SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/ / 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 Rule 14a-11(c) or Rule
14(a)-12
QUERYOBJECT SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than 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:
<PAGE>
- --------------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
QUERYOBJECT SYSTEMS CORPORATION
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 1999
--------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of QUERYOBJECT SYSTEMS CORPORATION, a Delaware corporation (the
"Company"), will be held at the Company's headquarters, located at 60 Charles
Lindbergh Boulevard, Uniondale, New York 11553, on June 2, 1999 at 10:00 A.M.,
local time, for the following purposes:
1. To elect seven members of the Board of Directors to serve
until the next annual meeting of stockholders and until their
successors have been duly elected and qualified;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase from 30,000,000 to 60,000,000
the authorized number of shares of the Company's Common Stock, $.001
par value;
3. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to increase from 2,000,000 to 4,000,000
the authorized number of shares of the Company's Preferred Stock, $.001
par value;
4. To approve an amendment to the Company's 1991 Stock Option
Plan that would increase from 1,950,000 to 7,806,000 the number of
shares reserved for issuance pursuant to the exercise of stock options
granted or to be granted thereunder;
5. To ratify the appointment of PricewaterhouseCoopers LLP as
the Company's independent auditors for the year ending December 31,
1999; and
6. To transact such other business as may properly be brought
before the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 26,
1999 as the record date for the Meeting. Only stockholders of record on the
stock transfer books of the Company at the close of business on that date are
entitled to notice of, and to vote at, the Meeting.
By Order of the Board of Directors
DANIEL M. PESS
Secretary
Dated: April 27, 1999
Uniondale, New York
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED
TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT IS
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
QUERYOBJECT SYSTEMS CORPORATION
60 CHARLES LINDBERGH BOULEVARD
UNIONDALE, NEW YORK 11553
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
JUNE 2, 1999
----------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders by the Board of
Directors of QUERYOBJECT SYSTEMS CORPORATION, a Delaware corporation (the
"Company"), in connection with the solicitation of the accompanying Proxy for
use at the 1999 Annual Meeting of Stockholders of the Company (the "Meeting") to
be held at the Company's principal executive offices located at 60 Charles
Lindbergh Boulevard, Uniondale, New York 11553, on June 2, 1999, at 10:00 A.M.,
local time, or at any adjournment thereof.
The approximate date on which this Proxy Statement and the accompanying
Proxy will first be sent or given to stockholders is May 3, 1999.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on April 26, 1999,
the record date (the "Record Date") for the Meeting, will be entitled to notice
of, and to vote at, the Meeting and any adjournment thereof. As of the close of
business on the Record Date, there were 6,180,985 outstanding shares of the
Company's common stock, $.001 par value (the "Common Stock"). In addition, as of
the Record Date, there were outstanding 1,678,500 shares of Series A Convertible
Preferred Stock, $.001 par value (the "Series A Preferred Stock"), and 96,750
shares of Series B Convertible Preferred Stock, $.001 par value (the "Series B
Preferred Stock" and collectively with the Series A Preferred Stock the
"Outstanding Preferred Stock").
VOTING OF PROXIES
Shares of Common Stock, Series A Preferred Stock and Series B Preferred
Stock represented by Proxies that are properly executed, duly returned and not
revoked will be voted in accordance with the instructions contained therein. If
no specification is indicated on the Proxy, all such shares will be voted (i)
for the election as directors of the persons who have been nominated by the
Board of Directors, (ii) for the approval of an amendment (the "Authorized
Common Stock Amendment") to the Company's Certificate of Incorporation
increasing from 30,000,000 to 60,000,000 the authorized number of shares of
Common Stock, (iii) for the approval of an amendment (the "Authorized Preferred
Stock Amendment") to the Company's Certificate of Incorporation increasing from
2,000,000 to 4,000,000 the authorized number of shares of Preferred Stock, (iv)
for the approval of an amendment to the Company's 1991 Stock Option Plan (the
"Plan") increasing from 1,950,000 to 7,806,000 the number of shares reserved for
issuance pursuant to the exercise of stock options granted or to be granted
thereunder (the "Stock Option Plan Amendment"), (v) for the ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
<PAGE>
for the year ending December 31, 1999 and (vi) on any other matter that may
properly be brought before the Meeting in accordance with the judgment of the
person or persons voting the Proxies.
The execution of a Proxy will in no way affect a stockholder's right to
attend the Meeting and to vote in person. Any Proxy executed and returned by a
stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy that is presented to
the Meeting or if the stockholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant to the authority conferred by such Proxy prior to such revocation.
Holders of Common Stock should sign and return the white proxy. Holders
of Series A Preferred Stock should sign and return the blue proxy. Holders of
Series B Preferred Stock should sign and return the yellow proxy.
The cost of solicitation of the Proxies being solicited on behalf of
the Board of Directors will be borne by the Company. In addition to the use of
the mails, proxy solicitation may be made by telephone, telegraph and personal
interview by officers, directors and employees of the Company. The Company will,
upon request, reimburse brokerage houses and persons holding Common Stock,
Series A Preferred Stock or Series B Preferred Stock in the names of their
nominees for their reasonable expenses in sending soliciting material to their
principals.
VOTING RIGHTS
Holders of each share of Common Stock are entitled to one vote for each
share held on all matters. Holders of each share of Series A Preferred Stock are
entitled to four votes per share on all matters. Holders of each share of Series
B Preferred Stock are entitled to 20 votes per share on all matters. Holders of
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
will vote together as a single class on all proposals. In addition, the votes
cast by holders of Common Stock on the Authorized Common Stock Amendment and
votes cast by holders of Outstanding Preferred Stock on the Authorized Preferred
Stock Amendment will be separately counted in determining the vote on such
proposals.
The holders of a majority of the outstanding shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock, whether present in person
or represented by proxy, will constitute a quorum for the election of directors,
the votes on the Stock Option Amendment and the ratification of the appointment
of PricewaterhouseCoopers LLP, any other matters that may come before the
meeting, and, when the votes cast by holders of Common Stock and Preferred Stock
are counted together as a single class, for the vote on the Authorized Common
Stock Amendment and the Authorized Preferred Stock Amendment. The holders of a
majority of the outstanding shares of Common Stock, whether present in person or
represented by proxy, will constitute a quorum when votes cast by such holders
are counted separately on the Authorized Common Stock Amendment. The holders of
a majority of the outstanding shares of Outstanding Preferred Stock, whether
present in person or represented by proxy, will constitute a quorum when votes
cast by such holders are counted separately on the Authorized Preferred Stock
Amendment.
Broker "non-votes" and the shares as to which a stockholder abstains
from voting are included for purposes of determining whether a quorum of shares
is present at a meeting. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
A plurality of the total votes cast by holders of Common Stock, Series
A Preferred Stock and Series B Preferred Stock, voting together as a single
class, is required for the election of directors. In tabulating
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<PAGE>
the vote on the election of directors, abstentions and broker "non-votes" will
be disregarded and will have no effect on the outcome of such vote.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
entitled to vote, voting together as a single class, together with the
affirmative vote of the holders of majority of the outstanding shares of Common
Stock, voting separately as a class, is required to approve the Authorized
Common Stock Amendment. Accordingly, abstentions and broker non-votes will have
the same effect as a negative vote.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
entitled to vote, voting together as a single class, together with the
affirmative vote of a majority of the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock entitled to vote, voting together as a class,
is required to approve the Authorized Preferred Stock Amendment. Accordingly,
abstentions and broker non-votes will have the same effect as a negative vote.
The affirmative vote of a majority of the votes cast by holders of
Common Stock, Series A Preferred Stock and Series B Preferred Stock, voting
together as a single class, is required to approve the Stock Option Plan
Amendment and the proposal to ratify the appointment of PricewaterhouseCoopers
LLP. In tabulating the votes on the proposals to approve the Stock Option Plan
Amendment and ratify the appointment of PricewaterhouseCoopers LLP, shares as to
which a stockholder abstains are considered shares entitled to vote on the
applicable proposal and therefore an abstention would have the effect of a vote
against such proposals. Broker non-votes, however, are not considered shares
entitled to vote on the applicable proposals and are not included in determining
whether the Stock Option Plan Amendment and the proposal to ratify the
appointment of PricewaterhouseCoopers LLP are approved.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Company's Common Stock and Outstanding Preferred Stock, as of the Record Date,
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock and Outstanding Preferred Stock, each
director, each executive officer, each nominee for election as a director and by
all directors and executive officers of the Company as a group. Unless otherwise
indicated, the address for each such person is in care of the Company, 60
Charles Lindbergh Boulevard, Uniondale, New York 11553. The calculations with
respect to beneficial ownership of Outstanding Preferred Stock held is based on
the number of shares held and not on the number of votes per share to which a
holder of Outstanding Preferred Stock is entitled.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF SHARES OF PREFERRED
DIRECTORS, NOMINEES, EXECUTIVE OFFICERS AND 5% OF COMMON STOCK PERCENT STOCK BENEFICIALLY PERCENT
STOCKHOLDERS BENEFICIALLY -AGE OWNED(1) -AGE
------------------------------------------------------------- --------------- ---- -------- -------
<S> <C> <C> <C> <C>
Barry Rubenstein(2).......................................... 5,944,256 53.1% 708,000 39.9%
68 Wheatley Road
Brookville, New York 11545
Irwin Lieber(3).............................................. 4,571,944 45.5% 600,000 33.8%
767 Fifth Avenue, 45th Floor
New York, New York 10153
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF SHARES OF PREFERRED
DIRECTORS, NOMINEES, EXECUTIVE OFFICERS AND 5% OF COMMON STOCK PERCENT STOCK BENEFICIALLY PERCENT
STOCKHOLDERS BENEFICIALLY -AGE OWNED(1) -AGE
------------------------------------------------------------- --------------- ---- -------- -------
<S> <C> <C> <C> <C>
Wheatley Foreign Partners, L.P.(4)........................... 4,515,694 45.2% 600,000 33.8%
c/o Fiduciary Trust
One Capital Place
Snedden Road
P.O. Box 1062
Grand Cayman
British West Indies
Wheatley Partners, L.P. (4).................................. 4,515,694 45.2% 600,000 33.8%
80 Cutter Mill Road
Great Neck, New York 11021
Brentwood Associates, VII L.P.(5)............................ 461,397 7.6% - -
3000 Sand Hill Road
Building 1, Suite 260
Menlo Park, California 94023
Eli Oxenhorn(6).............................................. 556,250 8.4% 50,000 2.8%
56 The Intervale
Roslyn Estates, New York 11576
PAW Partners(7).............................................. 1,625,000 21.1% 250,000 14.1%
10 Glenville Street
Greenwich, Connecticut 06831
Seneca Ventures(8)........................................... 336,106 6.2% 29,000 1.6%
68 Wheatley Road
Brookville, New York 11545
Woodland Venture Fund(8)..................................... 349,600 6.5% 29,000 1.6%
68 Wheatley Road
Brookville, New York 11545
Hudson Capital(9)............................................ 1,625,000 21.1% 50,000 2.8%
660 Madison Avenue - 14th Floor
New York, New York 10021
Bulldog Capital Partners, L.P. (10).......................... 650,000 9.7% 100,000 5.6%
33 North Garden Avenue
Suite 750
Clearwater, Florida 33755
Kenneth D. Cole(11).......................................... 325,000 5.1% 50,000 2.8%
c/o Kenneth Cole Productions
152 West 57th Street
New York, New York 10019
Andre Szykier (12)........................................... 249,157 4.1% - -
Alan W. Kaufman (13)......................................... 481,666 7.3% 50,000 2.8%
Amy L. Newmark (14).......................................... 337,933 5.2% 50,000 2.8%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF SHARES OF PREFERRED
DIRECTORS, NOMINEES, EXECUTIVE OFFICERS AND 5% OF COMMON STOCK PERCENT STOCK BENEFICIALLY PERCENT
STOCKHOLDERS BENEFICIALLY -AGE OWNED(1) -AGE
------------------------------------------------------------- --------------- ---- -------- -------
<S> <C> <C> <C> <C>
Robert Thompson (15)......................................... 122,760 * - -
Daniel M. Pess (16).......................................... 134,804 * - -
Rino Bergonzi (17)........................................... 15,833 * - -
Irwin Jacobs (17)............................................ 15,833 * - -
All directors and executive officers as a group (7 persons)(18) 1,357,986 18.6 100,000 5.6%
</TABLE>
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* Less than 1%
(1) A person is deemed to be the beneficial owner of voting securities that
can be acquired by such person within 60 days after the Record Date
upon the exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
options, warrants or convertible securities that are held by such
person (but not those held by any other person) and that are currently
exercisable (i.e., that are exercisable within 60 days after the Record
Date) have been exercised. Unless otherwise noted, the Company believes
that all persons named in the table have sole voting and investment
power with respect to all shares beneficially owned by them.
(2) Based upon information contained in a report on Schedule 13D (the
"Wheatley 13D") filed jointly by Barry Rubenstein, Wheatley Foreign
Partners, L.P. ("Wheatley Foreign"), Wheatley Partners, L.P.
("Wheatley"), Seneca Ventures ("Seneca"), Woodland Venture Fund
("Woodland Fund"), Woodland Partners, Rev-Wood Merchant Partners
("Rev-Wood") and certain other entities with the Securities Exchange
Commission ("SEC"). Includes an aggregate of 5,119,375 shares of Common
Stock issuable upon the exercise of options or warrants or upon the
conversion of Series A or Series B Preferred Stock held by Mr.
Rubenstein, Wheatley Foreign, Wheatley, Seneca, Woodland Fund , and
Rev-Wood. Mr. Rubenstein owns 50,000 shares of Series A Preferred
Stock. Mr. Rubenstein may be deemed to beneficially own (i) 48,000
shares of Series A Preferred Stock held by Wheatley Foreign, (ii)
552,000 shares of Series A Preferred Stock held by Wheatley, (iii)
29,000 shares of Outstanding Preferred Stock held by Seneca, 25,000 of
which is Series A Preferred Stock and 4,000 of which is Series B
Preferred Stock, and (iv) 29,000 shares of Outstanding Preferred Stock
held by Woodland Fund, 25,000 of which is Series A Preferred Stock and
4,000 of which is Series B Preferred Stock Mr. Rubenstein disclaims
beneficial ownership of the securities held by Woodland Partners,
Woodland Fund, Seneca, Wheatley, Wheatley Foreign and Rev-Wood, except
to the extent of his respective equity interest therein.
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<PAGE>
(3) Based on information contained in the Wheatley 13D. Includes (i) 56,250
shares of Common Stock issuable upon exercise of options and (ii) the
shares of Common Stock issuable upon the exercise or conversion of
warrants, options, Series A Preferred Stock and Series B Preferred
Stock owned by Wheatley and Wheatley Foreign, all as described in
Footnote 4 below. Mr. Lieber is a member and officer of Wheatley
Partners LLC. Mr. Lieber may be deemed to beneficially own (i) 552,000
shares of Series A Preferred Stock held by Wheatley and (ii) 48,000
shares of Series A Preferred Stock held by Wheatley Foreign. Mr. Lieber
disclaims beneficial ownership of the securities owned by Wheatley and
Wheatley Foreign, except to the extent of his equity interest therein.
(4) Based upon information contained in the Wheatley 13D. Includes an
aggregate of 3,906,250 shares of Common Stock issuable upon the
exercise of options or warrants or upon the conversion of Series A or
Series B Preferred Stock held by Wheatley and Wheatley Foreign.
Wheatley Foreign owns 48,000 shares of Series A Preferred Stock and
Wheatley owns 552,000 shares of Series A Preferred Stock. Wheatley
Foreign disclaims beneficial ownership of the securities held by
Wheatley and Wheatley disclaims beneficial ownership of the securities
held by Wheatley Foreign.
(5) This information is derived from a Schedule 13G filed by Brentwood
Associates VII, L.P. and certain other entities. The General Partner of
Brentwood Associates VII, L.P. is Brentwood VII Ventures, L.P., a
Delaware limited partnership ("Brentwood VII Ventures"). The general
partners of Brentwood VII Ventures are Jeffrey D. Brody, David W.
Chonette, Ross A. Jaffe, G. Bradford Jones, and John L. Walecka.
Information contained in Brentwood's Schedule 13G is provided solely
for the purpose of complying with Section 13(d) and Section 13(g) of
the Securities Exchange Act of 1934, as amended. Each of the
individuals or entities listed above disclaims beneficial ownership of
the securities described herein for any other purpose.
(6) Based upon information contained in a report on Schedule 13D filed by
Eli Oxenhorn with the SEC. Includes an aggregate of 556,250 shares of
Common Stock issuable upon the exercise of options or warrants or upon
the conversion of Series A or Series B Preferred Stock held by Mr.
Oxenhorn and Rev-Wood. Mr. Oxenhorn disclaims beneficial ownership of
the securities held by Rev-Wood, except to the extent of his equity
interest therein. Mr. Oxenhorn owns 50,000 shares of Series A Preferred
Stock.
(7) Consists of 1,625,000 shares issuable upon exercise of warrants or
conversion of Series A Preferred Stock. PAW Partners owns 250,000
shares of Series A Preferred Stock.
(8) Based upon information contained in the Wheatley 13D and certain other
information. Includes an aggregate of 295,625 shares of Common Stock
issuable upon the exercise of options or warrants or upon the
conversion of Series A or Series B Preferred Stock held by Seneca and
Woodland Fund. Seneca owns 29,000 shares of Outstanding Preferred
Stock, 25,000 of which is Series A Preferred Stock and 4,000 of which
is Series B Preferred Stock. Woodland Fund owns 29,000 shares of
Outstanding Preferred Stock, 25,000 of which is Series A Preferred
Stock and 4,000 of which is Series B Preferred Stock.
(9) Consists of 1,625,000 shares issuable upon the exercise of warrants or
conversion of Series B Preferred Stock. Hudson Capital owns 50,000
shares of Series B Preferred Stock.
(10) Consists of 650,000 shares issuable upon the exercise of warrants or
conversion of Series A Preferred Stock. Bulldog Capital Partners, L.P.
owns 100,000 shares of Series A Preferred Stock.
(11) Consists of 325,000 shares issuable upon the exercise of warrants or
conversion of Series A Preferred Stock. Mr. Cole owns 50,000 shares of
Series A Preferred Stock.
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<PAGE>
(12) Includes 312 shares of Common Stock owned by Remy Szykier, Mr.
Syzkier's daughter and 35,417 shares of Common Stock issuable upon
exercise of options (of which 20,833 are contingent upon stockholder
approval of the Stock Option Amendment).
(13) Consists of (i) 156,666 shares of Common Stock issuable upon exercise
of options (of which 27,500 are contingent upon stockholder approval of
the Stock Option Amendment), (ii) 200,000 shares that are issuable upon
the conversion of Series A Preferred Stock and (iii) 125,000 shares of
Common Stock that are issuable upon the exercise of Series A Warrants.
Mr. Kaufman owns 50,000 shares of Series A Preferred Stock
(14) Includes 128,333 shares of Common Stock issuable upon exercise of
options (of which 58,333 are contingent upon stockholder approval of
the Stock Option Amendment), and (ii) 200,000 shares of Common Stock
that are issuable upon the conversion of Series A Preferred Stock. Ms.
Newmark owns 50,000 shares of Series A Preferred Stock.
(15) Consists of 122,760 shares of Common Stock issuable upon exercise of
options (of which 89,375 are contingent upon stockholder approval of
the Stock Option Amendment).
(16) Consists of 134,804 shares of Common Stock issuable upon exercise of
options (of which 86,625 are contingent upon stockholder approval of
the Stock Option Amendment).
(17) Consists of 15,833 shares of Common Stock issuable upon exercise of
options.
(18) Includes those shares of Common Stock and Outstanding Preferred Stock
deemed to be included in the respective beneficial ownership of Messrs.
Szykier, Kaufman, Jacobs, Thompson, Pess, Bergonzi and Ms. Newmark as
described in notes 12 through 17.
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<PAGE>
PROPOSAL I--ELECTION OF DIRECTORS
NOMINEES
Unless otherwise specified, all Proxies received will be voted in favor
of the election of the persons named below as directors of the Company, to serve
until the next Annual Meeting of Stockholders of the Company and until their
successors shall be duly elected and qualified. Each of the nominees, other than
Messrs. Thompson and Pess, currently serve as directors of the Company. The
terms of office of the current directors expire at the Meeting and when their
successors are duly elected and qualified. Management has no reason to believe
that any of the nominees will be unable or unwilling to serve as a director, if
elected. Should any of the nominees not remain a candidate for election at the
date of the Meeting, the Proxies will be voted in favor of those nominees who
remain candidates and may be voted for substitute nominees selected by the Board
of Directors. The names of the nominees and certain information concerning them
are set forth below:
FIRST YEAR
NAME AGE BECAME DIRECTOR*
- -------------------------- -------------------- ----------------
Robert A. Thompson 50 -
Daniel M. Pess 46 -
Andre Szykier 54 1989
Alan W. Kaufman 61 1997
Rino Bergonzi 55 1997
Irwin Jacobs 62 1998
Amy L. Newmark 42 1998
- ---------------
* Directors' tenure includes their period of service as directors of the
Company's predecessor.
Robert A. Thompson, a nominee for director, joined the Company in
September 1997 as Vice President of Marketing and became Senior Vice President
of Marketing in April 1998. In December 1998, Mr. Thompson became President and
Chief Executive Officer. From January 1989 to August 1997, Mr. Thompson was
employed by Cognos Corporation, a provider of client/server tools for data
access, data analysis and application development, most recently as Director of
Marketing Programs. Mr. Thompson holds a B.A.A. in Radio and Television Arts
from Ryerson Politechnical Institute.
Daniel M. Pess, a nominee for director, joined the Company in July 1994
as Vice President of Finance and Administration and was promoted to Senior Vice
President of Finance and Administration in October 1997. In December 1998, Mr.
Pess became Executive Vice President and Chief Operating Officer. Since December
1996, Mr. Pess has also served as Chief Financial Officer of the Company and
since August 1997 Mr. Pess has served as Secretary of the Company. From 1991 to
July 1994, Mr. Pess was Corporate Controller of Uniforce Services, Inc., a
supplemental staffing company. From 1986 to 1991, Mr. Pess was employed as Chief
Financial Officer and Controller of The Dartmouth Plan, Inc., a financial
institution involved in mortgage and leasing
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<PAGE>
origination, sales and service. Mr. Pess is a Certified Public Accountant and
holds a B.S. in Accounting from C.W. Post College of Long Island University.
Alan W. Kaufman has been a director of the Company since August 1997,
Chairman of the Board since May 1998 and was President and Chief Executive
Officer of the Company from October 1997 to December 1998. Prior thereto, Mr.
Kaufman was an independent consultant from December 1996 to October 1997. From
April 1986 to December 1996, Mr. Kaufman held various positions with Cheyenne
Software, Inc., a provider of storage management, security and communications
software products, including Vice President of Marketing and Vice President of
Sales and Marketing, and served most recently as Executive Vice President of
Sales. Mr. Kaufman is a director of Global Telecommunication Solutions, Inc., a
publicly traded prepaid phone card company, and was the founding President of
the New York Software Industry Association. Mr. Kaufman holds a BSEE from Tufts
University.
Andre Szykier, co-founder of the Company, has served as its Executive
Vice President and Chief Technology Officer since the inception of the Company
in February 1989. Prior to co-founding the Company, Mr. Szykier was Director of
Business Research at Pacific Telesis Group, founder and Chief Executive Officer
of Elan Vital Research Ltd., a software engineering and consulting firm, and was
a mathematician at Bell Labs, where he obtained a patent on signal compression
and worked on interplanetary missions. Mr. Szykier holds an M.S. in Applied
Statistics from the University of California-Berkeley and a B.S. in Economics
from St. Mary's University.
Rino Bergonzi has been a director of the Company since August 1997.
Since November 1993, Mr. Bergonzi has served as Vice President and Division
Executive of Corporate Information Technology Services at AT&T, a worldwide
provider of voice, data and video telecommunications services to large and small
businesses, consumers and government entities. Mr. Bergonzi has 32 years of
experience in the information services field that includes working for such
companies as Western Union, United Parcel Service Information Services and EDS
Corp. Mr. Bergonzi is a director of Cornerstone Internet Solutions Company, a
public company that provides internet services.
Irwin Jacobs has been a director of the Company since May 1998. Mr.
Jacobs has been a private investor since August 1997. From June 1992 until
August 1997, Mr. Jacobs was President of DataViews Corp, a graphical user
interface software developer. From May 1990 until December 1991, Mr. Jacobs was
Senior Vice President of ASK Computer Services, a developer of manufacturing and
financial software and from April 1986 until May 1990, Mr. Jacobs was President
and Chairman of the Board of Perception Technology Corp, a manufacturer of voice
response systems. Prior thereto, Mr. Jacobs held various management positions at
Digital Equipment Corporation, including Vice President of the Business Products
Group and Vice President of Value Added Reseller Operations. Mr. Jacobs
currently is a director of Hologic Inc., a company that manufactures medical
equipment and a director of Integrated Computer Solutions, a software
development company. Mr. Jacobs holds a BSEE from Worcester Polytechnic
Institute.
Amy L. Newmark has been a director of the Company since May 1998. She
has been an independent investor since October 1997. Ms. Newmark was Executive
Vice President-Strategic Planning of WinStar Communications, Inc., a competitive
local exchange carrier, from April 1995 until September 1997. From April 1993 to
March 1995, Ms. Newmark was a General Partner of Information Age Partners, LP, a
hedge fund, and from 1990 to 1993, Ms. Newmark was President of Newmark
Research, Inc., an investment research and consulting firm. Ms. Newmark is a
Chartered Financial Analyst and graduated magna cum laude from Harvard College.
-9-
<PAGE>
The Board of Directors has a Stock Option and Compensation Committee,
which administers the Plan and makes recommendations concerning salaries and
incentive compensation for employees of and consultants to the Company, and an
Audit Committee which reviews the Company's financial statements and accounting
policies, resolves potential conflicts of interest, receives and reviews the
recommendations of the Company's independent auditors and confers with the
Company's independent auditors with respect to the training and supervision of
internal accounting personnel and the adequacy of internal accounting controls.
The Stock Option and Compensation Committee is currently composed of Rino
Bergonzi and Amy Newmark and the Audit Committee is currently composed of Rino
Bergonzi and Irwin Jacobs.
The Company does not presently have a nominating committee, the
customary functions of such committee being performed by the entire Board of
Directors.
DIRECTOR COMPENSATION
The Company does not currently compensate directors who are also
employees of the Company for service on the Board of Directors. Directors are
reimbursed for their expenses incurred in attending meetings of the Board of
Directors.
MEETINGS
The Board of Directors held seven meetings during the year ended
December 31, 1998. The Stock Option and Compensation Committee held one meeting
during the year ended December 31, 1998. From time to time, the members of the
Board of Directors act by unanimous written consent pursuant to the laws of the
State of Delaware.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company during the fiscal years ended December 31, 1998, 1997 and
1996 to the Company's Chief Executive Officer and to each executive officer
whose salary and bonus exceeded $100,000 with respect to the fiscal year ended
December 31, 1998 (collectively the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1)($) BONUS($) OPTIONS(#)
--------------------------- ---- ------------ -------- ----------
<S> <C> <C> <C>
Alan W. Kaufman, Chairman of the 1998 $75,000 - 200,000
Board and Former Chief Executive 1997 $16,538 - 100,000
Officer and President (2) 1996 - - -
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Robert Thompson, Chief Executive 1998 $145,000 $45,000(4) 350,000
Officer and President (3) 1997 $42,849 $11,250 50,000
1996 - - -
Daniel M. Pess, Executive Vice 1998 $139,583 $30,000(5) 335,000
President, Chief Operating Officer 1997 $119,167 $20,000 57,500
and Chief Financial Officer 1996 $100,000 $10,000(6) 1,250
Andre Szykier, Executive Vice 1998 $167,520(7) - 125,000
President and Chief Technology 1997 $154,786 - -
Officer 1996 $150,000(8) - -
</TABLE>
(1) Certain of the officers of the Company routinely receive other benefits
from the Company, the amounts of which are customary in the industry. The
Company has concluded, after reasonable inquiry, that the aggregate amounts
of such benefits during each of 1996, 1997 and 1998 did not exceed the
lesser of $50,000 or 10% of the compensation set forth above as to any
named individual.
(2) Mr. Kaufman served as Chief Executive Officer and President of the Company
from October 1997 to December 1998.
(3) Mr. Thompson's employment with the Company commenced in October 1997 and
Mr. Thompson became President and Chief Executive Officer of the Company in
December 1998.
(4) $11,250 of such amount was paid in 1999.
(5) $22,500 of such amount was paid in 1999.
(6) All of such amount was paid in 1997.
(7) Includes $12,500 of paid vacation from prior years.
(8) Mr. Szykier agreed to defer the payment of $10,417 of such compensation.
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers during the fiscal year ended
December 31, 1998. The Company has never granted any stock appreciation rights.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO
NAME OPTIONS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
- ------------------------- ------------------- ------------------- ------------------- --------------
<S> <C> <C> <C> <C>
Alan W. Kaufman 100,000 2.6 $ .94(1) 4/12/03
100,000 2.6 $ .94(2) 11/24/05
Robert Thompson 25,000 0.7 $ .94(1) 4/12/03
325,000 8.5 $ .94(2) 11/24/05
Daniel M. Pess 20,000 0.5 $ .94(1) 4/12/03
315,000 8.2 $ .94(2) 11/24/05
Andre Szykier 50,000 1.3 $ .94(1) 4/12/03
75,000 2.0 $ .94(2) 11/24/05
</TABLE>
(1) The exercise price of such options was repriced to $.94 on November 25,
1998. See "Report on Repricing of Options" below.
(2) The grant of such options is contingent upon stockholder approval of
the Stock Option Plan Amendment.
No options were exercised by the Named Executive Officers during the
fiscal year ended December 31, 1998.
The following table sets forth certain information regarding
unexercised stock options held by the Named Executive Officers as of December
31, 1998.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
DECEMBER 31, 1998 OPTIONS AT DECEMBER 31, 1998 (1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE($)
- -------------------------- --------------------------------- ------------------------------------
<S> <C> <C> <C>
Alan W. Kaufman 66,667/233,333 16,667/58,333
Robert Thompson 20,735/379,265 5,184/94,816
Daniel M. Pess 37,292/362,708 9,323/90,677
Andre Szykier 0/125,000 0/31,250
</TABLE>
(1) Based on the per-share closing price of the Common Stock of $1.19 on the
Nasdaq SmallCap Market on December 31, 1998.
REPORT ON REPRICING ON OPTIONS
On November 25, 1998 the Board of Directors repriced all outstanding
options held by employees of the Company and certain options held by consultants
to the Company, including options held by the Named Executive Officers, so that
all outstanding options then held by such persons would have an exercise price
of $.94 per share, the closing market price of the Company's Common Stock on
November 24, 1998 as reported by the Nasdaq SmallCap Market. Most of the
repriced options had an exercise price of $6.00 per share. The Board of
Directors believes that the repricing is consistent with the Company's
compensation policy, which is to utilize stock options to attract and retain
qualified employees with the same long-term interest as the Company's
stockholders. A significant portion of each employee's compensation is based on
the grant of stock options. Accordingly, the
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<PAGE>
Board of Directors believes that without the repricing the Company could lose
key employees at a time when the competition for personnel, including management
personnel, in technology companies located on Long Island, New York and
throughout the New York City metropolitan area, continues to be strong. As a
result of the repricing, options to purchase 200,000, 75,000, 20,000 and 50,000
shares of Common Stock held by Messrs. Kaufman, Thompson, Pess and Szykier,
respectively were repriced from $6.00 to $0.94 per share and options to purchase
65,000 shares of Common Stock held by Mr. Pess were repriced from $0.96 to $0.94
per share.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Robert
Thompson, its President and Chief Executive Officer, Andre Szykier, its
Executive Vice President and Chief Technology Officer and Daniel M. Pess, its
Executive Vice President, Chief Operating Officer and Chief Financial Officer.
The employment agreements of Messrs. Thompson, Szykier and Pess, provide for an
initial term through August 31, 1999, April 30, 1999 and April 30, 1999,
respectively, with annual base cash compensation of $145,000, $150,000,
$125,000, respectively. Each of Messrs. Thompson, Szykier and Pess are also
eligible to receive bonuses if the Company meets certain targets agreed upon
each fiscal year in advance by the Board of Directors. Each of Messrs. Szykier
and Pess is entitled to receive his full salary for 12 months upon termination,
unless his employment is terminated for cause, disability or death. Mr. Thompson
is entitled to receive his full salary for six months upon termination, unless
his employment agreement is terminated for cause, disability or death. Mr.
Szykier has agreed not to compete with the Company for a period of two years
after termination and each of Messrs. Thompson and Pess has agreed not to
compete with the Company for a period of one year after termination. All such
employment agreements are for full-time employment and are automatically
renewable for additional periods unless either party terminates such employment
agreement at least 60 days prior to the expiration of the initial term or any
subsequent term.
The Company also has an agreement with Alan W. Kaufman, whereby Mr.
Kaufman has agreed to serve as Chairman of the Board or as a consultant to the
Company through October 14, 1999. Mr. Kaufman's annual base cash compensation is
$75,000 per year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with
the Securities and Exchange Commission ("SEC"). Such officers, directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 1998, that there was compliance
with all Section 16(a) filing requirements applicable to its officers, directors
and 10% stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, the Company has raised capital through the sale of
debt and equity securities. Many of the investors in such offerings have been
officers, directors and entities associated with directors, and beneficial
owners of 5% or more of the Company's securities. In each transaction, such
persons participated on terms no more favorable than those offered to all other
investors.
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<PAGE>
PREFERRED STOCK PRIVATE PLACEMENTS
In October and November 1998, the Company had the initial closing of
two private placements -- the Series A Private Placement and the Series B
Private Placement. The Series A Private Placement consisted of 1,750,000 Units
(the "Series A Units") with a gross sales price of $3,500,000. The Series B
Private Placement consisted of 10 Units (the "Series B Units") with a gross
sales price of $1,000,000. Each Series A Unit consisted of one share of Series A
Preferred Stock and a warrant to purchase 2.5 shares of Common Stock at a per
share exercise price equal to $.50. Each Series B Unit consisted of 10,000
shares of Series B Preferred Stock and warrants to purchase an aggregate of
125,000 shares of Common Stock at a per share exercise price equal to $.50. The
Series A Units were sold at a purchase price of $2.00 per Unit and each share of
Series A Preferred Stock share is convertible into four shares of Common Stock.
The Series B Units were sold at a purchase price of $100,000 per Unit and each
share of Series B Preferred Stock is convertible into twenty shares of Common
Stock. The effective purchase price, on a Common Stock equivalent basis was $.50
per common share, which represented a discount from the fair market value of the
Company's Common Stock on the various dates of issuance. The Company consummated
the final closing on each of the Series A Private Placement and the Series B
Private Placement in February 1999. Among the purchasers in the Series A Private
Placement and the Series B Private Placement were the following individuals or
entities which beneficially own more than 5% of the outstanding Common Stock (i)
Wheatley and Wheatley Foreign (which purchased an aggregate of 600,000 Series A
Units), (ii) Seneca Ventures and Woodland Venture Fund (which each purchased
25,000 Series A Units and 4,000 Series B Units), (iii) Eli Oxenhorn and Kenneth
Cole (who each purchased 50,000 Series A Units, (iv) PAW Partners (which
purchased 250,000 Series A Units), (v) Hudson Capital (which purchased 50,000
Series B Units), and (vii) Bulldog Capital Partners (which purchased 100,000
Series A Units). In addition, Amy Newmark and Alan Kaufman, Directors of the
Company, each purchased 50,000 Series A Units.
Barry Rubenstein, a 5% stockholder, may be deemed to be the beneficial
owner of the Series A Units and/or Series B Units acquired by Wheatley, Wheatley
Foreign, Seneca Ventures and Woodland Venture Fund and Irwin Lieber, a 5%
Stockholder, may be deemed to be the beneficial owner of the Series A Units
acquired by Wheatley and Wheatley Foreign.
INTERIM FINANCINGS
In May 1997, in an interim financing, Wheatley and Wheatley Foreign
purchased $458,341 and $41,659 principal amounts of unsecured promissory notes
issued by the Company (the "First Interim Financing Notes"). The First Interim
Financing Notes were repaid out of the proceeds of the Bridge Financing (as
hereinafter defined).
In June 1997, in an interim financing, Brentwood purchased an unsecured
promissory note of $250,000 principal amount (the "Third Interim Financing
Note") and was issued warrants to purchase 4,206 shares of Common Stock.
In July 1997, the Company consummated a bridge financing (the "Bridge
Financing") whereby it issued $4,300,000 of unsecured promissory notes (the
"Bridge Notes") and warrants (the "Bridge Warrants") to purchase an aggregate of
1,075,000 shares of Common Stock (the "Bridge Warrant Shares"). As part of the
Bridge Financing, the Company repaid the First Interim Financing Notes. In
addition, Brentwood converted its Third Interim Financing Note into Bridge Notes
and Bridge Warrants and accordingly received $250,000 principal amount of Bridge
Notes and Bridge Warrants to purchase 41,667 Bridge Warrant Shares. The Bridge
Notes were repaid from the proceeds of the Company's initial public offering.
In October 1997, in an interim financing, Wheatley and Wheatley Foreign
purchased $552,000 and $48,000 principal amounts of unsecured promissory notes,
respectively. Such notes were repaid from the proceeds of the Company's initial
public offering.
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<PAGE>
In September and October 1998, Wheatley, Wheatley Foreign, Amy Newmark
and another entity purchased $349,600, $30,400, $20,000 and $90,000 principal
amounts of unsecured promissory notes issued by the Company (the "1998 Interim
Financing Notes"). Upon the initial closing of the Series A Private Placement,
Amy Newmark converted her 1998 Interim Financing Notes into Series A Units. The
remaining 1998 Interim Financing Notes were repaid between November 1998 and
January 1999.
OFFICER, DIRECTOR AND 5% STOCKHOLDERS' TRANSACTIONS
The Company has adopted a policy whereby all transactions between the
Company and its officers, directors, principal stockholders or affiliates, will
be approved by a majority of the Board of Directors 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 in arm's length transactions from
unaffiliated third parties.
PROPOSAL II - APPROVAL OF AN INCREASE IN
AUTHORIZED COMMON STOCK
In April 1999, the Board of Directors approved the Authorized Common
Stock Amendment, which would increase to 60,000,000 the number of shares of
Common Stock authorized for issuance, and directed that the Authorized Common
Stock Amendment be submitted to a vote of Stockholders at the Meeting. The form
of the proposed Authorized Common Stock Amendment is included in Exhibit A to
this Proxy Statement.
Article Four of the Company's Certificate of Incorporation as currently
in effect authorizes the issuance of up to 30,000,000 shares of Common Stock. As
of the Record Date, 6,180,985 shares of Common Stock were outstanding and
21,554,000 shares were reserved for issuance upon the exercise of outstanding
warrants and options and the conversion of outstanding Series A Preferred Stock
and Series B Preferred Stock. There was, therefore, as of the Record Date,
approximately 2,264,696 shares of authorized Common Stock available for future
issuance by the Company. The Company is also seeking approval of the Stock
Option Plan Amendment which would increase from 1,950,000 to 7,806,000 the
number of shares available for issuance under the Plan. As described under
"Proposal IV -- Approval of Amendment to 1991 Stock Option Plan," the Company
has granted options to purchase 2,436,036 shares of Common Stock which are
contingent upon stockholder approval of the Stock Option Plan Amendment. The
Board believes it is necessary to increase the number of shares of authorized
Common Stock in order to make available additional shares for possible stock
splits, acquisitions, financings, employee benefit plan issuances and for other
such corporate purposes as may arise.
The Company is in discussions with a placement agent relating to a
proposed private placement (the "Private Placement") of a minimum of 10 and a
maximum of 30 units (the "Units") at a purchase price of $100,000 per Unit. Each
Unit would consist of 100 shares of newly-created Series C Convertible Preferred
Stock, $.001 par value (the "Series C Preferred Stock"), and a Common Stock
Purchase Warrant (the "Warrant") to purchase 100,000 shares of Common Stock. If
all 30 Units were to be sold, the Company could in its discretion determine to
sell up to an additional 15 Units on the same terms and conditions as those
prepared to be offered. It is currently anticipated that each share of Seris C
Preferred Stock would be convertible into such number of shares of Common Stock
as is equal to the quotient obtained by dividing $1,000 by the fair market value
of the Common Stock, i.e., the average closing price of the Common Stock in the
principal securities market in which it is then traded for the five trading days
immediately preceding the date of the initial closing of the offering. Assuming
a fair market value of $.75 per share, a share of Series C Preferred Stock would
initially be convertible into 1,333 shares of
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<PAGE>
Common Stock. Upon liquidation, the Series C Preferred Stock would rank junior
to the Series A Preferred Stock and Series B Preferred Stock but senior to all
other classes and series of capital stock of the Company. The Warrants would
have a term of 2 1/2 years and would be exercisable at a per share price equal
to the fair market value of the Common Stock. Based on discussions with the
placement agent and market conditions, the terms of the Private Placement may
change. In order to issue the Common Stock underlying the Series C Preferred
Stock and the Warrants, the Company will need stockholder approval of the
Authorized Common Stock Amendment. Except for the Private Placement and grant of
stock options subject to stockholder approval of the Stock Option Plan
Amendment, the Company currently does not have any plans, arrangements,
negotiations or understandings with regard to the issuance of any Common Stock.
All newly authorized shares of Common Stock would have the same rights
as the presently authorized shares, including the right to one vote per share
and to participate in dividends when and to the extent declared and paid. While
the issuance of shares in certain instances may have the effect of stalling a
hostile takeover, the Board does not intend or view the increase in authorized
Common Stock as an anti-takeover measure nor is the Company aware of any
proposed or contemplated transaction of this type.
The issuance of additional shares of Common Stock by the Company may,
depending upon the circumstances under which the shares are issued, reduce
stockholders' equity per share and may reduce the percentage of ownership of
Common Stock of existing stockholders.
The additional shares of Common Stock would be available for issuance
without further action by the stockholders and without the accompanying delay
and expense involved in calling a special meeting of stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be traded.
Proxies received that contain no instructions to the contrary will be
voted FOR approval of the Authorized Common Stock Amendment. The affirmative
vote of the holders of a majority of the outstanding shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock entitled to vote, voting
together as a single class, and of the holders of a majority of the outstanding
shares of Common Stock entitled to vote, voting separately as a class, is
required to approve the Authorized Common Stock Amendment. Accordingly,
abstentions and broker non-votes will have the same effect as a negative vote.
If the proposal is approved by the stockholders, the Authorized Common Stock
Amendment would become effective upon its filing with the State of Delaware,
which would occur as soon as practicable following such approval.
THE BOARD OF DIRECTORS HAS APPROVED THE AUTHORIZED COMMON STOCK AMENDMENT
AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL THEREOF.
PROPOSAL III -- APPROVAL OF AN INCREASE IN
AUTHORIZED PREFERRED STOCK
In April 1999, the Board of Directors approved the Authorized Preferred
Stock Amendment, which would increase to 4,000,000 the number of shares of
Preferred Stock authorized for issuance, and directed that the amendment be
submitted to a vote of stockholders at the Meeting. The form of proposed
Authorized Preferred Stock Amendment is included in Exhibit A to this Proxy
Statement.
Article Four the Company's Certificate of Incorporation as currently in
effect authorizes the issuance of up to 2,000,000 shares of Preferred Stock. As
of the Record Date, 1,678,500 and 96,750 shares of Series A Preferred Stock and
Series B Preferred Stock were outstanding respectively. In addition, 173,725
shares of Series A Preferred Stock and 10,000 shares of Series B Preferred Stock
were reserved for issuance upon the exercise of certain options. There were,
therefore, as of the Record Date, approximately 41,025 shares of authorized
Preferred
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<PAGE>
Stock available for future issuance by the Company. Accordingly, based on the
current terms of the Private Placement, the Company has a sufficient number of
authorized Preferred Stock to consummate the Private Placement. Nevertheless,
the Board believes it would be desirable to increase the number of shares of
authorized Preferred Stock in order to make available additional shares for
possible acquisitions and other financings and for other such corporate purposes
as may arise. Except for the Private Placement, the Company currently does not
have any plans, arrangements, negotiations or understandings with regard to the
issuance of any Preferred Stock.
Currently, shares of Preferred Stock of the Company may be issued from
time to time in one or more classes or series, each of which class or series has
such distinctive designation or title as determined by the Board prior to the
issuance of the shares. Each class or series of Preferred Stock has such voting
powers, full or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as stated in such resolution or resolutions
providing for the issue of such class or series of Preferred Stock as may be
adopted from time to time by the Board prior to the issuance of any shares
thereof. However, so long as any shares of Series A Preferred Stock or Series B
Preferred Stock are outstanding, no future series of Preferred Stock may be
senior to or pari passu with the Series A Preferred Stock and the Series B
Preferred Stock with respects to rights on liquidation, dissolution or winding
up of the Company. While the issuance of Preferred Stock in certain instances
may have the effect of stalling a hostile takeover, the Board does not intend or
view the increase in authorized Preferred Stock as an anti-takeover measure nor
is the Company aware of any proposed or contemplated transaction of this type.
The issuance of additional shares of Preferred Stock by the Company
may, depending upon the circumstances under which the shares are issued, reduce
stockholders' equity per share and depending on the terms of the Preferred Stock
may reduce the percentage of ownership of Common Stock of existing stockholders.
The additional shares of Preferred Stock would be available for
issuance without further action by the stockholders and without the accompanying
delay and expense involved in calling a special meeting of stockholders, unless
such action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be traded.
Proxies received that contain no instructions to the contrary will be
voted FOR approval of the Authorized Preferred Stock Amendment. The affirmative
vote of the holders of a majority of the outstanding shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock entitled to vote, voting
together as a single class, and of a majority of the outstanding shares of
Series A Preferred Stock and Series B Preferred Stock, entitled to vote, voting
together as a class, is required to approve the Authorized Preferred Stock
Amendment. Accordingly abstentions and broker non-votes will have the same
effect as a negative vote. If the proposal is approved by the stockholders, the
Authorized Preferred Stock Amendment would become effective upon its filing with
the State of Delaware, which would occur as soon as practicable following such
approval.
THE BOARD OF DIRECTORS HAS APPROVED THE AUTHORIZED PREFERRED STOCK
AMENDMENT AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL THEREOF.
PROPOSAL IV -- APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN
The Board of Directors of the Company has unanimously approved for
submission to a vote of the stockholders a proposal to amend the Plan to
increase from 1,950,000 shares of Common Stock to 7,806,000 shares of Common
Stock the number of shares reserved for issuance pursuant to the exercise of
options granted thereunder. The purposes of the Plan are to attract and retain
the best available personnel for positions of responsibility within the Company,
to provide additional incentives to employees of the Company and to promote the
success of the Company's business through the grant of options to purchase
Common Stock. Each option granted pursuant to the Plan shall be designated at
the time of grant as either an "incentive stock option" or as a "non-qualified
option."
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<PAGE>
The Plan, as proposed to be amended, would authorize the issuance of a
maximum of 7,806,000 shares of Common Stock pursuant to the exercise of options
granted thereunder. As of the date hereof, stock options to purchase all of the
1,950,000 shares of Common Stock available under the Plan have been granted,
including options to purchase 530,000 shares to executive officers and Directors
of the Company. In addition, options to purchase 2,436,036 shares of Common
Stock have been granted subject to stockholder approval of the Stock Option Plan
Amendment, including options to purchase 1,055,000 shares to executive officers
and Directors of the Company. See "Executive Compensation - Option Grants in
Last Fiscal Year." Should such stockholder approval not be obtained, then any
stock options granted under the Plan on the basis of the increase to 7,806,000
shares of Common Stock will terminate without ever becoming exercisable for any
of the shares of Common Stock subject to those options, and no further options
will be granted. In addition, if the Company is unable to obtain stockholder
approval of the Authorized Common Stock Amendment, the Company will only be able
to grant options to purchase an additional 1,383,188 shares of Common Stock
under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Stock Option and Compensation Committee
of the Board of Directors, which determines to whom, among those eligible, and
the time or times at which options, will be granted, the number of shares to be
subject to options the duration of options, any conditions to the exercise of
options, and the manner in a price at which options may be exercised. In making
such determinations, the Stock Option and Compensation Committee may take into
account the nature and period of service of eligible employees, their level of
compensation, their past, present and potential contributions to the Company and
such other factors as the Stock Option Committee in its discretion deems
relevant.
The Stock Option and Compensation Committee is authorized to amend,
suspend or terminate the Plan, except that it is not authorized without
stockholder approval (except with regard to adjustments resulting from changes
in capitalization) to (i) increase the maximum number of shares that may be
issued pursuant to the exercise of options granted under the Plan; (ii) permit
the grant of an incentive stock option under the Plan with an option price less
than 100% of the fair market value of the shares at the time such option is
granted; (iii) materially change the eligibility requirements for participation
in the Plan; (iv) extend the term of any option or the period during which any
option may be granted under the Plan; or (v) materially modify the requirements
as to eligibility for participation in the Plan.
OPTION PRICE
The exercise price of each option is determined by the Stock Option and
Compensation Committee, but may not be less than 100% of the fair market value
of the shares of Common Stock covered by the option on the date the option is
granted, in the case of an incentive stock option, nor less than 85% of the fair
market value of the shares of Common Stock covered by the option on the date the
option is granted, in the case of a non-qualified stock option. If an incentive
stock option is to be granted to an employee who owns over 10% of the total
combined voting power of all classes of Company's stock, then the exercise price
may not be less than 110% of the fair market value of the Common Stock covered
by the option on the date the option is granted.
TERMS OF OPTIONS
Unless otherwise provided in the Stock Option Agreement, the term of
each option shall be seven (7) years from the date of grant, provided that the
maximum term of each option shall be 10 years. Options granted to an employee
who owns over 10% of the total combined voting power of all classes of stock of
the Company shall expire not more than five years after the date of grant. The
Plan provides for the earlier expiration of options of a participant in the
event of certain terminations of employment.
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REGISTRATION OF SHARES
The Company has filed a registration statement under the Securities Act
with respect to 1,950,000 shares of Common Stock issuable pursuant to the Plan.
The Company intends to file an additional registration statement under the
Securities Act with respect to the additional 5,856,000 shares of Common Stock
issuable pursuant to the Stock Option Plan Amendment subsequent to the Stock
Option Plan Amendment's approval by the Company's stockholders.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast by holders of the
Common Stock, Series A Preferred Stock and Series B Preferred Stock, voting
together as a single class, is required to approve the Stock Option Plan
Amendment. If the Stock Option Plan Amendment is approved, the first sentence of
Section 4 of the Plan will read as follows:
"Subject to adjustment as provided in Section 7 hereof, a total of
7,806,000 shares of the Company's Common Stock (the "Stock") shall be subject to
the Plan."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSAL TO AMEND THE 1991 STOCK OPTION PLAN
PROPOSAL V--RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors appointed PricewaterhouseCoopers LLP, certified
public accountants, as the Company's independent auditors for the fiscal year
ending December 31, 1999. Although the selection of auditors does not require
ratification, the Board of Directors has directed that the appointment of
PricewaterhouseCoopers LLP be submitted to stockholders for ratification due to
the significance of such appointment to the Company. If stockholders do not
ratify the appointment of PricewaterhouseCoopers LLP, the Board of Directors
will consider the appointment of other certified public accountants. The
approval of the proposal to ratify the appointment of PricewaterhouseCoopers LLP
requires the affirmative vote of a majority of the votes cast by holders of the
Common Stock, Series A Preferred Stock and Series B Preferred Stock, voting
together as a single class.
The Company's auditors for the fiscal year ended December 31, 1998 were
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP has advised the Company
that a representative will be present at the Meeting at which time he will
respond to appropriate questions submitted by stockholders and will make such
statements as he may desire.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 1999.
ANNUAL REPORT
All stockholders of record as of the Record Date, have been sent, or
are concurrently herewith being sent, a copy of the Company's 1998 Annual Report
for the year ended December 31, 1998, which contains certified financial
statements of the Company for the year ended December 31, 1998.
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ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1998
(WITHOUT EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITING TO DANIEL M. PESS, EXECUTIVE VICE PRESIDENT, CHIEF OPERATING OFFICER,
CHIEF FINANCIAL OFFICER AND SECRETARY AT QUERYOBJECT SYSTEMS SOFTWARE
CORPORATION, 60 CHARLES LINDBERGH BOULEVARD, UNIONDALE, NEW YORK 11553.
STOCKHOLDER PROPOSALS
Stockholder proposals made in accordance with Rule 14a-8 under the
Exchange Act and intended to be presented at the Company's 2000 Annual Meeting
of Stockholders must be received by the Company at its principal office in
Uniondale, New York no later than December 27, 1999 for inclusion in the proxy
statement for that meeting.
In addition, the Company's By-laws require that a stockholder give
advance notice to the Company of nominations for election to the Board of
Directors and of other matters that the stockholder wishes to present for action
at an annual meeting of stockholders (other than matters included in the
Company's proxy statement in accordance with Rule 14a-8). Such stockholder's
notice must be given in writing, include the information required by the By-laws
of the Company, and be delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Company at its principal offices. The
Company must receive such notice not less than 45 days prior to the date in the
current year that corresponds to the date in the prior year on which the Company
first mailed its proxy materials for the prior year's annual meeting of
stockholders. While the Company has not yet set the date of its 2000 Annual
Meeting of Stockholders, if it were held on June 2, 2000 (the date that
corresponds to the date on which the 1999 Annual Meeting is being held), notice
of a director nomination or stockholder proposal made otherwise than in
accordance with Rule 14a-8 would be required to be given to the Company no later
than March 18, 2000.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters
other than those set forth herein which will be presented for consideration at
the Meeting. If any other matter or matters are properly brought before the
Meeting or any adjournment thereof, the persons named in the accompanying Proxy
will have discretionary authority to vote, or otherwise act, with respect to
such matters in accordance with their judgment.
Daniel M. Pess
Secretary
April 27, 1999
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<PAGE>
Exhibit A
FOURTH: This corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of Common Stock this Corporation is authorized to issue is
60,000,000, par value $0.001 per share, and the total number of shares of
Preferred Stock this Corporation is authorized to issue is 4,000,000 shares of
Preferred Stock, with the Board of Directors being hereby authorized to fix or
alter the rights, preferences, privileges and restriction granted to or imposed
upon any series of such Preferred Stock, and the number of shares constituting
any such series and the designation thereof, or of any of them. The Board of
Directors is also authorized to increase or decrease the number of shares of any
series, prior or subsequent to the issue of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
QUERYOBJECT SYSTEM CORPORATION
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
JUNE 2, 1999
The undersigned, a stockholder of QueryObject Systems Corporation, a
Delaware corporation (the "Company"), does hereby appoint Robert Thompson and
Daniel M. Pess, and each of them, the true and lawful attorneys and proxies with
full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the 1999 Annual
Meeting of Stockholders of the Company to be held at the Company's principal
executive offices, located at 60 Charles Lindbergh Boulevard, Uniondale, New
York 11553, on June 2, 1999 at 10:00 A.M., local time, or at any adjournment or
adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS:
The election of Robert A. Thompson, Daniel M. Pess, Andre Szykier, Alan
W. Kaufman, Rino Bergonzi, Irwin Jacobs and Amy L. Newmark to the Board
of Directors, to service until the 2000 Annual Meeting of Stockholders
and until their respective successors are elected and shall qualify.
WITHHOLD AUTHORITY
FOR ALL TO VOTE FOR ALL ________________________
NOMINEES ___ NOMINEES ___ ________________________
TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL
NOMINEE(S), PRINT NAME ABOVE.
2. TO APPROVE INCREASE IN AUTHORIZED COMMON STOCK:
______ FOR _____ AGAINST _____ ABSTAIN
3. TO APPROVE INCREASE IN AUTHORIZED PREFERRED STOCK:
______ FOR _____ AGAINST _____ ABSTAIN
4. TO AMEND THE COMPANY'S 1991 STOCK OPTION PLAN:
______ FOR _____ AGAINST _____ ABSTAIN
5. TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS:
______ FOR _____ AGAINST _____ ABSTAIN
6. DISCRETIONARY AUTHORITY:
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
AND FURTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS
HEREINBEFORE GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO
ELECT DIRECTORS, APPROVE THE AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
WHICH WOULD INCREASE THE AUTHORIZED COMMON STOCK AND THE AUTHORIZED PREFERRED
STOCK, APPROVE THE AMENDMENT TO THE 1991 STOCK OPTION PLAN AND TO RATIFY THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
<PAGE>
The undersigned hereby revokes any proxy or proxies heretofore
given, and ratifies and confirms that all the proxies appointed hereby, or any
of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Dated _______________________, 1999
_____________________________ (L.S.)
_____________________________ (L.S.)
Signature(s)
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES
APPEAR HEREON. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
INDICATE THE CAPACITY IN WHICH SIGNING. WHEN
SIGNING AS JOINT TENANTS, ALL PARTIES IN THE JOINT
TENANCY MUST SIGN. WHEN A PROXY IS GIVEN BY A
CORPORATION, IT SHOULD BE SIGNED WITH FULL
CORPORATE NAME BY A DULY AUTHORIZED OFFICER.
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY IN THE
ENVELOPE PROVIDED FOR THIS PURPOSE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
