SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
QAD INC.
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(Name of Registrant as Specified In Its Charter)
- - ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE>
QAD INC.
[QAD LOGO] 6450 Via Real
Carpinteria, California 93013
805-684-6614
June 2, 1998
To Our Stockholders:
On behalf of the Board of Directors of QAD Inc. (the "Company"), I
cordially invite you to attend the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held at the Fess Parker Doubletree Resort, 633 East
Cabrillo Street, Santa Barbara, California, on June 30, 1998 at 10:00 a.m. local
time. A Notice of Annual Meeting, form of proxy and a proxy statement containing
information about the matters to be acted upon at the Annual Meeting are
enclosed.
At this year's meeting you will be asked to elect five directors and to
ratify the selection of the independent auditors. The accompanying Notice of
Annual Meeting and Proxy Statement describe these proposals. We encourage you to
read this information carefully.
We urge you to attend the Annual Meeting. Your participation in the affairs
of the Company is important. The Annual Meeting is an excellent opportunity for
the Company's management to discuss the Company's progress with you in person.
Whether in person or by proxy, it is important that your shares be
represented at the Annual Meeting. To ensure your participation in the Annual
Meeting, regardless of whether you plan to attend in person, please complete,
sign, date and return the enclosed proxy promptly. If you attend the Annual
Meeting, you may revoke your proxy at that time and vote in person, if you wish,
even if you have previously returned your form of proxy.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Karl F. Lopker
Chief Executive Officer
<PAGE>
[QAD LOGO]
QAD Inc.
6450 Via Real
Carpinteria, California 93013
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 30, 1998
10:00 a.m. Pacific Daylight Time
To the Stockholders of QAD Inc.:
NOTICE is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of QAD Inc., a Delaware corporation (the "Company") will be held on
Tuesday, June 30, 1998 at the Fess Parker Doubletree Resort, 633 East Cabrillo
Street, Santa Barbara, California, at 10:00 a.m. Pacific Daylight Time for the
following purposes:
1. To elect one director to hold office until the Annual Meeting of
Stockholders in the year 1999 (Class I Director), two directors to hold
office until the Annual Meeting of Stockholders in the year 2000 (Class II
Directors), and two directors to hold office until the Annual Meeting of
Stockholders in the year 2001 (Class III Directors);
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the Company's 1999 fiscal year; and
3. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Holders of the Company's common stock, par
value $.001 per share ("Common Stock") at the close of business on May 11, 1998,
the record date fixed by the Board of Directors, are entitled to notice of and
to vote at the Annual Meeting. The Company's Board of Directors urges that all
stockholders of record exercise their right to vote at the meeting personally in
Santa Barbara, California, or by proxy. Accordingly, we are sending you the
following Proxy Statement and the enclosed proxy card.
Whether or not you plan to attend the Annual Meeting, please specify your
vote on the accompanying proxy and date, sign and return it as promptly as
possible in the enclosed self-addressed, postage-paid envelope (does not apply
outside US) by June 20, 1998. Under Delaware law, if you will not be in
attendance in person at the Annual Meeting in Santa Barbara, California, in
order to vote you must do so by proxy. Unless you do so, or are present in
person in Santa Barbara, California, you will not be counted for purposes of
establishing a quorum.
Only stockholders of record on the books of the Company at the close of
business on May 11, 1998 will be entitled to vote at the Annual Meeting. A list
of stockholders entitled to vote will be available for inspection at the
Company's offices, 6450 Via Real, Carpinteria, California 93013, for ten days
prior to the Annual Meeting.
Your prompt response will be appreciated.
By Order of the Board of Directors
Joseph E. Nida,
Secretary
Carpinteria, California
June 2, 1998
<PAGE>
QAD Inc.
6450 Via Real
Carpinteria, CA 93013
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors (the "Board")
of QAD Inc., a Delaware corporation (the "Company") to be used at the Annual
Meeting of Stockholders (the "Annual Meeting") on Tuesday, June 30, 1998 at the
Fess Parker Doubletree Resort, 633 East Cabrillo Street, Santa Barbara,
California, at 10:00 a.m. Pacific Daylight Time. This Proxy Statement and the
enclosed form of proxy are being sent to stockholders on or about June 2, 1998.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following items:
ITEM I: To elect five directors, one director to hold office until the Annual
Meeting of Stockholders in the year 1999 (Class I director), two
directors to hold office until the Annual Meeting of Stockholders in
the year 2000 (Class II directors), and two directors to hold office
until the Annual Meeting of Stockholders in the year 2001 (Class III
directors).
ITEM II: To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the Company's 1999 fiscal year.
ITEM III: To consider and transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The Annual Report to Stockholders enclosed is not to be regarded as proxy
soliciting material. If you would like an additional copy, please contact the
Company at 6450 Via Real, Carpinteria, California 93013, Attn: Investor
Relations, telephone: (805) 566-5139.
The Board of the Company believes that election of its director nominees
and approval of Item II are in the best interests of the Company and its
stockholders and recommends to the stockholders the approval of each of the
nominees and of Item II.
VOTING
Voting and Revocability of Proxies
The accompanying proxy is solicited by the Company's Board of Directors
(the "Board of Directors") for use at the Annual Meeting. A proxy may be revoked
at any time prior to its use by: (1) delivering to the Secretary of the Company
a signed notice of revocation or a later dated proxy, (2) attending the Annual
Meeting and voting in person or (3) giving notice of revocation of the proxy at
the Annual Meeting. Attendance at the Annual Meeting will not in itself
constitute the revocation of a proxy. Prior to the Annual Meeting, any written
notice of revocation should be sent to QAD Inc., 6450 Via Real, Carpinteria,
California 93013, Attention: Corporate Secretary. Any notice of revocation that
is delivered at the Annual Meeting should be hand delivered to the Secretary of
the Company at or before the taking of the vote. A stockholder may be requested
to present such documents as shall be reasonably requested for the purpose of
establishing such stockholder's identity. This Proxy Statement, the accompanying
proxy card and the 1998 Annual Report to Stockholders are being mailed or
otherwise distributed to stockholders on or about June 2, 1998.
The shares of common stock, par value $.001 per share ("Common Stock")
represented by properly executed proxies will be voted in accordance with the
instructions indicated on such proxies. If no specific instructions are given,
the shares will be voted FOR the election of the nominees for director set forth
herein and FOR ratification of KPMG Peat Marwick LLP as the firm of independent
auditors to audit the consolidated financial statements of the Company and its
subsidiaries for fiscal 1999. In addition, if other matters come before the
Annual Meeting, the persons named in the accompanying form of proxy will vote in
accordance with their best judgment with respect to such matters.
Record Date, Voting Rights and Outstanding Shares
The Board of Directors has fixed the close of business on May 11, 1998 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting and any adjournment or postponement thereof
(the "Record Date"). Only holders of record of the Company's Common Stock on the
Record Date are entitled to vote at the Annual Meeting. Each holder of record of
Common Stock at the close of business on the Record Date is entitled to one vote
per share on each matter to be voted upon by the stockholders at the Annual
Meeting. As of the Record Date, there were 29,162,674 shares of Common Stock
issued and outstanding.
Quorum, Voting Requirements and Effect of Abstentions and Non-Votes
At the Annual Meeting, inspectors of election will determine the presence
of a quorum and tabulate the results of the voting by stockholders. The holders
of a majority of the total number of outstanding shares of stock that are
entitled to vote at the meeting must be present in person or by proxy in order
to have the quorum that is necessary for the transaction of business at the
Annual Meeting. The inspectors will treat properly executed proxies marked
"ABSTAIN" or required to be treated as "non-votes" as present for purposes of
determining whether there is a quorum at the Annual Meeting. A "non-vote" occurs
when a broker or nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the broker or nominee
does not have discretionary voting power and has not received instructions from
the beneficial owner.
The five nominees for director who receive a plurality of the votes cast by
the holders of the Common Stock, in person or by proxy at the Annual Meeting,
will be elected. All other matters will require the approval of a majority of
the votes cast by the Common Stock, in person or by proxy at the Annual Meeting.
Abstentions and non-votes will have the same effect as a vote against the
proposal to ratify the appointment of the independent auditors.
The Stockholders of the Company have no dissenters' or appraisal rights in
connection with either Item I or II.
The Company has been informed that the holders of more than 60% of the
shares entitled to vote intend to vote FOR the election of the directors
nominated by the Board of Directors and FOR Item II. If such holders do in fact
so vote their shares, the election of such directors and the approval of Item II
are assured, irrespective of the votes of other stockholders. See "Security
Ownership of Certain Beneficial Owners and Management Ownership-Principal
Stockholders."
ELECTION OF DIRECTORS
(ITEM I)
Pursuant to the Company's Certificate of Incorporation, effective with the
first annual meeting of stockholders when the Company shall have at least 800
stockholders of record as determined under Section 2115 of the California
Corporations Code, the Board of Directors of the Company shall be divided into
three classes of directors, with each class having a number of directors as
nearly equal in number as possible and with the terms of each class expiring in
a different year. The first such meeting is the 1998 Annual Meeting and,
therefore, the Company's Board of Directors will be divided into three classes
as described in this Proxy Statement.
It is intended that valid proxies received will be voted, unless contrary
instructions are given, to elect the five nominees named in the following table
to the respective class of directorship indicated therein. Should any nominee
decline or be unable to accept such nomination to serve as a director, an
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event that the Company does not currently anticipate, the persons named in the
enclosed proxy reserve the right, in their discretion, to vote for a lesser
number of or for substitute nominees designated by the Board of Directors, to
the extent consistent with the Company's Certificate of Incorporation and its
By-Laws.
Each of the five nominees for director to be elected by the holders of
Common Stock is currently a member of the Board of Directors. If elected, each
such nominee will hold office until the Annual Meeting of Stockholders as
specified in the following table and until his or her respective successor is
duly elected and qualified.
<TABLE>
<CAPTION>
Name Age Director Since Positions with the Company Committees
- ------------------------------- ------- ----------------- ------------------------------------ ----------------
<S> <C> <C> <C> <C>
Nominees for Directors to
Hold Office Until 1999
- -------------------------------
Evan M. Bishop 43 1981 Director, Functional
Architect/Manufacturing
Nominees for Directors to
Hold Office Until 2000
- -------------------------------
Karl F. Lopker 46 1981 Director, Chief Executive Audit (Ex Officio)
Officer Compensation
Pamela M. Lopker 43 1979 Director, Chairman of the
Board and President
Nominee for Director to
Hold Office Until 2001
- ------------------------------
Peter R. Van Cuylenburg 49 1997 Director Audit,
Compensation
Koh Boon Hwee 47 1997 Director Audit,
Compensation
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE INCUMBENT
DIRECTORS IDENTIFIED ABOVE.
Information Concerning the Incumbent Directors and Nominees for Election
Set forth below is information with respect to the individuals who are
nominees for election to the Board of Directors of the Company who all standing
for election at the Annual Meeting.
Nominee for Election as Director to Hold Office Until the 1999 Annual
Meeting of Stockholders
EVAN M. BISHOP
Evan M. Bishop has served the Company as a Director since joining QAD in
1981. Mr. Bishop currently also holds the position of Functional
Architect/Manufacturing. Mr. Bishop is certified in Production and Inventory
Management by the American Production and Inventory Control Society. Mr. Bishop
holds a Bachelor of Arts degree in Mathematics and Economics from the University
of California at Santa Barbara.
Nominees for Election as Directors to Hold Office Until the 2000 Annual
Meeting of Stockholders
KARL F. LOPKER
Karl F. Lopker has served as Director, Chief Executive Officer and
Secretary since joining the Company in 1981. Mr. Lopker was founder and
President of Deckers Outdoor Corporation from 1973 to 1981, where he currently
serves as a Director. Mr. Lopker is certified in Production and Inventory
Management at the Fellow level by the American Production and Inventory Control
Society. Mr. Lopker
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studied Electrical Engineering and Computer Science at the University of
California at Santa Barbara. Mr. Lopker and Pamela Lopker are married.
PAMELA M. LOPKER
Pamela M. Lopker founded the Company in 1979 and has been its Chairman of
the Board and President since inception. Prior to founding the Company,
Ms. Lopker served as Senior Systems Analyst for Comtek Research from 1977 to
1979. Ms. Lopker is certified in Production and Inventory Management by the
American Production and Inventory Control Society. Ms. Lopker earned a Bachelor
of Arts degree in Mathematics from the University of California at Santa
Barbara. Ms. Lopker and Karl Lopker are married.
Nominees for Election as Directors to Hold Office Until the 2001 Annual
Meeting of Stockholders
KOH BOON HWEE
Koh Boon Hwee was appointed an outside director in September 1997. Mr. Koh
currently serves as Executive Chairman of Singapore-based Wuthelam Group, a
diversified holding company whose core businesses include electronics
manufacturing; paints, coating and chemicals; real estate development and
management, and private direct investments. Mr. Koh also serves as Chairman of
Singapore Telecom, Singapore Post and the Council of the Nanyang Technological
University. He serves on the boards of several other statutory and public
organizations including the Securities Industry Council, the Institute of Policy
Studies, Singapore International Foundation and the Singapore-U.S. Business
Council.
PETER R. VAN CUYLENBURG
Peter R. Van Cuylenburg was appointed an outside Director in November 1997.
Mr. Van Cuylenburg is the president of Quantum Corporation's Specialty Storage
Products Group, based in Milpitas, California and he also serves on the board of
directors of Dynatech Corporation and Mitel Corporation. Past board memberships
include NeXT Computer and Cable and Wireless, plc. Mr. Van Cuylenburg's career
includes executive posts at Xerox Corporation, NeXT Computer, Inc., Cable and
Wireless, plc., and Texas Instruments, in the U.K., U.S. and France. Mr. Van
Cuylenburg holds a Diploma in Electrical Engineering from Bristol Polytechnic
and an Honorary Doctorate of Technology from Bristol Polytechnic.
Compensation of Directors
Directors are reimbursed for direct expenses relating to their activities
as members of the Board of Directors. Pursuant to the Company's 1997 Stock
Incentive Program, directors are eligible to participate in the Company's
Nonqualified Stock Option Plan and directors who are not employees of the
Company may participate in the Company's Non-Employee Director Stock Option
Plan. Upon joining the Company in 1997, each Mr. Koh and Mr. Van Cuylenburg were
granted by the Board of Directors a nonqualified stock option for 15,000 Shares
of the Company's Common Stock. The Company also committed to grant to Mr. Koh
and Mr. Van Cuylenburg two additional options, each to acquire 7,500 shares of
the Company's Common Stock (for a total additional 15,000 shares to each). The
grant date of the first 15,000 share option to each director was the date of
such director's appointment to the Board of Directors or their retention by the
Company as a consultant, whichever was earlier. The grant date of the second
option will be the first anniversary of each director's appointment as a
director and the grant date of the third option will be the second anniversary
of such appointment, provided the grantee continues to be a director on such
dates. All such options vest in four equal installments on each of the first
through fourth anniversaries of the respective grant date. It is the Company's
intention to continue to make appropriate awards under the 1997 Stock Incentive
Program to each non-employee director upon such person's election to the Board.
Board of Directors and Board Committees
During fiscal 1998, the Board of Directors held two regularly scheduled and
special meetings and acted by unanimous written consent on 36 occasions. During
fiscal 1998, all directors attended at least
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seventy-five percent (75%) of the meetings of the Company's Board of Directors
during the time when they were a member and of the meetings of committees
thereof of which they were a member. In addition to attending meetings,
directors also discharge their responsibilities by review of Company reports to
directors, visits to Company facilities, correspondence and telephone
conferences with the Company's executive officers and others regarding matters
of interest and concern to the Company.
The Board of Directors has standing Audit and Compensation committees. All
committees report their activities, actions and recommendations to the Board of
Directors, as appropriate.
Audit Committee
Messrs. Koh, Van Cuylenburg and Lopker (ex officio) currently are members
of the Audit Committee. The Audit Committee: reviews with the Company's
management, the internal auditors and the independent auditors the Company's
policies and procedures with respect to internal controls; reviews significant
accounting matters; approves the audited financial statements prior to public
distribution; approves any significant changes in the Company's accounting
principles or financial reporting practices; reviews independent auditor
services; and recommends to the Board of Directors the firm of independent
auditors to audit the Company's consolidated financial statements. From the
formation of the Audit Committee in December 1997 to the end of the fiscal year,
the Audit Committee did not meet or act by written consent.
Compensation Committee
Messrs. Koh, Van Cuylenburg and Lopker currently are members of the
Compensation Committee. The Compensation Committee: recommends to the Board of
Directors the compensation and cash bonus opportunities based on the achievement
of objectives set by the Compensation Committee with respect to the Chairman of
the Board of Directors and President, the Chief Executive Officer and other
executive officers; administers the Company's compensation plans for the same
executives; determines equity compensation for all employees; reviews and
approves the cash compensation and bonus objectives recommended by the Chairman
of the Board of Directors and President and the Chief Executive Officer for the
other executive officers of the Company; and reviews various matters relating to
employee compensation and benefits. Mr. Lopker is recused from all matters
involving the Chairman of the Board and President and the Chief Executive
Officer and does not participate in administration of the 1997 Stock Incentive
Program. A sub-committee of the Compensation Committee composed of Messrs. Koh
and Van Cuylenburg administers, and makes all ongoing determinations concerning
matters relevant to, the Company's 1997 Stock Incentive Program. The
Compensation Committee (including for purposes of administering the 1997 Stock
Incentive Program) held meetings or acted by unanimous written consent on two
occasions during fiscal 1998.
Compensation Committee Interlocks and Insider Participation
Messrs. Koh, Van Cuylenburg and Lopker currently are members of the
Compensation Committee. Mr. Lopker is the Chief Executive Officer of the
Company. No other interlocking relationships exist between the Company's
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee believes that the compensation levels of the
Company's executive officers, who provide leadership and strategic direction for
the Company, should consist of (i) base salaries that are commensurate with
executives of other comparable software companies and (ii) cash bonus
opportunities based on achievement of objectives set by the Compensation
Committee with respect to the Chairman and the President and the Chief Executive
Officer and set by such officers, in consultation with the Compensation
Committee, with respect to the other executive officers of the Company. The
Compensation Committee also believes that it is important to provide the
Company's executive officers with significant stock-based incentive
compensation, which increases in value in direct correlation with
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improvement in the performance of the Company's Common Stock, thereby aligning
management's interest with those of the Company's stockholders.
The Compensation Committee considers the following factors (ranked in order
of importance) when determining compensation of executive officers: (i) the
Company's performance measured by attainment of specific strategic objectives
and operating results, (ii) the individual performance of each executive officer
including the achievement by the executive (or such executive's functional
group) of identified goals, and (iii) historical cash and equity compensation
levels.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a publicly-held company for compensation in excess of $1,000,000
paid to such a company's chief executive officer and its four other most highly
compensated executive officers, unless the plan and awards pursuant to which any
portion of the compensation is paid meet certain requirements. The Company's
1997 Stock Incentive Program includes provisions which will enable the Company
to meet those requirements if it becomes necessary. Because the Compensation
Committee has not yet been and does not anticipate being faced in the near
future with compensation levels that are affected by Section 162(m), the
Compensation Committee has not yet determined that meeting such requirements
will necessarily be in the best interest of the Company.
Cash Compensation
The salaries of certain executive officers were initially set by their
respective employment agreements, which provide that the Company may increase
such executive officer's base salary throughout the term or any renewal term
thereof. Each such agreement is consistent with the Company's compensation
policy as set forth herein.
As stated above, the compensation of executive officers is also based in
part upon individual performance and comparative industry compensation levels.
Early in each year, a performance plan is established. Each such annual plan
sets forth overall goals to be achieved by the Company, as well as specific
performance goals to be achieved by each of its executive officers according to
his or her duties and responsibilities, for the relevant year. Because the
Compensation Committee did not exist until late into fiscal 1998, the
Compensation Committee did not have a role in setting compensation policy for
fiscal 1998. For fiscal 1999, the Compensation Committee anticipates the overall
goals will include (i) the meeting of targets relating to the gross sales of new
software licenses, (ii) the meeting of targets relating to gross maintenance
revenues, (iii) the meeting of targets relating to new customers in each of the
Company's targeted vertical markets and to additional sales to existing
customers in each of such vertical markets industry-specific, (iv) acquisitions
of technologies and businesses consistent with the Company's business and
product goals and the successful integration of such acquired businesses and
technologies, (v) the enhancement of strategic relationships, (vi) the meeting
of cash flow, expense, and other budgetary targets and (vii) the achievement of
appreciation in the Company's stock price.
The base salaries of each of the executive officers identified below were
either set by, or determined by reference to, such executives' compensation with
the Company prior to the Company's initial public offering or the terms of such
executive's initial hiring by the Company if after the Company's initial public
offering. Bonus compensation for such executives was determined based on a
formula that ties the target bonus objective (which in most instances is
established as a percentage of base salary) to the achievement by the Company of
overall corporate goals (all of which were met or exceeded in fiscal 1998) and
to the achievement of specified individual or functional area goals. Under this
formula, the executive officers' bonus amounts could be greater or less than the
target bonus objective based on the Company's and the executives' performance
against such goals. Applying these standards, in fiscal 1998, Ms. Lopker
received a bonus in the amount of $49,574, Ms. Foley received a bonus in the
amount of $125,658, Mr. Niedzielski received a bonus in the amount of $54,000,
Mr. Anderson received a bonus in the amount of $43,500 and Ms. Biddison received
a bonus in the amount of $29,800. Other executive officers of the Company
received salary increases and bonuses based on their achievement of overall
corporate goals and individual and functional area goals during fiscal 1998. On
average, the
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Compensation Committee believes the cash compensation for executive officers of
the Company is comparable to industry salary and bonus levels.
Equity Compensation
The full Board of Directors and, upon formation of the Compensation
Committee, the non-employee members of the Compensation Committee administer and
authorize all grants and awards made under the 1997 Stock Incentive Program. In
some instances, awards are authorized for new employees as incentives to join
the Company. In determining whether and in what amount to grant stock options or
other equity compensation to the Company's executive officers in fiscal 1998,
the Board of Directors or the non-employee members of the Compensation Committee
considered the amount and date of vesting of currently outstanding incentive
equity compensation granted previously to each of the Company's executive
officers. The Compensation Committee believes that continued grants of equity
compensation to key executives is an important tool to retain and motivate
exceptionally talented executives who are necessary to achieve the Company's
long-term goals, especially at a time of significant growth and competition in
the Company's industry.
During fiscal 1998, the Board of Directors or non-employee members of the
Compensation Committee approved grants of equity compensation to the executive
officers named in the Summary Compensation Table below who received grants and
approved grants of equity compensation to certain of the other executive
officers of the Company, consistent with the Board of Directors' and
Compensation Committee's overarching policy of granting equity compensation to
key executives and to the Company's employees in general.
During fiscal 1998 following the Company's initial public offering the
Compensation Committee was composed of three voting members. During fiscal 1998,
the voting members of the Compensation Committee were Messrs. Koh, Van
Cuylenburg and Lopker.
The Compensation Committee
Koh Boon Hwee
Peter R. Van Cuylenburg
Karl F. Lopker
Executive Compensation
The following table and discussion summarizes the compensation of the Chief
Executive Officer of the Company and each of the four other most highly
compensated executive officers of the Company during fiscal 1998 (the "Named
Executive Officers") for the years indicated during which such person was
employed by the Company.
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<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
-----------------
Annual Compensation Awards
-------------------------------------------------------- -----------------
Other
Annual Restricted
Name and Fiscal Salary Bonus Compensation Stock All Other
Principal Position Year ($) ($) ($)(1) Awards ($) Compensation
- ------------------------------ ------- ---------- ----------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Pamela M. Lopker
Chairman of the Board and 1998 162,500 49,574 3,322 -- 3,100
President 1997 170,236 83,902 -- -- --
Karl F. Lopker 1998 162,500 -- 2,731 -- --
Chief Executive Officer 1997 166,561 127,143 -- -- --
Rita V. Foley(4)
Executive Vice President,
Sales and Marketing 1998 121,174 125,658 -- -- 37,352
Vincent P. Niedzielski
Executive Vice President, 1998 245,000 54,000 1,762 -- 13,235
Research & Development 1997 205,857 -- -- 190,500(5) --
Barry R. Anderson(2)
Vice President,
Administration 1998 134,750 43,500(3) 3,164 -- 10,145
Margaret A. Biddison
Vice President, Global 1998 155,000 29,800 3,351 -- --
Marketing 1997 136,660 31,116 -- 952,500(5) --
- ---------------
<FN>
(1) "Other Annual Compensation" comprises the Company's contributions to the
Company's Section 401(k) Plan and profit sharing plan on behalf of the
Named Executive Officers.
(2) Mr. Anderson joined the Company on April 1, 1997; therefore, the
compensation received by him for fiscal 1998 is for the 10-month period
ended January 31, 1998.
(3) Does not include a loan in the amount of $77,728, which is subject to
forgiveness over a three-year period. None of the loan was forgiven in
fiscal 1998, and, correspondingly, no compensation is reflected in the
table.
(4) Ms. Foley joined the Company on August 4, 1997; therefore, the compensation
received by her for fiscal 1998 is for the six-month period ended January
31, 1998.
(5) The restricted stock granted to Ms. Biddison and Mr. Niedzielski vests
ratably over a five-year period, with the first shares having vested in
January 1998.
</FN>
</TABLE>
Option Grants in Fiscal 1998
The following table sets forth certain information concerning options to
purchase Common Stock that were granted in fiscal 1998 to the Named Executive
Officers. The Company did not grant SARs in fiscal 1998.
8
<PAGE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Percent of
Number of Total
Securities Options Exercise
Underlying Granted to Or Base Grant Date
Name and Options Employees Price Expiration Present
Principal Position Granted (1) In FY 1998 ($/Share) Date Value ($) (2)
- ------------------------ -------------- -------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Karl F. Lopker -- -- -- -- --
Pamela M. Lopker -- -- -- -- --
Rita V. Foley 200,000 10.52% $15.00 8/6/07 $1,467,755
Vincent P. Niedzielski 80,000 4.21% $15.00 2/1/07 $587,102
Barry R. Anderson 50,000 $15.00 4/1/07 $366,939
10,000 3.16%(3) $11.875 12/18/05 $58,099
Margaret A. Biddison -- -- -- -- --
- ---------------
<FN>
(1) Mr. Niedzielski's options vest in three annual increments, one third on
each of the first through third anniversaries of the date of grant, and
expire in ten years. Mr. Anderson's 50,000-share option grant vests in five
annual increments, 20% on each of the first through fifth anniversaries of
the date of grant, and expires in ten years; his 10,000-share option grant
vests in four annual increments, 25% on each of the first through fourth
anniversaries of the date of grant, and expires in eight years. Ms. Foley's
options vest in five annual increments, 20% on each of the first through
fifth anniversaries of the date of grant, and expire in ten years. All
other granted options vest in four annual increments, 25% on each of the
first through fourth anniversaries of the date of grant, and expire in
eight years.
(2) The fair value of each option grant is estimated on the date of grant using
the Black-Scholes model of option valuation to determine grant date fair
value, as prescribed under Statement of Financial Accounting Standards No.
123 (SFAS No. 123), Accounting for Stock-Based Compensation, with the
following assumptions:
Expected stock price volatility 46%
Risk-free interest rate 6.5%
Expected life of options 5 years
Expected dividend yield 0.00%
The Company's stock options currently are not transferable, and the actual
value of the stock options that an employee may realize, if any, will
depend on the excess of the market price on the date of exercise over the
exercise price, so that there is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes
model. The Company has based its assumption for stock price volatility on
the variance of weekly closing prices of the Company's stock from its
initial public offering date to the present. The risk-free rate of return
used equals the average yield on ten-year zero coupon U.S. Treasury issues
for fiscal year 1998. No discount was applied to the value of the grants
for non-transferability, and risk of forfeiture was accounted for in the
expected life of the options.
(3) Represents the combined percentage for both grants.
</FN>
</TABLE>
Option Exercises in Fiscal 1998 and Year-End Values
The following table sets forth information concerning the exercise by the
Named Executive Officers of options to purchase Common Stock during fiscal 1998
and unexercised options to purchase Common Stock held by the Named Executive
Officers as of January 31, 1998.
9
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of
Number of Securities Unexercised
Shares Underlying Unexercised In-The-Money
Acquired Value Options/SARs Options/SARs
on Exercise Realized At Fiscal Year-End At Fiscal Year-End
Name (#) ($) (#) ($)
- -------------------------- --------------- ---------- -------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Karl F. Lopker -- -- -- -- -- --
Pamela M. Lopker -- -- -- -- -- --
Rita V. Foley -- -- -- 200,000 -- --
Vincent P. Niedzielski -- -- -- 80,000 -- --
Barry R. Anderson -- -- -- 60,000 -- $27,500
Margaret A. Biddison -- -- -- -- -- --
__________________
<FN>
(1) The value realized equals the aggregate amount of the excess of the fair
market value on the date of exercise (the closing price of Common Stock as
reported by the Nasdaq Stock Market, Inc. for the exercise date) over the
relevant exercise price(s).
(2) The value of the in-the-money options is based on the closing price of the
Company's Common Stock as reported by the Nasdaq Stock Market, Inc. January
31, 1998, which was $14.625 per share, less the aggregate exercise price,
times the aggregate number of shares issuable pursuant to such options.
</FN>
</TABLE>
Employment Agreements and Change of Control Arrangements
None of the Company's executive officers has employment or severance
arrangements with the Company.
Certain Transactions
In 1994, the Company awarded 8,600 restricted shares to Margaret A.
Biddison in connection with the commencement of her employment. Under the
Company's 1994 Stock Compensation Plan, Ms. Biddison was awarded 23,800 and
100,000 restricted shares during the one month ended January 31, 1996 and the
fiscal year ended January 31, 1997, respectively. Also under the 1994 Stock
Compensation Plan, Vincent P. Niedzielski was awarded 20,000 restricted shares
during the fiscal year ended January 31, 1997. In connection with the hiring of
Barry Anderson in fiscal 1998, the Company made a loan to him in the amount of
$77,728. The loan is subject to forgiveness over a three-year period, provided
Mr. Anderson remains employed by the Company. None of the principal of the loan
was forgiven in fiscal 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OWNERSHIP
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of May 11, 1998, by (i) each person
who is known by the Company to own beneficially five percent or more of the
Company's Common Stock, (ii) each of the Company's directors and Named Executive
Officers and (iii) all current directors and executive officers as a group. The
percentage ownership figures set forth in the table are calculated on the basis
of the number of shares of Common Stock outstanding as of May 11, 1998.
10
<PAGE>
<TABLE>
<CAPTION>
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class
- ----------------------------- -------------------------- -------------------
<S> <C> <C>
Pamela M. Lopker 18,873,800 (2) 64.7%
Karl F. Lopker 18,873,800 (2) 64.7%
Evan M. Bishop 791,000 2.7%
Koh Boon Hwee -- *
Peter R. Van Cuylenburg -- *
Albert J. Moyer 21,000 *
Rita V. Foley 1,112 *
Vincent P. Niedzielski 38,667 *
Barry R. Anderson 15,588 *
All Directors and
Executive Officers
As a Group (9 persons) 19,741,167 67.7%
__________________
<FN>
* Less than 1 percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or become exercisable within 60 days following May
11, 1998 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person. Unless otherwise indicated in the footnotes to this table,
the persons and entities named in the table have sole voting and sole
investment power with respect to the shares set forth opposite such
stockholder's name.
(2) All shares are held jointly by Pamela and Karl Lopker, except that 680,092
shares are held in trust for the Lopkers' minor children and 12,000 shares
are held in a charitable remainder trust. Pamela and Karl Lopker act as
joint trustees of the trusts. An additional 61,000 shares are held by a
charitable foundation of which the Lopkers are officers.
</FN>
</TABLE>
11
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of the Nasdaq Composite Index and the BARS Software
Index for the period beginning August 5, 1997 and ending January 31, 1998. The
graph assumes that $100 was invested on the date of the Company's initial public
offering and that all dividends are reinvested. Historic stock price performance
should not be considered indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG QAD INC., THE NASDAQ COMPOSITE INDEX,
AND THE BANCAMERICA ROBERTSON STEPHENS SOFTWARE INDEX
[PERGORMANCE GRAPH]
<TABLE>
<CAPTION>
Measurement Periods Nasdaq BARS
(Months During Fiscal Year Composite Software
1998 Covered) QAD Inc. Index Index
- ------------------------------- ------------- -------------- --------------
<S> <C> <C> <C>
08/05/97 100.00 100.00 100.00
08/29/97 140.00 97.52 100.30
09/30/97 120.00 104.53 102.80
10/31/97 93.33 96.85 98.97
11/28/97 105.00 98.33 99.28
12/31/97 80.83 96.52 95.41
01/30/98 98.33 99.87 97.33
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than 10% of the Company's Common Stock
(collectively, "Reporting Persons") to file reports of ownership and changes in
ownership with the SEC and Nasdaq. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received or written
representations from Reporting
12
<PAGE>
Persons, with the exception of Evan Bishop and Koh Boon Hwee who did not timely
file a Form 3 and a Form 5, respectively, with respect to exempt option grants,
the Company believes that, with respect to the fiscal year ended January 31,
1998, all the Reporting Persons complied with all applicable filing requirements
of Section 16(a).
SELECTION OF INDEPENDENT AUDITORS
(ITEM II)
A proposal will be presented at the Annual Meeting to ratify the
appointment of the firm of KPMG Peat Marwick LLP as independent auditors to
audit the consolidated financial statements of the Company and its subsidiaries
for the fiscal year ending January 31, 1999. Although such ratification is not
required by law, the Board of Directors believes that stockholders should be
given this opportunity to express their views on the subject. While not binding
on the Board of Directors, the failure of the stockholders to ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors would
be considered by the Board in determining whether to continue the engagement of
KPMG Peat Marwick LLP. It is expected that representatives of KPMG Peat Marwick
LLP will attend the Annual Meeting, have the opportunity to make a statement if
they so desire, and be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
FISCAL 1999.
ANNUAL REPORT
The Company's 1998 Annual Report to Stockholders, including financial
statements for the year ended January 31, 1998, is being distributed to all
stockholders of the Company together with this Proxy Statement, in satisfaction
of the requirements of the Commission. Additional copies of such report are
available upon request. To obtain additional copies of such Annual Report,
please contact the Company's Investor Relations Department at (805) 566-5139.
EXPENSE OF SOLICITATION OF PROXIES
The cost of soliciting proxies will be paid by the Company. In addition to
solicitation by mail, solicitations may also be made by telephone, telecopy or
in person. Arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to their principals,
and the Company will reimburse them for their expenses in so doing. Officers and
other employees of the Company, as yet undesignated, may also request the return
of proxies by telephone, telecopy or in person.
OTHER BUSINESS
It is not anticipated that any other matters will be brought before the
Annual Meeting for action. If any such other matters shall properly come before
the Annual Meeting, however, it is intended that the persons authorized under
the proxies may, in the absence of instructions to the contrary, vote or act
thereon in accordance with their best judgment.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders of the Company
may present proper proposals for inclusion in the Company's proxy statement and
for consideration at the next annual meeting by submitting their proposals to
the Company in a timely manner. Any stockholder of the Company who wishes to
present a proposal for the inclusion in the proxy statement for action at the
1999 Annual Meeting of Stockholders must comply with the Company's Certificate
of Incorporation and By-Laws and the rules and regulations of the Commission
then in effect. To be considered for inclusion in next year's proxy statement,
such a proposal must be mailed to the Company at its offices at 6450 Via Real,
13
<PAGE>
Carpinteria, California 93013, Attention: Corporate Secretary, and must be
received by the Company not later than January 31, 1999
IMPORTANT
TO ASSURE YOUR REPRESENTATION AND A QUORUM FOR THE TRANSACTION OF BUSINESS
AT THE ANNUAL MEETING, THE COMPANY URGES YOU TO PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY.
QAD Inc.
June 2, 1998
14
<PAGE>
QAD INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 30, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
ANNUAL MEETING OF STOCKHOLDERS OF QAD INC. The undersigned hereby appoints
Pamela M. Lopker, Karl. F. Lopker and A.J. Moyer, and each of them, as Proxies,
each with the power to appoint his or her substitutes, and hereby authorizes
them to represent and to vote, as designated below and in accordance with their
judgment upon any other matter properly presented, all the shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of QAD Inc. (the
"Company") held of record by the undersigned at the close of business on May 11,
1998, at the Annual Meeting of Stockholders to be held on June 30, 1998 or any
adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
HEREIN AS DIRECTORS OF THE COMPANY AND FOR RATIFICATION OF KPMG PEAT MARWICK LLP
AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 1999.
Should any nominee decline or be unable to accept such nomination to serve as a
director, an event that the Company does not currently anticipate, the persons
named in the enclosed proxy reserve the right, in their discretion, to vote for
a lesser number or for substitute nominees designated by the Board of Directors.
[X] Please mark your votes as indicated in this example.
IMPORTANT
TO ASSURE YOUR REPRESENTATION AND A QUORUM FOR THE TRANSACTION OF BUSINESS AT
THE ANNUAL MEETING, THE COMPANY URGES YOU TO PLEASE CMOPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the election of the nominees named herein and FOR Item 2.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
QAD INC. 1998 ANNUAL MEETING
1. ELECTION OF DIRECTORS:
(to serve until the respective Annual Meeting of Stockholders indicated).
Nominees: To serve until 1999 Annual Meeting: 1. Evan M. Bishop
To serve until 2000 Annual Meeting: 2. Karl F. Lopker
3. Pamela M. Lopker
To serve until 2001 Annual Meeting: 4. Peter R. Van Cuylenburg
5. Koh Boon Hwee
/__ / FOR all nominees /___/ WITHHOLD AUTHORITY
listed to the left (except to vote for all nominees
as specified below) listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
___________________________________
/ /
/_________________________________/
2. The proposal to ratify the appointment of KPMG Peat Marwick LLP as the
Company's Independent auditors for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Check appropriate box Date_____________________ NO. OF SHARES
Indicates changes below:
Address Change? [ ] Name Change? [ ]
[ ] Please check this box
if you plan to attend
the Annual Meeting.
Number of persons
Attending: ______.
_______________________________________
/ /
/ /
/______________________________________/
Signature(s) in Box Please sign your name as it appears in
the box. When shares are held by joint tenants, both should
sign. when signing as attorney, executor, administrator,
trustee or guardian, please give the full title or capacity.
if a corporation, please sign in corporate name by an
authorized officer and give title. if a partnership, please
sign in partnership name by an authorized person.
