4.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . 17 4.5 Shareholder Vote; Investment Representation Certificate . . . . . . . . . . . . . . . . . . . . . . 18 4.6 Registration Rights; NASDAQ Listing . . . . . . . . . . 18 4.7 Access to Information . . . . . . . . . . . . . . . . . 18 4.8 Business Plan . . . . . . . . . . . . . . . . . . . . . 18 4.9 Employment Agreements . . . . . . . . . . . . . . . . . 18 4.10 Existing Agreement . . . . . . . . . . . . . . . . . . . 20 4.11 Supplements to Schedules . . . . . . . . . . . . . . . . 20 4.12 Limbex Stock Options . . . . . . . . . . . . . . . . . . 21 ARTICLE 5 CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . 21 5.1 Conditions to Obligations of Quarterdeck, the Shareholders and Limbex . . . . . . . . . . . . . . . . 21 5.2 Conditions to Obligations of Quarterdeck . . . . . . . . 21 5.3 Conditions to Obligations of Limbex and the Shareholders . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 6 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . 22 6.1 Survival of Representations, Warranties, Covenants and Agreements . . . . . . . . . . . . . . . . 22 6.2 Indemnification of Quarterdeck . . . . . . . . . . . . . 23 6.3 Indemnification of the Shareholders . . . . . . . . . . 25 6.4 Procedure for Indemnification of Quarterdeck and the Surviving Corporation with Respect to Non-Third Party Claims . . . . . . . . . . . . . . . 25
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Page ---- 6.5 Procedure for Indemnification of the Shareholders with Respect to Non-Third Party Claims . . . . . . . . . 27 6.6 Procedure for Indemnification with Respect to Third-Party Claims . . . . . . . . . . . . . . . . . . . 27 6.7 Procedure for Indemnification with Respect to Certain Claims . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE 7 TERMINATION . . . . . . . . . . . . . . . . . . . . . . 29 7.1 Termination by Mutual Consent . . . . . . . . . . . . . 29 7.2 Effect of Termination . . . . . . . . . . . . . . . . . 29 ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30 8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . 30 8.2 Entire Agreement; Modifications; Waiver . . . . . . . . 30 8.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . 31 8.4 Publicity . . . . . . . . . . . . . . . . . . . . . . . 31 8.5 Successors and Assigns . . . . . . . . . . . . . . . . . 31 8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . 31 8.7 Further Assurances . . . . . . . . . . . . . . . . . . . 32 8.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 32 8.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . 32 8.10 Appointment of Escrow Committee . . . . . . . . . . . . 32 8.11 Covenant Not To Compete . . . . . . . . . . . . . . . . 32
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EXHIBITS -------- Exhibit A Merger Consideration Exhibit B Escrow Agreement Exhibit C Registration Rights Agreement Exhibit D Investment Representation Certificate Exhibit E Limbex Stock Options
iv 6 AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization (the "Agreement") is entered into as of August 13, 1996, by and among Quarterdeck Corporation, a Delaware corporation ("Quarterdeck"), Limbex Corporation, a California corporation ("Limbex"), and the shareholders of Limbex set forth on the signature page hereto (the "Shareholders"). RECITALS The parties hereto intend that, subject to the terms and conditions hereinafter set forth, Quarterdeck will acquire Limbex in accordance with the terms of this Agreement by way of a merger (the "Merger") of a subsidiary of Quarterdeck incorporated in California ("Merger Sub") with and into Limbex, as a result of which (i) all outstanding shares of capital stock of Merger Sub will automatically be converted into the same number of shares of Common Stock of Limbex, (ii) all of the outstanding shares of Convertible Preferred Stock - Series B, $.00001 par value per share, of Limbex ("Series B Preferred"), and common stock, $.00001 par value per share, of Limbex ("Limbex Common Stock," and collectively with the Series B Preferred, "Limbex Stock"), except for shares of Limbex Stock owned by Quarterdeck, will automatically be converted into the right to receive shares of common stock of Quarterdeck ("Quarterdeck Common Stock") or, under certain circumstances, cash, (iii) all of the outstanding shares of Limbex Stock owned by Quarterdeck and all of the outstanding shares of Limbex's Convertible Preferred - Series A, par value $.00001 per share ("Series A Preferred") owned by Quarterdeck will be canceled, and no payment shall be made nor other consideration paid with respect thereto, and (iv) all outstanding options to acquire Limbex Common Stock will be assumed by Quarterdeck and become options to acquire Quarterdeck Common Stock, each on the terms and conditions set forth herein. As used in this Agreement, the term "Limbex Stock" does not include the Series A Preferred. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows: ARTICLE 1 PLAN OF REORGANIZATION 1.1 BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL. The respective boards of directors of Quarterdeck and Limbex have duly adopted and approved this Agreement, and this Agreement shall be submitted to the shareholders of Limbex for approval in accordance with the applicable provisions of the California Corporations Code (the "California Law"). 1.2 THE MERGER. Subject to the terms and conditions of this Agreement Merger Sub shall be merged with and into Limbex (the "Merger") pursuant to California Law, with Limbex as the surviving corporation. At the Effective Time (as hereinafter defined), the 7 separate existence of Merger Sub shall cease and Limbex, as the surviving corporation in the Merger, shall continue its corporate existence under California Law. As a result of the Merger, at the Effective Time, (i) all of the issued and outstanding shares of Merger Sub will automatically be converted into the same number of shares of common stock of Limbex, (ii) all of the issued and outstanding shares of Limbex Stock (other than (a) shares as to which dissenters' rights are perfected under Chapter 13 of the California Law, (b) any shares of Limbex Stock owned by Limbex or any direct or indirect wholly-owned subsidiary of Limbex (such shares described in this clause (b) are referred to herein as the "Non-Participating Shares"), (c) any shares of Limbex Stock owned by Quarterdeck and any shares of Series A Preferred, (d) any shares of Limbex Stock owned by Morgan, which are addressed in Section 1.2(c) below, and (e) any shares of Limbex Stock owned by Inference, which are addressed in Section 1.2(d) below) shall automatically be converted into the right to receive in the aggregate 1,197,009 shares of Quarterdeck Common Stock on the SEC Effective Date (as defined below). (a) On the date on which the Securities and Exchange Commission (the "SEC") declares effective the registration statement on Form S-3 of Quarterdeck to be filed with the SEC pursuant to Section 2(a)(i) of the Registration Rights Agreement to be entered into among Quarterdeck and the Shareholders substantially in the form of Exhibit C hereto (the "SEC Effective Date"), Quarterdeck shall issue to each Shareholder (other than Morgan, Inference, Quarterdeck, Limbex or any wholly-owned subsidiary of Limbex) the number of shares of Quarterdeck Common Stock set forth opposite such Shareholder's name on Exhibit A hereto. (b) Any shares of Limbex Common Stock owned by Quarterdeck and all shares of Series A Preferred shall be canceled in the Merger, and no payment shall be made nor other consideration paid with respect thereto. Any Non-Participating Shares shall be canceled in the Merger, and no securities of Quarterdeck or other consideration shall be delivered in exchange therefor. (c) As a result of the Merger, at the Effective Time, all of the issued and outstanding shares of Limbex Stock owned by Howard Morgan shall automatically be converted into the right to receive (i) 34,984 shares of Quarterdeck Common Stock on the Closing Date and (ii) cash in an amount equal to the fair market value of 18,838 shares of Quarterdeck Common Stock, based upon the average closing sales price of Quarterdeck Common Stock for a period of five trading days ending on the trading day two trading days prior to the Closing Date, payable at the time that Howard Morgan is required by federal tax laws to pay income taxes with respect to the shares of Quarterdeck Common Stock received in the Merger; provided, however, that in no event shall Quarterdeck pay such amount later than January 31, 1997, and offset by any and all amounts that Mr. Morgan owes at such time to Quarterdeck. (d) As a result of the Merger, at the Effective Time, (i) all of the issued and outstanding shares of Limbex Common Stock owned by Inference shall automatically be converted into the right to receive on the Closing Date a number of shares of 2 8 Quarterdeck Common Stock equal to $610,526 divided by the average closing sales price of Quarterdeck Common Stock for the period of five trading days ending on the trading day two trading days prior to the Closing Date, and (ii) all of the issued and outstanding shares of Series B Preferred shall automatically be converted into the right to receive $3,599,753 from Quarterdeck on the first anniversary of the Closing Date (the "Inference Preferred Consideration Date"), which may be paid, at Quarterdeck's option, in cash, a number of shares of Quarterdeck Common Stock equal to $3,599,753 divided by the average closing sales price of Quarterdeck Common Stock for the period of five trading days ending on the trading day two trading days prior to the Inference Preferred Consideration Date, or a combination of cash and shares of Quarterdeck Common Stock. (e) Prior to the Distribution Date (as defined in the Rights Agreement), all references in this Agreement to the Quarterdeck Common Stock to be received pursuant to the Merger shall be deemed to include the corresponding percentage of a right (the "Right") to purchase shares of Series A Junior Participating Preferred Stock of Quarterdeck pursuant to the Rights Agreement dated as of August 11, 1992, between Quarterdeck and Bank of America NT&SA, as Rights Agent (the "Rights Agreement"). (f) If, between the date of this Agreement and the various dates at which shares of Quarterdeck Common Stock may be issued pursuant to the Merger, the outstanding shares of Quarterdeck Common Stock shall have been changed into a different number of shares or a different class by reason of any reclassification, recapitalization, split, reverse split, stock dividend or combination, the consideration to be issued to the holders of Limbex Stock pursuant to the Merger shall be correspondingly adjusted. (g) In the event that Quarterdeck enters into an agreement with any corporation, partnership, person or other entity or group (other than any affiliate or associate of Quarterdeck) (a "Third Party") pursuant to which such Third Party agrees to acquire (the "Acquisition") all of the then outstanding capital stock of Quarterdeck or substantially all of the assets of Quarterdeck and the Acquisition is consummated prior to the Inference Preferred Consideration Date, then the issuance of any shares of Quarterdeck Common Stock to Inference with respect to the Series B Preferred Stock shall occur immediately prior to the consummation of the Acquisition (the "Acquisition Issuance Date") and all references to the Inference Preferred Consideration Date in this Article 1 shall instead mean the Acquisition Issuance Date. 1.3 THE CLOSING. The closing (the "Closing") of the Merger shall take place at the principal executive offices of Quarterdeck Corporation, (assuming the satisfaction or satisfactory waiver of all conditions set forth in Article 5 of this Agreement) simultaneously with the Effective Time. The date on which the Closing occurs is referred to herein as the "Closing Date." 1.4 EFFECTIVE TIME. The Merger shall become effective immediately upon the filing of the appropriate certificate of merger and related instruments with the office of the Secretary of State for the State of California (the "Effective Time"). 3 9 1.5 EXEMPTION FROM REGISTRATION. The Quarterdeck Common Stock to be issued in connection with the Merger will be issued in a transaction exempt from registration under the Securities Act of 1933, as amended, and exempt from registration or qualification under the California Corporate Securities Law (the "California Securities Act"). 1.6 SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES; STATUS OF OUTSTANDING CERTIFICATES; FRACTIONAL SHARES. The conversion of shares of Limbex Stock into the right to receive shares of Quarterdeck Common Stock or cash as provided for by this Agreement shall occur automatically at the Effective Time without further action by the holders thereof. Until surrendered, each certificate that prior to the Effective Time represented shares of Limbex Stock will be deemed to evidence the right to receive that number of shares of Quarterdeck Common Stock and/or the amount of cash into which such Limbex Stock has been converted. Stock certificates for fractions of Quarterdeck Common Stock shall not be issued in the Merger and such fractional interests shall not entitle the owners thereof to vote, to receive dividends or to exercise any other right of a stockholder with respect to such fractional interest. In lieu of any such fractional interests, each holder of Limbex Stock who would otherwise have been entitled to a fraction of a share of Quarterdeck Common Stock upon surrender of stock certificates will be paid cash (rounded to the nearest cent, 0.5 cents to be rounded to 1 cent) upon such surrender in an amount equal to such fraction times the closing sale price of a share of Quarterdeck Common Stock on the Nasdaq National Market on the Closing Date. 1.7 DISSENTERS' RIGHTS. Holders of Limbex Stock who have complied with all requirements for perfecting the dissenters' rights as set forth in Chapter 13 of the California Law shall be entitled to their rights under such laws. Limbex shall give Quarterdeck prompt written notice of any assertions of dissenters' rights or withdrawals of assertions of dissenters' rights, and any other instrument in respect thereof received by Limbex and the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal. 1.8 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. (a) The articles of incorporation and bylaws of Merger Sub, as in effect on the Effective Date, shall be (until amended or repealed as provided by law) the articles of incorporation and bylaws of the surviving corporation, respectively, except that such articles of incorporation shall be amended to provide that the name of the surviving corporation shall be Limbex Corporation. (b) The directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officers of the surviving corporation until their successors are elected or appointed and qualified. 1.9 ESCROW. A portion of the shares of Quarterdeck Common Stock to be issued and cash to be paid in the Merger to the Shareholders other than Inference (the "Escrow Consideration") shall be delivered by Quarterdeck on behalf of such Shareholders into escrow and shall be held in escrow as collateral for the indemnification obligations of the Shareholders 4 10 pursuant to Article 6 of this Agreement and disbursed pursuant to the terms of an escrow agreement ("Escrow Agreement") substantially in the form attached hereto as Exhibit B. Quarterdeck shall, upon issuance of consideration in the Merger from time to time, deliver into escrow on behalf of the Shareholders (other than Inference) the number of shares of Quarterdeck Common Stock or the amount of cash set forth opposite such Shareholder's name on Exhibit A hereto. ARTICLE 2 REPRESENTATIONS AND WARRANTIES REGARDING LIMBEX Alex Jacobson ("Jacobson") and Brad Allen ("Allen") represent and warrant to Quarterdeck as follows: 2.1 ORGANIZATION AND STANDING. (a) Limbex is a corporation duly organized, validly existing and in good standing under the laws of the State of California, has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. Whenever used in this Article 2, "Material Adverse Effect" shall mean any fact, event or condition, or the absence of any fact, event or condition, as the context requires, which, individually or in the aggregate, would have a material adverse effect on the business, properties, condition (financial or otherwise) or results of operations of Limbex. (b) Limbex has delivered to Quarterdeck complete and accurate copies of its Articles of Incorporation and Bylaws and minutes of all of its directors' and shareholders' meetings. Limbex stock books provided to Quarterdeck are complete and accurate as of the date hereof. 2.2 CAPITALIZATION. (a) The authorized capital stock of Limbex consists of (i) 10,000,000 shares of Limbex Common Stock and (ii) 1,684,422 shares of preferred stock, par value $.00001 per share. Schedule 2.2 accurately sets forth the outstanding shares of capital stock of Limbex (including any rights, options or warrants to purchase shares of capital stock of Limbex) as well as the ownership thereof. Except as set forth on Schedule 2.2, there are no outstanding shares of capital stock of Limbex and there are no options, warrants or other securities convertible into shares of capital stock of Limbex nor any other rights, agreements or arrangements with respect to the issuance of capital stock of Limbex or securities convertible into or exchangeable for capital stock of Limbex. (b) (i) all of the issued and outstanding shares of Limbex Stock and the Series A Preferred have been duly authorized and validly issued, are fully paid and non assessable, and were issued in full compliance with all applicable federal and state securities 5 11 laws and were not issued in violation of any preemptive rights; (ii) none of the issued and outstanding shares of Limbex Stock is subject to repurchase and (iii) all outstanding options to purchase capital stock of Limbex have been granted in accordance with Limbex's stock option plans (true and correct copies of which have been delivered to Quarterdeck) and all applicable securities laws. (c) Except for any restrictions imposed by applicable state and federal securities laws, there is no right of first refusal, co-sale right, right of participation, right of first offer, option or other restriction on transfer applicable to any shares of Limbex Stock. Limbex is not a party or subject to any agreement, and there is no agreement between or among any Shareholders that affects or relates to the voting or giving of written consent with respect to any shares of Limbex Stock other than (i) the Voting Trust and Transfer Restriction Agreement, dated as of May 9, 1995, between Jacobson and Allen, (ii) the Shareholder Voting Agreement, dated as of May 9, 1995, among Quarterdeck, Inference, Jacobson, Allen and Morgan and (iii) the Buy-Sell Agreement, dated as of May 9, 1995, among Quarterdeck, Inference, Jacobson, Allen and Morgan, all of which will terminate at or prior to the Effective Time. 2.3 SUBSIDIARIES. Limbex does not own, directly or indirectly, an interest in any corporation, partnership, business, trust or other entity. 2.4 AUTHORITY, APPROVAL AND ENFORCEABILITY. (a) Subject to obtaining any required approvals of the holders of Limbex Stock and the Series A Preferred, Limbex has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and all corporate action on its part necessary for such execution, delivery and performance has been duly taken. (b) The execution and delivery by Limbex of this Agreement does not, and the performance and consummation of the transactions contemplated by this Agreement will not, result in any conflict with, breach or violation of or default, termination or forfeiture under (or upon the failure to give notice or the lapse of time, or both, result in any conflict with, breach or violation of or default, termination or forfeiture under) any terms or provisions of (i) its Articles of Incorporation or Bylaws, (ii) any statute, rule, regulation, or any judicial, governmental, regulatory or administrative decree, order or judgment applicable to Limbex, or (iii) any material agreement, lease or other instrument to which it is a party or by which it or any of its assets may be bound. (c) No consent, approval, authorization, order, registration, qualification or filing of or with any court or any regulatory authority or any other governmental or administrative body is required on the part of Limbex for the consummation by it of the transactions contemplated by this Agreement, except the filing of the certificate of merger and related instruments with the Secretary of State of the State of California. 6 12 (d) Upon due execution and delivery by Limbex, this Agreement will be its legal, valid and binding obligation, enforceable against it in accordance with the terms hereof, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and subject to the availability of equitable remedies. 2.5 FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION. (a) Limbex has delivered to Quarterdeck complete copies of its unaudited balance sheet as of June 30, 1996 and the related unaudited statements of income (loss) and retained earnings (deficit) for the periods then ended (collectively, the "Limbex Financials"). The Limbex Financials present fairly (but not in accordance with GAAP) its financial position as of such date and the results of its operations and cash flows for the period then ended. Certain financial transactions and liabilities reflected in the Limbex Financials, including royalty advances paid to Quarterdeck by Limbex and payments from Limbex to Inference, although fairly presented, may not be presented in accordance with GAAP. (b) There is no outstanding claim, liability or obligation of any nature, whether absolute, accrued, contingent or otherwise, known to Limbex, Jacobson or Allen, other than the liabilities and obligations reflected on the Limbex Financials, except for (i) liabilities and obligations incurred in the ordinary course of business since the date of the Limbex Financials and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required to be reflected in the Limbex Financials in order fairly to present its financial position. (c) All of the accounts receivable reflected on the Limbex Financials (other than accounts receivable from Quarterdeck) and all accounts receivable incurred since that date are or have been fully collectible in the normal course of business and there are no known or asserted claims or other rights of set-off against any thereof, except to the extent of any reserves set forth therefore on the Limbex Financials. (d) All of the accounts payable reflected on the Limbex Financials and all accounts payable incurred since that date arose in the ordinary course of business, and there is no such account payable delinquent in its payment. 2.6 MATERIAL ADVERSE CHANGE. Since June 30, 1996, to the best knowledge of Jacobson and Allen, there has not been any material adverse change in the assets, liabilities, financial condition, or operating results of Limbex from that reflected in the Limbex Financials. 2.7 PROPERTIES. Except for the Intellectual Property of Limbex, which is defined in and covered by Section 2.10, Limbex has good title to, valid leasehold interests in, or other right to use all of the assets used in its operations, free and clear of any mortgages, pledges, security interests, encumbrances, material restrictions or adverse claims. All of such assets are in good 7 13 operating condition, normal wear and tear excepted, and are adequate and suitable for the purposes for which they are presently being used. 2.8 INSURANCE. Schedule 2.8 sets forth a list of the insurance policies held by Limbex. Limbex is in compliance with each of such policies such that none of the coverage provided under such policies has been invalidated. 2.9 MATERIAL AGREEMENTS. (a) Schedule 2.9 sets forth a list of the oral and written agreements to which Limbex is a party or to which it is subject presently in effect involving aggregate annual payments in excess of $10,000. (b) To the best knowledge of Jacobson and Allen, no party to any such contract, agreement or arrangement intends to cancel, withdraw, modify or amend such agreement or arrangement except as expressly provided in this Agreement. (c) Limbex has performed all material obligations required to be performed by it on or prior to the date hereof under each contract, obligation, commitment, agreement, undertaking, arrangement or lease referred to in this Section 2.9, except for such failures to perform, defaults, breaches, or violations under such instruments or obligations that would not have a Material Adverse Effect. 2.10 INTELLECTUAL PROPERTY RIGHTS. (a) (i) Limbex has full title and ownership of or rights to utilize all license rights, copyrights, trade secrets, information, proprietary rights and processes necessary for or used in its business as now conducted (collectively, "Intellectual Property") without any infringement of the copyrights and trade secret rights of others; (ii) all Intellectual Property is valid, subsisting, unexpired, enforceable and has not been abandoned; (iii) no holding, decision or judgment has been rendered by any governmental authority which would limit, cancel or question the validity of any Intellectual Property; (iv) except for (A) the Technology License Agreement dated May 5, 1995 between Limbex and Inference and the Software Publishing Agreement dated May 5, 1995, as amended, between Limbex and Quarterdeck and (B) agreements and licenses entered into in the ordinary course of business, there are no outstanding options, licenses, liens, encumbrances or agreements of any kind relating to the foregoing nor is Limbex bound by or a party to any options, licenses, liens, encumbrances or agreements of any kind with respect to the Intellectual Property of any other person or entity; (v) Limbex has not received any communications nor is it or Jacobson or Allen aware of any entity alleging that Limbex has infringed or, by conducting its business as currently conducted, would infringe any intellectual property right of any other person or entity; (vi) Limbex, Jacobson and Allen are not aware of any infringement of the Intellectual Property by third parties; (vii) Limbex has not received any communication from any governmental agency stating that Limbex is not entitled to register, or receive patents for, any of its Intellectual Property; (viii) Limbex, Jacobson and Allen are not aware that any of Limbex's employees or consultants is obligated under any contract (including licenses, 8 14 covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his or her best efforts to promote and secure the Intellectual Property of Limbex or that would conflict with its business as conducted; provided, however, that this representation shall not be violated by any agreement by any Limbex employee to refrain from disclosing or using the confidential information of any former employer or other third party or otherwise with respect to any trade secrets or other intellectual property rights of any former employer or third party; (ix) to the best knowledge of Limbex, Jacobson and Allen, neither the execution nor delivery of this Agreement, nor the carrying on of Limbex's business by Limbex's employees or consultants, nor the conduct of Limbex's business as currently conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees or consultants of Limbex is now obligated; (x) each of Limbex's employees and consultants who participate in the creation of Intellectual Property, past and present, have executed agreements with Limbex assigning or licensing his or her rights in any Intellectual Property to Limbex; and (xi) Limbex, Jacobson and Allen do not believe it is or will be necessary to utilize any inventions of any of its employees or consultants (or persons it currently intends to hire as service providers) made prior to their employment by it. Schedule 2.10 also sets forth all material patents, patent applications, trademarks (registered or unregistered) copyrights, processes, and license agreements owned or licensed by Limbex that are necessary for or used in its business as now conducted. All of Limbex's license agreements or assignments with respect to its Intellectual Property are in writing and evidence legitimate ownership or licensing of such rights in Limbex. All royalty obligations of Limbex are listed on Schedule 2.10. No unlicensed invention that is shown as being owned by any employee or consultant of Limbex is necessary for the conduct of Limbex business as presently conducted. (b) To the best knowledge of Limbex, Jacobson and Allen, Limbex is not making unauthorized use of any confidential information of third parties nor any confidential information in which any of its present or past employees or other service providers, has claimed a proprietary interest; and Limbex, Jacobson and Allen are not aware of any facts that would give rise to such a claim. (c) Without limiting the generality of the foregoing representations, Limbex expressly represents and warrants that: (i) Limbex is not a party to any existing or unexpired consulting agreements pursuant to which Limbex provides consulting services to others; (ii) Limbex, Jacobson and Allen are not aware of any event that has occurred which would give rise to any present or future liability under any agreement to provide indemnification for infringement of any third party rights or otherwise; and (iii) Limbex is not in arrears in the payment of any royalty obligations pursuant to any license agreements with third parties concerning the Intellectual Property. 9 15 2.11 EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 2.11, Limbex does not maintain and is not a party to any compensation or employee benefit plans, programs or contracts within the meaning of Section 3(3) of ERISA (the "Compensation and Benefit Programs") for employees or former employees or their dependents. Limbex has provided Quarterdeck with all documents and government filings relating to the Compensation and Benefit Programs. The Compensation and Benefit Programs have been maintained in all material respects, in compliance with all applicable laws, and there are no material liabilities associated with the Compensation and Benefit Programs (statutory, contractual or otherwise) which have not been fully funded by Limbex. Neither Limbex nor any ERISA Affiliate has sponsored, maintained or contributed to, or has had any obligation to constitute, any pension plan regulated under Title IV of ERISA within the last six years. No Compensation or Benefit Program provides benefits described in Section 3(1) of ERISA to any former employees or retirees of Limbex or any ERISA Affiliate except as required under Part 6 Title I of ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" of Limbex means any other person (other than Quarterdeck and Inference) that, together with Limbex as of the relevant measuring date under ERISA, was or is required to be treated as a single employer under Section 414 of the Code. 2.12 ENVIRONMENTAL AND SAFETY LAWS. Limbex has, in all material respects, complied and is in compliance with all applicable local, state and federal environmental laws, regulations, ordinances and administrative and judicial orders relating to the generation, recycling, use, sale, storage, handling, transfer and disposal of any Hazardous Substances, and Limbex has not been alleged to be in violation of, or been subject to any administrative, judicial or regulatory proceeding pursuant to, such laws or regulations. As used herein, "Hazardous Substances" shall mean any asbestos, petroleum or any substance or material defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or other similar term, by any federal, state or local environmental statute, regulation or ordinance presently in effect, including, without limitation, any material or substance which is designated or defined as a "hazardous substance," "hazardous waste" or "toxic substance" in (i) the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., and any amendments thereto, (ii) the Federal Resource Conservation and Recovery Act 42 U.S.C. Section Section 6901 et seq., and any amendments thereto, (iii) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., and any amendments 10 16 thereto, or (iv) the Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq., and any amendments thereto. 2.13 COMPLIANCE WITH LAWS. Limbex has complied in all material respects with all foreign, federal, state, local and county laws, ordinances, regulations, judgments, orders, decrees or rules of any court, arbitrator or governmental, regulatory or administrative agency or entity applicable to its business. Limbex has all valid and current permits, licenses, orders, authorizations, registrations, approvals and other analogous instruments (and each is in full force and effect) and Limbex has made all filings and registrations and the like necessary or required by law to conduct its business, except where the failure to maintain such permits and other instruments or to make such filings and registrations would not have a Material Adverse Effect. Limbex has not received any governmental notice of any violation by Limbex of any such laws, rules, regulation or orders. Limbex is not in default or material noncompliance under any such permits, consents, or similar instruments. 2.14 ABSENCE OF LITIGATION. Limbex is not a party to any litigation, claim, arbitration, investigation or other proceeding, nor is there any such litigation, claim, arbitration, investigation or other proceeding threatened against Limbex. Neither Limbex nor any of its officers or directors is bound by any judgment, decree, injunction, ruling or order of any court, governmental, regulatory or administrative department, commission, agency or instrumentality, arbitrator or any other person that relates to Limbex or its business. 2.15 NO BROKERS. Limbex is not obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with any transaction contemplated hereby or thereby. 2.16 TAXES. (a) Definitions. For purposes of this Agreement: (i) the term "Taxes" means (A) all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, franchise, withholding, payroll, employment, excise, property or other taxes of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto, (B) any liability for payment of amounts described in clause (A) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of law and (C) any liability for the payment of amounts described in clauses (A) or (B) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other person; and the term "Tax" means any one of the foregoing Taxes; and (ii) the term "Returns" means all returns, statements and other documents required to be filed in respect of Taxes, and the term "Return" means any one of the foregoing Returns. 11 17 (b) Limbex has completed and filed on a timely basis (giving effect to valid extensions of time for filing) and in materially correct form all Returns required to be filed. As of the time of filing, the filed Returns did not materially misstate the income, assets, operations, activities, status or other matters of Limbex or any other information required to be shown thereon, to the extent the same are relevant for Tax purposes and none of such Returns contains a disclosure statement under Section 6662 of the Code (or any predecessor provision or comparable provision of state, local or foreign law). Limbex will complete and file on a timely basis (giving effect to valid extensions of time for filing) and in a materially correct manner all Returns required to be filed after the date of this Agreement and on or prior to the Closing. (c) With respect to all amounts in respect of Taxes attributable to all taxable periods or portions of periods ending on or before the date of Closing, all applicable Tax laws and agreements have been complied with in all material respects, and all such amounts required to be paid by Limbex to taxing authorities or others have been paid or, if due but remain payable without penalty or interest, have been adequately reserved for. Limbex does not owe any Taxes on compensation paid to any of its employees, other than Taxes that are not yet due and payable. (d) (i) none of the Limbex Returns have been audited or are under audit by any tax authority, and Limbex has not received notice of a forthcoming audit of its Returns; (ii) no claim has been made by a Tax authority in a jurisdiction where Limbex does not file Returns that it is or may be subject to Tax by that jurisdiction; (iii) no extensions or waivers of statutes of limitations with respect to the Returns have been given by or requested from Limbex; and (iv) no power of attorney granted by Limbex with respect to Taxes is in force. (e) There are no liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of Limbex. (f) Limbex is not a party to or bound by any tax indemnity, tax sharing or tax allocation agreement. (g) Limbex has never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code, or a member of combined, consolidated or unitary group for state, local or foreign Tax purposes. Limbex has not filed a consent pursuant to the collapsible corporation provisions of Section 341(f) of the Code (or any corresponding provision of state, local or foreign income Tax law) or agreed to have Section 341(f)(2) of the Code (or any corresponding provision of state, local or foreign income Tax law) apply to any disposition of any asset owned by it. (h) Limbex has not agreed to make, nor is it required to make, any adjustment under Sections 481(a) or 263A of the Code or any comparable provision of state or foreign tax laws by reason of a change in accounting method or otherwise. Limbex has taken no action that is not in accordance with past practice that could defer a liability for Taxes of 12 18 Limbex or the Shareholders from any taxable period ending on or before the Closing Date to any taxable period ending after such date. (i) Limbex is not a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in connection with the Merger, any change of control of Limbex or any other transaction contemplated by this Agreement, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. (j) Limbex is not, and has not been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. (k) As of the date hereof, no shareholder of Limbex is other than a United States person within the meaning of the Code. (l) Limbex does not have and has not had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States and such foreign country, and Limbex has not engaged in a trade or business within any foreign country. (m) The unpaid Taxes of Limbex as of the date hereof are not materially in excess of the unpaid liability for Taxes reflected on the most recent accounting books of Limbex heretofore provided to Quarterdeck. No material Tax liability of Limbex has been incurred since January 1, 1996, other than in the ordinary course of business. (n) Except for those options issued to Howard Morgan and Peter Tierney, all outstanding options to acquire equity of the Limbex that purport to be or were otherwise intended (when issued) to be treated as "incentive stock options" ("ISOs") within the meaning of Section 422 of the Code (and any predecessor provision and any similar provision applicable state, local or other Tax law) were issued in compliance with such section. Other than those options issued to Howard Morgan and Peter Tierney, all such outstanding options currently qualify for treatment as ISOs, and are held by persons who are employees of Limbex. The representations and warranties contained in this Section 2.16(n) are not intended to expand in any way the rights of the option holders of Limbex or expand any representations or warranties made to them by Limbex or create any representations or warranties to them by Limbex. 2.17 COMPLIANCE WITH INSTRUMENTS. Limbex is not in violation of or conflict with, breach of or in default under (either with the giving of notice or the passage of time or both) any term or provision of its Articles of Incorporation or Bylaws, or any agreement, arrangement, contract, lease or other instrument to which it or its properties is subject except where such would not have a Material Adverse Effect. 2.18 RELATED PARTY TRANSACTIONS. Except as set forth on Schedule 2.18, no employee, officer or director of Limbex or member of his or her immediate family is indebted 13 19 to Limbex, nor is Limbex indebted (or committed to make loans or extend or guarantee credit) to any of them. None of such persons has any direct or indirect ownership interest in any firm or corporation with which Limbex is affiliated or with which Limbex has a business relationship, or any firm or corporation that competes with Limbex, except that the employees, officers or directors of Limbex and members of their immediate families may own stock in publicly traded companies that may compete with Limbex. No member of the immediate family of any officer or director of Limbex is directly interested in any material contract with Limbex. 2.19 DISCLOSURE; ACCURACY OF DOCUMENTS AND INFORMATION. No representation or warranty made by Limbex, Jacobson or Allen in this Agreement, when taken together, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The copies of all instruments, agreements, other documents delivered by Limbex to Quarterdeck or their counsel pursuant to this Agreement shall be complete and correct in all material respects as of the date of delivery thereof. ARTICLE 2A REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS Each of the Shareholders severally and not jointly represent and warrant to Quarterdeck as follows: 2A.1 AUTHORITY, APPROVAL AND ENFORCEABILITY. (a) Such Shareholder (other than Inference) has the full power and authority to execute, deliver and perform its obligations under this Agreement and the Escrow Agreement, and all action on its part necessary for such execution, delivery and performance has been duly taken. Inference has the full corporate power and corporate authority to execute, deliver and perform its obligations under this Agreement, and all action on its part necessary for such execution, delivery and performance has been duly taken. (b) The execution and delivery by such Shareholder of this Agreement does not, and the performance and consummation of the transactions contemplated by this Agreement and the Escrow Agreement will not, result in any conflict with, breach or violation of or default, termination or forfeiture under (or upon the failure to give notice or the lapse of time, or both, result in any conflict with, material breach or violation of or default, termination or forfeiture under) any statute, rule, regulation, judicial, governmental, regulatory or administrative decree, order or judgment applicable to such Shareholder, or any material agreement or other instrument to which it is a party or to which it or any of its assets is subject. (c) Upon due execution and delivery by such Shareholder, this Agreement and the Escrow Agreement (except with respect to Inference) will be his, her or its 14 20 legal, valid and binding obligation, enforceable against him, her or it in accordance with the respective terms hereof and thereof, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and subject to the availability of equitable remedies. (d) Such Shareholder is the record and beneficial owner of the shares of Limbex Stock reflected as owned by him, her or it on Schedule 2.2, free and clear of any and all liens, security interests, encumbrances or claims. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF QUARTERDECK Quarterdeck represents and warrants to Limbex and the Shareholders as follows: 3.1 ORGANIZATION AND STANDING. Quarterdeck is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware, has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. Whenever used in this Article 3, "Material Adverse Effect" shall mean and be defined as any fact, event or condition, or the absence of any fact, event or condition, as the context requires, which, individually or in the aggregate, would have a material adverse effect on the business, properties, condition (financial or otherwise) or results of operations of Quarterdeck and its subsidiaries (on a consolidated basis). 3.2 AUTHORITY, APPROVAL AND ENFORCEABILITY. (a) Each of Quarterdeck and Merger Sub has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Escrow Agreement, and the Registration Rights Agreement, and all corporate action on its part necessary for such execution, delivery and performance has been duly taken. No vote or consent of the stockholders of Quarterdeck is required in connection with the transactions contemplated by this Agreement including the Merger. (b) The execution and delivery by Quarterdeck and Merger Sub of this Agreement and the Escrow Agreement and the execution and delivery by Quarterdeck of the Registration Rights Agreement do not, and the performance and consummation of the transactions contemplated by this Agreement, the Escrow Agreement and the Registration Rights Agreement will not, result in any conflict with, breach or violation of or default, termination or forfeiture under (or upon the failure to give notice or the lapse of time, or both, result in any conflict with, breach or violation of or default, termination or forfeiture under) any terms or provisions of (i) their respective Certificate or Articles of Incorporation, as the 15 21 case may be, or Bylaws, (ii) any statute, rule, regulation or any judicial, governmental, regulatory or administrative decree, order or judgment, or (iii) any material agreement, lease or other instrument to which it is a party or to which it or any of its assets may be bound. (c) No consent, approval, authorization, order, registration, qualification or filing of or with any court or any regulatory authority or any other governmental or administrative body is required on the part of Quarterdeck or Merger Sub for the consummation by Quarterdeck and Merger Sub of the transactions contemplated by this Agreement, except any approvals or filings required under state "blue sky" laws (which will be obtained or made in accordance with such laws by Quarterdeck on a timely basis) and the filing of the certificate of merger and related instruments with the Secretary of State of the State of California. (d) Upon due execution and delivery by the parties hereto and thereto, this Agreement, the Escrow Agreement and the Registration Rights Agreement will be the legal, valid and binding obligation of Quarterdeck, and this Agreement and the Escrow Agreement will be the legal, valid and binding obligation of Merger Sub enforceable against Quarterdeck or Merger Sub, as the case may be, in accordance with the respective terms hereof and thereof, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally. 3.3 FINANCIAL STATEMENTS AND REPORTS. Quarterdeck has timely filed all required forms, reports, statements and documents with the Securities and Exchange Commission (the "Commission") all of which have complied in all material respects with all applicable requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Quarterdeck has delivered or made available to Limbex and the Shareholders true and complete copies of (i) Quarterdeck's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, (ii) its proxy statement relating to Quarterdeck's annual stockholders meeting held February 2, 1996, and (iii) all other forms, reports, statements and documents filed by Quarterdeck with the Commission since September 30, 1995 (collectively, the "Quarterdeck Reports"). As of their respective dates, the Quarterdeck Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The consolidated financial statements of Quarterdeck included or incorporated by reference in the Quarterdeck Reports were prepared in accordance with GAAP applied on a consistent basis (except as otherwise stated in such financial statements or, in the case of audited statements, the related report thereon of independent certified public accounts), and present fairly the financial position and results of operations, cash flows and of changes in stockholders' equity of Quarterdeck and its consolidated subsidiaries as of the dates and for the periods indicated, subject, in the case of unaudited interim financial statements, to normal year-end audit adjustments, none of which either singly or in the aggregate are or will be material, and except that the unaudited interim financial statements do not contain all of the disclosures required by GAAP. 16 22 3.4 QUARTERDECK COMMON STOCK. The shares of Quarterdeck Common Stock to be issued to the holders of Limbex Stock as contemplated hereunder are duly authorized, and when issued pursuant to the terms of this Agreement, will be validly issued, fully paid, non- assessable and not subject to any preemptive rights. 3.5 NO BROKERS. Quarterdeck is not obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with any transaction contemplated hereby or thereby. ARTICLE 4 COVENANTS 4.1 MAINTENANCE OF BUSINESS. Except as otherwise contemplated by this Agreement, during the period from the date hereof to the Effective Time, Limbex agrees to carry on its business in the ordinary course and in substantially in the same manner as it has prior to the date of this Agreement and agrees not to enter into any material agreements or take any other significant actions outside the ordinary course of business without the prior written consent of Quarterdeck, which consent shall not be unreasonably withheld. 4.2 TAX TREATMENT. Quarterdeck, Limbex and the Shareholders understand and agree that the Merger will be treated for federal income tax purposes as a taxable sale by the Shareholders of the Limbex Stock and not as a "reorganization" within the meaning of Section 368(a) of the Code, and agree to treat the Merger as such on their income tax returns reflecting the Merger. Quarterdeck, Limbex and the Shareholders agree that no party to this Agreement is (i) making any representation or warranty as to the tax consequences of the Merger or (ii) indemnifying any party to this Agreement for any tax consequences of the Merger. 4.3 OTHER DISCUSSIONS. From and after the date of this Agreement until the Closing or this Agreement is terminated in accordance with its terms, neither Limbex nor any of its officers, directors, agents or representatives (including the Shareholders) will initiate discussions, solicit or negotiate (including providing any non-public information concerning its business), or authorize any person or entity to discuss, solicit or negotiate on its or their behalf, with any other party concerning the possible sale or disposition of all or any material portion of Limbex's business, assets or capital stock. Limbex will immediately notify Quarterdeck, however, if any offer is received from a potential purchaser or of any discussions with a potential purchaser. 4.4 BEST EFFORTS. Each party will use its best efforts to cause all conditions to the Closing to be satisfied as soon as practicable. Without limiting any party's rights or remedies for any breach of any representations or warranty made hereunder, each party shall use its best efforts to obtain any consents necessary or desirable in connection with the consummation of the transactions contemplated by this Agreement. 17 23 4.5 SHAREHOLDER VOTE; INVESTMENT REPRESENTATION CERTIFICATE. Until this Agreement has been terminated in accordance with its terms, the Shareholders agree to vote all shares of Limbex Stock held by them in favor of the Merger. Each of the Shareholders shall execute an Investment Representation Certificate in the form attached hereto as Exhibit B (the "Investment Representation Certificate"). 4.6 REGISTRATION RIGHTS; NASDAQ LISTING. Quarterdeck shall provide to the Shareholders of Limbex registration rights pursuant to the terms of a registration rights agreement (the "Registration Rights Agreement") substantially in the form of Exhibit C attached hereto. Quarterdeck shall cause the shares of Quarterdeck Common Stock to be issued pursuant to this Agreement to be listed as of the date such shares are issued on the Nasdaq National Market. 4.7 ACCESS TO INFORMATION. Quarterdeck shall continue to have access to the facilities, employees, and records of Limbex; provided, however, all confidential information obtained by Quarterdeck will be kept confidential in accordance with the terms of the Confidentiality Agreement previously entered into between Quarterdeck and Limbex (the "Confidentiality Agreement"). 4.8 BUSINESS PLAN. The parties have agreed upon a business plan (the "Business Plan") for the business of Limbex (the "Limbex Business"), which includes a product development plan. The Business Plan may not be materially modified without the consent of Jacobson and Allen so long as they remain employees of Quarterdeck. Quarterdeck will contribute to the Limbex Business the amounts by which the amounts required to carry out the Business Plan exceed the cash generated by the Limbex Business on an on-going basis, provided that Quarterdeck shall not be obligated to contribute more than the amount to be specified in a budget to be incorporated into the Business Plan. The day to day operations of the Limbex Business will be conducted by Jacobson or Allen, so long as they are employees of Quarterdeck, subject to senior management and the Board of Directors of Quarterdeck having the authority to manage the Limbex Business. 4.9 EMPLOYMENT AGREEMENTS. (a) As a condition to the closing of the Merger, each of Jacobson and Allen will enter into an employment agreement with Quarterdeck. The vesting period for options granted to Jacobson and Allen and the acceleration of such vesting shall be as set forth in subparagraph (b) below, provided that (i) in the event Quarterdeck terminates Jacobson or Allen without Cause (as defined in their Employment Agreements) or Jacobson or Allen leave with Good Reason (as defined below), fifty percent (50%) of any options not yet vested in the terminated individual shall automatically and immediately vest, (ii) for a period of one (1) year following any such termination without Cause or following any such departure for Good Reason, the terminated individual shall be retained by Quarterdeck to perform ongoing services as an independent contractor consultant on terms to be mutually agreed upon, and during such one (1) year period such individual will achieve vested rights in the same number of shares that would have vested had such individual continued to be employed by Quarterdeck 18 24 during such one (1) year period (i.e., one quarter of the total options granted shall be subject to vesting during such period) with such vested shares to be in addition to all previously vested shares, including without limitation shares previously vested pursuant to clause (i) of this Subsection 4.9(a). "Good Reason" shall mean (x) Quarterdeck's material violation of its obligations under the Employment Agreement of Jacobson or Allen, as the case may be, provided that such violation shall not be deemed Good Reason if Quarterdeck cures such violation within thirty (30) days after notice thereof or (ii) the substantial diminution of Jacobson's or Allen's, as the case may be, duties and responsibilities. (b) Quarterdeck shall initially grant as of the Closing Date a total of 300,000 non-qualified options to acquire shares of Quarterdeck Common Stock to employees of the Limbex Business (including Jacobson and Allen), with the allocation of such options to individual employees to be determined by Jacobson and Allen as part of the management of the Limbex Business, subject to approval by the Quarterdeck compensation committee. Quarterdeck senior management will recommend approval by the Quarterdeck compensation committee of the allocation of options determined by Jacobson and Allen and endeavor to obtain such approval. Such options shall vest over a period of four (4) years, provided that if Quarterdeck Common Stock achieves the values set forth below at any time during the option period, outstanding unvested options shall vest immediately on the date of achievement of the acceleration trigger, with the options so vested to be applied pro rata among the holders of outstanding unvested options, such that the aggregate number of vested options (including options vested immediately prior to the achievement of the applicable acceleration trigger) shall equal the number set forth opposite each such acceleration trigger:
Acceleration Trigger Number of Vested Options -------------------- ------------------------ $17 100,000 $22 200,000 $32 300,000
(c) Provided that Jacobson or Allen (or both Jacobson and Allen) remains in the employ of Quarterdeck, Quarterdeck shall grant as of the first, second, and third anniversaries of the Closing Date an additional 100,000 options to acquire shares of Quarterdeck Common Stock on each such anniversary (i.e., a total of 300,000 additional options), which options shall be allocated to employees of the Limbex Business (including Jacobson and Allen) as determined by Jacobson and Allen, if both remain employed by Quarterdeck, or by Jacobson or Allen, if only one remains employed by Quarterdeck, subject to approval by the Quarterdeck compensation committee. Quarterdeck senior management will recommend approval by the Quarterdeck compensation committee of the allocation of options determined by Jacobson and/or Allen and endeavor to obtain such approval. Such options shall also vest over a period of four (4) years, provided that if Quarterdeck Common Stock achieves the values set forth below at any time during the option period, outstanding unvested options shall vest immediately (to the extent of outstanding options) on the date of achievement of the acceleration trigger, with options so vested to be applied pro rata among the holders of 19 25 outstanding unvested options, such that the aggregate number of vested options (including options vested immediately prior to the achievement of the applicable acceleration trigger) shall equal the number set forth opposite each such acceleration trigger:
Acceleration Trigger Number of Options -------------------- ----------------- $47 100,000 $57 200,000 $67 300,000
(d) Quarterdeck Common Stock shall be deemed to have achieved the values set forth in subparagraphs (b) and (c) above if (i) the closing sale price of Quarterdeck Common Stock as of the close of each trading day during a period of forty-five (45) consecutive days equals or exceeds the specified value, or (ii) the average closing sale price of Quarterdeck Common Stock for the trading days during a period of forty-five (45) consecutive days equals or exceeds the specified value, and the closing sale price of Quarterdeck Common Stock is equal to or greater than the specified value on at least thirty (30) of such forty-five (45) consecutive days. In the event that Quarterdeck Common Stock achieves the applicable acceleration trigger value prior to the date of grant of the applicable option, such option shall be fully vested as of the date of grant provided that the closing sale price of the Quarterdeck Common Stock as of the date of grant of the option is equal to or higher than the applicable acceleration trigger value. To the extent that the vesting of options is accelerated pursuant to subparagraphs (b) or (c), the remaining options not so accelerated shall vest pro rata over the remainder of the four year vesting period. (e) The exercise price for the options pursuant to this Section 4.9 shall be the fair market value of the Quarterdeck Common Stock as of the date of grant of the applicable option. All shares of Quarterdeck Common Stock issued upon exercise of options granted pursuant to this Section 4.9 shall be registered on or before the date of issuance on Form S-8. 4.10 EXISTING AGREEMENTS. All existing agreements between Limbex and any party(ies) hereto will, upon the closing, terminate and be of no further force and effect, other than (i) the Technology License Agreement, dated May 9, 1995, between Inference and Limbex, as amended by Amendment No. 1 and Amendment No. 2 thereto (the "License Agreement"), and (ii) Stock Purchase Agreement, dated July 31, 1996, among Limbex, Inference, Jacobson and Allen. 4.11 SUPPLEMENTS TO SCHEDULES. From time to time prior to the Closing Date, Allen and Jacobson will promptly inform Quarterdeck and Quarterdeck will promptly inform Allen and Jacobson in writing of any matter known to any of them hereafter arising (as distinguished from matters that existed prior to the date hereof) that, if existing or occurring on or prior to the date hereof, would have been required to be set forth or described in the Schedules hereto or as an exception to the representations and warranties herein. No action or 20 26 inaction by Allen, Jacobson, Limbex or Quarterdeck following receipt of any such information shall constitute a waiver of any of its rights hereunder. 4.12 LIMBEX STOCK OPTIONS. Each option to acquire shares of Limbex Common Stock outstanding at the Closing (the "Limbex Stock Options") shall be assumed by Quarterdeck at the Closing (subject to execution by each holder of (i) an option agreement with Quarterdeck and (ii) a release and termination agreement with Limbex terminating such holder's Limbex Stock Option and releasing Limbex from any obligations thereunder), and shall become options to acquire 0.53553237 of a share of Quarterdeck Common Stock for each share of Limbex Common Stock previously subject to the Option at an exercise price per share equal to the exercise price per share of Limbex Common Stock divided by 0.53553237. The options to acquire shares of Quarterdeck Common Stock shall be (x)(A) in the case of Limbex Stock Options that are ISOs, ISOs of Quarterdeck, and (B) in the case of Limbex Stock Options that are non-qualified options, non-qualified stock options of Quarterdeck, (y) fully vested at the assumption and (z) issued under Quarterdeck's Amended and Restated 1990 Stock Incentive Plan (relating to securities that have been registered on Registration Statements on Form S-8). The assumed options shall be evidenced by the standard forms of option agreement used in connection with such plans. Exhibit E hereto sets forth the outstanding Limbex Stock Options as of the date hereof. ARTICLE 5 CONDITIONS TO MERGER 5.1 CONDITIONS TO OBLIGATIONS OF QUARTERDECK, THE SHAREHOLDERS AND LIMBEX. The respective obligations of Quarterdeck, the Shareholders and Limbex to consummate the transactions contemplated hereby are subject to satisfaction (or waiver) of the following conditions: (a) The parties hereto shall have obtained all consents and approvals of shareholders and third parties (including governmental authorities) required to consummate the transactions contemplated by this Agreement. (b) Consummation of the transactions contemplated by this Agreement shall not violate any order, decree or judgment of any court, and if any order, decree or judgment of any court would be so violated, the parties shall use their reasonable efforts to seek the modification, rescission, withdrawal or elimination of such order, decree or judgment as soon as practicable in order to permit the Closing to occur. (c) The Escrow Agreement, the Registration Rights Agreement and the Employment Agreements shall be executed and delivered by the parties thereto. 5.2 CONDITIONS TO OBLIGATIONS OF QUARTERDECK. The obligations of Quarterdeck to consummate the transactions contemplated hereby are subject to satisfaction (or waiver) of the following conditions: 21 27 (a) The representations and warranties of Limbex and the Shareholders made herein shall be true and correct in all material respects as of the Closing Date. (To the extent Allen, Jacobson or Limbex hereafter provides supplements to the Schedules hereto as provided in Section 4.11 hereof, such supplements shall not be deemed a breach of the representations and warranties of Limbex and the Shareholders hereunder, but to the extent that any such supplement or supplements constitute a material adverse change to the representations and warranties contained herein, such supplement or supplements may constitute a basis for the failure of a condition in the preceding sentence; the provisions of this sentence shall not apply to the correction of any representation or warranty that was untrue as of the date hereof.) Limbex and the Shareholders shall have performed in all material respects all obligations and agreements undertaken to be performed by them at or prior to the Closing. (b) Quarterdeck shall have received the Investment Representation Certificate executed by each of the Shareholders. (c) Quarterdeck shall be satisfied that no holders of Limbex Stock shall exercise dissenters' rights in connection with the Merger. 5.3 CONDITIONS TO OBLIGATIONS OF LIMBEX AND THE SHAREHOLDERS. The obligations of Limbex and the Shareholders to consummate the transactions contemplated hereby are subject to satisfaction (or waiver) of the following conditions: (a) The representations and warranties of Quarterdeck made herein shall be true and correct in all material respects as of the Closing Date. Quarterdeck shall have performed in all material respects all obligations and agreements undertaken to be performed by it at or prior to the Closing. (b) The shares of Quarterdeck Common Stock to be issued in the Merger shall be approved for listing on the Nasdaq National Market. ARTICLE 6 INDEMNITY 6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS. All representations, warranties, covenants and agreements of Quarterdeck, Limbex and the Shareholders in this Agreement shall survive the execution, delivery, and performance of this Agreement in accordance with this paragraph. All representations and warranties of each party set forth in this Agreement shall be deemed to have been made again by such party at and as of the Closing Date. Quarterdeck shall, on behalf of the Shareholders (other than Inference), deliver the Escrow Consideration into escrow as provided in the Escrow Agreement. The Escrow Consideration shall be released from escrow one year from the Closing Date (except to the extent that claims have been submitted or notice of a claim has been provided during such one year period) in accordance with the terms of the Escrow Agreement. The representations and warranties of Quarterdeck and the Shareholders set forth 22 28 in this Agreement shall terminate (absent fraud or willful misrepresentation) on the date two years from the Closing Date (except to the extent that claims have been submitted or notice of the claim has been provided during such two year period), except for Sections 2.2(a) and 2A.1(d), which shall not terminate, and Section 2.16, which shall terminate upon the expiration of the statutes of limitations applicable to the matters covered thereby. 6.2 INDEMNIFICATION OF QUARTERDECK. (a) Each of the Shareholders other than Inference (the "Indemnifying Shareholders"), jointly and severally, agree to indemnify, defend and hold harmless Quarterdeck and its affiliates, successors, assigns, agents and representatives (collectively, the "Affiliated Parties") from and against any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, remedies and penalties, including interest, penalties and reasonable attorneys' fees and expenses (collectively, "Losses") that any of them shall incur or suffer to the extent they arise from or are attributable to by reason of or in connection with any breach or inaccuracy of the representations and warranties contained in Article 2 of this Agreement. (i) No claim, demand, suit or cause of action shall be brought under this Section 6.2(a) unless and until the aggregate amount of claims under this Section 6.2(a) exceeds $50,000, in which event Quarterdeck and the Affiliated Parties shall be entitled to indemnification for all claims under this Section 6.2(a) in excess of such $50,000. (ii) The liability of the Shareholders other than Inference, Jacobson and Allen under this Section 6.2(a) shall be limited to the return to Quarterdeck of Escrow Consideration, whether or not such Escrow Consideration has been issued or paid and delivered into, or released from, escrow. (iii) The liability of Jacobson and Allen under this Section 6.2(a) shall be full recourse and shall not be limited to the return of Escrow Consideration, subject to Section 6.2(e); provided, however, that the liability of Jacobson and Allen shall not be full recourse (and shall instead be limited to the Escrow Consideration, whether or not such Escrow Consideration has been issued and delivered into or released from escrow) with respect to a breach of the representations and warranties contained in Section 2.10 hereof that are qualified to the knowledge, awareness or belief of Limbex, Jacobson or Allen unless Jacobson or Allen had knowledge, awareness or belief of the facts or circumstances causing the breach of such representations or warranties. (b) Each of the Shareholders, severally and not jointly, agrees to indemnify, defend and hold harmless Quarterdeck and the Affiliated Parties against and in respect of any Losses that any of them shall incur or suffer to the extent they arise from or are attributable to by reason of or in connection with any breach or inaccuracy of such Shareholder's representations or warranties contained in Article 2A of this Agreement. (i) Quarterdeck's and the Affiliated Parties' recourse against the Escrow Consideration in respect of a claim against any Shareholder under this 23 29 Section 6.2(b) shall be limited to the return to Quarterdeck of Escrow Consideration allocable to such Shareholder determined pursuant to the Escrow Agreement, whether or not such Escrow Consideration has been issued or paid and delivered into, or released from, escrow. (ii) The liability of the Shareholders under Section 6.2(b) shall be full recourse and shall not be limited to the return of Escrow Consideration, subject to Section 6.2(e). (c) For purposes of the indemnification set forth in this Article 6, the fair market value of one share of Quarterdeck Common Stock shall be equal to the average closing sales price of Quarterdeck Common Stock on the Nasdaq National Market on each trading day during a period of five trading days ending on the trading day two trading days prior to the date on which a claim is paid under this Article 6. (d) No disclosure by Limbex or the Shareholders other than as set forth in this Agreement or the schedules hereto nor any investigation made by or on behalf of Quarterdeck with respect to Limbex or the Shareholders shall be deemed to affect Quarterdeck's reliance on the representations and warranties made by Limbex or the Shareholders contained in this Agreement and shall not constitute a waiver of Quarterdeck's rights to indemnity as herein provided for the breach or inaccuracy of any of Limbex's or the Shareholders' representations or warranties under this Agreement. (e) Notwithstanding anything else in this Section 6.2 to the contrary, the aggregate liability of each Shareholder (other than Inference) under Sections 6.2(a), 6.2(b) and 6.2(f) shall not exceed the amount received or to be received by such Shareholder in connection with the Merger, with the fair market value of one share of Quarterdeck Common Stock equal to the average closing sales price of Quarterdeck Common Stock on the Nasdaq National Market on each trading day during a period of five trading days ending on the trading day two trading days prior to the SEC Effective Date and the aggregate liability of Inference under Section 6.2(b) shall not exceed $4,210,279; provided, however, that nothing in this Section 6.2(e) shall limit Quarterdeck's right to full recourse against all of the Escrow Consideration attributable to such Shareholder or Shareholders regardless of the value of such Escrow Consideration and whether or not such Escrow Consideration has been released from escrow. The indemnity obligations set forth in this Section 6.2 shall be the exclusive remedy of Quarterdeck with respect to a breach or inaccuracy of the representations and warranties of the Shareholders, other than with respect to liability arising out of, involving or relating to intentional fraud or willful misrepresentation or a breach of Section 8.11. (f) Allen and Jacobson agree to indemnify and hold harmless Quarterdeck, and any current or future employee or director of Quarterdeck, from and against any and all costs, expenses, liabilities and damages (including but not limited to attorneys fees, taxes, interest and penalties) resulting from a determination by a taxing authority that (i) the Limbex options that purport to be ISOs were not ISOs immediately prior to the time they were assumed by Quarterdeck in connection with the Merger, or (ii) the acceleration of the vesting 24 30 schedule set forth in such Limbex options resulted in such options being treated other than as ISOs. 6.3 INDEMNIFICATION OF THE SHAREHOLDERS. (a) Quarterdeck agrees to indemnify, defend and hold harmless the Shareholders (and their respective successors and assigns) from and against and in respect of, any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, remedies and penalties, including interest, penalties and reasonable attorneys' fees and expenses (collectively, "Shareholder Losses") that any of the Shareholders shall incur or suffer and which arise from or are attributable to by reason of or in connection with any breach or inaccuracy of Quarterdeck's representations or warranties contained in this Agreement. (b) No claims, demand, suit or cause of action shall be brought against the Shareholders under this Section 6.3 unless and until the aggregate amount of claims under this Section 6.3 exceeds $50,000, in which event the Shareholders shall be entitled to indemnification from Quarterdeck for all claims under this Section 6.3 in excess of such $50,000. Quarterdeck shall have no obligations under this Section 6.3 for an amount in excess of the fair market value of Quarterdeck Common Stock received or to be received by Jacobson and Allen in connection with the Merger and the fair market value of Limbex Escrow Shares (as defined in the Escrow Agreement) and Escrow Cash received or to be received by Howard Morgan, Thelma Birks, Michelle Kraus and Clay Chisum, with the fair market value of one share of Quarterdeck Common Stock equal to the average closing sales price of Quarterdeck Common Stock on the Nasdaq National Market on each trading day during a period of five trading days ending on the trading day two trading days prior to the SEC Effective Date. The indemnity obligations set forth in this Section 6.3 shall be the exclusive remedy of the Shareholders with respect to a breach or inaccuracy of the representations and warranties of Quarterdeck, other than with respect to liability arising out of, involving or relating to intentional fraud or willful misrepresentation. (c) No disclosure by Quarterdeck other than as set forth in this Agreement or the schedules hereto nor any investigation made by or on behalf of the Shareholders with respect to Quarterdeck shall be deemed to affect the Shareholders' reliance on the representations and warranties made by Quarterdeck contained in this Agreement and shall not constitute a waiver of the Shareholders' rights to indemnity as herein provided for the breach or inaccuracy of any of Quarterdeck's representations or warranties under this Agreement. 6.4 PROCEDURE FOR INDEMNIFICATION OF QUARTERDECK AND THE SURVIVING CORPORATION WITH RESPECT TO NON-THIRD PARTY CLAIMS. Prior to termination of the escrow for the Escrow Consideration, Quarterdeck and the Affiliated Parties shall not be entitled to seek recourse against a Shareholder in satisfaction of a claim under Section 6.2 without first seeking recourse against the Escrow Consideration allocable to such Shareholder in the escrow, unless (i) the amount of such claim against such Shareholder, when taken together with all other claims against such Shareholder by all of the indemnified parties, exceeds the aggregate 25 31 fair market value of the Escrow Consideration (with the fair market value of Escrow Shares being determined pursuant to Section 6.2(c)) allocable to such Shareholder in escrow at the time such claim is initiated and (ii) such Shareholder's liability hereunder in respect of such claim is not limited to the Escrow Consideration, in which event the indemnified party may seek direct recourse against such Shareholder in respect of such claim. If Quarterdeck shall have any claim against the Shareholders pursuant to this Article 6 for which it seeks recourse against the Escrow Consideration (but excluding claims resulting from the assertion of liability by third parties), Quarterdeck shall promptly give written notice thereof to the Escrow Agent (as defined in the Escrow Agreement) and the escrow committee established pursuant to the terms of the Escrow Agreement (the "Committee"), including in such notice a brief description of the facts upon which such claim is based and the amount thereof. If the Committee objects to the allowance of any such claims, it shall give written notice to Quarterdeck and the Escrow Agent within forty-five (45) days following receipt of Quarterdeck's notice of claim, advising Quarterdeck and the Escrow Agent that it does not consent to the delivery of any or some of the Escrow Consideration out of escrow for application to such claims. If no such written notice is timely provided by the Committee to Quarterdeck and the Escrow Agent and received by the Escrow Agent within forty-five (45) days following the Committee's receipt of Quarterdeck's notice of claim, the Escrow Agent shall, within five business days after the expiration of the prior notice period, deliver out of escrow the lesser of: (a) the portion of the Escrow Consideration most nearly equal in value to the amount of the claim or claims thus to be satisfied, or (b) all of the Escrow Consideration. If the Committee notifies Quarterdeck and the Escrow Agent receives written notice within the foregoing forty-five (45) day period that the Committee objects to such application of the Escrow Consideration after a claim has been made, the Escrow Agent shall hold the Escrow Consideration in an amount most nearly equal in value to the amount of the claim or claims then made in escrow until the rights of the Shareholders and Quarterdeck with respect thereto have been agreed upon between the Committee and Quarterdeck in accordance with the Escrow Agreement and the Escrow Agent receives written notice accordingly or the Escrow Agent is directed by a court or arbitration panel. If any distribution referred to in this Section 6.4 involves less than all of the Escrow Consideration, it shall be allocated pro rata against the Escrow Consideration therein based on the Escrow Consideration beneficially owned by each Shareholder (unless the claim made is based on an inaccuracy or breach of a representation or warranty contained in Article 2A of this Agreement, in which case the allocation of the distribution of the Escrow Consideration shall be determined in accordance with Section 6.2(b)). If Quarterdeck has any claim against any Shareholder or Shareholders pursuant to this Article 6 (but excluding claims resulting from the assertion of liability by third parties) outside of the Escrow or over and above the amount of the Escrow Consideration, Quarterdeck shall promptly give written notice thereof to such Shareholder or Shareholders, including in such notice a brief description of the facts upon which such claim is based and the amount thereof. If such Shareholder or Shareholders, within forty-five (45) days after receipt of Quarterdeck's notice of claim, do not give written notice to Quarterdeck announcing their intent to contest such assertion of Quarterdeck such assertion shall be deemed accepted and the amount of claim shall be deemed a valid claim and such Shareholder or Shareholders shall, within fifteen (15) days after expiration of the prior notice period deliver to Quarterdeck the amount of the claim. In the event, however, that such Shareholder or Shareholders contest the assertion of a claim by giving such written notice to 26 32 Quarterdeck within said period, then the parties shall act in good faith to reach agreement regarding such claim. In the event the parties (other than Inference) are unable to reach an agreement regarding such claim, such claim shall be settled in accordance with Section 2.5 of the Escrow Agreement. 6.5 PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS WITH RESPECT TO NON-THIRD PARTY CLAIMS. If any Shareholder has any claim against Quarterdeck pursuant to this Article 6 (but excluding claims resulting from the assertion of liability by third parties), the Shareholder shall promptly give written notice thereof to Quarterdeck, including in such notice a brief description of the facts upon which such claim is based and the amount thereof. If Quarterdeck, within forty five (45) days after receipt of the Shareholders' notice of claim, does not give written notice to the Shareholders announcing its intent to contest such assertion of the Shareholder such assertion shall be deemed accepted and the amount of claim shall be deemed a valid claim and Quarterdeck shall, within fifteen (15) days after expiration of the prior notice period, deliver to the Shareholders the amount of the claim, which, if such claim is brought on behalf of all Shareholders, shall be allocated on a pro rata basis based on the number of shares of Limbex Stock beneficially owned by each Shareholder as set forth in Schedule 2.2. In the event, however, that Quarterdeck contests the assertion of a claim by giving such written notice to the Shareholders within said period, then the parties shall act in good faith to reach agreement regarding such claim. In the event the parties are unable to reach an agreement regarding such claim, such claim shall be settled in accordance with Section 2.5 of the Escrow Agreement. 6.6 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD-PARTY CLAIMS. (a) If an indemnified party determines to seek indemnification under this Article 6 with respect to a claim resulting from the assertion of liability by third parties, such indemnified party shall promptly give notice to the indemnifying parties of facts upon which any such claim is based; the notice shall set forth such material information with respect thereto as is then reasonably available to such indemnified party. In case any such liability is asserted against the indemnified party, and the indemnified party notifies the indemnifying parties thereof, the indemnifying parties will be entitled, if such indemnifying parties so elect by written notice delivered to the indemnified party within fifteen (15) business days after receiving the indemnified party's notice, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. Notwithstanding the foregoing, (i) the indemnified party shall also have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless the indemnified party shall reasonably determine that there is a conflict of interest between or among the indemnified party and any indemnifying party with respect to such claim, in which case the fees and expenses of such counsel will be borne by such indemnifying parties and (ii) the rights of an indemnified party to be indemnified hereunder in respect of claims resulting from the assertion of liability by third parties shall not be adversely affected by its failure to give notice pursuant to the foregoing unless, and, if so, only to the extent that, such indemnifying parties are materially prejudiced thereby. With respect to any assertion of liability by a third party that 27 33 results in an indemnifiable claim, the parties hereto shall make available to each other all relevant information in their possession material to any such assertion. (b) In the event that such indemnifying parties, within fifteen (15) business days after receipt of the aforesaid notice of a claim, fail to assume the defense of an indemnified party against such claim, the indemnified party shall have the right to undertake the defense, compromise, or settlement of such action on behalf of and for the account, expense, and risk of such indemnifying parties. (c) Notwithstanding anything in this Article 6 to the contrary, if there is a reasonable probability that a claim may materially adversely affect an indemnified party, the indemnified party shall have the right to participate (at the indemnified party's expense) in such defense, compromise, or settlement and such indemnifying parties shall not, without the indemnified party's written consent (which consent shall not be unreasonably withheld), settle or compromise any such claim or consent to entry of any judgment in respect thereof unless such settlement, compromise, or consent includes as an unconditional term thereof the giving by the claimant or the plaintiff to the indemnified party a release from all liability in form and substance satisfactory to such indemnified party in respect of such claim. If the indemnifying parties notify the indemnified party that they wish to accept a bona fide written offer to settle or compromise from any such claimant or plaintiff (which offer includes a release of the indemnified party from all liability in respect of such claim), and the indemnified party does not consent to such settlement or compromise, the indemnifying parties shall not be liable under this Section 6.6 for the amount by which any Losses from any subsequent settlement, compromise or judgment with respect to such claim exceeds such bona fide written offer; provided, however, that, if one or more of the Shareholders is the indemnifying party and Quarterdeck or any of the Affiliated Parties is the indemnified party, the provisions of this sentence shall not apply unless, at the time the indemnifying parties give notice of their desire to accept a bona fide written offer, all such indemnifying parties (i) acknowledge in writing to Quarterdeck that Quarterdeck and the Affiliated Parties are entitled unconditionally to indemnification under this Agreement by the Shareholders for such settlement or compromise and (ii) provide to Quarterdeck evidence reasonably satisfactory to Quarterdeck that such parties have the financial ability to satisfy any liability resulting from such settlement or compromise. (d) In the event Quarterdeck is an "indemnified party" with respect to a third party claim for which it seeks recourse against the Escrow Consideration and a settlement or judgment is reached with respect to such claim, such indemnified party shall promptly give written notice thereof to the Committee and the Escrow Agent, including in such notice a brief description of the settlement or judgment and the amount thereof. If the Committee objects to the allowance of any such claims, it shall give written notice to such indemnified party and the Escrow Agent within thirty 28 34 (30) days following receipt of such notice of claim, advising such indemnified party and the Escrow Agent that it does not consent to the delivery of any or a portion of the Escrow Consideration out of escrow to such indemnified party for application to such claims. If no such written notice is timely provided by the Committee to such indemnified party and received by the Escrow Agent within thirty (30) days following the Committee's receipt of Quarterdeck's notice of claim, the Escrow Agent shall, within five (5) business days after the expiration of the prior thirty (30) day notice period, deliver out of escrow the lesser of: (a) that portion of the Escrow Consideration most nearly equal in value to the amount of the claim or claims thus to be satisfied, or (b) all of the Escrow Consideration. If the Committee notifies such indemnified party and the Escrow Agent receives such written notice within the foregoing thirty (30) day period that the Committee objects to such application of the Escrow Consideration, the Escrow Agent shall hold the Escrow Consideration in escrow until the rights of the Shareholders and such indemnified party with respect thereto have been agreed upon between the Committee and such indemnified party or until such rights are finally determined in accordance with the Escrow Agreement and the Escrow Agent receives written notice accordingly. If any distribution referred to in this Section 6.6 involves less than all of the Escrow Consideration, it shall be allocated pro rata against the Escrow Consideration therein based on the Escrow Consideration beneficially owned by each Shareholder (unless the claim made is based on an inaccuracy or breach of a representation or warranty contained in Article 2A of this Agreement, in which case the allocation distribution of the Escrow Shares shall be determined in accordance with Section 6.2(b)). 6.7 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO CERTAIN CLAIMS. Notwithstanding the provisions of this Section 6, Quarterdeck shall not be entitled to seek recourse against any Shareholder or against the Escrow Consideration allocable to any Shareholder in satisfaction of a claim for which Inference has enforceable indemnification obligations to Limbex pursuant to the License Agreement without first seeking recourse against Inference. ARTICLE 7 TERMINATION 7.1 TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing, this Agreement may be terminated by written consent of Quarterdeck and Limbex, notwithstanding approval of the Merger by the shareholders of Limbex. In addition, this Agreement shall automatically terminate if the Closing does not occur on or before one month from the date hereof. 7.2 EFFECT OF TERMINATION. In the event of termination as provided above, the obligations of the parties hereunder shall terminate; provided, that (a) Sections 2.15, 3.5, 4.11, 8.1, 8.3, 8.4, 8.6, 8.8 and 8.9 of this Agreement and the Confidentiality Agreement shall survive such termination and continue in full force and effect and (b) nothing herein will relieve any party from liability for any breach of this Agreement prior to such termination. 29 35 ARTICLE 8 MISCELLANEOUS 8.1 NOTICES. Any notice given hereunder shall be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile) or the third day after mailing by certified or registered mail, postage prepaid, as follows: (a) If to Quarterdeck: Quarterdeck Corporation 13160 Mindanao Way, 3rd Floor Marina del Rey, CA 90292 Attention: Law Department Facsimile: (310) 309-4217 (b) If to Limbex: Limbex Corporation 13160 Mindanao Way, 2nd Floor Marina del Rey, CA 90292 Attention: Alex Jacobson and Brad Allen Facsimile: (310) 309-4282 (c) If to the Shareholders other than Inference: Limbex Corporation 13160 Mindanao Way, 2nd Floor Marina del Rey, CA 90292 Attention: Alex Jacobson and Brad Allen Facsimile: (310) 309-4282 (d) If to Inference: Inference Corporation 100 Rowland Way Novato, California 94945 Attention: William D. Griffin Facsimile: (415) 899-9080 or to such other address as any party may have furnished in writing to the other parties in the manner provided above. 8.2 ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement and the exhibits and schedules hereto and the documents referred to herein and the Confidentiality 30 36 Agreement between the parties hereto constitute the final, exclusive and complete understanding of the parties with respect to the subject matter hereof and supersede any and all prior agreements, understandings and discussions with respect thereto, including, without limitation, (i) the Amended and Restated Memorandum of Intent, dated January 30, 1996, (ii) the Amended and Restated Memorandum of Intent, dated June 12, 1996, by and among Quarterdeck, Limbex and the Shareholders, (iii) that certain Letter Agreement, dated July 31, 1996, by and among Quarterdeck, Limbex and certain of the shareholders of Limbex and (iv) that certain side Agreement, dated July 31, 1996, by and among Quarterdeck, Limbex and Inference. No variation or modification of this Agreement and no waiver of any provision or condition hereof, or granting of any consent contemplated hereby, shall be valid unless in writing and signed by the party against whom enforcement of any such variation, modification, waiver or consent is sought. The rights and remedies available to Quarterdeck and Limbex and the Shareholders pursuant to this Agreement and all exhibits hereunder shall be cumulative. 8.3 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall constitute an original copy hereof, but all of which together shall constitute one agreement. 8.4 PUBLICITY. Neither Limbex nor its officers or directors, nor the Shareholders, shall, unless required by law, issue any statement or communication to the general public or the press regarding the transactions contemplated hereby without the prior written consent of Quarterdeck. Neither Quarterdeck nor its officers or directors shall, unless required by law, issue any statement or communication to the general public or the press regarding the proposed transaction which mentions Inference unless Quarterdeck first provides written notice of such statement or communication to Inference. Quarterdeck may then issue such statement or communication if Inference does not object in writing thereto within 48 hours (or within such other time period as is reasonably practicable and specified in such notice to Inference). If Inference does object within such period, Quarterdeck and Inference shall in good faith attempt promptly to resolve their differences regarding such statement or communication before it is issued. 8.5 SUCCESSORS AND ASSIGNS. No party may, without the prior express written consent of each other party, assign this Agreement in whole or in part. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person, including, without limitation, any option holder of Limbex, any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. 8.6 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California as applied to contracts between California residents made and to be performed entirely within the State of California. 31 37 8.7 FURTHER ASSURANCES. At the request of any of the parties hereto, and without further consideration, the other parties agree to execute such documents and instruments and to do such further acts as may be necessary or desirable to effectuate the Merger. 8.8 EXPENSES. Provided that the Merger is consummated, Quarterdeck shall pay any legal fees incurred by Limbex (but not any shareholder thereof) in connection with the Merger up to the amount of $100,000 ("Reimbursable Counsel Fees"). Neither Quarterdeck nor Limbex shall be liable for or shall pay any Merger-related legal fees and expenses in excess of the Reimbursable Counsel Fees incurred prior to the consummation of the Merger. 8.9 ATTORNEYS' FEES. In the event of any suit or other proceeding to construe or enforce any provision of this Agreement or any other agreement to be entered into pursuant hereto, or otherwise in connection with this Agreement, the prevailing party's or parties' reasonable attorneys' fees and costs (in addition to all other amounts and relief to which such party or parties may be entitled) shall be paid by the other party or parties. 8.10 APPOINTMENT OF ESCROW COMMITTEE. By approval of this Agreement (by written consent or at a duly authorized shareholders' meeting) the shareholders shall appoint Allen and Jacobson as committee members pursuant to the Escrow Agreement. Such committee members shall have all of the authority granted pursuant to the Escrow Agreement. 8.11 COVENANT NOT TO COMPETE. Each of Allen and Jacobson, severally and not jointly, agree that for a period of three years from the Closing Date (the "Non-Compete Period"), he shall not, directly or indirectly, as principal, agent, employee, employer, consultant, stockholder, partner or in any other individual or representative capacity, engage in any business directly competitive with the business currently conducted by Limbex in any county or metropolitan area in which Limbex currently conducts business (the "Competitive Business"); provided, further, that if the employment of Allen or Jacobson is terminated by Quarterdeck without Cause or Jacobson or Allen terminate their employment with Quarterdeck with Good Reason (as defined in Section 4.9 of this Agreement) during the Non-Compete Period, Allen or Jacobson, as the case may be, shall not be obligated to refrain from engaging in the Competitive Business for more than one year from the date of such termination. Notwithstanding anything to the contrary contained herein, Allen and Jacobson may, without violating the provisions of this Section 8.11, purchase and hold up to 5% of any entity whose shares are publicly traded on NASDAQ or any U.S. stock exchange, whether or not such entity is engaged in a Competitive Business. Any provision of this Section 8.11 which is deemed invalid or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions of this paragraph in such jurisdiction or rendering that or any other provisions of this Agreement invalid or unenforceable in any other jurisdiction. If any covenant should be deemed invalid or unenforceable because of its scope, geographical area or duration, or any combination thereof, such covenant shall be modified and reformed so that the scope, geographic area and duration of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid and enforceable. For 32 38 purposes of this Section 8.11 only, each of the Allen and Jacobson agrees that the counties and metropolitan areas in which Limbex currently conducts business are those areas in which any product of Limbex may be purchased or is accessible through electronic or other means. 33 39 IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first above written. QUARTERDECK CORPORATION By: ------------------------------------- Title: LIMBEX CORPORATION By: ------------------------------------- Title: THE SHAREHOLDERS: ------------------------------------------- Bradley Allen ------------------------------------------- Alexander Jacobson ------------------------------------------- Howard Morgan ------------------------------------------- Thelma Birks ------------------------------------------- Michelle Kraus ------------------------------------------- Clay Chisum INFERENCE CORPORATION By: -------------------------------------- 34 40 EXHIBIT A MERGER CONSIDERATION TO BE RECEIVED AT CLOSING
SHARES TO BE RECEIVED NAME IN MERGER ---- --------- ESCROW NON-ESCROW TOTAL ------ ---------- ----- Inference -- 77,897(1) 77,897(1) Corporation Howard Morgan 3,498(2) 31,486(2) 34,984(2)
1 The shares of Limbex Common Stock owned by Inference shall automatically be converted into the right to receive on the Closing Date a number of shares of Quarterdeck Common Stock equal to $610,526 divided by the average closing sales price of Quarterdeck Common Stock for the period of five business days ending on the business day two business days prior to the Closing Date. 2 The shares of Limbex Common Stock owned by Howard Morgan shall automatically be converted into the right to receive (i) 34,984 shares of Quarterdeck Common Stock on the Closing Date and (ii) cash in an amount equal to the fair market value of 18,838 shares of Quarterdeck Common Stock, based upon the average closing sales price of Quarterdeck Common Stock for a period of five business days ending on the business day two business days prior to the Closing Date, payable at the time that Howard Morgan is required by federal tax laws to pay income taxes with respect to the shares of Quarterdeck Common Stock received in the Merger; provided, however, that in no event shall Quarterdeck pay such amount later than January 31, 1997, and offset by any and all amounts that Mr. Morgan owes at such time to Quarterdeck. 41 MERGER CONSIDERATION TO BE RECEIVED AFTER CLOSING
DATE TO BE SHARES TO BE RECEIVED CASH CONSIDERATION TO BE RECEIVED IN TOTAL NAME RECEIVED IN MERGER MERGER CONSIDERATION ---- --------- --------- ------ ------------- NON- NON- ESCROW ESCROW TOTAL ESCROW ESCROW TOTAL ------ ------ ----- ------ ------- ----- Inference First -- (1) (1) -- -- -- (1) Corporation Anniversary Howard Tax Payment -- -- -- $14,765(2) $132,880(2) $147,645(2) (2) Morgan Date Brad Allen SEC 60,296 542,668 602,964 -- -- -- 602,964 shares Effective Date Alex SEC 57,664 518,976 576,640 -- -- -- 576,640 shares Jacobson Effective Date Thelma SEC 1,338 12,050 13,388 -- -- -- 13,388 shares Birks Effective Date Clay SEC 268 2,410 2,678 -- -- -- 2,678 shares Chisum Effective Date Michelle SEC 134 1,205 1,339 -- -- -- 1,339 shares Kraus Effective Date
1 The shares of Limbex Series B Preferred owned by Inference shall automatically be converted into the right to receive on the Inference Preferred Consideration Date a number of shares of Quarterdeck Common Stock equal to $3,599,753 divided by the average closing sales price of Quarterdeck Common Stock for the period of five business days ending on the business day two business days prior to the Inference Preferred Consideration Date. 2 The shares of Limbex Common Stock owned by Howard Morgan shall automatically be converted into the right to receive (i) 34,984 shares of Quarterdeck Common Stock on the Closing Date and (ii) cash in an amount equal to the fair market value of 18,838 shares of Quarterdeck Common Stock, based upon the average closing sales price of Quarterdeck Common Stock for a period of five business days ending on the business day two business days prior to the Closing Date, payable at the time that Howard Morgan is required by federal tax laws to pay income taxes with respect to the shares of Quarterdeck Common Stock received in the Merger; provided, however, that in no event shall Quarterdeck pay such amount later than January 31, 1997, and offset by any and all amounts that Mr. Morgan owes at such time to Quarterdeck. 2 EX-99.2 3 ESCROW AGREEMENT 1 LIMBEX ESCROW AGREEMENT This Agreement is made and entered into as of this 13th day of August, 1996, by and among American Stock Transfer and Trust Company (the "Escrow Agent"), Quarterdeck Corporation, a Delaware corporation ("Quarterdeck"), the shareholders of Limbex Corporation ("Limbex") listed on the execution pages hereto (individually, a "Limbex Shareholder" and, collectively, the "Limbex Shareholders"), and Bradley Allen and Alexander Jacobson (the "Committee"). W I T N E S S E T H: WHEREAS, Quarterdeck, Limbex and the Limbex Shareholders have entered into an Agreement and Plan of Reorganization, dated as of August 13, 1996 (collectively, with all amendments, schedules, exhibits and certificates referred to therein, the "Reorganization Agreement"), which provides for the acquisition of Limbex by Quarterdeck by way of a merger of a subsidiary of Quarterdeck with and into Limbex (the "Limbex Merger") in connection with which, among other things, the issued and outstanding shares of common stock, $.00001 par value per share, of Limbex will be converted into the right to receive (i) shares of common stock, $.001 par value per share, of Quarterdeck ("Quarterdeck Common Stock") and/or (ii) cash, on the Closing Date, the SEC Effective Date (as each such term is defined in the Reorganization Agreement) and December 31, 1996 (the "Issuance Dates") as specified in the Reorganization Agreement (collectively, the "Merger Consideration"); and WHEREAS, the Reorganization Agreement provides that the number of shares of Quarterdeck Common Stock and the amount of cash set forth on Exhibit A hereto to be issued or paid in the Limbex Merger and otherwise distributable to the shareholders of Limbex pursuant thereto will be deposited in escrow with the Escrow Agent pursuant to this Agreement. NOW, THEREFORE, in consideration of the mutual premises and covenants contained in the Reorganization Agreement and herein, the parties agree as follows: ARTICLE I ESCROW 1.1 ESCROW. (a) Subject to Sections 2.1 and 2.2 of this Agreement, on each of the Issuance Dates, Quarterdeck shall, on behalf of each of the Limbex Shareholders, deliver to the Escrow Agent, to the extent that each such Limbex Shareholder receives Merger Consideration, and the Escrow Agent shall hold in escrow, Quarterdeck Common Stock certificates in the names of each such Limbex Shareholder representing the number of shares, if any, of Quarterdeck Common Stock issued to such Limbex Shareholder on such date set forth on Exhibit A hereto and the cash consideration, if any, paid to such Limbex Shareholder on such date. The shares of Quarterdeck Common Stock delivered into escrow are referred to as the "Limbex Escrow Shares;" the cash consideration delivered into the Cash Escrow Account (as defined below) is referred to as the "Escrow Cash;" and the Limbex Escrow Shares and the Escrow Cash are collectively referred to as the "Escrow Consideration." (b) Concurrently with the delivery of any Limbex Escrow Shares to the Escrow Agent pursuant hereto, each Limbex Shareholder shall execute a stock power with respect to such Limbex Shareholder's certificates evidencing such shares, which stock power shall 2 be delivered to the Escrow Agent and attached to the certificates evidencing such shares. All Escrow Cash delivered by Limbex Shareholders to the Escrow Agent pursuant hereto shall be held in a single separate account (the "Cash Escrow Account") and shall be invested in accordance with written instructions from the Committee to the Escrow Agent. The Limbex Escrow Shares and the Escrow Cash shall be held and distributed by the Escrow Agent in accordance with the terms and conditions of this Agreement. (c) Promptly following the issuance thereof, Quarterdeck shall provide a written notice to the Escrow Agent (with a copy to the Committee) of the total number of shares of Quarterdeck Common Stock issued to each Limbex Shareholder, the amount of cash consideration paid to each Limbex Shareholder and the number of shares of Quarterdeck Common Stock and the amount of cash consideration to be deposited into escrow by each Limbex Shareholder. ARTICLE II APPLICATION OF ESCROW CONSIDERATION 2.1 DISTRIBUTION OF ESCROW CONSIDERATION. (a) Within five (5) business days after the date one year from the Closing of the Limbex Merger, the Escrow Agent shall distribute to the Limbex Shareholders all of the Escrow Consideration then held in the escrow pursuant to Article I hereof, less Escrow Consideration having an aggregate value most nearly equal to the amount of any pending claims asserted by Quarterdeck under the Reorganization Agreement as is set forth in a written notice from Quarterdeck to the Escrow Agent prior thereto. The value of such pending claims shall be determined in good faith by the Board of Directors of Quarterdeck, after taking into account such factors as the Board of Directors shall deem appropriate, provided that if the Committee by prompt written notice to the Escrow Agent does not agree with the Board of Directors' determination of the amount of any such pending claims, the amount of any such pending claim shall be finally determined in accordance with Section 2.5 of this Agreement. The Escrow Consideration shall be distributed to the Limbex Shareholders on a pro rata basis, based on each Limbex Shareholder's equity interest in Limbex immediately prior to the Closing of the Limbex Merger, with each Limbex Shareholder being entitled to receive such Limbex Shareholder's proportionate share of Escrow Cash and/or Limbex Escrow Shares deposited by such Limbex Shareholder in escrow. (b) The Escrow Consideration not so distributed pursuant to Section 2.1(a) shall be retained in escrow by the Escrow Agent until all such pending claims are resolved and the Escrow Agent receives written instructions from Quarterdeck and the Committee to distribute such Escrow Consideration or the Escrow Agent receives written instructions from an arbitrator or court to distribute such Escrow Consideration; provided, that upon the disposition of any such claims prior to the disposition of all such claims, the Escrow Agent shall, upon receipt of written instructions from Quarterdeck and the Committee or an arbitrator or court, deliver to the Limbex Shareholders Escrow Consideration in the amount indicated in such written notice and which, in the aggregate, is most nearly equal to the excess of the value of the remaining Escrow Consideration over the amount of the remaining unresolved and pending aggregate claims as determined above. 2 3 2.2. PROCEDURE FOR INDEMNIFICATION OF QUARTERDECK AND THE SURVIVING CORPORATION. (a) If Quarterdeck shall have any claim against the Limbex Shareholders pursuant to Article 6 of the Reorganization Agreement (but excluding claims resulting from the assertion of liability by third parties) for which it seeks recourse against the Escrow Consideration, it shall promptly give written notice thereof to the Escrow Agent and the Committee, including in such notice a brief description of the facts upon which such claim is based and the amount thereof. If the Committee objects to the allowance of any such claims, it shall give written notice to Quarterdeck and the Escrow Agent within forty-five (45) days following receipt of Quarterdeck's notice of claim, advising it and the Escrow Agent that it does not consent to the delivery of any or some of the Escrow Consideration out of escrow for application to such claims. If no such written notice is timely provided by the Committee to Quarterdeck and the Escrow Agent and received by the Escrow Agent within forty-five (45) days following the Committee's receipt of Quarterdeck's notice of claim, the Escrow Agent shall, within five (5) business days after the expiration of the prior notice period, deliver out of escrow the lesser of: (a) that portion of the Escrow Consideration most nearly equal in value to the amount of the claim or claims thus to be satisfied, or (b) all of the Escrow Consideration. If the Committee notifies Quarterdeck and the Escrow Agent; and the Escrow Agent receives written notice within the foregoing forty-five (45) day period that the Committee objects to such application of the Escrow Consideration after a claim has been made, the Escrow Agent shall hold the Escrow Consideration most nearly equal to the amount of the claim or claims then made in escrow until the rights of the Limbex Shareholders and Quarterdeck with respect thereto have been agreed upon between the Committee and Quarterdeck in accordance with this Agreement and the Escrow Agent receives written notice from Quarterdeck and the Committee accordingly. If any distribution referred to in this Section 2.2(a) involves less than all of the Escrow Consideration, it shall be allocated pro rata against the Escrow Consideration therein based on the Escrow Consideration beneficially owned by each Limbex Shareholder (unless the claim made is based on an inaccuracy or breach of a representation or warranty contained in Article 2A of the Reorganization Agreement, in which case the allocation of the distribution of the Escrow Consideration shall be determined in accordance with Section 6.2(b) of the Reorganization Agreement). (b) In the event Quarterdeck is an "indemnified party" with respect to a third party claim for which it seeks recourse to the Escrow Consideration and a settlement or judgment is reached with respect to such claim, Quarterdeck shall promptly give written notice thereof to the Committee and the Escrow Agent, including in such notice a brief description of the settlement or judgment and the amount thereof. If the Committee objects to the allowance of any such claims, it shall give written notice to such indemnified party and the Escrow Agent within thirty (30) days following receipt of such notice of claim, advising Quarterdeck and the Escrow Agent that it does not consent to the delivery of any or some of the Escrow Consideration out of escrow to Quarterdeck for application to such claims. If no such written notice is timely provided by the Committee to Quarterdeck and the Escrow Agent and received by the Escrow Agent within thirty (30) days following the Committee's receipt of Quarterdeck's notice of claim, the Escrow Agent shall, within five (5) business days after the expiration of the prior thirty (30) day notice period, deliver out of escrow the lesser of: (a) that portion of the Escrow Consideration most nearly equal in value to the amount of the claim or claims thus to be satisfied, or (b) all of the Escrow Consideration. If the Committee objects to such application of the Escrow Consideration by notifying Quarterdeck and the Escrow Agent, and the Escrow Agent receives such written notice within the foregoing thirty (30) day period, the Escrow Agent shall hold the Escrow Consideration in escrow until the rights of the Limbex Shareholders and Quarterdeck with respect thereto have been agreed upon between the Committee and Quarterdeck or until 3 4 such rights are finally determined in accordance with this Escrow Agreement and the Escrow Agent receives written notice from Quarterdeck and the Committee accordingly. If any distribution referred to in this Section 2.2(b) involves less than all of the Escrow Consideration, it shall be allocated pro rata against the Escrow Consideration therein based on the Escrow Consideration beneficially owned by each Limbex Shareholder (unless the claim made is based on an inaccuracy or breach of a representation or warranty contained in Article 2A of the Reorganization Agreement, in which case the allocation distribution of the Escrow Consideration shall be determined in accordance with Section 6.2(b) of the Reorganization Agreement). 2.3 OWNERSHIP OF LIMBEX ESCROW SHARES; VOTING RIGHTS. The Limbex Shareholders shall have all indicia of ownership of the Limbex Escrow Shares and shall remain the registered owners of such shares while they are held in escrow, including, without limitation, the right to vote the Limbex Escrow Shares and receive distributions thereon and the obligations to pay all taxes, assessments, and charges with respect thereto, but excluding the right to sell, transfer, pledge, hypothecate or otherwise dispose of any Limbex Escrow Shares; provided, that any distribution of stock of Quarterdeck on or with respect to the Limbex Escrow Shares and any other shares or securities into which such Limbex Escrow Shares may be changed or for which they may be exchanged pursuant to corporate action of Quarterdeck affecting holders of Quarterdeck Common Stock generally shall be delivered to the Escrow Agent and upon such delivery and receipt, held in escrow and shall be subject to the indemnity and escrow provisions of Article 6 of the Reorganization Agreement. All amounts earned and received into escrow on the Limbex Escrow Shares (dividends or other distributions) shall be distributed pro rata to the Limbex Shareholders based upon their beneficial ownership of Limbex Escrow Shares from time to time upon the written request of the Committee, and the Escrow Agent shall be reimbursed by Quarterdeck for the reasonable cost of such distribution. The Escrow Agent shall have no responsibility or liability for shares or property not delivered and received by it. 2.4 RIGHTS TO AMOUNTS EARNED ON ESCROW CASH. All amounts earned and received into escrow with respect to the Escrow Cash shall be distributed pro rata to the Limbex Shareholders based upon their beneficial ownership of the Escrow Cash within five (5) business days after the date one year from the Closing of the Limbex Merger, and the Escrow Agent shall be reimbursed by Quarterdeck for the reasonable cost of such distribution. 2.5 ARBITRATION. Any controversy involving a claim by Quarterdeck pursuant to Article 6 of the Reorganization Agreement or this Agreement or a claim by any Limbex Shareholder pursuant to Article 6 of the Reorganization Agreement or this Agreement shall be finally settled by arbitration in Los Angeles, California, in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Such arbitration shall be conducted by three arbitrators chosen by mutual agreement of the Committee and Quarterdeck. Failing such agreement, the arbitration shall be conducted in accordance with the foregoing rules. Discovery, including without limitation the production of books, records, documents and other evidence, and the taking of depositions, shall be freely granted at the request of either party, subject to the discretion and control of the arbitrators. At the conclusion of any arbitration, the arbitrators will issue a written opinion of findings of fact and conclusions of law. Upon receipt of such opinion, either party may file within ten (10) days thereafter a motion to reconsider, and the arbitrators thereupon will reconsider the issues raised by such motion and either confirm or change the decision, which will then be final and conclusive. Depositions shall be conducted in accordance with the California Code of Civil Procedure. The cost and expenses (including counsel fees) of any such arbitration shall be borne by the Limbex Shareholders and Quarterdeck in such proportions as shall be determined by the arbitrators, or if there is no such 4 5 determination, each party shall pay its own costs and expenses (including counsel fees) of any such arbitration. 2.6 MARKET VALUE OF LIMBEX ESCROW SHARES. For purposes of this Article II, the market value of Limbex Escrow Shares shall be determined as provided in Article 6 of the Reorganization Agreement. ARTICLE III AUTHORITY AND INDEMNIFICATION 3.1 AUTHORITY. Upon consummation of the Limbex Merger and in consideration of the Merger Consideration, each Limbex Shareholder shall be deemed to have irrevocably appointed the Committee as their attorneys in fact to contest, settle, compromise or otherwise dispose of any claim made by Quarterdeck in accordance with this Agreement. No further documentation shall be required to evidence such appointment, and such power of attorney shall be coupled with an interest, thereby confirming such appointment as irrevocable. The Committee shall be empowered to act by unanimous vote with respect to all matters arising under this Agreement. 3.2 INDEMNITY. No Committee member shall be liable to anyone whatsoever by reason of any error of judgment or for any act done or step taken or omitted by them in good faith or for any mistake of fact or law for anything which he or she may do or refrain from doing in connection herewith unless caused by or arising out of his or her own gross negligence or willful misconduct. Each Limbex Shareholder shall, jointly and severally, indemnify and hold the Committee, and each of them, harmless from any and all liability and expense (including, without limitation, counsel fees) which may arise out of any action taken or omitted by them as a Committee member in accordance with this Agreement, as the same may be amended, modified or supplemented, except such liability and expense as may result from the gross negligence or willful misconduct of a Committee member. 3.3 RELIANCE. The Committee shall be entitled to treat as genuine any letter, paper, facsimile, telex, or other document furnished or caused to be furnished to it by any party to this Agreement and believed by it to be genuine and to have been telexed, telegraphed, faxed, or cabled or signed and presented by any party to this Agreement. ARTICLE IV ESCROW AGENT 4.1 DUTIES AND OBLIGATIONS. The duties and obligations of the Escrow Agent are exclusively set forth in this Agreement, as each may from time to time be amended. The Escrow Agent may request, rely and shall be protected in acting or refraining from acting upon any written notice, request, waiver, consent, receipt or other paper or document from Quarterdeck, Limbex or any Committee member, not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth of any information therein contained, that the Escrow Agent in good faith believes to be genuine and as to which the Escrow Agent shall have no actual notice of invalidity, lack of authority or other deficiency. The Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, for anything which it may do or refrain from doing in connection therewith, except for any liability arising from its own gross negligence or willful misconduct. 5 6 The Escrow Agent shall be entitled to consult with competent and responsible counsel of its choice with respect to the interpretation of the provisions hereof, and any other legal matters relating hereto, and shall be fully protected in taking any action or omitting to take any action in good faith in accordance with the advice of such counsel. The Escrow Agent shall be entitled to request written instructions from Quarterdeck or the Committee as the case may be, and shall have the right to refrain from acting until it has received such written instructions. No provision in this Agreement or in the Reorganization Agreement shall require the Escrow Agent to risk or expend its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder; provided that the Escrow Agent will be promptly paid or reimbursed upon request for any and all expenses, fees, costs, disbursements and/or advances which may be incurred or made by it in accordance with the provisions hereof (including reasonable compensation, and any expenses and disbursements of Escrow Agent's counsel, and all agents not regularly in Escrow Agent's employ). 4.2 RISK OF LOSS. The Escrow Agent acknowledges and agrees that the Escrow Agent bears the exclusive risk of loss, theft or damage with respect to the Limbex Escrow Shares in its possession. 4.3 ESCROW AGENT'S COMPENSATION. Quarterdeck shall pay to the Escrow Agent compensation in respect of the Escrow Agent's duties and obligations under this Agreement. Upon the execution of this Agreement and the delivery of the Limbex Escrow Shares to the Escrow Agent, the Escrow Agent shall be entitled to a one-time escrow fee of $1,000; provided that in the event that the escrow contemplated by this Agreement remains in effect after the one (1) year anniversary of the Closing of the Limbex Merger, then the Escrow Agent shall be entitled to received from Quarterdeck such additional escrow fees as the parties may agree. 4.4 RESIGNATION. The Escrow Agent may resign at any time by giving not less than sixty (60) days written notice thereof to each of Quarterdeck and the Committee. 4.5 SUCCESSOR ESCROW AGENT. Upon receipt of the Escrow Agent's notice of resignation, Quarterdeck and the Committee may appoint a successor escrow agent. Upon the acceptance of the appointment as escrow agent hereunder by a successor escrow agent and the transfer to such successor escrow agent of the Limbex Escrow Shares, the resignation of the Escrow Agent shall become effective and the Escrow Agent shall be discharged from any future duties and obligations under this Agreement. 4.6 CONFLICTING DEMANDS. If on or before the close of escrow the Escrow Agent receives or becomes aware of any conflicting demands or claims with respect to the Escrow Consideration or the rights of any of the parties hereto to such Escrow Consideration, the Escrow Agent shall have the right to discontinue any or all further acts on the Escrow Agent's part until such conflict is resolved to the Escrow Agent's satisfaction, and the Escrow Agent shall have the right to commence or defend any action or proceedings for the determination of such conflict. In the event any of the above-described events occur, each of Quarterdeck, on the one hand, and the Limbex Shareholders (pro rata based on the Merger Consideration received by the Limbex Shareholders in connection with the Limbex Merger), on the other hand, agree to pay one half of all costs, damages, judgments and expenses, including reasonable attorneys fees, suffered or incurred by the Escrow Agent in connection with, or arising out of, such conflicting demands or claims, including, without limitation, a suit in interpleader brought by the Escrow Agent. 4.7 INDEMNITY. The Limbex Shareholders and Quarterdeck hereby agree to jointly and severally indemnify the Escrow Agent for, and to hold it harmless against any loss, 6 7 liability or expense arising out of or in connection with this Agreement and carrying out its duties hereunder, including the costs and expenses of defending itself against any claim of liability, except in those cases where the Escrow Agent has been guilty of gross negligence or willful misconduct. Anything in this Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. ARTICLE V MISCELLANEOUS 5.1 NOTICES. Unless otherwise provided, all notices or other communications required or permitted to be given to the parties hereto shall be in writing and shall be deemed to have been given if personally delivered (including personal delivery by facsimile, provided that the sender receives telephonic or electronic confirmation that the facsimile was received by the recipient), or three (3) days after mailing by certified or registered mail, return receipt requested, first class postage prepaid, addressed as follows (or at such other address as the addressed party may have substituted by notice pursuant to this Section 5.1): (a) If to Quarterdeck or Acquisition Sub: Quarterdeck Corporation 13160 Mindanao Way, 3rd Floor Marina del Rey, CA 90292 Attention: Law Department Facsimile:(310) 309-4218 (b) If to the Committee, to their respective addresses set forth below their respective names in Schedule A attached hereto. (c) If to the Escrow Agent: American Stock Transfer and Trust Company 6201 15th Avenue Brooklyn, New York 11219 Attention: _______________________ Facsimile: _______________________ 5.2 TERMINATION. This Agreement shall terminate upon the mutual written express agreement of Quarterdeck and the Committee. In any event, this Agreement shall terminate when all of the Escrow Consideration has been distributed in accordance with the terms hereof. 5.3 INTERPRETATION. The validity, construction, interpretation and enforcement of this Agreement shall be determined and governed by the laws of the State of California. The invalidity or unenforceability of any provision of this Agreement or the invalidity or unenforceability of any provision as applied to a particular occurrence or circumstance shall not affect the validity or enforceability of any of the other provisions of this Agreement or the applicability of such provision, as the case may be. All capitalized terms used in this Agreement, unless otherwise defined herein, shall have the meanings ascribed to them in the Reorganization Agreement. 7 8 5.4 COUNTERPARTS. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one agreement. 5.5 TRANSFER OF INTERESTS. None of the Limbex Shareholders shall sell, transfer, pledge, hypothecate or otherwise dispose of any Escrow Consideration, or any interest therein, prior to the distribution of such Escrow Consideration in accordance with Section 2.1 above. 5.6 TAXES. For purposes of federal and state income taxation, the Escrow Consideration shall be treated as owned by the Limbex Shareholders and this Agreement shall be interpreted in a manner to effect the Limbex Shareholders' ownership of the Escrow Consideration for such tax purposes as of the date such Escrow Consideration is issued or paid by Quarterdeck to the Limbex Shareholders. 8 9 IN WITNESS WHEREOF, the parties have signed this Agreement on the day and year first above written. AMERICAN STOCK TRANSFER AND TRUST COMPANY, as Escrow Agent By: ------------------------------------- QUARTERDECK CORPORATION, a Delaware corporation By: ------------------------------------- THE LIMBEX SHAREHOLDERS: ---------------------------------------- Bradley Allen ---------------------------------------- Alexander Jacobson ---------------------------------------- Howard Morgan ---------------------------------------- Thelma Birks ---------------------------------------- Michelle Kraus ---------------------------------------- Clay Chisum 9 10 THE COMMITTEE ---------------------------------------- Bradley Allen ---------------------------------------- Alexander Jacobson Address: c/o Limbex Corporation 13160 Mindanao Way, 2nd Floor Marina del Rey, CA 90292 10 11 EXHIBIT A MERGER CONSIDERATION TO BE RECEIVED AT CLOSING
- ----------------------------------------------------------------- SHARES TO BE RECEIVED NAME IN MERGER ---- --------- ESCROW NON-ESCROW TOTAL ------ ---------- ----- Inference -- 77,897(1) 77,897(1) Corporation Howard Morgan 3,498(2) 31,486(2) 34,984(2) - -----------------------------------------------------------------
(1) The shares of Limbex Common Stock owned by Inference shall automatically be converted into the right to receive on the Closing Date a number of shares of Quarterdeck Common Stock equal to $610,526 divided by the average closing sales price of Quarterdeck Common Stock for the period of five business days ending on the business day two business days prior to the Closing Date. (2) The shares of Limbex Common Stock owned by Howard Morgan shall automatically be converted into the right to receive (i) 34,984 shares of Quarterdeck Common Stock on the Closing Date and (ii) cash in an amount equal to the fair market value of 18,838 shares of Quarterdeck Common Stock, based upon the average closing sales price of Quarterdeck Common Stock for a period of five business days ending on the business day two business days prior to the Closing Date, payable at the time that Howard Morgan is required by federal tax laws to pay income taxes with respect to the shares of Quarterdeck Common Stock received in the Merger; provided, however, that in no event shall Quarterdeck pay such amount later than January 31, 1997, and offset by any and all amounts that Mr. Morgan owes at such time to Quarterdeck. 12 MERGER CONSIDERATION TO BE RECEIVED AFTER CLOSING
- ----------------------------------------------------------------------------------------------------------------------- DATE TO BE SHARES TO BE RECEIVED CASH CONSIDERATION TO BE RECEIVED IN TOTAL NAME RECEIVED IN MERGER MERGER CONSIDERATION ---- --------- --------- ------ ------------- NON- ESCROW ESCROW TOTAL ESCROW NON-ESCROW TOTAL ------ ------ ----- ------ ----------- ----- Inference First -- (1) (1) -- -- -- (1) Corporation Anniversary Howard Tax Payment -- -- -- $14,765(2) $132,880(2) $147,645(2) (2) Morgan Date Brad Allen SEC 60,296 542,668 602,964 -- -- -- 602,964 shares Effective Date Alex SEC 57,664 518,976 576,640 -- -- -- 576,640 shares Jacobson Effective Date Thelma Birks SEC 1,338 12,050 13,388 -- -- -- 13,388 shares Effective Date Clay Chisum SEC 268 2,410 2,678 -- -- -- 2,678 shares Effective Date Michelle SEC 134 1,205 1,339 -- -- -- 1,339 shares Kraus Effective Date - -----------------------------------------------------------------------------------------------------------------------
(1) The shares of Limbex Series B Preferred owned by Inference shall automatically be converted into the right to receive on the Inference Preferred Consideration Date a number of shares of Quarterdeck Common Stock equal to $3,599,753 divided by the average closing sales price of Quarterdeck Common Stock for the period of five business days ending on the business day two business days prior to the Inference Preferred Consideration Date. (2) The shares of Limbex Common Stock owned by Howard Morgan shall automatically be converted into the right to receive (i) 34,984 shares of Quarterdeck Common Stock on the Closing Date and (ii) cash in an amount equal to the fair market value of 18,838 shares of Quarterdeck Common Stock, based upon the average closing sales price of Quarterdeck Common Stock for a period of five business days ending on the business day two business days prior to the Closing Date, payable at the time that Howard Morgan is required by federal tax laws to pay income taxes with respect to the shares of Quarterdeck Common Stock received in the Merger; provided, however, that in no event shall Quarterdeck pay such amount later than January 31, 1997, and offset by any and all amounts that Mr. Morgan owes at such time to Quarterdeck. 2 EX-99.3 4 REGISTRATION RIGHTS AGREEMENT 1 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of August 13, 1996, by and among Quarterdeck Corporation, a Delaware corporation (the "Company"), and the holders of capital stock of Limbex Corporation, a California corporation ("Limbex"), set forth on the signature pages hereto (the "Holders"). WHEREAS, each Holder is or will become the owner of Shares (as defined below) in connection with the acquisition of Limbex by Quarterdeck by way of the merger of a subsidiary of Quarterdeck with and into Limbex (the "Merger"), pursuant to the terms of the Agreement and Plan of Reorganization, dated as of August 13, 1996 (the "Acquisition Agreement"), by and among the Company, Limbex, and certain other parties; and WHEREAS, pursuant to the terms of the Acquisition Agreement, the Company has agreed to grant to the Holders the registration rights provided for below. NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the mutual covenants and agreements set forth in the Acquisition Agreement and hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree as follows: 1. Certain Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Closing" shall have the meaning specified in the Acquisition Agreement. "Closing Date" shall have the meaning specified in the Acquisition Agreement. "Inference Preferred Consideration Date" shall have the meaning specified in the Acquisition Agreement. "Limbex Common Stock" shall mean the common stock, $.00001 par value per share, of Limbex. "Person" shall mean an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Prospectus" shall mean any prospectus included in a Registration Statement including any resale prospectus and any preliminary prospectus, and any amendment or supplement thereto, and in each case including all material incorporated by reference therein. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance with this Agreement, including, without limitation: (i) all 2 applicable registration and filing fees imposed by the SEC and such securities exchange or exchanges on which securities of the same class are then listed or the National Association of Securities Dealers, Inc. ("NASD"), (ii) all fees and expenses incurred in connection with compliance with state securities or "blue sky" laws (including reasonable fees and disbursements of counsel in connection with qualification of any of the Shares under any state securities or blue sky laws and the preparation of a blue sky memorandum) and compliance with the rules of the NASD, (iii) all expenses of any Persons in preparing or assisting in preparing, printing and distributing the Registration Statement, any Prospectus, certificates and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Shares on any securities exchange or exchanges pursuant to Section 3(j) hereof, and (v) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance. Registration Expenses shall specifically exclude underwriting discounts and commissions, the fees and disbursements of counsel representing a Holder and transfer taxes, if any, relating to the sale or disposition of Shares by a Holder, all of which shall be borne by such Holder in all cases. "Registration Statement" shall mean the registration statements (or amendments to registration statements) filed by the Company pursuant to Section 2(a) of this Agreement. "SEC" shall mean the Securities and Exchange Commission or any successor entity. "SEC Effective Date" shall have the meaning specified in the Acquisition Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Shares" shall mean shares of common stock, par value $.001 per share, ("Common Shares") of the Company, issued or issuable to the Holders as consideration in the Merger, adjusted for any reclassification, recapitalization, split, reverse split, stock dividend or combination. 2. Registration under the Securities Act. (a) Registration. (i) Inference Closing Shares and SEC Effective Date Shares. The Company shall file a registration statement on Form S-3 or an amendment to an existing registration statement on Form S-3 within three business days following the Closing, relating to the sale by (A) Inference Corporation, a Delaware corporation ("Inference"), of Shares received by it in the Merger on the Closing Date with respect to shares of Limbex Common Stock owned by it, and (B) the Holders of Shares to be received on the SEC Effective Date, and shall use its best efforts to cause such registration statement or amendment to be declared effective by the 2 3 SEC on or before September 15, 1996 or as soon as practicable thereafter. The Company agrees to use its best efforts to keep the registration statement filed hereunder continuously effective (and to include a Prospectus at all times meeting the requirements of the Securities Act) for a period of two years (or one year if the SEC changes the holding period required under Rule 144 under the Securities Act from two years to one year) from the SEC Effective Date. (ii) Inference Preferred Consideration Shares. The Company shall file a registration statement on Form S- 3 or an amendment to an existing registration statement on Form S-3 on or before May 31, 1997 relating to the sale by Inference of the Shares reasonably expected to be issued to Inference on the Inference Preferred Consideration Date, and shall use its best efforts to cause such registration statement or amendment to be declared effective by the SEC on the Inference Preferred Consideration Date or as soon thereafter as practicable. The Company agrees to use its best efforts to keep the registration statement (or amendment) filed hereunder continuously effective (and to include a Prospectus at all times meeting the requirements of the Securities Act) for a period of two years (or one year if the SEC changes the holding period required under Rule 144 under the Securities Act from two years to one year) from the Inference Preferred Consideration Date. (b) Expenses. The Company shall pay all Registration Expenses in connection with a registration pursuant to this Agreement. (c) Plan of Distribution. Subject to compliance by Quarterdeck's employees with Quarterdeck's policies relating to trading in Quarterdeck's Common Stock by employees and with applicable federal and state securities law and regulations, any registration statement filed pursuant to this Agreement shall include disclosure under the caption "Plan of Distribution" or other appropriate caption that contemplates distribution of the Shares by the selling stockholders and their permitted assignees, including hedging transactions and/or short sales, option transactions and loans to secure such transactions. 3. Registration Procedures. In connection with the obligations of the Company under Section 2 hereof, the Company shall: (a) prepare and file with the SEC, within the time period set forth in Section 2 hereof, and use its best efforts to have declared effective by the SEC, the Registration Statements, which shall (i) be available for public resale of the Shares by the selling Holders, and (ii) comply as to form in all material respects with the requirements of the applicable form and include all company-related information and financial statements required by the SEC to be filed therewith; (b) (i) prepare and file with the SEC such amendments to the Registration Statements as may be necessary to keep it effective for the applicable period; (ii) cause any Prospectus to be amended or supplemented as required and to be filed as required by Rule 424 or any similar rule that may be adopted under the Securities Act; (iii) respond as promptly as practicable to any comments received from the SEC with respect 3 4 to the Registration Statement or any amendment thereto; and (iv) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof; (c) furnish to each Holder, upon request and without charge, as many copies of any Prospectus and any amendment or supplement thereto as is requested in order to facilitate the public sale or other disposition of the Shares; (d) use its best efforts to register or qualify the Shares under all applicable state securities or blue sky laws of such jurisdictions in the United States and its territories and possessions as any Holder shall reasonably request in writing and keep such registration or qualification effective during the period the Registration Statement is required to be kept effective; provided, however, that in connection therewith, the Company shall not be required to (i) qualify as a foreign corporation to do business or to register as a broker or dealer in any such jurisdiction where it would not otherwise be required to qualify or register but for this Section 3(d), (ii) subject itself to taxation in any such jurisdiction with respect to such registration or qualification, or (iii) file a general consent to service of process in any such jurisdiction; (e) notify each Holder promptly and, if requested by a Holder, confirm in writing, (i) when the Registration Statement and any post-effective amendments thereto have become effective, (ii) when any amendment or supplement to a Prospectus has been filed with the SEC, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of the Registration Statement or any part thereof or the initiation of any proceedings for that purpose, (iv) if the Company receives any notification with respect to the suspension of the qualification of the Shares for offer or sale in any jurisdiction or the initiation of any proceeding for such purpose, and (v) of the happening of any event during the period the Registration Statement is effective as a result of which (A) such Registration Statement contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (B) a Prospectus as then amended or supplemented contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (f) use best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement by the SEC or any state securities authority as promptly as possible and to amend and cure any deficiencies resulting in such suspension; (g) furnish to each Holder upon request, without charge, at least one conformed copy of the Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Shares to be sold and not bearing any Securities Act legend 4 5 and enable certificates for such Shares to be issued for such numbers of Shares and registered in such names as the Holders may reasonably request; and (i) use its best efforts to cause all Shares to be listed on any securities exchange or NASD Automatic Quotation System on which the Common Shares are then listed; 4. Certain Agreements of Holders. (a) Each Holder agrees to furnish to the Company in writing such information regarding the Holder and such Holder's proposed distribution of Shares as the Company may from time to time reasonably request in connection with the preparation of the Registration Statement, or registration or qualification of the Shares under state securities or blue sky laws and, furnish to the Company in writing such information regarding all sales or other dispositions of Shares made by the Holder as the Company may from time to time reasonably request. (b) Each Holder agrees, if requested by the Company in the case of a Company initiated non-underwritten offering or if requested by the managing underwriter or underwriters in a Company initiated underwritten offering, not to effect any public sale or distribution of any Shares, including a sale pursuant to Rule 144 under the Securities Act (except as part of such Company initiated registration), during the ten day period prior to, and during the ninety day period beginning on, the date of effectiveness of each Company initiated offering made pursuant to its registration statement, to the extent timely notified in writing by the Company or the managing underwriters. 5. Indemnification, Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder and its officers, directors, partners, agents, brokers and underwriters and each Person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act, as follows with respect to any Registration Statement covering the resale by such Holder of any Shares: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to which such Holder, officer, director, partner, agent, broker, underwriter or controlling Person may become subject under the Securities Act or otherwise (A) that arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (B) that arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Prospectus or any amendment or supplement thereto, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; 5 6 (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever, based upon any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such settlement is effected with the written consent of the Company; and (iii) subject to the limitations set forth in Section 5(c), against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever, based upon any such untrue statement or alleged untrue statement, omission or alleged omission that relates to the sale by a Holder of Shares under the Registration Statement, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 5(a) shall not apply to any Holder with respect to any loss, liability, claim, damage or expense that arises out of or is based upon (1) any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in the Registration Statement or any amendment thereto or a Prospectus or any amendment or supplement thereto or (2) trades made by such Holder in violation of Section 6 below. (b) Indemnification by Holders. Each Holder severally, in proportion of the number of Shares to be sold by such Holder pursuant to such Registration Statement, agrees to indemnify and hold harmless the Company and the other selling holders, and each of their respective directors, officers and partners (including each director of the Company and each officer of the Company who signed the Registration Statement), and each Person, if any, who controls the Company or any other selling holder within the meaning of Section 15 of the Securities Act, to the same extent as the indemnity contained in Section 5(a) hereof, but only insofar as such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or any amendment thereto or the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by such selling Holder expressly for use therein; provided, that, with respect to the Holders' indemnification obligations set forth in this Section 5(b) with respect to Section 5(a)(ii) above, such settlement is effected with the written consent of the Holders against which indemnification is sought. (c) Conduct of Indemnification Proceedings. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 5(a) or (b) above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party materially prejudices the indemnifying party or results in the forfeiture by the indemnifying party of 6 7 substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 5(a) or (b) above. After receipt of such notice, the indemnifying party shall be entitled to participate in and, at its option, jointly with any other indemnifying party so notified, to assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by such indemnifying party and approved by the indemnified party, which approval shall not be unreasonably withheld; provided, however, that, if the defendants in any such action or proceeding include both the indemnified party and the indemnifying party and the indemnified party reasonably determines, upon advice of counsel, that a conflict of interest exists or that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, then the indemnified party shall be entitled to counsel (which shall be limited to a single law firm) the reasonable fees and expenses of which shall be paid by the indemnifying party. If the indemnifying party does not assume the defense of any such action or proceeding, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party will pay the reasonable fees and expenses of counsel (which shall be limited to a single law firm) for the indemnified party. In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of such indemnifying party. If the indemnifying party assumes the defense of any such action or proceeding in accordance with this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified party incurred thereafter in connection with such action or proceeding except as set forth in the proviso in the second sentence of this Section 5(c). (d) Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 5 is for any reason held to be unenforceable although applicable in accordance with its terms, the indemnifying party shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the indemnified party, in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the foregoing, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution 7 8 from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5(d), each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act and directors, officers and partners of a Holder shall have the same rights to contribution as such Holder, and each director of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. (e) Notwithstanding any term or condition to the contrary, the liability of any Holder pursuant to this Section 5 shall be limited to the gross proceeds received by such Holder as a result of the sale giving rise to the liability. (f) The obligations of the Company and the Holders under this Section 5 shall survive the completion of any offering of the Shares pursuant to a Registration Statement. 6. Suspension of Registration Requirement. (a) Each Holder agrees that he, she or it will not effect any sales of Shares pursuant to a Registration Statement after such Holder has received notice from the Company to suspend sales as a result of the occurrence or existence of any Suspension Event (as defined in Section 6(b) below) until the Company provides notice to such Holder that all Suspension Events have ceased to exist. In addition, each Holder agrees that he, she or it will not effect any sales of Shares pursuant to the Registration Statement after such Holder has received notice from the Company to suspend sales because (i) the Registration Statement, any Prospectus or any supplement thereto contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (ii) the Company has filed a post-effective amendment to the Registration Statement that has not been declared effective, until the Company notifies such Holder that the misstatement or omission has been corrected or the post-effective amendment has been declared effective, as the case may be. (b) Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation to file a Registration Statement and make any filings with any state securities authority, to use its best efforts to cause a Registration Statement or any state securities filings to become effective, or to amend or supplement a Registration Statement or any state securities filings shall be temporarily suspended in the event of and during a Suspension Event. A "Suspension Event" shall exist at such times (i) that the Company is not eligible to use Form S-3 for the registration contemplated by Section 2(a) hereof or (ii) as circumstances exist that the Company determines make it impractical or inadvisable for the Company to file, amend or supplement a Registration Statement or such filings or to cause a Registration Statement or such filings to become effective (such circumstances to include, without limitation, (A) the Company conducting an underwritten primary offering and being advised by the underwriters that sale of Shares under the Registration Statement would have a material adverse effect on the Company's offering or 8 9 (B) pending negotiations relating to, or consummation of, a transaction or the occurrence of some other event (x) where any of the foregoing would require disclosure under applicable securities laws of material information in a Registration Statement (or any other document incorporated into a Registration Statement by reference) or such state securities filings and (y) as to which the Company has a bona fide business purpose for preserving confidentiality or which renders the Company unable to comply with SEC requirements). Suspension of the Company's obligations pursuant to this Section 6(b) shall continue only for so long as a Suspension Event or its effect is continuing; provided, however, that in no event shall any Suspension Event pursuant to clause (ii) of the preceding sentence exceed more than ninety (90) days in any one hundred eighty (180) day period. The Company shall notify each Holder promptly after any Suspension Event occurs or ceases to exist. 7. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified, supplemented or waived, nor may consent to departures therefrom be given, without the written consent of the Company and the Holders of more than 50% of the outstanding Shares owned beneficially by Holders at the date of any such amendment, modification, supplement or waiver. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if to a Holder, at such Holder's registered address appearing on the share register of the Company or (ii) if to the Company, at 13160 Mindanao Way, 3rd Floor, Marina del Rey, California, Attention: Law Department. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; or at the time delivered if delivered by an air courier guaranteeing overnight delivery. (c) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. This Agreement and the registration rights granted hereunder may not be assigned by a Holder without the consent of the Company and such assignee agreeing to be bound by the provisions of this Agreement. (d) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 9 10 (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to the conflicts of law provisions thereof. (g) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (h) Attorneys' Fees. In the event of any suit or other proceeding to construe or enforce any provision of this Agreement, or otherwise in connection with this Agreement, the prevailing party's or parties' reasonable attorneys' fees and costs (in addition to all other amounts and relief to which such party or parties may be entitled) shall be paid by the other party or parties. 10 11 IN WITNESS WHEREOF, the parties have signed this Agreement on the day and year first above written. QUARTERDECK CORPORATION By: ------------------------------------- THE SHAREHOLDERS: ---------------------------------------- Bradley Allen ---------------------------------------- Alexander Jacobson ---------------------------------------- Howard Morgan ---------------------------------------- Thelma Birks ---------------------------------------- Michelle Kraus ---------------------------------------- Clay Chisum INFERENCE CORPORATION By: ------------------------------------- 11 -----END PRIVACY-ENHANCED MESSAGE-----