<PAGE>
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 [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
QCS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[[LETTERHEAD OF QCS CORPORATION]]
650 Castro Street, Suite 210
Mountain View, California 94041
T: (650) 966-1214
http://www.qcs.net
September 30, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders (the
"Meeting") of QCS Corporation (the "Company") to be held on October 29, 1998.
The Meeting will begin promptly at 10:00 a.m., local time, at the Hyatt Rickeys
Hotel, located at 4219 El Camino Real, Palo Alto, California 94306.
The official Notice of Meeting, Proxy Statement and Proxy Card are included with
this letter. The matters listed in the Notice of Meeting are described in
detail in the Proxy Statement.
The vote of every stockholder is important. Mailing your completed Proxy Card
will not prevent you from voting in person at the meeting if you wish to do so.
Please complete, sign, date and promptly return your Proxy Card in the enclosed
envelope. Your cooperation will be greatly appreciated.
Members of the Company's Board of Directors and management look forward to
greeting personally those stockholders who are able to attend the Meeting.
Sincerely,
/s/Marcel van Heesewijk
Marcel van Heesewijk
President, Chief Executive Officer
and Chairman of the Board of Directors
<PAGE>
QCS CORPORATION
650 Castro Street, Suite 210
Mountain View, California 94041
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
----------------
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of QCS Corporation, a Delaware corporation (the "Company"), will be
held at the Hyatt Rickeys Hotel, located at 4219 El Camino Real, Palo Alto,
California 94306, on October 29, 1998, at 10:00 a.m., local time, for the
following purposes:
1. To elect four (4) directors of the Company to hold office until the
1999 Annual Meeting of Stockholders or until their respective
successors are duly elected and qualified;
2. To approve an amendment to the Company's Certificate of Incorporation
to change the name of the Company to QCS.net Corporation;
3. To approve an amendment to the Company's Certificate of Incorporation
to eliminate the cumulative dividend to which the holders of the
Company's Series A Convertible Preferred Stock previously have been
entitled;
4. To ratify and approve the adoption of the Company's 1997 Stock Option
Plan and to approve the amendment of such Option Plan to increase the
number of shares of the Company's common stock reserved for issuance
thereunder from 3,000,000 shares of Common Stock to 4,000,000 shares
of Common Stock;
5. To ratify the selection of PricewaterhouseCoopers LLP as the
independent auditors of the Company for the fiscal year ending June
30, 1999; and
6. To transact such other business as may properly come before the
Meeting or any adjournment or postponement of the Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
<PAGE>
Only stockholders of record at the close of business on September 15, 1998
will be entitled to notice of and to vote at the Meeting and any adjournments
thereof. Each of these stockholders is cordially invited to be present and vote
at the Meeting in person.
By Order of the Board of Directors
/s/ Marcel van Heesewijk
Marcel van Heesewijk
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
Mountain View, California
September 30, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THIS IS IMPORTANT BECAUSE A
MAJORITY OF THE SHARES MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO
CONSTITUTE A QUORUM AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN
PERSON EVEN THOUGH YOU SEND IN YOUR PROXY CARD NOW. IN ADDITION, YOU MAY REVOKE
THE PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
QCS CORPORATION
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SHARES OUTSTANDING AND VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . 3
PROPOSAL ONE--ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . 8
PROPOSAL TWO--APPROVAL OF CHANGE IN THE NAME OF
THE COMPANY TO QCS.NET CORPORATION. . . . . . . . . . . . . . . . . . . .22
PROPOSAL THREE--APPROVAL OF ELIMINATION OF THE CUMULATIVE
DIVIDEND ON SERIES A CONVERTIBLE PREFERRED STOCK. . . . . . . . . . . . .23
PROPOSAL FOUR--RATIFICATION AND APPROVAL OF THE QCS
CORPORATION 1997 STOCK OPTION PLAN AND AMENDMENT THERETO. . . . . . . . .25
PROPOSAL FIVE--RATIFICATION OF INDEPENDENT AUDITORS. . . . . . . . . . . . . .31
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
</TABLE>
<PAGE>
QCS CORPORATION
650 CASTRO STREET, SUITE 210
MOUNTAIN VIEW, CALIFORNIA 94041
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1998
----------------
GENERAL INFORMATION
Your proxy in the enclosed form is solicited by the Board of Directors (the
"Board") of QCS Corporation, a Delaware corporation (the "Company"), for use at
its Annual Meeting of Stockholders to be held at Hyatt Rickeys Hotel, located at
4219 El Camino Real, Palo Alto, California 94306, on October 29, 1998 at 10:00
a.m. (the "Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting and at any adjournment or postponement of the Meeting. The
mailing of this Proxy Statement, the accompanying Notice of Annual Meeting and
the form of Proxy Card (the "Proxy Card") to the stockholders of the Company is
expected to commence on or about September 30, 1998.
The shares of the Company's Common Stock, par value $0.001 per share
("Common Stock"), represented by proxy will be voted in accordance with the
instructions given on the Proxy Card, subject to the proper execution of the
Proxy Card and its receipt by the Company prior to the close of voting at the
Meeting or any adjournment or postponement thereof. Proxies received by the
Company on which no contrary instruction has been given will be voted "FOR" the
election of the directors to the Board nominated by the Board, "FOR" the
approval of an amendment to the Company's Certificate of Incorporation, as
amended (the "Certificate of Incorporation") to change the name of the Company
to QCS.net Corporation, "FOR" the approval of an amendment to the Certificate of
Incorporation to eliminate the cumulative dividend to which the holders of the
Company's Series A Convertible Preferred Stock ("Series A Preferred Stock")
previously have been entitled, "FOR" the ratification and approval of the QCS
Corporation 1997 Stock Option Plan (the "Option Plan") and the amendment of the
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder, "FOR" ratification of the selection of independent auditors
for the fiscal year ending June 30, 1999 and as to any other matter that may be
properly brought before the Meeting in accordance with the judgment of the proxy
holders. A stockholder giving a proxy has the power to revoke it at any time
before it is exercised by filing with the Secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date. The powers of the
proxy holders will be suspended if the person executing the Proxy Card is
present at the Meeting and votes in person.
<PAGE>
Copies of solicitation material will be furnished to brokerage firms,
nominees, fiduciaries and custodians holding shares of Common Stock in their
names which are beneficially owned by others ("Record Holders") to forward to
such beneficial owners. In addition, the Company may reimburse such persons and
the Company's transfer agent for their reasonable out-of-pocket expenses in
forwarding the solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented, if deemed desirable or
necessary, by either telephone, telegram, facsimile or personal solicitation by
directors, officers or employees of the Company. No additional compensation
will be paid for any such services. The Company reserves the right, if deemed
desirable or necessary, to retain a proxy solicitation firm to deliver
solicitation material to Record Holders for distribution by them to their
principals and to assist the Company in collecting proxies from such holders.
The costs of these services to the Company, exclusive of out-of-pocket costs, is
not expected to exceed $10,000. Except as described above, the Company does not
intend to solicit proxies other than by mail.
<PAGE>
SHARES OUTSTANDING AND VOTING RIGHTS
RECORD DATE AND SHARES OUTSTANDING
Only holders of shares of Common Stock of record as of the close of
business on September 15, 1998 (the "Record Date"), are entitled to vote at the
Meeting. On the Record Date, 19,186,478 shares of Common Stock (collectively,
the "Shares") were issued and outstanding and the closing price of the Common
Stock on the Nasdaq Over-the-Counter Market ("Nasdaq OTC") was $1.062 per share.
Each of the Shares is entitled to one vote on all matters to be voted upon at
the Meeting.
QUORUM; BROKER NON-VOTES; ABSTENTIONS
The presence, in person or by proxy duly authorized, of the holders of a
majority of the Shares will constitute a quorum for the transaction of business
at the Meeting and any adjournment or postponement thereof. The Shares that are
voted by proxy "FOR," "AGAINST" or "WITHHELD FROM" a proposal are treated as
being present at the Meeting for purposes of establishing a quorum and are also
treated as shares entitled to vote at the Meeting with respect to such proposal.
Broker non-votes (i.e., shares held by a broker or nominee which are
represented at the Meeting, but with respect to which such broker or nominee is
not empowered to vote on a particular proposal) will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Meeting. Abstentions and broker non-votes will be counted for purposes of
determining the number of votes cast with respect to a particular proposal on
which the broker has expressly not voted, provided that approval of the proposal
requires the approval by a majority of the Shares. For example, in the event
that the approval of a proposal, as set forth herein, requires the approval of a
majority of the Shares, a broker non-vote will be equivalent to a vote against
such proposal.
Directors will be elected by a plurality of votes of the Shares present in
person or represented by proxy at the Meeting. In determining whether a proposal
that requires approval by the vote of the holders of a majority of the Shares
represented in person or by proxy and entitled to vote at the Meeting, as
submitted to the Company's stockholders in the Proxy Card, has been approved,
abstentions and broker non-votes are not counted as votes for or against the
proposal.
REVOCABILITY OF PROXY
A proxy may be revoked by a stockholder at any time prior to the voting at
the Meeting by written notice to the Secretary of the Company, by submission of
another duly executed proxy bearing a later date or by voting in person at the
Meeting. Such notice or later proxy will not affect a vote on any matter taken
prior to the receipt thereof by the Company or its transfer agent. The mere
presence at the Meeting of the stockholder who has appointed a proxy will not
revoke
<PAGE>
the prior appointment. If not revoked, the proxy will be voted at the Meeting
in accordance with the instructions indicated on the Proxy Card by the
stockholder or, if no instructions are indicated, will be voted "FOR" the
election of the directors to the Board nominated by the Board, "FOR" the
approval of an amendment to the Certificate of Incorporation to change the name
of the Company to QCS.net Corporation, "FOR" the approval of an amendment to the
Certificate of Incorporation to eliminate the cumulative dividend to which the
holders of Series A Preferred Stock previously have been entitled, "FOR" the
ratification and approval of the Option Plan and the amendment of the Option
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder, "FOR" ratification of the selection of independent auditors for the
fiscal year ending June 30, 1999, and as to any other matter that may be
properly brought before the Meeting in accordance with the judgment of the proxy
holders.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 11, 1998, assuming the
conversion into Common Stock of 4,641,267 shares of Series A Preferred Stock, by
(i) each person who is known to the Company to own beneficially more than five
percent (5%) of the outstanding shares of Common Stock, (ii) each director of
the Company, (iii) each of the Chief Executive Officer and the executive
officers of the Company who earned in excess of $100,000 for all services in all
capacities (collectively, the "Named Executive Officers"), as set forth below in
the Summary Compensation Table, and (iv) all current directors and executive
officers as a group. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investing power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable community property law, and their address is
650 Castro Street, Suite 210, Mountain View, California 94041.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
----------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT(2)
<S> <C> <C>
Marcel van Heesewijk 4,712,963 19.78%
Mattheus Wegbrans 2,183,100 9.16%
Chemin de la Cairee -- Villa Ariari
06140 St Paul de Vence
France
Carlyle-QCS Partners, LP 3,297,630(3) 13.79%
1001 Pennsylvania Avenue, NW
Washington, D.C. 20004
French American Banking Corporation 2,114,100 8.87%
World Financial Center, Tower A
200 Liberty Street
New York, NY 10281
Proactive Partners, L.P. et al. 1,814,400(4) 7.61%
50 Osgood Place, Penthouse
San Francisco, CA 94133
<PAGE>
STF Management Limited 1,891,200(5) 7.94%
as General Partner of Sharp Technology Fund I &
II, LP
1 Cornwall Street, 4th Floor
Birmingham, UK
Todd S. Myhre 1,372,077(6) 5.44%
Leo Klijn 798,000(7) 3.31%
Louis A. Delmonico 75,000 *
Johan Vunderink 121,000(8) *
All Directors and Executive Officers as a group 7,890,063 (9) 32.67%
(5 persons)
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and generally includes voting
or investment power with respect to securities. Shares of Common Stock subject
to options or warrants exercisable within 60 days of September 11, 1998 are
deemed outstanding and to be beneficially owned by the person holding such
options or warrants for the purpose of computing the percentage ownership of
such person or entity holding such options or warrants but are not deemed
outstanding for computing the percentage ownership of any other person.
(2) Percentage ownership is based on (i) 19,186,478 shares of Common Stock
outstanding as of September 11, 1998, (ii) 4,641,267 shares of Series A
Preferred Stock outstanding as of September 11, 1998, the terms of which
shares are substantially equivalent to shares of Common Stock and may be
converted into shares of Common Stock at any time at the option of the
respective holders, and (iii) 534,152 shares of Common Stock underlying
currently exercisable warrants to purchase such shares of Common Stock at a
purchase price of $0.01 per share.
(3) Includes 1,456, 311 shares of Common Stock and assumes the conversion of
1,695,688 shares of Series A Preferred Stock, which amount includes a dividend
of 239,377 shares of Series A Preferred Stock. Also includes warrants to
purchase 145,631 shares of Common Stock that are exercisable within 60 days of
September 11, 1998.
(4) Includes 455,016 shares of Common Stock held by each of Proactive Partners,
L.P.
<PAGE>
("Proactive") and Lagunitas Partners, L.P. ("Lagunitas"), respectively, and
assumes the conversion of 452,184 shares of Series A Preferred Stock held by
each of Proactive and Lagunitas, respectively, which latter amount includes a
dividend of 63,834 shares of Series A Preferred Stock to be distributed by the
Company to each of Proactive and Lagunitas pursuant to the dividend of shares
of Series A Preferred Stock more fully described in Proposal Three of this
Proxy Statement. Charles C. McGettigan, Myron A. Wick III, J. Patterson
McBaine and Jon D. Gruber are the general partners of Proactive Investment
Managers, L.P., the general partner of Proactive. In addition, Messrs.
McBaine and Gruber control the entity that is the controlling general partner
of Lagunitas. With respect to Proactive, Messrs. McGettigan, Wick, McBaine
and Gruber, as general partners of Proactive Investment Managers, L.P., share
voting power and investment power of the shares and may be deemed to be
beneficial owners of the shares held by Proactive. With respect to Lagunitas,
Messrs. McBaine and Gruber share voting power and investment power of the
shares and may be deemed to be beneficial owners of the shares held by
Lagunitas. Messrs. McGettigan, Wick, McBaine and Gruber disclaim ownership of
any such shares except to the extent of their respective interests in such
shares arising from their pecuniary interests in Proactive, Lagunitas, or any
other entities they control or for which they exercise voting and investment
power.
(5) Includes 873,787 shares of Common Stock and assumes conversion of 1,017,413
shares of Series A Preferred Stock held by STF Management Limited, which
amount includes a dividend of 143,626 shares of Series A Preferred Stock to be
distributed by the Company to each of Proactive and Lagunitas pursuant to the
dividend of shares of Series A Preferred Stock more fully described in
Proposal Three of this Proxy Statement.
(6) Consists of options to purchase 1,372,077 shares of Common Stock that are
exercisable within 60 days of September 11, 1998.
(7) Consists of (i) 498,000 shares of Common Stock and (ii) options to purchase
300,000 shares of Common Stock that are exercisable within 60 days of
September 11, 1998.
(8) Consists of (i) 100,000 shares of Common Stock and (ii) warrants to
purchase 21,000 shares of Common Stock, held by Het Goede Paard b.v. (a
company wholly-owned by Mr. Vunderink), that are exercisable within 60 days of
September 11, 1998.
(9) Includes (i) Mr. Klijn's options to purchase 300,000 shares of Common Stock
and (ii) Mr. Vunderink's warrants to purchase 21,000 shares of Common Stock,
each of which are exercisable within 60 days of September 11, 1998.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The Board currently consists of four directors, and, as proposed, four
directors are to be elected to the Board at the Meeting. The Company's Bylaws
(the "Bylaws") provide that the number of directors is determined by resolution
of the Board, and the Certificate of Incorporation provides that the number of
directors cannot be increased above seven without the consent of the holders of
at least 65% of the outstanding shares of Series A Preferred Stock.
In addition, the Certificate of Incorporation provides that the holders of
the Series A Preferred Stock (the "Series A Holders"), voting as a separate
class, are entitled to elect up to three directors (the "Series A Directors").
A quorum of 65% of the outstanding shares of Series A Preferred Stock, in person
or by proxy, is required to elect the Series A Directors. To date, the Series A
Holders have not exercised their right to elect the Series A Directors, and the
Company does not believe currently that the Series A Holders will exercise such
right in connection with the directors to be elected at the Meeting. In the
event that the Series A Holders choose to nominate and elect the Series A
Directors, such election shall be conducted through an action by written consent
of the Series A Holders, and the number of directors will be increased
accordingly to accommodate the Series A Directors.
Under the Certificate of Incorporation, holders of the Common Stock are
entitled to elect the Company's directors, subject to the provisions of the
Certificate of Incorporation and Bylaws.
Each director nominee elected at the Meeting will hold office until the
next annual meeting of stockholders of the Company, or until his successor is
duly elected and qualified, unless he resigns or his seat on the Board becomes
vacant due to his death, removal or other cause in accordance with the Bylaws of
the Company. Management knows of no reason why any of these nominees would be
unable or unwilling to serve; but, in the event that any director nominee is
unable or unwilling to serve, the proxies will be voted for the election of such
other person(s) for the office of director as management may recommend in the
place of such nominee. THE BOARD RECOMMENDS VOTING "FOR" THE FOUR (4) NOMINEES
BELOW LISTED.
INFORMATION REGARDING DIRECTOR NOMINEES
The following table sets forth the names, ages, principal occupations for
the periods indicated and other directorships of the four director nominees at
the Meeting, each of whom is currently a director of the Company.
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE DIRECTOR
YEARS AND OTHER DIRECTORSHIPS SINCE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Marcel van Heesewijk 37 Mr. van Heesewijk has served as a Director since 1993 and as 1993
Chairman of the Board since October 1996, and has served as
the Company's President and Chief Executive Officer from 1993
through October 1996 and from February 1997 until the present.
Mr. van Heesewijk has also served as the Company's Acting
Chief Financial Officer since February 1997, and as Vice
President of Business Strategies and Alliances from October
1996 to February 1997. From January 1990 to June 1992, Mr.
van Heesewijk was the General Manager of European operations
for Pande Inc., a software engineering services firm. From
January 1987 to January 1988, Mr. van Heesewijk held
management positions with Siemens AG in both Germany and
Portugal. Mr. van Heesewijk earned his bachelor's degree in
Economics from the University of Groningen in the Netherlands
in 1984 and earned his degree of the EAP, European School of
Management Studies in Paris, Oxford and Berlin in 1986.
<PAGE>
NAME AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE DIRECTOR
YEARS AND OTHER DIRECTORSHIPS SINCE
- -----------------------------------------------------------------------------------------------------------------
Mattheus Wegbrans 48 Mr. Wegbrans has served as a Director since July 1996, and 1993
served as the Company's Executive Vice President of Field
Operations and Sales from July 1996 until June 1998. From
December 1994 to August 1996, Mr. Wegbrans served as a Vice
President of Digital Equipment Corporation ("DEC"), where he
was responsible for the management of DEC's computer systems
business in Europe, the Middle East and Africa. Mr. Wegbrans
served as the Company's Vice President of Sales and Marketing
from 1993 to December 1994. From June 1992 to June 1993, Mr.
Wegbrans was a Director of Software Publishing Corporation
and, from July 1990 to May 1992, a founder and President of
NeXT Computer Europe.
Johan Vunderink 51 Mr. Vunderink has served as a Director since July 1997. From 1997
March 1996 to the present, Mr. Vunderink has served as Chief
Executive Officer of The Right Fit b.v., a management
consulting company. From 1992 to March 1996, Mr. Vunderink
served as Executive Vice President of Marketing and Sales of
BSO Holding b.v. From 1989 to 1992 Mr. Vunderink was
President and CEO of Origin Technology, which subsequently was
merged into BSO Holding b.v.
<PAGE>
NAME AGE PRINCIPAL OCCUPATION FOR THE PAST FIVE DIRECTOR
YEARS AND OTHER DIRECTORSHIPS SINCE
- -----------------------------------------------------------------------------------------------------------------
Louis A. Delmonico 57 Dr. Delmonico has served as a Director since April 1998. 1998
Since September 1994, he has served as the President and
Director of L.A. Delmonico Consulting Inc., an independent
consulting firm. From September 1994 to May 1995, Dr.
Delmonico served as the Vice Chairman of the MacNeal-
Schwendler Corporation, a mechanical engineering software and
services company. From May 1987 to August 1994, Dr. Delmonico
served as the Chairman and CEO of PDA Engineering Inc., a
mechanical engineering software and services company. In
addition, he is currently an adviser to and director of
several private software companies. Dr. Delmonico earned his
Ph.D. in Marketing from the University of Upsalla, Sweden in
1967.
</TABLE>
VOTE REQUIRED AND BOARD RECOMMENDATION
The four nominees for director receiving the highest number of affirmative
votes of the Shares present in person or represented by proxy at the Meeting and
entitled to be voted for them shall be elected as directors of the Company.
Votes withheld from any director nominee are counted for purposes of determining
the presence or absence of a quorum for the transaction of business, but have no
other legal effect under Delaware law. Stockholders do not have the right to
cumulate their votes in the election of directors. Holders of proxies solicited
by this Proxy Statement will vote the proxies received by them as directed on
the proxy card or, if no direction is made, for the election of the Board's
nominees. If any of the nominees is unable or declines to serve as a director
at the time of the Meeting, the proxy holders will vote for a nominee designated
by the present Board to fill the vacancy. It is not presently expected that any
of the nominees will be unable or will decline to serve as a director.
THE BOARD RECOMMENDS A VOTE "FOR" THE NOMINEES ABOVE LISTED.
<PAGE>
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of the Company and their ages as of the
Record Date are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- --------------------------------------------------------------------------------
<S> <C> <C>
Marcel van Heesewijk 37 President, Chief Executive Officer, Acting
Chief Financial Officer and Chairman of the
Board
Mattheus Wegbrans 48 Director
Johan Vunderink (1), (2) 50 Director
Louis A. Delmonico (1), (2) 57 Director
Leo Klijn 35 Vice President of Corporate Operations
</TABLE>
- -------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
A description of the background of each of the Company's current directors
has been provided above under "Information Regarding Director Nominees." A
description of the background of each of the Company's executive officers who is
not a director follows:
LEO KLIJN has served as the Company's Vice President of Corporate
Operations since June 1997. From January 1994 to June 1997, Mr. Klijn served as
the Vice President and General Manager of the Company's Asia-Pacific operations.
From January 1987 to January 1994, he occupied various management positions with
the Casino Group, France's fourth biggest integrated retailing company, in its
food processing division and the sales and marketing of private label products
to importers and retailers in North America, Europe and Asia. From January 1992
to January 1994, Mr. Klijn established and managed Casino Group's buying office
in Asia. Mr. Klijn earned his bachelor's degree from Nijenrode University,
Netherlands School of Business in 1983 and a degree of the EAP, European School
of Management Studies in Paris, Oxford and Berlin in 1986.
BOARD OF DIRECTORS
The Board currently consists of four members, Messrs. van Heesewijk,
Wegbrans, Vunderink and Delmonico. The Company's Bylaws provide that the
determination of the number of directors shall be set by resolution of the
Board, with the current authorized number set at four directors. The
Certificate of Incorporation provides that the number of directors constituting
the Board cannot exceed seven, unless approved by the holders of at least 65% of
the outstanding shares of Series A Preferred Stock voting together as one class.
In addition, the holders of the Series A
<PAGE>
Preferred Stock, voting as a separate series, are entitled to elect no less than
three directors of the Board.
The Board has recently formed a compensation committee (the "Compensation
Committee") and an audit committee (the "Audit Committee"), each composed of
Messrs. Vunderink and Delmonico. The Compensation Committee will make
recommendations to the Board concerning salaries and incentive compensation for
the Company's officers and employees. The Audit Committee will aid management
in the establishment and supervision of the Company's financial controls,
evaluate the scope of the annual audit, review audit results, consult with
management and the Company's independent auditors prior to the presentation of
financial statements to the stockholders and, if appropriate, initiate inquiries
into aspects of the Company's financial affairs.
Executive officers are appointed by, and serve at, the discretion of the
Board. There are no family relationships among any of the directors or
executive officers of the Company.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1998 ("Fiscal 98"), the Board held
five meetings. Each director attended at least 75% of the meetings held during
Fiscal 98 which occurred on or after the initiation of his term as a director.
During Fiscal 98, the Board formed an Audit Committee and a Compensation
Committee. The Company does not have a Nominating Committee nor a committee
that performs equivalent functions of a nominating committee. The Audit
Committee and the Compensation Committee currently are composed of Messrs.
Vunderink and Delmonico. Neither the Audit Committee nor the Compensation
Committee held any meetings during Fiscal 98.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF 1934
Section 16(a) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC.
Officers, directors and greater than ten percent (10%) stockholders are required
by regulations of the SEC to furnish the Company with copies of all Section
16(a) forms that they file.
To the Company's knowledge, based solely on conversations with the
Company's officers and directors and a review of such reports filed with the
SEC, the Company is aware of the following Form 3's and Form 4's which have
not been filed: one Form 3 which has not been filed by Leo Klijn, the
Company's Vice President of Corporate Operations; one Form 3 and one Form 4
(one transaction) which have not been filed by Johan Vunderink, a director of
the Company; one Form 3 and two Form 4's (one transaction each) which have
not been filed by Louis A. Delmonico, a director of the Company; and one Form
3 which has not been filed by Carlyle-QCS Partners, LP, a 10% stockholder.
The Company is making every effort to assist in the filing of these forms
with the SEC. The Company is not aware of any other applicable Section 16(a)
filings which have not been filed as required.
<PAGE>
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Messrs. Vunderink and Delmonico each currently receive $1,500 for each
Board meeting that they attend. The other directors of the Company have not
historically and do not currently receive cash for services that they provide as
directors, although they are reimbursed in accordance with the Company's policy
for their expenses in connection with attending meetings of the Board. Directors
serving on committees of the Board receive no special compensation for such
activities. The Company may elect to pay additional cash compensation or grant
additional options to directors in the future.
EXECUTIVE COMPENSATION
The following table shows, for the three fiscal years ended June 30, 1998,
the cash and other compensation awarded to, earned by or paid to Mr. Heesewijk
and each other executive officer who earned in excess of $100,000 for all
services in all capacities:
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION YEAR ANNUAL COMPENSATION
----------------------------------------
SALARY BONUS OTHER
($) ($) ANNUAL
COMPENSATION
($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marcel van Heesewijk 1998 $99,000 -- $69,000(1)
President, CEO, Acting CFO
and Chairman of the Board
1997 $101,000 -- $53,000(2)
1996 $103,000 -- $44,000(3)
Mattheus Wegbrans(4) 1998 $139,400 -- --
Director
1997 $132,000 -- $12,000(5)
1996 -- -- --
Leo Klijn 1998 $79,200 -- $48,600(6)
Vice President of
Corporate Operations
1997 $100,400 -- $30,000(7)
1996 $90,000 -- $35,000(8)
</TABLE>
- --------------
(1) Includes $13,000 of automobile expenses, $45,000 of housing expense and
$11,000 of relocation expenses.
(2) Includes $8,000 of automobile expenses and $45,000 of housing expenses.
(3) Includes $44,000 of housing expenses.
(4) Mr. Wegbrans rejoined the Company in August 1996 and did not receive any
compensation during the fiscal year ended June 30, 1996. Mr. Wegbrans
resigned from his position as Executive Vice President of Field Operations
and Sales effective June 30, 1998 and retained his seat on the Board.
(5) Includes $12,000 of housing expenses.
<PAGE>
(6) Includes $7,800 of automobile expenses and $40,800 of housing expenses.
(7) Includes $30,000 of housing expenses.
(8) Includes $35,000 of housing expenses.
<PAGE>
QCS CORPORATION 1997 STOCK OPTION PLAN
In December 1997, the Board readopted, subject to stockholder approval, the
Option Plan, which provides for the grant of incentive stock options
(collectively, "ISOs") to employees and nonstatutory stock options to employees,
directors and consultants. A total of 3,000,000 shares of Common Stock have
been reserved for issuance under the Option Plan, under which options to
purchase 1,948,077 shares of Common Stock have been granted as of September 11,
1998. In August 1998, the Board adopted, subject to stockholder approval, an
amendment to the Option Plan to increase the number of shares reserved for
issuance thereunder from 3,000,000 to 4,000,000 shares of Common Stock. Options
granted under the Option Plan typically vest over five years. The Board is
currently responsible for administering the Option Plan and determining the
exercise price of options granted thereunder to executive officers and directors
of the Company. The exercise price of ISOs must be at least equal to the fair
market value of the Common Stock on the date of grant. In addition, the
exercise price of any stock option granted to an optionee who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company must equal at least 110% of the fair market value of the Common Stock on
the date of grant. The exercise price may be paid in such consideration as
determined by the Board. With respect to any participant who owns stock
representing more than 10% of the voting power of all classes of stock of the
Company, the term of the option is limited to five years or less. The term for
all other options may not exceed ten years.
The Board may amend or modify the Option Plan at any time without the
consent of the optionees, so long as such action does not adversely affect their
outstanding options. In addition, no amendment of the Option Plan may, without
the approval of the Company's stockholders, (i) modify the class of individuals
eligible for participation, (ii) increase the number of shares available for
issuance, except in the event of certain changes to the Company's capital
structure, (iii) materially increase the benefits accruing to optionees under
the Option Plan, or (iv) extend the term of the Option Plan. The Option Plan
will terminate in 2007, unless sooner terminated by the Board.
As of September 11, 1998, the Company had outstanding options under the
Option Plan for an aggregate of 1,948,077 shares of Common Stock.
See "Proposal Four" of this Proxy Statement for more detail regarding the
Option Plan.
ADDITIONAL OPTION GRANTS
In October 1996, the Company granted options to Todd Myhre to purchase
2,858,493 shares of Common Stock, vesting over 18 months, as compensation for
serving as the Company's President, Chief Executive Officer and director. In
February 1997, these options were rescinded by mutual agreement, and Mr.
Myhre resigned from his position with the Company and from the Board. The
Company then granted new options to Mr. Myhre to purchase 1,372,077 shares of
Common Stock at $2.27 per share under the Option Plan pursuant to a
consulting agreement.
<PAGE>
These options are fully vested and may be exercised on or before April 11,
1999.
Prior to the fiscal year ended June 30, 1997, upon approval of the Board,
the Company issued options to purchase an additional 1,008,000 shares of Common
Stock under individual stock option agreements. 1,450,000 shares were
authorized for grant under these agreements. These options generally become
exercisable over a three year period and expire ten years from the date of
grant. Unvested options are canceled upon termination of employment and become
available under the Option Plan.
The following table sets forth certain information regarding options to
purchase shares of Common Stock held as of June 30, 1998 by each of the Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR END FISCAL YEAR END
(#) ($) (1)
SHARES -----------------------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leo Klijn -- -- 300,000 / 0 $562,500 / $0
</TABLE>
- --------------
(1) Calculated by determining the difference between the closing price of the
Common Stock underlying the option as quoted on the Nasdaq OTC on June 30, 1998
($1.875) and the exercise price of the option.
EMPLOYMENT AND CONSULTING ARRANGEMENTS
The Company entered into a consulting agreement effective as of May 1, 1998
with L.A. Delmonico Consulting Inc., of which Louis A. Delmonico, a director of
the Company, is the President. This agreement provides for compensation of
$1,500 per day; to date, Dr. Delmonico's compensation has been $3,000.
SIMPLE RETIREMENT ACCOUNT
In February 1998, the Company established simple retirement accounts (the
"Retirement Accounts") covering certain of the Company's eligible employees.
The Retirement Accounts are intended to qualify under Section 408(p) of the
Internal Revenue Code, as amended ("IRC"). To qualify as an "eligible employer"
with respect to any year, the Company must have no more than
<PAGE>
100 employees who received at least $5,000 of compensation from the Company for
the preceding year. In the event that the Company maintains the Retirement
Accounts for one or more years and then fails to be an eligible employer for any
subsequent year, the Company will be entitled to a two-year grace period
following the last year that the Company was an eligible employer. Pursuant to
the Retirement Accounts, eligible employees may elect to have the Company make
contributions under a qualified salary reduction arrangement as a percentage of
compensation in an aggregate amount not to exceed $6,000 for each eligible
employee in any year. The Company is required to make matching contributions to
the Retirement Accounts for any year in amounts equal to so much of the
respective amounts that the eligible employees elect as does not exceed the
applicable percentage of compensation for the year. Under Section 408(p) of the
IRC, the term "applicable percentage" means three percent (3%); provided,
however, that the Company may elect to apply a lower percentage (not less than
one percent (1%)) for any year if such election does not result in the
applicable percentage being lower than three percent (3%) in more than two of
the years in the five-year period ended with such year. The Company elected an
applicable percentage equal to one percent (1%) for the first year of the
Retirement Accounts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 98, the Compensation Committee consisted of Messrs. Vunderink
and Delmonico and currently consists of Messrs. Vunderink and Delmonico. No
executive officer of the Company served on the compensation committee of another
entity or on any other committee of the board of directors of another entity
performing similar functions during Fiscal 98.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has from time to time granted options and other compensation to
its directors and executive officers. The Company also has entered into
employment and consulting arrangements with certain executive officers and
directors of the Company. See "Security Ownership of Certain Beneficial Owners
and Management" and "--Employment and Consulting Arrangements."
On August 12, 1997, the Company entered into an agreement with Het Goede
Paard b.v. ("HGP"), a company wholly owned by Mr. Vunderink, a director of the
Company. Under this agreement, HGP agreed to arrange for investors to acquire
equity interests in the Company. The agreement provides that HGP is entitled to
a finder's fee of five percent of the aggregate amount of any investments made
because of its efforts. Seventy percent of such finder's fee is to be paid in
the form of warrants to purchase the Company's shares of Common Stock, and the
remaining thirty percent is to be paid in cash. Pursuant to this Agreement, in
Fiscal 98 the Company paid to HGP a total of $6,750 in cash and warrants to
purchase 21,000 shares of Common Stock at $.75 per share.
All future transactions, including any loans from the Company to its
officers, directors,
<PAGE>
principal stockholders or affiliates, will be approved by a majority of the
Board, including a majority of the disinterested members of the Board or, if
required by law, a majority of disinterested stockholders, and will be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
<PAGE>
PROPOSAL TWO
APPROVAL OF CHANGE IN
THE NAME OF THE COMPANY TO
QCS.NET CORPORATION
(ITEM 2 ON THE PROXY CARD)
The Board believes that it is desirable for the stockholders to consider
and act upon a proposal to amend the Company's Certificate of Incorporation to
change the name of the Company to better reflect the Company's business and its
internet-based products and services. The Board believes that the name "QCS.net
Corporation" will achieve this objective and promote recognition of the
Company's website. Pursuant to the proposal, the name of the Company will be
changed from QCS Corporation to QCS.net Corporation.
The change of the Company's name will not affect, in any way, the validity
or transferability of currently outstanding stock certificates, nor will the
Company's stockholders be required to surrender or exchange any stock
certificates that they currently hold. In addition, the Company will request
that Nasdaq allow the Company to continue to use the ticker symbol "QCSC."
Other than changing the Company's name to QCS.net Corporation, and the
proposed elimination of the cumulative dividend for the Series A Preferred
Stock as set forth below in Proposal Three, the proposed amendment in no way
changes the Certificate of Incorporation.
The Board has adopted resolutions setting forth the proposed amendment
to the Certificate of Incorporation, declaring its advisability and directing
that the proposed amendment be submitted to the stockholders for their
approval at the Meeting. The proposed amendment to the Certificate of
Incorporation is attached hereto as "EXHIBIT A." If adopted by the
stockholders, the amendment will become effective upon filing as required by
the Delaware General Corporation Law.
VOTE REQUIRED AND BOARD RECOMMENDATION
Ratification and approval of the amendment to the Certificate of
Incorporation to change the name of the Company to QCS.Net Corporation requires
the affirmative vote of a majority of the Shares. Accordingly, abstentions and
broker non-votes will have the same effect as votes against this proposal.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE CHANGE IN NAME OF THE
COMPANY TO QCS.NET CORPORATION.
<PAGE>
PROPOSAL THREE
APPROVAL OF ELIMINATION OF
THE CUMULATIVE DIVIDEND
ON THE SERIES A CONVERTIBLE PREFERRED STOCK
(ITEM 3 ON THE PROXY CARD)
The Board believes that it is desirable for the stockholders to consider
and act upon a proposal to amend the Certificate of Incorporation to eliminate
the cumulative dividend to which the Series A Holders previously have been
entitled (the "Series A Dividend").
On June 17, 1998, the Company sent a letter (the "June 17 Letter") to the
Series A Holders in connection with a proposed recapitalization of the Company.
The June 17 Letter provided for, among other things, the consent of the Series A
Holders to (i) eliminate the Series A Dividend (as provided for in Article 4(c)
(Dividends) of the Certificate of Incorporation); and (ii) pay all amounts
accrued with respect to such dividend through the pro rata issuance of
additional shares of Series A Preferred Stock (calculated in accordance with the
terms of the June 17 Letter) in lieu thereof.
On July 23, 1998, the Company sent an additional letter to the Series A
Holders, confirming that the Company had received, on or prior to June 30, 1998,
executed copies of the June 17 Letter from holders holding in excess of eighty
percent (80%) of the outstanding shares of Series A Preferred Stock, thereby
constituting sufficient authorization and approval to amend the Certificate of
Incorporation in order to eliminate the Series A Dividend. As consideration for
the elimination of the Series A Dividend, the Board has approved the issuance of
(i) an aggregate of 660,681 shares of Series A Preferred Stock on a pro rata
basis to the Series A Holders as of June 30, 1998, and (ii) an aggregate of
61,607 shares of Common Stock to two stockholders that subsequently converted
their shares of Series A Preferred Stock into shares of Common Stock.
Given that the Company has received the requisite approval from the holders
of Series A Preferred Stock to eliminate the Series A Dividend, the purpose of
this Proposal Three is to obtain the requisite authorization and approval only
to amend the Certificate of Incorporation to reflect the elimination of the
Series A Dividend. Other than eliminating the Series A Dividend, and the
proposed change in the Company's name as set forth above in Proposal Two, the
proposed amendment in no way changes the Certificate of Incorporation.
The proposed amendments to the Certificate of Incorporation of the
Corporation, which are to Section (c) and Section (d)(1)(i) of the Article
numbered "FOURTH", are, respectively, set forth as follows:
SECTION (c)
"The Series A Preferred shall not be entitled to any preference in the
receipt of dividends. In the event that the Board of Directors declares
a dividend with respect to the Common Stock, each share of Series A
Preferred shall be entitled to participate in and receive said dividend,
out of funds legally available therefor, based on the number of shares
of Common Stock into which such share of Series A Preferred could be
converted as of the date of such declaration."
SECTION (d)(1)(i)
"Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, each of the holders of the shares of
Series A Preferred shall be paid an amount equal to One Dollar and
Three Cents ($1.03) per share of Series A Preferred held by such
holder, such amount payable with respect to one (1) share of Series
A Preferred being sometimes referred to herein as the "Series A
Liquidation Preference Payment," and with respect to all shares of
Series A Preferred being sometimes referred to herein as the
"Series A Liquidation Preference Payments."
The Board has adopted resolutions setting forth the proposed amendment to
the Certificate of Incorporation, declaring its advisability and directing that
the proposed amendment be submitted to the stockholders for their approval at
the Meeting. If adopted by the stockholders, the amendment to the Certificate of
Incorporation will become effective upon filing as required by the Delaware
General Corporation Law.
<PAGE>
VOTE REQUIRED AND BOARD RECOMMENDATION
Ratification and approval of the amendment to the Certificate of
Incorporation to eliminate the Series A Dividend requires the affirmative vote
of a majority of the Shares. Accordingly, abstentions and broker non-votes will
have the same effect as votes against this proposal.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF ELIMINATION OF THE CUMULATIVE
DIVIDEND ON THE SERIES A PREFERRED STOCK.
<PAGE>
PROPOSAL FOUR
RATIFICATION AND APPROVAL OF
THE QCS CORPORATION 1997 STOCK OPTION PLAN AND
AMENDMENT THERETO
(ITEM 4 ON THE PROXY CARD)
The Option Plan was adopted by the Board and became effective on December
1, 1997 (the "Effective Date"), and is submitted to the stockholders for
ratification and approval at the Meeting. Under the Option Plan, 3,000,000
shares of Common Stock were initially reserved for issuance upon exercise of
options granted by the Company (the "Option Shares"). In August 1998, the Board
adopted the proposed amendment which, in addition to the ratification of the
Option Plan, is the subject of this Proposal Four. The proposed amendment to
the Option Plan increases the number of Option Shares from 3,000,000 to
4,000,000 shares of Common Stock. As of September 11, 1998, options to purchase
a total of 2,956,077 shares of Common Stock have already been granted, including
options to purchase 1,008,000 shares of Common Stock granted prior to the
adoption of the Option Plan.
The Board believes that approval of Proposal Four is important because it
will provide the Company with the flexibility to grant stock options that the
Company believes will be required to facilitate potential future growth. The
Board believes that the Option Plan and the proposed amendment thereto
encourages and assists the Company's employees to acquire an equity interest in
the Company, helps align employee interests with other stockholders, helps
provide for the future financial security of the Company's employees and fosters
good employee relations. The opportunity for employees to acquire shares of
Common Stock pursuant to the Option Plan will be important to attract and retain
qualified employees who are essential to the success of the Company. The Board
believes that the increase in the Option Shares to 4,000,000 shares will provide
the Company with a reasonable reserve of Option Shares for potential growth.
Stockholders are requested in this Proposal Four to ratify and approve the
Board's adoption of the Option Plan as of the Effective Date and the proposed
amendment to the Option Plan. An affirmative vote by the holders of a majority
of the Shares present in person or represented by proxy at the Meeting is
required for the approval and ratification of the Option Plan and the proposed
amendment to the Option Plan.
The essential features of the Option Plan are outlined below.
PURPOSE
The general purpose of the Option Plan is to assist the Company in the
recruitment, retention and motivation of employees, directors and consultants
who are in a position to make contributions to the Company's progress. The
Option Plan offers a significant incentive to the employees, directors and
consultants of the Company by enabling such persons to acquire shares
<PAGE>
of Common Stock, thereby increasing their proprietary interest in the growth and
success of the Company.
SHARES SUBJECT TO THE OPTION PLAN
In the event of any increase or decrease in the number of issued shares of
Common Stock resulting from the payment of a stock split, a reverse stock split,
a stock dividend, recapitalization, combination or reclassification of the
Company's stock or any other event which results in an increase or decrease in
the number of issued shares effected without receipt of consideration by the
Company, the Board will make adjustments in the number and/or exercise price of
options and/or the number of shares of Common Stock available under the Option
Plan, as appropriate. The Board's determination in connection with such
adjustments will be final, binding and conclusive. Except as expressly provided
in the Option Plan, no issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, will affect, and no
adjustment by reason thereof will be made with respect to, the number or price
of shares subject to a stock option.
If this proposal is approved, the aggregate number of shares of Common
Stock that will be reserved for issuance under the Option Plan will be increased
from 3,000,000 to 4,000,000 shares.
ADMINISTRATION
The Option Plan is administered by the Board. Subject to the limitations
set forth in the Option Plan, the Board has the authority to determine to whom
options will be granted (including initial grants to incoming directors), the
term during which an option may be exercised and the rate at which an option may
be exercised.
The Option Plan provides for the grant of both ISOs intended to qualify as
such under Section 422(b) of the IRC and nonstatutory stock options ("NSOs").
ISOs may be granted only to employees (including officers and directors who are
also employees) of the Company. NSOs may be granted to employees (including
officers and directors who are also employees), directors and consultants of the
Company. If any options granted under the Option Plan for any reason expire or
are canceled or otherwise terminated without having been exercised in full, the
shares of Common Stock allocable to the unexercised portion of such options
again become available for issuance under the Option Plan. Options granted
pursuant to the Option Plan will vest at the times determined by the Board
(generally over a five-year period).
The maximum term of each stock option granted under the Option Plan is ten
years. Stock options granted under the Option Plan must be exercised by the
optionee before the earlier of the expiration date specified in the optionee's
stock option agreement or 90 days after termination of the optionee's
employment, except that the period may be extended on certain events, including
death and termination due to disability, but not beyond the maximum ten-year
<PAGE>
term.
The exercise price of all ISOs granted under the Option Plan must be no
less than 100% of the fair market value per share of Common Stock on the date
of grant. In the case of NSOs, the per share exercise price may be no less
than 85% of the fair market value per share of Common Stock on the date of
grant. With respect to an employee who owns more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
of its subsidiaries, the exercise price of any stock option granted must be
no less than 110% of the fair market value per share of Common Stock on the
date of grant. In addition to payment in cash, the Option Plan permits an
optionee, with the approval of the Board, to pay the exercise price of an
option, all or in part, with (i) shares of Common Stock which have already
been owned by the optionee or his or her representative and which are
surrendered to the Company in good form for transfer, or (ii) by delivery of
a full recourse promissory note secured by a pledge of the shares purchased.
Such shares of Common Stock shall be valued at their fair market value on the
date when the new shares of Common Stock are purchased under the Option Plan.
Based upon the closing price of the Company's shares of Common Stock on
Nasdaq OTC on September 11, 1998 ($1.125 per share), the maximum aggregate value
of the underlying securities to be issued under the Option Plan, if the Option
Plan is amended as proposed, is currently approximately $4.5 million. The
actual value of the securities to be issued under the Option Plan will be
determined by the fair market value of the underlying securities on the date(s)
such securities are issued.
NONTRANSFERABILITY
During an optionee's lifetime, such optionee's option(s) shall be
exercisable only by him or her and will not be transferable except pursuant to a
qualified domestic relations order as defined by the IRC. In the event of an
optionee's death, such optionee's option(s) shall not be transferable other than
by will or by the laws of descent and distribution.
DURATION, AMENDMENT AND TERMINATION
The Board may amend, suspend or terminate the Option Plan at any time,
except that any amendment, suspension or termination shall not affect any option
previously granted. Any amendment of the Option Plan, however, that (i)
increases the number of shares of Common Stock subject to the Option Plan, other
than any increase pursuant to reorganization, (ii) materially modifies the
requirements as to eligibility for participation in the Option Plan,
(iii) materially increases the benefits accruing to holders of stock options
under the Option Plan, or (iv) extends the term of the Option Plan, will be
subject to approval of the Company's stockholders by the affirmative vote of the
holders of a majority of the securities of the Company present or represented
and entitled to vote at a duly held stockholders' meeting. Stockholder approval
is not required for any other amendment of the Option Plan. Unless sooner
terminated by the Board, the Option Plan will terminate in 2007, and Options
outstanding upon the date of termination shall remain in effect until they are
exercised or expire by their terms. The Option
<PAGE>
Plan shall expire for all purposes on the date twenty (20) years following the
Effective Date.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS
Under federal income tax law, a grant of an ISO under the Option Plan is
not a taxable event for the Company or the recipient. Generally, the exercise
of an ISO also will not result in any federal income tax consequences to the
Company or the recipient except in circumstances where the alternative minimum
tax applies. In calculating alternative minimum taxable income ("AMTI"), the
excess of the fair market value of the shares of Common Stock acquired upon
exercise of the ISO, generally determined at the time of exercise, over the
amount paid for the shares of Common Stock by the taxpayer is included.
However, if such shares are disposed of in a "disqualifying disposition," as
defined below, in the year of exercise, the maximum amount included as AMTI is
the gain on the disposition of such shares.
When the recipient disposes of ISO shares after the shares have been held
for at least two years from the date of grant of the ISO and one year after its
exercise ("ISO holding period"), the recipient will recognize capital gain or
loss equal to the difference between the basis in the shares (generally the
exercise price) and the amount received in such disposition. If the recipient
disposes of the ISO shares prior to the expiration of the ISO holding period, a
"disqualifying disposition" is deemed to have occurred and the recipient must
recognize compensation (ordinary) income equal to the lesser of (1) the
difference between the ISO exercise price and the stock's fair market value on
the date of exercise or (2) the recipient's actual gain, if any, on the purchase
and sale. The compensation income is then added to the basis of the ISO shares
for purposes of calculating gain or loss on the disposition of the ISO shares.
The Company is entitled to take a deduction for the compensation income
recognized on the disqualifying disposition if it has properly tracked the
disqualifying transaction.
NONSTATUTORY STOCK OPTIONS
There will be no federal income tax consequences to the Company or the
recipient as a result of a grant of an NSO under the Option Plan. Upon exercise
of such an option, the recipient will generally recognize ordinary income in an
amount equal to the excess of the fair market value of the shares of stock
acquired at the time of exercise over the exercise price. Upon the subsequent
disposition of the shares, the optionee will realize a capital gain or loss,
depending on whether the selling price exceeds the fair market value of the
shares on the date of exercise. The optionee's holding period in the shares,
for capital gain and loss purposes, begins on the date of exercise.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of an NSO granted under the Option
Plan for any amounts included by the recipient as ordinary income at the time
the recipient is taxed on such amounts. This
<PAGE>
compensation is subject to withholding and the Company reports the income on a
Form W-2 or 1099.
OTHER TAX CONSEQUENCES
The foregoing discussion is intended to be a general summary only of the
federal income tax aspects of options granted under the Option Plan. Tax
consequences may vary depending on the particular circumstances at hand. In
addition, administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Furthermore, no information is
given with respect to state or local taxes that may be applicable. Participants
in the Option Plan who are residents of or are employed in a country other than
the United States may be subject to taxation in accordance with the tax laws of
that particular country in addition to or in lieu of United States federal
income taxes.
EXEMPTION FROM SECTION 16 OF THE EXCHANGE ACT
Section 16 of the Exchange Act ("Section 16") establishes insider liability
for profits realized from any "short-swing" trading transaction (i.e., purchase
and sale, or sale and purchase within less than six months). Grants of options
are generally viewed as purchases of the underlying securities for purposes of
Section 16. Rule 16b-3 under the Exchange Act ("Rule 16b-3") provides that
transactions by officers and directors pursuant to an employee stock option
plan, such as option grants, are exempt from Section 16 liability provided that
the plan meets certain requirements. In general, such exemption from such rules
require that the transactions be: (i) approved by the Board, or a committee of
the Board that is composed solely of two or more Non-Employee Directors, as such
term is defined in Rule 16b-3; (ii) approved or ratified by either the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with Delaware law or the written consent of the holders of a majority
of the securities of the Company entitled to vote, provided that such
ratification occurs no later than the date of the next annual meeting of
stockholders; or (iii) equity securities of the Company so acquired are held by
the officer or director for a period of at least six months following the date
of such acquisition, provided that this condition shall be satisfied with
respect to a derivative security if at least six months elapse from the date of
acquisition of the derivative security to the date of disposition of the
derivative security (other than upon exercise or conversion) or its underlying
equity security.
The Option Plan is structured to comply with the above exemption
requirements of Rule 16b-3.
VOTE REQUIRED AND BOARD RECOMMENDATION
Ratification and approval of the Option Plan and its subsequent amendment
as discussed herein requires the affirmative vote of a majority of the Shares
present in person or represented by proxy at the Meeting and entitled to be
voted for it. Accordingly, abstentions will have the
<PAGE>
same effect as votes against this proposal and broker non-votes will not affect
the outcome of voting on this proposal.
The Board believes that the Option Plan and its subsequent amendment
encourages and assists the Company's employees to acquire an equity interest in
the Company, helps align employee interests with other stockholders, helps
provide for the future financial security of the Company's employees and fosters
good employee relations. The opportunity for employees to acquire shares of
Common Stock pursuant to the Option Plan will be important to attract and retain
qualified employees who are essential to the success of the Company.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION AND APPROVAL OF THE OPTION
PLAN AND THE AMENDMENT THERETO.
<PAGE>
PROPOSAL FIVE
RATIFICATION OF INDEPENDENT AUDITORS
(ITEM 5 ON THE PROXY CARD)
The Board has selected PricewaterhouseCoopers LLP ("PWC") as the Company's
independent auditors for the fiscal year ending June 30, 1999, and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Meeting. PWC has audited the Company's
financial statements annually since the fiscal year ended June 30, 1996. Its
representatives are expected to be present at the Meeting, will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of PWC as the Company's
independent auditors is not required by the Company's Bylaws or otherwise. The
Board is submitting the selection of PWC to the stockholders for ratification as
a matter of good corporate practice. In the event that the stockholders fail to
ratify the selection, the Board will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Board in its discretion may direct
the appointment of a different independent accounting firm at any time during
the year if the Board determines that such a change could be in the best
interests of the Company and its stockholders.
VOTE REQUIRED AND BOARD RECOMMENDATION
Ratification of the selection of PWC as the Company's independent auditors
requires the affirmative vote of a majority of the Shares present in person or
represented by proxy at the Meeting and entitled to be voted for it.
Accordingly, abstentions will have the same effect as votes against this
proposal and broker non-votes will not affect the outcome of voting on this
proposal.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF PWC TO
SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE
30, 1999.
<PAGE>
OTHER BUSINESS
The Company is not aware of any other matters to be presented at the
Meeting. If any other matters are properly brought before the Meeting, it is
the intention of the persons named in the enclosed Proxy Card to vote the shares
that they represent in accordance with their best judgment.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals that stockholders desire to have included in the Company's proxy
materials for the 1999 Annual Meeting of Stockholders must be received by the
Secretary of the Company at its principal executive offices (650 Castro Street,
Suite 210, Mountain View, California 94041) no later than June 2, 1999, and must
satisfy the conditions established by the SEC for stockholder proposals to be
included in such proxy materials.
Proxies received in connection with the 1999 Annual Meeting of Stockholders
will confer on the Company discretionary authority (i) to vote on any
stockholder proposal which is received by the Company after August 15, 1999 and
(ii) to vote on any stockholder proposal which is received by the Company on or
before August 15, 1999 if the proxy statement includes advice on the nature of
the matter and how the Company intends to exercise its discretion to vote on
such matter.
FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB for Fiscal 98 is being
mailed with this Proxy Statement to stockholders entitled to notice of the
Meeting. At any stockholder's written request, the Company will provide without
charge, a copy of the Annual Report for Fiscal 98 which incorporates the Form
10-KSB as filed with the SEC, including the financial statements and a list of
exhibits. If copies of exhibits are requested, a copying charge of $0.20 per
page will be made. Requests should be sent to Investor Relations, QCS
Corporation, 650 Castro Street, Suite 210, Mountain View, California 94041.
By Order of the Board of Directors
/s/ Marcel van Heesewijk
Marcel van Heesewijk
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
Mountain View, California
September 30, 1998
<PAGE>
QCS CORPORATION
650 Castro Street, Suite 210
Mountain View, California 94041
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Marcel van Heesewijk and
Louis A. Delmonico and each of them, his true and lawful agents and proxies with
full power of substitution in each, to represent the undersigned at the Annual
Meeting of Stockholders of QCS Corporation to be held at the Hyatt Rickeys
Hotel, located at 4219 El Camino Real, Palo Alto, California 94306, on October
29, 1998, at 10:00 a.m., local time, and at any adjournments thereof, and to
vote as designated.
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" ALL NOMINEES TO THE BOARD OF DIRECTORS, "FOR" THE APPROVAL OF AN AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY
TO QCS.NET CORPORATION, "FOR" THE APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO ELIMINATE THE CUMULATIVE DIVIDEND TO WHICH THE
HOLDERS OF THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK PREVIOUSLY HAVE
BEEN ENTITLED, "FOR" THE RATIFICATION AND APPROVAL OF THE OPTION PLAN AND THE
AMENDMENT OF THE OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE THEREUNDER, "FOR" RATIFICATION OF THE SELECTION OF
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1999, AND AS THE PROXY
HOLDER MAY DETERMINE IN HIS OR HER DISCRETION WITH REGARD TO ANY OTHER MATTER
PROPERLY BROUGHT BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
YOUR VOTE IS IMPORTANT! PLEASE VOTE.
(Continued on reverse side)
<PAGE>
BACK OF CARD
- --------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS
____ FOR all nominees listed below.
____ FOR all nominees listed below except as marked below to the
contrary.
____ WITHHOLD AUTHORITY to vote for all nominees listed below.
(Vote Withheld)
NOMINEES: 1. Marcel van Heesewijk ____
2. Mattheus Wegbrans ____
3. Johan Vunderink ____
4. Louis A. Delmonico ____
2. APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY TO QCS.NET CORPORATION
Vote For ____ Vote Against ____ Abstain ____
3. APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
ELIMINATE THE CUMULATIVE DIVIDEND ON THE SERIES A CONVERTIBLE PREFERRED
STOCK
Vote For ____ Vote Against ____ Abstain ____
4. RATIFY AND APPROVE THE QCS CORPORATION 1997 STOCK OPTION PLAN AND AMENDMENT
THERETO
Vote For ____ Vote Against ____ Abstain ____
5. RATIFY SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS
Vote For ____ Vote Against ____ Abstain ____
and to vote on such other business as may properly come before the meeting
Dated:_______, 1998
<PAGE>
______________________________________
Signature of Stockholder(s)
______________________________________
Signature of Stockholder(s)
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
THANK YOU FOR VOTING.
