UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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☐ | Soliciting Material Pursuant to §240.14a-12 |
QAD Inc. |
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QAD Inc.
100 Innovation Place
Santa Barbara, California 93108
805-566-6000
May 1, 2018
2020
To All QAD Inc.Our Stockholders:
On behalf of the Board of Directors of QAD Inc., I cordially invite you to attend the Annual Meeting of Stockholders of QAD to be held at the QAD corporate headquarters located at 100 Innovation Place, Santa Barbara, California,CA 93108, on Monday,Thursday, June 11, 20182020 at 8:00 a.m. local time. We will be using the “Notice and Access” method of providing proxy materials to stockholders via the Internet. time (the "Annual Meeting").
On or about May 1, 2018,2020, we will mail a Notice of Internet Availability of Proxy Materials (“Notice”(the “Notice”) to our stockholders of record as of April 16, 2018,2020, other than those stockholders who previously requested electronic or paper delivery of communications from us. The Notice will include instructions on how to access an electronic copy of our proxy materials, including the proxy statement, our 20182020 Annual Report on Form 10-K, and instructions with respect to how to vote your shares, as well as instructions on how to request a printed copy of our proxy materials. Details regarding the business to be conducted at the Annual Meeting are described in the Notice and proxy statement.
Your vote is important. Whether or not you plan to attend the Annual Meeting, you are urged to vote your shares as promptly as possible to ensure your representation at the annual meeting.Annual Meeting. Please review the instructions on the Notice regarding voting, as well as the question and answer section inat the first partend of this proxy statement.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Karl F.Pamela M. Lopker
Pamela M. Lopker
Karl F. Lopker
Chief Executive OfficerPresident
QAD INC.
NOTICE OF 20120820 ANNUAL MEETING OF STOCKHOLDERS
TIME AND DATE: | 8:00 a.m. local time on Thursday, June 11, | ||
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| QAD Inc. | ||
100 Innovation Place | |||
Santa Barbara, CA 93108 | |||
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ITEMS OF BUSINESS: | (1) | To elect | |
| (2) | To approve, on a non-binding advisory basis, the compensation paid to our executive officers identified in our summary compensation table (“Named | |
(3) | To ratify the selection of KPMG LLP as our independent registered public accounting firm for our current fiscal year; and | ||
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| To transact any other business that may properly come before the meeting or any postponement or adjournment thereof. | |
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WHO CAN VOTE: | You are entitled to vote if you were a stockholder of record at the close of business on the record date of April 16, | ||
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VOTING BY PROXY: | It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares electronically via the Internet, by telephone or by completing and returning the proxy card or voting instruction card if you requested paper proxy materials. Voting instructions are provided in the Notice of Internet Availability of Proxy Materials, or, if you requested printed materials, the instructions are printed on your proxy card and included in the accompanying proxy statement. You can revoke a proxy at any time prior to its exercise at the Annual Meeting by following the instructions in | ||
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MEETING ADMISSION: | You are entitled to attend the Annual Meeting only if you are a stockholder of record as of the close of business on April 16, |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on June June 11, 20120820. The proxy materials, including this proxy statement and our Annual Report on Form 10-K,, are available on the following website: www.proxyvote.com/
By Order of the Board of Directors
/s/ Daniel Lender
Daniel Lender,
Corporate Secretary
Santa Barbara, California
May 1, 20182020
QAD Inc.100 Innovation PlaceSanta Barbara, California 93108805-566-6000TABLE OF CONTENTS
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VOTE RECOMMENDATIONS | 1 |
PROXY STATEMENT | 2 |
PROPOSAL 1: ELECTION OF DIRECTORS | 3 |
Directors | 3 |
Required Vote | 3 |
Information Concerning the Nominees for Election | 4 |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION | 6 |
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF QAD FOR THE 2021 FISCAL YEAR | 7 |
AUDITOR INFORMATION | 8 |
Principal Accounting Fees and Services | 8 |
EXECUTIVE OFFICERS | 9 |
OTHER BUSINESS | 9 |
CORPORATE GOVERNANCE AND RELATED MATTERS | 10 |
Board of Directors | 10 |
Director Independence | 10 |
Board Leadership Structure | 10 |
Executive Sessions | 11 |
Board of Directors Meetings | 11 |
Standing Committee Meetings | 11 |
Standing Committee Membership | 11 |
Audit Committee | 11 |
Audit Committee Independence and Financial Literacy | 12 |
Compensation Committee | 12 |
Compensation Committee Interlocks and Insider Participation | 12 |
Governance Committee | 12 |
Nominating Procedures | 13 |
Charters for Board Committees | 14 |
Risk Oversight | 14 |
Code of Business Conduct and Code of Ethics | 14 |
Prohibition on Hedging Transactions and Pledging Policy | 14 |
Management’s Compliance Committee | 15 |
Employee Complaint Procedure | 15 |
Availability of Corporate Governance Information | 15 |
DIRECTOR COMPENSATION | 16 |
Director Compensation Overview | 16 |
Non-Employee Director Cash Retainer and Meeting Fees | 16 |
Non-Employee Director Equity Compensation | 17 |
Non-Employee Director Compensation for Fiscal Year 2020 | 17 |
Non-Employee Director Outstanding Equity Awards at 2020 Fiscal Year End | 17 |
COMPENSATION COMMITTEE REPORT | 18 |
COMPENSATION DISCUSSION AND ANALYSIS | 19 |
Executive Summary of Compensation Structure | 19 |
Executive Compensation Philosophy | 19 |
Benchmarking of Compensation | 20 |
Elements of the Executive Compensation Program | 21 |
Base Salary | 21 |
Cash Bonus | 21 |
Customer Satisfaction Multiplier | 21 |
Cash Bonus Results | 22 |
Revenue Component | 22 |
Contribution Component | 22 |
DSO Component | 22 |
Non-GAAP Measures | 23 |
Payout on Financial Goals | 23 |
Strategic Goals | 24 |
Discretionary Bonus | 25 |
Equity Awards | 25 |
Restricted Stock Units (RSUs) | 26 |
Performance Stock Units (PSUs) | 26 |
Broad Based Employee Benefit Programs | 28 |
Change in Control Agreements and Executive Termination Policy | 28 |
Administrative Policies and Practices | 29 |
Tax Deductibility of Executive Compensation | 29 |
EXECUTIVE COMPENSATION | 30 |
Summary Compensation Table | 30 |
Grants of Plan-Based Awards during Fiscal Year 2020 | 31 |
Outstanding Equity Awards at 2020 Fiscal Year End | 32 |
SAR Exercises and RSUs Vested During Fiscal Year 2020 | 33 |
Equity Compensation Plan Information | 33 |
Potential Payments upon Termination or Change in Control | 34 |
CEO PAY RATIO | 35 |
REPORT OF AUDIT COMMITTEE | 36 |
Charter | 36 |
Meetings | 36 |
Audit Committee Report | 36 |
Auditor Independence | 37 |
Audit Committee Recommendation | 37 |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 38 |
Transactions with Related Persons | 38 |
Policies and Procedures for Review and Approval of Related Party Transactions | 38 |
DELINQUENT SECTION 16(a) REPORTS | 38 |
STOCK OWNERSHIP | 39 |
Stock Ownership of Directors, Executive Officers and Certain Beneficial Owners | 39 |
FREQUENTLY ASKED QUESTIONS | 40 |
EXEMPTIONS FOR A CONTROLLED COMPANY ELECTION | 45 |
ANNUAL REPORT | 45 |
STOCKHOLDER PROPOSALS | 46 |
VOTE RECOMMENDATIONS
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Proposal | Board |
Reason for Recommendation | See Page |
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1. | Election of six directors | FOR | The Board of Directors believes the six Board nominees possess the skills, experience and diversity to effectively monitor performance, provide oversight, and advise management on the Company’s long-term strategy.
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2. | Advisory vote to approve executive compensation (say-on-pay) | FOR | Our executive compensation programs demonstrate our pay for performance philosophy, which we believe creates alignment with our stockholders and drives the creation of sustainable long-term stockholder value.
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3. | Ratify the selection of KPMG LLP as our independent registered public accounting firm for our current fiscal year. | FOR | Based on our Audit Committee’s assessment of KPMG’s qualifications and performance, we believe the retention of KPMG for fiscal year 2021 is in the Company’s best interests. | 7 |
PROXY STATEMENT
We are providing these proxy materials in connection with the QAD Inc. 20182020 Annual Meeting of Stockholders (the “Annual Meeting”). The Notice of Internet Availability of Proxy Materials (the “Notice”), this proxy statement and the accompanying proxy card or voting instruction card, including an Internet link to our previously filed 20182020 Annual Report on Form 10-K, were first made available to stockholders on or about May 1, 2018.2020. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully.
FREQUENTLY ASKED QUESTIONS
What is a “proxy”?
A proxy is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. Karl F. Lopker and Pamela M. Lopker have each been designated as proxies for the Annual Meeting.
Who is soliciting my vote?
The Board of Directors of QAD Inc. (“QAD” or the “Company”) is soliciting your vote at the Annual Meeting.
What is the purpose of the Annual Meeting?
You will be asked to:
Vote to elect five directors as nominated;
Approve, on a non-binding advisory basis, the compensation paid to our Named Executives as defined below; and
Transact any other business that may properly come before the meeting.
What are the Board of Directors’ recommendations?
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Who can attend the Annual Meeting?
Only stockholders as of the record date, and any stockholder’s spouse or duly appointed proxy, may attend. No guests will be allowed to attend the Annual Meeting.
Who is entitled to vote at the Annual Meeting?
All stockholders who owned QAD common stock at the close of business on April 16, 2018, the record date for the Annual Meeting, who attend, or their duly appointed proxies, may vote at the Annual Meeting.
What do I need to be admitted to the Annual Meeting?
In order to be admitted to the Annual Meeting, a stockholder must present photo identification, such as a driver’s license, and proof of ownership of QAD stock on the record date, such as the Notice, a brokerage statement or letter from a bank or broker indicating ownership on the record date, a proxy card, or legal proxy or voting instruction card provided by your broker, bank or nominee.
Why did I receive a Notice in the mail regarding the Internet availability of proxy materials this year instead of a paper copy of proxy materials?
We are permitted to furnish proxy materials, including this proxy statement and our 2018 Annual Report on Form 10-K, to our stockholders by providing access to such documents on the Internet instead of mailing printed copies. We believe that this process provides a convenient and quick way to access the proxy materials and vote, while allowing us to conserve natural resources and reduce the costs of printing and distributing proxy materials. Most stockholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to most of our stockholders, will instruct you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may vote. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions in the Notice for requesting such materials. Any request to receive proxy materials by mail or email will remain in effect until you revoke it.
Can I vote my shares by filling out and returning the Notice?
No. The Notice only identifies the items to be voted on at the Annual Meeting. You cannot vote by marking the Notice and returning it. The Notice provides instructions on how to vote and how to request paper copies of the proxy materials.
Why didn’t I receive a Notice in the mail regarding the Internet availability of proxy materials?
Stockholders who previously elected to access proxy materials over the Internet will not receive the Notice in the mail. You should have received an email with links to the proxy materials and online proxy voting. Additionally, if you previously requested paper copies of the proxy materials or if applicable regulations require delivery of the proxy materials, you will not receive the Notice.
If you received a paper copy of the proxy materials or the Notice by mail, you can eliminate all such paper mailings in the future by electing to receive an email that will provide Internet links to these documents. Opting to receive all future proxy materials online will save us the cost of producing and mailing documents to your home or business and help us conserve natural resources. To request electronic delivery, please go to the website provided on your proxy card or voting instruction card and follow the instructions.
What are my voting rights?
You have one-twentieth (1/20th) of a vote for each share of QAD Class A common stock you owned at the close of business on the record date and one (1) vote for each share of QAD Class B common stock you owned at the close of business on the record date, provided each share was either held directly in your name as the stockholder of record or held for you as the beneficial owner through a broker, bank or other nominee (“Nominee”). There is no cumulative voting available in connection with the election of directors.
What is the difference between holding shares as a stockholder of record and beneficial owner?
Most of our stockholders hold their shares through a Nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record. If your shares are registered directly in your name with QAD’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the stockholder of record with respect to those shares, and this Notice or the proxy materials are being sent directly to you by QAD. As the stockholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the Annual Meeting. If you have requested printed proxy materials, we have enclosed a proxy card for you to use.
Beneficial Owner. If your shares are held in a stock brokerage account or by a Nominee, you are considered the beneficial owner of the shares which are held in “street name” and these proxy materials are being forwarded to you by your Nominee, who is considered the stockholder of record with respect to these shares. As the beneficial owner, you have the right to direct your Nominee on how to vote your shares. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you request, complete and deliver a proxy from your Nominee.
How many votes can be cast by all stockholders?
On the record date, we had 16,162,794 shares of Class A common stock outstanding and entitled to vote with 808,139 votes and 3,261,149 shares of Class B common stock outstanding and entitled to vote with 3,261,288 votes, for a total of 4,069,288 votes that may be cast.
How many votes must be present to hold the Annual Meeting?
A majority of the voting power of our outstanding shares as of the record date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. Your shares are counted as present at the Annual Meeting if you are present and vote in person at the Annual Meeting, vote by telephone or vote via the Internet, or a proxy card has been properly submitted by you or on your behalf. Both abstentions and proxies submitted by brokers that do not indicate a vote because they do not have discretionary authority and have not received instructions as to how to vote on a proposal (“broker non-votes”) are counted as present for the purpose of determining the presence of a quorum.
How many votes are required to elect director nominees?
Directors are elected by a plurality of the votes cast. That means the five (5) individuals nominated for election to the Board of Directors who receive the most “FOR” votes (among votes properly cast in person, electronically, telephonically or by proxy) will be elected. If you withhold authority to vote with respect to the election of some or all of the nominated directors, your shares will not be voted with respect to those nominated directors indicated. Your shares will be counted for purposes of determining whether there is a quorum, but will have no effect on the election of those nominated directors. Abstentions and broker non-votes will also have no effect on the vote.
How many votes are required to adopt the other proposals?
All other proposals will be approved if such proposals receive the affirmative vote of a majority of the votes cast on the matter. If your shares are represented at the Annual Meeting, but you abstain from voting on any of these matters, your shares will be counted as present and entitled to vote on a particular matter for purposes of establishing a quorum, and the abstention will have the same effect as a vote against that proposal. Broker non-votes will be counted as present for purposes of establishing a quorum, but will not have any effect on the outcome of these proposals because they are not treated as votes cast.
Your vote on Proposal 2 (vote on executive compensation) is advisory, which means the result of the vote is non-binding on the Company. Although the vote is non-binding, the Compensation Committee of the Board values the opinions of QAD’s stockholders and will review and consider the voting results when making future decisions regarding executive compensation.
Is my vote confidential?
All proxies, ballots and vote tabulations that identify stockholders are confidential. An independent tabulator will receive, inspect and tabulate your proxy. Your vote will not be disclosed to anyone, other than the independent tabulator, without your consent.
Who will count the votes and where can I find the voting results?
Broadridge Financial Solutions, Inc. will tabulate the voting results. We will announce the preliminary voting results at the Annual Meeting and will publish the results by filing a current report on Form 8-K with the SEC within four business days of the Annual Meeting.
What if I don’t provide a proxy or, do provide a proxy, but don’t give specific voting instructions?
If no proxy is returned or if a proxy is signed and returned but no specific instructions are given on one or more of the issues to be voted upon, proxies will be voted in accordance with applicable rules, laws and regulations as follows:
Stockholder of Record. If you are a stockholder of record and you do not return a proxy, your shares will not be voted at our Annual Meeting and your shares will not be counted for purposes of determining a quorum. If you are a stockholder of record and you indicate when voting by Internet or by telephone that you wish to vote as recommended by our Board of Directors, or you return a signed proxy card, but do not indicate how you wish to vote, then to the extent you did not specify a choice, your shares will be voted:
in accordance with the recommendations of the Board of Directors on all matters presented in this proxy statement; and
as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the meeting.
If you indicate a choice with respect to any matter to be acted upon on your proxy card, the shares will be voted in accordance with your instructions on such matter.
Beneficial Owner. Brokers holding shares must vote according to specific instructions they receive from the beneficial owners of those shares. If you are a beneficial owner and you do not return a proxy, or you do provide a proxy, but you fail to specify your voting instructions, your broker may in some cases vote the shares in the broker’s discretion. However, brokers are precluded from exercising voting discretion on certain proposals without specific instructions from the beneficial owner. Brokers cannot vote on Proposals 1 and 2 without instructions from the beneficial owners. If you are a beneficial owner and do not instruct your broker how to vote on the election of directors, your broker will not vote for you. Broker non-votes will not affect the outcome of the vote on Proposal 1 as long as a quorum is present. Broker non-votes will not have an effect on Proposal 2 as long as a majority of the shares represented and voting at the meeting cast their votes in favor of these proposals.
Can I change or revoke my vote after I return my proxy card or voting instruction card?
Even if you voted by telephone or on the Internet or if you signed and delivered the proxy card or voting instruction card in the form accompanying this proxy statement, you retain the power to revoke your proxy or change your vote. You can revoke your proxy or change your vote any time before it is exercised by giving written notice to the Corporate Secretary specifying such revocation. You may change your vote by a later-dated vote by telephone or on the Internet or by timely delivery of a valid, later-dated proxy or by voting in person by ballot at the Annual Meeting.
What does it mean if I receive more than one Notice, proxy or voting instruction card?
It generally means that your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy cards and voting instruction cards you receive.
How do I vote?
Your vote is important. You may vote on the Internet, by telephone, by mail or by attending the Annual Meeting and voting by ballot, all as described below. The Internet and telephone voting procedures are designed to authenticate stockholders by use of a control number and to allow you to confirm that your instructions have been properly recorded. If you requested printed materials and choose to vote by telephone or on the Internet, you do not need to return your proxy card or voting instruction card. Telephone and Internet voting facilities are available now and will be available 24 hours a day until 11:59 p.m., Eastern Daylight Time, on June 10, 2018.
Vote on the Internet. If you are a stockholder of record, you may submit your proxy by going to www.proxyvote.com and following the instructions provided in the Notice. If you requested printed proxy materials, you may follow the instructions provided with your proxy materials and on your proxy card. If your shares are held with a broker, you will need to go to the website provided on your Notice or voting instruction card. Have your Notice, proxy card or voting instruction card in hand when you access the voting website. On the Internet voting site, you can confirm that your instructions have been properly recorded.
Vote by Telephone. If you are a stockholder of record, you can also vote by telephone by dialing 1-800-690-6903. If your shares are held with a broker, you can vote by telephone by dialing the number specified on your voting instruction card. Voice prompts will allow you to vote your shares and confirm that your instructions have been properly recorded. Have your Notice, proxy card or voting instruction card in hand when you call.
Vote by Mail. If you have requested printed proxy materials, you may choose to vote by mail, by marking your proxy card or voting instruction card, dating and signing it, and returning it in the postage-paid envelope provided. If the envelope is missing and you are a stockholder of record, please mail your completed proxy card to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717. If the envelope is missing and your shares are held with a broker, please mail your completed voting instruction card to the address specified therein. Please allow sufficient time for mailing if you decide to vote by mail.
Voting at the Annual Meeting. The method or timing of your vote will not limit your right to vote at the Annual Meeting if you attend the Annual Meeting and vote in person. However, if your shares are held in the name of a bank, broker or other nominee, you must obtain a legal proxy, executed in your favor, from the holder of record to be able to vote at the Annual Meeting. You should allow yourself enough time prior to the Annual Meeting to obtain this proxy from the holder of record.
The shares voted electronically, telephonically, or represented by the proxy cards received, properly marked, dated, signed and not revoked, will be voted at the Annual Meeting.
Who pays for the solicitation of proxies?
QAD will bear the expense of printing and mailing Notices and proxy materials. In addition to the solicitation of proxies by mail, our directors, officers and other employees may solicit proxies by personal interview, telephone, facsimile or email. They will not be paid any additional compensation for such solicitation. We will request Nominees who hold shares of common stock in their names to furnish Notices and proxy material to beneficial owners of the shares. We will reimburse such Nominees for their reasonable expenses incurred in forwarding solicitation materials to such beneficial owners.
Are there any other matters to be voted on at the Annual Meeting that are not included in the proxy?
We are not currently aware of any other business to be acted upon at the Annual Meeting. However, if other matters are properly brought before the Annual Meeting, your proxy will have the right, in his or her discretion, to vote or act on those matters according to the proxy’s best judgment.
Adjournment may be approved by the holders of shares representing a majority of votes present in person or by proxy at the meeting, whether or not a quorum exists, without further notice other than by an announcement made at the Annual Meeting.
Exemptions for a Controlled Company Election
The NASDAQ Stock Market has established specific exemptions from its listing standards for controlled companies, i.e., companies of which more than 50% of the voting power is held by an individual, a group or another entity. QAD is a controlled company by virtue of the fact that Ms. Pamela M. Lopker, President and Chairman of the Board, and Mr. Karl F. Lopker, Chief Executive Officer (“CEO”) and Director, jointly control the majority of votes in QAD’s stock. Please see “Stock Ownership of Directors, Executive Officers and Certain Beneficial Owners” beginning on page 16 of this proxy statement for additional information.
The Company has elected to rely upon certain of the exemptions provided in the rules for a controlled company. Specifically, the Company will rely on exceptions to the requirements that listed companies (i) have a majority of independent directors or a compensation committee comprised solely of independent directors, (ii) select, or recommend for the Board’s selection, director nominees by a majority of independent directors or a nominating committee comprised solely of independent directors, (iii) determine officer compensation by a compensation committee comprised solely of independent directors or by a majority of the Board upon recommendation of a compensation committee comprised solely of independent directors and (iv) satisfy certain responsibilities of the compensation committee prior to retaining or receiving advice from a compensation consultant, legal counsel or other advisor to the compensation committee. Notwithstanding the fact that QAD is a controlled company, QAD’s current practices include (i) having a majority of independent directors, (ii) selecting director nominees by the full Board of Directors and (iii) determining officer compensation by a majority of independent directors or a compensation committee comprised solely of independent directors.
Annual Report
If you would like a copy of our 2018 Annual Report on Form 10-K, we will send you one without charge. Please call 805-566-5139 or write to request a copy:
QAD Inc.100 Innovation PlaceSanta Barbara, CA 93108Attn: Investor Relations
The Annual Report on Form 10-K and this proxy statement are available in the Investor Relations section of the QAD Internet site at www.qad.com. The SEC also maintains an Internet site at http://www.sec.gov that contains all SEC filings made by QAD.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At our Annual Meeting, stockholders will elect fivesix directors to hold office until our next Annual Meetingannual meeting of Stockholders.stockholders. The directors shall serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal. Proxies cannot be voted for a greater number of persons than the number of nominees named. If any nominee for any reason is unable to serve or will not serve, the proxies may be voted by the proxy holders for sucha substitute nominee designated by our Board of Directors. We are not aware that any of the nominees will be unable or unwilling to serve as director.
Directors |
The following incumbent directors are being nominated for re-electionelection to the Board: Karl F. Lopker,Scott J. Adelson, Anton Chilton, Kathleen M. Crusco, Peter R. van Cuylenburg, Pamela M. Lopker Scott J. Adelson,and Lee D. Roberts, and Peter R. van Cuylenburg.Roberts. Please see “Information Concerning the Nominees for Election” beginning on page 8
EXECUTIVE OFFICERS
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OTHER BUSINESS
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CORPORATE GOVERNANCE AND RELATED MATTERS
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Board of this proxy statement for information concerning each of our incumbent directors standing for re-election.Directors
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Required VoteDirector Independence
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Directors are elected by a plurality of votes cast. Votes withheld and broker non-votes are not counted toward a nominee’s total. If you do not vote for a particular nominee or indicate that you withhold authority to vote for a particular nominee, your withholding will have no effect on the election of directors.Board Leadership Structure
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The Executive Sessions
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Board of Directors recommends a voteMeetings
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Standing Committee Meetings
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Standing Committee Membership
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Audit Committee
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Audit Committee Independence and Financial Literacy
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Compensation Committee
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Compensation Committee Interlocks and Insider Participation
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Governance Committee
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Nominating Procedures
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Charters for the electionBoard Committees
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Risk Oversight
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Code of Business Conduct and Code of Ethics
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Prohibition on Hedging Transactions and Pledging Policy
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Management’s Compliance Committee
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Employee Complaint Procedure
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Availability of Corporate Governance Information
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DIRECTOR COMPENSATION
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Director Compensation Overview
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Non-Employee Director Cash Retainer and Meeting Fees
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Non-Employee Director Equity Compensation
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Non-Employee Director Compensation for Fiscal Year 2020
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Non-Employee Director Outstanding Equity Awards at 2020 Fiscal Year End
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COMPENSATION COMMITTEE REPORT
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COMPENSATION DISCUSSION AND ANALYSIS | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Summary of Compensation Structure | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Compensation Philosophy | 19 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benchmarking of Compensation | 20 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Elements of the | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Base Salary | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Bonus | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer Satisfaction Multiplier | 21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Bonus Results | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Component | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contribution Component | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DSO Component | 22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP Measures | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payout on Financial Goals | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Strategic Goals | 24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discretionary Bonus | 25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Awards | 25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (RSUs) | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Stock Units (PSUs) | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Broad Based Employee Benefit Programs | 28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in Control Agreements and Executive Termination Policy | 28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Administrative Policies and Practices | 29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax Deductibility of Executive Compensation | 29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Grants of Plan-Based Awards during Fiscal Year 2020 | 31 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Equity Awards at 2020 Fiscal Year End | 32 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SAR Exercises and | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Compensation Plan Information | 33 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Potential Payments upon Termination or Change in Control | 34 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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CEO PAY RATIO | 35 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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REPORT OF AUDIT COMMITTEE | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charter | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Meetings | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit Committee Report | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Auditor Independence | 37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit Committee Recommendation | 37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Transactions with Related Persons | 38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Policies and Procedures for Review and Approval of Related Party Transactions | 38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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DELINQUENT SECTION 16(a) REPORTS | 38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK OWNERSHIP | 39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Ownership of Directors, | 39 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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VOTE RECOMMENDATIONS
Pamela M. Lopker founded QAD in 1979 and has been President and Chairman of the Board since QAD Inc.’s incorporation in 1986. Prior to founding QAD, Ms. Lopker served as Senior Systems Analyst for Comtek Research from 1977 to 1979. She is certified in Production and Inventory Management by the American Production and Inventory Control Society. Ms. Lopker earned a Bachelor of Arts degree in Mathematics from the University of California, Santa Barbara. She is married to Karl F. Lopker, Chief Executive Officer of QAD. The Board nominated Ms. Lopker to serve as a director because she is the founder and visionary for the Company, with over thirty-five years of enterprise software company experience, extensive software industry expertise and a deep understanding of the Company’s products, customers, industry and global operational issues. Her history with and knowledge of QAD, combined with her unique skills, is important to the Board’s oversight of long-term strategy and provides the Board with a deep understanding of the Company’s business and operations.
Scott J. Adelson has been a director of the Company since April 2006 and currently serves on the Audit and Compensation Committees. He serves as the Co-President of Houlihan Lokey, where he has been employed since 1987. He also serves as their Global Co-Head of Corporate Finance as well as on the Houlihan Lokey Board of Directors. Mr. Adelson has written and commentated extensively on a number of corporate finance and securities valuation subjects for various business publications. He has served on the board of directors of MPA (Motorcar Parts and Accessories) since April 2008 and Pacific Island Restaurants since December 2013. Mr. Adelson is also an active board member of various middle-market businesses as well as prominent non-profit organizations, such as the Lloyd Greif Center for Entrepreneurial Studies and the Board of Leaders at the University of Southern California, Marshall School of Business. The Board nominated Mr. Adelson to serve as a director because of his experience in advising hundreds of companies on a diverse and in-depth variety of corporate finance issues, including mergers and acquisitions and capital structure, which, combined with his experience on the boards of directors of other companies, provides insight to the Board on strategic and financial issues.
Lee D. Roberts has been a director of the Company since January 2008 and currently serves as Chairman of the Compensation Committee, and as a member of the Audit Committee and the Governance Committee. Mr. Roberts is Chief Executive Officer and President of BlueWater Consulting, LLC. Prior to that, Mr. Roberts was General Manager and Vice President for Document Content and Business Process Management at IBM Corporation. Mr. Roberts was with FileNET Corporation from 1997 until its acquisition by IBM in 2006, serving as its Chairman and CEO from 2000 to 2006, its President and CEO from 1998 to 2000 and its President and Chief Operating Officer from 1997 to 1998. Prior to FileNET, Mr. Roberts spent twenty years at IBM where he held numerous senior management, sales and marketing roles. Mr. Roberts currently serves on the boards of Unisys Corporation, where he is Chairman of the Compensation Committee, Compuware Corporation and two private companies. The Board nominated Mr. Roberts to serve as a director because of his extensive executive management experience which enables him to provide strategic counsel important to the Board in its oversight of management. Also, Mr. Robert’s financial expertise brings an understanding of strategy, finance, and mergers and acquisitions that is an important aspect of the makeup of our Board of Directors.
Peter R. van Cuylenburg, Ph.D. has been a director of the Company since November 1997 and currently serves as Lead Director, Chairman of the Audit Committee and the Governance Committee, and a member of the Compensation Committee. Since 2000, Dr. van Cuylenburg has practiced as an independent advisor to several high-technology companies, involving a variety of concurrent Board memberships listed below and a part-time role as a General Partner in a venture capital fund. He is presently a Director of Verimatrix, Inc. a privately-held company (since June 2006) and a General Partner in Crescendo Ventures (since December 2004). Previously Dr. van Cuylenburg was President and Chief Operating Officer of InterTrust Technologies Corporation from October 1999 to December 1999 and advisor to its Chairman from December 1999 to December 2000. Dr. van Cuylenburg served as President of Quantum Corporation’s DLTtape and Storage Systems Group (DSS) from September 1996 to October 1999. Past board memberships include: ARC International plc (LSE:ARK), Transitive Technologies Ltd., JNI Inc (JNIC), Peregrine Systems Inc. (PRGNQ), ClearSpeed Technologies Group plc, SealedMedia Ltd., Anadigm Ltd., Elixent Ltd., Mitel Corporation (MLT), Dynatech Corporation, NeXT Computer, Inc., and Cable and Wireless plc. Dr. van Cuylenburg’s career includes executive posts at Xerox Corporation, NeXT Computer, Inc., Cable and Wireless plc. and Texas Instruments. The Board nominated Dr. van Cuylenburg to serve as a director of the Company because of his experience as a Chairman, CEO, President and EVP of various high technology companies. His leadership skills, experience with strategic, operational and financial issues, and service on the boards of a variety of public companies, including various audit, compensation and governance committees, is important to the Board’s oversight of strategy, risk management, compensation and corporate governance practices.
|
Proposal | Board |
Reason for Recommendation | See Page |
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|
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1. | Election of six directors | FOR | The Board of Directors believes the six Board nominees possess the skills, experience and diversity to effectively monitor performance, provide oversight, and advise management on the Company’s long-term strategy.
| 3 |
2. | Advisory vote to approve executive compensation (say-on-pay) | FOR | Our executive compensation programs demonstrate our pay for performance philosophy, which we believe creates alignment with our stockholders and drives the creation of sustainable long-term stockholder value.
| 6 |
3. | Ratify the selection of KPMG LLP as our independent registered public accounting firm for our current fiscal year. | FOR | Based on our Audit Committee’s assessment of KPMG’s qualifications and performance, we believe the retention of KPMG for fiscal year 2021 is in the Company’s best interests. | 7 |
PROXY STATEMENT
We are providing these proxy materials in connection with the QAD Inc. 2020 Annual Meeting of Stockholders (the “Annual Meeting”). The Notice of Internet Availability of Proxy Materials (the “Notice”), this proxy statement and the accompanying proxy card or voting instruction card, including an Internet link to our previously filed 2020 Annual Report on Form 10-K, were first made available to stockholders on or about May 1, 2020. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully.
Adjournment may be approved by the holders of shares representing a majority of votes present in person or by proxy at the meeting, whether or not a quorum exists, without further notice other than by an announcement made at the Annual Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At our Annual Meeting, stockholders will elect six directors to hold office until our next annual meeting of stockholders. The directors shall serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal. Proxies cannot be voted for a greater number of persons than the number of nominees named. If any nominee for any reason is unable to serve or will not serve, the proxies may be voted by the proxy holders for a substitute nominee designated by our Board of Directors. We are not aware that any of the nominees will be unable or unwilling to serve as director.
Directors |
The following incumbent directors are being nominated for election to the Board: Scott J. Adelson, Anton Chilton, Kathleen M. Crusco, Peter R. van Cuylenburg, Pamela M. Lopker and Lee D. Roberts. Please see “
EXECUTIVE OFFICERS
9
Set forth below is certain biographical information concerning our executive officers, except
OTHER BUSINESS
9
CORPORATE GOVERNANCE AND RELATED MATTERS
10
Board of Directors
10
Director Independence
10
Board Leadership Structure
10
Executive Sessions
11
Board of Directors Meetings
11
Standing Committee Meetings
11
Standing Committee Membership
11
Audit Committee
11
Audit Committee Independence and Financial Literacy
12
Compensation Committee
12
Compensation Committee Interlocks and Insider Participation
12
Governance Committee
12
Nominating Procedures
13
Charters for biographical information regarding Karl F. LopkerBoard Committees
14
Risk Oversight
14
Code of Business Conduct and Pamela M. Lopker which is provided above underCode of Ethics
14
Prohibition on Hedging Transactions and Pledging Policy
14
Management’s Compliance Committee
15
Employee Complaint Procedure
15
Availability of Corporate Governance Information
15
DIRECTOR COMPENSATION
16
Director Compensation Overview
16
Non-Employee Director Cash Retainer and Meeting Fees
16
Non-Employee Director Equity Compensation
17
Non-Employee Director Compensation for Fiscal Year 2020
17
Non-Employee Director Outstanding Equity Awards at 2020 Fiscal Year End
17
COMPENSATION COMMITTEE REPORT
18
COMPENSATION DISCUSSION AND ANALYSIS | 19 |
Executive Summary of Compensation Structure | 19 |
Executive Compensation Philosophy | 19 |
Benchmarking of Compensation | 20 |
Elements of the | 21 |
Base Salary | 21 |
Cash Bonus | 21 |
Customer Satisfaction Multiplier | 21 |
Cash Bonus Results | 22 |
Revenue Component | 22 |
Contribution Component | 22 |
DSO Component | 22 |
Non-GAAP Measures | 23 |
Payout on Financial Goals | 23 |
Strategic Goals | 24 |
Discretionary Bonus | 25 |
Equity Awards | 25 |
Restricted Stock Units (RSUs) | 26 |
Performance Stock Units (PSUs) | 26 |
Broad Based Employee Benefit Programs | 28 |
Change in Control Agreements and Executive Termination Policy | 28 |
Administrative Policies and Practices | 29 |
Tax Deductibility of Executive Compensation | 29 |
EXECUTIVE COMPENSATION | 30 |
Summary Compensation Table | 30 |
Grants of Plan-Based Awards during Fiscal Year 2020 | 31 |
Outstanding Equity Awards at 2020 Fiscal Year End | 32 |
SAR Exercises and RSUs Vested During Fiscal Year 2020 | 33 |
Equity Compensation Plan Information | 33 |
Potential Payments upon Termination or Change in Control | 34 |
CEO PAY RATIO | 35 |
REPORT OF AUDIT COMMITTEE | 36 |
Charter | 36 |
Meetings | 36 |
Audit Committee Report | 36 |
Auditor Independence | 37 |
Audit Committee Recommendation | 37 |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | 38 |
Transactions with Related Persons | 38 |
Policies and Procedures for Review and Approval of Related Party Transactions | 38 |
DELINQUENT SECTION 16(a) REPORTS | 38 |
STOCK OWNERSHIP | 39 |
Stock Ownership of Directors, Executive Officers and Certain Beneficial Owners | 39 |
FREQUENTLY ASKED QUESTIONS | 40 |
EXEMPTIONS FOR A CONTROLLED COMPANY ELECTION | 45 |
ANNUAL REPORT | 45 |
STOCKHOLDER PROPOSALS | 46 |
VOTE RECOMMENDATIONS
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Proposal | Board |
Reason for Recommendation | See Page |
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1. | Election of six directors | FOR | The Board of Directors believes the six Board nominees possess the skills, experience and diversity to effectively monitor performance, provide oversight, and advise management on the Company’s long-term strategy.
| 3 |
2. | Advisory vote to approve executive compensation (say-on-pay) | FOR | Our executive compensation programs demonstrate our pay for performance philosophy, which we believe creates alignment with our stockholders and drives the creation of sustainable long-term stockholder value.
| 6 |
3. | Ratify the selection of KPMG LLP as our independent registered public accounting firm for our current fiscal year. | FOR | Based on our Audit Committee’s assessment of KPMG’s qualifications and performance, we believe the retention of KPMG for fiscal year 2021 is in the Company’s best interests. | 7 |
PROXY STATEMENT
We are providing these proxy materials in connection with the QAD Inc. 2020 Annual Meeting of Stockholders (the “Annual Meeting”). The Notice of Internet Availability of Proxy Materials (the “Notice”), this proxy statement and the accompanying proxy card or voting instruction card, including an Internet link to our previously filed 2020 Annual Report on Form 10-K, were first made available to stockholders on or about May 1, 2020. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully.
Adjournment may be approved by the holders of shares representing a majority of votes present in person or by proxy at the meeting, whether or not a quorum exists, without further notice other than by an announcement made at the Annual Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At our Annual Meeting, stockholders will elect six directors to hold office until our next annual meeting of stockholders. The directors shall serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal. Proxies cannot be voted for a greater number of persons than the number of nominees named. If any nominee for any reason is unable to serve or will not serve, the proxies may be voted by the proxy holders for a substitute nominee designated by our Board of Directors. We are not aware that any of the nominees will be unable or unwilling to serve as director.
Directors |
The following incumbent directors are being nominated for election to the Board: Scott J. Adelson, Anton Chilton, Kathleen M. Crusco, Peter R. van Cuylenburg, Pamela M. Lopker and Lee D. Roberts. Please see “Information Concerning the Nominees for Election” beginning on page 4 of this proxy statement for information concerning each of our incumbent directors standing for election.
Nominee for Director to |
Age |
Director Since | Position with the Company |
Scott J. Adelson | 59 | 2006 | Independent Director |
Anton Chilton | 52 | 2018 | Chief Executive Officer, Director |
Kathleen M. Crusco(1) | 55 | 2019 | Independent Director |
Peter R. van Cuylenburg | 72 | 1997 | Chairman of the Board, Independent Director |
Pamela M. Lopker | 65 | 1986 | President, Director |
Lee D. Roberts | 67 | 2008 | Independent Director |
(1) | Ms. Crusco was appointed as a director on December 1, 2019. |
Required Vote |
Directors are elected by a plurality of votes cast. Votes withheld and broker non-votes are not counted toward a nominee’s total. If you do not vote for a particular nominee or indicate that you withhold authority to vote for a particular nominee, your withholding will have no effect on the election of directors.
Information Concerning the Nominees for |
| Scott J. Adelson | |||
Anton Chilton |
| Anton Chilton was appointed Chief Executive Officer and a member of QAD's Board of Directors in December 2018. Before that, he served as Chief, Global Field Operations and Executive Vice President commencing in March 2017. Previously, he served as Executive Vice President, Global Services | ||
Kathleen Crusco | Kathleen M. Crusco has been a director of the Company since December 2019 and currently serves as a member of the Audit Committee, the Compensation Committee and the Governance Committee. Ms. Crusco most recently served as the Executive Vice President and Chief Financial Officer at Kony, Inc., a privately-held provider of digital experience applications for banking and low-code application development platform solutions from December 2017 to January 2020. Prior to her role at Kony, Inc., she served as Executive Vice President, Chief Operating Officer and Chief Financial Officer at Epicor Software Corporation, a privately-held software company. Ms. Crusco joined Epicor in 2011 when the company merged with Activant Solutions, Inc., a business management software company where she served as Chief Financial Officer from 2007. She also spent five years at Polycom, including serving as Vice President of Worldwide Finance, and has held a variety of positions of increasing responsibility at Documentum, Inc., Adaptec, Inc. and Price Waterhouse LLP. Ms. Crusco holds a Bachelor of Science in Business Administration with an emphasis in accounting from California State University, Chico. She has been a member of the board of directors of publicly-held Calix, Inc. since 2017 and Poly, formerly Plantronix, since 2018. The Board nominated Ms. Crusco to serve as a director because she brings significant and relevant expertise to QAD, with a long track record as a financial software executive and director, and she brings an understanding of, and experience in, enterprise software with a focus on manufacturing and the cloud market. |
| Peter R. van Cuylenburg, D.Tech. has been a director of the Company since November 1997 and currently serves as Chairman of the Board, Lead Director, Chairman of the Audit Committee and the Governance Committee, and a member of the Compensation Committee. Since 2000, Dr. van Cuylenburg has practiced as an independent advisor to several high-technology companies, involving a variety of concurrent Board memberships, listed below, and a part-time role as a General Partner in a venture capital fund. Previously Dr. van Cuylenburg was President and Chief Operating Officer of InterTrust Technologies Corporation from October 1999 to December 1999 and advisor to its Chairman from December 1999 to December 2000. Dr. van Cuylenburg served as | |||
Pamela M. Lopker | Pamela M. Lopker founded QAD in 1979 and has been President since | |||
Lee D. Roberts | Lee D. Roberts has been a director of the Company since January 2008 and currently serves as Chairman of the Compensation Committee, and as a member of the Audit Committee and the Governance Committee. Mr. Roberts is Chief Executive Officer and President of BlueWater Consulting, LLC. Prior to that, Mr. Roberts was General Manager and Vice President for Document Content and Business Process Management at IBM Corporation. Mr. Roberts was with FileNET Corporation from 1997 until its acquisition by IBM in 2006, serving as its Chairman and CEO from 2000 to 2006, its President and CEO from 1998 to 2000 and its President and Chief Operating Officer from 1997 to 1998. Prior to FileNET, Mr. Roberts spent twenty years at IBM where he held numerous senior management, sales and marketing roles. Mr. Roberts currently serves on the boards of Unisys Corporation, where he is Chairman of the Compensation Committee, Compuware Corporation and two private companies. The Board nominated Mr. Roberts to serve as a director because of his extensive executive management experience which enables him to provide strategic counsel important to the Board in its oversight of management. Also, Mr. Robert’s financial expertise brings an understanding of strategy, finance, and mergers and acquisitions that is an important aspect of the makeup of our Board of Directors. |
FOR √ | THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE SIX NOMINEES LISTED ABOVE. |
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") requires us to hold an advisory vote of our stockholders at least once every three years to approve the compensation of our Named Executives. Consistent with the advisory vote of stockholders at our 2019 Annual Meeting on the frequency of such vote, our Board of Directors has chosen to hold this vote annually. This vote is not intended to address any specific item of compensation or specific Named Executive, but rather the overall compensation of all of our Named Executives and the compensation philosophy, policies and practices described in this proxy statement. QAD discloses those items in the “Compensation Discussion and Analysis” section of this proxy statement beginning on page 19.
As described in the “Compensation Discussion and Analysis,” we design our executive compensation programs to attract and retain highly-talented and productive Named Executives; align the interests of the Named Executives with the interests of the stockholders; provide incentives for the Named Executives to achieve strategic and financial goals; and reward the Named Executives for performance that enhances stockholder value. A meaningful portion of our Named Executives’ compensation is at risk, reflecting our emphasis on pay that rewards performance and drives long-term stockholder value. We believe our compensation program, as a whole, promotes our objectives in both the short and long term.
As an advisory vote, this proposal is not binding on the Company, the Board of Directors or the Compensation Committee. However, the Compensation Committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by our stockholders and will consider the outcome of the vote when making future compensation decisions on our executive compensation programs.
We ask you to approve the following resolution:
“RESOLVED, that the compensation paid to QAD’s Named Executives, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
√ | THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING, ADVISORY BASIS, OF THE RESOLUTION SET FORTH ABOVE RELATING TO THE COMPENSATION PAID TO OUR NAMED EXECUTIVES. |
PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF QAD FOR THE 2021 FISCAL YEAR
The Audit Committee of the Board of Directors has appointed KPMG LLP ("KPMG") to audit our financial statements for fiscal year 2021. We are asking you to ratify that appointment. KPMG has been QAD’s independent accounting firm since 1990, and we believe they are well qualified for the job. Although the ratification is not required by law, the Board believes that stockholders should be given the opportunity to express their views on the subject. While not binding on the Board, the failure of the stockholders to ratify the appointment of KPMG as QAD’s independent auditors would be considered by the Board and the Audit Committee in determining whether to continue the engagement of KPMG. Even if our stockholders ratify the appointment of KPMG, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of QAD and its stockholders. A KPMG representative intends to be at the annual meeting to answer appropriate questions and to make a statement if he or she desires.
FOR √ | THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE SELECTION OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2021. |
AUDITOR INFORMATION
Principal Accounting Fees and Services |
The fees billed or expected to be billed by KPMG for professional services rendered to the Company during fiscal year 2020 and fiscal year 2019 are set forth below. The Audit Committee has concluded that the provision of the non-audit services described below by KPMG to the Company did not and does not impair or compromise their independence. All such services were pre-approved by the Audit Committee in accordance with the pre-approval policy described below. KPMG has served as our independent accounting firm since 1990.
The fees billed or expected to be billed by KPMG for fiscal years 2020 and 2019 for services rendered to the Company were as follows:
Fiscal Year | Fiscal Year | |||||||
(In thousands) | ||||||||
Audit fees | $ | 1,453 | $ | 1,736 | ||||
Audit-related fees | 15 | 35 | ||||||
Tax fees | 10 | — | ||||||
All other fees | — | — | ||||||
Total fees | $ | 1,478 | $ | 1,771 |
Audit Fees. These amounts represent fees billed or expected to be billed by KPMG for professional services rendered for the audits of the Company’s annual financial statements for the fiscal years ended January 31, 2020 and 2019, the reviews of the financial statements, including the Company Quarterly Reports on Form 10-Q, and services related to statutory and regulatory filings and engagements for such fiscal years. Audit fees also represent fees billed or expected to be billed by KPMG for professional services rendered for the audits of the effectiveness of internal control over financial reporting for the fiscal years ended January 31, 2020 and 2019.
Audit-Related Fees. These amounts represent fees billed or expected to be billed by KPMG for professional services rendered that were reasonably related to the performance of the audits or the reviews of the Company’s financial statements for fiscal years 2020 and 2019 (but which are not included under “Audit Fees” above). Audit-related fees consist principally of certain agreed-upon engagements.
Tax Fees. This amount represents fees billed or expected to be billed by KPMG for professional services rendered for assistance with tax consulting and tax advice.
Audit Committee Pre-Approval Policy. The Audit Committee has adopted a policy for the pre-approval of all audit and permitted non-audit services that may be performed by the Company’s independent registered public accounting firm. Under this policy, each year, at the time it engages the independent registered public accounting firm, the Audit Committee pre-approves the audit engagement terms and fees and may also pre-approve detailed types of audit-related and permitted tax services to be performed during the year. All other permitted non-audit services are required to be pre-approved by the Audit Committee on an engagement-by-engagement basis. The Audit Committee may delegate its authority to pre-approve services to one or more of its members whose activities are reported to the Audit Committee at each regularly scheduled meeting.
EXECUTIVE OFFICERS
Set forth below is certain biographical information concerning our executive officers, except for biographical information regarding Anton Chilton and Pamela M. Lopker who are described above under the heading “Information Concerning the Nominees for Election.”
Daniel Lender was first appointed Chief Financial Officer and Executive Vice President in July 2003. Previously, he served as QAD’s Vice President of Global Sales Operations and Vice President of Latin America. Mr. Lender joined QAD in 1998 as Treasurer following a nine-year tenure with the former Republic National Bank of New York, last serving as Vice President and Treasurer of the Bank’s Delaware subsidiary. He earned a master of business administration degree from the Wharton School of the University of Pennsylvania and a bachelor of science degree in applied economics and business management from Cornell University.
Kara L. Bellamy has served as Chief Accounting Officer, Corporate Controller and Senior Vice President since January 2008. Previously, she served as QAD’s Director of Finance, Americas beginning in 2006 and joined QAD as Assistant Corporate Controller in 2004. Prior to joining QAD, Ms. Bellamy served as Corporate Controller for Somera Communications, Inc. and began her career in public accounting at Ernst & Young LLP. Ms. Bellamy is a Certified Public Accountant (inactive) and received a bachelor of arts degree in business economics with an accounting emphasis from the University of California, Santa Barbara.
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other business before the meeting, and, so far as is known to the Board of Directors, no matters are to be brought before the meeting except as specified in the Notice of Annual Meeting of Stockholders. As to any business that may properly come before the meeting, however, it is intended that proxies will be voted in respect thereof in accordance with the instruction of our Board of Directors, or, if no instruction is given, in accordance with the judgment of the persons voting such proxies.
CORPORATE GOVERNANCE AND RELATED MATTERS
Board of Directors
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Our Board of Directors has six members, each of whom is standing for election at the 2020 Annual Meeting. All directors are elected annually for a term that expires at the subsequent annual meeting or until their successors are elected and qualified.
Director Independence
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Four current directors, Mr. Adelson, Ms. Crusco, Dr. van Cuylenburg and Mr. Roberts, are non-management directors and are each an “independent” director as defined under Rule 5605 of the NASDAQ Stock Market listing standards. Dr. van Cuylenburg serves as Chairman of the Board and lead director. Two directors are management directors, Mr. Chilton, Chief Executive Officer, and Ms. Lopker, President.
If stockholders or other interested parties wish to communicate with the full Board, the independent directors as a group or any individual director, they may write to QAD Inc., 100 Innovation Place, Santa Barbara, CA 93108, Attention: Corporate Secretary or email to directors@qad.com. Further information on how to contact our Board is available through our investor relations Internet site at www.qad.com, under “Investor Relations. Further information on how to contact our Board is available through our investor relations Internet site at www.qad.com, under “Investor Relations — –Corporate Governance.”
Board Leadership Structure
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Currently, we separate the positions of Chief Executive Officer, President and independent Chairman of the Board. Separating these positions allows our Chief Executive Officer and President to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing independent advice to, serve as the President and Chairman of the Board and Mr. Lopker is best suited to serve as our CEO because of their extensive knowledge of our business, industry and customers, and they are thus most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. The Board believes that having Ms. Lopker in the role of President and Chairman and Mr. Lopker in the role of CEO promotes strategic development and execution, and fosters greater communication between management and the Board, which are essential to effective governance.
Key responsibilities of the Board include developing strategic direction and holding management accountable for the execution of strategy once it is developed. The Board believes that having Ms. Lopker as President and Chairman and Mr. Lopker in the role of CEO, together with an independent lead director having the duties described below, is in the best interest of QAD’s stockholders because this arrangement provides the appropriate balance between strategic development and oversight of, management. The Board believes that having an independent director serve as Chairman is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.
Since August 2018, Dr. van Cuylenburg, who also serves as our lead director, has served as our independent Chairman. In the event the Chairman is an independent director, as is currently the case, the role of lead director will be assumed by the Chairman and the annual retainer for the lead director shall not apply. The responsibilities of the Chairman of the Board include setting the agenda for each meeting of the Board, in consultation with the Chief Executive Officer and President, and facilitating communication with the Board, executive officers and stockholders.
Dr. van Cuylenburg also serves as the independent lead director for all meetings of the independent directors held in executive session. The role of the independent lead director is, among other things, to establish agendas for such executive sessions in consultation with the other directors; to serve as a liaison between the independent directors and the Chief Executive Officer and President in matters relating to the Board as a whole (although all independent directors are encouraged to freely communicate with the Chief Executive Officer, President and other members of management at any time); to review meeting schedules to help ensure there is sufficient time for the discussion of all agenda items; and to call meetings of the independent directors as appropriate.
In addition, as described below, our Board has three standing committees, consisting entirely of independent directors. The Board delegates substantial responsibility to these committees, which report their activities and actions back to the full Board. We believe having independent committees with independent chairpersons is an important aspect of the leadership structure of our Board.
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The independent directors of the Board may meet in executive session, without the President or the CEO present, at every regularly scheduled Board meeting and at additional times as appropriate. They met in executive session on three occasions during fiscal year 2020.
Board of Directors Meetings |
Our business, property and affairs are managed under the direction of our Board of Directors. Members of our Board are kept informed of our business through discussions with our Chief Executive Officer, President and other officers and members of management, by reviewing materials provided to them, by visiting our offices and by participating in meetings of the Board and its committees. During fiscal year 2020, the Board of Directors held four regularly scheduled meetings and one special meeting of only the outside directors. In fiscal year 2020, all current directors attended at least 75% of the aggregate of all meetings of the Board of Directors held during the period such director was a member of the Board and all current members of standing committees attended at least 75% of the standing committee meetings held during the period such director was a member. The Company encourages all members of the Board to attend each annual meeting of stockholders when feasible. All current directors, except Ms. Crusco, were in attendance at the 2019 Annual Meeting. Ms. Crusco joined our Board of Directors after the 2019 Annual Meeting took place.
Standing Committee Meetings
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The Board appoints committees to help carry out its duties. In particular, Board committees work on key issues in greater detail than would be possible at full Board meetings. Each committee reviews the results of its meetings with the full Board. For fiscal year 2020, there were three standing committees: Audit, Compensation and Governance.
Standing Committee Membership |
Audit Committee | Compensation Committee | Governance Committee | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Scott J. Adelson(1) | Scott J. Adelson | Scott J. Adelson(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kathleen M. Crusco(2) | Kathleen M. Crusco(2) | Kathleen M. Crusco(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peter R. van Cuylenburg* | Peter R. van Cuylenburg | Peter R. van Cuylenburg* | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lee D. Roberts | Lee D. Roberts* | Lee D. Roberts | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leslie J. Stretch(3) |
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| Indicates chair. |
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(1) | Mr. Adelson was appointed to the Audit Committee and the Governance Committee effective June 23, 2019 and resigned from both committees effective December 1, 2019. | |
(2) | Ms. Crusco was appointed to the Audit Committee and the Governance Committee effective December 1, 2019, and the Compensation Committee effective April 13, 2020. | |
(3) | Mr. Stretch was a member of the Audit Committee and the Governance Committee from June 11, 2014 to February 7, 2018 and from August 24, 2018 to June 23, 2019. Mr. Stretch’s term on the Board of Directors, including the Audit Committee and the Governance Committee, ended on June 23, 2019 due to Mr. Stretch not standing for reelection. |
The functions performed by these committees are summarized below.
Audit Committee
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The Audit Committee is responsible for overseeing and monitoring the accounting and financial reporting processes of the Company and the audits of its financial statements. The current Audit Committee members are Ms. Crusco, Dr. van Cuylenburg and Mr. Roberts. The Audit Committee relies on the expertise and knowledge of management, the internal auditors and the independent auditor in carrying out its oversight responsibilities. The Audit Committee’s specific responsibilities are delineated in the Audit Committee Charter, and include:
• | the appointment, compensation, retention and oversight of the independent auditor engaged to prepare or issue audit reports on the financial statements and internal control over financial reporting of the |
• | overseeing and monitoring the |
• | overseeing and monitoring the performance of the Company’s internal |
The Audit Committee met five times during fiscal year 2020, including meetings to review and discuss each quarterly earnings release prior to its announcement.
Audit Committee Independence and Financial Literacy
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All members of the Audit Committee are “independent” directors as the term is defined in Rule 5605 of the NASDAQ Stock Market listing standards. The Board of Directors has determined that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the Committee, qualifies as an “audit committee financial expert” as that term is defined in the requirements of the Sarbanes-Oxley Act, and meets the independence and financial literacy requirements of the NASDAQ Stock Market.
Compensation Committee
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The current Compensation Committee members are Mr. Adelson, Ms. Crusco, Dr. van Cuylenburg and Mr. Roberts, each of whom is “independent” as the term is defined in Rule 5605 of the NASDAQ Stock Market listing standards.
The primary responsibilities of the Compensation Committee are to:
• | establish and review the general compensation policies applicable to the Chief Executive Officer, Chief Financial Officer, President and other executive officers; |
• | review and approve the level of compensation, including salaries, fees, benefits, executive incentive plans and perquisites, of the Chief Executive Officer, the President and other executive officers; |
• | review and advise the Board concerning the performance of the executive officers; |
• | review and advise the Board concerning compensation practices and trends in order to assess the adequacy and competitiveness of the QAD executive compensation programs among comparable companies in our industry; |
• | ensure that senior executive incentive plans are administered in a manner consistent with our compensation strategy; |
• | administer the stock compensation programs, including determining the employees and other parties who are to receive grants of stock and the terms of such grants; and |
• | review and recommend employment agreements for management and severance arrangements for senior executive officers.
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The Compensation Committee’s role includes producing the report on executive compensation. The specific responsibilities and functions of the Compensation Committee are delineated in the Compensation Committee Charter. The Compensation Committee held four regularly scheduled meetings during fiscal year 2020.
Compensation Committee Interlocks and Insider Participation |
No member of the Compensation Committee has ever been an officer or employee of the Company or of any of our subsidiaries or affiliates. During the last fiscal year, none of our executive officers served on the board of directors or on the compensation committee of any other entity, any officers of which served either on our Board or on our Compensation Committee.
Governance Committee |
The Governance Committee is responsible for the administration of our Code of Business Conduct, continuing Board education and the annual review of our compliance with the governance standards of the NASDAQ Stock Market. QAD’s Board believes strongly that good corporate governance accompanies and greatly aids our long-term business success. The specific responsibilities of the Governance Committee are described in the Governance Committee Charter. The Governance Committee met once during fiscal year 2020. The current members of the Governance Committee are Ms. Crusco, Dr. van Cuylenburg and Mr. Roberts each of whom, as previously indicated, is independent.
The primary responsibilities of the Governance Committee are to:
| Oversee and administer the Company’s Corporate Code of Conduct; |
• | Oversee the |
• | Review applicable NASDAQ governance standards annually and confirm and/or provide for the |
• | Oversee IT governance |
Nominating Procedures |
The Board does not have a formal nominating committee. QAD is a “controlled company” as such term is used in the NASDAQ Stock Market rules and, accordingly, is exempted from certain regulations pertaining to the director nomination process. Please see “Exemptions for a Controlled Company Election” on page 45 of this proxy statement. The Board has determined that director nominees who are not currently serving as directors be recommended for the Board’s selection by a designated committee of one or more directors. These directors do not operate under a charter, but meet as appropriate to recommend nominees to the Board for service on the Company’s Board of Directors and to recommend to the Board such persons to fill any vacancy that may arise between annual meetings of the stockholders. The directors nominated for election identified in this proxy statement, all of whom are existing directors, were nominated unanimously by the full Board. Five of our six current directors were elected by our stockholders at last year’s annual meeting. Ms. Crusco was appointed to the Board in December 2019.
When evaluating potential director nominees, the committee designated by the Board considers the listing requirements of the NASDAQ Stock Market as well as a potential nominee’s personal and professional integrity, experience in corporate management, time available for service, experience in the Company’s industry, global business and social perspective, experience as a board member of other publicly-held companies, ability to make independent analytical inquiries and practical business judgment. QAD does not have a formal policy with regard to the consideration of diversity in identifying director nominees, but the committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills, and expertise to oversee the Company’s business. After potential nominees are evaluated, the committee designated by the Board makes recommendations regarding nominations to the full Board. The committee may retain, at the Company’s expense, any independent search firm, experts or advisors that it believes are appropriate in connection with the nomination process. Ms. Crusco was identified to us as a prospective Board member by one of the Company’s ongoing advisors.
The policy of the Board is to have the Board consider properly submitted stockholder recommendations for candidates for membership to the Board. In evaluating nominees recommended by stockholders, the Board will utilize the same criteria used for nominees initially proposed by the Board members. If a stockholder wishes to nominate directors for election to the Board at next year’s Annual Meeting, such nominations must comply with Section 2.7 of our bylaws and be submitted in writing to the following address:
QAD Inc.
100 Innovation Place
Santa Barbara, CA 93108
Attention: Corporate Secretary
Charters for Board Committees |
Each of the Audit Committee, the Compensation Committee and the Governance Committee has a committee charter. The committee charters describe the purpose, responsibilities, structure and operations of each committee. Copies of the committee charters are available on the Company’s Internet site at www.qad.com, under “Investor Relations — Corporate Governance.”
Risk Oversight |
The Board has an active role, as a whole and at the committee level, in overseeing management of the Company’s risks. The Board regularly reviews the Company’s operations and the associated risks, including cybersecurity risks.
• | The Audit Committee is responsible for overseeing general risk management. It periodically reports to the Board regarding briefings provided by management as well as the Audit Committee’s own analysis and conclusions regarding the adequacy of the Company’s |
• | The |
Both committees rely on management to be responsible for day-to-day risk management, including the monitoring of material risks facing the Company, such as strategic risks, operational risks, financial risks and legal and compliance risks. In addition, the Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. With the input of the Company’s executive officers, the Board also works to assess and analyze the most likely areas of future risk for the Company, including cybersecurity risk.
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Both committees rely on management to be responsible for day-to-day risk management, including the monitoring of material risks facing the Company, such as strategic risks, operational risks, financial risks and legal and compliance risks. In addition, the Board encourages management to promote a corporate culture that incorporates risk management into the Company’s corporate strategy and day-to-day business operations. With the input of the Company’s executive officers, the Board also works to assess and analyze the most likely areas of future risk for the Company, including cybersecurity risk.
Since cybersecurity risk oversight is a top priority for the Board, the Board oversees a multi-level process to address cybersecurity risks. QAD's CyberSecurity Steering Committee meets regularly to evaluate cybersecurity requirements and controls, review security events and threats, recommend improvements in cybersecurity infrastructure and processes, and oversee cybersecurity training programs for employees. The Company's Executive Committee, which includes the Chief Financial Officer as well as both executive Board members, regularly receives updates concerning the activities of the CyberSecurity Steering Committee. The Chief Financial Officer reports to the full Board at each quarterly Board meeting on the Company's cybersecurity risk oversight activities. The Board's Governance Committee also annually reviews information technology governance and cybersecurity for internal systems and cloud services for external customers. In addition, we created and filled a new position overseeing information security compliance that is responsible for delivering a security program aimed at mitigating risk, ensuring continuity of operations and safeguarding the Company’s assets, reputation and brand.
Code of Business Conduct and Code of Ethics |
The Board has adopted the Company’s “Code of Business Conduct,” (the “Code of Business Conduct”), which promotes the highest ethical standards in all of the Company’s business dealings. The Code of Business Conduct applies to the Company’s directors and employees, including the Chief Executive Officer, the President, the Chief Financial Officer and the Chief Accounting Officer. The Board has also approved, and the Company has adopted, a “Code of Ethics for the Chief Executive Officer and Senior Financial Officers of QAD Inc.” (the “Code of Ethics”) in order to satisfy the SEC’s requirements for a code of ethics for senior financial officers. The Code of Business Conduct and the Code of Ethics are available on the Company’s Internet site at www.qad.com, under “Investor Relations — Corporate Governance.”
Prohibition on Hedging Transactions and Pledging Policy |
Management’s Compliance
Prohibition on Hedging Transactions. Our insider trading policy prohibits all of our employees, including our executive officers, and our non-employee directors from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, short sales, puts, collars, straddles and exchange funds) or otherwise engaging in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of QAD securities.
Pledging Policy. Our insider trading policy prohibits our directors, executive officers and their immediate family members (i) from holding QAD securities in a margin account; and (ii) from pledging QAD securities as collateral to secure or guarantee indebtedness, subject to an exception pertaining to our founder, Pamela Lopker. Ms. Lopker may pledge Company securities, not to exceed 20% of the Company securities owned or controlled by her, as collateral to secure or guarantee a loan or other financing arrangement but only with the prior approval of the Governance Committee of the Board. Decisions of the Governance Committee will be based on all the facts and circumstances pertaining to the request including but not limited to: (i) the key terms of the transaction under which the Company securities would be pledged; (ii) the aggregate number of shares of Company securities intended to be pledged in relation to both the total number of Company securities outstanding and the total number of shares of Company securities owned or controlled by Ms. Lopker; (iii) the market value and the trading volume of the Company securities; (iv) Ms. Lopker’s ability to repay any such indebtedness without recourse to the Company securities intended to be pledged; and (v) any compelling needs of Ms. Lopker justifying the pledge. No pledged Company securities shall be counted towards any stock ownership and retention requirements that may apply to Ms. Lopker. Any such pledge must comply with the other terms of our insider trading policy and must be precleared as specified in our insider trading policy.
Management’s Compliance Committee |
Management has established a Compliance Committee composed of certain executive officers and non-executive employees to oversee the Company’s compliance with its obligations related to certification of appropriate disclosure controls and internal controls over financial reporting. The Compliance Committee administers a set of procedures to oversee such compliance, including a requirement that certain members of management sign certifications each fiscal quarter that, to their knowledge, the operations within their span of control are fairly presented and appropriate internal controls are in place to ensure the accuracy of such results. The Compliance Committee typically meets twice quarterly and may meet more often if needed. In fiscal year 2018,2020, the Compliance Committee met nineeight times, and has reported its findings to the Audit Committee in each quarter of fiscal year 2018.2020.
Employee Complaint Procedure |
With oversight from the Audit Committee, the Company has established procedures to receive, retain and address employee complaints communicated to QAD. These procedures include a confidential hotline to answer employees’ ethics questions and to report employees’ ethical concerns and incidents including, without limitation, concerns about (i) accounting, internal controls or auditing matters and (ii) legal and regulatory compliance matters. This hotline is available 24 hours a day, seven days a week, and callers may choose to remain anonymous.
Availability of Corporate Governance Information |
For additional information on our corporate governance, including Board committee charters and our Code of Business Conduct and Code of Ethics, visit our investor relations Internet site at www.qad.com, under “Investor Relations — Corporate Governance.” Each of these documents is also available in print, free of charge, to any stockholder who requests it by writing to QAD Inc., 100 Innovation Place, Santa Barbara CA 93108, Attention: Investor Relations or email to investor@qad.com.
DIRECTOR COMPENSATION
Director Compensation Overview |
Director Compensation Overview
Our directors play a critical role in guiding QAD’s strategic direction and overseeing the management of the Company. We seek to attract and retain highly qualifiedhighly-qualified directors who have sufficient time to attend to their considerable duties and responsibilities as directors of the Company. The many responsibilities and risks and the substantial time commitment of being a director of a public company require that we provide adequate incentives for our directors’ continued performance by paying compensation commensurate with our directors’ workload. While our employee directors are not separately compensated for being on the Board, our non-employee directors are compensated based upon their respective levels of Board participation and responsibilities, including service on Board committees. Annual cash retainers and equity grants to the non-employee directors are intended to correlate with the responsibilities of each such director.
Non-Employee Director Cash Retainer and Meeting Fees |
For fiscal year 2018,2020, each of our non-employee directors received the applicable retainers and fees set forth below for serving as a chair or a member of one or more of the standing committees ofon the Board.
Board Retainers and Standing | |||||
Annual Board Member Retainer | 40,000 | ||||
Chairman Supplemental Retainer |
| 50,000 | |||
Lead Director Supplemental Retainer (not applicable if Chairman is lead director) | 20,000 | ||||
Annual Committee Member Retainer: | |||||
Audit Committee | 10,000 | ||||
Compensation Committee | 7,500 | ||||
Governance Committee | — | ||||
Annual Committee Chair Retainer: | |||||
Audit Committee | 15,000 | ||||
Compensation Committee | 10,000 | ||||
Governance Committee | — | ||||
Fee per Board Meeting: | |||||
In person per meeting | 2,000 | ||||
By telephone per meeting | 1,000 | ||||
Fee per Committee Meeting: | |||||
Audit Committee | |||||
In person per meeting not held concurrently | 2,000 | ||||
By telephone per meeting not held concurrently | 1,000 | ||||
Compensation Committee | |||||
In person per meeting not held concurrently | 2,000 | ||||
By telephone per meeting not held concurrently | 1,000 | ||||
Governance Committee | |||||
In person per meeting not held concurrently | 2,000 | ||||
By telephone per meeting not held concurrently | 1,000 |
A Board member receives $2,000 for each Board and committee meeting attended in person and $1,000 for each such meeting attended via telephone. However, separate fees do not apply to any committee meetings held in conjunction with a regularly scheduled Board meeting or another committee meeting. From time to time, the Board forms special ad hoc committees to perform various functions on behalf of the Board. At times, fees may be paid for services on such ad hoc committees. Directors are also reimbursed for direct expenses related to their activities as members of the Board of Directors.
Non-Employee Director Equity Compensation
Non-Employee Director Equity Compensation |
The Board of Directors has approved equity compensation for the non-employee Board members as follows:
For each non-employee Board member that has served over one year on the Board, and is reelected at the Annual Meeting of Stockholders, an annual grant of 4,000 shares of Class A common stock that is fully vested on the date of grant with a grant date of the date of the Annual Meeting of Stockholders.
For each new non-employee Board member, a one-time grant of 4,000 shares of Class A common stock that is fully vested on the date of grant with a grant date on or about the date of such Board member’s election or appointment to the Board.
For each new non-employee Board member, who is reelected at the first Annual Meeting of Stockholders following such Board member’s appointment, a one-time grant of a pro-rata portion of the annual grant of 4,000 shares of Class A common stock, based upon such Board member’s time of service on the Board since the date of appointment through the date of the first Annual Meeting of Stockholders following such Board member’s appointment. Such grant shall be fully vested on the date of grant with a grant date of the date of the first Annual Meeting of Stockholders following such Board member’s appointment.
• | For each non-employee Board member that has served over one year on the Board, and is reelected at the Annual Meeting of Stockholders, an annual grant of 4,000 shares of Class A common stock that is fully vested on the date of grant with a grant date of the date of the Annual Meeting of Stockholders. | |
• | For each new non-employee Board member, a one-time grant of 4,000 shares of Class A common stock that is fully vested on the date of grant with a grant date on or about the date of such Board member’s election or appointment to the Board. | |
• | For each new non-employee Board member, who is reelected at the first Annual Meeting of Stockholders following such Board member’s appointment, a one-time grant of a pro-rata portion of the annual grant of 4,000 shares of Class A common stock, based upon such Board member’s time of service on the Board since the date of appointment through the date of the first Annual Meeting of Stockholders following such Board member’s appointment. Such grant shall be fully vested on the date of grant with a grant date of the date of the first Annual Meeting of Stockholders following such Board member’s appointment. |
Such awards are made under our 2016 Stock Incentive Program (the “2016 Program”). Under the 2016 Program, equity awards to non-employee Board members are limited to $250,000 per year, as determined for the Company’s financial accounting purposes as of the date of grant.
The Board applies stock ownership guidelines to non-employee directors to further align the interests of the non-employee directors with the interests of our stockholders. The guidelines stipulate that each non-employee Board member should own at least $30,000 in Company stock per year served on the Board, up to a maximum requirement of $150,000 in Company stock, measured on an annual basis as of the date of the annual stockholder meeting.
The table below sets forth information concerning the compensation of our non-employee Board members for fiscal year 2018.2020.
Non-Employee Director Compensation for Fiscal Year 2018
Non-Employee Director Compensation for Fiscal Year 2020 |
Name |
| Fees |
| Stock |
| All |
| Total |
|
Fees |
Stock |
All |
Total | ||||||||||||||||||||
Scott J. Adelson |
| 54,500 |
| 126,600 |
| — |
| 181,100 |
| 63,500 | 161,520 | — | 225,020 | ||||||||||||||||||||
Kathleen M. Crusco(2) | 14,500 | 197,320 | — | 211,820 | |||||||||||||||||||||||||||||
Peter R. van Cuylenburg | 129,500 | 161,520 | — | 291,020 | |||||||||||||||||||||||||||||
Lee D. Roberts |
| 71,000 |
| 126,600 |
| — |
| 197,600 |
| 73,000 | 161,520 | — | 234,520 | ||||||||||||||||||||
Leslie J. Stretch (3) |
| 62,000 |
| 126,600 |
| — |
| 188,600 |
| 29,000 | — | — | 29,000 | ||||||||||||||||||||
Peter R. van Cuylenburg |
| 96,500 |
| 126,600 |
| — |
| 223,100 |
|
(1) |
|
| The amounts in this column represent the aggregate grant date fair value of stock awards granted during fiscal year |
(2) | Ms. Crusco was appointed to the Board on December 1, 2019. | |
(3) | Mr. Stretch served on the Board in fiscal year 2020 until his |
Non-Employee Director Outstanding Equity Awards at 2018 Fiscal Year-End
Non-Employee Director Outstanding Equity Awards at 2020 Fiscal Year End |
As of January 31, 2018,2020, none of the non-employee directors held any unvested or unexercised outstanding options or SARs or any other unvested stock awards.
STOCK OWNERSHIP
Stock Ownership of Directors, Executive Officers and Certain Beneficial Owners
The following table shows the number of shares of QAD common stock beneficially owned on the record date, April 16, 2018, by each executive named in the “Summary Compensation Table” on page 28 and each non-employee director. The table also shows any person known to the Company to be the beneficial owner of more than five percent of our common stock as of March 31, 2018. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options, SARs, RSUs, warrants and other rights held by that person that are currently exercisable or become exercisable within 60 days following April 16, 2018, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the beneficial owner’s name.
Ms. Lopker and Mr. Lopker hold the following: 5,020,095 Class A and 2,357,535 Class B shares held jointly in the Lopker Living Trust, and 430,674 Class A and 21,075 Class B shares held by the Lopker Family Foundation. Ms. Lopker and Mr. Lopker are members of the Board of Directors of the Lopker Family Foundation. Ms. Lopker holds 4,193 Class A and 1,028 Class B shares in an IRA account. Mr. Lopker holds 156,556 Class A and 51,772 Class B shares in his name only and Ms. Lopker holds 152,014 Class A and 50,496 Class B shares in her name only. The business address for Ms. Lopker and Mr. Lopker is: c/o QAD Inc., 100 Innovation Place, Santa Barbara, California, 93108. Ms. Lopker and Mr. Lopker disclaim beneficial ownership of any of the foregoing shares in which they have no pecuniary interest.
The holdings for Tikvah Management LLC (“Tikvah”) are based on a Form 13F-HR filed with the SEC on February 14, 2018 showing shares owned as of December 31, 2017. The address for Tikvah is 831 E. Moorehead Street, Suite 940, Charlotte, North Carolina 28202.
|
| Class A |
|
| Class B |
| ||||||||||||||||||||||||||
Beneficial Owner |
| Shares |
|
| SARs/ |
|
| Percentage of |
|
| Shares |
|
| SARs/ |
|
| Percentage of |
| ||||||||||||||
Pamela M. and Karl F. Lopker |
|
| 5,763,532 |
|
|
|
| 1,755,000 |
|
|
|
| 41.96 | % |
|
|
| 2,481,906 |
|
|
|
| 255,000 |
|
|
|
| 77.84 | % |
| ||
Scott J. Adelson |
|
| 44,258 |
|
|
|
| — |
|
|
|
| 0.27 | % |
|
|
| 6,267 |
|
|
|
| — |
|
|
|
| 0.19 | % |
| ||
Lee D. Roberts |
|
| 18,156 |
|
|
|
| — |
|
|
|
| 0.11 | % |
|
|
| 2,368 |
|
|
|
| — |
|
|
|
| 0.07 | % |
| ||
Peter R. van Cuylenburg |
|
| 30,181 |
|
|
|
| — |
|
|
|
| 0.19 | % |
|
|
| 280 |
|
|
|
| — |
|
|
|
| 0.01 | % |
| ||
Daniel Lender |
|
| 129,366 |
|
|
|
| 25,000 |
|
|
|
| 0.95 | % |
|
|
| 8,046 |
|
|
|
| — |
|
|
|
| 0.25 | % |
| ||
Anton Chilton |
|
| 184 |
|
|
|
| 3,750 |
|
|
|
| 0.02 | % |
|
|
| 5 |
|
|
|
| — |
|
|
|
| — |
|
| ||
Kara L. Bellamy |
|
| 2,267 |
|
|
|
| 5,125 |
|
|
|
| 0.05 | % |
|
|
| 1,862 |
|
|
|
| — |
|
|
|
| 0.06 | % |
| ||
All Executive Officers and Directors as a Group |
|
| 5,987,944 |
|
|
|
| 1,788,875 |
|
|
|
| 43.32 | % |
|
|
| 2,500,734 |
|
|
|
| 255,000 |
|
|
|
| 78.37 | % |
| ||
Tikvah Management LLC |
|
| 980,150 |
|
|
|
| — |
|
|
|
| 6.06 | % |
|
|
| 85,907 |
|
|
|
| — |
|
|
|
| 2.63 | % |
| ||
|
COMPENSATION COMMITTEE REPORT
The following Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent that QAD specifically incorporates it by reference into such filing.
The Board of Directors has established a Compensation Committee of independent directors to assist in the oversight and governance of compensation for the Named Executives. The Compensation Committee has the duties and powers as described in its written charter as adopted by the Board and available on our website. The current members of the Compensation Committee are Mr. Roberts, Mr. Adelson, andMs. Crusco, Dr. van Cuylenburg.Cuylenburg and Mr. Roberts.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement with QAD’s management as required by Item 402(b) of Regulation S-K.management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended January 31, 2018,2020, filed with the SEC on April 16, 2018.14, 2020.
Submitted by: |
|
|
|
| Peter R. van Cuylenburg |
Lee D. Roberts, Chairman |
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary of Compensation Structure |
Cash compensation for each of the Named Executives includes a base salary (“Base Salary”) plus short-term cash incentives (“Cash Bonus”). The Cash Bonus is targeted at 100% of Base Salary for Mr. Chilton and Ms. Lopker, 60% of Base Salary for Mr. Lender and 45% of Base Salary for Ms. Bellamy. The Cash Bonus is weighted by the Customer Satisfaction Multiplier, as described below under “Customer Satisfaction Multiplier”. For fiscal year 2020, 70% of each Named Executive’s Cash Bonus opportunity was based on QAD’s financial performance and 30% on strategic goals. The financial performance opportunity consisted of 40% based on actual revenue relative to planned revenue (non-GAAP, as further described below) for the fiscal year, 40% based on contribution margin (non-GAAP) relative to the plan for the fiscal year, and 20% based on results related to our cash collection goals, measured in days sales outstanding (“DSO”). 21% of the Cash Bonus opportunity for financial performance was paid following each quarter related to quarterly results and 16% was paid after fiscal year end related to annual performance. The strategic goals opportunity for the Named Executives was based on performance against goals under the Company’s strategic plan, half of which were metrics related to the Company’s cloud business targets and half of which goals were within each of their areas of responsibility. The Compensation Committee exercised its discretion in determining each Named Executive’s performance with respect to goals within their area of responsibility, which may include additional goals that were not part of the initial strategic plan.
Equity awards are used as long-term incentives for the Named Executives and are intended to align the interests of the Named Executives with QAD’s strategic goals and the interests of stockholders. Each Named Executive Summaryreceived a combination of restricted stock units (“RSUs”) and performance stock units (“PSUs”) (PSUs and RSUs together “Equity Awards”), however, Mr. Chilton was granted his RSUs in fiscal year 2019 at the time of his appointment as CEO and the Compensation Committee granted Mr. Chilton only his PSUs during the annual Equity Award grant in fiscal year 2020.
Executive Compensation Philosophy |
QAD’s executive compensation program applies to the following named executive officers (“Named Executives”):
| Chief Executive Officer |
Pamela M. Lopker | President |
Daniel Lender | Chief Financial Officer and Executive Vice President |
|
|
Kara | Chief Accounting Officer |
|
|
The compensation objectives for QAD’s Named Executives are to:
attract and retain highly talented and productive executives;
align the interests of the Named Executives with the interests of the stockholders;
provide incentives for the Named Executives to achieve strategic and financial goals; and
reward the Named Executives for performance that enhances stockholder value.
• | attract and retain highly talented and productive executives; | |
• | align the interests of the Named Executives with the interests of the stockholders; | |
• | provide incentives for the Named Executives to achieve strategic and financial goals; and | |
• | reward the Named Executives for performance that enhances stockholder value. |
When making compensation decisions, the Compensation Committee considers the elements of base salary (“Base Salary”), short-term cash incentives (“Salary, Cash Bonus”)Bonus and long-term equity awards in the form of restricted stock units (“RSUs”) and/or stock appreciation rights (“SARs” and with RSUs “Equity Awards”)Equity Awards collectively in order to determine the total compensation for each Named Executive. Base Salary is the only fixed element and provides baseline compensation for the Named Executives. The Compensation Committee sets compensation for the Named Executives so their individual components as well as their total compensation packages are within the market range for their individual positions and are internally consistent with the compensation packages of other QAD senior executives relative to their positions in the Company. The Compensation Committee focuses the Named Executives on achieving superior annual and long-term performance by structuring their compensation mix so that a substantial part of their potential compensation is tied to achieving positive returns for our stockholders.
Base Salary is established at a level that is competitive with our peer companies and reflects the role, experience and performance of each Named Executive.
• | Base Salary is established at a level that is competitive with our peer companies and reflects the role, experience and performance of each Named Executive. | |
• | Cash Bonus focuses the Named Executives on the Company’s annual and short-term performance by linking it to (i) the Company’s achievement of its financial goals for the year, (ii) the Company’s achievement of very aggressive growth targets in relation to its global cloud business and (iii) each Named Executive’s performance in achieving the Company’s strategic plan in areas subject to such Named Executive’s individual responsibility. | |
• | RSUs with time-based vesting help tie our Named Executives’ variable realizable compensation to our overall performance and further align their interests with those of our stockholders, while ensuring that the Named Executives receive some equity compensation so long as they continue to be employed by the Company. | |
• | PSUs, which are contingent upon both employment with the Company and achievement of pre-determined performance objectives, tie our Named Executives’ variable realizable compensation to specified performance objectives of the Company. Depending on the financial performance levels achieved, a percentage of the PSUs (0% to 200% of the target award) will vest to the Named Executives. There is no guarantee that the Company’s outstanding PSUs will vest in whole or in part. |
The Compensation Committee established fiscal year 20182020 compensation targets for the Named Executives based on the Company’s annual operating plan and at a level that, based on market data, theythe Compensation Committee believed fairly compensated the Named Executives. Individual Named Executive compensation packages took into account the following factors:
Assessment of financial and personal results achieved, leadership demonstrated and challenges faced during fiscal year 2018 by each Named Executive;
Compensation history and existing equity interest for each Named Executive;
Relative compensation among the Named Executives and other senior executives within the Company;
Estimates of costs and disruption that would be incurred to hire replacements for each Named Executive;
Competitive market analysis and peer group data; and
Extra responsibilities performed by a Named Executive in his or her role with the Company compared to the standard responsibilities expected in the position.
• | Assessment of financial and personal results achieved, leadership demonstrated and challenges faced during fiscal year 2020 by each Named Executive; | |
• | Compensation history and existing equity interest for each Named Executive; | |
• | Relative compensation among the Named Executives and other senior executives within the Company; | |
• | Estimates of costs and disruption that would be incurred to hire replacements for each Named Executive; | |
• | Competitive market analysis and peer group data; and | |
• | Extra responsibilities performed by a Named Executive in his or her role with the Company compared to the standard responsibilities expected in the position. |
Executive Compensation Philosophy
Compensation of the CEO and President
QAD is a “controlled company” with a majority of the vote controlled by the two individuals currently holding the offices of President and CEO. Ms. Lopker is the President and the founder of QAD and Mr. Lopker is the CEO of QAD and the husband of Ms. Lopker. Together they have been the leaders of QAD throughout its growth from a private company to a public multinational enterprise. They continue to provide active leadership in the strategic direction and day-to-day operations of the Company. The Compensation Committee has determined that due to the crossover in the roles they perform in setting the direction of the Company, determining our product strategy and interfacing with key customers, they are to be compensated equally.
Cash compensation for each of Mr. Lopker and Ms. Lopker includes a Base Salary plus a Cash Bonus incentive targeted at 100% of Base Salary. For fiscal year 2018, 70% of each of their respective Cash Bonus opportunities was based on QAD’s financial performance, weighted by the Customer Satisfaction Multiplier as described below under “Customer Satisfaction Multiplier” and 30% of each of their Cash Bonus opportunities was based on individual goals, as described below. The financial performance opportunity consisted of 40% based on actual revenue relative to planned revenue (non-GAAP, as further described below) for the fiscal year, 40% based on contribution margin (non-GAAP) relative to the plan for the fiscal year, and 20% based on results related to our cash collection goals, measured in days sales outstanding (“DSO”). 21% of the Cash Bonus opportunity for financial performance was available each quarter related to quarterly results and 16% was available after fiscal year end related to annual performance. The individual goal opportunity was based on performance against the Company’s strategic plan as determined in the discretion of the Compensation Committee, weighted by the Customer Satisfaction Multiplier.
Because of their majority control, the Compensation Committee believes the personal motivation of Mr. Lopker and Ms. Lopker is more focused on equity rather than cash. The Compensation Committee further believes that this focus on equity is a positive factor because it more closely aligns the interests of Mr. Lopker and Ms. Lopker with the interests of other stockholders. Therefore, when determining the compensation mix for Mr. Lopker and Ms. Lopker, the Compensation Committee places greater emphasis on the equity portion of their total compensation package as compared to the other Named Executives.
Compensation of Other Named Executives
The other Named Executives include Mr. Lender, Mr. Chilton and Ms. Bellamy. Cash compensation for these other Named Executives includes a Base Salary plus a Cash Bonus incentive, which is intended to ensure a strong connection between the Named Executive’s compensation and operating results. Mr. Lender had a Cash Bonus opportunity at target equal to 60% of Base Salary, Mr. Chilton had a Cash Bonus opportunity at target equal to 60% of Base Salary and Ms. Bellamy had a Cash Bonus opportunity at target equal to 42% of Base Salary. For fiscal year 2018, 70% of the Cash Bonus opportunity of each of the other Named Executives was based on QAD’s financial performance, weighted by the Customer Satisfaction Multiplier. The financial performance opportunity consisted of 40% based on actual revenue relative to planned revenue (non-GAAP) for the fiscal year, 40% based on contribution margin (non-GAAP) relative to the plan for the fiscal year, and 20% based on results related to the Company’s DSO goals. 21% of the Cash Bonus opportunity for financial performance was available each quarter related to quarterly results and 16% was available after fiscal year end related to annual performance.
For fiscal year 2018, the remaining 30% of the Cash Bonus of each of the other Named Executives was based on their performance against the Company’s strategic plan within the individual Named Executive’s area of responsibility, weighted by the Customer Satisfaction Multiplier. The Compensation Committee exercised its discretion in determining the performance of each of the Named Executives, which may have been supplemented by additional matters addressed by a Named Executive during the course of the year that were not part of the initial strategic plan.
Equity Awards are used as long-term incentives for the other Named Executives and are intended to align the interests of the other Named Executives with QAD’s strategic goals and the interests of stockholders.
Benchmarking of Compensation |
To ensure that the compensation of the Named Executives is market competitive, pay levels for the Named Executives are benchmarked against proxy data compiled by Main Data GroupEquilar and the compensation practices of the Compensation Peer Group (as defined below). Also, in July 2017, the Compensation Committee engaged Pearl Meyer, an executive compensation consulting firm, to provide consultation towas engaged by the Compensation Committee with respectin July 2017 to a competitive assessment of theconduct an external peer group review and perform executive compensation program.benchmarking analysis. Pearl Meyer conducted a full review ofdetermined QAD's peer group for compensation purposes and reported its findings at the December Compensation Committee meeting. Pearl Meyer concluded that QAD's annual performance incentive components were well-tailored to the Company and working well; and that the long-term incentive component was well-aligned with peers, with the total number of equity awards granted in a year compared to total common shares outstanding in line with peers and guidelines.
If insufficient Compensation Peer Group data is available for a particular position, we expand the benchmarking to include companies outside our Compensation Peer Group that have similar industry, revenue and employee population characteristics. A review of publicly-traded companies is internally conducted each year to determine appropriate companies for possible inclusion in the Compensation Peer Group. Proxy data compiled by Main Data Group is used to identifyidentifying technology companies that compete with QAD or have other characteristics that make them suitable for comparison with QAD, have similar revenuescomparison. The peer group recommended by Pearl Meyer was reviewed, revised to delete a peer company that was acquired, and employ a similar employee base population. The Compensation Committee reviews a list of potential candidates compiled from the Main Data Group data for inclusion in the Compensation Peer Group, along with three years of each company’s financial performance. The Compensation Peer Group is selectedapproved by the Compensation Committee from this list to include those companies that are most likely to compete against us in the market for executive talent.Committee. For fiscal year 2018,2020, the Compensation Peer Group consisted of the following companies:
|
| Progress Software |
American Software, Inc. |
|
|
Apptio, Inc. | Manhattan Associates, Inc. | SPS Commerce, Inc. |
Aspen Technology, Inc. |
| Synchronoss Technologies, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
To market check the appropriate compensation for the Named Executives, the Compensation Committee reviews points of similarity between QAD and the companies within the Compensation Peer Group based on factors such as industry segment, size when measured by market capitalization and/or revenue, growth expectations, number of employees and similar business models. For each Named Executive, each element of their compensation mix, as well as their total direct compensation, is compared against market data. The Compensation Committee reviews the survey data from Equilar and Radford and the compensation practices of the Compensation Peer Group and compares the compensation of each of the Named Executives to compensation paid for similar positions in the Compensation Peer Group. The Compensation Committee also compares the compensation of each of the Named Executives with data fromthe compensation of other senior executives within QAD in order to maintain internal equity with respect to cash and equity compensation packages in effect for all senior executives.
Elements of the Executive Compensation Program
|
The compensation packages provided to each of the Named Executives for fiscal year 2020 consisted of three major elements: (1) Base Salary, (2) Cash Bonus and (3) Equity Awards. The Named Executives also participated in QAD’s benefit programs and certain Named Executives had change in control and termination benefit arrangements commensurate with market practices.
Base Salary |
QAD strives to be market competitive and to set Base Salary at a level that is appropriate for each Named Executive’s role. Merit, experience, skills and level of performance are all considered when setting Base Salary. The Chief People Officer and the CEO evaluate the Base Salary for Mr. Lender Mr. Chilton and Ms. Bellamy, based on an internal assessment of the scope and responsibility of their positions. The chairman of the Compensation Committee, with input provided by the Chief People Officer, evaluates the Base Salary of the CEO and the President. A market check of Base Salary is performed by reviewing similar roles identified in Compensation Peer Group data and market surveys from Main Data Group data and market surveys from Equilar for companies with revenue between $200 million and $500 million. The Compensation Committee is then presented with the results of the evaluations and sets each Named Executive’s Base Salary for the year at a level which the Compensation Committee believes is market competitive for such Named Executive’s position.
Cash Bonus |
The Cash Bonus is an “at risk” variable component of the compensation mix for each Named Executive and is designed to encourage the Named Executives to contribute to meeting Company financial targets and perform at a high level within their individual areas of responsibility. The Chief People Officer and the CEO evaluate the Cash Bonus amount as a percentage of Base Salary for Mr. Lender Mr. Chilton and Ms. Bellamy, based on internal assessment of the scope and responsibility of each of their positions. The chairman of the Compensation Committee, with input provided by the Chief People Officer, performs a similar analysis for the CEO and the President. The market competitiveness of the Cash Bonus for each Named Executive is compared to similar roles identified in a combination of Compensation Peer Group data and market surveys from Main Data Group data and market surveys from Equilar for companies with revenue between $200 million and $500 million. The Compensation Committee then sets each Named Executive’s Cash Bonus target for the year based on the evaluation presented. The Cash Bonus opportunity is weighted in favor of the achievement of QAD’s financial targets over individual goals in order to focus the Named Executives on achieving the Company’s financial targets, which we believe are aligned with providing stockholder value. For fiscal year 2020, 70% of each Named Executive’s Cash Bonus opportunity was based on achievement of Company financial goals, while the other 30% was based on strategic goals. The portions of the Cash Bonus achieved by measurement of financial goals and by performance against strategic goals in order to focus the Named Executives on achieving the Company’s financial targets, which we believe are aligned with providing stockholder value. For fiscal year 2018, 70% of each Named Executive’s Cash Bonus opportunity was based on achievement of Company financial goals, while the other 30% was based on individual goals. The portions of the Cash Bonus achieved by measurement of financial goals and by individual performance were each weighted by the Customer Satisfaction Multiplier.
Customer Satisfaction Multiplier |
The Cash Bonus computation for Named Executives, as well as for all other employees on a Cash Bonus plan, except certain sales personnel, includes a component that focuses our employees on providing high quality service across all areas that impact our customers by adjusting the Cash Bonus for the degree of customer satisfaction with QAD. This component, called the Customer Satisfaction Multiplier, is applied to both the portion of the Cash Bonus that is based on Company financial goals and the portion based on strategic goals. Historically, we have conducted a customer satisfaction survey twice per year with half of the customer contacts surveyed in each round. This survey encompasses a number of questions across our business departments and we take the average of the customer scores for a final determination of the Customer Satisfaction Multiplier, which is then compared to an historical baseline that is periodically reviewed for appropriateness. This baseline was established using historical customer survey results that represent a generally satisfied customer score. For fiscal year 2020, 100% achievement could be reached by performing within an acceptable range above or below this baseline. Achievement below the bottom of the range would result in the Customer Satisfaction Multiplier being 80%. Achievement above the top of the range would result in the Customer Satisfaction Multiplier being 120%. The customer surveys conducted during fiscal year 2020 resulted in the Company achieving a score within the range of the baseline for both the first half and second half of the year and, as a result, the Customer Satisfaction Multiplier was 100% for each period and for fiscal year 2020 as a whole.
The Cash Bonus computation for Named Executives, as well as for all other employees on a Cash Bonus plan, except certain sales personnel, includes a component that focuses our employees on providing high quality service across all areas that impact the customer by adjusting the Cash Bonus for the degree of customer satisfaction with QAD. This component, called the Customer Satisfaction Multiplier, is applied to both the portion of the Cash Bonus that is based on Company financial goals and the portion based on individual goals. Historically, we have conducted a customer satisfaction survey twice per year with half of the customer contacts surveyed in each round. This survey encompasses a number of questions across our business departments and we take the average of the customer scores for a final determination of the Customer Satisfaction Multiplier, which is then compared to an historical baseline that is periodically reviewed for appropriateness. This baseline was established using historical customer survey results that represent a generally satisfied customer score. For fiscal year 2018, 100% achievement could be reached by performing within an acceptable range above or below this baseline. Achievement below the bottom of the range would result in the Customer Satisfaction Multiplier being 80%. Achievement above the top of the range would result in the Customer Satisfaction Multiplier being 120%. The customer surveys conducted during fiscal year 2018 resulted in QAD achieving scores within the range of the baseline and, as a result, the Customer Satisfaction Multiplier was 100% for the year.
Cash Bonus Results |
Cash Bonus payments for achieving Company financial goals are based on quarterly and annual non-GAAP targets set in the operating plan for (i) revenue performance (the “Revenue Component” which is 40% of the target payment), (ii) contribution margin (the “Contribution Component” which is 40% of the target payment) and (iii) DSO targets (the “DSO Component” which is 20% of the target payment). The Revenue Component incentivizes our Named Executives to be focused on driving new customer business, developing desirable products, delivering high value services and support to customers, and designing and implementing an effective sales process. The Contribution Component focuses the Named Executives on generating profits and monitoring expenses. The DSO Component ensures our Named Executives are monitoring contracts entered into with customers where payment terms are commensurate with the timing of when products and services are provided and contracts where customers' timely payments are an indication of customer satisfaction. We believe that the goal set for each of these components was aggressive, but achievable. After application of the Customer Satisfaction Multiplier, each Named Executive earned approximately 85% of their Cash Bonus target that was based on achievement of Company financial goals. In all cases, payout percentages are prorated for performance between the minimum and the target and between the target and the maximum.
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| The fiscal year | |
• | 90% of each target must be achieved to reach a minimum payout of 50% of the Revenue Component of the Cash Bonus for such period. | |
• | If 100% of a quarterly or annual target is achieved, payout is 100% for such period. | |
• | The maximum payout of 300% for a quarterly or annual target is made if achievement is 130% of target for such period. | |
• | In fiscal year |
Contribution Component |
| The fiscal year | |
• | 60% of each target must be achieved to reach a minimum payout of 50% of the Contribution Component of the Cash Bonus for such period. | |
• | If 100% of a quarterly or annual target is achieved, payout is 100% for such period. | |
• | The maximum payout of 300% for a quarterly or annual target is made if achievement is 160% of target for such period. | |
• | In fiscal year |
DSO Component |
• | The fiscal year | |
• | For each target, if achievement in number of days is no greater than 130% of the target, a minimum payment of 50% is made for such period. | |
• | If 100% of a quarterly target is achieved, payout is 100% of the DSO Component of the Cash Bonus for such period. | |
• | The maximum payout of 300% for a quarterly target is made if achievement in number of days is 65% of target or less for such period. | |
• | In fiscal year |
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The major differences between non-GAAP revenue used for Cash Bonus determinations and GAAP revenue are that:
• | Non-GAAP revenue does not include travel rebill to our customers. | |
• | Non-GAAP revenue includes certain revenue recognition timing differences from GAAP revenue. | |
• | Non-GAAP revenue excludes services revenue. | |
• | Non-GAAP revenue is decreased by fees paid to agents and support partners, whereas in the GAAP financial statements these amounts are included as revenue offset by expenses. | |
• | Non-GAAP revenue includes bookings related to QAD cloud transactions and other subscriptions. |
The major differences between non-GAAP contribution used for Cash Bonus determinations and GAAP operating income are that:
• | Non-GAAP contribution does not include expenses related to Equity Awards. | |
• | Non-GAAP contribution includes certain timing differences from GAAP operating income. | |
• | Non-GAAP contribution does not include certain amortizations, such as for acquired software and other intangibles from acquisitions. | |
• | Non-GAAP contribution includes implied margin on bookings related to QAD cloud and other subscription transactions. |
Payout on Financial Goals
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For fiscal year 2020, the payouts based on achievement of Company financial goals and the Customer Satisfaction Multiplier (as described above) were approximately:
• | Revenue Component – | |
• | Contribution Component – | |
• | DSO Component – | |
• | Overall Achievement of Financial Goals – | |
• | Customer Satisfaction Multiplier – 100% | |
• | Total Financial Bonus – |
The Compensation Committee approved Cash Bonus payments for achievement of Company financial goals as follows:
Name | Target | Amount | Additional | Amount | ||||||||||||||||
Anton Chilton | 315,000 | 267,745 | 0 | 267,745 | ||||||||||||||||
Pamela M. Lopker | 240,011 | 204,005 | 0 | 204,005 | ||||||||||||||||
Daniel Lender | 212,331 | 180,478 | 0 | 180,478 | ||||||||||||||||
Kara L. Bellamy | 90,435 | 76,868 | 0 | 76,868 |
Strategic Goals |
Cash Bonus payments for achievement of strategic goals are generally based on the contribution of each Named Executive to the priorities set out in QAD’s strategic plan. The strategic goals component is divided into two parts, with 50% relating to the Company achieving what we believe to be very aggressive growth targets in relation to our global cloud business and 50% related to each Named Executive’s individual performance for the year in each of their own areas of responsibility that support QAD’s strategic goals, as well as material accomplishments achieved during the year that were not identified at the time strategic goals were set. QAD’s fiscal year 2020 strategic plan included initiatives in the areas of reaccelerating the growth in QAD’s global cloud business, improving the profitability in our professional services business, enhancing the effectiveness and capabilities in our sales and marketing organization, the successful launch and customer adoption of QAD Adaptive ERP, developing our employees and continuous operational improvement. Each Named Executive’s individual goals were set in support of these strategic initiatives.
After the fiscal year ends, Named Executives are evaluated on the performance of the Company related to growth of QAD’s global cloud business and on their own performance with respect to the goals in their individual areas of responsibility. The Company’s very aggressive growth targets in relation to our cloud business were achieved above the minimum payout target and resulted in a payout of 138% on that metric for each of the Named Executives. The evaluations of each Named Executive’s individual performance with respect to the goals in the areas for which they are responsible is a subjective assessment and are further described below.
Mr. Chilton’s individual goals related to achieving the overall strategic initiatives of the Company, with particular emphasis on improving the efficiency and efficacy of the sales and marketing organization, the development of a long-term strategic plan for the Company and the achievement of the Company’s operational and financial goals. The Compensation Committee reviewed Mr. Chilton’s accomplishments and rated him at 105% achievement. Combining the cloud business portion and the individual performance portion, the Committee approved paying Mr. Chilton 121.5% of his strategic goals component, subject to the Customer Satisfaction Multiplier of 100% for a total of 121.5%.
Ms. Lopker’s individual goals related to achieving the overall strategic initiatives of the Company, with particular emphasis on maintaining our Cloud delivery performance and the adoption and continued development of QAD’s Adaptive ERP application. The Compensation Committee reviewed Ms. Lopker’s accomplishments and rated her at 105% achievement. Combining the cloud business portion and the individual performance portion, the Committee approved paying Ms. Lopker 121.5% of her strategic goals component, subject to the Customer Satisfaction Multiplier of 100% for a total of 121.5%.
Mr. Lender’s individual goals related to operational effectiveness initiatives in support of the Company’s sales, professional services and other operational areas; maintaining compliance with SEC and other regulatory requirements; maintaining and improving effective accounting, tax and financial planning, and internal controls operations; leading investor and analyst communications; managing and supporting several legal department initiatives; and providing executive sponsorship to various areas of the business. Mr. Chilton conducted a review of Mr. Lender’s accomplishments and rated him at 110% achievement. Combining the cloud business portion and the individual performance portion, Mr. Chilton recommended a payment of 124% of Mr. Lender’s strategic goals component, subject to the Customer Satisfaction Multiplier of 100% for a total of 124%, which was approved by the Compensation Committee.
Ms. Bellamy’s individual goals related to the successful implementation of the lease accounting standard, the design and implementation of improvements to the quote to cash process, the adoption and monitoring of new metrics related to the Company’s subscription revenue, the management of the Company’s tax processes, including multiple jurisdictional tax audits, and various other improvements across treasury, internal audit, investor relations and financial systems. Mr. Lender conducted a review of Ms. Bellamy’s accomplishments and rated her at 120% achievement. Combining the cloud business portion and individual performance portion, Mr. Lender recommended a payment of 129% of Ms. Bellamy’s strategic goals component, subject to the Customer Satisfaction Multiplier of 100% for a total of 129%, which was approved by the Compensation Committee.
For fiscal year 2020, the dollar amounts approved by the Compensation Committee as Cash Bonus payments to the Named Executives for achievement of strategic goals were as follows:
Name | Target | Amount | Additional | Amount | ||||||||||||
Anton Chilton | 135,000 | 164,025 | 0 | 164,025 | ||||||||||||
Pamela M. Lopker | 102,862 | 124,977 | 0 | 124,977 | ||||||||||||
Daniel Lender | 90,999 | 112,839 | 0 | 112,839 | ||||||||||||
Kara L. Bellamy | 38,758 | 49,998 | 0 | 49,998 |
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The Compensation Committee may, on occasion, award discretionary bonuses to the Named Executives. No cash discretionary bonuses were awarded to Named Executives for fiscal year 2020.
Name | Target | Amount | Additional | Amount | ||||||||||||
Karl F. Lopker | 233,020 | 289,136 | — | 289,136 | ||||||||||||
Pamela M. Lopker | 233,020 | 289,136 | — | 289,136 | ||||||||||||
Daniel Lender | 203,091 | 251,999 | — | 251,999 | ||||||||||||
Anton Chilton | 171,080 | 212,279 | — | 212,279 | ||||||||||||
Kara L. Bellamy | 81,948 | 101,682 | — | 101,682 |
Cash Bonus payments for achievement of individual goals are generally based on the contribution of each Named Executive to the priorities set out in QAD’s strategic plan. After fiscal year earnings are released, Named Executives are evaluated on their accomplishments for the year based on strategic goals for their individual areas of responsibility as well as material accomplishments achieved during the year that were not identified at the time strategic goals were set. This evaluation is a subjective assessment of their accomplishments for the year in the areas for which they are responsible. QAD’s fiscal year 2018 strategic plan included initiatives in the areas of continuing to grow QAD’s global cloud business, enhancing our professional services capabilities, updating and augmenting our product capabilities through the development of our Channel Islands initiative, developing our employees and continuous operational improvement. Each Named Executive’s individual goals were set in support of these strategic initiatives.
Mr. Lopker’s and Ms. Lopker’s individual goals component was divided into two parts, with 50% relating to the Company achieving what we believe to be very aggressive growth targets in relation to our global cloud business and 50% related to individual performance. The Company’s very aggressive growth targets in relation to our cloud business were achieved above the minimum payout target, and resulted in a payout of 229% on that metric. Mr. Lopker’s and Ms. Lopker’s individual performance related to meeting the financial targets including overall revenue and profitability, cash flow and balance sheet targets of the Company, driving growth through our Cloud business, maintaining high customer satisfaction and improving gross margins in our global cloud business, enhancing our customer engagement initiatives by vertical segment, adjusting our professional services capacity to meet market requirements while managing margins, driving product development initiatives with a focus on the Channel Islands project, and stewarding employee and operational programs. Mr. Lopker and Ms. Lopker shared individual goals and were jointly assessed on achievement against these goals. The Compensation Committee reviewed the accomplishments of Mr. Lopker and Ms. Lopker and rated them at 110% achievement. Combining the cloud business portion and the individual performance portion, the Committee approved paying each of them 169.5% of their individual goals component, subject to the Customer Satisfaction Multiplier of 100%.
Mr. Lender’s individual goals component was divided into two parts, with 50% relating to QAD achieving what we believe to be very aggressive growth targets in relation to our global cloud business and 50% related to individual performance. The Company’s very aggressive growth targets in relation to our cloud business were achieved above the minimum payout target, and resulted in a payout of 229% on that metric. Mr. Lender’s individual performance related to operational effectiveness initiatives, including the planning, implementation and development of several internal operational and financial systems to ensure compliance with changing regulations; maintaining and improving effective accounting, tax and financial planning, and internal controls operations; leading investor and analyst communications; managing and supporting several legal department initiatives; and providing executive sponsorship to various areas of the business. Mr. Lopker conducted a review of Mr. Lender’s accomplishments and rated him at 110% achievement. Combining the cloud business portion and individual performance portion, Mr. Lopker recommended a payment of 169.5% of Mr. Lender’s individual goals component, subject to the Customer Satisfaction Multiplier of 100%, which was approved by the Compensation Committee.
Mr. Chilton’s individual goals component was divided into two parts, with 50% relating to the Company achieving what we believe to be very aggressive growth targets in relation to our global cloud business and 50% related to individual performance. The Company’s very aggressive growth targets in relation to our cloud business were achieved above the minimum payout target and resulted in a payout of 229% on that metric. Mr. Chilton’s individual performance related to maximizing the effectiveness of the sales and services organizations, developing long-term strategic programs to enhance the competitiveness of our marketing and field operations, and implementing various training initiatives for the company. Mr. Lopker conducted a review of Mr. Chilton’s accomplishments and rated him at 100% achievement. Combining the cloud business portion and individual performance portion, Mr. Lopker recommended a payment of 164.5% of Mr. Chilton’s individual goals component, subject to the Customer Satisfaction Multiplier of 100%, which was approved by the Compensation Committee.
Ms. Bellamy’s individual goals related to achieving process improvements and implementation of enhancements to the Company’s internal accounting systems; managing various corporate accounting initiatives, including the design and development of systems and processes for compliance with changes to accounting standards; reviewing and improving the efficiency of our corporate and tax structures; enhancing investor relations communications; and managing our internal audit function and tax function. Mr. Lender conducted a review of Ms. Bellamy’s accomplishments and recommended a payment of 110% of her Cash Bonus target related to individual goals, subject to the Customer Satisfaction Multiplier of 100%, which was approved by the Compensation Committee.
For fiscal year 2018, the dollar amounts approved by the Compensation Committee as Cash Bonus payments to the Named Executives for achievement of individual goals were as follows:
Name | Target | Amount | Additional | Amount | ||||||||||||
Karl F. Lopker | 99,866 | 169,273 | — | 169,273 | ||||||||||||
Pamela M. Lopker | 99,866 | 169,273 | — | 169,273 | ||||||||||||
Daniel Lender | 87,039 | 147,531 | — | 147,531 | ||||||||||||
Anton Chilton | 73,320 | 120,611 | — | 120,611 | ||||||||||||
Kara L. Bellamy | 35,120 | 38,633 | — | 38,633 |
Discretionary Bonus
The Compensation Committee may, on occasion, award discretionary bonuses to the Named Executives. No cash discretionary bonuses were awarded to Named Executives for fiscal year 2018.
Equity Awards
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Equity Awards are designed to align the interests of the Named Executives with the interests of stockholders and the Company’s strategic goals by creating a direct link between their compensation, stockholder returns and Company objectives. They are intended to direct the attention of the Named Executives to making strategic decisions and managing our resources with the objectives of increasing stockholder value. We believe that Equity Awards also further our retention objectives by requiring Named Executives to remain with the Company over the vesting period to fully benefit from an Equity Award. We grant Equity Awards to the Named Executives in the form of RSUs and PSUs with respect to QAD common stock. Under our 2016 Program, Equity Awards are granted only with respect to Class A common stock. We generally grant RSUs with a four-year vesting period and, upon vesting, each RSU is converted into one share of QAD common stock. The shares awarded, which may be reduced by the number of shares equivalent in value to the required tax withholding, are then transferred to the Named Executive. We generally grant SARs with a four-year vesting period and an eight-year life at fair market value as of the date of grant. The appreciation on each vested, exercised SAR is paid, net of tax withholding, to the Named Executive in QAD common stock.
Both RSUs and PSUs are commonly used in the software and technology industries and are used by the Company as integral components of our competitive compensation packages. The Compensation Committee directed that we may grant RSUs to all employees, and PSUs to certain senior executives, including our Named Executives, who are eligible for a combination of RSUs and PSUs under the QAD Executive Long Term Incentive (“ELTI”) Program. PSUs were introduced in fiscal year 2020 due to the general trend in equity compensation in our industry of granting performance-based equity awards to senior executives. Since fiscal year 2011, we had granted only stock-settled stock appreciation rights (a contractual right to receive value tied to the post-grant appreciation of the underlying stock) to Ms. Lopker to reflect the Compensation Committee’s greater emphasis on appreciation in the equity portion of her total compensation package as compared to the other Named Executives. Upon adoption of the ELTI Program in fiscal year 2020, Ms. Lopker was granted a combination of RSUs and PSUs using the same approach as for the other Named Executives.
Both RSUs and PSUs are issued from an annually Board-approved pool of shares. Such pool of shares has been provided under our stockholder-approved 2016 Program. We limit the size of the pool in relation to the number of outstanding shares in order to limit the potential economic dilution to existing stockholders. We also adjust the size of the pool as required to reflect the number of employees eligible for Equity Awards in a given year. The Company has guidelines by employee level for all departments and levels, other than the President, Chief Executive Officer and Chief Financial Officer. We granted Equity Awards pertaining to approximately 374,270 shares during fiscal year 2020 for all employees, including the Named Executives, new hires, and non-employee directors.
Both RSUs and SARs are commonly used in the software and technology industries and are used by the Company as integral components of competitive compensation packages. We grant only RSUs to all employees, except the President and the Chief Executive Officer who receive only SARs. The Compensation Committee directed that only RSUs be granted to all employees, except the President and the Chief Executive Officer, due to the general trend in equity compensation in our industry of many companies moving exclusively to granting RSUs and employee feedback that RSUs are generally more attractive to them. We continue to grant only SARs to the President and the Chief Executive Officer, as has been the practice since fiscal year 2011, to reflect the Compensation Committee’s greater emphasis on appreciation in the equity portion of their total compensation package as compared to the other Named Executives.
Both RSUs and SARs are issued from an annually Board-approved pool of shares. Such pool of shares has been provided under our stockholder-approved 2016 Program. We limit the size of the pool in relation to the number of outstanding shares in order to limit the potential economic dilution to existing stockholders. We also adjust the size of the pool as required to reflect the number of employees eligible for Equity Awards in a given year. The Company has guidelines by employee level for all departments and levels, other than President, Chief Executive Officer and Chief Financial Officer. We granted approximately 674,000 Equity Awards during fiscal year 2018 for all employees, including the Named Executives, new hires, and non-employee directors.
We believe Equity Awards create performance incentives and align the interests of the Named Executives with the interests of stockholders because the value of an Equity Award increases or decreases in conjunction with the Company’s stock price, thereby focusing the Named Executives on achieving long-term Company growth and profitability. RSUs are also a retention tool that provides compensation to the Named Executives because, despite the volatility of our stock price, a given number of shares are awarded pursuant to an RSU irrespective of the price of the underlying stock. Both RSUs and SARs minimize the dilutive effects of our equity award program compared to traditional stock options. In the case of RSUs, this is accomplished by granting a smaller number of RSUs compared to stock options because the grant-date fair value of an RSU is generally greater than that of a stock option. In the case of SARs, this is accomplished by awarding shares on the exercise of a SAR only for the appreciation from the strike price, whereas a stock option results in the issuance of a whole share on exercise.
When determining the number of Equity Awards to be granted to each Named Executive, the Compensation Committee analyzes factors related to each Named Executive, including:
• | Total Equity Awards previously granted over the Named Executive’s term of employment; | |
• | The value of the proposed Equity Award; | |
• | The value of existing Equity Award holdings at the stock price in effect at the time of analysis and at various hypothetical price points; | |
• | The value of Equity Awards previously exercised or vested; and | |
• | The total compensation package of the Named Executive. |
For purposes of internal equity, we apply the same guidelines when determining grants of Equity Awards to Named Executives as are applied to grants of Equity Awards to other senior executives within the Company. However, the value of Equity Awards granted to a particular Named Executive may differ from other Named Executives and senior executives, at the same level within the Company. However, the amount of Equity Awards granted to a particular Named Executive may differ from other Named Executives and executives at the same level, because grants of Equity Awards are impacted by each Named Executive’s experience in his or her position, accomplishment of strategic goals, performance within his or her position over time, subjective assessment of individual performance and contribution to the Company, retention objectives and competitive issues. The size of an Equity Award in any one year is not directly related to a Named Executive’s performance in that year due to the nature of equity as a long-term incentive and QAD’s goal of providing Named Executives with long-term alignment with our strategic goals.
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We believe RSUs create performance incentives and align the interests of the Named Executives with the interests of stockholders because the value of an RSU increases or decreases in conjunction with the Company’s stock price, thereby focusing the Named Executives on achieving long-term Company growth and profitability. RSUs are also a retention tool that provides compensation to the Named Executives because, despite the volatility of our stock price, a given number of shares are awarded pursuant to an RSU irrespective of the price of the underlying stock. We generally grant RSUs with a four-year vesting period and, upon vesting, each RSU is converted into one share of QAD Class A common stock. The shares awarded, which may be reduced by the number of shares equivalent in value to the required tax withholding, are then transferred to the Named Executive.
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In fiscal year 2020, in consultation with Pearl Meyer, the Compensation Committee implemented PSUs as part of the ELTI program for certain senior executives, including the Named Executives. The Compensation Committee awarded our Named Executives a target number of PSUs which is 50% of each Named Executive’s fiscal year 2020 Equity Award and the balance is an equal number of time-based RSUs. The actual number of shares of Class A common stock of QAD Inc. issued upon vesting of each PSU tranche depends on the Company's financial performance over the relevant measurement period. The specific target values for the PSUs were set using aggressive three-year growth targets tied to the growth rate of the Company’s cloud subscription revenue.
The PSUs vest in accordance with the vesting dates and achievement of the specified performance objectives (the “Performance Objectives”). Subject to the achievement level of the Performance Objectives and the applicable Named Executive’s continued employment through each applicable vesting date, the PSUs will vest as to one-third (1/3) of the Target Number of Shares per each tranche on the first, second and third anniversaries of the grant date (the “Vesting Dates”). Upon vesting and achievement of at least the minimum level needed to be awarded shares, each PSU is converted into shares of QAD Class A common stock. The shares awarded, which may be reduced by the number of shares equivalent in value to the required tax withholding, are then transferred to the Named Executive. If at least the minimum level of achievement needed to be awarded shares is not satisfied, no PSUs in the relevant tranche will be converted into shares of QAD Class A common stock.
On each Vesting Date, the number of shares of Class A common stock that will be earned and vested will be based upon the achievement level of the Performance Objective, which for each Vesting Date is the trailing 3-year compounded annual growth rate of the Company’s cloud subscription revenue (“Cloud Subscription CAGR”) for the Company’s three most recent fiscal years ended prior to the Vesting Date, as set forth in the Company’s audited financial statements for such fiscal years. For the sake of clarity for the PSUs granted in fiscal year 2020, the Cloud Subscription CAGR measurement period is fiscal years 2018, 2019 and 2020 for Tranche 1; the Cloud Subscription CAGR measurement period is fiscal years 2019, 2020 and 2021 for Tranche 2; and the Cloud Subscription CAGR measurement period is fiscal years 2020, 2021 and 2022 for Tranche 3.
The number of shares of Class A common stock that will be earned and vested on each applicable Vesting Date will be a percentage of the portion of the target number of shares subject to PSUs that are in the tranche for such Vesting Date (the “Percentage of Target Number of Shares Vesting”) determined as follows:
Cloud Subscription CAGR | Percentage of Target Number of Shares Vesting |
Less than 25% | 0% |
25% | 50% |
30% | 100% |
33% | 150% |
35% or more | 200% |
The Percentage of Target Number of Shares Vesting for achievement between such Cloud Subscription CAGR achievement levels above 25% and below 35% will be based upon straight-line interpolation between the adjacent achievement levels. For example, at Cloud Subscription CAGR of 28% for a measurement period, the Percentage of Target Number of Shares Vesting pertaining to such measurement period would be 80% (50% + 3/5 x 50%), or at Cloud Subscription CAGR of 32%, the corresponding Percentage of Target Number of Shares Vesting would be 133-1/3% (100% + 2/3 x 50%). The number of shares of Class A common stock that will be earned and vested on a Vesting Date cannot exceed 200% of the portion of the target number of shares subject to PSUs in the tranche for the Vesting Date. No fractional shares will be issued; the number of shares of Class A common stock that will be earned and vested on a Vesting Date will be rounded down to the nearest whole share. Immediately upon each Vesting Date, the PSUs in the tranche for the Vesting Date will be converted to a number of shares of Class A common stock based upon the level of achievement of the applicable Performance Objective.
The following table sets forth the number of shares of our common stock subject to PSUs and RSUs granted to each Named Executive on June 23, 2019 under our ELTI Program, the values of which are reflected in the Summary Compensation Table below. The Compensation Committee determined ELTI Program award levels for our Named Executives after considering peer group equity award practices, individual performance, criticality of each Named Executive’s role, expected future contributions of and the long-term retention objectives for each Named Executive and our performance compared to our compensation peer group.
Name | Target number of PSUs | Number of RSUs | ||||||
Mr. Chilton(1) | 22,000 | 0 | ||||||
Ms. Lopker | 22,000 | 22,000 | ||||||
Mr. Lender | 12,500 | 12,500 | ||||||
Ms. Bellamy | 2,500 | 2,500 |
(1) Mr. Chilton was granted his RSUs in fiscal year 2019 at the time of his appointment as CEO.
Broad Based Employee Benefit Programs |
The Named Executives are covered by our employee benefit programs, which are applicable to all employees. These programs include health, dental, vision, disability and life insurance, health care and dependent care savings accounts, limited health club membership reimbursement, paid time off and Company contributions to a 401(k) plan. Benefits are provided to all employees in accordance with federal and state regulatory requirements and practices within the marketplace, and are a necessary element of compensation in attracting, acquiring and retaining talented employees.
Change in Control Agreements and Executive Termination Policy |
The Compensation Committee believes that change in control (“CIC”) agreements that provide acceleration of Equity Awards and severance compensation protection following a change in control assist the Company in attracting and retaining qualified executives, minimize the distraction caused by a potential transaction, serve as a reward for completing a strategic transaction that is determined to be in the best interest of our stockholders and reduce the risk that key executive talent will leave the Company before such a transaction is finalized. Therefore, the Compensation Committee has adopted a policy governing the terms of CIC agreements for certain employees. Pursuant to the policy, the terms, but not the payment amounts, of CIC agreements for Named Executives as approved by the Compensation Committee are substantially the same, each providing cash severance, accelerated vesting of certain previously granted, unvested, equity-based compensation and cash payments in lieu of continuation of benefits coverage. The CIC agreements provide a gross up for any excise taxes that the Named Executives may incur under Section 4999 of the Internal Revenue Code if the amounts they receive constitute “excess parachute payments.” CIC agreements are not considered as part of the annual compensation for Named Executives, and thus do not impact decisions made with respect to Base Salary, Cash Bonus and Equity Awards. CIC agreements include benefit amounts based on prior outside research and comparative data used by the Company to determine that its CIC agreements are market competitive. The Compensation Committee has approved CIC agreements with Mr. Lopker, Ms. Lopker and Mr. Lender. Other than increases to Mr. Lopker’s payments that are carried over from his pre-existing CIC agreement, these CIC agreements reflect current policy. Mr. Chilton and Ms. Bellamy did not have CIC agreements during fiscal year 2018.
CIC agreements for the applicable Named Executives provide that 50% of the previously granted, unvested, equity-based compensation for each Named Executive vests immediately upon a change in control. The remaining unvested Equity Awards vest upon the first anniversary date of the change in control, provided the Named Executive remains employed by the Company as of that date. For all other CIC benefits, the CIC agreements for the Named Executives are “double trigger” agreements, meaning that the payment of cash severance, accelerated vesting of the remaining 50% of the previously granted, unvested, equity-based compensation prior to the first anniversary date of the change in control and cash in lieu of continuation of benefits require both a “change in control” of the Company and the termination of a Named Executive’s employment by the Company, actually or constructively, without “cause” within 18 months following a change in control. The terms “change in control” and “cause” are defined in the CIC agreements. Upon occurrence of the double trigger, the CIC agreements provide a gross-up for any excise taxes that the Named Executives may incur under Section 4999 of the Internal Revenue Code if the amounts they receive constitute “excess parachute payments.” CIC agreements are not considered as part of the annual compensation for Named Executives, and thus do not impact decisions made with respect to Base Salary, Cash Bonus and Equity Awards. CIC agreements include benefit amounts based on prior outside research and comparative data used by the Company to determine that its CIC agreements are market competitive. The Compensation Committee has approved CIC agreements with Ms. Lopker, Mr. Chilton and Mr. Lender. These CIC agreements reflect current policy. Ms. Bellamy did not have a CIC agreement during fiscal year 2020.
The CIC agreement for each of the applicable Named Executives, Mr. Chilton, Ms. Lopker and Mr. Lender, provides that 50% of the previously granted, unvested, equity-based compensation for the Named Executive vests immediately upon a change in control. The remaining unvested Equity Awards vest upon the first anniversary date of the change in control, provided the Named Executive remains employed by the Company as of that date. For all other CIC benefits, the CIC agreements for the Named Executives are “double trigger” agreements, meaning that the payment of cash severance, accelerated vesting of the remaining 50% of the previously granted, unvested, equity-based compensation prior to the first anniversary date of the change in control and cash in lieu of continuation of benefits require both a “change in control” of the Company and the termination of a Named Executive’s employment by the Company, actually or constructively, without “cause” within 18 months following a change in control. The terms “change in control” and “cause” are defined in the CIC agreements. Upon occurrence of the double trigger, each of the CIC agreements provides for the following:
• | A lump sum payment equal to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | A lump sum payment equal to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | Immediate vesting of any unvested equity compensation; and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
• | A cash payment equivalent to the present value of the projected cost of continuation of all employee benefits and perquisites, including life insurance, health benefits, disability insurance, cars and expense reimbursement, and 401(k) matching payments for a period of
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For reasons similar to those supporting the adoption of CIC agreements, QAD has an executive termination policy under which certain senior executives with at least six months of service and as approved by the Compensation Committee are eligible to receive lump sum payments equal to six months of Base Salary and six months of healthcare continuation coverage premiums following an involuntary termination of employment without cause that is not covered by a CIC agreement. Mr. Chilton, Ms. Lopker and Mr. Lender are covered by the standard terms of the executive termination policy. However, as part of their employment arrangements, Mr. Chilton and Mr. Lender may receive twelve months of base salary, rather than six months of base salary and six months of benefits under the executive termination policy, upon termination without cause. Ms. Bellamy was not covered by the executive termination policy during fiscal year 2020.
Administrative Policies and Practices |
In administering our compensation programs, including the compensation program for the Named Executives, the Compensation Committee typically meets at least four times during each year on the day of regularly scheduled Board of Director meetings. At the end of each such Compensation Committee meeting, the Compensation Committee meets at least four times during each year on the day of regularly scheduled Board of Director meetings. At the end of each such Compensation Committee meeting, the Compensation Committee may meet in executive session in order to discuss executive compensation matters outside of the presence of management personnel and members of the Board who are not on the Compensation Committee. The Compensation Committee also meets telephonically to discuss extraordinary items, such as the hiring or termination of a Named Executive. The Compensation Committee members regularly confer with our Chief People Officer on matters regarding the compensation of the Named Executives and other key employees.
The Chief People Officer is the primary contact between management and the Compensation Committee. Each quarter, the Chief People Officer presents reports to the Compensation Committee, including information on the top 25 most highly compensated employees, a 401(k) plan update and the status of any recruitment of senior management. Other directors may be invited to Compensation Committee meetings as may be certain employees, including the CEO, the President and the Chief Financial Officer.
Tax Deductibility of Executive Compensation
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Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally limits the annual corporate tax deduction for compensation paid to a covered Named Executive to $1 million per individual. Prior to the Tax Cuts and Jobs Act of 2017, compensation paid to the Company’s Chief Financial Officer was not subject to this deduction limitation, and certain incentive compensation meeting the requirements to be considered “performance-based” for purposes of Section 162(m) had been exempt from this $1 million limit. The Compensation Committee has considered the impact of this tax code provision and attempts, to the extent practical, to implement compensation policies and practices that maximize the potential income tax deductions available to the Company by qualifying such compensation as performance-based compensation exempt from the deduction limits of Section 162(m).
However, recent U.S. tax legislation added the Chief Financial Officer as a covered employee and eliminated the "performance-based" exception, limiting the maximum U.S. federal income tax deduction that we may receive for annual compensation paid to any Named Executive covered by Section 162(m) of the Code to $1 million per individual. These new rules are effective starting in fiscal year 2019 for QAD, except that certain equity awards that we granted on or before November 2, 2017 may still be able qualify as performance-based compensation. Beginning in fiscal 2019, if the aggregate amount of any covered Named Executive’s salary, bonus, amount realized from SAR exercises and vesting of RSUs or other equity awards, and certain other compensation amounts that are recognized as taxable income by the Named Executive exceeds $1 million in any year, we will not be entitled to a U.S. federal income tax deduction for the amount over $1 million in that year.
The Compensation Committee will continue to review and modify our compensation practices and programs as necessary to ensure our ability to attract and retain executive talent while taking into account the deductibility of compensation payments. However, the Compensation Committee has deemed it desirable to retain flexibility in rewarding senior management with compensation subject to the deduction limits of Section 162(m) (including performance-based compensation in fiscal 2019 and later years) that could exceed the $1 million limitation on deductible compensation. Therefore, any such compensation in excess of the $1 million limitation on deductible compensation will not be deductible by the Company. No Named Executive received compensation in fiscal year 2018 that was subject to and exceeded the Section 162(m) limitation.
The Company’s compensation and termination arrangements are intended to qualify for exemption under, or satisfy the requirements of, the rules and regulations relating to nonqualified deferred compensation under Section 409A of the Internal Revenue Code.
EXECUTIVE COMPENSATION
However, this "performance-based" exception has been eliminated starting in fiscal year 2019 for QAD, except that taxable income recognized upon exercise of SARs that we granted on or before November 2, 2017, and not materially modified thereafter, may still qualify as performance-based compensation. Additionally, amounts paid pursuant to binding agreements entered into on or before November 2, 2017, and not materially modified thereafter, to our Chief Financial Officer and other persons whose compensation would not be subject to the Section 162(m) deduction limitation without regard to the Tax Cuts and Jobs Act are not subject to the deduction limitation unless and until an award's contract is materially modified, the contract is terminated or renewed or some other event occurs that impacts the grandfathered status of the award. If the aggregate amount of any covered Named Executive’s salary, bonus, amount (i) realized from exercise of SARs granted after November 2, 2017 and (ii) upon vesting of RSUs, PSUs or other equity awards (other than equity awards granted to our Chief Financial Officer on or before November 2, 2017), and (iii) certain other compensation amounts that are recognized as taxable income by the Named Executive (or by anyone who was a Named Executive in fiscal year 2018 or later) exceeds $1 million in any year, we will not be entitled to a U.S. federal income tax deduction for the amount over $1 million in that year.
The Compensation Committee will continue to review and modify our compensation practices and programs as necessary to ensure our ability to attract and retain executive talent while taking into account the deductibility of compensation payments. However, the Compensation Committee has deemed it desirable to retain flexibility in rewarding senior management with compensation subject to the deduction limits of Section 162(m) (including performance-based compensation) that has exceeded or could exceed the $1 million limitation on deductible compensation. Therefore, any such compensation in excess of the $1 million limitation on tax deductible compensation will not be tax deductible by the Company.
The Company’s compensation and termination arrangements are intended to qualify for exemption under, or satisfy the requirements of, the rules and regulations relating to nonqualified deferred compensation under Section 409A of the Internal Revenue Code.
EXECUTIVE COMPENSATION
Summary Compensation Table
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Name and Principal Position |
| Fiscal |
| Salary |
| Bonus |
| Stock |
| SAR |
| Non-Equity |
| All |
| Total ($) |
|
Anton Chilton |
| 2020 |
| 450,000 | 876,040 | — | 431,770 | 8,820 | 1,766,630 |
| |||||||
Chief Executive |
| 2019 |
| 384,728 |
| — |
| 870,320 |
| — |
| 242,962 |
| 8,512 |
| 1,506,522 |
|
Officer and Director |
| 2018 |
| 344,667 |
| — |
| 535,950 |
| — |
| 332,890 |
| 8,165 |
| 1,221,672 |
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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Pamela M. Lopker |
| 2020 |
| 342,873 | 1,749,000 | — | 328,892 | 8,200 | 2,429,055 |
| |||||||
President and Director |
| 2019 |
| 332,886 |
| — |
| — |
| 3,227,930 |
| 279,571 |
| 8,250 |
| 3,848,637 |
|
| 2018 |
| 332,886 |
| — |
| — |
| 1,821,306 |
| 458,409 |
| 8,124 |
| 2,620,725 |
| |
Daniel Lender |
| 2020 |
| 505,551 | 993,750 | — | 293,317 | 9,631 | 1,802,249 |
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Executive Vice |
| 2019 |
| 493,220 |
| — |
| 1,320,250 |
| — |
| 253,419 |
| 8,274 |
| 2,075,163 |
|
President and Chief Financial Officer |
| 2018 |
| 483,549 |
| — |
| 773,688 |
| — |
| 399,530 |
| 8,135 |
| 1,664,902 |
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
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Kara L. Bellamy |
| 2020 |
| 287,096 | 198,750 | — | 126,866 | 9,551 | 622,263 |
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Senior Vice President, |
| 2019 |
| 278,734 |
| — |
| 264,050 |
| — |
| 134,316 |
| 8,250 |
| 685,350 |
|
Corporate Controller and Chief Accounting Officer |
| 2018 |
| 278,734 |
| — |
| 154,738 |
| — |
| 140,315 |
| 8,133 |
| 581,920 |
|
(1) | Discretionary cash bonus. |
(2) | The amounts in this column represent the aggregate grant date fair value of RSUs and PSUs granted during each fiscal year presented as calculated in accordance with FASB ASC Topic 718. The amounts for the fiscal year 2020 include the aggregate grant date fair value of PSUs assuming achievement at target levels, the performance outcome judged to be probable at the time of grant, which is $876,040, $876,040, $497,750 and $99,500 for Mr. Chilton, Ms. Lopker, Mr. Lender and Ms. Bellamy, respectively. Assuming maximum achievement of the performance goals (200% of target), the grant date fair value of the 2020 PSUs granted would be $1,752,080, $1,752,080, $995,500 and $199,100 for Mr. Chilton, Ms. Lopker, Mr. Lender and Ms. Bellamy, respectively. The assumptions used in the valuation of these stock awards are set forth in our Annual Report on Form 10-K filed on April 14, 2020. These amounts do not correspond to the actual value that will be realized by the Named Executives upon the vesting of RSUs and PSUs, or the sale of the common stock |
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| |
(3) | The amounts in this column represent the aggregate grant date fair value of SARs granted during each fiscal year presented as calculated in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these SAR grants are set forth in our Annual Report on Form 10-K filed on April 14, 2020. These amounts do not correspond to the actual value that will be realized by the Named Executives upon the exercise of SARs, or the sale of the common stock underlying such awards. |
(4) | The amounts in this column represent payments based on Company financial results and individual performance under our Cash Bonus program described above. |
(5) | All Other Compensation includes employer matching contributions under the 401(k) plan, the cost of employer-paid life insurance and miscellaneous payments. |
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Grants of Plan-Based Awards during Fiscal Year
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The following table shows information about the non-equity incentive awards, PSUs and RSUs that are reflected in the Summary Compensation Table for fiscal year 2020 and that were granted to the Named Executives either during or with respect to services rendered in fiscal year 2020.
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (7) |
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Name |
Grant Date of Equity Awards | Threshold | Target | Maximum | Threshold | Target | Maximum | All Other | Grant Date |
Anton Chilton | 06/23/2019 | — | — | — | — | 22,000 | 44,000 | — | 876,040 |
225,000 | 450,000(2) | 1,328,400 | — | — | — | — | — | ||
Pamela M. Lopker | 06/23/2019 | — | — | — | — | 22,000 | 44,000 | — | 876,040 |
06/23/2019 | — | — | — | — | — | — | 22,000 | 872,960 | |
171,437 | 342,873(3) | 1,012,161 | — | — | — | — | — | ||
Daniel Lender | 06/23/2019 | — | — | — | — | 12,500 | 25,000 | — | 497,750 |
06/23/2019 | — | — | — | — | — | — | 12,500 | 496,000 | |
151,665 | 303,331(4) | 895,432 | — | — | — | — | — | ||
Kara L. Bellamy | 06/23/2019 | — | — | — | — | 2,500 | 5,000 | — | 99,550 |
06/23/2019 | — | — | — | — | — | — | 2,500 | 99,200 | |
64,597 | 129,193(5) | 381,378 | — | — | — | — | — |
(1) | Reflects threshold, target and maximum dollar amounts payable related to the Cash Bonus component of the Named Executives’ compensation during fiscal year
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(2) | Actual Cash Bonus amount paid was $431,770. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(3) | Actual Cash Bonus amount paid was $328,982. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(4) | Actual Cash Bonus amount paid was $293,317. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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(5) | Actual Cash Bonus amount paid was $126,866. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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31
The following table contains information concerning outstanding SARs, RSUs and PSUs for each of the Named Executives as of January 31, 2020.
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