<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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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)
QUADRAX CORPORATION
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(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 19, 1997
----------------
TO THE HOLDERS OF SHARES OF COMMON STOCK:
The Annual Meeting of Stockholders of Quadrax Corporation (the "Company")
will be held at the Green Valley Country Club, 371 Union Street, Portsmouth,
Rhode Island on Monday, May 19, 1997, at 10:00 A.M. local time (the
"Meeting"), for the following purposes:
1. To elect two Directors of the Company;
2. To approve an amendment of the Company's 1993 Stock Plan and 1994
Stock Plan to increase the number of shares of purchase the Company's
Common Stock available for grant thereunder;
3. To ratify the selection of Livingston & Haynes, P.C., as independent
accountants for the Company for the 1997 fiscal year; and,
4. To transact such other business as may properly come before the
Meeting.
Stockholders of record at the close of business on April 1, 1997, 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
<PAGE>
QUADRAX CORPORATION
300 HIGH POINT AVENUE
PORTSMOUTH, RHODE ISLAND 02871
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1997
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 Monday, May 19, 1997, at 10:00 a.m.,
local time, at the Green Valley Country Club, 371 Union Street, Portsmouth,
Rhode Island and at any adjournments and postponements thereof (the
"Meeting"). At the Meeting, stockholders will be asked to consider and vote
upon the following matters, all of which are more fully discussed below:
1.to elect two directors of the Company ("Proposal One");
2. to approve on amendment of the Company's 1993 Stock Plan and 1994 Stock
Plan to increase the number of shares of Common Stock available for
grant thereunder ("Proposal Two");
3. to ratify the selection of Livingston & Haynes, P.C. as independent
accountants for the 1997 fiscal year ("Proposal Three"); and
4.to transact such other business 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, 1997, 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 5, 1997, to
holders of record of Common Stock on the Record Date.
VOTING SECURITIES AND VOTES REQUIRED
On the Record Date, the Company had outstanding 34,387,014 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 Two and
Proposal Three.
<PAGE>
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
At the 1996 Annual Meeting, the stockholders of the Company properly
approved an amendment to the certificate of incorporation of the Company to
classify the board of directors into three classes. Class I consists of two
directors--John W. Jepson and Eugene L. Scott--whose terms of office will
expire at the Meeting. Class II consists of two directors--William G. Conway
and Sven Kraumanis--who will hold office until the 1998 Annual Meeting of
Stockholders. Class III is comprised of two directors--James Palermo and Alan
Milton--who will hold office until the 1999 Annual Meeting of Stockholders. If
Messrs. Scott and Jepson are elected by the stockholders they will serve a
three year term and will hold office until the 2000 Annual Meeting of
Stockholders. Unless otherwise instructed by proxy, the shares represented by
proxies will be voted for the election of the two nominees named below as
Directors of the Company for the ensuing three year term specified in the
Company's charter.
The Board has nominated for election two current directors of the Company:
John W. Jepson and Eugene L. Scott. 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 JOHN W. JEPSON AND EUGENE L. SCOTT 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............... 60 Chairman of the Board and Chief Executive
Officer
John A. McQuade................ 53 Vice President and Chief Administrative
Officer
Michael Dorf................... 49 Vice President and General Manager--Advanced
Materials Systems Division
Michael Buck................... 35 Vice President and General Manager--Quadrax
Golf Division
David L. Park.................. 47 Vice President--Product Development
Edward A. Stoltenberg.......... 57 Senior Vice President, Chief Financial
Officer and Secretary
William G. Conway.............. 54 Director
Sven Kraumanis................. 51 Director
Alan Milton.................... 43 Director
Eugene L. Scott................ 59 Director
John W. Jepson................. 63 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.
Michael Dorf has been Vice President and General Manager of the Company's
Advanced Materials Systems Division since March 1996. Prior to joining the
Company, Mr. Dorf had been employed by Textron Specialty Materials (a division
of Textron, Inc.) as Director of Industrial Product Development from May 1994
to March 1996, as Director of Sports Technology from March 1993 to May 1994
and Director of Boron Products from January 1991 to March 1993. Mr. Dorf holds
a B.S. degree in Chemical Engineering from Cornell University.
Michael Buck was appointed Vice President and General Manager of the
Company's Quadrax Golf Division in January 1997. He previously served as Vice
President--Sales and Marketing of the Company's Advanced Materials Division
from April 1996 to January 1997. From January 1994 to April 1996, Mr. Buck was
Director of Sports Technology at Textron Specialty Materials (a division of
Textron, Inc.). From June 1986 to January 1994, Mr. Buck was Product Manager--
Boron Composites at Textron. Mr. Buck has been involved for the past twelve
years in the business development, sales and marketing of advanced composite
materials, both domestically and internationally, with particular emphasis on
the sporting goods industry. Mr. Buck received his B.S. and M.S. degrees in
Mechanical Engineering from the University of Massachusetts and an M.B.A. with
High Distinction from Babson College.
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.
Edward A. Stoltenberg became Senior Vice President and Chief Financial
Officer of the Company in August 1995. From August 1994 to July 1995, Mr.
Stoltenberg served as the Company's Acting Chief Financial Officer. From 1990
to July 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.
Eugene L. Scott, nominee for director, has been a member of the Board of
Directors of the Company 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.
John W. Jepson, nominee for director, has been a member of the Board of
Directors since February 26, 1997. Mr. Jepson is president of Noble Golf Co.,
a company he founded in 1993. From 1990-1992, Mr. Jepson was executive vice
president of the Ben Hogan Company, a manufacturer of golf balls and clubs.
From 1968-1992, Mr. Jepson held various executive positions with The Acushnet
Company, a manufacturer of golf products. Mr. Jepson holds a Master of Science
and a Ph.D from Yale University.
3
<PAGE>
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 General Counsel to Legacy Expediters Ltd., a privately-
held real estate investor, developer and contractor in Ontario, Canada since
February 1997. Mr. Kraumanis was employed by Brassie Golf Corporation as
General Counsel from May 1993 until June 1996, as Vice President--Acquisitions
from May 1994 and as Secretary from June 1994 until June 1996. 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 a Managing Director of Mantis Holdings,
Inc., a New York based private investment company that focuses on high growth
manufacturers and advanced materials suppliers within the environmental
industry. Mr. Milton has been a director of Industrial Flexible Materials,
Inc., a publicly held company, since 1992, of Composite Particles, Inc., a
privately-held company, since 1993 and of Discas, Inc., a privately-held
company, since 1996. These companies are current portfolio holdings of Mantis
Holdings, Inc. Mr. Milton holds a Master of Environmental Sciences degree from
Clark University.
COMMITTEES AND MEETINGS OF BOARD OF DIRECTORS
The Board of Directors met seven times and acted two times by written
consent during fiscal 1996. 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 1996. 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 1996.
The Audit Committee is comprised of Sven Kraumanis and has one vacancy.
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 two times during fiscal 1996. The
Compensation Committee is comprised of Sven Kraumanis and has one vacancy.
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 January 1, 1996, that
was approved by the Board in February 1996. Under the
4
<PAGE>
terms of this agreement, for fiscal 1996, Mr. Palermo received a base salary
of $250,000 with certain increases in 1997 and 1998 and per year a bonus based
on the profitability of the Company. The agreement provides for certain
benefits, including payment by the Company of premiums for life insurance on
Mr. Palermo and an automobile allowance and options exercisable for a total of
100,000 shares of Common Stock under the 1993 Stock Plan on January 1, 1996,
1997, and 1998, respectively for an exercise price of the fair market value of
the Common Stock on that date of each year. Upon termination of his
employment, Mr. Palermo is entitled to receive severance benefits which
include the payment of his base salary for a period of one year plus any
health and disability benefits during this period. 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.
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. The Agreement has been
renewed in accordance with these terms.
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 of the contract
duration. 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 would 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 would 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 has been paid
$1,200 per month.
At the 1996 Annual Meeting, the Shareholders properly approved an amendment
to the 1993 Stock Plan to increase the number of options to purchase the
Company's Common Stock automatically granted to 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 received 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. Further,
included in this amendment is the right of each non-employee director to
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; (iii)
the date of the 1999 Annual
5
<PAGE>
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 above options
are awarded through the end of a 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.
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 1996 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) GRANTED COMPENSATION(2)
- ---- ----------------- ------ -------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Palermo........ Chairman of the 1996 $254,052 $50,000 $79,892(5) $43,010
Board and Chief 1995 $224,452 -- $16,893 $43,010
Executive Officer 1994 91,715 -- -- 462,500(3) --
David Park.............. Vice President- 1996 120,000 6,000
Product 1995 120,000 12,749 15,420 -- 660
Development 1994 24,077 -- 1,000 -- --
Edward Stoltenberg...... Senior Vice 1996 120,000 -- 41,575 2,983
President and 1995 48,171 -- 3,000 -0-
Chief Financial 1994 --
Officer (4)
John McQuade............ Vice President 1996 109,492 6,000 -- 956
and Chief 1995 91,892 12,748 6,000 -- 876
Administrative 1994 49,477 -- 1,500 -- --
Officer
David Soules............ Vice President 1996 98,577 6,000 -- 308
Manufacturing 1995 89,028 12,748 4,000 -- 300
Operations 1994 75,878 -- -0- -- --
</TABLE>
- --------
(1) Consists of automobile allowances and salary deferrals under the Companys
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 Acting Chief Financial Officer from April to
August 1995. He served as consultant to the Company from August 1994 to
April 1995. In 1996, the Company gave Mr. Stoltenberg 50,000 shares of
Common Stock for services previously performed.
(5) Includes $65,000 which is the difference between market price and exercise
price for 100,000 shares of Common Stock on the date of exercise.
6
<PAGE>
The following table sets forth certain information regarding stock options
granted by the Company to the Named Executive Officers during fiscal 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXPIRATION
NAME GRANTED (1) IN FISCAL YEAR(2) EXERCISE PRICE PER SHARE DATE
- ---- ------------------ ------------------------ ------------------------ ----------
<S> <C> <C> <C> <C>
James J. Palermo........ 100,000 6.39% $0.84 1/01/06
Edward Stoltenberg...... 30,000 1.92% $0.84 1/01/06
</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 1996 to acquire an aggregate of
1,565,500 shares.
On May 10, 1996, the Company granted 480,000 incentive stock options with a
$1.81 (market price of Common Stock on the date of grant) exercise price per
share to the following outside directors of the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXPIRATION
NAME GRANTED (1) IN FISCAL YEAR(2) EXERCISE PRICE PER SHARE DATE
- ---- ------------------ ------------------------ ------------------------ ----------
<S> <C> <C> <C> <C>
William G. Conway....... 120,000 8.08% $1.81 5/10/06
Sven Kraumanis.......... 120,000 8.08% $1.81 5/10/06
Alan Milton............. 80,000 5.39% $1.81 5/10/06
Eugene Scott............ 80,000 5.39% $1.81(3) 5/10/06
Gordon Werner(4)........ 80,000 5.39% $1.81 5/10/06
</TABLE>
- --------
(1) Represents shares of Common Stock issuable upon exercise of stock options
granted under the 1993 Stock Plan pursuant to automatic grants approved by
the Company's stockholders in 1996.
(2) All options granted to directors on May 10, 1996 are fully vested.
(3) Adjusted in February 1997, to an exercise price per share of $0.75.
(4) Resigned in March 1997.
On January 11, 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>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT YEAR- IN-THE-MONEY
END OPTIONS AT YEAR END(5)
------------------------------------- -------------------------
SHARES ACQUIRED
NAME IN EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- --------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Palermo........ 730,000(1)(2)(3) $83,200 -0- -0- -0- -0-
David Park.............. 72,000(3) $ 2,880 -0- -0- -0- -0-
Edward Stoltenberg...... 72,000(3) $ 2,880 30,000(4) -0- -0- -0-
John A. McQuade......... -0- -0- 82,000(3) -0- $ 3,280 -0-
David Soules............ -0- -0- 94,500(3) -0- $ 3,780 -0-
</TABLE>
- --------
(1) Exercise price per share for 100,000 shares was $0.84.
(2) Exercise price per share for 100,000 shares was $0.10.
(3) Exercise price per share $0.68.
(4) Exercise price per share $0.84.
(5) Value is based on the closing bid price per share of Common Stock on
December 31, 1996 ($0.72), 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. An amendment to the 1993 Stock Plan adopted by the Board of
Directors on February 27, 1996, and approved by the Company's stockholders on
May 10, 1996, increased the number of shares available for award under the
1993 Stock Plan by 1,065,154 shares (representing 4.9% of the 21,737,842
issued and outstanding shares of Common Stock as of the Record Date). The 1993
Stock Plan, as amended to date, provides for the grant of awards covering a
maximum of 2,451,912 shares of Common Stock, all of which may be granted as
incentive stock options if permissible under applicable federal income tax
laws.
The 1993 Stock Plan is described in greater detail under "PROPOSAL TWO:
AMENDMENT OF 1993 AND 1994 STOCK PLANS--Description of 1993 Stock Plan" at
page 10.
1994 Stock Plan. The 1994 Stock Plan reserved a total of 500,000 shares of
Common Stock for issuance. On April 14, 1996, the Board of Directors increased
to 1,000,000 the numbers of shares for issuance under the 1994 Stock Plan. As
of December 31, 1996, options to purchase a total of 726,000 shares of Common
Stock at a weighted average of exercise price of $1.03 per share were
outstanding under the 1994 Stock Plan, 338,000 options issued under the 1994
Stock Plan had been exercised, and no shares of Common Stock remained
available for award under the 1994 Stock Plan.
8
<PAGE>
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, 1997, 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 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.......................... 740,000 2.1%
David Park................................ 79,000 *
John A. McQuade(3)........................ 85,500 *
Edward A. Stoltenberg(4).................. 157,500 *
Michael Dorf(5)........................... 127,000 *
William G. Conway(6)...................... 133,333 *
Sven Kraumanis(6)......................... 133,333 *
Alan W. Milton(6)......................... 145,000 *
Eugene L. Scott(7)........................ 152,000 *
John W. Jepson(8)......................... 60,000 *
Michael Buck(9)........................... 100,000 *
All officers and directors as a group..... 1,912,666 5.4%
</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, 1997, 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 82,000 shares of Common Stock subject to outstanding options,
which are exercisable within sixty days after April 1, 1997.
(4) Includes 30,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1997.
(5) Includes 125,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1997.
(6) Consists solely of options to purchase shares of Common Stock which are
exercisable within sixty days after April 1, 1997.
(7) Includes 80,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1997.
(8) Includes 10,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after April 1, 1997.
(9) Includes 100,000 shares of Common Stock subject to outstanding options
which are exercisable within sixty days after April 1, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 and Edward A. Stoltenberg, the Chief Financial Officer. See
"Compensation Plans and Arrangements--Employment and Termination Arrangements"
at page 4.
The Company purchased $100,000 fair market value of advertising space for its
tennis products in Tennis Week magazine in 1996. Tennis Week magazine is
controlled by Mr. Scott, a director of the Company. The Company was to pay for
such advertising space by means of a cash payment of $37,500 and pay for the
balance
9
<PAGE>
by issuing Tennis Week shares of the Company's Common Stock valued at its fair
market value on May 10, 1996, the date on which the Board of Directors
approved such arrangement. The Company did not pay any of such cash or issue
any of such shares in 1996. In February 1997, the Company compromised its
obligations to Tennis Week by issuing 60,000 shares of unregistered Common
Stock and lowering the exercise price of Mr. Scott's 80,000 stock options to
$0.75. Such transactions were approved by the disinterested directors of the
Company.
PROPOSAL TWO:
AMENDMENT OF 1993 AND 1994 STOCK PLANS
On February 24, 1997, the Board of Directors approved amendments to the 1993
Stock Plan and the 1994 Stock Plan to increase the number of shares of Common
Stock available for grant or options under the 1993 Plan by 1,592,000 and to
increase the number of shares of Common Stock available for options under the
1994 Plan by 100,000 shares in order for the Company to be able to meet
certain contractual commitments to its employees and to have additional shares
available for grants or options to new employees, directors and consultants.
At December 31, 1996, neither Plan had any shares available for grant.
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 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 employees' 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 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
10
<PAGE>
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
At the 1996 Annual Meeting, shareholders voted to amend the 1993 Stock Plan
to increase the number of non-qualified options awarded to non-employee
directors of the Company. Pursuant to this amendment, each non-employee
director of the Company received a grant of non-qualified, fully vested
options to purchase 40,000 shares of the Company's Common Stock on the date of
the Annual Meeting, retroactive to the director's date of service of the
Board. Additionally, 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 on the date of such meeting; and, (iii) the date of the 1999
Annual Meeting of Shareholders, of 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 above
options are available through the end of a 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.
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 participants rights
under an award previously granted.
DESCRIPTION OF 1994 STOCK PLAN
The 1994 Stock Plan is substantially the same as the 1993 Stock Plan, except
that only options to purchase Common Stock may be granted, and directors who
are members of the Compensation Committee are not eligible to receive grants
of options under this Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO
AMEND THE 1993 STOCK PLAN AND THE 1994 STOCK PLAN.
11
<PAGE>
PROPOSAL THREE:
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors voted as of February 24, 1997, to appoint Livingston
& Haynes, P.C. as independent accountants for the Company and subsidiary
corporations for fiscal 1997. 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 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 1997.
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, 1996, all
Section 16(a) filing requirements applicable to Section 16 reporting persons
were satisfied.
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
therefore.
STOCKHOLDER PROPOSALS
The Company currently anticipates that the 1998 Annual Meeting of
Stockholders of the Company will be held on May 22, 1998. In order to be
included in the proxy materials for the 1998 Annual Meeting of Stockholders,
stockholder proposals must be received at the Company's principal executive
offices by no later than January 13, 1998.
12
<PAGE>
QUADRAX CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1997
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 Edward Stoltenberg, 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 Green Valley Country
Club, 371 Union Street, Portsmouth, Rhode Island on May 19, 1997, 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.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE SIDE
