Related Party Transactions and Outside Related Director Information


5/22/2006 Proxy Information

Karl F. Lopker is married to Pamela M. Lopker, Chairman of the Board and President of QAD.

Pursuant to a Stock Purchase Agreement dated as of December 23, 1999 (the ŇStock Purchase AgreementÓ), by and among QAD Inc., Pamela M. Lopker, Karl F. Lopker, The Lopker Living Trust Dated March 23, 1993, (the ŇLopker TrustÓ) and Recovery Equity Investors II, L.P., a Delaware limited partnership (ŇREI IIÓ), REI II purchased from the Lopker Trust 444,445 shares and from QAD 2,333,333 shares of QAD common stock, respectively (collectively, the ŇREI II SharesÓ), and from QAD a warrant exercisable for an aggregate of 225,000 shares of QAD common stock at an exercise price of $7.50 per share (subject to adjustment as provided in the warrant). In December 2003, REI II exercised this warrant for 225,000 shares at an exercise price of $7.50, bringing the total number of shares beneficially held by REI II to 3,002,778.

On May 17, 2005, QAD, REI II, Pamela Lopker, Karl Lopker and the Lopker Trust entered into an agreement (the ŇREI II AgreementÓ) providing that QAD would purchase from REI II 2,000,000 shares of QADŐs outstanding common stock held by REI II for an aggregate purchase price of $14,800,000. The transaction was consummated on May 24, 2005. Following this transaction, REI IIŐs ownership in QADŐs outstanding common stock declined to 1,002,778 shares or 3.14% of QADŐs outstanding common stock. As a result of the purchase of shares from REI II by QAD, the LopkerŐs beneficial ownership in QADŐs common stock increased from 53.24% to 56.57% of QADŐs outstanding common stock at the time.

As part of the REI II Agreement, REI II agreed to waive its right to request any demand registrations pursuant to the Registration Rights Agreement and the Stock Purchase Agreement was amended to extinguish the entitlement of REI II to designate one person for election to the Board of Directors of QAD.