R
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
77-0105228
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer £ | Accelerated filer £ | |
Non-accelerated filer £ (Do not check if a smaller reporting company) | Smaller reporting company R |
QAD INC. | |||
INDEX | |||
PART I - FINANCIAL INFORMATION |
Page
|
||
ITEM 1
|
Financial Statements (unaudited)
|
||
1 | |||
|
|||
2
|
|||
3
|
|||
4 | |||
|
|
||
ITEM 2
|
12
|
||
|
|||
ITEM 3
|
20 | ||
|
|
||
ITEM 4
|
21
|
||
PART II - OTHER INFORMATION | 21 | ||
ITEM 1
|
22
|
||
ITEM 1A
|
22
|
||
ITEM 5
|
Other Information | 22 | |
ITEM 6
|
22
|
||
SIGNATURES |
23
|
April 30,
|
January 31,
|
|||||||
2011
|
2011
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and equivalents
|
$ | 73,411 | $ | 67,276 | ||||
Accounts receivable, net
|
49,031 | 65,620 | ||||||
Deferred tax assets, net
|
3,953 | 3,954 | ||||||
Other current assets
|
12,334 | 12,553 | ||||||
Total current assets
|
138,729 | 149,403 | ||||||
Property and equipment, net
|
33,822 | 33,795 | ||||||
Capitalized software costs, net
|
639 | 841 | ||||||
Goodwill
|
6,537 | 6,457 | ||||||
Deferred tax assets, net
|
20,032 | 20,080 | ||||||
Other assets, net
|
2,592 | 2,518 | ||||||
Total assets
|
$ | 202,351 | $ | 213,094 | ||||
Liabilities and Stockholders’ Equity
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$ | 306 | $ | 304 | ||||
Accounts payable
|
7,482 | 10,003 | ||||||
Deferred revenue
|
91,318 | 94,453 | ||||||
Other current liabilities
|
24,272 | 30,891 | ||||||
Total current liabilities
|
123,378 | 135,651 | ||||||
Long-term debt
|
16,040 | 16,138 | ||||||
Other liabilities
|
5,640 | 5,214 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; none issued or outstanding
|
— | — | ||||||
Common stock:
|
||||||||
Class A, $0.001 par value. Authorized 71,000,000 shares; issued 14,146,416 shares at both April 30, 2011 and January 31, 2011
|
14 | 14 | ||||||
Class B, $0.001 par value. Authorized 4,000,000 shares; issued 3,536,604 shares at both April 30, 2011 and January 31, 2011
|
4 | 4 | ||||||
Additional paid-in capital
|
147,836 | 146,898 | ||||||
Treasury stock, at cost (1,646,731 shares and 1,721,601 shares at April 30, 2011 and January 31, 2011, respectively)
|
(26,943 | ) | (28,070 | ) | ||||
Accumulated deficit
|
(54,731 | ) | (54,438 | ) | ||||
Accumulated other comprehensive loss
|
(8,887 | ) | (8,317 | ) | ||||
Total stockholders’ equity
|
57,293 | 56,091 | ||||||
Total liabilities and stockholders’ equity
|
$ | 202,351 | $ | 213,094 |
Three Months Ended
April 30,
|
||||||||
2011
|
2010
|
|||||||
Revenue:
|
||||||||
License fees
|
$ | 6,344 | $ | 5,839 | ||||
Maintenance and other
|
34,338 | 31,511 | ||||||
Subscription fees
|
2,208 | 1,148 | ||||||
Professional services
|
16,513 | 12,343 | ||||||
Total revenue
|
59,403 | 50,841 | ||||||
Costs of revenue:
|
||||||||
License fees
|
1,031 | 1,430 | ||||||
Maintenance, subscription and other
|
8,775 | 8,648 | ||||||
Professional services
|
16,288 | 12,574 | ||||||
Total cost of revenue
|
26,094 | 22,652 | ||||||
Gross profit
|
33,309 | 28,189 | ||||||
Operating expenses:
|
||||||||
Sales and marketing
|
14,489 | 13,506 | ||||||
Research and development
|
8,483 | 9,327 | ||||||
General and administrative
|
7,713 | 7,441 | ||||||
Total operating expenses
|
30,685 | 30,274 | ||||||
Operating income (loss)
|
2,624 | (2,085 | ) | |||||
Other expense (income):
|
||||||||
Interest income
|
(136 | ) | (133 | ) | ||||
Interest expense
|
270 | 298 | ||||||
Other expense (income), net
|
818 | (23 | ) | |||||
Total other expense
|
952 | 142 | ||||||
Income (loss) before income taxes
|
1,672 | (2,227 | ) | |||||
Income tax expense (benefit)
|
652 | (1,007 | ) | |||||
Net income (loss)
|
$ | 1,020 | $ | (1,220 | ) | |||
Basic net income (loss) per share
|
||||||||
Class A
|
$ | 0.07 | $ | (0.08 | ) | |||
Class B
|
$ | 0.06 | $ | (0.07 | ) | |||
Diluted net income (loss) per share
|
||||||||
Class A
|
$ | 0.06 | $ | (0.08 | ) | |||
Class B
|
$ | 0.05 | $ | (0.07 | ) |
Three Months Ended
April 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$ | 1,020 | $ | (1,220 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
1,337 | 2,008 | ||||||
Provision for (recovery of) doubtful accounts and sales adjustments
|
73 | (41 | ) | |||||
Stock compensation expense
|
1,112 | 1,470 | ||||||
Excess tax benefits from share-based payment arrangements
|
(4 | ) | − | |||||
Other, net
|
(59 | ) | (81 | ) | ||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
17,780 | 20,770 | ||||||
Other assets
|
151 | (731 | ) | |||||
Accounts payable
|
(2,816 | ) | (1,391 | ) | ||||
Deferred revenue
|
(6,430 | ) | (4,178 | ) | ||||
Other liabilities
|
(6,653 | ) | (3,441 | ) | ||||
Net cash provided by operating activities
|
5,511 | 13,165 | ||||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(781 | ) | (345 | ) | ||||
Capitalized software costs
|
(13 | ) | (58 | ) | ||||
Other
|
16 | 2 | ||||||
Net cash used in investing activities
|
(778 | ) | (401 | ) | ||||
Cash flows from financing activities:
|
||||||||
Repayments of debt
|
(96 | ) | (72 | ) | ||||
Proceeds from issuance of common stock
|
21 | 49 | ||||||
Tax payments related to net share settlements of restricted stock
awards
|
(46 | ) | (35 | ) | ||||
Excess tax benefits from share-based payment arrangements
|
4 | − | ||||||
Cash dividends paid
|
(330 | ) | (606 | ) | ||||
Net cash used in financing activities
|
(447 | ) | (664 | ) | ||||
Effect of exchange rates on cash and equivalents
|
1,849 | 87 | ||||||
Net increase in cash and equivalents
|
6,135 | 12,187 | ||||||
Cash and equivalents at beginning of period
|
67,276 | 44,678 | ||||||
Cash and equivalents at end of period
|
$ | 73,411 | $ | 56,865 | ||||
Supplemental disclosure of non-cash activities:
|
||||||||
Future obligations associated with dividend declaration
|
$ | 934 | $ | 784 | ||||
Dividends paid in stock
|
596 | 178 |
Three Months Ended
|
||||||||
April 30,
|
||||||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Net income (loss)
|
$ | 1,020 | $ | (1,220 | ) | |||
Less: Dividends declared
|
(934 | ) | (787 | ) | ||||
Undistributed net income (loss)
|
$ | 86 | $ | ( 2,007 | ) | |||
Net income (loss) per share – Class A Common Stock
|
||||||||
Dividends declared
|
$ | 774 | $ | 651 | ||||
Allocation of undistributed net income (loss)
|
71 | (1,661 | ) | |||||
Net income (loss) attributable to Class A common stock
|
$ | 845 | $ | (1,010 | ) | |||
Weighted average shares of Class A common stock outstanding—
basic
|
12,797 | 12,545 | ||||||
Weighted average potential shares of Class A common stock
|
395 | - | ||||||
Weighted average shares of Class A common stock and potential common shares outstanding—
diluted
|
13,192 | 12,545 | ||||||
Basic net income (loss) per Class A common share
|
$ | 0.07 | $ | (0.08 | ) | |||
Diluted net income (loss) per Class A common share
|
$ | 0.06 | $ | (0.08 | ) | |||
Net income (loss) per share – Class B Common Stock
|
||||||||
Dividends declared
|
$ | 160 | $ | 136 | ||||
Allocation of undistributed net income (loss)
|
15 | (346 | ) | |||||
Net income (loss) attributable to Class B common stock
|
$ | 175 | $ | (210 | ) | |||
Weighted average shares of Class B common stock outstanding—
basic
|
3,184 | 3,136 | ||||||
Weighted average potential shares of Class B common stock
|
99 | - | ||||||
Weighted average shares of Class B common stock and potential common shares outstanding—
diluted
|
3,283 | 3,136 | ||||||
Basic net income (loss) per Class B common share
|
$ | 0.06 | $ | (0.07 | ) | |||
Diluted net income (loss) per Class B common share
|
$ | 0.05 | $ | (0.07 | ) |
Three Months Ended
|
||||||||
April 30,
|
||||||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Net income (loss)
|
$ | 1,020 | $ | (1,220 | ) | |||
Foreign currency translation adjustments
|
(570 | ) | 770 | |||||
Comprehensive income (loss)
|
$ | 450 | $ | (450 | ) |
Fair value measurement at reporting date using
|
||||||||||||
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
Significant Other
Observable Inputs
(Level 2)
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||||
(in thousands)
|
||||||||||||
Money market mutual funds as of April 30, 2011
|
$ | 57,737 | $ | — | $ | — | ||||||
Money market mutual funds as of January 31, 2011
|
$ | 48,390 | $ | — | $ | — |
April 30,
|
January 31,
|
|||||||
2011
|
2011
|
|||||||
(in thousands)
|
||||||||
Capitalized software costs:
|
||||||||
Capitalized software development costs
|
$ | 1,464 | $ | 1,924 | ||||
Acquired software technology
|
478 | 954 | ||||||
1,942 | 2,878 | |||||||
Less accumulated amortization
|
(1,303 | ) | (2,037 | ) | ||||
Capitalized software costs, net
|
$ | 639 | $ | 841 |
Gross Carrying
Amount
|
Accumulated
Impairment
|
Goodwill, Net
|
||||||||||
(in thousands)
|
||||||||||||
Balance at January 31, 2011
|
$ | 22,065 | $ | (15,608 | ) | $ | 6,457 | |||||
Impact of foreign currency translation
|
80 | − | 80 | |||||||||
Balance at April 30, 2011
|
$ | 22,145 | $ | (15,608 | ) | $ | 6,537 |
April 30,
|
January 31,
|
|||||||
2011
|
2011
|
|||||||
(in thousands)
|
||||||||
Note payable
|
$ | 16,346 | $ | 16,442 | ||||
Less current maturities
|
(306 | ) | (304 | ) | ||||
Long-term debt
|
$ | 16,040 | $ | 16,138 |
Three Months Ended
April 30,
|
||||||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Cost of maintenance, subscription and other revenue
|
$ | 52 | $ | 88 | ||||
Cost of professional services
|
126 | 214 | ||||||
Sales and marketing
|
209 | 327 | ||||||
Research and development
|
167 | 256 | ||||||
General and administrative
|
558 | 585 | ||||||
Total stock-based compensation expense
|
$ | 1,112 | $ | 1,470 |
Three Months Ended
April 30,
|
||||||||
2011
|
2010
|
|||||||
Expected life in years
(1)
|
3.75 | 4.75 | ||||||
Risk free interest rate
(2)
|
1.54 | % | 1.11 | % | ||||
Volatility
(3)
|
71 | % | 70 | % | ||||
Dividend rate
(4)
|
2.23 | % | 2.04 | % |
(1)
|
The expected life of SARs granted under the stock-based compensation plans is based on historical vested stock option and SAR exercise and
post-vest forfeiture patterns and includes an estimate of the expected term for stock options and SARs that were fully vested and outstanding.
|
(2)
|
The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of SARs in effect at the time of grant.
|
(3)
|
The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of the Company’s common stock for a period equivalent to the expected life of the SARs, which it believes is representative of the expected volatility over the expected life of the SARs.
|
(4)
|
The Company expects to continue paying quarterly dividends at the same rate as the three months ending on April 30, 2011.
|
|
Stock Options/
SARs
(in thousands)
|
Weighted
Average
Exercise
Price per
Share
|
Weighted
Average
Remaining
Contractual
Term (years)
|
Aggregate
Intrinsic Value
(in thousands)
|
||||||||||||
Outstanding at January 31, 2010
|
2,214 | $ | 11.76 |
|
||||||||||||
Granted
|
683 | 8.95 | ||||||||||||||
Exercised
|
(88 | ) | 6.44 | |||||||||||||
Expired
|
(58 | ) | 10.42 | |||||||||||||
Forfeited
|
(98 | ) | 8.93 | |||||||||||||
Outstanding at January 31, 2011
|
2,653 | $ | 11.33 | |||||||||||||
Granted
|
29 | 9.09 | ||||||||||||||
Exercised
|
(41 | ) | 7.65 | |||||||||||||
Expired
|
(4 | ) | 9.78 | |||||||||||||
Forfeited
|
(21 | ) | 9.60 | |||||||||||||
Outstanding at April 30, 2011
|
2,616 | $ | 11.38 | 4.7 | $ | 3,757 | ||||||||||
Vested and expected to vest at
April 30, 2011
(1)
|
2,513 | $ | 11.47 | 4.7 | $ | 3,579 | ||||||||||
Vested and exercisable at April 30, 2011
|
1,300 | $ | 13.69 | 3.0 | $ | 1,356 |
(1)
|
The expected-to-vest SARs are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding SARs.
|
RSUs
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
|
(in thousands)
|
|||||||
Restricted stock at January 31, 2010
|
475 | $ | 10.74 | |||||
Granted
|
128 | 8.81 | ||||||
Vested
(1)
|
(165 | ) | 11.37 | |||||
Forfeited
|
(3 | ) | 8.75 | |||||
Restricted stock at January 31, 2011
|
435 | $ | 10.02 | |||||
Granted
|
10 | 8.50 | ||||||
Vested
(1)
|
(13 | ) | 7.33 | |||||
Restricted stock at April 30, 2011
|
432 | $ | 10.06 |
(1)
|
The number of RSUs vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.
|
Three Months Ended
April 30,
|
||||||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Revenue:
|
||||||||
North America
(1)
|
$ | 25,280 | $ | 21,497 | ||||
EMEA
|
18,450 | 15,624 | ||||||
Asia Pacific
|
10,627 | 10,138 | ||||||
Latin America
|
5,046 | 3,582 | ||||||
$ | 59,403 | $ | 50,841 |
(1)
|
Sales into Canada accounted for 3% and 5% of North America total revenue in the three months ended April 30, 2011 and 2010, respectively.
|
Three Months
Ended
|
Increase (Decrease)
Compared to Prior
Period
|
Three Months
Ended
|
||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Revenue
|
||||||||||||||||
License fees
|
$ | 6,344 | $ | 505 | 9 | % | $ | 5,839 | ||||||||
Percentage of total revenue
|
11 | % | 12 | % | ||||||||||||
Maintenance and other
|
34,338 | 2,827 | 9 | % | 31,511 | |||||||||||
Percentage of total revenue
|
58 | % | 62 | % | ||||||||||||
Subscription fees
|
2,208 | 1,060 | 92 | % | 1,148 | |||||||||||
Percentage of total revenue
|
3 | % | 2 | % | ||||||||||||
Professional services
|
16,513 | 4,170 | 34 | % | 12,343 | |||||||||||
Percentage of total revenue
|
28 | % | 24 | % | ||||||||||||
Total revenue
|
$ | 59,403 | $ | 8,562 | 17 | % | $ | 50,841 |
Three Months Ended
|
Increase (Decrease)
Compared
to Prior Period
|
Three Months
Ended
|
||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Cost of revenue
|
||||||||||||||||
Cost of license fees
|
$ | 1,031 | $ | (399 | ) | -28 | % | $ | 1,430 | |||||||
Cost of maintenance, subscription
and other
|
8,775 | 127 | 1 | % | 8,648 | |||||||||||
Cost of professional services
|
16,288 | 3,714 | 30 | % | 12,574 | |||||||||||
Total cost revenue
|
$ | 26,094 | $ | 3,442 | 15 | % | $ | 22,652 | ||||||||
Percentage of revenue
|
44 | % | 45 | % |
Three Months Ended
|
Increase (Decrease)
Compared
to Prior Period
|
Three Months
Ended
|
|||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
||||||||||||||
(in thousands)
|
|||||||||||||||||
Sales and marketing
|
$ | 14,489 | $ | 983 | 7 | % | $ | 13,506 | |||||||||
Percentage of revenue
|
25 | % | 27 | % |
Increase (Decrease)
|
|||||||||||||||||
Three Months Ended
|
Compared
to Prior Period
|
Three Months
Ended
|
|||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
||||||||||||||
(in thousands)
|
|||||||||||||||||
Research and development
|
$ | 8,483 | $ | (844 | ) | -9 | % | $ | 9,327 | ||||||||
Percentage of revenue
|
14 | % | 18 | % |
Increase (Decrease)
|
|||||||||||||||||
Three Months Year Ended
|
Compared
to Prior Period
|
Three Months Ended
|
|||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
||||||||||||||
(in thousands)
|
|||||||||||||||||
General and administrative
|
$ | 7,713 | $ | 272 | 4 | % | $ | 7,441 | |||||||||
Percentage of revenue
|
13 | % | 14 | % |
Three Months Ended
|
Increase (Decrease)
Compared
to Prior Period
|
Three Months
Ended
|
||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Other expense (income)
|
||||||||||||||||
Interest income
|
$ | (136 | ) | $ | (3 | ) | -2 | % | $ | (133 | ) | |||||
Interest expense
|
270 | (28 | ) | -9 | % | 298 | ||||||||||
Other expense (income), net
|
818 | 841 | 3,657 | % | (23 | ) | ||||||||||
Total other expense
|
$ | 952 | $ | 810 | 570 | % | $ | 142 | ||||||||
Percentage of revenue
|
1 | % | 0 | % |
Increase (Decrease)
|
||||||||||||||||
Three Months Ended
|
Compared
to Prior Period
|
Three Months Ended
|
||||||||||||||
April 30, 2011
|
$ | % |
April 30, 2010
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Income tax expense (benefit)
|
$ | 652 | $ | 1,659 | 165 | % | $ | (1,007 | ) | |||||||
Percentage of revenue
|
1 | % | -2 | % | ||||||||||||
Effective tax rate
|
39 | % | 45 | % |
(in thousands)
|
Three Months
Ended
April 30, 2011
|
Three Months
Ended
April 30, 2010
|
||||||
Net cash provided by operating activities
|
$ | 5,511 | $ | 13,165 | ||||
Net cash used in investing activities
|
(778 | ) | (401 | ) | ||||
Net cash used in financing activities
|
(447 | ) | (664 | ) | ||||
Effect of foreign exchange rates on cash and equivalents
|
1,849 | 87 | ||||||
Net increase in cash and equivalents
|
$ | 6,135 | $ | 12,187 |
1.
|
The election of six directors to serve until our 2012 annual meeting of stockholders:
|
CLASS A STOCK
|
||||||||||||||||
NUMBER OF
VOTES
FOR
|
% OF
SHARES
VOTING
|
NUMBER OF
VOTES
WITHHELD
|
% OF
SHARES
VOTING
|
|||||||||||||
Karl F. Lopker
|
415,518 | 84.13 | % | 78,400 | 15.87 | % | ||||||||||
Pamela M. Lopker
|
415,524 | 84.13 | % | 78,394 | 15.87 | % | ||||||||||
Scott J. Adelson
|
414,770 | 83.98 | % | 79,148 | 16.02 | % | ||||||||||
Thomas J. O’Malia
|
412,869 | 83.59 | % | 81,049 | 16.41 | % | ||||||||||
Lee D. Roberts
|
414,126 | 83.85 | % | 79,792 | 16.15 | % | ||||||||||
Peter R. van Cuylenberg
|
414,019 | 83.82 | % | 79,899 | 16.18 | % |
CLASS B STOCK
|
||||||||||||||||
NUMBER
OF
VOTES
FOR
|
% OF
SHARES
VOTING
|
NUMBER OF
VOTES
WITHHELD
|
% OF
SHARES
VOTING
|
|||||||||||||
Karl F. Lopker
|
2,000,621 | 84.36 | % | 370,920 | 15.64 | % | ||||||||||
Pamela M. Lopker
|
2,000,655 | 84.36 | % | 370,886 | 15.64 | % | ||||||||||
Scott J. Adelson
|
2,036,967 | 85.89 | % | 334,574 | 14.11 | % | ||||||||||
Thomas J. O’Malia
|
2,027,631 | 85.50 | % | 343,910 | 14.50 | % | ||||||||||
Lee D. Roberts
|
2,033,910 | 85.76 | % | 337,631 | 14.24 | % | ||||||||||
Peter R. van Cuylenberg
|
1,969,631 | 83.05 | % | 401,910 | 16.95 | % |
10.1 | Change in Control Policy* |
10.2 | Executive Termination Policy* |
10.3 | Acknowledgement between the Registrant and Daniel Lender dated October 10, 2008* |
10.4 | Third Amendment to Credit Agreement between the Registrant and Bank of America, N.A. effective as of June 9, 2011 |
31.1 |
Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchang Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2 | Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchang Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopte pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopte pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Date: June 9, 2011
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By:
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/s/ DANIEL LENDER |
Daniel Lender | ||
Executive Vice President, Chief Financial Officer | ||
(on behalf of the Registrant) |
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By:
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/s/ KARA BELLAMY |
Kara Bellamy | ||
Senior Vice President, Corporate Controller | ||
(Chief Accounting Officer) |
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·
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Retain Top Executive Management through a period of uncertainty
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Enhance the value of the entity to a prospective buyer
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Preserve the neutrality of the Executive Management team in negotiating and executing the transition
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Keep the Executive Management team focused on the business rather than on their personal financial security
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Bridge the unemployment gap
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Any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or persons acting as a group, other than Pamela M. Lopker and Karl F. Lopker as joint holders
,
or either of them (the “Lopkers”) or a living trust for their benefit over which they maintain control of the assets of the trust and the voting rights for shares in the trust, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities.
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·
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A merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company; or such surviving entity outstanding immediately after such merger or consolidation; or
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·
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The sale or other disposition by the Company of all, or substantially all, of the Company’s assets, other than a transfer to (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (iii) a person, or persons acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power represented by the Company’s then outstanding voting securities, or (iv) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by a person described in clause (iii).
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·
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The Executive is assigned any duties which are wholly and clearly inconsistent with the position and status of an executive of the Company, or a substantial alteration in the nature, status or prestige of Executive’s official position resulting in a decrease in authority or responsibilities from those in effect immediately prior to a Change in Control;
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·
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The Executive’s Base Monthly Salary is decreased by the Company, or the Executive’s benefits or opportunities under any employee benefit or incentive plan or program of the Company is or are materially reduced other than in connection with a reduction in salary or benefits generally applicable to all employees of the Company;
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The Executive’s principal office location is relocated to a location more than twenty-five (25) miles from the Executive’s then present location without the Executive’s written consent;
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The Company fails to pay the Executive any deferred payments under any bonus or incentive plans in a timely manner;
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The Company fails to reimburse the Executive for business expenses in accordance with the Company’s policies, procedures or practices;
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The Company fails to agree to or actually indemnify the Executive for the Executive’s actions and/or inactions, as either a director or officer of the Company, to the fullest extent permitted by Delaware law, and the Company fails to maintain reasonable levels of directors and officers liability insurance coverage for the Executive when such insurance is available;
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The Company fails to obtain a written agreement from any successor or assign of the Company to assume and perform Executive’s employment agreement as then in effect and the Change in Control Agreement; or
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The Company purports to terminate the Executive’s employment for Cause and such purported termination of employment is not effected in accordance with this Policy.
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Compensation Base
is defined as an Executive’s highest fiscal year based salary in effect within two years prior to the Change in Control
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·
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Average Annual Bonus
is defined as an Executive’s average annual bonus for the two full fiscal years immediately preceding the Change in Control
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·
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Vesting of
any equity compensation granted under the QAD Inc. 2006 Stock Incentive Program ("
Equity Compensation")
to commence at time of termination of Executive’s employment
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·
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Payment
to compensate for employee benefits being received at time of termination of Executive’s employment
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·
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Participation
: Included in this Tier are the following Company Executives
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1.
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Chief Executive Officer
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2.
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President
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3.
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Chief Financial Officer
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·
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Benefits
:
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·
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Eighteen (18) months of compensation base
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One and one-half (1 1/2) multiple of average annual bonus
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Vesting of all Equity Compensation
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Eighteen (18) months benefit replacement payment
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·
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Participation
: Included in this Tier, Executives with Position Title of Executive Vice President, and other members of the Company’s Executive Committee by prior approval of the Compensation Committee
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Benefits
:
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●
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Twelve (12) months of compensation base
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●
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One (1) multiple of average annual bonus
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●
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Vesting of all Equity Compensation
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●
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Twelve (12) months benefit replacement payment
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·
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Participation
:
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Included in this Tier are Executives with titles of Vice President by prior approval of the Compensation Committee and other individuals by prior approval of the Compensation Committee
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Benefits
:
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●
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Six (6) months of compensation base
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●
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One (1) multiple of average annual bonus
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●
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Vesting of all Equity Compensation
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●
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Six (6) months benefit replacement payment
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·
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Payment to Specified Employee:
If a payment obligation under the Agreement is made to an Executive upon his or her separation from service while he or she is a “specified employee” (as defined under Section 409A of the Code and determined in good faith by the Compensation Committee), any payment of “deferred compensation” (as defined under Treasury Regulation Section 1.409A-1(b)(1) after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12 that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest and shall be paid within 30 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 30 days after the appointment of the personal representative or executor of the Executive’s estate following his death. During the 6-month delay period, interest shall accrue at the prime rate of interest published in the northeast edition of The Wall Street Journal on the date of Executive’s separation from service. Accordingly, subject to the requirements of Section 409A of the Code, an Executive may not receive his or her Change in Control Benefits payment until 6 months after separation from service.
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Compliance Intended:
This Policy is intended not to result in the imposition of any tax, interest charge or other assessment, penalty or addition under Section 409A of the Code. In addition to any specific references to Section 409A of the Code in this Policy, all terms and conditions of this Policy are intended, and shall be interpreted and applied to the greatest extent possible in such manner as may be necessary, to comply with the provisions of Section 409A of the Code and any rules, regulations or other regulatory guidance issued under Section 409A of the Code. However, the Company does not guarantee any particular tax effect to Executive. The Company shall not be liable to Executive for any payment made under this Agreement that is determined to result in an additional tax, penalty, or interest under Section 409A of the Code, nor for reporting in good faith any payment made under this Agreement as an amount includible in gross income under Section 409A of the Code.
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|
·
|
Keep the Executive Management team focused on the business rather than on their personal financial security
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|
·
|
Bridge the unemployment gap
|
|
·
|
Compensation Base
is defined as an Executive’s highest fiscal year base salary in effect within two years prior to the Executive’s Termination
|
|
·
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Participation
: Included in this Tier are the following Company Executives
|
|
1.
|
Chief Executive Officer
|
|
2.
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President
|
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3.
|
Chief Financial Officer
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4.
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Executives with Position Title of Executive Vice President
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·
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Benefits
:
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·
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Six (6) months of Compensation Base
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·
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Six (6) months of COBRA payments or similar regional heath coverage
|
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·
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Participation
: All employees not identified and included in the Tier 1 structure above, must be expressly approved by the Compensation Committee in order to receive Benefits under this Policy, as noted within Compensation Committee minutes.
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·
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Benefits
:
|
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·
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Six (6) months of Compensation Base
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·
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Six (6) months of COBRA payments or similar regional heath coverage
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·
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It is intended that lump sum payments to be made under this Policy will, be paid within the “short-term deferral period” (as defined for purposes of Section 409A), and each such payment shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A. It is intended that COBRA payments and other health coverage provided under this Policy qualify as separation pay plan medical benefits within the meaning of Treasury Regulation Section 1.409A-1(b)(9)(v)(B), and this Policy shall be interpreted and administered accordingly.
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·
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If a payment under this policy is made to an Executive upon his or her separation from service while he or she is a “specified employee” (as defined under Section 409A of the Code and determined in good faith by the Compensation Committee), any payment of “deferred compensation” (as defined under Treasury Regulation Section 1.409A-1(b)(1) after giving effect to the exemptions in Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12 that is scheduled to be paid within six (6) months after such separation from service shall accrue with interest and shall be paid within 30 days after the end of the six-month period beginning on the date of such separation from service or, if earlier, within 30 days after the appointment of the personal representative or executor of the Executive’s estate following his death. During the 6-month delay period, interest shall accrue at the prime rate of interest published in the northeast edition of The Wall Street Journal on the date of Executive’s separation from service. Accordingly, subject to the requirements of Section 409A of the Code, an Executive may not receive his or her Change in Control Benefits payment until 6 months after separation from service.
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·
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This Policy is intended to comply with the provisions of Section 409A, and, to the extent practicable, this Policy shall be construed in accordance therewith.
However, the Company does not guarantee any particular tax effect to Executive. The Company shall not be liable to Executive for any payment made under this Agreement that is determined to result in an additional tax, penalty, or interest under Section 409A of the Code, nor for reporting in good faith any payment made under this Agreement as an amount includible in gross income under Section 409A of the Code.
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/s/ Daniel Lender
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/s/ Murray Ray
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Daniel Lender
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Murray Ray
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CPO & EVP, Human Resources
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QAD Inc. | ||
Dated: December 18, 2008 | Dated: December 18, 2008 |
QAD INC. , as the Borrower | ||
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By:
|
/s/ DANIEL LENDER |
Name: | Daniel Lender | |
Title: | Chief Financial Officer |
BANK OF AMERICA, N.A.
,
as the Lender
|
||
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By:
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/s/ SUGEET MANCHANDA MADAN |
Name: | Sugeet Manchanda Madan | |
Title: | Director |
1.
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I have reviewed this Quarterly Report on Form 10-Q of QAD Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
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4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the Registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
|
c)
|
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and
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d)
|
disclosed in this report any change in the Registrant’s internal control over financial reporting thatoccurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over
financial reporting; and
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5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the Registrant’s ability to record,process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have asignificant role in the Registrant’s internal control over financial reporting.
|
Date: June 9, 2011 | |
/s/ KARL F. LOPKER | |
Karl F. Lopker | |
Chief Executive Officer | |
QAD Inc. |
1.
|
I have reviewed this Quarterly Report on Form 10-Q of QAD Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
|
4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the Registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
|
c)
|
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the Registrant’s internal control over financial reporting thatoccurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in thecase of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over
financial reporting; and
|
5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the Registrant’s ability to record,process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have asignificant role in the Registrant’s internal control over financial reporting.
|
Date: June 9, 2011 | |
/s/ DANIEL LENDER | |
Daniel Lender | |
Chief Executive Officer | |
QAD Inc. |
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: June 9, 2011 | |
/s/ KARL F. LOPKER | |
Karl F. Lopker | |
Chief Executive Officer | |
QAD Inc. |
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: June 9, 2011 | |
/s/ DANIEL LENDER | |
Daniel Lender | |
Chief Financial Officer | |
QAD Inc. |