<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[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 (S)240.14a-11(c) or (S)240.14a-12
QUADRAX CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
QUADRAX CORPORATION
300 HIGH POINT AVENUE
PORTSMOUTH, RHODE ISLAND 02871
----------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1996
----------------
TO THE HOLDERS OF SHARES OF COMMON STOCK:
The Annual Meeting of Stockholders of Quadrax Corporation (the "Company")
will be held at the Tennis Hall of Fame, Newport, Rhode Island on Friday, May
10, 1996 at 10:00 A.M. local time (the "Meeting"), for the following purposes:
1. To elect Directors of the Company;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to classify the Board of Directors;
3. To approve an amendment of the Company's 1993 Stock Option Plan to
increase the number of shares of Common Stock available for grant
thereunder;
4. To approve an amendment of the Company's 1993 Stock Option Plan to
provide automatic grants of options to purchase the Company's Common Stock
to each non-employee director on the date of each annual meeting of
stockholders;
5. To ratify the selection of Livingston & Haynes, P.C., as independent
accountants for the Company for the 1996 fiscal year; and,
6. To transact such other business as may properly come before the
Meeting.
Stockholders of record at the close of business on April 1, 1996, are
entitled to vote at the Meeting. Stockholders are urged, whether or not they
expect to attend the Meeting in person, to complete and return promptly the
enclosed proxy in the accompanying envelope, which requires no postage if
mailed in the United States. If you attend, your having sent in your proxy
will not restrict your right to vote in person.
We cordially invite you to attend and participate in the Annual Meeting in
person.
By Order of the Board of Directors,
_____________________________________
James J. Palermo
President
April 10, 1996
<PAGE>
QUADRAX CORPORATION
300 HIGH POINT AVENUE
PORTSMOUTH, RHODE ISLAND 02871
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1996
This Proxy Statement is being furnished to the holders of common stock,
$.000009 par value ("Common Stock"), of Quadrax Corporation, a Delaware
corporation (the "Company"), in connection with the solicitation by the Board
of Directors of the Company of proxies for use at the Annual Meeting of
Stockholders of the Company to be held on Friday, May 10, 1996, at 10:00 a.m.,
local time, and at any adjournments and postponements thereof at the Tennis
Hall of Fame, Newport, Rhode Island (the "Meeting"). At the Annual Meeting,
stockholders will be asked to consider and vote upon the following matters,
all of which are more fully discussed below:
1. the proposed election of six directors ("Proposal One");
2. the approval of the proposed amendment to the Company's Restated
Certificate of Incorporation to classify the Board of Directors ("Proposal
Two");
3. the amendment of the Quadrax Corporation 1993 Stock Option Plan to
increase the number of shares of Common Stock available for grant
thereunder ("Proposal Three");
4. the amendment of the Quadrax Corporation 1993 Stock Option Plan to
provide automatic grants of options to purchase the Company's Common Stock
to each non-employee director on the date of each annual meeting of
stockholders ("Proposal Four");
5. the ratification of the appointment of independent accountants for
fiscal 1996 ("Proposal Five"); and
6. such other matters as may properly come before the Meeting.
Any proxy in the enclosed form that is properly executed and returned to the
Company (a "Proxy") will be voted at the Meeting in accordance with any
specifications thereon or, if no specification is made with respect to one or
more of the proposals set forth in the Proxy, will be voted for approval of
those proposals. Any holder of Common Stock may revoke a Proxy by: (i)
attending the Meeting and giving oral notice of the holder's intention to vote
in person, without compliance with any other formalities; or, (ii) delivering
either an instrument revoking the Proxy or a duly executed proxy bearing a
later date to the Secretary of the Company prior to the commencement of the
Meeting.
A Proxy may confer discretionary authority to vote with respect to any
matter which management does not know, a reasonable time before the date
hereof, is to be presented at the Meeting. Management does not know of any
such matter that may come before the Meeting and that would be required to be
set forth in this Proxy Statement or the accompanying form of Proxy. If any
other matter is properly presented for action at the Meeting, it is intended
that the persons named in the accompanying form of Proxy and acting thereunder
will vote in accordance with their best judgment on such matter.
The Company has fixed the close of business on April 1, 1996, as the record
date for the determination of stockholders entitled to notice of and to vote
at the Meeting (the "Record Date"). This Proxy Statement and the accompanying
notice and form of Proxy are first being mailed on or about April 10, 1996, to
holders of record of Common Stock on the Record Date.
<PAGE>
VOTING SECURITIES AND VOTES REQUIRED
On the Record Date, the Company had outstanding shares of Common Stock.
Only stockholders of record on the Record Date are entitled to vote at the
Annual Meeting. Each holder of Common Stock is entitled to one vote per share
on matters as to which such class of stock is entitled to vote. The holders of
a majority of the outstanding shares of Common Stock, present in person or
represented by proxy, will constitute a quorum for the meeting. If a quorum is
present, the vote of a majority of the shares of Common Stock present is
required for approval of each of Proposal One, Proposal Three, Proposal Four
And Proposal Five. The affirmative vote of a majority of the outstanding
shares of the Company's Common Stock is required for approval of Proposal Two.
Abstentions are treated as present and entitled to vote and therefore have
the effect of a vote against a matter. A broker non-vote on a matter is
considered not entitled to vote on the matter and thus is not counted in
determining whether a matter requiring approval of a majority of the shares
present and entitled to vote has been approved.
PROPOSAL ONE:
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall consist
of between one and seven directors and that the number of directors of the
Company shall be fixed from time to time by the stockholders of the Company,
subject to enlargement or reduction by vote of the Board of Directors. The
Board currently consists of six members, and the Board has not recommended any
change in that number.
The Board has nominated for election each of the six current directors of
the Company: William G. Conway, Sven Kraumanis, Alan Milton, James J. Palermo,
Eugene Scott and Gordon Werner. If any Nominee becomes unavailable for any
reason, the shares represented by such proxies may be voted for a substitute
Nominee designated by the Board of Directors. Each director elected at the
Meeting will hold office until his successor has been duly elected and
qualified, or until his earlier death, resignation or removal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL ONE IN ORDER TO
CAUSE WILLIAM G. CONWAY, SVEN KRAUMANIS, ALAN W. MILTON, EUGENE L. SCOTT,
JAMES J. PALERMO AND GORDON WERNER TO BE RE-ELECTED AS DIRECTORS OF THE
COMPANY.
DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The following table sets forth certain information concerning each director
and executive officer of the Company as of the date of this Proxy Statement:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James J. Palermo.......... 59 Chairman of the Board and Chief Executive Officer
John A. McQuade........... 52 Vice President and Chief Administrative Officer
David L. Park............. 46 Vice President--Product Development
David A. Soules........... 35 Vice President--Manufacturing Operations
Edward A. Stoltenberg..... 56 Senior Vice President and Chief Financial Officer
William G. Conway......... 53 Director
Sven Kraumanis............ 50 Director
Alan Milton............... 42 Director
Eugene L. Scott........... 58 Director
Gordon Werner............. 64 Director
</TABLE>
2
<PAGE>
James J. Palermo has been a member of the Board of Directors since July
1994. Mr. Palermo has been Chief Executive Officer of the Company since
September 1994, and Chairman of the Board Directors since February 1995. He
previously served as President and Chief Operating Officer of the Company from
May 1994 to September 1994. From January 1990 to May 1994, Mr. Palermo was a
Principal of J.P. Associates, Inc., an investment banking firm.
John A. McQuade has served as Vice President and Chief Administrative
Officer of the Company since May 1994. From October 1990 to May 1994, Mr.
McQuade was an Executive Vice President of J.P. Associates, Inc., an
investment banking firm. From April 1984 to September 1990, he served as Vice
President, Manufacturing of New England Digital Corporation, a manufacturer
and distributor of computer equipment.
David L. Park has been Vice President-Product Development of the Company
since October 1994. From January 1989 to October 1994, Mr. Park was Vice
President and Technical Director of Bird Machine Company, a manufacturer of
equipment for the chemical, mining, oil, environmental, pulp and paper
industries.
David A. Soules has served as Vice President-Manufacturing Operations of the
Company since April 1995. He previously served as the Company's Director of
Tape Products and Technology from August 1992 to September 1994 and as the
Company's Director of Operations from September 1994 to April 1995. From
September 1991, to September 1992, Dr. Soules was a Research Chemist for
Phillips Petroleum Company in the Petroleum Products Division and from
November 1987 to September 1991, he was a Research Chemist for Phillips
Petroleum Company in the Plastics Division. Dr. Soules has published numerous
technical papers and articles, and is a member of the American Chemical
Society and the Society for the Advancement of Material and Process
Engineering. Dr. Soules received his Ph.D. from North Dakota State University.
Edward A. Stoltenberg became Senior Vice President and Chief Financial
Officer of the Company in August 1995. From August 1994 to April 1995, Mr.
Stoltenberg served as the Company's Acting Chief Financial Officer. From 1990
to August 1995, Mr. Stoltenberg was a principal of Aegis Business Consultants,
a firm that specialized in the turning around of financially troubled
companies. In connection therewith, Mr. Stoltenberg served as an officer and
director of NUVO Corporation of America and R.J.E. Enterprises, Inc., both
privately-held companies which underwent Chapter 11 reorganizations in 1994
and 1993, respectively. Mr. Stoltenberg is a Certified Public Accountant and
holds a Masters Degree in Business Administration from the University of
Michigan.
William G. Conway was elected to the Board of Directors in October 1994.
Since April 1991, Mr. Conway has served as the President of The Conway
Company, Inc. of Santa Fe, New Mexico, a firm engaged in real estate
development, financing and consulting. From June 1986 to February 1991, Mr.
Conway was Managing Director of Jones Lang Wootton, USA, LP, an international
real estate consulting group. From September 1994 to November 1994, Mr. Conway
was a director of Apogee Robotics, Inc., a publicly held company engaged in
the fabrication of mechanical robotic materials handling systems that
subsequently filed for bankruptcy protection on December 13, 1994.
Sven Kraumanis has been a member of the Board of Directors since July 1994.
Mr. Kraumanis has been employed by Brassie Golf Corporation as General Counsel
since May 1993, as Vice President-Acquisitions since May 1994 and as Secretary
since June 1994. Brassie Golf Corporation is engaged in the design,
construction, purchase, ownership and management of golf courses, and its
common stock is listed on the Nasdaq SmallCap Market and the Toronto Stock
Exchange. From August 1994 to December 1994, Mr. Kraumanis was a director of
Apogee Robotics, Inc., a publicly held company engaged in the fabrication of
mechanical and robotic materials handling systems that filed for bankruptcy
protection on December 13, 1994. From 1979 until May 1993, Mr. Kraumanis
served as President and General Counsel of Harvest Consultants, Ltd., a land
development and consulting company that he founded.
Alan W. Milton has been a member of the Board of Directors since August
1995. Since 1991, Mr. Milton has been the Managing Director of Mantis
Holdings, Inc., a New York based private investment company that
3
<PAGE>
focuses on high growth manufacturers and advanced materials suppliers within
the environmental industry. Mr. Milton has been a board member of Industrial
Flexible Materials, Inc., a publicly held company, since 1992 and a board
member of Composite Particles, Inc., a privately-held company, since 1993.
Both companies are current portfolio holdings of Mantis Holdings, Inc. Mr.
Milton holds a Master of Environmental Sciences degree from Clark University.
Eugene L. Scott has been a member of the Board of Directors in since
September 1995. Mr. Scott is the founder and publisher of Tennis Week. Mr.
Scott served as counsel to the United States Tennis Open from 1971 to 1972 and
is currently a member of the board of directors of the United States Tennis
Association. Mr. Scott has served as a past president of the United States
International Lawn Tennis Club (1976) and Vice President of the International
Tennis Hall of Fame (1981). Mr. Scott is a former professional tennis player
and a member of the New York State Bar Association.
Gordon Werner has been a director of the Company since April 1995, and also
was a director of the Company from May 1994 to July 1994. Since November 1991,
Mr. Werner has been a director of Reddi Brake Supply Corporation, a
distributor of automobile replacement parts. From October 1991 to February
1995, Mr. Werner was the Vice Chairman and a director of Reddi Brake Supply
Corporation. The common stock of Reddi Brake Supply Corporation is listed on
the Nasdaq National Market. Since July 1993, Mr. Werner has been the Vice
Chairman and a director of BioLase Technology Corporation, a manufacturer of
dental and medical laser instruments. The common stock of BioLase Technology
Corporation is listed on the Nasdaq SmallCap Market.
COMMITTEES AND MEETINGS OF BOARD OF DIRECTORS
The Board of Directors met 11 times and acted 12 times by written consent
during fiscal 1995. No Director attended fewer than 75% of the total meetings
of the Board of Directors and committees on which such Board member served.
The Board of Directors currently has two committees that were in existence
during fiscal 1995. The Audit Committee reviews the internal accounting
policies of the Company and consults with, and reviews the services provided
by, the Company's independent accountants. The Audit Committee met one time
during fiscal 1995. The Audit Committee is comprised of Sven Kraumanis and
Gordon Werner.
The Compensation Committee considers and makes recommendations to the Board
on executive compensation, bonuses and employment plan benefits and makes
awards under the Quadrax Corporation 1993 Stock Plan (the "1993 Stock Plan")
and the Quadrax Corporation 1994 Non-Qualified Stock Option Plan (the "1994
Stock Plan"). The Compensation Committee met one time during fiscal 1995.
Since April 17, 1995, the Compensation Committee is comprised of Sven
Kraumanis and Gordon Werner.
COMPENSATION PLANS AND ARRANGEMENTS
Employment and Termination Arrangements
The Company has entered into certain employment and termination agreements
with the following Executive Officers:
James J. Palermo, the Chairman and Chief Executive Officer of the Company,
entered into an employment agreement with the Company on August 9, 1994 which
was subsequently amended in April 1995. Under the terms of this agreement, for
fiscal 1995 Mr. Palermo received a base salary of $230,000 per year (subject
to increase based on certain periodic revenue targets), a bonus based on the
profitability of the Company, and certain benefits, including payment by the
Company of premiums for life insurance on Mr. Palermo and an automobile
allowance. Mr. Palermo also received 200,000 shares of Common Stock and
options exercisable for a total of 50,000 shares of Common Stock. Upon
termination of his employment, Mr. Palermo was entitled to receive a lump sum
severance payment equal to 25% of his base salary and would be bound by
certain non-competition provisions.
4
<PAGE>
In February, 1996, the Board of Directors of the Company approved a new
contract for Mr. Palermo. Pursuant to this agreement, Mr. Palermo has a base
salary of $250,000 for fiscal 1996, with certain increases in 1997 and 1998.
The agreement provides for an automobile and expense allowance and options to
purchase 100,000 shares of the Company's Common Stock under the 1993 Stock
Plan on January 1, 1996, 1997, and 1998, respectively, at an exercise price of
the fair market value of the Common Stock on such date of each year. Mr.
Palermo will receive a performance bonus and up to an additional 100,000
options each year tied to the Company's revenue and net income and the price
of the Company's Common Stock. Mr. Palermo will be granted certain options
that vest immediately upon termination of his employment due to any change of
control of the Company.
David Park, the Vice President-Production of the Company, entered into an
employment agreement with the Company on September 26, 1994, pursuant to which
he receives a base salary of $120,000 per year, a bonus based on the
achievement of certain milestones agreed upon by Mr. Park and the President of
the Company, and certain benefits common to all executive officers of the
Company. In addition, Mr. Park was issued an option exercisable to acquire
72,000 shares of Common Stock. Upon termination or expiration of the
agreement, Mr. Park will receive 50% of his base salary payable over four
months in arrears and is subject to certain non-competition provisions. The
agreement expires on September 30, 1996, but provides that the term will be
renewed annually until either party provides notice of termination in
accordance with the terms thereof.
John A. McQuade, the Vice President and Chief Administrative Officer,
entered into an employment agreement with the Company on January 1, 1996,
pursuant to which he receives a base salary of $110,000 per year and certain
benefits common to all executive officers of the Company. Upon termination or
expiration of the employment agreement, Mr. McQuade is subject to a non-
competition agreement during any period during which he is being paid by the
Company. The Agreement expires on December 31, 1996, but provides that the
term will be renewed annually until either party provides notice of
termination in accordance with the terms thereof.
Edward A. Stoltenberg, the Senior Vice President and Chief Financial
Officer, entered into an employment agreement with the Company on January 1,
1996, pursuant to which he receives a base salary of $120,000 per year and
certain benefits common to all executive officers of the Company. In addition,
in each of the three years of his contract, Mr. Stoltenberg will be awarded
options to acquire 30,000 shares of Common Stock, at an exercise price of the
fair market value of each shares on January 1, of each year. Mr. Stoltenberg
will receive a performance bonus of options to purchase up to an additional
30,000 shares of Common Stock each year tied to the Company's revenue and net
income and the price of the Company's Common Stock. Upon termination by the
Company without cause, Mr. Stoltenberg will be eligible for continuation of
his base salary for 36 months, and immediate vesting of all options. Upon
termination for any other reason by the Company, Mr. Stoltenberg will be
eligible for continuation of his base salary for twelve months. Mr.
Stoltenberg is subject to a non-competition agreement during any period in
which he is being paid by the Company. The employment agreement expires
December 31, 1998.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
Directors who are also employees of the Company do not receive any
additional remuneration for their services as directors. Effective January 1,
1995, each director who was not an employee of the Company was paid $1,200 per
month.
In fiscal 1995, upon initial election to the Board of Directors, each non-
employee director is awarded, as of October 1 of the year in which elected,
non-qualified stock options under the 1993 Stock Plan to purchase 10,000
shares of Common Stock at a price equal to the market price of Common Stock on
the date of election. On October 1 of each year, each non-employee director of
the Company (other than a director who was first elected in that year) is
automatically awarded non-qualified stock options to purchase 3,333 shares of
Common Stock at
5
<PAGE>
the market price on that date. The Company is proposing to increase these
automatic grants of options to non-employee directors, subject to stockholder
approval. See "PROPOSAL FOUR: AMENDMENT OF 1993 STOCK PLAN--Awards to Non-
Employee Directors" at page .
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid to the other current executive officers of the Company whose
salary and bonus for fiscal 1995 exceeded $100,000 on an annualized basis
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
SHARES
UNDERLYING
PRINCIPAL FISCAL OTHER ANNUAL OPTIONS ALL OTHER
NAME POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION COMPENSATION
---- --------------------- ------ -------- ------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Palermo....... Chairman of the 1995 $196,952 $ -- $16,893 $43,010(2)
Board and Chief 1994 91,715 -- -- 462,500(3) --
Executive Officer 1993 -- -- -- -- --
David Park............. Vice President-- 1995 120,000 12,749 15,420 -- 660
Product 1994 24,077 -- 1,000 45,000 --
Development 1993 -- -- -- -- --
Edward Stoltenberg..... Senior Vice President 1995 48,171 -- 3,000
and Chief Financial 1994 --
Officer 1993 --
John McQuade........... Vice President and 1995 91,892 12,748 6,000 -- 876
Chief Administrative 1994 49,477 0 1,500 -- --
Officer 1993 0 -- -- -- --
</TABLE>
- - - --------
(1) Consists of automobile allowances and salary deferrals under the Company's
401(k) Plan. No other perquisites or other benefits to any Named Executive
Officer for any specified year totaled more than the lesser of $25,000 and
10% of the total annual salary and bonus reported for the Named Executive
Officer for that year.
(2) Consists of premiums paid by the Company for life and long-term disability
insurance.
(3) Grant of 200,000 shares of Common Stock.
(4) Mr. Stoltenberg has been Senior Vice President and Chief Financial Officer
since August 1995 and was the Company's Acting Chief Financial Officer
from April to August 1995. He served as consultant to the Company from
August 1994 to April 1995.
6
<PAGE>
The following table sets forth certain information regarding stock options
granted by the Company to the Named Executive Officers during fiscal 1995:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN EXPIRATION
NAME GRANTED (1) FISCAL YEAR(2) EXERCISE PRICE PER SHARE DATE
- - - ---- ------------------ ------------------------ ------------------------ ----------
<S> <C> <C> <C> <C>
James J. Palermo........ 330,000 36.4% $2.00(3) 5/09/05
100,000 11.0% $0.10 7/28/05
Edward Stoltenberg...... 72,000(4) 7.9% $1.81(3) 8/01/05
</TABLE>
- - - --------
(1) Represents shares of Common Stock issuable upon exercise of stock options
granted under the 1993 Stock Plan and the 1994 Stock Plan.
(2) The Company granted options in fiscal 1995 exercisable to acquire an
aggregate of 905,267 shares.
(3) All outstanding options to present employees and directors, including
those listed in the table, were amended effective February 27, 1996, to
have an exercise price of $0.68 per share, the fair market value of the
Company's Common Stock on such date.
(4) Options vest at the rate of 50% on each of December 31, 1995 and December
31, 1996.
On May 9, 1995, the Company granted 330,000 incentive stock options with a
$2.00 (approximately 110% of the market price of Common Stock on the date of
grant) exercise price per share to James J. Palermo. Additionally, the
Compensation Committee of the Board of Directors re-granted options to acquire
an aggregate of 688,000 shares of Common Stock by canceling options
outstanding under the 1993 Stock Plan and the 1994 Stock Plan in exchange for
the granting under the 1993 Stock Plan and the 1994 Stock Plan of new options
exercisable on the same vesting schedules as the previously outstanding
options but having an exercise price of $1.81 per share. These re-grants were
effected as incentives for employees of and consultants to the Company.
On February 27, 1996, the Compensation Committee of the Board of Directors
re-granted options to acquire an aggregate of 1,189,166 shares of Common Stock
by canceling options outstanding under the 1993 Stock Plan and the 1994 Stock
Plan for current employees and directors in exchange for the granting under
the 1993 Stock Plan and the 1994 Stock Plan of new options exercisable on the
same vesting schedules as the previously outstanding options but having an
exercise price of $0.68 per share. These re-grants were effected as incentive
for employees and directors of the Company as a result of the Management
turmoil caused by the former Chairman of the Board, Pattinson Hayton, III upon
his resignation in February 1995, and the material decline in the Company's
Common Stock price during 1995. Given the relatively small amount of the
Company owned by or subject to options in favor of current employees (less
than 6% of the Company's outstanding stock), the Compensation Committee
determined that additional incentives to remaining management were both
warranted and necessary.
7
<PAGE>
The following table shows aggregated option exercises in the last fiscal
year and fiscal year-end option values for the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SHARES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT YEAR-END OPTIONS AT YEAR END (6)
----------------------------------- -------------------------
SHARES ACQUIRED
NAME IN EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ---- --------------- -------------- ----------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Palermo........ -- -- 330,000(1) -- --
100,000(2) -- $74,375
150,000(5) --
33,333(3) 16,667(3)
David Park.............. -- -- 72,000(3) -- -- --
Edward Stoltenberg...... -- -- 36,000(3) 36,000(4) -- --
John A. McQuade......... -- -- 72,000(3) -- -- --
8,334(5) 1,666(4) -- --
</TABLE>
- - - --------
(1)Exercise price per share $2.00.
(2) Exercise price per share $0.10.
(3) Exercise price per share $1.81
(4) Options vest on December 31, 1996.
(5) Exercise price per share $1.56
(6) Value is based on the closing bid price per share of Common Stock on
December 29, 1995 ($.844), as reported on the NASDAQ SmallCap Market, less
the applicable option exercise price. These values have not been, and may
never be, realized. Actual gains, if any, on exercise will depend on the
value of the Common Stock on the date of the sale of the shares.
Stock Option Plans
1993 Stock Plan. The 1993 Stock Plan, as amended to date, provides for the
grant of awards covering a maximum of 1,386,758 shares of Common Stock, of
which 1,090,459 shares may be granted as incentive stock options. An amendment
to the 1993 Stock Plan adopted by the Board of Directors on March 28, 1995,
and approved by the Company's stockholders on May 31, 1995, increased the
number of shares available for award under the 1993 Stock Plan by 581,949
shares, all or any portion of which can be granted as incentive stock options,
to 1,386,758 shares.
As of December 31, 1995, options to purchase a total of 988,539 shares of
Common Stock were outstanding under the 1993 Stock Plan, options for a total
of 401,326 shares of Common Stock had been exercised under the 1993 Stock Plan
and no shares of Common Stock remained available for award under the 1993
Stock Plan.
The 1993 Stock Plan is described in greater detail under "PROPOSAL THREE:
AMENDMENT OF 1993 STOCK PLAN--Description of 1993 Stock Plan" at page .
1994 Stock Plan. The 1994 Stock Plan reserved a total of 500,000 shares of
Common Stock for issuance. On April 14, 1995, the Board of Directors increased
to 1,000,000 the numbers of shares for issuance under the 1994 Stock Plan. As
of December 31, 1995, options to purchase a total of 814,000 shares of Common
Stock at a weighted average of exercise price of $1.81 per share were
outstanding under the 1994 Stock Plan, no options issued under the 1994 Stock
Plan had been exercised, and 186,000 shares of Common Stock remained available
for award under the 1994 Stock Plan.
1989 Stock Plan. The Quadrax Corporation 1989 Non-Qualified Stock Plan was
approved by the Board of Directors on November 9, 1989. In connection with the
adoption of the 1993 Stock Plan, the Board of Directors
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<PAGE>
terminated the 1989 Stock Plan with respect to future option grants. As of
December 31, 1995, options to acquire an aggregate of 69,856 shares of Common
Stock were outstanding under the 1989 Stock Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock as of April 1, 1996, by (i) each person
known by the Company to own beneficially more than five percent of the Common
Stock, (ii) each director of the Company, (iii) each Named Executive Officer
and (iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
----------------------------
NAME(2) NUMBER PERCENT OF CLASS
- - - ------- --------- ----------------------------
<S> <C> <C>
James J. Palermo (3).................... 723,333 3.3%
David Park (4).......................... 79,000 *
John A. McQuade (5)..................... 85,500 *
Edward A. Stoltenberg (6)............... 121,100 *
Gordon Werner (7)....................... 13,794 *
William G. Conway (7)................... 13,333 *
Sven Kraumanis (7)...................... 13,333 *
Alan W. Milton (7)...................... 65,000 *
Eugene L. Scott (7)..................... 11,000 *
All officers and directors as a group... 1,233,389 5.7%
</TABLE>
- - - --------
(1) Each stockholder possesses sole voting and investment power with respect
to the shares listed, except as otherwise noted and subject to community
property laws where applicable. Amounts shown include shares issuable
within sixty days following April 1, 1996 pursuant to the exercise of
options.
(2) The address of each named person is in care of: Quadrax Corporation, 300
High Point Avenue, Portsmouth, Rhode Island 02871.
(3) Includes 530,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1996.
(4) Includes 72,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1996.
(5) Includes 82,000 shares of Common Stock subject to outstanding options,
80,334 of which are exercisable within sixty days after April 1, 1996.
(6) Includes 66,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1996.
(7) Consists solely of options to purchase shares of Common Stock which are
exercisable within sixty days after April 1, 1996 and 457 shares in the
case of Mr. Werner and 1,000 shares in the case of Mr. Scott.
In fiscal 1995, pursuant to a settlement agreement to which the Company was
a party, the Company retired all outstanding shares of convertible preferred
stock, $.01 par value ("Preferred Stock") which had previously controlled the
election of a majority of the members of the Board of Directors. As of the
date hereof, control of the Company is vested exclusively in the holders of
Common Stock. See "Certain Relationships and Related Transactions--Pattinson
Hayton, III, and Affiliates" below.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pattinson Hayton, III and Affiliates
On July 8, 1994, Pattinson Hayton, III, through Conagher & Co., Inc.
("Conagher"), a California corporation of which Mr. Hayton is a stockholder
and a director, purchased a majority of the then existing Voting
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Preferred Stock of the Company from the Company's founder and former Chief
Executive Officer, Richard A. Fisher. Conagher's ownership of the Voting
Preferred Stock entitled it to elect three-fifths of the Board of Directors
until December 31, 1996.
Contemporaneous with the acquisition of the Voting Preferred Stock, Mr.
Hayton also agreed to purchase newly issued shares of Common Stock through
Conagher. Pursuant to a stock purchase agreement dated July 8, 1994, Conagher
purchased 1,500,000 shares of Common Stock in exchange for a $3,000,000
promissory note from Conagher (the "July Promissory Note") payable in five
equal consecutive monthly installments beginning August 16, 1994. Thereafter,
pursuant to a stock purchase agreement dated August 26, 1994 and subsequently
amended on September 16, 1994, Conagher purchased an additional 2,250,000
shares of Common Stock in exchange for a $4,500,000 promissory note from
Conagher (the "August Promissory Note"), payable in equal consecutive monthly
installments beginning October 30, 1994. Thus, as a result of these purchases,
Conagher acquired 3,750,000 shares of Common Stock in exchange for promissory
notes aggregating $7,500,000.
In September 1994, Conagher satisfied its obligations under the July
Promissory Note by paying to the Company an aggregate of $1,742,675 and by
arranging for the discharge of notes payable by the Company to Applied Laser
Systems ("ALS") in the amount of $1,257,325. Conagher also made aggregate
payments of approximately $3,500,000 in connection with the August Promissory
Note. The remaining balance of approximately $1,000,000, which was due and
owing as of January 30, 1995, was not paid by Conagher.
In connection with Conagher's failure to pay the balance due on the August
Promissory Note, the Company entered into negotiations which led to the
Settlement Agreement dated February 13, 1995, and subsequently amended on
March 17, 1995, and May 30, 1995 (the "Settlement Agreement"). Mr. Hayton was
a director and stockholder of Allied, one of the parties to the Settlement
Agreement. Pursuant to the Settlement Agreement, record ownership of the
Voting Preferred Stock owned by Conagher was transferred to Mr. Palermo, as
trustee for the holders of Common Stock. Mr. Palermo was required to vote the
Voting Preferred Stock as directed by the holders of the Common Stock, and as
a result holders of Common Stock were able to elect all of the Company's
directors in 1995. In conjunction with the acquisition of the Voting Preferred
Stock from Conagher, Mr. Palermo replaced Mr. Hayton as Chairman of the Board
and Mr. Hayton resigned as a director of the Company.
To induce Mr. Hayton to surrender the Voting Preferred Stock and to settle
outstanding obligations relating to Mr. Hayton's transactions in the Company's
securities and other obligations among the Company, Allied, Conagher, Mr.
Hayton, and Mr. Fisher, the Company agreed to issue to Allied 1,150,000
restricted shares of Common Stock. The Company, among other things, also
agreed to: (i) retain Allied or its nominee as a financial advisor and agent
pursuant to a Financial Advisor and Distribution Agreement (the "Advisor
Agreement") for the placement of a new class of preferred stock; (ii) issue
Mr. Fisher a $750,000 promissory note in exchange for the cancellation of the
$750,000 promissory note payable by Conagher; (iii) enter into employment
agreements with certain Company employees; (iv) transfer certain office leases
and equipment, automobile leases and insurance policies to Allied; (v) assume
liability for the lease of an automobile; and, (vi) release Conagher, Allied
and Mr. Hayton and their successors, assigns, agents and attorneys from any
and all claims. The Company also agreed to cancel Conagher's remaining payment
obligations under the August Promissory Note in exchange for Allied's
execution and delivery of a promissory note in the amount of $621,563 (the
"February Promissory Note"), payable in installments with the final payment
due on January 1, 1997.
On February 28, 1995, Allied failed to pay $150,000 due under the February
Promissory Note. The Company subsequently declared Allied to be in default on
the note and the entire principal amount due and payable. In addition, the
Company determined not to pay Allied $10,000 that Allied claimed was due March
1, 1995 under the Advisor Agreement. In connection therewith, the Company
entered into an amendment dated March 17, 1995 with Allied, Conagher, Mr.
Hayton, Mr. Palermo and Mr. Fisher (the "Amendment") whereby (i) the Advisor
Agreement was terminated, (ii) the Company agreed to pay Allied four percent
of any net
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<PAGE>
proceeds realized by the Company from the sale of any shares of any new issue
of preferred stock issued and sold by the Company between February 13, 1995
and May 19, 1995, (iii) Allied agreed to pay $150,000 to the Company upon
execution of the Amendment and to deliver a promissory note to the Company in
the amount of $311,563 in exchange for the cancellation of the February
Promissory Note.
The sum of $311,563 was paid in full on April 3, 1995, as required.
Accordingly, all of the payment obligations of Allied under all of the
promissory notes issued in connection with the financing provided by Conagher
and Allied, and in connection with the Settlement Agreement and the First
Amendment thereto, have been fully satisfied. The Company believes that the
circumstances surrounding Mr. Hayton's resignation and the need for the
Company to install new management justified the terms of the Settlement
Agreement, as amended, with Mr. Hayton.
RICHARD A. FISHER
In July 1995, the Company and Mr. Fisher modified the Settlement Agreement.
Pursuant to the Settlement Agreement, the Company had issued a $750,000
promissory note to Mr. Fisher in exchange for the transfer of the voting
rights under the Voting Preferred Stock to Mr. Palermo, as trustee. Under the
terms of that promissory note, Mr. Fisher had the right to recover the voting
rights of such stock (and hence to control the company), if the Company
defaulted under the note. In order to terminate Mr. Fisher's contingent voting
rights and to amend the payment terms of the $750,000 promissory note, the
parties entered into a Repayment Agreement on July 13, 1995. Under the
Repayment Agreement, the Company agreed to issue Mr. Fisher a sufficient
number of registered shares of Common Stock of the Company, such that the
proceeds from the sale of such shares by Mr. Fisher would equal the then
outstanding principal balance under the promissory note of approximately
$300,000, plus accrued interest.
On December 8, 1995, the parties agreed to pay Mr. Fisher $108,000 in
consideration of the termination of all on-going agreements with Mr. Fisher
and to increase the $300,000 outstanding principal balance of the promissory
note by $81,146 to account for $73,650 due Mr. Fisher for consulting fees and
benefits, and $7,496 in accrued interest. In addition, the parties agreed that
if by February 7, 1996, the Company had not issued such shares to Mr. Fisher
pursuant to an effective registration statement, the Company would pay Mr.
Fisher $381,146 in cash on such date. The Company believes that the payment
terms, as negotiated in February 1995, and renegotiated in July 1995 and again
in December 1995, are at least as favorable to the Company as those which
could have been obtained from an unrelated party. As a result of this final
settlement, the Company retired all of the remaining Voting Preferred Stock,
restoring control of the Company to the Common Stock holders.
Directors and Executive Officers
The Company is a party to certain employment and termination arrangements
with James J. Palermo, the Chairman of the Board and Chief Executive Officer
of the Company, John A. McQuade, the Vice President and Chief Administrative
Officer, Edward A. Stoltenberg, the Chief Financial Officer, and David Park,
the Vice President-Production of the Company. See "Compensation Plans and
Arrangements--Employment and Termination Arrangements" at page .
Gordon Werner, a director of the Company from May 1994 to July 1994 and from
April 1995 to date, has entered into a letter agreement with the Company dated
March 28, 1995, whereby he will receive a success fee of 4% of the net
proceeds that the Company receives from financing sources introduced to the
Company by Mr. Werner. Pursuant to this letter agreement, Mr. Werner was paid
$55,800 in June 1995, in connection with a sale of preferred stock by the
Company that generated gross proceeds of $1,500,000. The Company believes that
the terms of this agreement are at least as favorable to the Company as those
which could have been obtained from an unaffiliated party. The consulting
agreement with Mr. Werner was approved by Messrs. Palermo, Conway and
Kraumanis, the disinterested directors of the Company at such time.
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<PAGE>
PROPOSAL TWO:
APPROVAL OF CLASSIFICATION OF BOARD OF DIRECTORS
Under existing provisions of the Company's Certificate of Incorporation and
Bylaws, each director of the Company is elected annually for a term of one
year. In February 1996, the Board approved certain amendments to the Company's
Certificate of Incorporation and Bylaws (the "Classified Board Provisions") to
reorganize the Company's Board of Directors into three classes as nearly equal
in number as possible. Assuming stockholder approval, and the subsequent
implementation of the Classified Board Provisions, each class of directors
will, after an interim arrangement, serve for three years, with only one of
the three classes being elected each year.
The following is a summary of the Classified Board Provisions and their
effect upon the Company and its stockholders. A copy of the Classified Board
Provisions is attached hereto as Exhibit A and the summary contained herein is
qualified in its entirety by reference to such exhibit.
THE CLASSIFIED BOARD PROVISIONS
Adoption of a Classified Board
Delaware corporate law provides that a corporation's Certificate of
Incorporation may provide that the directors be divided into up to three
classes. The Classified Board Provisions will divide the directors into three
approximately equal classes--Class I, consisting of two directors comprised of
Gordon Werner and Eugene Scott, Class II, consisting of two directors
comprised of William G. Conway and Sven Kraumanis, and Class III, consisting
of two directors comprised of James Palermo and Alan Milton. Following the
interim arrangement described below, the directors of each class will serve
three year terms, and the term of one class will expire each year.
To implement the classified board, the Classified Board Provisions provide
that the Class I, Class II and Class III directors will initially be elected
at the meeting for terms of one year, two years and three years, respectively.
If the Classified Board Provisions are adopted, Class I directors elected at
the meeting will hold office until the 1997 Annual Meeting of Stockholders;
Class II directors elected at the meeting will hold office until the 1998
Annual Meeting of Stockholders; and Class III directors elected at the meeting
will hold office until the 1999 Annual Meeting of Stockholders. At each Annual
Meeting of Stockholders commencing with the 1997 Annual Meeting of
Stockholders, directors elected to succeed those in the class whose terms then
expire will be elected for three-year terms, so that the term of one class of
directors expires each year. Thus, after the meeting to which this Proxy
Statement relates, Stockholders will elect only approximately one-third of the
directors at each Annual Meeting of Stockholders. Each director will serve
until a successor is duly elected and qualified or until his earlier death,
resignation or removal.
The number of directors to be elected at the meeting is six. For information
regarding the nominees for election to the Company's Board of Directors at the
meeting, see "Proposal One--Election of Directors."
Reasons for Adoption of the Classified Board Provisions
Considering the Company's recent management and strategic turmoil created by
the actions of Pattinson Hayton, III, (See "Certain Relationships and Related
Transactions--Pattinson Hayton, III and Affiliates"), and the concomitant
decline in the Market Value of the Company's Common Stock, the Board of
Directors strongly believes that dividing the directors into three classes and
providing that directors will serve three-year terms rather than one-year
terms is advantageous to the Company and its stockholders, because it enhances
the likelihood of continuity and stability in the Company's management and in
policies formulated by the Board. At any given time, at least two-thirds of
the directors will have at least one year of experience as directors of the
Company.
The Board also believes the Classified Board Provisions would, if adopted,
reduce the possibility that a third party could effect a sudden or surprise
change in control of the Company's Board of Directors. At least two
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<PAGE>
Annual Meetings of Stockholders, rather than one, will be required to effect a
change in a majority of Board members. The delay afforded by the Classified
Board Provisions would serve to ensure that the Board, if confronted by a
hostile tender offer, proxy contest or other surprise proposal from a third
party who has acquired a block of the Company's Common Stock, will have
sufficient time to review the proposal and appropriate alternatives to the
proposal, and to act in a manner which it believes to be the best interests of
the stockholders.
The Board believes that if a potential acquiror were to purchase a
significant or controlling interest in the Company, such acquiror could remove
the Company's directors and obtain control of the Board and thereby remove the
Company's management, which could severely curtail the Company's ability to
negotiate effectively with such potential acquiror on behalf of all other
stockholders. The threat of obtaining control of the Board would deprive the
Board of the time and information necessary to evaluate the proposal, to study
alternative proposals and to help ensure that the best price is obtained in
any transaction involving the Company which may ultimately be undertaken. The
Classified Board Provisions are designed to reduce the vulnerability of the
Company to an unsolicited takeover proposal, particularly a proposal that does
not contemplate the acquisition of all the Company's outstanding shares, or an
unsolicited proposal for the restructuring or sale of all or part of the
Company.
The proposed Classification of the Board is intended to encourage persons
seeking to acquire control of the Company to initiate such an acquisition
through arm's-length negotiations with the Company's Board of Directors. The
Classified Board Provisions would not prevent a negotiated acquisition of the
Company with the cooperation of the Board, and a negotiated acquisition could
be structured in such a manner as to shift control of the Board to
representatives of the acquiror as part of the transaction.
Possible Disadvantages of the Classified Board Provisions
Since the Classified Board Provisions will increase the amount of time
required for a takeover bidder to obtain control of the Company without the
cooperation of the Board, even if the takeover bidder were to acquire a
majority of the Company's outstanding Common Stock, the Classified Board
Provisions could tend to discourage certain tender offers and other attempts
to change control of the Company, even though stockholders might feel such
attempt would be beneficial to them or the Company. In addition, the
Classified Board Provisions may discourage tender offers, open market
purchases in anticipation of tender offers, and other investment and
speculative market activity that may have the effect of increasing the market
price of or price volatility in the Company's stock. As a result, stockholders
could be deprived of certain opportunities to sell their shares at a
temporarily higher price.
Vote Required
Approval of the Classified Board Provisions requires the affirmative vote of
a majority of the outstanding shares of the Company's Common Stock.
THE BOARD OF DIRECTORS RECOMMEND VOTING "FOR" APPROVAL OF THE CLASSIFIED
BOARD AMENDMENT.
PROPOSAL THREE:
AMENDMENT OF 1993 STOCK PLAN
The 1993 Stock Plan, which was adopted by the Board of Directors on March
31, 1993 and approved by the Company's stockholders on June 7, 1993, provides
for the grant of awards covering a maximum of 446,299 shares of Common Stock,
of which up to 150,000 shares could be granted as incentive stock options. On
May 6, 1994 the Board of Directors voted to amend the 1993 Stock Plan to
provide that each non-employee director shall receive a formula award of
options as of the date of his or her initial election to the Board, rather
than on October 1 of the year of election. As the result of an amendment
adopted by the Board of Directors on October 1994 and approved by the
Company's stockholders on October 1994, the number of shares available for
award
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<PAGE>
under the 1993 Stock Plan was increased by 358,510 to 804,809 shares and again
in May, 1995 to 1,386,758 shares. All or any portion of the 1,386,758 shares
may be granted as incentive stock options.
On May 9, 1995, the Company granted 330,000 incentive stock options with a
$2.00 (approximately 110% of the market price of the Common Stock on the date
of grant) exercise price per share to James J. Palermo. On May 9, 1995, the
Compensation Committee of the board re-granted options to acquire an aggregate
of 688,000 shares of Common Stock by canceling options outstanding under the
1993 Stock Plan and the 1994 Stock Plan in exchange for the granting under the
1993 Stock Plan and the 1994 Stock Plan of new options exercisable on the same
vesting schedules as the previously outstanding options but having an exercise
price of $1.81 per share. These re-grants were effected as incentives for
employees of and consultants of the Company.
On February 27, 1996, the Compensation Committee of the Board of Directors
re-granted options to acquire an aggregate of 1,189,166 shares of Common Stock
by canceling options outstanding under the 1993 Stock Plan and the 1994 Stock
Plan for current employees and directors in exchange for the granting under
the 1993 Stock Plan and the 1994 Stock Plan of new options exercisable on the
same vesting schedules as the previously outstanding options but having an
exercise price of $0.68 per share. These re-grants were effected as incentive
for employees and directors of the Company.
The Board of Directors voted on February 27, 1996 to further amend the 1993
Stock Plan, subject to approval by the affirmative vote by holders of the
majority of shares of Common Stock represented in person or by proxy at the
Meeting, to increase the number of shares available for award under the 1993
Stock Plan by [ ] shares (representing 4.9% of the [ ] issued and
outstanding shares of Common Stock as of the Record Date), all or any portion
of which may be granted as incentive stock options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
AMEND THE 1993 STOCK PLAN.
DESCRIPTION OF 1993 STOCK PLAN
The following is a summary of the principal features of the 1993 Stock Plan,
assuming approval by the stockholders of the proposal to amend the Plan.
OPERATION OF THE 1993 STOCK PLAN
The 1993 Stock Plan is currently administered by the Compensation Committee.
Awards may be granted to officers and other key employees of the Company. Non-
employees who perform services for the Company may be considered employees of
the Company for all purposes under the 1993 Stock Plan, other than the grant
of incentive stock options. Non-employee directors of the Company are
automatically granted certain awards under the 1993 Stock Plan. The Company
has proposed a separate amendment of the 1993 Stock Plan to increase the
number of options subject to such automatic grants. See "Proposal Four" on
page . The purpose of the 1993 Stock Plan is to encourage stock ownership by
eligible employees, thereby increasing the personal interest of the employees
in the Company's continued success and progress. The eligibility criteria of
the 1993 Stock Plan are intended to encompass a group which is currently
estimated at fifteen individuals. The Compensation Committee bases its
selection of award recipients, and its determination of the number of shares
of Common Stock to be covered by each award, on the nature of the employee's
duties and present and potential contributions to the Company's success and
other factors it deems relevant.
Awards to Employees
Awards under the 1993 Stock Plan may be granted in the form of (i) incentive
stock options within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), (ii) non-qualified stock options, (iii)
shares of Common Stock subject to specified restrictions ("restricted
shares"), (iv) restricted units entitling the holder thereof to receive one
share of Common Stock (or equivalent cash payments) for each
14
<PAGE>
unit in increments during a restricted period ("restricted units"), (v) stock
appreciation rights ("rights") accompanying options or granted separately, or
(vi) limited stock appreciation rights ("limited rights") accompanying
options. Except for incentive stock options, there is no limitation on the
aggregate number of shares of Common Stock which can be granted pursuant to
such awards to any one employee. Shares reserved for issuance, but never
issued, such as shares covered by expired or terminated options, generally
will be available for subsequent awards.
Stock options will have terms determined by the Compensation Committee, but
no incentive stock option may be granted after March 23, 2003 or have a term
exceeding ten years (or five years in the case of incentive stock options
granted to an employee or officer holding 10% or more of the voting stock of
the Company). Stock options become exercisable as determined by the
Compensation Committee, except that no options may be exercised by directors
or officers within six months of the date of grant. The Compensation Committee
may accelerate the exercisability of any option at any time. In addition,
options may be granted which become immediately exercisable upon a change of
control of the Company.
The option price of incentive stock options may not be less than the market
price of Common Stock on the date of grant (or not less than 110% of such
market value in the case of incentive stock options granted to an employee or
officer holding 10% or more of the voting stock of the Company). An option may
be exercised by payment of the option price in cash (including money loaned by
the Company to the optionee in compliance with applicable law and on such
terms and conditions as the Compensation Committee may determine), or subject
to the approval of the Compensation Committee, by payment in already owned
shares of Common Stock or surrender of outstanding awards under the 1993 Stock
Plan or any other stock option or incentive compensation plan of the Company.
Payment in stock or by surrendering other awards would permit the holder of a
non-qualified option to start with no shares or with a relatively small number
of shares of Common Stock and, through successive and substantially
simultaneous exercises, exercise such option in full with no cash outlay. The
Compensation Committee, in its sole discretion, may determine that upon
exercise of such option, no shares of Common Stock will be delivered and the
employee will be entitled only to cash equal to the "appreciation value"
(i.e., the aggregate fair market value of shares subject to the option less
the aggregate exercise price of the option).
Awards to Non-Employee Directors
Upon initial election to the Board of Directors, a person who is not also an
employee of the Company is awarded non-qualified options to purchase 10,000
shares of Common Stock at a price equal to the market price of Common Stock on
the date of election. On October 1 of each year, all non-employee directors of
the Company (other than a director who was first elected in that year) are
awarded non-qualified options to purchase 3,333 shares of Common Stock at the
market price on that date. All options have a term of 10 years and vest
ratably over a three year period on each anniversary date of the grant, except
that all options become immediately exercisable upon a change of control of
the Company. Upon termination of the directorship, all outstanding options are
subject to the same provisions with respect to exercisability and expiration
as are applicable to options of employees upon termination of employment. The
Board has proposed a further amendment of this provision to increase both the
initial grant of options and the annual grant of options. See "Proposal Four"
on page .
Plan Amendment
The Board of Directors may suspend, terminate, modify or amend the 1993
Stock Plan; provided, however, that any amendment that would increase the
aggregate number of Common Stock that may be issued, materially increase the
benefits accruing to participants or materially modify the requirements as to
eligibility for participation will be subject to shareholder approval. No
suspension, termination, modification or amendment of the 1993 Stock Plan may,
without the consent of a participant, adversely affect the participant's
rights under an award previously granted.
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<PAGE>
Awards Under the 1993 Stock Plan
As of March 31, 1996, options for the purchase of a total of 988,539 shares
of Common Stock were outstanding under the 1993 Stock Plan and options for
401,326 shares of Common Stock had been exercised under the 1993 Stock Plan.
No shares of Common Stock remain available for award under the 1993 Stock
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL THREE.
PROPOSAL FOUR:
AUTOMATIC GRANTS OF OPTIONS UNDER THE 1993 STOCK PLAN
On February 27, 1996, the Board voted to amend the 1993 Stock Plan, subject
to approval by the affirmative vote of holders of a majority of the shares of
Common Stock present and voting at the Meeting in person or by proxy, to
increase the number of options to purchase the Company's Common Stock
automatically granted to the non-employee directors of the Company on the date
of each annual meeting of shareholders. Pursuant to such amendment, each non-
employee director of the Company will receive a grant of non-qualified, fully-
vested options to purchase 40,000 shares of the Company's Common Stock at the
market price of the Common Stock on the date of the meeting, retroactive to
the director's date of service on the Board. Additionally, if this "Proposal
Four" is properly approved by the shareholders, each non-employee director
will receive an automatic grant of non-qualified options to purchase 20,000
shares of Common Stock at the market value on the following dates: (i) the
date of the 1997 annual meeting of shareholders, if the price of the Company's
Common Stock is at or above $2.00 per share on the date of such meeting; (ii)
the date of the 1998 annual meeting of shareholders, if the price of the
Company's Common Stock is at or above $4.00 per share on the date of such
meeting; and, (iii) the date of the 1999 annual meeting of shareholders, if
the price of the Company's Common Stock is at or above $8.00 per share on the
date of such meeting.
All of the foregoing automatic grants of options to the non-employee
directors of the Company will be awarded through the end of such director's
term and will vest immediately upon any change of control of the Company
resulting in the removal of the director from the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF PROPOSAL
FOUR.
PROPOSAL FIVE:
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors voted as of February 27, 1996 to appoint Livingston &
Haynes, P.C. as independent accountants for the Company and subsidiary
corporations for fiscal 1996. Livingston & Haynes, P.C. has served as
independent accountants for the Company since October 26, 1994. This
appointment is being submitted to the holders of Common Stock for
ratification. Although the submission of this matter to stockholders is not
required by law, if the appointment is not ratified by the holders of Common
Stock, and the Board of Directors will reconsider its selection of independent
accountants.
A representative of Livingston & Haynes, P.C. is expected to be present at
the Meeting. This representative will have the opportunity to make a statement
if such representative desires to do so and will be available to respond to
appropriate questions presented at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF LIVINGSTON &
HAYNES, P.C. AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR FISCAL 1996.
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OTHER MATTERS
The Board of Directors does not intend to present to the Meeting any
business other than the proposals listed herein, and the Board was not aware,
as of the time of the mailing of this Proxy Statement to holders of Common
Stock of any other business that may be properly presented for action at the
Meeting. If any business should come before the Meeting, the persons named in
the accompanying form of proxy will have discretionary authority to vote said
proxy in accordance with their judgment.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity security (collectively, "Section 16
reporting persons"), to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission. Section 16
reporting persons are required by regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to Section 16 reporting persons
were satisfied, except that Mr. Palermo late filed a Form 4 relating to six
transactions, Mr. McQuade late filed a Form 3 and a Form 4 relating to two
transactions, Mr. Park late filed a Form 3 and a Form 4 relating to one
transaction, Mr. Stoltenberg late filed a Form 3 and a Form 4 relating to two
transactions, Mr. Conway late filed a Form 3 and a Form 4 relating to one
transaction, Mr. Kraumanis late filed a Form 3 and a Form 4 relating to one
transaction, Mr. Milton late filed a Form 3 relating to two transactions
effective the date he became a director, Mr. Scott late filed a Form 3
relating to two transactions effective the date he became a director, and Mr.
Werner late filed a Form 3 and a Form 4 relating to one transaction effective
the date he became a director.
SOLICITATION
The cost of soliciting proxies, including the cost of reimbursing brokerage
houses and other custodians, nominees or fiduciaries for forwarding proxy
statements to their principals, will be borne by the Company. Solicitation may
be made in person or by telephone or telegraph by officers or regular
employees of the Company, who will not receive additional compensation
therefor. In addition, the Company has retained Georgeson & Company to aid in
the solicitation of proxies. The charges of such firm, estimated at $6,000
(excluding expenses), will be paid by the Company.
STOCKHOLDER PROPOSALS
The Company currently anticipates that the 1997 Annual Meeting of
Stockholders of the Company will be held on May 9, 1997. In order to be
included in the proxy materials for the 1997 Annual Meeting of Stockholders,
stockholder proposals must be received at the Company's principal executive
offices by no later than January 10, 1997.
17
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LOGO
PROXY
QUADRAX CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a stockholder of Quadrax Corporation, (the "Company") hereby
revoking any proxy heretofore given, does hereby appoint Messrs. James J.
Palermo, and Sven Kraumanis, and each of them, proxies with full power of
substitution, for and in the name of the undersigned to attend the Annual
Meeting of Stockholders of the Company to be held at the Tennis Hall of Fame,
Newport, Rhode Island on May 10, 1996, and any adjournment thereof and there to
vote upon all matters specified in the notice of said meeting, as set forth on
the reverse hereof, and upon such other business as may properly and lawfully
come before the meeting, all shares of stock of said Company which the
undersigned would be entitled to vote if personally present at said meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED, IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR ALL
PROPOSALS.
No. 1 [_] ELECTION OF DIRECTORS [_] WITHHOLD ALL NOMINEES
James J. Palermo, William Conway, Sven Kraumanis, Alan Milton, Eugene
Scott, and Gordon Werner
(INSTRUCTION: To withhold authority to vote for any individual, strike
that nominee's name above.)
- - - --------------------------------------------------------------------------------
No. 2 Approval of Amendment to the Company's Restated Certificate of
Incorporation to classify the Board.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
LOGO
No. 3 Approval of Amendment to the 1993 Stock Option Plan to increase number of
shares available for grant.
[_] FOR [_] AGAINST [_] ABSTAIN
No. 4 Approval of Amendment to the 1993 Stock Option Plan to provide options to
non-employee directors on the date of each annual meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
No. 5 Appointment of Livingston & Haynes, P.C., as Independent Auditors for
fiscal 1996.
[_] FOR [_] AGAINST [_] ABSTAIN
Dated: _______________________________ 1996
All as described in the Proxy Statement
dated April 10, 1996 receipt of which is
hereby acknowledged.
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SIGNATURE
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SIGNATURE IF HELD JOINTLY
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREON. If signing as attorney, executor,
administrator, trustee, or guardian,
indicate such capacity. All joint tenants
must sign. If a partnership, please sign
in partnership name by authorized person.
THE BOARD OF DIRECTORS REQUESTS THAT YOU FILL IN, DATE AND SIGN THE PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE.
