IQ SOFTWARE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
JUNE 11, 1996
The Annual Meeting of Shareholders of IQ Software
Corporation will be held at 10:00 A.M. (local time), Tuesday,
June 11, 1996 at the Northeast Atlanta Hilton, 5993 Peachtree
Industrial Boulevard, Norcross, Georgia for the following
purposes:
1. To elect two directors;
2. To transact such other business as may properly be
brought before the Meeting and any adjournments
thereof.
Only shareholders of record of Common Stock of the
Corporation on May 3, 1996 are entitled to notice of and to vote
at the Meeting and any adjournment thereof.
You are cordially invited to attend the Meeting. Whether
or not you plan to attend, it is important that your stock be
represented and voted at the Meeting. Enclosed is a proxy which
you are urged to complete, sign and forward in the accompanying
envelope, which requires no postage if mailed in the United
States.
By Order of the Board of Directors,
UGO F. IPPOLITO
Secretary
May 6, 1996
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IQ SOFTWARE CORPORATION
3295 River Exchange Drive, Suite 550
Norcross, Georgia 30092
May 6, 1995
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 1996
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of IQ Software
Corporation ("Corporation") to be voted at the Annual Meeting of
Shareholders of the Corporation ("Meeting") to be held at the
Northeast Atlanta Hilton - Peachtree Corners, 5993 Peachtree
Industrial Boulevard, Norcross, Georgia on June 11, 1996 at 10:00
A.M. local time, and at any adjournment thereof. This Proxy
Statement and the enclosed proxy are being sent to shareholders
on or about May 6, 1996. The Corporation's principal executive
offices are located at 3295 River Exchange Drive, Suite 550,
Norcross, Georgia 30092.
All proxies delivered pursuant to this solicitation are
revocable at any time at the option of the person executing the
proxy by giving written notice of revocation to the Corporation,
by executing another proxy bearing a later date, or by voting in
person at the meeting. All properly executed proxies delivered
pursuant to this solicitation and not revoked will be voted at
the Meeting in accordance with the directions given. Unless
contrary instructions are given, the persons named on the proxy
intend to vote the shares so represented "FOR" the election of
the two (2) nominees for directors named in this Proxy Statement.
As to any other business which may come before the Meeting, the
persons named on the proxy will vote according to their best
judgment.
Only holders of Common Stock of the Corporation of record
on May 3, 1996 are entitled to vote at the Meeting. Each
shareholder of record on the record date is entitled to one vote
for each share of Common Stock of the Corporation so held. On
May 3, 1996, there were 4,575,466 shares of Common Stock of the
Corporation issued and outstanding.
The presence of a majority of the outstanding shares of
Common Stock represented in person or by proxy at the Meeting
will constitute a quorum. The two nominees receiving the highest
vote totals will be elected as directors of the Corporation. All
other matters to be voted upon will be decided by the affirmative
vote of the majority of the shares present or represented at the
Meeting and entitled to vote.
Abstentions, withheld votes and broker non-votes will be
included in the calculation of the number of shares of Common
Stock represented in person or by proxy at the Meeting in
determining whether the quorum requirement is satisfied, but will
not be counted as votes cast for the matter to be voted upon.
Broker "non-votes" occur when a broker holding shares for a
beneficial owner votes on one matter pursuant to its
discretionary authority or instructions from the beneficial
owner, but does not vote on another matter for the
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reason that the broker does not have discretionary authority to
vote such shares on such other matter and has not received
voting instructions from the beneficial owner. Since all
matters, except the election of directors, requires the
affirmative vote of the holders of a majority of the shares
present or represented at the Meeting for quorum purposes,
abstentions, withheld votes and broker non-votes increase the
number of shares present or represented at the Meeting for quorum
purposes and thereby increase the number of affirmative votes
necessary to approve the matter.
ITEM 1 - ELECTION OF DIRECTORS.
BOARD OF DIRECTORS.
Pursuant to the By-laws of the Corporation, the Board of
Directors consists of six members. The directors are divided
into three classes, each class serving for a period of three
years. One-third of the members of the Board of Directors are
elected by the shareholders annually.
The directors, whose term will expire at the 1996 Annual
Meeting of the Shareholders, are Charles R. Chitty and J. William
Goodhew, III. The two directors have been nominated by the Board
of Directors to stand for reelection as directors at the 1996
Annual Meeting of Shareholders to hold office until the 1999
Annual Meeting of Shareholders and until their successors are
elected and qualified.
Should any one or more of these nominees become unable to
serve for any reason, which is not anticipated, the Board of
Directors may, unless the Board by resolution provides for a
lesser number of directors, designate substitute nominees. In
such event, the persons named on the enclosed proxy will vote for
the election of such substitute nominee or nominees. All of the
nominees were elected to their present terms by the shareholders
at the shareholders meeting held on June 29, 1993.
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INFORMATION ON NOMINEES AND INCUMBENT DIRECTORS.
<TABLE>
BUSINESS
EXPERIENCE
YEAR DURING PAST FIVE
FIRST YEARS AND OTHER
NAME AGE ELECTED INFORMATION
NOMINEES FOR ELECTION TO TERM EXPIRING IN 1999
<S> <C> <C> <C>
Charles R. Chitty 44 1984 Chairman of the Board, President and Chief Executive Officer of the
Corporation.
J. William Goodhew, III(1) 58 1987 President of Peachtree Software, Inc., a computer software company, a
subsidiary of Automatic Data Processing, Inc.
INCUMBENT DIRECTORS ELECTED TO TERM EXPIRING IN 1997
Richard L. Jackson (1)(2) 42 1988 Chairman, President and Chief Executive Officer of Allegiant Physician
Services, Inc., a physician management service for hospitals and
physicians. Prior to September 1991 he was President of the Company.
In addition, he is chairman and/or president of several companies
which provide specialized medical services.
J. Leland Strange (2) 54 1991 Chairman and President of Intelligent Systems Corporation, and its
predecessor, Intelligent Systems Master L.P. Intelligent Systems
Corporation has operations and investments in micro computer-related
technologies and products, as well as specialized health care
services. He is also a director of Healthdyne Technologies, Inc.
INCUMBENT DIRECTOR ELECTED TO TERM EXPIRING IN 1998
Ugo F. Ippolito (1)(2) 61 1984 Partner of the law firm of Glass, McCullough, Sherrill & Harrold.
</TABLE>
(1) Member of the Compensation Committee of the Board of
Directors
(2) Member of the Audit Committee of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE
NOMINEES FOR DIRECTORS.
<PAGE>
OWNERSHIP OF EQUITY SECURITIES OF THE CORPORATION.
The following table sets forth information regarding
beneficial ownership of the Corporation's Common Stock of each
director and executive officer and persons known to the
Corporation to own beneficially more than 5% of the Corporation's
Common Stock on May 1, 1996.
DIRECTORS, AGGREGATE NUMBER
EXECUTIVE OFFICERS OF SHARES PERCENT OF
AND FIVE PERCENT BENEFICIALLY OUTSTANDING
SHAREHOLDERS OWNED SHARES(1)(2)
Intelligent Systems Corporation 472,801 10.36%
4355 Shackleford Road
Norcross, GA 30093
Charles R. Chitty(4)
c/o IQ Software Corporation
3295 River Exchange Drive, Suite 550
Norcross, GA 30092 381,813 8.36%
Matthew C. Reedy(3)
c/o IntelliSolve Group, Inc.
13300 Old Blanco Road, Ste. 140
San Antonio, TX 78216 340,186 7.45%
David C. Cormack 180,000 3.94%
Jay S. Chaudhry 15,900 *
J. William Goodhew, III 28,000 *
Ugo F. Ippolito(5) 28,261 *
Richard L. Jackson 2,000 *
J. Leland Strange(6) 7,000 *
All Directors and Executive Officers
as a group, including affiliates
(9 persons)(6) 707,304 15.19%
*Indicates less than 1%
(1) Based on 4,565,466 shares of Common Stock outstanding on May
1, 1996.
(2) For purposes of this table, a person is deemed to be the
beneficial owner of any shares that such person has the
right to acquire within sixty (60) days of May 1, 1996. For
purposes of computing the percentage of outstanding shares
held by each person named above, any shares such person has
a right to acquire within sixty (60) days of May 1, 1996 are
deemed to be outstanding, but are not deemed to be
outstanding for the purpose of computing the percentage
ownership of any other person. The number of shares
beneficially owned as set forth in the above schedule
includes the designated number of shares subject to stock
option grants under the Corporation's stock option plans to
the following persons: Mr. Goodhew, 2,000 shares; Mr.
Ippolito, 2,000; Mr. Jackson, 2,000; Mr. Strange, 7,000; Ms.
Welch, 9,375; Mr. Chaudhry, 15,000; and Mr. Durnwald,
16,250.
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(3) Includes 18,000 shares held by Mr. Reedy as trustee of the
Reedy Family Educational Trust.
(4) Includes 130,000 shares held by trusts, of which Mr. Chitty
or his spouse is a trustee.
(5) Includes 5,611 shares owned by Mr. Ippolito's wife.
(6) Does not include shares owned by Intelligent Systems
Corporation, of which Mr. Strange is a director and officer
and the holder of approximately 22.3% of its outstanding
stock.
THE BOARD OF DIRECTORS AND ITS COMMITTEES.
There were five meetings of the Board of Directors during
fiscal year 1996. The Board of Directors has two standing
Committees; the Audit Committee and the Compensation Committee.
The Compensation Committee held four meetings during fiscal year
1996 and the Audit Committee held two meetings. The Corporation
does not have a nominating committee. All nominees for the Board
of Directors are nominated by the entire Board of Directors.
The Audit Committee reviews the scope of the audits as
recommended by the independent auditors, the scope of the
internal auditing procedures of the Corporation and the systems
of internal accounting controls, and reviews reports to the Audit
Committee by the independent auditors. The Audit Committee also
has the power to select the independent auditors to audit the
books and records of the Corporation and to discharge such
independent auditors.
The Compensation Committee administers the stock option
plans of the Corporation and determines the salaries and other
compensation of all officers of the Corporation. The Committee
has the power to recommend approval, termination or amendment of
all compensation programs for officers of the Corporation.
Non-employee directors receive a fee of $1,250 for each
quarterly Board of Directors meeting attended. The Directors
receive no fees for serving on Committees thereof. Pursuant to
the 1994 Non-Employee Directors Stock Option Plan, each
non-employee director is awarded an option to purchase 1,000
shares of Common Stock at its then market value on the day
following each Annual Meeting.
<PAGE>
EXECUTIVE COMPENSATION.
The following tables and narrative text set forth the
compensation of the five most highly compensated executive
officers (determined as of the end of 1996 fiscal year) of the
Corporation (who earned more than $100,000 during the 1996 fiscal
year) for services rendered during the fiscal years ended January
31, 1996, 1995 and 1994 in all capacities. No stock options were
granted to the officers named in the following table during the
1996 fiscal year. The Corporation has not granted any stock
appreciation rights.
SUMMARY COMPENSATION TABLE
<TABLE>
ANNUAL COMPENSATION
Name and Incentive
Principal Fiscal Compensation Other
Position Year Salary (Bonus) Compensation
<S> <C> <C> <C> <C>
Charles R. Chitty 1996 $185,000 $ 74,761 $ --
Chairman, President and 1995 180,000 122,455 --
Chief Executive Officer 1994 175,000 100,927 --
David C. Cormack (2) 1996 51,667 41,667 35,000 (1)
Senior Vice President-Sales
Jay S. Chaudhry (3) 1996 120,000 40,000 24,684 (1)
Senior Vice President-Marketing 1995 10,000 -- --
George S. Innis 1996 90,000 16,125 --
Vice President-Development 1995 67,735 -- --
1994 48,900 -- --
Robert W. Ott 1996 108,000 15,000 --
Vice President Sales 1995 108,000 10,000 --
1994 90,000 8,750 --
</TABLE>
(1) Other compensation reflects relocation allowances paid by
the Corporation.
(2) David C. Cormack commenced employment with the Corporation
October 1, 1995.
(3) Jay S. Chaudhry commenced employment with the Corporation
January 1, 1995.
<PAGE>
The following table sets forth information with respect
to the executive officers named in the "Summary Compensation
Table" during the 1996 fiscal year and the unexercised stock
options held as of the end of the 1996 fiscal year, including
stock options granted prior to the 1996 fiscal year.
AGGREGATE STOCK OPTION EXERCISES IN FISCAL YEAR ENDED
JANUARY 31, 1996 AND FISCAL YEAR-END STOCK OPTION VALUES
<TABLE>
Value Realized
Number of ($) (Market
Shares price at time
Acquired of exercise Number of Value of Unexercised
on less exercise Unexercised Stock In-the-Money Stock
Name Exercise price) Options at FY-End Options at FY-End (1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Charles R. Chitty -- $ -- -- -- $ -- $ --
David C. Cormack -- -- -- -- -- --
Jay S. Chaudhry 15,000 45,000 7,500 22,500
George S. Innis -- -- 3,125 11,875 5,469 18,281
Robert W. Ott 12,500 135,147 25,000 -- 237,500 --
</TABLE>
(1) The fair market value of a share of Common Stock of the
Corporation at fiscal year end, January 31, 1996 was $11.00.
EMPLOYMENT CONTRACTS.
Mr. Cormack has a three year contract of employment with
the Corporation, which commenced October 1, 1995. He was
initially appointed Vice President, Sales of OLAP Products. In
December, 1995, he was elected Senior Vice President - Sales for
the Company. The employment agreement provided for an annual base
salary of $155,000 per year, which will increase to $180,000 on
August 1, 1996. Mr. Cormack is eligible for annual bonuses
subject to meeting mutually agreed upon business targets.
Depending on the business targets which are met, for the fiscal
year which ends January 31, 1997, the bonus to Mr. Cormack will
range between $50,000 and $400,000. Bonuses for periods
thereafter are to be agreed upon. Mr. Cormack's employment
contract includes payment of relocation expenses not to exceed
$35,000, and includes a covenant not to compete with the
Corporation for one year following termination of the contract.
401(K) PLAN.
The Corporation has adopted a tax-qualified savings plan
("401(k) Plan") which is intended to qualify under Section 401(k)
of the Internal Revenue Code of 1986, as amended ("Code"). The
Corporation pays only the administrative expenses of the 401(k)
Plan and currently makes no contributions to the 401(k) Plan. All
United States employees, including officers, who have met the
eligibility requirements may participate in the 401(k) Plan. Each
employee may elect to contribute to the 401(k) Plan, through
payroll deductions, up to the statutory limitation and may direct
the investment of their account in various investment funds.
Under Section 401(k) of the Code, the employee's contribution to
the 401(k) Plan are not taxable to the employee until such
amounts are distributed to the employee.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION.
The members of the Compensation Committee of the Board of
Directors consist of Messrs. Goodhew, Ippolito and Jackson.
J. William Goodhew, III, a director of the Corporation,
is the President of Peachtree Software, Inc. ("Peachtree").
Peachtree is a licensee of certain software from the Corporation.
The amount of revenues received by the Corporation from Peachtree
was approximately $73,175 for fiscal year 1996. The license
agreements between the Corporation and Peachtree were negotiated
in good faith and at arms length.
Ugo F. Ippolito, a director and Secretary of the
Corporation, is a partner of Glass, McCullough, Sherrill &
Harrold, Atlanta, Georgia, the Corporation's legal counsel. In
the normal course of business legal services were rendered to the
Corporation by Glass, McCullough, Sherrill & Harrold.
On April 18, 1995, the Corporation loaned $1.8 million to
Daystar Digital, Inc. pursuant to a note receivable ("Note").
Under the terms of the agreement, the Note is payable one year
from the date of the agreement. In an amendment dated April 18,
1996, the maturity of the Note was extended to January 17, 1997.
At the time the maturity of the Note was extended, the interest
rate was increased to prime plus 11/2%. The Note is guaranteed by
Intelligent Systems Corporation and is secured by 240,163 shares
of the Corporation's common stock held by Intelligent Systems
Corporation. J. Leland Strange, a director of the Corporation, is
a director and officer of Intelligent Systems Corporation and
owns approximately 22.3% of the outstanding stock of Intelligent
Systems Corporation.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION.
The Corporation's executive compensation program is
designed to foster revenue growth and increased profits.
The executive compensation program consists of three
elements: a base salary, an annual bonus and long term incentive
through stock ownership. The compensation program for each
executive officer is reviewed at least annually by the Committee.
The annual bonus for the executive officers is determined on the
overall financial performance of the Corporation, and, if an
executive officer is responsible for an operation, it will be
determined, in part, on the financial performance of
thatoperation.
Numerous factors are taken into account in determining
the compensation of the Chief Executive Officer, including
historic compensation levels, compensation levels of other
executive employees of the Corporation and the amounts paid to
the executive officers of other corporations. The Compensation
Committee reviews surveys prepared by industry groups and
accountants setting forth salary levels of executive officers in
other companies. In the case of executive officers, other than
the President and the Chairman, the Committee has adopted the
recommendations of the Chief Executive Officer.
<PAGE>
ANNUAL BONUS.
For the 1996 fiscal year the Committee approved a management
incentive program for the executive officers, excluding Messrs.
Chitty and Reedy (a former executive officer), based upon
predetermined revenue and pretax profit margin objectives as
recommended by the Chief Executive Officer. The program is
designed to encourage both revenue and profit growth. Partial
payments of the annual bonus are made during the fiscal year and
the balance upon the definitive calculation of the amounts
payable after the end of the fiscal year. The annual incentive
compensation of Messrs. Chitty and Reedy was based upon a
percentage of operating income of the Corporation before interest
and extraordinary income and expense and a discretionary bonus
awarded by the Committee based upon specified non-financial
goals.
LONG TERM INCENTIVE.
The Committee believes that significant stock ownership
in the Corporation provides an economic incentive to the
management to grow the Corporation for the long term. Stock
options have been granted to executive officers during the past
eight years. The stock options normally vest at the rate of 25% a
year and are for a term of seven years. The options are designed
to provide the recipients with a greater interest in the long
term growth and performance of the Corporation through increases
in the value of the shares they can acquire pursuant to the stock
option grants.
COMPENSATION OF CHIEF EXECUTIVE OFFICER.
The Committee determined that for fiscal 1996 the Chief
Executive Officer's base salary should be $185,000 with a bonus
equal to 2% of operating income (not to exceed $100,000) for
fiscal 1996, before deductions of Messrs. Chitty and Reedy's
bonuses and a discretionary bonus as determined by the Committee
not to exceed $50,000.
The Committee took into account the fact that the Chief
Executive Officer is not provided with any perquisites, including
motor vehicle, and the Corporation does not contribute to any
employee pension program. In addition, the Chief Executive
Officer, in view of his stock ownership in the Corporation, has
not been granted any stock options during the 1996 fiscal year
and prior years, while all other executive officers and
other key employees have been granted stock options. The
Compensation Committee believes that the compensation programs
are designed to improve financial results and provide long term
goals to grow the Corporation and the value of its Common Stock.
<PAGE>
COMPENSATION COMMITTEE
J. William Goodhew, III
Ugo F. Ippolito
Richard L. Jackson
COMPARISON OF CUMULATIVE TOTAL RETURN.
Set forth below is a line graph presentation showing the
comparison of the cumulative total return on the Corporation's
Common Stock to both the NASDAQ Stock Market Index for U.S.
Companies and the S&P Software & Services Index selected by the
Corporation. The graph assumes $100 invested on October 15, 1992
in Common Stock of the Corporation and $100 invested on September
30, 1992 in the two indexes. The comparison assumes that all
dividends are reinvested. Since the Corporation's Common Stock
was not publicly traded until October 15, 1992, the graph is
limited to the period commencing October 15, 1992 through the
fiscal year end January 31, 1996 for the Corporation's Common
Stock and to the period commencing September 30, 1992 through
January 31, 1996 for the indexes.
COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG IQ SOFTWARE CORPORATION, THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE S&P COMPUTER SOFTWARE & SERVICES INDEX
[GRAPHIC CHART GOES HERE]
10/15/92 1/93 1/94 1/95 1/96
IQ Software Corporation $100 176 89 137 116
S & P Computer Software
& Services $100 120 138 131 186
NASDAQ Stock Market - U.S. $100 122 148 169 258
<PAGE>
OTHER INFORMATION.
The solicitation of proxies may be made personally, by
telephone, by telegraph or by mail by officers and other
employees of the Corporation and its subsidiaries who will not be
additionally compensated therefor. In addition, the Corporation
has engaged its transfer agent, Chemical Bank, to assist in
connection with the solicitation of proxies from shareholders
whose shares are held in a nominee's name by various brokerage
firms and banks. The cost of such solicitation is estimated to be
less than $5,000. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of the
Corporation's Common Stock as of the record date will be
requested to forward proxy soliciting materials to the
beneficial owners of such shares and will be reimbursed by the
Corporation for their reasonable expenses. The cost of preparing,
assembling and mailing this proxy soliciting material and the
Notice of Annual Meeting of Shareholders will be paid by the
Corporation.
SHAREHOLDER PROPOSALS FOR 1997.
In order to be eligible for inclusion in the Corporation's
proxy statement for the 1997 Annual Meeting of Shareholders,
shareholder proposals must be received by the Corporation at its
principal office, addressed to the President at 3295 River
Exchange Drive, Suite 550, Norcross, Georgia 30092 by January 25,
1997.
INDEPENDENT AUDITORS.
Ernst & Young LLP has been selected as the independent
auditors for the fiscal year ending January 31, 1997. A
representative of Ernst & Young LLP is expected to be present at
the Meeting and will have the opportunity to make a statement if
desired and such representative is expected to be available to
respond to appropriate questions.
OTHER BUSINESS.
It is not anticipated that any matter, other than those
set forth in the Notice of Annual Meeting of Shareholders and
described in this Proxy Statement, will be brought before the
Meeting. However, if any other matter should properly come before
the Meeting, it is the intention of the persons named on the
enclosed proxy to vote the executed proxies received by them in
accordance with their best judgment on such business and other
matters including those dealing with the conduct of the Meeting.
By Order of the Board of Directors,
UGO F. IPPOLITO
Secretary
May 6, 1996
<PAGE>
