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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(c)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
QC OPTICS, INC.
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(Name of Registrant as Specified in Its Charter)
XXXXXXXX
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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QC OPTICS, INC.
154 MIDDLESEX TURNPIKE
BURLINGTON, MASSACHUSETTS 01803
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of QC
OPTICS, INC. (the "Company"), a Delaware corporation, will be held on Tuesday,
June 10, 1997, at 10:00 a.m. at the Renaissance Bedford Hotel, 44 Middlesex
Turnpike, Bedford, Massachusetts 01730 for the following purposes:
1. To elect one (1) member of the Board of Directors for a three
year term;
2. To ratify and confirm the selection of Arthur Andersen LLP as
independent auditors for the Company for the fiscal year
ending December 31, 1997; and
3. To consider and act upon any matters incidental to the
foregoing and any other matters that may properly come before
the Annual Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 22,
1997, as the record date for the determination of stockholders entitled to
notice of and vote at the Annual Meeting and any adjournment or adjournments
thereof.
We hope that all stockholders will be able to attend the Annual Meeting
in person. In order to assure that a quorum is present at the Annual Meeting,
please date, sign and promptly return the enclosed proxy whether or not you
expect to attend the Annual Meeting. A postage-prepaid envelope, addressed to
American Securities Transfer & Trust, Inc., the Company's transfer agent and
registrar, has been enclosed for your convenience. If you attend the Annual
Meeting, your proxy will, at your request, be returned to you and you may vote
your shares in person.
By Order of the Board of Directors
K. Andrew Bernal
Secretary
Burlington, Massachusetts
April 29, 1997
QC OPTICS, INC.
154 MIDDLESEX TURNPIKE
BURLINGTON, MASSACHUSETTS 01803
PROXY STATEMENT
April 29, 1997
The enclosed proxy is solicited by the Board of Directors of QC Optics,
Inc. (the "Company"), a Delaware corporation, for use at the Annual Meeting of
Stockholders to be held on Tuesday, June 10, 1997 at 10:00 a.m. at the
Renaissance Bedford Hotel, 44 Middlesex Turnpike, Bedford, Massachusetts, 01730
and at any adjournment or adjournments thereof.
Stockholders of record at the close of business on April 22,1997 will
be entitled to vote at the Annual Meeting or any adjournment thereof. On that
date, 3,242,500 shares of Common Stock, $.01 par value per share, of the Company
(the "Common Stock") were issued and outstanding and entitled to vote at the
Annual Meeting. Each share of Common Stock entitles the holder to one vote with
respect to all matters submitted to Stockholders at the Annual Meeting. There
are no other voting securities of the Company.
The presence of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote at the Annual Meeting, either in person
or represented by a properly executed proxy, is necessary to constitute a quorum
for the transaction of business at the Annual Meeting.
The election of directors will be determined by a plurality of the
votes cast. The other proposals to be voted upon by the stockholders of the
Company require the vote of a majority of the Common Stock present at the Annual
Meeting for passage. Votes withheld from any nominee, abstentions and broker
non-votes (which result when a broker holding shares for a beneficial holder has
not received timely voting instructions on certain matters from such beneficial
holder and the broker does not have discretionary voting power on such matters)
are counted as present or represented for purposes of determining the presence
or absence of a quorum at the Annual Meeting. Abstentions are counted in
tabulation of the votes cast on proposals presented to stockholders, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
THE DIRECTORS, NOMINATED DIRECTOR AND OFFICERS OF THE COMPANY AS A
GROUP OWN OR MAY BE DEEMED TO CONTROL APPROXIMATELY 41.6% OF THE OUTSTANDING
SHARES OF COMMON STOCK. EACH OF THE DIRECTORS, NOMINATED DIRECTOR AND OFFICERS,
HAS INDICATED HIS INTENT TO VOTE ALL SHARES OF COMMON STOCK OWNED OR CONTROLLED
BY HIM IN FAVOR OF EACH ITEM SET FORTH HEREIN.
Stockholders may vote in person or by proxy. Execution of a proxy will
not in any way affect a stockholder's right to attend the Annual Meeting and
vote in person. The proxy may be revoked at any time before it is exercised by
written notice to the Secretary prior to the Annual Meeting,
by giving to the Secretary a duly executed proxy bearing a later date than the
proxy being revoked at any time before such proxy is voted, or by appearing at
the Annual Meeting and voting in person. The shares represented by all properly
executed proxies received in time for the Annual Meeting will be voted as
specified therein. In the absence of other instructions set forth on a proxy,
shares will be voted in favor of the election of director of the person named in
this Proxy Statement and in favor of all other items set forth herein.
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote may be taken, such shares represented by all proxies received
by the Board of Directors will be voted with respect thereto in accordance with
the judgment of the persons named as attorneys in the proxies. The Board of
Directors knows of no matter to be acted upon at the Annual Meeting that would
give rise to appraisal rights for dissenting stockholders.
An annual report containing audited financial statements for the fiscal
years ended December 31, 1996 ("Fiscal 1996") and December 31, 1995 ("Fiscal
1995") is being mailed herewith to all stockholders entitled to vote at the
Annual Meeting. This Proxy Statement and the accompanying proxy were first
mailed to stockholders on or about April 29, 1997.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws, as amended,
provide that the members of the Board of Directors (the "Board") shall be
classified as nearly as possible into three classes, each with as nearly as
possible one-third of the members of the Board. A classified board is designed
to assure continuity and stability in the Board's leadership and policies. Eric
T. Chase is classified as a Class I director and shall serve until the 1999
Annual Meeting; John M. Tarrh is classified as a Class II director and shall
serve until the 1998 Annual Meeting; and Charles H. Fine is classified as a
Class III director and is being nominated at this Annual Meeting to serve as a
Director until the 2000 Annual Meeting. Effective March 6, 1997, Yutaka Goto, a
Class III director, resigned from the Board. On March 7, 1997, the Board of
Directors voted to set the number of directors at three (3) and to reclassify
the directorship of Charles H. Fine from Class II to Class III.
The successors to the class of directors whose terms expire at an
Annual Meeting would be elected for a term of office to expire at the third
succeeding Annual Meeting after their election and until their successors have
been duly elected by the stockholders. Directors chosen to fill vacancies on a
classified board shall hold office until the next election of the class for
which directors shall have been chosen, and until their successors are duly
elected by the stockholders. Officers are elected by, and serve at the
discretion of, the Board of Directors. No director, executive officer, or
significant employee is related by blood, marriage or adoption to any other
director, executive officer, or significant employee.
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Shares represented by all proxies received by the Board of Directors
and not so marked so as to withhold authority to vote for the individual
director will be voted (unless such nominee is unable or unwilling to serve) FOR
the election of the nominee named herein. The Board of Directors knows of no
reason why such nominee should be unwilling to serve, but if such should be the
case, proxies will be voted for the election of some other person or for fixing
the number of directors at a lesser number.
The following table sets forth the year the nominee Director and the
other Directors of the Company were first elected as a Director and the ages,
positions and offices currently held by each Director:
Year Nominee
First Became
Name Age Director Position
- ---- --- -------- --------
Eric T. Chase 38 1990 Chief Executive Officer,
President, Chairman of
the Board and Founder
Charles H. Fine* 40 1996 Director
John M. Tarrh 49 1996 Director
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*Nominee for election at this Annual Meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) ("Section 16(a)") of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), requires executive officers and directors, and
persons who beneficially own more than ten percent (10%) of the Company's Common
Stock, to file initial reports of ownership on Form 3 and reports of changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
"SEC") and any national securities exchange on which the Company's securities
are registered. Executive officers, directors and greater than ten percent (10%)
beneficial owners are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent (10%)
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beneficial owners during Fiscal 1996 were complied with, with the exception of
the following: All of the Company's executive officers, directors and greater
than ten percent (10%) beneficial owners during Fiscal 1996 each had one late
Form 3 filing.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met twice during Fiscal 1996. All of the
Company's Directors attended all of the Annual Meetings of the Board of
Directors in Fiscal 1996 during the period for which they were Directors. No
Director or executive officer is related by blood, marriage or adoption to any
other Director or executive officer.
The Board of Directors established both an Audit Committee and
Compensation Committee on June 18, 1996. Messrs. Fine and Tarrh serve as members
of the Audit Committee. The Audit Committee is concerned primarily with
recommending the selection of and reviewing the effectiveness of the Company's
independent auditors as well as reviewing the effectiveness of the Company's
accounting policies and practices, financial reporting and internal controls.
The Audit Committee reviews any transactions which involve a potential conflict
of interest and the scope of independent audit coverages, the fees charged by
the independent auditors, and internal control systems. The Audit Committee did
not meet formally in Fiscal 1996.
Messrs. Fine and Tarrh also serve as members of the Compensation
Committee. The Compensation Committee is responsible for setting and
administering the policies which govern annual compensation for the Company's
executives. The Compensation Committee negotiates and proposes to the Board of
Directors compensation arrangements for officers, other key employees, certain
consultants and directors of the Company. Following review and approval by the
Compensation Committee of the compensation policies, all issues pertaining to
executive compensation are submitted to the Board of Directors for approval. The
Compensation Committee did not meet formally in Fiscal 1996.
The Company does not have a standing nominating committee or a
committee performing similar functions.
BACKGROUND
The following is a brief summary of the background of the nominee
director, the existing directors and executive officers of the Company:
ERIC T. CHASE, CHIEF EXECUTIVE OFFICER, PRESIDENT, CHAIRMAN OF THE
BOARD, AND FOUNDER. Mr. Chase co-founded the Company in July 1986 and served as
its Vice President of Sales and Marketing until May 1990 when he was elected
President of the Company. In June 1996, Mr. Chase was also elected the Chief
Executive Officer and Chairman of the Board. He was formerly with GCA
Corporation, semiconductor equipment manufacturer, in the position of Staff
Scientist and Technical Marketing Specialist. Mr. Chase holds seven patents and
has authored a variety of articles
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related to inspection equipment. Mr. Chase graduated from the University of
California, Irvine with Bachelor degrees in both Physics and Economics.
JOHN R. FREEMAN, VICE PRESIDENT OF FINANCE, AND TREASURER. Mr. Freeman
was elected as the Company's Vice President of Finance and Treasurer in June
1996. Over the past 20 years, he has been involved with several companies in
various roles, including chief financial officer and controller. In 1984, Mr.
Freeman founded Freeman & Associates, a consulting firm which provided chief
financial officer/controller services to small businesses and, through his firm,
he served as the Company's part-time controller as a consultant from January
1987 until he joined the Company as an employee in May 1996. Mr. Freeman has a
Bachelor of Arts degree in accounting from Duke University.
K. ANDREW BERNAL, VICE PRESIDENT OF SALES AND MARKETING, AND SECRETARY.
In June 1993, Mr. Bernal joined the Company as a Sales Manager and advanced to
Director of Marketing and Sales in January 1994. In October 1994, he became the
Company's Vice President of Sales and Marketing and is responsible for
management of the sales, marketing and field services departments. In May 1991
he joined Rippey Corporation, also a manufacturer of semiconductor processing
equipment, as a Product Manager where he managed the sales of equipment. Mr.
Bernal founded Tritec Industries, a manufacturer of semiconductor processing
equipment, in August 1981 and held the position of Vice President of Sales and
Marketing. Mr. Bernal holds a Bachelor of Technology degree in Chemical
Engineering from the University of Dayton.
ABDU BOUDOUR, VICE PRESIDENT OF ENGINEERING. Mr. Boudour has held
various positions at the Company, including Senior Physicist in the Engineering
Department from April 1987 to February 1994, where he was responsible for design
and development of the Company's equipment, and Far East Marketing Manager for
which he was based in Japan from February 1994 to April 1995. In July 1995, Mr.
Boudour advanced to Director of Engineering and in June 1996, he was elected
Vice President of Engineering. Prior to joining the Company in April 1987, Mr.
Boudour was with PTR Optics, an optical component manufacturer. He earned his
Bachelor of Science degree from the University of Oran, Algeria and has a Master
of Science degree in Physics from Northeastern University.
JAY L. ORMSBY, VICE PRESIDENT OF TECHNOLOGY AND FOUNDER. Mr. Ormsby
co-founded the Company in July 1986 with Mr. Chase and served as the Company's
Vice President of Engineering until June 1996. In June 1996, he was elected as
the Company's Vice President of Technology. Mr. Ormsby has over 30 years
experience in design, development and marketing of high technology systems. Mr.
Ormsby was formerly with GCA Corporation, a company that was a semiconductor
equipment manufacturer, in the position of Chief Engineer, Technology Division.
Mr. Ormsby has a Bachelor of Science degree in Mechanical Engineering from The
Cooper Union for the Advancement of Science and Art and a Master of Science
degree in Engineering from Northeastern University.
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ALBERT E. TOBEY, VICE PRESIDENT OF OPERATIONS. Since joining the
Company in June 1988, Mr. Tobey has served as its Vice President of Operations
with responsibility for manufacturing operations. Mr. Tobey has over 30 years
experience in engineering as a system designer and in various management
positions both in engineering and manufacturing. Mr. Tobey served as the
Principal Engineer - RTOS Program at AVCO Systems ("AVCO"), a defense
contractor, and worked for over 19 years with AVCO, advancing from an
electronics technician to a senior systems engineer. His primary positions at
AVCO were in telemetry and instrumentation systems. Mr. Tobey received his
Bachelor of Science degree in Electrical Engineering from Northeastern
University.
CHARLES H. FINE, NOMINEE DIRECTOR. Mr. Fine has served as a director of
the Company since June 1996. Since January 1983, Mr. Fine has served on the
faculty of the Sloan School of Management at Massachusetts Institute of
Technology ("MIT"). Mr. Fine has expertise in manufacturing and technology
management and his research has focused on the automotive, semiconductor, and
capital equipment industries. Mr. Fine received his Bachelor of Arts degree from
Duke University and earned both his Master of Science and Ph.D. degrees from
Stanford University.
JOHN M. TARRH, DIRECTOR. Mr. Tarrh has served as a director of the
Company since May 1996. Since January 1987, Mr. Tarrh has been the Senior Vice
President, Chief Financial Officer and a director of Applied Science and
Technology, Inc. ("ASTeX"), a publicly held corporation he co-founded that
manufactures systems and controls for advanced materials such as semiconductors
and diamond. Prior to January, 1987, Mr. Tarrh was the Manager of the Mirror
Confinement Division of MIT's Plasma Fusion Center where he was responsible for
financial management, project management and administration. Mr. Tarrh earned
his Master of Science degree in Electrical Engineering from MIT.
CERTAIN TRANSACTIONS
In July 1996, the Company entered into employment agreements with
Messrs. Chase, Freeman, Bernal, Boudour, Ormsby and Tobey. See "Employment
Contracts, Termination of Employment and Change-in-Control Arrangements."
In October 1995, the Company, Kobe Steel USA Holdings, Inc. ("Kobe
Steel"), a controlling stockholder of the Company, and certain management
employees of the Company pursuant to the QC Optics Voting Trust (the "Voting
Trust") entered into a Stock Repurchase and Loan Repayment Agreement (the
"Agreement"). Pursuant to the terms of the Agreement, as amended on March 29,
1996, the Company purchased an aggregate of 1,337,313 shares (the "Kobe Shares")
of its voting and non-voting Common Stock from Kobe Steel or approximately 62.5%
of all of the Company's Common Stock then owned by Kobe Steel for a purchase
price of $5,000,000. Of the $5,000,000 purchase price, $3,250,000 was financed
by State Street Bank and Trust Company pursuant to the terms of a $4,000,000
revolving line of credit (the "Line of Credit") evidenced by a promissory note
secured by all of the assets of the Company (the "Bank Note"), $1,000,000 was
provided from available cash of the Company and $750,000 was financed pursuant
to a promissory note from the
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Company to Kobe Steel, which was also secured by all of the assets of the
Company (the "Kobe Note"). The Kobe Note was subordinated to the Bank Note. In
connection with this transaction, a corporation formed in February 1995 by
Messrs. Chase, Bernal, Ormsby, Freeman, Tobey and Boudour (collectively, the
"Stockholders") to acquire an equity interest in the Company was merged into the
Company. As a result of this merger, the Stockholders exchanged their shares in
such corporation for an aggregate of 1,337,313 shares of the Company's Common
Stock. The consideration for the merger was the unlimited personal guarantees
provided to the Bank by Messrs. Chase and Bernal and the limited guarantees
provided by Messrs. Ormsby, Freeman, Tobey and Boudour to secure the Bank Note.
In addition, all of the shares issued to these individuals were pledged as
collateral to secure both the Line of Credit and the Kobe Note. The Company
recorded a non-recurring, non-cash charge of $1,701,000 during Fiscal 1996 as a
result of this merger.
The Line of Credit and Bank Note mature on June 30, 1998 and the
interest rate per annum is the bank's prime rate plus 1%. On October 24, 1996,
the interest rate was decreased to the bank's prime rate plus 1/2%. The Line of
Credit has a fee on the daily unused portion of the facility at the rate of 1/4%
per annum. The aggregate amount outstanding under the Line of Credit shall not
exceed the sum of 80% of qualifying receivables and 10% (not to exceed $350,000)
of qualifying inventory. The Bank Note was secured by unlimited personal
guarantees from Messrs. Chase and Bernal and each of the several stockholders of
the Voting Trust pledged their QCO Shares held in the Voting Trust to the bank
as collateral. These guarantees and the pledges were released by the bank on
October 29, 1996. The Kobe Note was satisfied in full on October 29, 1996.
Of the remaining 802,387 shares held by Kobe Steel, the Voting Trust
held an option (the "Option") to purchase up to 588,418 shares at a price of
$3.74 per share. The Option expired in October 1996.
On October 27, 1995, the Company and Messrs. Chase, Bernal, Ormsby,
Freeman, Tobey and Boudour entered into a voting trust agreement known as the
"QC Optics Voting Trust, u/d/t dated as of October 27, 1995" (the "Voting
Trust"). Mr. Chase is the trustee of the Voting Trust. The Voting Trust holds
all voting rights to all Company shares held by each beneficiary and continues
in force for a period of 21 years from October 27, 1995, unless terminated
earlier as a result of a merger, dissolution, sale of all or substantially all
of the Company's assets or liquidation, or agreement of the parties.
Kobe Steel USA International, Inc. has provided loans to the Company
since July 1991 by means of a revolving credit arrangement. At March 29, 1996,
the principal amount due totaled $4,250,000. This amount plus accrued interest
of approximately $6,000 was paid in full by the Company on March 29, 1996 in
connection with the closing of the Agreement utilizing amounts received from
Kobe Steel as a capital infusion in the same amount and on the same date.
Until December 1994, Kobe Steel and the Company were parties to a
distributor agreement. In connection with this distributor agreement, sales of
approximately $2.2 million were generated for the year ended December 31, 1994
and approximately $611,000 was generated for the year ended December 31, 1995.
Subsequent to December 1995, Kobe Steel has not been a distributor of the
Company.
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Any future transactions between the Company and its officers,
directors, principal stockholders or other affiliates will be on terms no less
favorable than could be obtained from independent third parties and will be
subject to approval by a majority of the independent and disinterested
directors.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of April 22, 1997, the ownership of
the Company's Common Stock by (i) each person who is known by the Company to own
of record or beneficially more than 5% of the Company's Common Stock, (ii) each
of the Company's directors and (iii) all directors and officers as a group.
Except as otherwise indicated, the stockholders listed in the table have sole
voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
Name and Address of Number of Shares of Common Percentage
Beneficial Owner(1) Stock Beneficially Owned of Class(2)
- ------------------- ------------------------ -----------
<S> <C> <C>
QC Optics Voting Trust (3)................ 1,347,613 41.6%
Kobe Steel USA Holdings, Inc.............. 802,387 24.8%
Eric T. Chase (3) (4)..................... 1,349,477 41.6%
K. Andrew Bernal (3) (5).................. 315,702 9.7%
Jay L. Ormsby (3) (6)..................... 163,979 5.1%
Charles H. Fine (7)....................... 4,688 *
John M. Tarrh (7)......................... 4,688 *
All Directors and Officers as a group
(8 people)(3)(4)(5)(6)(7)(8)(9)...... 1,364,881 41.9%
</TABLE>
________________
* Less than 1%
(1) The address for all of these individuals is c/o QC Optics, Inc., 154
Middlesex Turnpike, Burlington, Massachusetts 01803.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares
of Common Stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purpose of computing the
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percentage ownership of such individual or group, but are not deemed to
be outstanding for the purpose of computing the percentage ownership of
any other person shown in the table.
(3) Eric T. Chase is the sole voting trustee of the QC Optics Voting Trust
(the "Voting Trust"). The stockholders participating in the Voting
Trust and the number of their shares subject to the Voting Trust are as
follows: Eric T. Chase - 634,517 shares; K. Andrew Bernal - 314,754
shares; Jay L. Ormsby - 162,599 shares; John R. Freeman - 78,581;
Albert E. Tobey - 78,581 shares; Abdu Boudour - 78,581 shares.
(4) Includes 1,347,613 shares subject to the Voting Trust for which Mr.
Chase is the sole voting trust and includes 100 shares of Common Stock
owned by Mr. Chase. Also includes 1,764 shares of Common Stock issuable
upon the exercise of an option to purchase 5,292 shares of the
Company's Common Stock at an exercise price of $5.10. The option
expires on June 19, 2006 and vests in three equal installments over a
three year period commencing June 20, 1997.
(5) Includes 948 shares of Common Stock issuable upon the exercise of an
option to purchase 2,844 shares of the Company's Common Stock at an
exercise price of $5.10. The option expires on June 19, 2006 and vests
in three equal installments over a three year period commencing June
20, 1997.
(6) Includes 1,380 shares of Common Stock issuable upon the exercise of an
option to purchase 4,140 shares of the Company's Common Stock at an
exercise price of $5.10. The option expires on June 19, 2006 and vests
in three equal installments over a three year period commencing June
20, 1997.
(7) Includes 4,688 shares of Common Stock issuable upon the exercise of an
option to purchase 15,000 shares of the Company's Common Stock at an
exercise price of $5.10. This figure includes 938 shares of Common
Stock underlying the option that vests on July 1, 1997. The option
expires on June 17, 2006 and vests in 16 equal installments over a
period of four years commencing July 1, 1996.
(8) Includes the shares subject to the Voting Trust and owned by the
officers as set forth in footnote 3.
(9) Includes (i) 1,080 shares of Common Stock issuable upon the exercise of
an option owned by Mr. Boudour to purchase 3,240 shares of the
Company's Common Stock; (ii) 100 shares of Common Stock owned by John
R. Freeman; (iii) 1,200 shares of Common Stock issuable upon the
exercise of an option owned by Mr. Freeman to purchase 3,600 shares of
the Company's Common Stock; and (iv) includes 1,320 shares of Common
Stock issuable upon the exercise of an option owned by Mr. Tobey to
purchase 3,960 shares of the Company's Common Stock. The exercise price
for each of these options is $5.10. These options expire on June 19,
2006 and vest in equal installments over a three year period commencing
June 20, 1997.
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COMPENSATION OF OFFICERS AND DIRECTORS
Executive Officers' Compensation
The following table sets forth information concerning the annual and
long-term compensation for services rendered to the Company for the fiscal years
ended December 31, 1996, 1995 and 1994 ("Fiscal 1994") of those persons who were
at December 31, 1996: (i) the chief executive officer of the Company; and (ii)
each other executive officer of the Company whose annual compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Awards
------
(a) (b) (c) (d) (e) (f)
Securities
Name and Other Annual Underlying
Principal Position Year Salary(1) Bonus Compensation (2) Options (#)
- ------------------ ---- --------- ----- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Eric T. Chase.............................1996 $140,000 $ - 0 - $ 3,462 5,292
Chief Executive Officer, President 1995 $134,000 $ - 0 - $ 6,000 - 0 -
and Chairman of the Board 1994 $127,000 $ - 0 - $ 6,000 - 0 -
Jay L. Ormsby.............................1996 $112,000 $ - 0 - $ - 0 - 4,140
Vice President of Technology 1995 $109,000 $ - 0 - $ - 0 - - 0 -
1994 $104,000 $ - 0 - $ - 0 - - 0 -
Albert E. Tobey...........................1996 $107,000 $ - 0 - $ - 0 - 3,960
Vice President of Operations 1995 $ 99,000 $ - 0 - $ - 0 - - 0 -
1994 $ 97,000 $ - 0 - $ - 0 - - 0 -
K. Andrew Bernal..........................1996 $ 78,000 $ - 0 - $ 65,000 2,844
Vice President of Sales and 1995 $ 72,000 $ - 0 - $ 22,000 - 0 -
Marketing, and Secretary 1994 $ 66,000 $ - 0 - $ 22,000 - 0 -
</TABLE>
____________
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(1) Amounts shown indicate cash compensation earned and received by
executive officers. Effective July 1, 1996, the Company increased the
salaries of Messrs. Chase, Ormsby, Tobey and Bernal to $147,000,
$114,500, $110,300 and $79,000 respectively. See "Employment Contracts,
Termination of Employment and Change-in-Control Arrangements."
Executive officers participate in group health and other benefits
generally available to all employees of the Company.
(2) Through July 21, 1996, the Company provided a bi-weekly automobile
allowance of $230.75 for Mr. Chase.
STOCK OPTIONS
The following table sets forth information concerning individual grants
of stock options to purchase the Company's Common Stock made to Messrs. Chase,
Ormsby, Tobey and Bernal during Fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration
Name Granted (#)(1) Year(2) ($/Share) Date
- ---- -------------- ------- --------- ----
<S> <C> <C> <C> <C>
Eric T. Chase....................... 5,292 4.8% $5.10 06/19/06
Jay L. Ormsby....................... 4,140 3.8% $5.10 06/19/06
Albert E. Tobey..................... 3,960 3.6% $5.10 06/19/06
K. Andrew Bernal.................... 2,844 2.6% $5.10 06/19/06
</TABLE>
- --------------------
(1) Each of these options to purchase Common Stock was granted on June 19,
2006 and vest in three equal installments over a three year period
commencing June 20, 1997.
(2) In Fiscal 1996, options to purchase a total of 109,492 shares of Common
Stock were granted to employees of the Company, including executive
officers.
- 11 -
The following table sets forth the value of Mr. Chase's, Mr. Ormsby's
Mr. Tobey's and Mr. Bernal's outstanding stock options held as of the end of
Fiscal 1996. Messrs. Chase, Ormsby, Tobey and Bernal did not exercise any stock
options during Fiscal 1996.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End (#)(1) at Fiscal Year-End($)(2)(3)
--------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Eric T. Chase. . . . . . . . . . . 1,764 3,528 -0- -0-
Jay L. Ormsby. . . . . . . . . . . 1,380 2,760 -0- -0-
Albert E. Tobey. . . . . . . . . . 1,320 2,640 -0- -0-
K. Andrew Bernal . . . . . . . . . 948 1,896 -0- -0-
</TABLE>
(1) See "Summary Compensation Table."
(2) In-the-Money options are those options for which the fair market value
of the underlying Common Stock is greater than the exercise price of
the option.
(3) The value of the unexercised options is determined by multiplying the
number of options held by the difference in the fair market value of
the Common Stock underlying the options at the end of Fiscal 1996 (as
determined by the closing price as reported by AMEX on December 31,
1996, which was $4.75 per share) and the exercise price of the options
granted. Since the fair market value at the end of Fiscal 1996 was
lower than the exercise price of all of the options held, none of the
options listed in this table are In-the-Money.
COMPENSATION OF DIRECTORS
Each of the Company's non-management and non-affiliated directors,
Messrs. Fine and Tarrh, receives a fee of $1,000 per meeting plus out-of-pocket
expenses. Messrs. Fine and Tarrh each received $2,000 in Fiscal 1996. Each of
Messrs. Fine and Tarrh also received an option under the Company's 1996 Formula
Stock Option Plan to purchase 15,000 shares of the Company's Common Stock at an
exercise price of $5.10 per share. These options expire on June 17, 2006 and
vest in 16 equal installments over a period of four years commencing July 1,
1996.
- 12 -
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Effective as of July 1, 1996, the Company entered into employment and
non-competition agreements (the "Agreements") with each of Eric T. Chase, Jay L.
Ormsby, Albert E. Tobey, K. Andrew Bernal, Abdu Boudour and John R. Freeman.
Eric T. Chase's and Jay L. Ormsby's Agreements provide for annual base salaries
of $147,000 and $114,500, respectively, through June 30, 1997 and at least the
same base salaries, as determined by the Company's Board of Directors or
Compensation Committee, for the next two years until the Agreements expire on
June 30, 1999. Albert E. Tobey's, Abdu Boudour's and John R. Freeman's
Agreements provide for annual base salaries of $110,300, $90,000 and $100,000,
respectively, and expire on December 31, 1997. K. Andrew Bernal's Agreement
provides for an annual base salary of $79,000 plus incentive payments of
one-half (1/2) of one percent (1%), subject to reduction by the Company's Board
of Directors or Compensation Committee, of all "Major Orders," which are defined
as orders for systems or products of the Company other than orders for spare
parts or service less than $25,000 or from Company distributors or
representatives, and expires on December 31, 1997. The Agreements also provide
for vacation, insurance, participation in the Company's 401(k) plan, and certain
other benefits as may be determined by the Compensation Committee or the
Company's Board of Directors. Each individual is entitled to receive benefits
offered to the Company's employees generally. Each individual is also entitled
to receive severance in the event his employment is terminated by the Company
without cause (the "Severance Benefits"). The Severance Benefits are equal to
the individual's current annual base salary in Eric T. Chase's and Jay L.
Ormsby's Agreements and six (6) months of the individual's current annual base
salary in Albert E. Tobey's, Abdu Boudour's, John R. Freeman's and K. Andrew
Bernal's Agreements.
In the event of a Change in Control in the Company, each individual
will receive severance payments as provided in the Agreements. A Change in
Control is defined generally as: the acquisition by an individual, entity or
group of beneficial ownership of 25% or more of the outstanding shares of Common
Stock; unapproved changes in the Board of Directors; tender offers to acquire
any of the Common Stock; certain reorganizations, mergers or consolidations; a
complete or substantial liquidation or dissolution of the Company; or the sale
or disposition of all or substantially all of the assets of the Company.
In the event of a Change in Control during the term of an Agreement or
any renewal or extension thereof and provided the individual remains employed by
the Company for a period of twelve months from the date of the Change in
Control, the individual will receive, at the one-year anniversary of the Change
in Control, a supplemental amount in a lump sum, irrespective of whether he
thereafter actually terminates employment with the Company. The lump sum is
equal to the individual's annual Base Salary immediately preceding the Change in
Control in Eric T. Chase's and Jay L. Ormsby's Agreements and six (6) months of
the individual's annual Base Salary immediately preceding the Change in Control
in Albert E. Tobey's, Abdu Boudour's, John R. Freeman's and K. Andrew Bernal's
Agreements. In the event of the actual termination of an individual's employment
contemporaneous with or following a Change in Control, except (i) because of the
individual's death, (ii) by the Company for cause or disability (as defined in
the employment agreement), or (iii) by the individual other than for good reason
(as defined in the employment agreement) the individual shall be entitled to
receive an amount equal to 299% of the individual's annual Base Salary
- 13 -
immediately preceding the Change in Control in Eric T. Chase's and Jay L.
Ormsby's Agreements and 150% of the individual's annual Base Salary immediately
preceding the Change in Control in Albert E. Tobey's, Abdu Boudour's, John R.
Freeman's and K. Andrew Bernal's Agreements. Certain additional provisions also
apply.
Each Agreement also contains non-competition provisions for a period of
two (2) years following termination, a confidentiality provision and an
ownership provision in the Company's favor for techniques, discoveries and
inventions arising during the term of employment. The Agreements provide for
successive one-year renewals after the initial term.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has traded on the American Stock Exchange
("AMEX") under the symbol "QCO" from October 24, 1996 to November 18, 1996 and
thereafter under the symbol "OPC."
As of April 22, 1997, there were approximately nine (9) record holders
of the Company's Common Stock. Management believes there are approximately 787
beneficial holders of the Company's Common Stock.
For the periods indicated, the following table sets forth the range of
high and low sale prices for the Common Stock as reported by AMEX from October
24, 1996 through April 22, 1997.
Sale
----
High Low
1996
Fourth Quarter (commencing October 24, 1996) $6 1/2 $4 3/4
1997
First Quarter $5 7/8 $3 3/4
Second Quarter (through April 22, 1997) $3 3/4 $3
DIVIDENDS
The Company has not paid dividends on its Common Stock since its
inception and does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future. The Company currently intends to reinvest earnings,
if any, in the development and expansion of its business. Any future
determination with respect to the payments of dividends will be subject to the
discretion of the Company's Board of Directors and will depend upon the
earnings, capital requirements, and financial positions of the Company, general
economic conditions, and other pertinent factors. In addition, the Company's
agreement with its primary bank lender prohibits the payment of dividends
without the bank's prior written consent.
- 14 -
PROPOSAL NO. 2
ACCOUNTING MATTERS AND RATIFICATION OF AUDITORS
The persons named in the enclosed proxy will vote to ratify the
selection of Arthur Andersen LLP as auditors for the fiscal year ending December
31, 1997 unless otherwise directed by the stockholders. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting of
stockholders, and will have the opportunity to make a statement and answer
questions from stockholders if he or she so desires.
VOTING AT ANNUAL MEETING
The Board of Directors has fixed Wednesday, April 22, 1997, as the
record date for the determination of Stockholders entitled to vote at this
Annual Meeting. At the close of business on that date, there were outstanding
and entitled to vote 3,242,500 shares of Common Stock.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, officers and employees of the
Company may solicit in person or by telephone. The Company may reimburse brokers
or persons holding stock in their names, or in the names of their nominees, for
their expenses in sending proxies and proxy material to beneficial owners.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all proxies
received by the Company will be effective, notwithstanding any transfer of the
shares to which such proxies relate, unless prior to the Annual Meeting the
Company receives a written notice of revocation signed by the person who, as of
the record date, was the registered holder of such shares. The Notice of
Revocation must indicate the certificate number or numbers of the shares to
which such revocation relates and the aggregate number of shares represented by
such certificate(s).
STOCKHOLDER PROPOSALS
In order to be included in proxy material for the 1998 Annual Meeting,
tentatively scheduled for June 9, 1998, stockholders' proposed resolutions must
be received by the Company on or before April 13, 1998, but not earlier than
March 12, 1998. The Company suggests that proponents submit their proposals by
certified mail, return receipt requested, addressed to the Secretary of the
Company.
- 15 -
ANNUAL REPORT
THE COMPANY IS PROVIDING TO EACH STOCKHOLDER, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT, INCLUDING THE FINANCIAL STATEMENTS FOR THE
COMPANY'S MOST RECENT FISCAL YEAR ENDED DECEMBER 31, 1996.
MISCELLANEOUS
Management does not know of any other matters which may come before
this Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
By Order of the Board of Directors
K. Andrew Bernal
Secretary
Burlington, Massachusetts
April 29, 1997
MANAGEMENT HOPES THAT THE STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
- 16 -
QC OPTICS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 10, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED hereby appoints Eric T. Chase as Proxy to vote for and
on behalf of the undersigned at the Annual Meeting of Stockholders of QC OPTICS,
INC. (the "Company") to be held at the Renaissance Bedford Hotel, 44 Middlesex
Turnpike, Bedford, Massachusetts 01730 on Tuesday, June 10, 1997 at 10:00 a.m.,
and at any adjournment or adjournments thereof. The undersigned hereby directs
the said Eric T. Chase to vote in accordance with his judgment on any matters
which may properly come before the Annual Meeting, all as indicated in the
Notice of the Annual Meeting, receipt of which is hereby acknowledged, and to
act on the following matters set forth in such notice as specified by the
undersigned:
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF THE DIRECTOR
AND FOR PROPOSAL 2.
(1) To elect Charles H. Fine as a Class III Director of the Board of
Directors of the Company for a term of three (3) years.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY FOR NOMINEE
(2) To ratify and confirm the selection of Arthur Andersen
LLP as independent auditors for the Company for the fiscal
year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1 and 2.
(3) IN THE COMPANY'S DISCRETION TO TRANSACT SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR AND IN FAVOR OF
THE ITEMS SET FORTH ABOVE UNLESS A CONTRARY SPECIFICATION IS MADE.
(Continued, and to be signed on the other side)
(Continued from other side)
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Dated:_____________________, 1997
------------------------------
Signature
------------------------------
Signature if held jointly
------------------------------
Printed Name
------------------------------
Address
Note: Please sign above the word
"signature" exactly as the name
appears on the stock certificate.
When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If the person named on
the stock certificate has died,
please submit evidence of your
authority. If a corporation,
please sign in full corporate
name by the President or
authorized officer and indicate
the signer's office. If a
partnership, please sign in the
partnership name by authorized
person.