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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / 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 Section240.14a-11(c) or
Section240.14a-12
QAD INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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</TABLE>
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<TABLE>
<S> <C>
QAD Inc.
[LOGO] 6450 Via Real
Carpinteria, California 93013
805-684-6614
</TABLE>
May 5, 2000
To All QAD Stockholders:
On behalf of the Board of Directors of QAD Inc., I cordially invite you to
attend the annual meeting of stockholders of QAD to be held at the Fess Parker's
DoubleTree Resort, 633 East Cabrillo Street, Santa Barbara, California, on
June 8, 2000 at 10:00 a.m. Pacific Time. A notice of the 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 two directors and to
ratify the selection of the independent auditors. The accompanying notice of the
meeting and proxy statement describe these proposals. We encourage you to read
this information carefully.
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>
[LOGO]
QAD INC.
6450 VIA REAL
CARPINTERIA, CALIFORNIA 93013
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 2000
10:00 A.M. PACIFIC TIME
------------------------
To the Stockholders of
QAD Inc.:
NOTICE is hereby given that the annual meeting of stockholders of QAD Inc.,
a Delaware corporation, will be held:
Time: Thursday, June 8, 2000, 10:00 a.m. Pacific Time
Place: Fess Parker's DoubleTree Resort, 633 East Cabrillo Street, Santa
Barbara, California,
Purposes:
1. To elect two directors to hold office until the annual meeting of
stockholders in 2003 (Class II Directors);
2. To ratify the appointment of independent auditors; and
3. To conduct other business if it is properly raised.
The items of business are more fully described in the Proxy Statement
accompanying this Notice. Only stockholders of record on April 10, 2000 may vote
at the meeting.
Your vote is important. Please complete, sign, date and return your proxy
card in the enclosed envelope promptly.
By Order of the Board of Directors
Joseph E. Nida,
SECRETARY
Carpinteria, California
May 5, 2000
<PAGE>
QAD INC.
6450 VIA REAL
CARPINTERIA, CA 93013
------------------------
PROXY STATEMENT
---------------------
QAD's board is using this proxy statement to solicit proxies from the
holders of QAD Inc. common stock to be used at the annual meeting of
stockholders. This meeting will be held on June 8, 2000 at 10:00 a.m. Pacific
Time. We are first mailing this proxy statement and the accompanying form of
proxy to QAD stockholders on or about May 5, 2000.
MATTERS RELATING TO THE ANNUAL MEETING:
<TABLE>
<S> <C>
Time and Place: June 8, 2000
10:00 a.m. Pacific Time
Fess Parker's DoubleTree Resort
633 East Cabrillo Street
Santa Barbara, California 93103
Record Date: April 10, 2000
Outstanding Shares Held on Record Date: 33,256,095 shares of common stock
Shares Entitled to Vote: 33,060,372 shares of common stock (excludes
195,723 shares held in QAD's treasury)
Quorum Requirement: A quorum of shareholders is necessary to hold a
valid meeting. The presence in person or by
proxy at the meeting of holders of shares
representing a majority of the votes of the
common stock entitled to vote at the meeting is
a quorum.
Abstentions and broker "non-votes" count as
present for establishing a quorum. Shares held
by QAD in its treasury do not count toward a
quorum. A broker non-vote occurs on an item when
a broker is not permitted to vote on that item
without instruction from the beneficial owner of
the shares and no instruction is given.
Shares Beneficially Owned by QAD Officers
and Directors on April 10, 2000: 21,524,442 shares of common stock, including
exercisable options. These shares represent in
total approximately 65% of the voting power of
QAD's common stock.
These individuals have indicated that they will
vote in favor of the proposals recommended by
QAD's board.
</TABLE>
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<S> <C>
Annual report: The annual report to stockholders that
accompanies this proxy statement is not proxy
soliciting material. If you would like an
additional copy, please contact QAD at the
address set forth below for company contact.
Company contact: You may contact QAD for additional information
or copies of the annual report by mailing us at:
QAD Inc.
6450 Via Real
Carpinteria, California 93013
Attn: Investor Relations
Or telephoning us at: (805) 566-4445.
</TABLE>
THE PROPOSALS:
<TABLE>
<S> <C>
ITEM I: To elect two directors to hold office until the
annual meeting of stockholders in the year 2003
(Class II directors).
ITEM II: To ratify the appointment of KPMG LLP as QAD's
independent auditors for QAD's 2001 fiscal year.
ITEM III: To conduct other business if it is properly
raised.
</TABLE>
VOTE NECESSARY TO APPROVE THE PROPOSALS:
<TABLE>
<S> <C>
ITEM I, Election of Directors: Directors are elected by a plurality of the
votes represented by the shares of common stock
present at the meeting in person or by proxy.
This means that the director nominees with the
most affirmative votes are elected to fill the
available seats. Only the number of votes "FOR"
affect the outcome. Withheld votes and
abstentions have no effect on the vote.
Because two directors are up for election, the
two nominees with the greatest number of votes
will be elected to fill the vacancies.
ITEM II, Ratification of independent
auditors: Ratification of the selection of KPMG LLP as
QAD's independent auditors for the 2001 fiscal
year requires a majority of the votes cast by
holders of the common stock. Abstentions have no
effect on the vote.
</TABLE>
Under New York Stock Exchange rules that govern most brokers, if your broker
holds your shares in its name, your broker is permitted to vote your shares on
Items I and II even if it does not receive voting instructions from you.
The stockholders have no dissenters or appraisal rights in connection with
any of Items I or II.
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PROXIES
Voting Your Proxy. You may vote in person at the meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the meeting. You can
always change your vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote for one of the individuals named
as your proxy, we will vote your shares as you have directed. You may vote for
or withhold authority to vote for QAD's director nominees. You may also vote for
or against the other proposals or abstain from voting.
If you submit your proxy but do not make specific choices, your proxy will
follow the board's recommendations and vote your shares:
- "FOR" the election of the two director nominees;
- "FOR" the ratification of KPMG LLP as the independent auditors for QAD's
2001 fiscal year;
- "FOR" any proposal by QAD's board to adjourn the annual meeting; and
- In its discretion as to any other business as may properly come before the
annual meeting.
REVOKING YOUR PROXY. You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date
- notifying the company's Secretary in writing at the address on the second
page of this proxy statement before the meeting that you have revoked your
proxy, or
- voting in person at the meeting.
VOTING IN PERSON. If you plan to attend a meeting and wish to vote in
person, we will give you a ballot at the meeting. You may be requested to
present documents for the purpose of establishing your identity. In addition, if
your shares are held in the name of your broker, bank or other nominee, you must
bring an account statement or letter from the nominee indicating that you are
the beneficial owner of the shares on April 10, 2000, the record date for
voting.
PEOPLE WITH DISABILITIES. We can provide reasonable assistance to help you
participate in the meeting if you tell us about your disability and your plan to
attend. Please call or write the Secretary of the company at least two weeks
before the meeting at the number or address on the second page of this proxy
statement.
CONFIDENTIAL VOTING. Independent inspectors count the votes. Your
individual vote is kept confidential from us unless special circumstances exist.
For example, a copy of your proxy card will be sent to us if you write comments
on the card.
PROXY SOLICITATION. We will pay our own costs of soliciting proxies. In
addition to this mailing, QAD employees may solicit proxies personally.
The extent to which these proxy soliciting efforts will be necessary depends
entirely upon how promptly proxies are submitted. You should send in your proxy
without delay. We also reimburse brokers and other nominees for their expenses
in sending these materials to you and getting your voting instructions.
OTHER BUSINESS; ADJOURNMENTS
We are not currently aware of any other business to be acted upon at the
meeting. If, however, other matters are properly brought before the meeting, or
any adjourned meeting, your proxies will have discretion to vote or act on those
matters according to their best judgment, including adjourning the meeting.
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Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. Any adjournment may be made from time to time by approval of
the holders of shares representing a majority of the votes present in person or
by proxy at the meeting, whether or not a quorum exists, without further notice
other than by an announcement made at the meeting. We do not currently intend to
seek an adjournment of our meeting.
ELECTION OF DIRECTORS
(ITEM I)
Under QAD's certificate of incorporation, the board of directors is 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 members of the board serve for three years. The terms of office of the
members of one class of directors expire each year in rotation so that the
members of one class are elected at each annual meeting for full three-year
terms. The term of office of only two of the present directors will expire at
this annual meeting.
Two directors have been nominated for election to three-year terms expiring
at the annual meeting in 2003. The terms of the other directors will continue as
indicated below.
The ages of directors are as of April 10, 2000.
The board recommends you vote FOR the two nominees listed below.
Valid proxies received will be voted, unless contrary instructions are
given, to elect the two nominees named in the following table to Class II of the
board of directors. Should any nominee decline or be unable to accept the
nomination to serve as a director, an event that we do not currently anticipate,
your proxy will have the right, in their discretion, to vote for a substitute
nominee or nominees designated by the board of directors, to the extent
consistent with QAD's certificate of incorporation and its bylaws.
NOMINEES FOR DIRECTOR
The nominees for director to be elected by the stockholders are currently
members of the board. If elected, the nominees will hold office until the annual
meeting of stockholders in 2003, and until his or her successor is duly elected
and qualified. The following table sets forth information about the two nominees
who are standing for election at the 2000 annual meeting.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR
TO HOLD OFFICE UNTIL 2003 AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY COMMITTEES
- ------------------------- -------- -------------- ------------------------------- -------------
<S> <C> <C> <C> <C>
Karl F. Lopker................... 48 1981 Chief Executive Officer Audit,
Compensation
Pamela M. Lopker................. 45 1981 President None
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE INCUMBENT DIRECTORS
IDENTIFIED ABOVE.
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INFORMATION CONCERNING THE NOMINEES FOR ELECTION AND THE OTHER INCUMBENT
DIRECTORS
Set forth below is information with respect to the two nominees for election
to the board of directors who are standing for election at the 2000 annual
meeting.
KARL F. LOPKER
Karl F. Lopker has served as Director and Chief Executive Officer 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
studied Electrical Engineering and Computer Science at the University of
California at Santa Barbara. Mr. Lopker and Pamela Lopker are married to each
other.
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 to each other.
INCUMBENT DIRECTORS NOT STANDING FOR ELECTION
The following section sets forth information about the other four members of
the board of directors. None of these directors are up for election at the 2000
annual meeting, and each will be up for election at the annual meeting set forth
in the table.
<TABLE>
<CAPTION>
DIRECTORS TO
HOLD OFFICE UNTIL 2001 AGE DIRECTOR SINCE COMMITTEES
- ---------------------- -------- -------------- -------------
<S> <C> <C> <C>
Koh Boon Hwee............................. 49 1997 Audit,
Compensation
Peter R. van Cuylenburg................... 52 1997 Audit,
Compensation
DIRECTORS TO
HOLD OFFICE UNTIL 2002
- ------------------------------------------
Jeffrey A. Lipkin......................... 54 1999 Audit
A.J. "Bert" Moyer......................... 56 2000 Compensation
</TABLE>
Set forth below is information with respect to the other incumbent directors
who are not standing for election at the 2000 annual meeting.
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; 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.
5
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PETER R. VAN CUYLENBURG
Peter R. van Cuylenburg was appointed an outside Director in November 1997.
Mr. van Cuylenburg is the former President and Chief Operating Officer of
InterTrust Technologies Corporation and currently serves as an advisor to the
chairman of that company. Prior to that, Mr. van Cuylenburg served as president
of Quantum Corporation's Specialty Storage Products Group, based in Milpitas,
California. He also serves on the board of directors of Mitel Corporation, and
as Director and Non-Executive Chairman of PixelFusion Group plc in the U.K. Past
board memberships include Dynatech Corporation, 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.
JEFFREY A. LIPKIN
Mr. Lipkin is founder and general partner of Recovery Equity Investors
("REI") I and II, which have over $200 million in institutional funds under
management for growth investments and turnarounds. The bulk of the funds have
been deployed in twenty-five transactions in a variety of industries including
asset-based lending (The Foothill Group), construction equipment (CMI
Corporation), electronics, telecommunications, fashion jewelry, and information
services. Mr. Lipkin is a director of CMI Corporation, which is listed on the
New York Stock Exchange, of the Chadmoore Wireless Group, and of numerous
privately held companies. Mr. Lipkin holds a B.A. in Physics from Harvard
College and a J.D. from Harvard Law School.
A.J. ("BERT") MOYER
Mr. Moyer served as Executive Vice President and Chief Financial Officer for
QAD from March 1998 until February 2000. He presently serves as president of the
commercial division of the Profit Recovery Group International, Inc. Prior to
joining QAD, Mr. Moyer served as Chief Financial Officer of Allergan, a
specialty pharmaceutical company based in Irvine, California. Mr. Moyer received
his Bachelor of Science degree in Business Administration from Duquesne
University. In 1973, he graduated from the Advanced Management Program at the
University of Texas, Austin.
COMPENSATION OF DIRECTORS
QAD employees receive no extra pay for serving as directors. Directors are
reimbursed for direct expenses relating to their activities as members of the
board of directors. Pursuant to our 1997 Stock Incentive Program, directors are
eligible to participate in the Nonqualified Stock Option Plan and directors who
are not employees may participate in the Non-Employee Director Stock Option
Plan. Upon joining QAD in 1997, Mr. Koh and Mr. van Cuylenburg each were granted
by the board of directors a nonqualified stock option for 15,000 shares of
common stock. QAD also granted to Mr. Koh and Mr. van Cuylenburg a nonqualified
stock option for 7,500 shares each in fiscal 1999. The grant date of the first
15,000-share option to each director was the date of the director's appointment
to the board of directors or their retention as a consultant, whichever was
earlier. The grant date of the second option was the first anniversary of the
director's appointment as a director. QAD has also granted to Mr. Koh and
Mr. van Cuylenburg a nonqualified stock option for 7,500 shares each in fiscal
2000, on the second anniversary of each director's appointment. All of the
options vest in four equal installments on each of the first through fourth
anniversaries of the respective grant dates. QAD intends to continue to make
appropriate awards under the 1997 Stock Incentive Program to each non-employee
director upon election to the board.
6
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In October 1998, QAD's board adopted a stock grant plan to supplement stock
option grants to non-employee directors. The plan provides that each
non-employee director be granted 7,500 shares annually, in four quarterly
installments of 1,875 shares each. The installments are made at the beginning of
each calendar quarter, subject to each non-employee director purchasing at least
a corresponding number of shares in the open market. For every share purchased,
one share will be granted, up to 1,875 shares per quarter. A director may
cumulate the rights under the plan for up to three-quarters per year, but all
purchases must occur before the end of each year of the plan. In addition, each
non-employee director must agree that the shares purchased or granted will be
held for three years from the purchase date. If non-employee director's status
is terminated prior to the expiration of the three-year period, except for death
or a change in control of QAD, the shares which were granted will be forfeited
to QAD, but the shares that had been purchased would continue to be owned by the
non-employee director. The plan commenced as of the fiscal quarter beginning
November 1, 1998 and ended October 31, 1999. During the time the plan was in
effect, both Mr. Koh and Mr. van Cuylenburg purchased 7,500 shares each and were
granted a corresponding 7,500 shares as provided under the plan. At the
February 4, 2000 Board meeting, the disinterested directors approved a renewal
of the plan effective as of October 8, 1999 for a period of one year with
certain revisions. The revisions exclude directors who hold or manage a share
position in QAD of more than 5% of the outstanding shares. As of April 10, 2000
Mr. van Cuylenburg purchased 7,500 shares and was granted the corresponding
7,500 shares as prescribed under the renewal of the plan. At the end of that
year the directors who do not participate in the plan will evaluate the
effectiveness of the plan to determine whether it should be renewed or revised.
BOARD OF DIRECTORS
During fiscal 2000, the board of directors held four regularly scheduled and
special meetings and acted by unanimous written consent on four occasions.
During fiscal 2000, all directors attended at least seventy-five percent (75%)
of the meetings of the board and of the meetings of committees of the board of
which they were a member (except for Mr. van Cuylenburg who missed one of two
compensation committee meetings). In addition to attending meetings, directors
also discharge their responsibilities by review of company reports to directors,
visits to company facilities, and correspondence and telephone conferences with
executive officers and others regarding matters of interest and concern to QAD.
BOARD COMMITTEES
The board appoints committees to help carry out its duties. In particular,
board committees work on key issues in greater detail than would be possible at
full board meetings. Each committee reviews the results of its meetings with the
full board.
AUDIT COMMITTEE
The audit committee is composed of the following directors:
Mr. van Cuylenburg (Chair)
Mr. Koh
Mr. Lipkin
Mr. Lopker (ex officio)
The audit committee met on four occasions during fiscal 2000. The committee
is responsible for accounting and internal control matters. The audit committee:
- reviews with management, the internal auditors and the independent
auditors, policies and procedures with respect to internal controls;
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- reviews significant accounting matters;
- approves the audited financial statements prior to public distribution;
- approves any significant changes in accounting principles or financial
reporting practices;
- reviews independent auditor services; and
- recommends to the board of directors the firm of independent auditors to
audit QAD's consolidated financial statements.
In addition to its regular activities, the committee is available to meet on
call of the independent accountants, controller or internal auditor whenever a
special situation arises.
COMPENSATION COMMITTEE
The compensation committee is composed of the following directors:
Mr. Moyer (Chair)
Mr. van Cuylenburg
Mr. Koh
Mr. Lopker
The compensation committee (including for purposes of administering the
QAD Inc. 1997 Stock Incentive Program) met on two occasions and acted by written
consent on one occasion during fiscal 2000. 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 our chairman of the board and
president, our chief executive officer and the other executive officers;
- administers QAD'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 and president and the chief
executive officer for the other executive officers; and
- reviews various matters relating to employee compensation and benefits.
Mr. Lopker is recused from all matters involving QAD's chairman of the board and
president and the chief executive officer and he does not participate in
approving grants or awards under the QAD Inc. 1997 Stock Incentive Program to
persons who are subject to Section 16 of the Exchange Act. A sub-committee of
the compensation committee composed of Messrs. Koh, Moyer and van Cuylenburg,
administers, and makes all ongoing determinations concerning matters relevant to
grants or awards under the stock incentive program to persons who are subject to
Section 16 of the Exchange Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. van Cuylenburg, Koh, Moyer and Lopker currently are members of the
compensation committee. Mr. Lopker is the chief executive officer of QAD. No
other interlocking relationships exist between the 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 QAD's
executive officers, who provide leadership and strategic direction, should
consist of (i) base salaries that are
8
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commensurate with executives of other comparable software companies and
(ii) cash bonus opportunities based on achievement of company objectives. These
objectives are set by the compensation committee with respect to the chairman
and president, and chief executive officer, and they are set by the chairman and
the chief executive officer, in consultation with the compensation committee,
for the other executive officers. The compensation committee also believes that
it is important to provide executive officers with significant stock-based
incentive compensation, which increases in value in direct correlation with
improvement in the performance of the common stock, thereby aligning
management's interest with those of the stockholders.
The compensation committee considers the following factors (ranked in order
of importance) when determining compensation of executive officers: (i) QAD'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 the 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 the 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 QAD Inc. 1997
Stock Incentive Program includes provisions that will enable QAD 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 those requirements will
necessarily be in the best interest of QAD.
CASH COMPENSATION
The base salaries of the executive officers are generally set at the time of
their initial hiring, subject to possible increases in future periods at the
discretion of QAD.
As stated above, the compensation of executive officers is also based in
part upon corporate performance, individual performance and comparative industry
compensation levels. Each year, management establishes a performance plan with
the compensation committee. The annual plan sets forth overall goals to be
achieved by QAD, as well as specific performance goals to be achieved by each of
its executive officers according to his or her duties and responsibilities.
For fiscal 2000, the compensation committee set the overall corporate goals
to focus exclusively on QAD's financial performance. The financial performance
criteria were and the bonus eligibility for achievement of the overall corporate
goals were weighted as follows:
- revenue--40%;
- operating profit--40%; and
- the accounts receivable collection period--20%.
QAD did not meet the targets for revenue, operating profit and the accounts
receivable collection period criteria established by the committee for fiscal
2000. QAD did meet the threshold revenue and the accounts receivable collection
period goals established by the committee for fiscal 2000. As such, only 50% of
the bonus under this aspect of the bonus program was paid to the executives
covered by the program. Some bonuses were also paid to executives based on
individual performance goals for fiscal 2000.
Bonus compensation for each of the executive officers named in the table
that follows was determined based on a formula that tied the target bonus
objective (which in most instances is established as a percentage of base
salary) to the achievement by QAD of the overall corporate goals
9
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described above (not all of which were met in fiscal 2000) 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 QAD's and the executives' performance against
such goals. Ms. Lopker and Mr. Lopker do not participate in a bonus plan and
thus received no bonus. The other executives whose bonus was tied to both
corporate and individual goals received the following bonuses: Mr. Armagnac
$36,400, Mr. Moyer $56,800, Mr. Niedzielski $45,360, and Mr. Anderson $26,100.
On average, the compensation committee believes the cash compensation for the
executive officers is comparable to industry salary and bonus levels.
EQUITY COMPENSATION
The compensation committee or a subcommittee consisting of 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 QAD. In determining
whether and in what amount to grant stock options or other equity compensation
to executive officers in fiscal 2000, the program administrators considered the
amount and date of vesting of currently outstanding incentive equity
compensation granted previously to each of the 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 our long-term goals, especially
at a time of significant competition and other challenges in our industry.
During fiscal 2000, the non-employee members of the compensation committee
approved grants of equity compensation to the executive officers named in the
Summary Compensation Table below, and the committee also approved grants of
equity compensation to other executive officers, consistent with the board of
directors' and the compensation committee's overarching policy of granting
equity compensation to key executives and to employees in general.
The Compensation Committee
Koh Boon Hwee
Peter R. van Cuylenburg
Karl F. Lopker
Bert Moyer
10
<PAGE>
EXECUTIVE COMPENSATION
The following tables and discussion summarize the compensation of the
president, the chief executive officer and each of the four other most highly
compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
LONG-TERM COMPENSATION AWARDS
--------------------------------------------- ------------
OTHER ANNUAL RESTRICTED
FISCAL SALARY BONUS COMPENSATION STOCK AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) COMPENSATION
- --------------------------- -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Pamela M. Lopker ............. 2000 157,500 -- 9,750 -- 4,802
Chairman of the Board and 1999 162,500 -- 4,916 -- 4,802
President 1998 162,500 49,574 3,322 -- 3,100
Karl F. Lopker ............... 2000 157,500 -- 9,750 -- --
Chief Executive Officer 1999 162,500 -- -- -- --
1998 162,500 -- 2,731 -- --
A. J. Moyer(2) ............... 2000 295,833 106,800(3) 21,603(4) 26,664 --
Executive Vice President, 1999 225,611 56,800(5) -- 20,000 14,400
Chief Financial Officer
Vincent P. Niedzielski ....... 2000 252,000 57,301(6) 5,024 27,543(7) --
Executive Vice President, 1999 244,215 58,762 1,188 57,500 --
Research & Development 1998 245,000 54,000 1,762 -- 13,235
Donald F. Armagnac(8) ........ 2000 186,999 63,889 6,323(9) -- --
Executive Vice President, 1999 174,000 64,950 5,000 --
Global Services 1998 51,515 3,762 1,250
Barry R. Anderson ............ 2000 174,000 52,009(10) 10,360 -- --
Executive Vice President, 1999 179,000 57,173(10) 5,831 -- --
Administration and General 1998 134,750 43,500(10) 3,164 -- 10,145
Counsel
</TABLE>
- ------------------------
(1) "Other Annual Compensation" also includes QAD's contributions to the 401(k)
plan and profit sharing plan on behalf of the named executive officers.
(2) Mr. Moyer resigned effective February 3, 2000.
(3) Includes a $50,000 loan that was forgiven.
(4) Includes $3,325 of taxes on relocation and $12,420 commuting expenses.
(5) Does not include a loan in the amount of $50,000, which was subject to
forgiveness over a six-month period. None of the loan was forgiven in
fiscal 1999, and, correspondingly, no compensation is reflected in the
table.
(6) Includes $11,941 loan balance that was forgiven.
(7) Includes $15,419 of exercised stock options.
(8) Mr. Armagnac started his employment with QAD on October 31, 1997, so his
compensation for fiscal year 1998 reflects only three months of employment.
(9) Includes a disqualifying disposition for stock purchased under the employee
stock purchase plan of $1,299.
(10) During fiscal 1998 a loan was issued 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. $25,910 of the loan was forgiven in each of
fiscal 1999 and in fiscal 2000, correspondingly, the compensation in
fiscal 1999 and 2000 is reflected in the table.
11
<PAGE>
OPTION GRANTS IN FISCAL 2000
The following table sets forth the option grants to the named executives
during fiscal 2000. QAD did not grant any stock appreciation rights in fiscal
2000.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE GRANT DATE
OPTIONS IN FY PRICE EXPIRATION PRESENT
NAME GRANTED(1) 2000 ($/SHARE) DATE VALUE ($)(2)
- ---- ---------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Karl F. Lopker...................... -- -- -- -- --
Pamela M. Lopker.................... -- -- -- -- --
A. J. Moyer......................... 7,000 3.1%(3) $3.5000 3/11/07 18,259
50,000 $3.8125 9/15/07 142,062
100 $3.5313 10/7/07 263
Vincent P. Niedzielski.............. 3,500 2.3%(3) $3.5000 3/11/07 9,129
40,000 $3.8125 9/15/07 113,650
100 $3.5313 10/7/07 263
Donald F. Armagnac.................. 5,000 3.0%(3) $3.5000 3/11/07 13,042
50,000 $3.8125 9/15/07 142,062
100 $3.5313 10/7/07 263
Barry R. Anderson................... 3,000 1.5%(3) $3.5000 3/11/07 7,825
25,000 $3.8125 9/15/07 71,031
100 $3.5313 10/7/07 263
</TABLE>
- ------------------------
(1) All granted options vest in four annual increments, 25% on each of the first
through fourth anniversaries of the date of grant, and expire in eight
years.
(2) The fair value of each option grant is estimated on the date of grant using
the Black-Scholes model of option valuation to determine grant date fair
value, as prescribed under Statement of Financial Accounting Standards
No. 123 (SFAS No. 123), Accounting for Stock-Based Compensation, with the
following assumptions:
<TABLE>
<S> <C>
Expected stock price volatility................... 79%
Risk-free interest rate........................... 6.3%
Expected life of options.......................... 6.5 years
Expected dividend yield........................... 0.00%
</TABLE>
QAD's stock options currently are not transferable, and the actual value of
the stock options that an employee may realize, if any, will depend on the
excess of the market price on the date of exercise over the exercise price.
There is no assurance the value realized by an executive will be at or near
the value estimated by the Black-Scholes model. We have based our assumption
for stock price volatility on the variance of monthly closing prices of our
stock from its initial public offering date to the present. The risk-free
interest rate used equals the average yield on ten-year zero coupon U.S.
Treasury issues for fiscal year 2000. No discount was applied to the value
of the grants for non-transferability, and risk of forfeiture was accounted
for in the expected life of the options.
(3) Represents the combined percentage for all grants.
12
<PAGE>
OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Karl F. Lopker.............................. -- -- -- -- -- --
Pamela M. Lopker............................ -- -- -- -- -- --
A. J. Moyer................................. -- -- 56,250 225,850 71,484 512,875
Vincent P. Niedzielski...................... 5,000 15,419 53,334 85,266 -- 284,484
Donald F. Armagnac.......................... 16,500 79,100 65,250 385,953
Barry R. Anderson........................... -- -- 38,750 104,350 58,281 321,578
</TABLE>
- ------------------------------
(1) Represents the difference between the option exercise price and the market
price of QAD common stock at the fiscal year-end. The actual gain, if any,
an executive realizes will depend on the market price of QAD stock at the
time of exercise. "In-the-money" means the market price of the stock is
greater than the exercise price of the option on the date specified.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Each of Mr. Moyer and Mr. Anderson has or had severance agreements that
provide for the payment to them of an amount equal to six months' salary in the
event of a termination of their employment with QAD. Each of the executive
officers has or had a change of control agreement that provides for acceleration
of vesting in their options and the payment to them of an amount equal to either
24 or 12 months' salary in the event of a termination of their employment with
QAD following a change of control.
CERTAIN TRANSACTIONS
In connection with the hiring of Barry R. Anderson in fiscal 1998, QAD lent
him $77,728. The loan is subject to forgiveness over a three-year period,
provided Mr. Anderson remains employed by QAD. $25,900 of the principal of the
loan was forgiven in each of fiscal 1999 and fiscal 2000. In connection with the
hiring of Mr. Moyer in fiscal 1999, QAD awarded 20,000 restricted shares to
Mr. Moyer. The restricted shares vest over three years. Later in fiscal 1999,
QAD granted Mr. Moyer a loan of $50,000 in connection with the expansion of his
responsibilities. The loan was subject to forgiveness over a six-month period,
provided Mr. Moyer remained employed by QAD. The entire amount of principal and
interest was forgiven in fiscal 2000.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
These tables show how much QAD common stock each executive named in the
Summary Compensation Table on page 11 and each non-employee director owned on
April 10, 2000. 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 April 10, 2000 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, the persons and entities named in the table have sole
voting and sole investment power with respect to the shares set forth opposite
the stockholder's name.
All shares held by the Lopkers are held jointly by Pamela and Karl Lopker,
except that 701,618 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 charitable remainder trust. An additional 244,500
shares are held by a charitable foundation of which the Lopkers are officers.
All
13
<PAGE>
shares held by Mr. Lipkin are held by Recovery Equity Investors II, L.P. (REI).
Mr. Lipkin is a general partner of REI.
<TABLE>
<CAPTION>
SHARES COVERED BY PERCENT
BENEFICIAL OWNER SHARES OWNED EXERCISABLE OPTIONS OF CLASS
- ---------------- ------------ ------------------- --------
<S> <C> <C> <C>
NON-EXECUTIVE 5% BENEFICIAL OWNERS
REI.................................................... 2,777,778 225,000 9.03%
DIRECTORS AND EXECUTIVE OFFICERS
Pamela M. Lopker....................................... 18,130,804 -- 54.52%
Karl F. Lopker......................................... 18,130,804 -- 54.52%
Koh Boon Hwee.......................................... 15,000 9,375 0.07%
Jeffrey Lipkin......................................... 2,777,778 225,000 9.03%
A. J. Moyer............................................ 22,000 95,500 0.35%
Peter R. van Cuylenburg................................ 30,000 9,375 0.12%
Vincent P. Niedzielski................................. -- 80,875 0.24%
Donald Armagnac........................................ 48 5,250 0.02%
Barry R. Anderson...................................... 14,830 49,500 0.19%
All Directors and Executive Officers As a Group
(12 persons)......................................... 21,020,067 504,375 64.72%
</TABLE>
14
<PAGE>
STOCKHOLDER RETURN PERFORMANCE GRAPH
The line graph below compares the yearly percentage change in the cumulative
total stockholder return on QAD's common stock with the cumulative total return
of the NASDAQ Composite Total Return Index and the Robertson Stephens (RS)
Software Index (previously known as the BancAmerica Robertson Stephens (BARS)
Software Index) for the period beginning August 5, 1997 and ending January 31,
2000. The graph assumes that $100 was invested on the date of QAD's initial
public offering and that all dividends were 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 TOTAL RETURN INDEX,
AND THE ROBERTSON STEPHENS SOFTWARE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MEASUREMENT PERIODS NASDAQ
(MONTHS FROM IPO COMPOSITE RS
THROUGH TOTAL RETURN SOFTWARE
FISCAL YEAR 2000 COVERED) QAD INC. INDEX INDEX
- ------------------------- -------- ------------ --------
<S> <C> <C> <C>
08/05/97 100.00 100.00 100.00
10/31/97 94.17 98.46 103.46
01/30/98 97.50 100.35 102.27
04/30/98 92.50 115.74 130.27
07/31/98 55.83 115.63 115.56
10/30/98 31.25 110.46 114.74
01/29/99 27.92 156.98 155.12
04/30/99 25.83 158.80 150.45
07/31/99 20.83 165.38 159.90
10/31/99 22.92 185.89 192.82
01/31/00 60.00 244.69 301.24
</TABLE>
15
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires QAD's officers and directors and
persons who own more than 10% of the common stock to file reports of ownership
and changes in ownership with the SEC and Nasdaq. Reporting persons are required
by SEC regulations to furnish QAD with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of those forms received or written
representations from persons subject to the reporting requirements of
Section 16(a), we believe that, with respect to the fiscal year ended
January 31, 2000, all reporting persons complied with all applicable filing
requirements of Section 16(a), except for Pamela and Karl Lopker, who each filed
three Form 4's late that involved three transactions in total and Mr. Armagnac
who filed his Form 3 late upon being appointed an executive officer of QAD. Two
of the Lopkers transactions involved the transfer of shares to the trusts for
the Lopker's minor children. The other transaction was de minimis in nature.
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM II)
The audit committee of the board has appointed KPMG LLP to audit our
financial statements for fiscal year 2001. We are asking you to ratify that
appointment. KPMG has been QAD's independent accounting firm for many years, and
we believe they are well qualified for the job. Although the ratification is not
required by law, the board believes that stockholders should be given this
opportunity to express their views on the subject. While not binding on the
board, the failure of the stockholders to ratify the appointment of KPMG as
QAD's independent auditors would be considered by the board and the audit
committee in determining whether to continue the engagement of KPMG. A KPMG
representative will be at the annual meeting to answer appropriate questions and
to make a statement if he or she desires.
The board recommends you vote "FOR" this proposal.
STOCKHOLDER PROPOSALS
Any stockholder proposal for QAD's annual meeting in 2001 must be sent to
the Secretary at the address of QAD's principal executive office given under
"company contact" on page 2. Any stockholder who wishes to present a proposal
for the inclusion in the proxy statement for action at the 2001 annual meeting
must comply with QAD's certificate of incorporation and bylaws and the rules and
regulations of the SEC then in effect. The deadline for receipt of a proposal to
be considered for inclusion in QAD's proxy statement is January 15, 2001. On
request, the Secretary will provide detailed instructions for submitting
proposals.
IMPORTANT
TO ASSURE YOUR REPRESENTATION AND A QUORUM FOR THE TRANSACTION OF BUSINESS
AT THE ANNUAL MEETING, WE URGE YOU TO PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD PROMPTLY.
QAD INC.
May 5, 2000
16
<PAGE>
QAD INC.
2000 ANNUAL MEETING
ADMISSION TICKET
You are cordially invited to attend the annual meeting of stockholders of
QAD Inc. on Thursday, June 8, 2000 at the Fess Parker's DoubleTree Resort, 633
East Cabrillo Street, Santa Barbara, California. The meeting will begin at
10:00 a.m., Pacific Time. Admission is limited to stockholders and guests of
QAD. This ticket will admit you and should be presented at the meeting to
expedite registration. To avoid delays, please arrive early and present this
ticket.
------------------------
PROXY VOTING INSTRUCTIONS
QAD Inc. encourages all stockholders to vote their proxies. Please complete,
sign, date, and return the proxy card attached below in the enclosed
postage-paid envelope.
<PAGE>
QAD INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 8, 2000
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
2000 ANNUAL MEETING OF STOCKHOLDERS OF QAD INC. The undersigned hereby appoints
Pamela M. Lopker and Karl. F. Lopker, 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 on the reverse side and in accordance with
their judgment upon any other matter properly presented, all the shares of
common stock of QAD Inc. held of record by the undersigned at the close of
business on April 10, 2000, at the annual meeting of stockholders to be held on
June 8, 2000 or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
NAMED HEREIN AS DIRECTORS OF QAD INC. AND FOR RATIFICATION OF KPMG LLP AS QAD'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 2001.
Should any nominee decline or be unable to accept his nomination to serve as
a director, an event that we do not currently anticipate, the persons named in
the enclosed proxy reserve the right, in their discretion, to vote for a
substitute nominee or nominees designated by the board of directors.
PLEASE MARK, SIGN, DATE AND RETURN THIS FORM PROMPTLY IN THE ENCLOSED ENVELOPE.
------------------------
SEE REVERSE SIDE
------------------------
<PAGE>
<TABLE>
<C> <S>
/X/ PLEASE MARK YOUR
VOTES AS INDICATED IN
THIS EXAMPLE.
</TABLE>
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.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of director Nominees: / / / / 2. The proposal to ratify / / / / / /
to serve until the Karl F. Lopker the appointment of
2003 annual meeting of Pamela M. Lopker KPMG LLP as QAD Inc.'s
stockholders. auditors for fiscal
year 2001
EXCEPT, FOR VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
----------------------------------------------------------
PLEASE INDICATE BY A CHECK MARK WHETHER / /
YOU PLAN TO ATTEND THE ANNUAL MEETING.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
PRINT NAME OF STOCKHOLDER
----------------------------------------
SIGNATURE(S) DATE
--------------------------------- ------------------
PLEASE SIGN YOUR NAME ABOVE. 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.
</TABLE>
