SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
QUIPP, INC.
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(Name of Registrant as Specified in its Charter)
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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)(1) 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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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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4) Date Filed:
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<PAGE>
QUIPP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF QUIPP, INC.:
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Quipp, Inc. (the "Company") will be held at its corporate offices at 4800 N.W.
157 Street, Miami, Florida on May 12, 1998 at 10:00 a.m.
Eastern Daylight Time, for the following purposes:
(1) To elect seven members of the Board of Directors;
(2) To vote upon a proposal to amend the Company's Articles of
Incorporation to provide for the classification of the Board
of Directors into three classes of directors with staggered
terms of office;
(3) To vote upon a proposal to amend the Company's Articles of
Incorporation to provide that all shareholders' action be
taken at a shareholders' meeting and not by written consent;
(4) To ratify the appointment of KMPG Peat Marwick LLP as
independent public accountants to examine the financial
statements of the Company for 1998; and
(5) To transact such other business as may properly be presented
at the Annual Meeting or any adjournments thereof.
Holders of the Company's Common Stock of record at the close of
business on March 27, 1998 are entitled to receive this notice and to vote at
the meeting and any adjournment.
Your vote is important. Whether you plan to attend the meeting or not,
we urge you to complete, sign and return your proxy card as soon as possible in
the envelope provided. This will ensure representation of your shares in the
event you are not able to attend the meeting. You may revoke your proxy and vote
in person at the meeting if you so desire.
Miami, Florida By Order of the Board of Directors
April __, 1998
Alan Singer,
Secretary
<PAGE>
QUIPP, INC.
4800 NW 157 STREET
MIAMI, FLORIDA 33014-6434
PROXY STATEMENT
This Proxy Statement is furnished to the holders of Common Stock, $.01
par value, (the "Common Stock") of Quipp, Inc. (the "Company"), a Florida
corporation, in connection with the solicitation of proxies by the Company's
Board of Directors for use at the 1998 Annual Meeting of Shareholders (the
"Meeting") to be held at the Company's corporate offices located at 4800 N.W.
157 Street, Miami, Florida on May 12, 1998 at 10:00 a.m., Eastern Daylight Time,
and at any adjournment or postponement of the Meeting.
This Proxy Statement, the foregoing notice and the enclosed proxy are
being sent to shareholders on or about April __, 1998. The shareholders of
record at the close of business on March 27, 1998 (the "Record Date") are
entitled to be notified of, and to vote at, the Meeting.
If the enclosed proxy is properly executed and returned in time for
voting, the shares of Common Stock represented by the proxy will be voted as
indicated in the proxy. If the proxy is not returned, or in the absence of
instructions to the contrary, it will be voted FOR the election of the nominees
of the Board of Directors, FOR the proposal to amend the Articles of
Incorporation to provide for classification of the Board of Directors, FOR the
proposal to amend the Articles of Incorporation to provide that shareholder
action may be taken only at shareholders meetings and not by written consent and
FOR ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for 1998. The proxy will extend to, and will be
voted at any adjourned or postponed session of the Meeting. The Board of
Directors is not aware of any matters to come before the Meeting other than
those described in this Proxy Statement. If any other matters properly come
before the Meeting, the persons named in the enclosed proxy will vote such proxy
in accordance with their best judgment with respect to such matters. At any time
before the proxy is exercised, a shareholder may revoke a proxy by delivering a
duly executed proxy bearing a later date to the Secretary of the Company at the
address set forth above, or by voting by ballot at the Meeting.
VOTING SECURITIES AND SECURITY OWNERSHIP
GENERAL
On March 27, 1998, there were outstanding 1,602,494 shares of Common
Stock, which constitutes the only class of voting securities of the Company.
Holders of Common Stock are entitled to one vote per share, exercisable in
person, or by proxy, at all meetings of shareholders. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of Common Stock
of the Company is required to constitute a quorum in order to transact business
at the Meeting.
Directors are elected by a plurality of votes cast. Generally, under
Florida law, action on a matter, other than the election of directors, is
approved if the votes cast on the subject matter favoring the action exceed the
votes cast opposing the action. Accordingly, abstentions will have no effect on
the vote. In addition, where brokers are prohibited from exercising
discretionary authority in voting shares for beneficial owners who have not
provided voting instructions (commonly referred to as "broker non-votes"), those
shares will not be included in vote totals.
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table set forth certain information concerning ownership
of the Common Stock of the Company as of March 17, 1998 (unless otherwise noted)
by (a) each shareholder known to the Company to beneficially own more than five
percent of the Common Stock, (b) each director and each nominee for election as
a director of the Company, (c) each executive officer of the Company named in
the Summary Compensation Table under "Executive Compensation," and (d) all
directors and executive officers of the Company as a group. Except as otherwise
noted, each person listed below, either alone or together with members of the
person's family sharing the same household, had sole voting and investment power
with respect to the shares listed next to such person's name.
<TABLE>
PERCENT OF
NUMBER OF SHARES OUTSTANDING
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES(1)
- -------------------------------------------------- ------------------------ --------------------------
<S> <C> <C>
Ralph M. Branca(2)................................ 45,000 2.7%
Richard H. Campbell(3)............................ 10,601 *
Jack D. Finley(3)................................. 66,564 4.1%
John W. Gildea(4)................................. 136,000 8.5%
Cristina H. Kepner(3)(5).......................... 16,189 1.0%
Louis D. Kipp(6).................................. 151,705 9.1%
Kenneth G. Langone(7)............................. 146,500 9.1%
William L. Rose(3)................................ 20,000 1.2%
Ralph S. Roth(8).................................. 9,000 *
All directors and executive officers
as a group(9)................................... 368,339 20.7%
</TABLE>
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*Less than 1%
(1) Applicable percentage of ownership is based on 1,602,494 shares of
Common Stock outstanding on March 17, 1998. Beneficial ownership is
determined in accordance with rules of the Securities and Exchange
Commission and means voting or investment power with respect to
securities. Shares of Common Stock issuable upon the exercise of stock
options exercisable currently or within 60 days of March 17, 1998 are
deemed outstanding and to be beneficially owned by the person holding
such option for purposes of computing such person's percentage
ownership, but are not deemed outstanding for the purpose of computing
the percentage ownership of any other person.
(2) Includes 42,000 shares underlying options that are exercisable
currently or within 60 days of March 17, 1998.
(3) Includes 10,000 shares underlying currently exercisable options.
(4) Includes 126,000 shares held by Network Fund III, Ltd., a Cayman
Islands exempt company ("Network Fund III"). Mr. Gildea is Chairman of
the Board of Directors, Chief Executive Officer, President, a director
and sole stockholder of Gildea Management Company, a Delaware
Corporation ("GMC"). By virtue of an investment advisory agreement
between GMC and Network Fund III, Mr. Gildea may be deemed to
beneficially own the shares held by Network Fund III. The above
information is derived from a Schedule 13G, dated March 9, 1998, filed
by Mr. Gildea and Network Fund III.
(5) Does not include shares held by Invemed Associates, Inc. (see Note 7).
Ms. Kepner is Executive Vice President of Invemed Associates, Inc.
(6) The address of Mr. Kipp is Quipp, Inc., 4800 N.W. 157 Street, Miami,
Florida 33014-6434. Includes 58,000 shares underlying options that are
exercisable currently or within 60 days of March 24, 1998.
2
<PAGE>
(7) Includes 45,400 shares held by Invemed Associates, Inc. Mr. Langone is
the Chairman of the Board and President of Invemed Associates, Inc. and
principal owner of its corporate parent. The address of Mr. Langone is
Invemed Associates, Inc., 375 Park Avenue, New York, New York 10152.
(8) Includes 8,000 shares underlying currently exercisable options.
(9) Includes 179,000 shares underlying option that are currently
exercisable within 60 days of March 17, 1998.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
At the Meeting, seven directors, constituting the entire Board of
Directors of the Company, are to be elected. If the proposal to amend the
articles of incorporation to classify the Board of Directors is adopted, the
directors will be elected for the terms set forth below. If the proposal is not
adopted, the directors will be elected to hold office until the Annual Meeting
of Shareholders in 1999 and until their respective successors are duly elected
and qualified. Unless instructions to the contrary are given, the shares
represented by a properly executed proxy will be voted "FOR" the election of the
nominees set forth below. All of the nominees other than Mr. Peri are currently
members of the Board of Directors of the Company.
The Board of Directors believes that all the nominees will be able to
serve as directors. If any nominee is unable to serve, the persons named in the
enclosed proxy will vote the shares they represent for the election of such
other persons as the Board of Directors may recommend, unless the Board of
Directors reduces the number of directors.
Set forth below is certain information concerning the nominees for
election as directors:
<TABLE>
NAME AGE POSITION WITH THE COMPANY
- ------------------ --- -------------------------------------
NOMINEES FOR ELECTION TO SERVE UNTIL THE 1999 ANNUAL MEETING OF SHAREHOLDERS
<S> <C> <C>
Jack D. Finley 70 Chairman of the Board
Anthony P. Peri 55 President and Chief Executive Officer
Designate
William L. Rose 72 Director
NOMINEES FOR ELECTION TO SERVE UNTIL THE 2000 ANNUAL MEETING OF SHAREHOLDERS
Ralph M. Branca 62 President, Chief Executive Officer and
Director
Louis D. Kipp 66 Director and Treasurer; President of Quipp
Systems, Inc.
NOMINEES FOR ELECTION TO SERVE UNTIL THE 2001 ANNUAL MEETING OF SHAREHOLDERS
Richard H. Campbell 61 Director
Cristina H. Kepner 51 Director
</TABLE>
3
<PAGE>
Mr. Finley has been a director of the Company since July 1989. He has
been an independent business investor and advisor since 1986. From 1968 to 1986,
Mr. Finley served in various capacities with Eikonix Corporation, ("Eikonix"), a
Company he co-founded that developed and produced color scanners. He served as
Eikonix's Executive Vice-President and, subsequently, Chairman of the Board,
prior to the sale of Eikonix to Eastman Kodak Company in 1985.
Mr. Peri will become President and Chief Executive Officer of the
Company and President of Quipp Systems, Inc. on April 6, 1998, at which time Mr.
Branca and Mr. Kipp will relinquish those positions. Both Mr. Branca and Mr.
Kipp will serve the Company on a consulting basis. Since May 1997, Mr. Peri has
been President and Chief Operating Officer of CText Inc., a pre-press systems
supplier to the newspaper industry. From August 1986 to May 1997, he served in
various capacities of Harris Publishing Systems Corporation, the most recent of
which was Vice President and General Manager, with responsibility for the
Company's software and systems integration business.
Mr. Rose has been a director of the Company since it commenced
operations in August 1983. From July 1982 to June 1991, he was President and
Chairman of the Board of Technit, Inc., a supplier of EMI shielding for the
electronics industry. Since 1991, he has remained a director of Technit, Inc.
Mr. Branca has been President and Chief Executive Officer of the
Company since May 1995 and a director of the Company since July 1991. He has
also been President of RMB Associates, a business consulting firm that he owns,
since November 1989. Prior to November 1989, he was employed by Emhart
Corporation, where he held numerous positions, the most recent of which was
Corporate Vice President of Operations.
Mr. Kipp, a founder of the Company, has been President of Quipp
Systems, Inc. ("Quipp Systems"), the Company's wholly-owned subsidiary, since
July 1987. He has been Treasurer of the Company since October 1990 and a
director of the Company since July 1995. He also served previously as a director
of the Company from August 1983 to January 1995. Mr. Kipp was President and
Treasurer of the Company from August 1983 to July 1987.
Mr. Campbell has been a director of the Company since May 1996. He has
been president of Seacoast Consulting, a private business consulting firm, since
August 1994. Mr. Campbell was Group Vice President of the Commercial and Outdoor
Products Group of Textron, Inc. from March 1992 to August 1994. From 1989 to
March 1992, he was Group Vice President of Black and Decker Corporation and also
served as President of that company's Hardware and Home Improvement Group. Prior
to that time, he was Executive Vice President of Emhart Corporation and
President of that company's Consumer Sector Group until the company was acquired
by Black and Decker Corporation.
Ms. Kepner has been a director of the Company since January 1995. She
has been Executive Vice President of Invemed Associates, Inc., an investment
banking firm, since February 1978. Ms. Kepner is also a director of NeoPath,
Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors held nine meetings during 1997. The Board has an
Audit Committee and a Compensation and Nominating Committee.
4
<PAGE>
The Audit Committee is currently comprised of Messrs. Rose (Chairman),
Campbell, Finley and Roth and Ms. Kepner. The principal functions of the
Committee are to recommend to the Board of Directors the engagement of the
independent auditors and to review with the auditors the plan and results of the
audit engagement and evaluation of the adequacy of the Company's system of
internal accounting controls. The Audit Committee met four times during 1997.
The Compensation and Nominating Committee is currently comprised of
Messrs. Finley (Chairman) and Rose and Ms. Kepner. The Committee approves the
salary, bonus and other benefits of members of senior management, reviews new
executive compensation plans, and administers certain of the Company's benefit
plans. In addition, the Committee recommends to the Board of Directors nominees
for election to the Board of Directors and the compensation of the directors.
The Committee will consider qualified candidates for election as directors
suggested by shareholders that are submitted in writing to the Secretary of the
Company in accordance with procedures set forth in the bylaws. The Compensation
and Nominating Committee met three times during 1997.
Ralph S. Roth, a director of the Company who is not standing for
reelection, attended five of the eight Board of Directors and Audit Committee
meetings held while he served on the Board of Directors and the Audit Committee
during 1997.
COMPENSATION OF DIRECTORS
The Company currently pays each non-employee director a fee of $1,200
for attendance at each meeting of the Board of Directors ($400 if the director
participates by telephone) and $200 for each meeting of a Board committee. Until
October 1997, under the Company's Directors Fee Purchase Plan, directors were
entitled to elect, prior to the year in which such fees are paid, to receive
such fees in Common Stock, based on the fair market value of the Common Stock at
the time the fees were paid. The Directors Fee Purchase Plan was terminated in
October 1997.
In addition, under the Company's 1996 Equity Compensation Plan, each
non-employee director receives an annual grant of options to purchase 5,000
shares (which generally are granted immediately after the election of directors
at the annual meeting of shareholders). The exercise price per share of the
options is equal to the fair market value of a shares of Company common stock on
the date of grant.
REPORT OF COMPENSATION AND NOMINATING
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation and Nominating Committee follows two basic principles
in setting the compensation for the Company's executive officers. First, annual
compensation should, to a meaningful extent, reflect the financial performance
of the Company. Second, incentives should be provided to executive officers that
will tie long-term rewards for the executive officers to increases in
shareholder value. The Committee attempts to effect this policy through the of
three components of compensation: salary, bonuses and stock options.
Salary determinations have not been based upon any specific criteria.
Nevertheless, the Committee is confident that, as compared to most other public
companies, the salaries paid to its executive officers are modest. Moreover, the
salaries of the executive officers were not increased in 1997 as compared to
1996, reflecting the Committee's judgment that annual compensatory increases
principally should be realized through bonuses based on Company performance. In
setting Mr. Branca's salary, the Committee considered
5
<PAGE>
the fact that he is not serving the Company on a full-time basis, and his duties
are principally focused upon the pursuit and analysis of strategic alternatives
(including acquisition and joint venture opportunities). Accordingly, Mr.
Branca's salary is set at a level substantially below that of Mr. Kipp, who has
continued to be responsible for the operations of Quipp Systems, the Company's
only operating subsidiary.
Bonuses are paid pursuant to the Quipp, Inc. Executive Incentive
Compensation Plan. Under that plan, an incentive pool, based on a percentage of
the Company's before-tax profit, is made available for awards to the Company's
executive officers. While the plan sets forth the total maximum amount of bonus
compensation that can be paid to participants, the Committee is not required to
pay the full amount of the pool, and has the discretion to determine how much of
the pool should be paid to the individual participants. The individual bonuses
were not based on any specific criteria. Mr. Branca's bonus principally
reflected the Committee's judgment that the scope of his efforts on behalf of
the Company far exceeded the level upon which his salary was based. Other
bonuses under the pool reflected the strong financial performance of the Company
during 1997.
The stock option component of the executive officers' compensation is
designed to provide incentives for the enhancement of shareholder value, since
the full benefit of stock option grants typically is not realized unless there
has been appreciation in share values over several years. Options have been
granted to executive officers under the Quipp, Inc. 1996 Equity Compensation
Plan at fair market value on the date of grant. Although grant levels for most
continuing employees during 1997 remained roughly equivalent to 1996 levels, the
total number of options underlying grants to the executive officers was
significantly decreased in 1997. The Committee believed that the options granted
in 1996 continued to provide a significant incentive to the executives to
enhance the long-term performance of the Company. Therefore, the Committee
determined that additional option grants could be made to the executive officers
at levels that, while incrementally increasing their long-term incentive, would
constitute a lower percentage of options granted under the plan generally. This
philosophy was applied by the Committee in considering the number of options
granted to Mr. Branca during 1997. Except as described above, the determination
of the number of options to be granted to the Company's executive officers was
not based on any specific criteria.
Certain provisions of the Internal Revenue Code provide generally that
publicly held corporations may not deduct compensation for its chief executive
officer or each of certain other executive officers to the extent that such
compensation exceeds $1 million for the executive. It is not expected that these
provisions will adversely affect the Company based on its current compensatory
structure. In this regard, base salary and bonus levels are expected to remain
well below the $1 million limitation in the foreseeable future. In addition, the
Company's 1996 Equity Compensation Plan is designed to preserve, to the extent
otherwise available, the deductibility of income realized upon the exercise of
stock options under the plan regardless of whether such income, together with
salary, bonus and other compensation, exceeds the limitation.
Jack D. Finley, Chairman
Cristina H. Kepner
William L. Rose
6
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth certain information regarding
compensation paid by the Company during the fiscal years ended December 31,
1997, 1996 and 1995 with respect to the Company's Chief Executive Officer and
only executive officer that earned salary and bonus in excess of $100,000 during
the year ended December 31, 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
AWARDS
-------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION($)(1)
- --------------------- -------- ------------ ----------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Ralph M. Branca(3) 1997 $50,000 $30,000 10,000 $--
President and 1996 $50,000 $30,000 40,000 $--
Chief Executive 1995 $30,000 $-- -- $--
Officer
Louis D. Kipp 1997 $110,000 $81,300 10,000 $2,212
President of Quipp 1996 $110,000 $61,710 60,000 $2,342
Systems, Inc., 1995 $110,000 $51,780 -- $1,494
Treasurer of the
Company
</TABLE>
- --------------------
(1) Constitutes amounts contributed by the Company, for the benefit of Mr.
Kipp, to the Company's Employee Savings and Investment Plan.
(2) Mr. Branca was elected President and Chief Executive Officer in May
1995.
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options during the fiscal year ended December 31, 1997 to the executive officers
of the Company who are named on the Summary Compensation Table:
7
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF
SHARES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED(1) FISCAL YEAR ($/SH)(2) DATE VALUE (3)
- ---- ----------------- -------------------------- ----------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Ralph M. Branca...... 10,000 11.2% $9.00 3/17/2002 $101,943
Louis D. Kipp........ 10,000 11.2% $9.00 3/17/2002 $101,943
</TABLE>
- --------------------------
(1) These options were immediately exercisable on the date of grant.
(2) The exercise price was based on the last sale price of the Company's
Common Stock reported on the Nasdaq National Market on the date of
grant.
(3) These amounts represent the estimated fair value of stock options,
measured at the date of grant using the Black-Scholes option pricing
model. There are four underlying assumptions used in developing the
grant valuations: an expected volatility of 33.53%; an expected term to
exercise of five years for 1997 grants; interest rates equal to the
U.S. Treasury Note rates in effect at the date of the grant (March 18,
1997 - 6.25%) for the expected term of the option; and an expected
dividend yield of zero. The actual value, if any, an officer may
realize will depend on the amount by which the stock price exceeds the
exercise price on the date the option is exercised. Consequently, there
is no assurance the value realized by an officer will be at or near the
value estimated above. These amounts should not be used to predict
stock performance.
STOCK OPTION EXERCISE AND HOLDINGS
The following table sets forth information regarding the number and
value of options held at December 31, 1997 by the executive officers of the
Company who are named in the Summary Compensation Table. Neither of the
executive officers exercised stock options during 1997.
<TABLE>
FISCAL YEAR END OPTION VALUES
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END(1)
-------------------------------------------- -------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- -------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Ralph M. Branca 34,000 16,000 $186,000 $ 74,000
Louis D. Kipp 46,000 24,000 $265,250 $111,000
</TABLE>
- --------------------------------
(1) Based upon $16.50 per share, which was the last sale price of the
Company's Common Stock as reported on the Nasdaq National Market on
December 31, 1997.
8
<PAGE>
EMPLOYMENT AND RELATED AGREEMENTS
Pursuant to a Restated Employment Agreement with Mr. Kipp, dated May 1,
1997, Quipp Systems has agreed to employ Mr. Kipp through April 30, 1999 (or
such earlier date as a new President of Quipp Systems is employed by Quipp
Systems) at a salary of $110,000 per year, plus any additional compensation
granted by the Board of Directors of Quipp Systems In addition, Quipp Systems
agreed to pay an incentive bonus to Mr. Kipp pursuant to the Company's Executive
Incentive Compensation Plan in an amount to be set by the Board of Directors of
the Company or the Compensation Committee of the Board of Directors.
In addition, the agreement provides that Quipp Systems will continue
Mr. Kipp's health insurance coverage until his 70th birthday, provided Mr. Kipp
pays the same premium as any similarly situated full-time employee. Any
insurance provided by Quipp Systems will be subordinated to any other health
insurance for which Mr. Kipp is eligible, subject to reimbursement of certain
Medicare premiums.
The agreement also provides that after a new President of Quipp Systems
succeeds Mr. Kipp, the Company will retain Mr. Kipp on a part-time basis. In
addition, at such time as a new President succeeds Mr. Kipp or, if earlier, on
April 30, 1999, any remaining unvested stock options to purchase Company Common
Stock held by Mr. Kipp will become vested.
Mr. Kipp has indicated to the Board of Directors his intention to
retire as President of Quipp Systems at such time as his replacement is
designated by the Board of Directors, and Mr. Peri will become President and
Chief Executive Officer of the Company, and President of Quipp Systems, in April
1998. However, as provided in the agreement, Mr. Kipp will continue with the
Company on a part-time basis.
Pursuant to an agreement with Mr. Branca dated as of July 16, 1996, the
Company has agreed to provide health insurance to Mr. Branca in the event of his
termination upon a "Change of Control" (as defined in the agreement). In the
event of such termination, the Company will continue Mr. Branca's health
insurance coverage until he reaches the age of 68, provided Mr. Branca pays 100
percent of the cost of such health insurance coverage, but in no event more than
the premium for any similarly situated full-time employee. Any health insurance
provided to Mr. Branca will be subordinated to any other health insurance for
which Mr. Branca is eligible, subject to reimbursement of certain Medicare
premiums.
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF
INCORPORATION PROVIDE FOR THE CLASSIFICATION OF THE
BOARD OF DIRECTORS
The Board of Directors is recommending a proposed amendment to Article
VI of the Company's Articles of Incorporation that would classify the Board of
Directors into three classes of directors with staggered terms. This change is
intended to increase the commitment of the members of the Board of Directors by
extending the term of each director to three years, and to reduce the number of
directors that are subject to election by the shareholders at any annual
shareholders meeting.
Under the proposed amendment, the Board of Directors will be divided
into three classes, each class to be as nearly equal in number as possible. If
the proposed amendment is adopted, three directors will be elected for a term
expiring at the 1999 annual meeting; two directors will be elected for a term
expiring at the 2000 annual meeting; and two directors will be elected for a
term expiring at the 2001 annual meeting,
9
<PAGE>
in each case until their respective successors are duly elected and qualified.
Beginning with the 1999 Annual Meeting of Shareholders, one class will be
elected each year for a three-year term.
The Board of Directors believes that this amendment is appropriate in
light of the Company's pending management changes. Since the Company's
formation, Louis D. Kipp has been integral to the Company's development and
success. Mr. Kipp was a co-founder of the Company and has continued to serve as
the President of the Company's only operating subsidiary, Quipp Systems. In
April 1998, Mr. Kipp will retire as President of Quipp Systems and be replaced
in that capacity by Mr. Peri. In addition, Mr. Peri will replace Mr. Branca as
President and Chief Executive Officer of the Company. Moreover, as announced on
several occasions, the Company is seeking acquisition and joint venture
opportunities. The Company believes that the current management transition and
focus on seeking expansion opportunities makes it appropriate to provide a
mechanism to preserve some degree of continuity of board membership in future
years.
In certain contexts, the classification of a board of directors may
have an anti-takeover effect because it would make a change in the composition
of a majority of the Board of Directors more difficult. The staggering of terms
of directors could have the effect of requiring at least two shareholder
meetings, instead of one (as is presently the case) to effect a change in
majority control of the Board of Directors. However, the Board of Directors
believes that any anti-takeover effects of this amendment will not be profound.
The corporate laws of certain states generally provide that if a Board of
Directors is classified, directors may be removed only for cause. However, under
Florida law, whether or not a corporation's board of directors is classified,
directors may be removed without cause, unless a specific provision is included
in the articles of incorporation providing that directors may be removed only
for cause. The Company's articles of incorporation do not contain such a
provision. In addition, procedures regarding removal of a director at
shareholders meetings of the Company (which, in the case of the Company,
requires the same vote as is generally necessary to pass any other matter under
consideration at a shareholders meeting) are not being changed.
Under the Florida Business Corporation Act and the bylaws of the
Company, any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors or by the shareholders
in the manner provided in the Florida Business Corporation Act. Any director
elected to fill a vacancy will hold office only until the next election of
directors by the shareholders, at which time a director will be elected to serve
the remaining portion of the term, if the term would not have expired at the
meeting.
If the proposed amendment is approved, the text of Article VI of the
Company's Articles of Incorporation would read as set forth below. The current
text of Article VI would be Section (1) of the proposed amendment and provisions
relating to classification of the Board of Directors would be added as Section
(2):
ARTICLE VI
(1) The total number of directors of this corporation
shall be the number from time to time fixed by the directors
in accordance with the terms and conditions of the bylaws of
the corporation.
(2) The directors shall be classified, with respect
to the time for which they severally hold office, into three
classes, as nearly equal in
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number as possible, one class to be originally elected for a
term expiring at the annual meeting of shareholders to be held
in 1999, another class to be originally elected for a term
expiring at the annual meeting of shareholders to be held in
2000, and another class to be originally elected for a term
expiring at the annual meeting of shareholders to be held in
2001, with each class to hold office until its successor is
duly elected and qualified. At each succeeding annual meeting
of shareholders, directors elected to succeed those directors
whose terms then expire shall be elected for a term of office
to expire at the third succeeding annual meeting of
shareholders after their election, with each director to hold
office until such person's successor shall have been duly
elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF
INCORPORATION TO REQUIRE THAT ALL SHAREHOLDER
ACTION BE TAKEN AT A SHAREHOLDERS MEETING AND
NOT BY WRITTEN CONSENT
The Board of Directors is recommending a proposed new Article VIII to
the Company's Articles of Incorporation, which provides that actions required or
permitted to be taken at any annual or special meeting of shareholders may be
taken only at a shareholders meeting and not by written consent of the
shareholders.
Under the Florida Business Corporation Act, unless otherwise provided
in the articles of incorporation, action required or permitted to be taken at an
annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote if a written consent or consents
describing the action taken is signed by the holders of not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote were present and voted. The
Company's Articles of Incorporation currently contain no provision restricting
shareholder action by written consent.
The adoption of the proposed amendment would eliminate the ability of
the Company's shareholders to act by written consent in lieu of a meeting. It is
intended to prevent solicitation of consents by shareholders seeking to effect
changes without giving all of the Company's shareholders entitled to vote on a
proposed action an adequate opportunity to participate at a meeting where such
proposed action is considered. Moreover, the Board of Directors believes it is
important that shareholders be able to discuss matters which may affect their
rights and that the Board of Directors and shareholders be able to give advance
consideration to any such action.
The proposed amendment could be deemed to have an anti-takeover effect
because it would prevent a takeover bidder holding or controlling a large block
of the Company's stock from using the written consent procedure to take
shareholder action unilaterally. However, the Board of Directors does not
believe that the elimination of shareholder action by written consent will
create a significant impediment to a tender offer or other offer to take control
of the Company. In this regard, it is noted that the amendment will not affect
the ability of shareholders to call a special meeting as provided under Florida
law. Nevertheless, the effect of this proposal may be to make it more difficult
or to delay certain actions by a group acquiring a substantial
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<PAGE>
percentage of the Company's stock, even though such actions might be desired by
the holders of the majority of the Company's stock.
The amendment will insure that all shareholders will have advance
notice of any attempted major corporate action by shareholders, and that all
shareholders will have an equal opportunity to participate at the meeting of
shareholders where such action is be considered. It will enable the Company to
set a record date for any shareholder voting, and should reduce the possibility
of disputes or confusion regarding the validity of purported shareholder action.
The amendment could provide some encouragement to a potential acquiror to
negotiate directly with the Board of Directors.
If the proposed amendment is approved, the text of new Article VIII of
the Company's Articles of Incorporation will read as follows:
ARTICLE VIII
No action required to be taken or which may be taken
at any annual or special meeting of shareholders of the
corporation may be taken by shareholders without a meeting,
and the power of shareholders to consent in writing without a
meeting to the taking of any such action is specifically
denied.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL
PROPOSAL TO AMEND QUIPP, INC. 1996 EQUITY COMPENSATION PLAN
At the Meeting, there will be presented to the shareholders a proposal
to approve an amendment to the Quipp, Inc. 1996 Equity Compensation Plan (the
"Equity Compensation Plan"). The Amendment would increase, by 200,000 shares,
the number of shares of Common Stock that may be issued under the Plan from
400,000 to 600,000.
The Equity Compensation Plan provides for (i) grants of stock options
("Stock Options") and stock-based awards ("Awards") to employees of the Company
and its subsidiary and certain consultants and advisors, (ii) grants of Stock
Options to non-employee members of the Board of Directors of the Company
("Non-employee directors") and (iii) grants of restricted stock ("Restricted
Stock Grants") to employees of the Company and its subsidiary. If the Company
has additional subsidiaries in the future, the Equity Compensation Plan will
apply to employees of, and certain consultants and advisors to, such
subsidiaries.
The Board of Directors believes the Plan has provided a significant
incentive to Company employees to enhance their efforts by aligning their
interest with those of the shareholders. The Board of Directors believes that in
light of the current transition in management and continuing effort by
management to pursue acquisition or joint venture opportunities, the ability to
issue additional shares under the plan would be helpful in attracting and
retaining key employees.
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<PAGE>
The key provisions of the Equity Compensation Plan are as follows:
GENERAL. If the proposed amendment is approved, the Equity Compensation
Plan will authorize up to 600,000 shares of Common Stock for issuance pursuant
to the terms of the Equity Compensation Plan, subject to adjustment in certain
circumstances as discussed below. If and to the extent Stock Options granted
under the Equity Compensation Plan terminate, expire or are canceled without
being exercised, or if any shares of restricted stock are forfeited, the shares
subject to such Stock Option or Restricted Stock Grant will become available
again for purposes of the Equity Compensation Plan (in the case of a Restricted
Stock Grant, regardless of whether such grant provided voting or dividend rights
to the participant). No Grantee may receive grants of Stock Options, Restricted
Stock Grants or Awards for more than an aggregate of 100,000 shares of Common
Stock during the term of the Equity Compensation Plan.
ADMINISTRATION OF THE EQUITY COMPENSATION PLAN. The Equity Compensation
Plan provides that it is to be administered and interpreted by the Board of
Directors or a committee of not less than two persons appointed by the Board of
Directors from among its members, each of whom must be an "outside director" as
defined by Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). The Board or such committee is hereinafter referred to as the
"Committee." The Compensation and Nominating Committee of the Board of Directors
currently serves as the Committee. Except as set forth in the Equity
Compensation Plan with regard to Non-employee directors, the Committee has the
sole authority to determine (i) persons to whom Stock Options or Restricted
Stock Grants (collectively, "Grants") or Awards may be granted under the Equity
Compensation Plan, (ii) the type, size and other terms and conditions of each
Grant or Award, (iii) the time when the Grants or Awards will be made and (iv)
any other matters arising under the Equity Compensation Plan.
The Committee has full power and authority to administer and interpret
the Equity Compensation Plan, to make factual determinations and to adopt or
amend such rules, regulations, agreements and instruments for implementing the
Equity Compensation Plan and for conduct of its business as it deems necessary
or advisable, in its sole discretion.
GRANTS AND AWARDS. All Grants and Awards are subject to the terms and
conditions set forth in the Equity Compensation Plan and to those other terms
and conditions consistent with the Equity Compensation Plan as the Committee
deems appropriate and as are specified in writing by the Committee to the
designated participant (the "Grant Letter"). The Committee must approve the form
and provisions of the Grant Letters. Grants and Awards under the Equity
Compensation Plan need not be uniform as among other recipients of the same type
of Grant or Award.
ELIGIBILITY FOR PARTICIPATION. The Committee is responsible for
designating employees of the Company and its subsidiary and consultants and
advisors who are eligible to participate in the Equity Compensation Plan. As of
March 1, 1998, 134 employees were eligible for Grants or Awards under the Equity
Compensation Plan. The Committee is authorized to select the persons to receive
Grants or Awards (the "Grantees") from among those eligible and to determine the
number of shares of Common Stock that are subject to each Grant or Award. To be
eligible, consultants and advisors must render bona fide services and such
services must not be in connection with the offer or sale of securities in a
capital raising transaction. In addition, Non-employee directors may receive
Grants of Stock Options only as described below under "Formula Grants to
Non-employee directors." Such grants of Stock Options to Non-employee directors
are referred to below as "Formula Grants."
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<PAGE>
STOCK OPTIONS. The Committee may grant Stock Options intended to
qualify as incentive stock options ("ISOs") within the meaning of section 422 of
the Code or so-called "non-qualified stock options" that are not intended to so
qualify ("NQSOs") or any combination of ISOs or NQSOs. Only employees of the
Company or its subsidiary may receive ISOs.
The Committee fixes the option price per share at the date of Grant.
The option price per share of any ISO or NQSO granted under the Equity
Compensation Plan may not be less than the fair market value of an underlying
share of Common Stock on the date of grant. However, if the Grantee of an ISO is
a person who holds more than 10% of the combined voting power of all classes of
outstanding stock of the Company, the option price per share of an ISO must be
at least 110% of the fair market value of a share of Common Stock on the date of
grant. To the extent that the aggregate fair market value of shares of Common
Stock, determined on the date of grant, with respect to which ISOs granted under
the Equity Compensation Plan and any other plan become exercisable for the first
time by a Grantee during any calendar year exceeds $100,000, such ISOs, to the
extent of such excess, must be treated as NQSOs. Currently, the measure of fair
market value of a share of Company Common Stock on a particular date is the
closing sale price of a share of Common Stock as reported on the Nasdaq National
Market on that date. On March 2, 1998, the closing price per share of the
Company's Common Stock, as reported on Nasdaq, was $16.25.
The Committee determines the term of each Stock Option, which may not
exceed ten years from the date of grant or, if the Grantee of an ISO is a person
who holds more than 10% of the combined voting power of all classes of
outstanding stock of the Company, five years from the date of grant. The vesting
period for Stock Options, if any, will be as determined by the Committee, in its
sole discretion, and specified in the Grant Letter. The Committee, in its sole
discretion, may accelerate the exercisability of any Stock Option, other than a
Stock Option subject to a Formula Grant to a Non-employee director that is held
by a Non-employee director. A Grantee may exercise a Stock Option by delivering
notice of exercise to the Committee with accompanying payment of the option
price. The Grantee may pay the option price in cash, or, with the approval of
the Committee, by delivering shares of Common Stock already owned by the Grantee
for the period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and having a fair market value on the date of
exercise equal to the option price or with a combination of cash and shares of
Common Stock or (except with respect to Formula Grants held by Non-employee
directors) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board ("Regulation T Payment"). Non-employee directors
who receive Formula Grants may make Regulation T payments with respect to the
Stock Options underlying the Formula Grants. The Grantee must pay, at the time
of exercise, the option price and the amount of any federal, state or local
withholding tax due in connection with such Stock Option exercise.
FORMULA GRANTS TO NON-EMPLOYEE DIRECTORS. Each Non-employee director
automatically receives a Grant of an NQSO to purchase 5,000 shares of Common
Stock immediately upon his or her first becoming a member of the Board of
Directors. In addition, each Non-employee director in office immediately after
the annual election of directors (other than directors first elected at such
meeting) will automatically receive, immediately after such election, a Grant of
an NQSO to purchase 5,000 shares of Common Stock. Stock Options granted to
Non-employee directors will have a per share exercise price equal to the fair
market value of a share of Common Stock on the date of grant and will be fully
exercisable on the date of grant. Options granted to Non-employee directors will
have a term of ten years from the date of grant, subject to earlier termination
as described below under "Termination of Stock Options as a Result of
Termination of Employment, Disability or Death."
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<PAGE>
TERMINATION OF STOCK OPTIONS AS A RESULT OF TERMINATION OF EMPLOYMENT,
DISABILITY OR DEATH. If a Grantee ceases to serve as an employee, director,
consultant or advisor to the Company or its subsidiary for any reason other than
disability, death or termination for cause, such person's Stock Option will
terminate 90 days following the date on which he or she ceases to serve. If such
person's service ceases due to the person becoming disabled within the meaning
of Section 22(e)(3) of the Code, such person's Stock Option will terminate one
year following the date on which he or she ceases to serve. In the event of the
death of such person while providing such service or within three months after
he or she ceases to serve, such person's personal representative may exercise
the Stock Option until one year from the date of death. If such person's service
ceases due to termination by the Company for cause (as defined in the Equity
Compensation Plan), such person's Stock Options will terminate immediately.
However, in each case described above (other than with respect to Formula Grants
then held by Non-employee directors), the Committee may specify a different
termination date, but in any event no later than the date of expiration of the
option term.
RESTRICTIONS ON TRANSFERABILITY OF STOCK OPTIONS. Subject to the
exceptions set forth in the following sentence, no Stock Option granted under
the Equity Compensation Plan may be transferred, except by will or the laws of
descent and distribution. However, (i) an NQSO may be transferred pursuant to a
"qualified domestic relations order," within the meaning of Sections 401(a)(13)
and 414(p) of the Code or of Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") and (ii) the Committee may provide, in a Grant
Letter, that a Grantee my transfer Stock Options to his or her children,
grandchildren or spouse or to one or more trusts for the benefit of such family
members or to partnerships in which such family members are the only partners,
provided that the Grantee receives no consideration for the transfer and the
Grant Letters relating to the transferred Stock Options continue to be subject
to the same terms and conditions that were applicable immediately prior to such
transfer.
RESTRICTED STOCK GRANTS. The Committee may issue shares of Common Stock
to a participant under a Restricted Stock Grant for no consideration unless
otherwise required by law. The Grant Letter relating to a Restricted Stock Grant
will provide for a period during which the Grant will remain subject to certain
restrictions, including restrictions on transferability (the "Restriction
Period"). During the Restriction Period, a Grantee may not sell, assign,
transfer, pledge or otherwise dispose of the shares of Common Stock to which
such Restriction Period applies, except as provided by the Committee. If so
determined by the Committee, a Grantee may have voting rights and the right to
receive dividends during the Restricted Period with regard to the Restricted
Stock Grant. If a Grantee's employment terminates during the Restriction Period,
the Restricted Stock Grant terminates with respect to all shares of Common Stock
covered by the Grant as to which the restriction has not lapsed, and those
shares of Common Stock will be forfeited by the Grantee. All restrictions
imposed under the Restricted Stock Grant lapse upon the expiration of the
applicable Restriction Period. In addition, the Compensation Committee may
determine as to any or all Restricted Grants that all restrictions will lapse
under such other circumstances as it deems appropriate.
STOCK-BASED AWARDS. Subject to limitations of applicable law, the
Committee may grant to participants, other than Non-employee directors, Awards
of Company Common Stock purely as a "bonus" and not subject to any restrictions
or conditions.
AMENDMENT AND TERMINATION OF THE EQUITY COMPENSATION PLAN. The Board of
Directors may amend or terminate the Equity Compensation Plan at any time.
Nevertheless, the Board of Directors may not, without obtaining shareholder
approval, change the class of individuals eligible to receive an ISO, or
increase the maximum number of shares as to which Grants or Awards may be made
under the Equity Compensation Plan or the individual limit for any single
participant. In addition, provisions of the Equity Compensation
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<PAGE>
Plan relating to Formula Grants to Non-employee directors may not be amended
more than once every six months, other than to comport with changes in the Code
or ERISA.
The Equity Compensation Plan will terminate on March 14, 2006 unless
terminated earlier by the Board of Directors or extended by the Board of
Directors with approval of the shareholders.
AMENDMENT AND TERMINATION OF OUTSTANDING GRANTS. A termination or
amendment of the Equity Compensation Plan that occurs after a Grant is made will
not result in the termination or amendment of the Grant unless the Grantee
consents; provided, however, that the Committee may revoke any Grant if it is
contrary to applicable law, or modify a Grant to bring it into compliance with
valid and mandatory government regulation. The termination of the Equity
Compensation Plan will not impair the power and authority of the Committee with
respect to outstanding Grants.
ADJUSTMENT PROVISIONS. If there is any change in the number or kind of
shares of Common Stock outstanding by reason of a stock dividend, a
recapitalization, stock split, or combination or exchange of such shares, or
merger, reorganization or consolidation of the Company, reclassification or
change in the par value or similar event, or if the value of outstanding shares
of Common Stock is substantially reduced due to the Company's payment of an
extraordinary dividend or distribution, the number of shares of Common Stock
available for Grants and Awards, the individual limit for any single
participant, and the number of shares and price per share subject to outstanding
Stock Options, will be proportionately adjusted by the Compensation Committee to
reflect any increase or decrease in the number or kind of issued shares of
Common Stock.
CHANGE OF CONTROL PROVISIONS. In the event of a "Change of Control,"
all outstanding Stock Options will be immediately exercisable and all
restrictions on Restricted Stock Grants will lapse, unless the Committee
determines otherwise. The Committee may make such determination up to 30 days
following the Change of Control, provided that the Committee is comprised of the
same members as served on the Committee immediately prior to such Change of
Control; however, the Committee cannot make such a determination with respect to
Stock Options granted subject to Formula Grants and held by Non-employee
directors.
Under the Equity Compensation Plan, a "Change of Control" will be
deemed to have occurred upon the earliest to occur of the following events: (i)
the date the shareholders of the Company (or the Board of Directors, if
shareholder action is not required) approve a plan or other arrangement pursuant
to which the Company will be dissolved or liquidated, or (ii) the date the
shareholders of the Company (or the Board of Directors, if shareholder action is
not required) approve a definitive agreement to sell or otherwise dispose of
substantially all of the assets of the Company, or (iii) subject to certain
exceptions, the date the shareholders of the Company (or the Board of Directors,
if shareholder action is not required) and the shareholders of the other
constituent corporation (or its board of directors, if shareholder action is not
required) have approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, or (iv) the date any entity, person
or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended, (other than the Company or an
employee benefit plan (or related trust) sponsored or maintained by the Company)
becomes the beneficial owner of, or obtains voting control over, securities of
the Company having at least 20 percent of the combined voting power of
outstanding securities of the Company in the election of directors, or (v)
directors are elected such that a majority of the members of the Board of
Directors will have been members of the Board of Directors for less than two
years, unless the election or nomination for election of each new director who
was not a
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<PAGE>
director at the beginning of such two year period was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of such period.
FEDERAL TAX CONSEQUENCES. There are no federal income tax consequences
to Grantees or to the Company upon the grant of an NQSO under the Equity
Compensation Plan. Upon the exercise of NQSOs, a Grantee will recognize ordinary
compensation income in an amount equal to the excess of the fair market value of
the shares of Common Stock at the time of exercise over the exercise price of
the NQSO, and the Company generally will be entitled to a corresponding federal
income tax deduction. Upon the sale of shares of Common Stock acquired by
exercise of an NQSO, a Grantee will have a capital gain or loss (long-term or
short-term depending upon the length of time the shares of Common Stock were
held) in an amount equal to the difference between the amount realized upon the
sale and the Grantee's adjusted tax basis in the shares of Common Stock (the
exercise price plus the amount of ordinary income recognized by the Grantee at
the time of exercise of the NQSO).
A Grantee of an ISO will not recognize taxable income for purposes of
the regular income tax, upon either the grant or exercise of the ISO. A Grantee
who disposes of the shares of Common Stock acquired upon exercise of an ISO
after two years from the date the ISO was granted and after one year from the
date such shares were transferred to him will recognize long-term capital gain
or loss in the amount of the difference between the amount realized on the sale
and the option price (or the Grantee's other tax basis in the shares), and the
Company will not be entitled to any tax deduction by reason of the grant or
exercise of the ISO. As a general rule, if a Grantee disposes of the shares of
Common Stock acquired upon exercise of an ISO before satisfying both holding
period requirements (a "disqualifying disposition"), his or her gain recognized
on such a disposition will be taxed as ordinary income to the extent of the
difference between the fair market value of such shares on the date of exercise
and the option price, and the Company will be entitled to a deduction in that
amount. The gain, if any, in excess of the amount recognized as ordinary income
on such a disqualifying disposition will be long-term or short-term capital
gain, depending upon the length of time the Grantee held his or her shares of
Common Stock prior to the disposition.
A Grantee normally will not recognize taxable income upon receiving a
Restricted Stock Grant, and the Company will not be entitled to a deduction,
until such Common Stock is transferable by the Grantee or no longer subject to a
substantial risk of forfeiture for federal tax purposes, whichever occurs
earlier. When the Common Stock is either transferable or is no longer subject to
a substantial risk of forfeiture, the Grantee will recognize ordinary
compensation income in an amount equal to the fair market value of the Common
Stock subject to the Restricted Stock Grant (less any amounts paid for such
shares) at that time, and the Company will be entitled to a deduction in the
same amount. A Grantee may, however, elect to recognize ordinary compensation
income in the year the Restricted Stock Grant is awarded in an amount equal to
the fair market value of the Common Stock (less any amounts paid for such
shares) at that time, determined without regard to the restrictions. In such
event, the Company will be entitled to a deduction in the same year, provided
the Company complies with the applicable withholding requirements for federal
tax purposes. Any gain or loss recognized by the Grantee upon subsequent
disposition of the Common Stock will be capital gain or loss. If, after making
the election, any Common Stock subject to a Restricted Stock Grant is forfeited,
or if the market value declines during the Restriction Period, the Grantee is
not entitled to any tax deduction or tax refund.
A Grantee will recognize taxable income upon grant of an Award in an
amount equal to the fair market value of the Common Stock subject to the Award
at that time, and the Company will be entitled to a deduction in the same
amount.
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<PAGE>
SECTION 162(M). Under Section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration would
include amounts received upon the exercise of Stock Options granted under the
Equity Compensation Plan, the value of shares of Common Stock received when the
shares of Restricted Stock became transferable (or such other time when income
is recognized) and the value of shares of Common Stock when an Award is granted.
An exception does exist, however, for "performance-based compensation,"
including amounts received upon the exercise of Stock Options pursuant to a plan
approved by shareholders that meets certain requirements. The Equity
Compensation Plan, when approved by shareholders, is intended to make grants of
Stock Options thereunder meet the requirements of "performance-based
compensation." Restricted Stock Grants and Awards of Common Stock generally will
not qualify as "performance-based compensation."
PRIOR GRANTS. Since the inception of the plan, the Committee has
authorized the grant of Stock Options to purchase 300,000 shares, including
Grants to the following executive officers and groups: Ralph M. Branca, 50,000
shares; Louis D. Kipp, 70,000 shares; all current executive officers as a group,
151,000 shares; all current directors who are not executive officers as a group,
48,000 shares, and all employees other than executive officers, as a group,
96,000 shares. Mr. Peri will receive an option to purchase 30,000 shares upon
commencement of his employment with the Company. No Restricted Stock Grants or
Awards have been authorized under the Equity Compensation Plan.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THIS PROPOSAL
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KMPG Peat Marwick LLP as the
independent public accountants to examine the financial statements of the
Company for 1998. In accordance with the resolution of the Board of Directors,
this selection will be presented to the shareholders for ratification at the
Meeting. The firm of KMPG Peat Marwick LLP has audited the Company's financial
statements annually since 1983. If the shareholders do not ratify the
appointment of KPMG Peat Marwick LLP, the selection of independent public
accountants will be reconsidered by the Board of Directors. A representative of
KPMG Peat Marwick LLP is expected to be present at the Meeting and will have an
opportunity to make a statement if he or she desires to do so and will also be
available to respond to appropriate questions raised at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THE RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP
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FIVE YEAR PERFORMANCE COMPARISON
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock for the past
five fiscal years with the cumulative total return of the Nasdaq Stock Market
(U.S. issuers) ("Nasdaq") and the Dow Jones Factory Equipment Industry Group,
described more fully below (the "Factory Equipment Group"). Dividend
reinvestment has been assumed and, with respect to companies in the Factory
Equipment Group, the returns of each such company have been weighted at each
measurement point to reflect relative stock market capitalization.
[performance graph]
<TABLE>
INDEX FY END FY END FY END FY END FY END FY END
1992 1993 1994 1995 1996 1997
- ------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Quipp, Inc. $100.00 $ 72.00 $175.00 $262.50 $231.25 $412.50
Nasdaq $100.00 $114.80 $112.21 $158.70 $195.19 $239.53
Factory Equipment Group $100.00 $118.46 $119.75 $155.40 $161.08 $186.66
=============================== ============ ============ ============ ============ ============ ============
</TABLE>
The Factory Equipment Group is not a "published industry or
line-of-business index" as that term is defined by Securities and Exchange
Commission regulations. Accordingly, the Factory Equipment Group is considered a
"peer index" and the identity of the issuers used in the index is as follows:
American Vanguard Corp., Baldwin Technology Inc. Class A, Bethlehem Corporation,
Binks Sames Corp., Bridgeport Machines Inc., Brown & Sharpe Manufacturing Co.
Class A, Calnetics Corporation, Chicago Rivet & Machine Co., Cincinnati Milacron
Inc., Devlieg-Bullard Inc., Farrel Corporation, Flow International Corp.,
Gardner Denver Machinery, Inc., Gleason Corporation, The Gorman-Rupp Company,
Hirsch International Corp. Class A, Hurco Companies Inc., Impact Systems, Inc.,
Innovex Inc., Inotek Technologies Corp., Interlake Corp., Invivo Corporation,
K-Tron International, Inc., Katy Industries, Inc., Key Technology Inc., Kulicke
& Soffa Industries, Inc., Lynch Corporation, McClain Industries, Inc., Middleby
Corporation, The Monarch Machine Tool Co. & Subsidiaries, Moore Products Co.,
Paul Mueller Company, Nordson Corporation, Oilgear Company, Orbotech Ltd.,
Princeton Media Group Inc., Quipp Inc., Regal-Beloit Corp, Secom General
Corporation, Selas Corporation of America, Shelter Components Corporation, SI
Handling Systems, Inc., Sonics & Materials, Inc., Speizman Industries Inc., The
L.S. Starrett Company, Summa Industries, Taylor Devices, Inc., Thermo Terratech,
Inc., Twin Disc Incorporated, Unit Instruments Inc. (CA), Utilx Corporation and
Valmet Oy Ads.
19
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and beneficial owners of more than ten percent
of the Company's Common Stock to file reports of ownership of Company securities
and changes in ownership with the Securities and Exchange Commission ("SEC").
The Company believes that all filings required to be made during 1997 were made
on a timely basis.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Any shareholder proposal to be presented at the 1999 Annual Meeting of
Shareholders must be received by the Company on or before December __, 1998 in
order to be included in the proxy statement relating to the Meeting. In
addition, the Company's Bylaws provide that any shareholder wishing to make a
nomination for director must give the Company notice no less than 21 days nor
more than 50 days prior to any meeting of shareholders called for the election
of directors, and that notice must meet certain other requirements set forth in
the Bylaws. Shareholders may request a copy of the Bylaws from the Secretary,
Quipp, Inc., 4800 N.W. 157 Street, Miami, FL 33014-6434.
SOLICITATION OF PROXIES
The expense of solicitation of proxies for the Meeting will be paid by
the Company. In addition to the mailing of the proxy material, such solicitation
may be made in person or by telephone or telecopy by directors, officers or
regular employees of the Company.
April __, 1998
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APPENDIX
QUIPP, INC. 1996 EQUITY COMPENSATION PLAN
The purpose of the Quipp, Inc, 1996 Equity Compensation Plan
(the "Plan") is (i) to provide designated officers (including officers who are
also directors), and other employees of Quipp, Inc. and its subsidiaries (within
the meaning specified in Section 424(f) of the Code) (hereinafter collectively
referred to as the "Company"), members of the Board who are not employed in any
capacity by the Company ("Non-Employee Directors") and consultants and advisors
to the Company ("Key Advisors") with certain rights to acquire common stock of
the Company, and (ii) to provide for the grant of incentive stock options and
nonqualified stock options. The Company believes that the Plan will be an
incentive to the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders, and will align the
economic interests of the participants with those of the shareholders.
i. ADMINISTRATION
Subject to the provisions of Section 6, the Plan shall be
administered and interpreted by the Board of Directors or by a committee
consisting of not less than two persons appointed by the Board of Directors of
the Company from among its members who are Non-Employee Directors of the
Company, all of whom are "outside directors" as defined under section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") and related Treasury
regulations. The Board of Directors, in such administrative capacity or, if
appointed, such Committee, (either of which are hereinafter referred to as the
"Committee"), subject to the provisions of Section 6, shall have the sole
authority to determine (i) the individuals to whom options and awards shall be
granted under the Plan, (ii) the type, size and terms of the grants or awards to
be made to each such individual, (iii) the time when the grants or awards will
be made and (iv) any other matters arising under the Plan. The Committee shall
have full power and authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan and for conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interests in the Plan or in any awards granted hereunder.
ii. GRANTS AND AWARDS
Incentives under the Plan shall consist of incentive stock
options, nonqualified stock options, restricted stock grants (hereinafter
collectively referred to as "Grants") and stock bonus awards ("Awards"). All
Grants and Awards shall be subject to the terms and conditions set forth herein
and to those other terms and conditions consistent with this Plan as the
Committee deems appropriate and as are specified in writing by the Committee to
the employee, Key Advisor or Non-Employee Director (the "Grant Letter"). The
Committee shall approve the form and provisions of each Grant Letter. Grants
and/or Awards under a particular Section of the Plan need not be uniform as
among the employees or Key Advisors and Grants and/or Awards under two or more
Sections of the Plan may be combined in one instrument. Grants to Non-Employee
Directors shall be governed by Section 6.
iii. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustment specified below, the aggregate
number of shares of common stock, $.01 par value, of the Company ("Company
Stock") that may be issued or transferred under the Plan is 600,000 shares. The
maximum aggregate number of shares of Company Stock that shall be subject to
options restricted stock grants or stock bonus awards under the Plan to any
single individual during the term of the Plan shall be 100,000 shares. The
shares may be authorized but unissued shares of
<PAGE>
Company Stock or treasury shares of Company Stock, including, without
limitation, shares repurchased by the Company on the open market. If and to the
extent options granted under the Plan terminate, expire, or cancel without
having been exercised, or if any shares of restricted stock are forfeited
(regardless of whether any voting rights are exercised, dividends received, or
any other rights were vested in the Participant prior to forfeiture), the shares
subject to such option or comprising such restricted stock shall again be
available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of
Company Stock outstanding by reason of a stock dividend, recapitalization, stock
split, or combination or exchange of such shares, or a merger, reorganization or
consolidation of the Company, reclassification or change in par value or by
reason of any other extraordinary or unusual event affecting the outstanding
Company Stock as a class without the Company's receipt of consideration or if
the value of outstanding Shares of Company Stock is substantially reduced due to
the Company's payment of an extraordinary dividend or distribution, the maximum
number of shares of Company Stock available for Grants or Awards, the maximum
number of shares of Company Stock for which any one individual participating in
the Plan may receive Grants and Awards over the term of the Plan, and the number
of shares and price per share subject to outstanding Stock Options shall be
proportionately adjusted by the Committee to reflect any increase or decrease in
the number or kind of issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants or Awards; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. During the Restriction Period (as defined
in Section 7(a)), shares of the Company Stock subject to the Restricted Stock
Grant (as defined in the introductory clause of Section 7) shall be deemed to be
outstanding, and the number and kind of such shares shall be adjusted in the
same manner as other outstanding shares of Company Stock as a result of any of
the events that would cause the operation of the provisions of this Section
3(b). The adjustments determined by the Committee shall be final, binding and
conclusive. As used herein, the term "Company Stock" shall include any other
kind of Company securities issued in respect of Company Stock pursuant to the
events set forth in this Section 3(b).
iv. ELIGIBILITY FOR PARTICIPATION
Officers and other employees of the Company, Key Advisors
designated by the Committee and Non-Employee Directors shall be eligible to
participate in the Plan (hereinafter referred to individually as the
"Participant" and collectively as the "Participants"). The Committee shall
select the individuals (other than Non-Employee Directors) to receive Grants and
Awards (the "Grantees") from among the Participants and determine the number of
shares of Company Stock subject to a particular Grant or Award in such manner as
the Committee determines; provided, however, that Key Advisors must render bona
fide services and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction; and provided further, that
Non-Employee Directors may receive only Nonqualified Stock Options (as defined
below) pursuant to Section 6 hereof.
v. GRANTING OF OPTIONS
(a) NUMBER OF SHARES. The Committee shall grant to each
Grantee a number of stock options as the Committee shall determine.
(b) TYPE OF OPTION AND PRICE. The Committee may grant options
qualifying as incentive stock options within the meaning of Section 422 of the
Code ("Incentive Stock Options") or stock options which are not intended to so
qualify ("Nonqualified Stock Options") or any combination of Incentive Stock
Options and Nonqualified Stock Options (hereinafter referred to collectively as
"Stock Options") in accordance with the terms and conditions set forth herein;
provided, however, that Key
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Advisors shall not be eligible to receive grants of Incentive Stock Options and
Non-Employee Directors may receive only Nonqualified Stock Options pursuant to
Section 6 hereof.
The purchase price of Company Stock subject to an Incentive
Stock Option or a Nonqualified Stock Option shall be at least equal to the "Fair
Market Value" of a share of such Company Stock on the date such Stock Option is
granted. The Fair Market Value per share shall be, if the principal trading
market for the Company Stock is a national securities exchange or the Nasdaq
National Market, the last reported sale price thereof on the relevant date or
the latest preceding date upon which a sale was reported, or, if the Company
Stock is not principally traded on such exchange or market, the mean between the
last reported "bid" and "asked" prices thereof on the relevant date, as reported
on Nasdaq or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting service, as
applicable and as the Committee determines. If the Company Stock is not subject
to reported transactions or "bid" or "ask" quotations as set forth above, the
Fair Market Value per share shall be as determined by the Committee.
(c) TERM. The Committee shall determine the option term of
each Stock Option. The term shall not exceed ten years from the date of grant.
(d) EXERCISABILITY OF OPTIONS. Subject to Section 6, Stock
Options shall become exercisable in accordance with the terms and conditions
determined by the Committee, in its sole discretion, and specified in the Grant
Letter. The Committee, in its sole discretion, may accelerate the exercisability
of any or all outstanding Stock Options, other than stock options granted
pursuant to Section 6 and held by a Participant who is then a Non-Employee
Director, at any time and for any reason. In addition, all outstanding Stock
Options including stock options granted pursuant to Section 6, shall become
immediately exercisable upon a Change in Control (as defined herein) unless the
Committee, in its sole discretion, determines not to accelerate such Stock
Options upon a Change in Control (the Committee shall not make such a
determination in connection with Stock Options granted pursuant to Section 6
held by a Participant who is then a Non-Employee Director). The Committee may
make such determination prior to the Change in Control or, provided that the
Committee making such determination following a Change in Control is comprised
of the same members as those on the Committee immediately prior to such Change
in Control, within thirty (30) days following such Change in Control.
(e) MANNER OF EXERCISE. A Grantee may exercise a Stock Option,
in whole or in part, by delivering a notice of exercise to the Committee with
accompanying payment of the option price. Such notice may instruct the Company
to deliver shares of Company Stock due upon the exercise of the Stock Option to
any registered broker or dealer designated by the Company ("Designated Broker")
in lieu of delivery to the Grantee. Such instructions must designate the account
into which the shares are to be deposited. The Grantee may tender this notice of
exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
(f) TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.
(1) In the event the Grantee ceases to be an employee
or director of the Company or Key Advisor for any reason other than disability,
death or a termination for cause by the Company, any Stock Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within
ninety days of the date on which he ceases to be an employee or Key Advisor (or,
except with respect to Stock Options granted pursuant to Section 6 and held by
persons who are then Non-Employee Directors, within such other period of time as
may be specified by the Committee), but in any event no later than the date of
expiration of the option term.
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(2) In the event the Grantee ceases to be an employee
or director of the Company or a Key Advisor because he is disabled within the
meaning of section 22(e)(3) of the Code, any Stock Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one year of
the date on which he ceases to be an employee, director or Key Advisor (or,
except with respect to Stock Options granted pursuant to Section 6 and held by
persons who are then Non-Employee Directors, within such other period of time as
may be specified by the Committee), but in any event no later than the date of
expiration of the option term.
(3) In the event of the death of the Grantee while he
is an employee, director or Key Advisor of the Company or within not more than
three months of the date on which he ceases to be an employee, director or Key
Advisor (or, except with respect to Stock Options granted pursuant to Section 6
and held by persons who are then Non-Employee Directors, within such other
period of time as may be specified in by the Committee), any Stock Option which
was otherwise exercisable by the Grantee at the date of death may be exercised
by his personal representative at any time prior to the expiration of one year
from the date of death (or, except with respect to Stock Options granted
pursuant to Section 6 and held by persons who are then Non-Employee Directors,
within such other period of time as may be specified in by the Committee), but
in any event no later than the date of expiration of the option term.
(4) In the event the Grantee ceases to be an employee
or director of the Company or Key Advisor on account of a termination for
"Cause" by the Company, any Stock Option held by the Grantee shall terminate as
of the date he ceases to be an employee or Key Advisor (or, except with respect
to Stock Options granted pursuant to Section 6 and held by persons who are then
Non-Employee Directors, as the Committee may otherwise provide) but in any event
no later than the date of expiration of the option term. "Cause" shall mean (i)
with respect to Grantees other than Non-Employee Directors, except to the extent
otherwise provided in a Grantee's Grant Letter, a finding by the Committee,
after full consideration of the facts presented on behalf of both the Company
and the Grantee, that the Grantee has breached his or her employment or service
contract with the Company, or has been engaged in disloyalty to the Company,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her employment or service,
or has disclosed trade secrets or confidential information of the Company, (ii)
with respect to Non-Employee Directors, the date the Grantee's directorship is
terminated, if the directorship is terminated on account of (A) any act of
fraud, intentional misrepresentation, embezzlement or theft, (B) commission of a
felony or (C) disclosure of trade secrets or confidential information of the
Company. In such event, in addition to the immediate termination of the Option,
the Grantee shall automatically forfeit all Option Shares for any exercised
portion of an Option for which the Company has not yet delivered the share
certificates upon refund by the Company of the Option Price.
(g) SATISFACTION OF OPTION PRICE. The Grantee shall pay the
option price in cash or, with the approval of the Committee, by delivering
shares of Company Stock already owned by the Grantee for the period necessary to
avoid a charge to the Company's earnings for financial reporting purposes and
having a fair market value on the date of exercise equal to the option price or
with a combination of cash and shares, or (except with respect to Stock Options
granted pursuant to Section 6 and held by persons who are then Non-Employee
Directors) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board or any successor regulation of the agency then
responsible for administering margin regulations pertaining to securities
brokers ("Regulation T"). Non-Employee Directors who hold Stock Options granted
pursuant to Section 6 may make payment through a broker in accordance with
procedures permitted by Regulation T. The Grantee shall pay the option price and
the amount of withholding tax due, if any, at the time of exercise. Shares of
Company Stock shall not be issued or transferred upon exercise of a Stock Option
until the option price and applicable withholding taxes are fully paid.
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(h) REQUIREMENTS FOR INCENTIVE STOCK OPTIONS. Each Grant of an
Incentive Stock Option shall provide that to the extent that the aggregate fair
market value of the Company Stock on the date of the Grant with respect to which
Incentive Stock Options are exercisable for the first time by a Grantee during
any calendar year under the Plan or any other stock option plan of the Company
exceeds $100,000, then such Stock Options, to the extent of such excess, shall
be treated as Nonqualified Stock Options. An Incentive Stock Option shall not be
granted to any Participant who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company or parent of the Company, unless the option price per share is not
less than 110% of the fair market value of Company Stock on the date of grant
and the option term is not more than five years from the date of grant.
Notwithstanding anything in the Plan to the contrary, to the extent that any
Stock Option does not qualify as an Incentive Stock Option, such option shall be
treated as a Nonqualified Stock Option.
6. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
A Non-Employee Director shall be entitled to receive Nonqualified Stock
Options only in accordance with this Section 6.
(a) INITIAL GRANT. Each Non-Employee Director who is a member
of the Board on the effective date of the Plan (the "Effective Date") and who
was not previously an employee of the Company will receive on the Effective Date
a grant of a Nonqualified Stock Option to purchase 5,000 shares of Company
Stock. Each Non-Employee Director who first becomes a member of the Board after
the Effective Date will receive a grant of a Nonqualified Stock Option to
purchase 5,000 shares of Company Stock immediately upon his or her becoming a
member of the Board.
(b) ANNUAL GRANTS. On each date that the Company holds its
annual meeting of stockholders, commencing with the 1997 calendar year, each
Non-Employee Director in office immediately after the annual election of
directors (excluding any directors first elected at such meeting, who shall each
receive the grant specified in Section 6(a)) will receive a grant of a
Nonqualified Stock Option to purchase 5,000 shares of Company Stock.
(c) OPTION EXERCISE PRICE; TERM OF OPTIONS. Options granted
under this Section 6 shall have a per share exercise price equal to the Fair
Market Value of a share of Company Stock on the date of grant, and such options
shall be fully exercisable on the date of grant. Options granted under this
Section 6 shall have a term of ten years from the date of grant, subject to
earlier termination pursuant to Section 5(f).
(d) ADMINISTRATION. The provisions of this Section 6 are
intended to operate automatically and not require administration. However, to
the extent that administrative determinations are required, the provisions of
this Section 6 shall be made by the members of the Board who are not eligible to
receive grants under this Section 6, but in no event shall such determinations
affect the eligibility of Grantees, the determination of the exercise price, the
timing of the grants or the number of shares subject to Stock Options granted
hereunder or otherwise cause the Plan, insofar as it relates to Non-Employee
Directors, to fail to satisfy the conditions of Rule 16b-3(c)(ii) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(e) ACCELERATION. Upon the occurrence of a Change of Control,
each Stock Option granted pursuant to this Section 6 shall automatically
accelerate and become fully exercisable as to all shares subject to such option
and shall remain exercisable until the expiration of the option term.
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<PAGE>
(f) APPLICABILITY OF PLAN PROVISIONS. Except as otherwise
provided in the Plan (including this Section 6), the Nonqualified Stock Options
granted to Non-Employee Directors shall be subject to the provisions of this
Plan applicable to Nonqualified Stock Options granted to other persons.
(g) AMENDMENT. Notwithstanding any other provision of the
Plan, this Section 6 and the provisions of Section 5(f) and Section 5(g) as they
pertain to Non-Employee Directors may not be amended more than once every six
months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or the rules
thereunder.
7. RESTRICTED STOCK GRANTS
The Committee may issue or transfer shares of Company Stock, subject to
restriction as set forth herein, to a Participant under a grant (a "Restricted
Stock Grant"). Non-Employee Directors and Key Advisors shall not be eligible to
receive Restricted Stock Grants. The following provisions are applicable to
Restricted Stock Grants:
(a) GENERAL REQUIREMENTS. Shares of Company Stock issued
pursuant to Restricted Stock Grants will be issued for no consideration unless
otherwise required under applicable law. Subject to any other restrictions by
the Committee as provided pursuant to this Section, restrictions on the transfer
of shares of Company Stock set forth in Section 7(d) shall lapse as provided in
the Grant Letter. The period of time during which the Restricted Stock Grant
will remain subject to restrictions including the time prior to satisfaction of
performance or other conditions for removal of restrictions will be designated
in the Grant Letter as the "Restriction Period."
(b) NUMBER OF SHARES. The Committee shall grant to each
Grantee a number of shares of Company Stock pursuant to a Restricted Stock Grant
in such manner as the Committee determines.
(c) REQUIREMENT OF EMPLOYMENT. If the Grantee's employment
terminates during a period designated in the Grant Letter as the Restriction
Period, the Restricted Stock Grant terminates as to all shares covered by the
Grant as to which restrictions on transfer have not lapsed, and, unless the
Company has retained possession of the shares of Company Stock subject to
restriction, those shares of Company Stock must be immediately returned to the
Company. The Committee may, however, provide for complete or partial exceptions
to this requirement as it deems equitable.
(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE.
During the Restriction Period, a Grantee may not sell, assign, transfer, pledge,
or otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except as provided by the Committee. Each certificate for a share
issued or transferred under a Restricted Stock Grant shall contain a legend
giving appropriate notice of the restrictions in the Grant. The Grantee shall be
entitled to have the legend removed from the stock certificate or certificates
covering any of the shares subject to restrictions when all restrictions on such
shares have lapsed.
(e) VOTING AND DIVIDENDS. If so determined by the Committee,
the Grantee shall have the right to vote shares of the Company Stock subject to
the Restricted Stock Grant and to receive the payment of any cash dividends paid
on such shares during the Restricted Period.
(f) LAPSE OF RESTRICTIONS. All restrictions imposed under the
Restricted Stock Grant shall lapse upon the expiration of the applicable
Restriction Period; provided, however, that upon a Change in Control (as defined
herein), the Restricted Period relating to the shares which have not, prior to
such date, been satisfied shall immediately lapse, unless the Committee, in its
sole discretion, determines not
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<PAGE>
to lapse such restrictions upon a Change in Control. The Committee may make such
determination prior to the Change in Control or, provided that the Committee
making such determination following a Change in Control is comprised of the same
members as those on the Committee immediately prior to such Change in Control,
within thirty (30) days following such Change in Control. In addition, the
Committee may determine as to any or all Restricted Stock Grants, that all the
restrictions shall lapse, without regard to any Restriction Period, under such
circumstances as it deems appropriate.
8. STOCK-BASED AWARDS.
The Committee is authorized, subject to limitations under
applicable law, to grant to Participants other than Non-Employee Directors
Awards of Company Stock purely as a "bonus" and not subject to any restrictions
or conditions.
9. TRANSFERABILITY OF STOCK OPTIONS
No Stock Option granted under the Plan may be transferred,
except by will or by the laws of descent and distribution. During the lifetime
of the person to whom a Stock Option is granted, such Stock Option may be
exercised only by such person. Notwithstanding the foregoing, a (i) Nonqualified
Stock Option may be transferred pursuant to the terms of a "qualified domestic
relations order," within the meaning of sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of ERISA and (ii) the Committee may
provide, in a Grant Letter, that a Grantee may transfer Stock Options to his or
her children, grandchildren or spouse or to one or more trusts for the benefit
of such family members or to partnerships in which such family members are the
only partners (a "Family Transfer"), provided that the Grantee receives no
consideration for a Family Transfer and the Grant Letters relating to Stock
Options transferred in a Family Transfer continue to be subject to the same
terms and conditions that were applicable to such Stock Options immediately
prior to the Family Transfer.
10. CHANGE IN CONTROL
A "Change of Control" shall be deemed to have occurred upon
the earliest to occur of the following events: (i) the date the shareholders of
the Company (or the Board of Directors, if shareholder action is not required)
approve a plan or other arrangement pursuant to which the Company will be
dissolved or liquidated, or (ii) the date the shareholders of the Company (or
the Board of Directors, if shareholder action is not required) approve a
definitive agreement to sell or otherwise dispose of substantially all of the
assets of the Company, or (iii) the date the shareholders of the Company (or the
Board of Directors, if shareholder action is not required) and the shareholders
of the other constituent corporation (or its board of directors if shareholder
action is not required) have approved a definitive agreement to merge or
consolidate the Company with or into such other corporation, other than, in
either case, a merger or consolidation of the Company in which holders of shares
of the Company Stock immediately prior to the merger or consolidation will have
at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation's
voting securities) immediately after the merger or consolidation, which common
stock (and, if applicable, voting securities) is to be held in the same
proportion as such holders' ownership of Company Stock of the Company
immediately before the merger or consolidation, or (iv) the date any entity,
person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended, (other than the Company or any
employee benefit plan (or related trust) sponsored or maintained by the Company)
shall have become the beneficial owner of, or shall have obtained voting control
over, securities of the Company having at least twenty percent (20%) of the
combined voting power of outstanding securities of the Company in the election
of directors, or (v)
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the first day after the date this Plan is approved by shareholders of the
Company when directors are elected such that a majority of the members of the
Board of Directors shall have been members of the Board of Directors for less
than two years, unless the election or nomination for election of each new
director who was not a director at the beginning of such two year period was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period.
11. AMENDMENT AND TERMINATION OF THE PLAN
(a) AMENDMENT. The Board of Directors of the Company may amend
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an incentive stock option or increase the
maximum number of shares as to which Grants or Awards may be made under the
Plan, or the individual limit for any single Participant, without obtaining
shareholder approval by such vote as is required by the Florida Business
Corporation Act, as amended and, if applicable, the provisions of the Company's
Articles of Incorporation or By-Laws, or, if a greater vote is required in order
to comply with applicable requirements of the Code or Rule 16b-3, by such vote
as is required by the Code or Rule 16b-3. No amendment to the Plan shall
adversely affect any outstanding Grant or Award, however, without the consent of
the Participant holding such Grant or Award.
(b) TERMINATION OF PLAN. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board of Directors of the Company or unless extended
by the Board with the approval of the shareholders.
(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A
termination or amendment of the Plan that occurs after a Grant or Award is made
shall not result in the termination or amendment of the Grant or Award unless
the Participant holding such Grant or Award consents or unless the Committee
acts under Section 18(b). The termination of the Plan shall not impair the power
and authority of the Committee with respect to an outstanding Grant. Whether or
not the Plan has terminated, an outstanding Grant or Award may be terminated or
amended under Section 18(b) or may be amended by agreement of the Company and
the Participant holding such Grant or Award consistent with the terms of the
Plan.
12. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Participant or other
person to any claim or right to be given a Grant or Award under this Plan.
Neither this Plan nor any action taken hereunder shall be construed as giving
any Participant any rights to be retained by or in the employ of the Company.
13. WITHHOLDING OF TAXES
The Company shall have the right to deduct from wages paid to
the employee of the Company, any federal, state or local taxes required by law
to be withheld with respect to Grants or Awards, and the Participant or other
person receiving Company Stock under the Plan shall be required to pay to the
Company the amount of any such taxes which the Company is required to withhold
with respect to such Company Stock.
14. AGREEMENTS WITH PARTICIPANTS
Each Grant made under this Plan shall be evidenced by a Grant
Letter containing such terms and conditions consistent with the terms of the
Plan, as the Committee shall approve.
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15. REQUIREMENTS FOR ISSUANCE OF SHARES
No Company Stock shall be issued or transferred upon payment
of any Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Restricted Stock Grant, Stock Option or Award made to any Participant
hereunder on such Participant's undertaking in writing to comply with such
restrictions on his subsequent disposition of such shares of Company Stock as
the Committee shall deem necessary or advisable as a result of any applicable
law, regulation or official interpretation thereof, and certificates
representing such shares may be legended to reflect any such restrictions.
16. HEADINGS
Section headings are for reference only. In the event of a
conflict between a title and the content of a Section, the content of the
Section shall control.
17. EFFECTIVE DATE OF THE PLAN
Subject to the approval of the Company's shareholders, this
Plan shall be effective as of the date the Plan is adopted by the Board of
Directors of the Company. If the Plan is not approved by the Company's
shareholders within twelve months following such date, all Grants under the plan
shall be null and void. No Awards may be made prior to shareholder approval.
18. MISCELLANEOUS
(a) SUBSTITUTE GRANTS. The Committee may make a Grant to an
employee of another corporation who becomes a Participant by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant granted by such
corporation ("Substituted Stock Incentives"). The terms and conditions of the
substitute Grant may vary from the terms and conditions required by the Plan and
from those of the Substituted Stock Incentives. The Committee shall prescribe
the provisions of the substitute Grants.
(b) COMPLIANCE WITH LAW. The Plan, the exercise of Grants and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by an
governmental or regulatory agency as may be required, including, without
limitation, the filing of a registration statement under the Securities Act of
1933 with respect to shares of Company Stock under the Plan. The Plan is
intended to enable transactions under the Plan with respect to directors and
officers (within the meaning of Section 16(a) under the Securities Exchange Act
of 1934, as amended) to satisfy the conditions of Rule 16b-3; to the extent that
any provision of the Plan would cause a conflict with such conditions or would
cause the administration of the Plan as provided in Section 1 to fail to satisfy
the conditions of Rule 16b-3, such provision shall be deemed null and void to
the extent permitted by applicable law. Notwithstanding the foregoing, the
provision in Grant Letters for Family Transfers pursuant to Section 9 is
expressly permitted, even though Stock Options evidenced by such Grant Letters
may not be deemed to satisfy the conditions of Rule 16b-3 as a result of such
provision. The Committee may revoke any Grant if it is contrary to applicable
law or modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payments to Participants. The Committee may, in its sole
discretion, agree to limit its authority under this Section.
-9-
<PAGE>
(c) OWNERSHIP OF STOCK. A Participant shall have no rights as
a shareholder with respect to any shares of Company Stock covered by a Grant or
Award until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company, except as may be
determined pursuant to Section 7(e).
-10-
<PAGE>
FRONT:
QUIPP, INC.
ANNUAL MEETING OF SHAREHOLDERS-MAY 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RALPH M. BRANCA, JACK D. FINLEY and
LOUIS D. KIPP with full power of substitution, proxies of the undersigned to
represent the undersigned and to vote all shares of Common Stock of Quipp, Inc.
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of Quipp, Inc. to be held at the company offices
at 4800 N.W. 157th Street, Miami, FL. 33014, at 10:00 A.M. E.D.T. on May 12,
1998 and at any adjournment thereof, subject to the directions indicated below.
1. Election of Directors:
Nominees are: Ralph M. Branca, Richard H. Campbell, Jack D. Finley,
Cristina H. Kepner, Louis D. Kipp, Anthony P. Peri and William L. Rose.
[ ] FOR all nominees listed above
[ ] WITHHOLD AUTHORITY to vote for nominees
[ ] WITHHOLD AUTHORITY to vote for nominees indicated
on the line immediately below
---------------------------------------------------------------
2. Proposal to amend the Articles of Incorporation to provide for
classification of the Board of Directors
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. Proposal to amend the Articles of Incorporation to provide that
shareholders action be taken only at a meeting
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. Proposal to amend the Quipp, Inc. 1996 Equity Compensation Plan
[ ]FOR [ ]AGAINST [ ]ABSTAIN
5. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants for 1998.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
NOTE: THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
BACK:
5. To vote on such other matters that may properly come before the meeting.
If no directions are given, the shares will be voted FOR the election
of the listed nominees for director and FOR the proposals to amend the Articles
of Incorporation, amend the Quipp, Inc. 1996 Equity Compensation Plan and ratify
the appointment of KPMG Peat Marwick LLP. This Proxy also delegates
discretionary authority to vote with respect to any other matters that may
properly come before the meeting or any adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF QUIPP, INC.
Date:_____________________, 1998 ____________________________________________
Signature
____________________________________________
Signature
NOTE: Please sign this proxy exactly as
name(s) appear hereon. When signing as
attorney-in-fact, executor, administrator,
trustee, or guardian, please add your title
as such, and if signed as a corporation,
please sign with full corporate name by duly
authorized officer or officers and affix the
corporate seal. Where stock is issued in the
name of two or more persons, all such
persons should sign.
