<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
QUALITY PRODUCTS, INC.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
The date on which the definitive copies of this Proxy Statement
are intended to be released to security holders is April 13, 1998.
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 8, 1998
To Holders of Common Stock of Quality Products, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of
Quality Products, Inc., a Delaware corporation, (the "Company") will
be held on Friday, May 8, 1998 at 10:00 a.m., local time, at the
Company's principal executive offices located at , 560 Dublin Avenue,
Columbus, Ohio 43215, for the following purposes, which are more
fully described in the accompanying Proxy Statement:
1. To approve an amendment to the Company's Bylaws to set the number
of directors at not less than three nor more than seven and to permit
the Company's Board to determine the exact number within that range.
2. To elect directors. If the Bylaw provision is approved, the
stockholders will elect up to five directors. If it is not approved,
the stockholders will elect four directors.
3. To approve Quality Products, Inc.'s 1997 Stock Option Plan, and
the grant of options to purchase 600,000 shares of the Company's
common stock, par value $.00001, to certain employees.
4. To ratify the grant to Messrs. Weaver and Reuben of options to
purchase 225,000 shares each of the Company's common stock for a total
of 450,000 shares, 350,000 shares at $1.00 per share and 100,000
shares at $2.00 per share.
5. To ratify the appointment of Farber & Hass, LLP as independent
auditors of the Company for fiscal year 1998.
6. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
All shareholders are cordially invited to attend the meeting in
person. However, to ensure that each shareholder's vote is counted
at the meeting, shareholders are requested to mark, sign, date and
return the enclosed proxy card as promptly as possible in the
envelope provided. Shareholders attending the meeting may vote in
person even if they have previously returned proxy cards. Only
shareholders of record as of the close of business on March 10, 1998
are entitled to receive notice of, to attend, and to vote at the
meeting.
Sincerely,
/s/ JONATHON P. REUBEN
JONATHON P. REUBEN
CHIEF FINANCIAL OFFICER AND SECRETARY
March 25, 1998
<PAGE>
QUALITY PRODUCTS, INC.
560 Dublin Avenue
Columbus, Ohio 43215
PROXY STATEMENT
INTRODUCTION
The Board of Directors (the "Board") of Quality Products, Inc., a
Delaware corporation, (the "Company") is soliciting the enclosed
proxy from shareholders for use at the Company's annual meeting of
shareholders (the "Annual Meeting") to be held on Friday, May 8, 1998
at 10:00 a.m., local time, or at any adjournment(s) thereof. The
purposes of the Annual Meeting are set forth in this Proxy Statement
and in the accompanying Notice of Annual Meeting of Shareholders.
The Annual Meeting will be held at the Company's principal executive
offices at , 560 Dublin Avenue, Columbus, Ohio 43215. The Company's
telephone number is (614) 228-0185.
These proxy solicitation materials were mailed on or about April 10,
1998 to all shareholders entitled to vote at the Annual Meeting.
SHAREHOLDER PROPOSALS
No shareholder proposals have been submitted for consideration at the
annual meeting. Shareholders who intend to present proposals at the
next annual meeting of shareholders must send such proposals to the
Company for receipt no later than November 2, 1998, in order for such
proposals to be considered for inclusion in the proxy statement for
the next annual meeting.
SHAREHOLDERS ENTITLED TO VOTE AND REVOCATION OF PROXIES
Shareholders of record as of the close of business on March 10, 1998
(the "Record Date") are entitled to notice of, to attend and to vote
at the Annual Meeting. The closing sale price of Common Stock as
reported on the NASDAQ National Market on the Record Date of March
10, 1998, was $1.15625 per share. There were 2,554,056 shares of
Common Stock issued and outstanding on the Record Date. Each share
has one vote on all matters except, in the electing directors,
stockholders may cumulate their votes. That is, if five directors
are to be elected, each shareholder has the number of votes equal to
the number of shares held times five (5). The shareholder may then
distribute this number of votes in any way among the nominees for
director. The Company's directors are soliciting discretionary
authority to cumulate votes.
A shareholder who gives a proxy to the Company's directors as
requested in this solicitation may revoke such proxy by attending the
Annual Meeting and voting in person, or by delivering to the
Company's Corporate Secretary at the Company's principal executive
<PAGE>
offices referred to above, prior to the Annual Meeting, a written
notice of revocation or a duly executed proxy bearing a date later
than that of the previously submitted proxy.
The Company is bearing the cost of this solicitation. In addition,
the Company will reimburse brokerage firms and other persons
representing beneficial owners of shares for their reasonable
expenses in forwarding solicitation material to such beneficial
owners. Proxies may be solicited by certain of the Company's
directors, officers, and regular employees, without additional
compensation, personally or by telephone, fax, or telegram.
QUORUM AND REQUIRED VOTE
In electing directors, if the Bylaw amendment passes, the five
candidates receiving the highest number of affirmative votes and a
plurality of the votes of shares present or represented by proxy at
the meeting and entitled to vote will be elected as directors. If it
is not passed, the four candidates receiving the highest number of
affirmative votes and a plurality of the votes of shares present or
represented by proxy at the meeting and entitled to vote will be
elected as directors. The Board has nominated four directors and, if
the amendment passes, one additional director.
Proposals 1, 3, 4, and 5 each require for approval the affirmative
vote of a majority of the required quorum. The required quorum for
the transaction of business at the Annual Meeting is a majority of
the shares of Common Stock issued and outstanding on the Record Date
(the "Quorum").
DIRECTORS AND EXECUTIVE OFFICERS
Shareholders are being asked to approve an amendment to the Company's
Bylaws which would, if approved, set the number of directors at not
less than three (3) nor more than seven (7) and permit the Company's
Board to determine the exact number within that range. The Board has
nominated four directors in accordance with the Bylaws presently in
effect to serve until the next annual meeting. If the Bylaw
Amendment is passed, the Board has set the number of directors at
five and nominated one additional director. For a description of
this proposal, see the section of this Proxy Statement entitled
"PROPOSAL NO. 1-- TO AMEND THE COMPANY'S BYLAWS TO SET A NEW RANGE OF
THE NUMBER OF DIRECTORS AND TO PERMIT THE BOARD TO DETERMINE THE
NUMBER WITHIN THAT RANGE".
The name, age, and principal occupation of each of the nominees for
directors are set forth below. The Board has nominated the first
four individuals on the list in accordance with the present Bylaws
and the last individual if the Bylaw amendment passes.
<PAGE>
<TABLE>
<CAPTION>
Name Age Positions Director
Since
<S> <C> <C> <C>
Bruce C. Weaver 37 President, Director,
and Chairman of the
Board February 1996
Edward Varon 52 Investor New
William Harrison, Jr. 64 Vice President of
Operation of QPI
Multipress New
Murray Koppelman 66 President of Eastlake
Securities, Inc. New
Theodore P. Schwartz 60 President of QPI
Multipress New
</TABLE>
Bruce C. Weaver (Age 37) is the President, a director, and Chairman
of the Board of Directors of the Company. He became a consultant to
the Company in November 1995, and in February 1996, he became
president and a director. For more than the past five years, Mr.
Weaver has been self-employed as an accountant in Canada and
consultant to financially troubled companies in the United States and
Canada.
Edward Varon (Age 52) is an investor in the Company's refinancing.
Since September 1996, he has been self-employed as an investor. For
more than five years prior to September 1996, he was a founding
partner of E.D. Michaels, Inc., a women's apparel manufacturer and
distributor. In November 1997, he invested $50,000 in the Company's
refinancing note.
William Harrison, Jr. (Age 64) is Vice President of Operations of QPI
Multipress, Inc., the Company's sole operating subsidiary. In
September 1993, Mr. Harrison joined QPI Multipress, Inc. as plant
manager. Since October of 1993, he has also been Vice President of
Operations at Multipress and its principal operating officer. Prior
to September 1993, Mr. Harrison was manufacturing manager for Horton
Emergency Vehicles, a manufacturer of emergency and rescue vehicles.
Murray Koppelman (Age 66) is presently President and owner of
Eastlake Securities, Inc., 575 Lexington Ave., New York, New York.
Eastlake Securities arranged the Company's recent refinancing of its
bank debt and acts as collateral agent for the participants in that
refinancing, including Eastlake Securities. For more than the past
five years, Mr. Koppelman has been President and owner of Eastlake
Securities, Inc.
<PAGE>
Theodore P. Schwartz (Age 60) is President of QPI Multipress, Inc.
The Company hired him as President on December 15, 1997. Mr.
Schwartz has been involved in the hydraulic press business for the
past 37 years. From July 1990 to December 1997, Mr. Schwartz was an
officer and director of PH Group, Inc., a manufacturer of hydraulic
presses. From 1982 until July 1990, Mr. Schwartz was an employee of
QPI Multipress, Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The Company has only one class of stock outstanding, common stock.
The following table lists the common stock ownership of management
and certain beneficial owners as of March 20, 1998.
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Owner Class
__________________________ ____________________ __________
<S> <C> <C>
Bruce C. Weaver, President 170,783 shares 6.7%
560 Dublin Avenue
Columbus, Ohio 43215
Jonathon P. Reuben, CFO 279,166 shares(1) 10.9%
560 Dublin Avenue
Columbus, Ohio 43215
Directors and Officers as
a Group (3 persons) 435,366 17.0%
Murray Koppelman 186,666 shares(2) 7.3%
575 Lexington Ave.
New York, NY 10022
Richard W. Cohen 66,666 shares(3) 2.6%
31st Floor
1345 Avenue of the Americas
New York, NY 10105
<FN>
(1) Mr. Reuben does not own but holds a proxy for one half of his
279,166 shares. These 139,583 shares were owned by Thomas Raabe, the
Company's former Chief Executive Officer. As part of his termination
agreement with the Company, Mr. Raabe granted Mr. Reuben a proxy to
vote these shares which is irrevocable until the shares are sold in
an open market transaction. 120,000 of those shares are now owned by
Murray Koppelman subject to Mr. Reuben's proxy.
(2) Of Mr. Koppelman's 186,666 shares, on February 27, 1998, Mr.
Koppelman purchased 120,000 shares from Thomas Raabe the Company's
former Chief Executive Officer. These 120,000 shares, however, are
subject to an irrevocable proxy that Mr. Raabe previously granted to
Jonathon P. Reuben. In addition, Mr. Koppelman has the right to
receive the following shares: (a) 266,666 shares are issuable when
<PAGE>
and if he converts $200,000 principal amount of the Company's
Convertible Note which he purchased from a third party in August
1997, (b) 60,000 shares are issuable if and when he converts Series A
Warrants which he purchased in the Company's November 25, 1997
Private Placement, and 30,000 shares are issuable if and when
Eastlake Securities, which Mr. Koppelman owns, exercises the
Company's Series A Warrants which were issued to it as placement
agent for the Company's November 25, 1997 Private Placement. Mr.
Koppelman may convert the Note and warrants to shares common stock at
any time. If he converts all of his rights into shares, he will own
543,332 shares representing 18.7% of the Company's issued and
outstanding shares.
(3) Until February 1998, Mr. Cohen was Secretary and General Counsel
to the Company. He may have the right to receive 266,666 shares
which are issuable when and if he converts the $200,000 principal
amount of the Company's Convertible Note which he purchased in August
1997. The Company is investigating whether Mr. Cohen's purchase of
this Note at a substantial discount at a time when he was an officer
and counsel to the Company constituted the taking of a corporate
opportunity. If he converts all of his Note into shares, he will own
333,332 shares representing 11.8% of the Company's issued and
outstanding shares.
</FN>
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
required the Company's officers and directors, and persons who own
more than ten per cent of the Company's common stock to file reports
of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). The SEC also requires
officers, directors, and greater than ten percent shareholders to
send to the Company copies of all Section 16(a) forms that they file.
Based solely on a review of copies of the forms filed
electronically with the SEC, the Company believes that all
transactions required to be reported have been reported. On the
other hand, the following individuals filed certain forms late:
In November and December 1997, Bruce Weaver, President and
Director, filed two Form 4's late which forms reported four
transactions in August and October 1997 in relating to stock options
he received from the Company.
In December 1997, Jonathon P. Reuben, Chief Financial Officer
and Director, filed one Form 4 late which reported three transactions
in October 1997 relating to stock options he received from the
Company.
<PAGE>
In December 1997, Richard W. Cohen, who was the Company's
Secretary and General Counsel, filed one Form 4 late which reported
his acquisition of 66,666 shares in August 1997.
BOARD MEETINGS
The Board of Directors has consisted of Bruce C. Weaver and Jonathon
Reuben since October 1996. During fiscal 1997, the Board held three
meetings and acted by unanimous consent on one occasion. The Board
has no committees at the present time. Both directors attended all
meetings.
COMPENSATION OF BOARD MEMBERS
The Board has not authorized any compensation to Board members for
acting as directors. The Company does reimburse Board members their
expenses relating to the duties as directors.
<TABLE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<CAPTION>
Name and Principal Restricted
Position Year Salary ($) Bonus ($) Stock Awards
___________________ ____ ___________ __________ ____________
<S> <C> <C> <C> <C>
Bruce C. Weaver, 1997 $ 86,038(1) $75,935(2) 0
President since 1996 50,250 4,000 $6,979(3)
February 1996 1995 0 0 0
Jonathan P. Reuben, 1997 $ 30,000 27,576(2) 0
Secretary and Chief 1996 21,923 1,000 6,979(3)
Financial Officer 1995 0 0
William Harrison, Jr., 1997 103,176 39,967 0
Vice President of QPI 1996 80,696 20,000 0
Multipress 1995 57,376 0 0
Thomas P. Raabe, 1997 0 0 0
Chairman and CEO 1996 65,571 0 6,979(3)
from March 1995 to 1995 60,775 0 0
February 1996
<PAGE>
<CAPTION>
Name and Principal Options/SARs All Other
Position Year (#) Compensation
___________________ ____ ____________ ____________
<S> <C> <C> <C>
Bruce C. Weaver, 1997 100,000 $ 0
President since 1996 175,000 0
February 1966 1995 0 0
Jonathan P. Reuben, 1997 0 0
Secretary and Chief 1996 175,000 0
Financial Officer 1995 0 0
William Harrison, Jr., 1997 35,000 0
Vice President of QPI 1996 0 0
Multipress 1995 0 0
Thomas P. Raabe, 1997 0 $53,680(4)
Chairman and CEO 1996 175,000(4) 0
from March 1995 to 1995 0 0
February 1996
<FN>
(1) $14,038 of this amount represents 1996 salary which Mr. Weaver
was not paid in fiscal 1996 due to lack of funds and which was then
paid in 1997.
(2) In fiscal 1997, Messrs. Weaver and Reuben were paid these cash
bonuses pursuant to a Multipress employee bonus plan and as
discretionary director bonuses. In December 1997, Mr. Weaver repaid
$37,500 of such bonus and Mr. Reuben repaid his $27,576 bonus.
(3) Represents the value in February 1996 of stock bonuses of
139,583 shares of common stock paid to Mr. Weaver, Mr. Reuben, and
Mr. Raabe in February 1996.
(4) Mr. Raabe, who lives in Colorado, was provided with a Company-
leased apartment in Tampa, Florida costing $7,800 in fiscal 1995 and
$6,000 in fiscal 1996 and the use of a Company-leased car in Tampa
until his termination as an officer in February 1996. The costs of
these items are not included in the above table. In October 1996,
Mr. Raabe became a consultant to the Company for a three year term.
However, in August 1997, the Company satisfied all of its obligations
to Mr. Raabe by paying him a lump sum of $50,000 in consideration for
his release of all of the Company's future consulting fee obligations
and his surrender for cancellation of options to purchase 175,000
shares of common stock for $.10 per share. The $50,689 Mr. Raabe
received in fiscal 1997 also includes $3,680 of insurance premium
reimbursement paid to him.
</FN>
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has an employment contract with Mr. Weaver to serve as
President of Quality Products Inc. for the period October 1, 1997
through September 30, 2000. Mr. Weaver's salary is $84,000 annually,
plus a bonus equal to 5% of the Company's annual audited net income
to the extent it exceeds $750,000 in any fiscal year. In addition,
if Mr. Weaver is terminated for any reason, his salary through
September 30, 2000, becomes immediately due and payable and he is
still entitled to any bonus that would become payable if he remained
as President of the Company. Mr. Weaver, a Canadian citizen, is not
required to reside or work in or near the Company's Columbus, Ohio
headquarters.
The Company has an employment contract with Mr. Reuben to serve as
Chief Financial Officer for the period October 1, 1997 through
September 30, 2000. Mr. Reuben's salary is $30,000 annually. As a
result of the demands of his full-time accounting practice in Los
Angeles, after the annual meeting, Mr. Reuben will no longer be an
officer or director of the Company. As a severance package, the
Company has agreed to pay Mr. Reuben $25,250 in exchange for
cancellation of his 225,000 options to purchase the Company's common
stock. In addition, the Company has agreed to pay Mr. Reuben the
salary that would have been paid if he had continued as an officer
through the end of his employment contract on September 30, 2000 and
accelerate payments of his salary so all payments are made by the end
of fiscal 1998, totalling approximately $75,000.
The Company's subsidiary, QPI Multipress, has an employment contract
with Theodore P. Schwartz to serve as its President for the period
December 15, 1997 through December 31, 2002. Mr. Schwartz receives a
base salary of $120,000 plus benefits and an annual bonus based upon
Multipress' gross margins to the extent they exceed $2,000,000 in any
fiscal year.
<PAGE>
<TABLE>
The following table shows the stock options granted to each executive
officer.
<CAPTION>
No. of Shares % of Total
Underlying Options Granted
Name Year Options to Employees
__________________ ____ _____________ _______________
<S> <C> <C> <C>
Bruce C. Weaver 1996 175,000 50%
1997 100,000 66.7%
1998 50,000 50%
Jonathan P. Reuben 1996 175,000 50%
1997 0
1998 50,000 50%
William Harrison 1996 0
1997 35,000 23.3%
1998 0
<CAPTION>
Exercise Price
Name Year Per Share Expiration Date
__________________ ____ _____________ _______________
<S> <C> <C> <C>
Bruce C. Weaver 1996 $1.00 September 2000
1997 1.00 September 2000
1998 2.00 June 2000
Jonathan P. Reuben 1996 1.00 September 2000
1997
1998 2.00 June 2000
William Harrison 1996
1997 1.00 September 2000
1998
</TABLE>
CHANGE IN CONTROL - AGREEMENTS
Bruce C. Weaver, President has a provision in his employment
agreement whereby if he is terminated as an officer of the Company,
all salary due him through September 30, 2000, becomes immediately
due and payable and he is entitled to his bonuses through that year
based on the Company's net earnings through September 30, 2000.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 24, 1998, Mr. Reuben and the Company agreed that Mr. Reuben
will not stand for reelection as a director at the Company's annual
meeting and will at that time resign as an officer of the Company.
The Company has agreed to pay Mr. Reuben $26,250 in exchange for
canceling his options to purchase 225,000 shares of the Company's
common stock and, by the end of fiscal 1998, to pay him the total
salary that would be paid under his employment contract through
September 30, 2000 of approximately $75,000.
Effective October 1, 1997, Mr. Weaver and Mr. Reuben each agreed to
increase the exercise price of their respective options to purchase
175,000 shares, granted in February 1996, from $.10 per share to
$1.00 per share. In consideration for this agreement, the Board
agreed to pay Mr. Weaver and Mr. Reuben $75,000 each in 1998 and
granted them new options to purchase 50,000 shares each at $2.00 per
share during the period September 15, 1999 through June 30, 2000. In
Proposal 4, shareholders are being asked to ratify the grant of these
options.
On November 25, 1997, the Company closed a private placement of 30
units of debentures in the amount of $1,530,000. Each unit
represents: a) a $50,000 interest in a 6% $1,500,000 note payable, b)
a warrant to purchase 10,000 shares of the Company's common stock at
$1 per share during the period November 1, 1997 through September 30,
1999, and c) a warrant to purchase 15,000 shares of the Company's
common stock at $2 per share during the period October 1, 1999
through September 30, 2001. The Company incurred expenses of
approximately $150,000 in connection with this offering. The Company
utilized the proceeds of the offering to repay the bank line of
credit, a $135,000 note payable and expenses associated with the
offering. Murray Koppelman's wholly owned firm, Eastlake Securities,
Inc., acted as Placement Agent for the Private Placement and is
acting as agent for investors who purchased units in the Private
Placement.
In August 1996, the Company issued a note payable in the amount of
$500,000 (the "Note") in connection with the settlement of certain
litigation. The Note is convertible, upon demand, into 500,000 to
666,666 shares of common stock of the Company at a price of $0.75 to
$1.00 per share. The Company is required to make quarterly interest
only payments at 6% per annum. The agreement contains certain
acceleration clauses. The principal amount of the note and unpaid
interest are payable in full in August 2001.
In August, 1997, Richard Cohen, who was Secretary and General Counsel
to the Company purchased at a substantial discount $250,000 of the
Company's $500,000 Note and Murray Koppelman purchased at a
substantial discount the remaining $250,000. Mr. Cohen and Mr.
Koppelman immediately exercised the conversion option in the note to
<PAGE>
convert $50,000 each into 66,666 shares each of the Company's common
stock. The remaining notes totaling $400,000, convertible at $0.75
per share and bearing interest at 6%, remain outstanding.
Mr. Cohen's law firm served as the Company's outside general counsel
and received payments of $116,429 and $78,637 for the years ended
September 30, 1997 and 1996, respectively, for legal services
rendered to the Company.
On January 29, 1997, the Board replaced Mr. Cohen as Secretary with
Jonathon P. Reuben and replaced his firm as general counsel with a
new firm. The Board took these actions to save money on legal fees
and because of Mr. Cohen's apparent conflicts of interest as a
creditor, shareholder, officer, and counsel to the Company. The
Company is investigating whether Mr. Cohen's purchase of the Note at
a substantial discount was a corporate opportunity for the Company
which Mr. Cohen should have offered to the Company.
In February 1996, the Company terminated the employment of Thomas
Raabe, former Chairman and CEO, but he remained a director. Mr.
Raabe resigned as a director in October 1996 and rendered consulting
services to the Company on a limited as requested basis through
August 1997. During such period, Mr. Raabe received compensation of
$50,000 plus reimbursement of $3,680 for health insurance benefits.
In August 1997, the Company paid Mr. Raabe $50,000 in consideration
for terminating the Company's obligations under his consulting
agreement and for terminating options to purchase up to 175,000
shares of common stock at $.10 per share exercisable between April
15, 1999 - December 31, 1999. As part of the termination agreement,
Mr. Raabe gave Jonathon P. Reuben, Chief Financial Officer and a
Director, an irrevocable proxy to vote his remaining 139,583 shares
of common stock.
In July, 1995, the Company provided a loan to Mr. Raabe in the amount
of $20,000. During February 1996, $1,250 was repaid and subsequently
the balance was forgiven as part of the settlement of claims between
the Company and Mr. Raabe in October 1996.
<PAGE>
OVERVIEW OF PROPOSALS
This Proxy Statement contains five proposals. The first is to
amend the Company's Bylaws to set the number of directors at not less
than three nor more than seven and to permit the Company's Board to
determine the exact number within that range. The second is to elect
directors. If the Bylaw amendment is approved, stockholders will
elect five directors. If it is not approved, stockholders will elect
four directors. The third proposal is to approve the Quality
Products, Inc.'s 1997 Stock Option Plan, and the grant of options to
certain employees to purchase 150,000 shares of common stock under
that plan. The fourth proposal is to ratify the grant to Messrs.
Weaver and Reuben of options to purchase 225,000 shares each of the
Company's common stock for a total of 450,000 shares. The fifth and
last proposal is to ratify the appointment of Farber & Hass, LLP as
independent auditors of the Company for fiscal year 1998.
PROPOSAL NO. 1 - TO AMEND THE COMPANY'S BYLAWS TO SET A NEW RANGE OF
THE NUMBER OF DIRECTORS AND TO PERMIT THE BOARD TO DETERMINE THE
NUMBER WITHIN THAT RANGE.
Section 3.2 of the Company's Bylaws presently states that the Company
shall have not less than one (1) nor more than nine (9) directors.
It further sets the number at four and requires a shareholder vote to
change that number. The directors propose to amend Section 3.2 to
provide that there shall be not less than three (3) nor more than
seven (7) directors and to provide that the Board may set the exact
number within that range without obtaining shareholder approval.
PURPOSE OF PROPOSAL - The proposal is designed to provide the
Company's directors with more flexibility in determining the number
of directors as circumstances change. The Company presently has two
directors and would like to add two directors who represent the
investors in the Company's November 25, 1997 Private Placement,
namely Murray Koppelman and Edward Varon. If the number of directors
remained at four, then there is the potential of a two to two
deadlock of directors between these investors and the Company's
present management. Accordingly, to add these two representatives of
recent investors, it is necessary to increase the number of directors
on the Board. The present directors are also nominating the two
primary executive officers of the Company's operating subsidiary, QPI
Multipress, namely Mr. Harrison and Mr. Schwartz. Finally, in
management's opinion, a Board of less than three directors does not
provide a sufficient variety and a Board of more than seven is too
large for a Company of this size. Accordingly, if this Amendment is
passed, the Board has set the number of directors at five.
<PAGE>
TEXT OF BYLAW
Presently, Section 3.2 of the Corporation's Bylaws reads as follows:
Section 3.2 NUMBER OF DIRECTORS. The number of directors of the
Corporation shall not be less than one nor more than nine. The
number of directors shall, at the date of adoption of these
Amended and Restated By-Laws, initially be fixed at four, and
hereafter, such number of directors may be fixed or changed (a)
at any annual meeting of the stockholders, or at any special
meeting of the stockholders called for that purpose, by the
affirmative vote of the holders of shares of stock entitling
them to exercise at least one-half of the voting power of the
Corporation on such proposal, or (b) by a resolution duly
adopted by at least one-half of the voting power of the
Corporation then in office, provided that no decrease in the
number of directors shall have the effect of shortening the term
of any incumbent director. Directors need not be stockholders.
The Board recommends that shareholders approve an amendment to
replace the above provision in its entirety so that it reads as
follows:
Section 3.2 NUMBER OF DIRECTORS, ELECTION AND TERM. The Board
shall consist of not less than three (3) nor more than seven (7)
directors. Except as otherwise provided by law or the
Certificate of Incorporation, the exact number of directors
shall be fixed and may be changed from time to time by
resolution of the Board. Each year Stockholders shall elect the
directors at the annual Stockholders' meeting or at a special
meeting of Stockholders held in lieu of the annual meeting.
Each director shall hold office until the earlier of his or her
successor being duly elected and qualified, death, resignation,
or removal. Each director shall qualify by expressly accepting
his election to the Board or by acting as a director.
VOTE REQUIRED - If a quorum is present, the affirmative vote of the
majority of shares present in person or represented by proxy at the
meeting and entitled to vote is required to amend the Company's
Bylaws. A quorum is present if a majority of the outstanding shares
are present or represented by proxy at the meeting. If a quorum is
not present the meeting will be adjourned to a later date and no vote
will be taken.
RECOMMENDATION - The Board has approved this amendment and highly
recommends an affirmative vote by the Company's stockholders to amend
Section 3.2 of the Company's Bylaws.
<PAGE>
PROPOSAL NO. 2, ELECTION OF DIRECTORS
If the shareholders approve Proposal No. 1, the Bylaw amendment, then
five directors are to be elected at the Annual Meeting. If Proposal
No. 1 is not approved then four directors are to be elected at the
Annual Meeting. Holders of proxies solicited by this Proxy Statement
will vote the proxies they receive as directed on the proxy card or,
if no direction is made, for the election of the directors nominated
by the Board. If any nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxy holders will
vote for a nominee designated by the present Board to fill the
vacancy. It is not presently expected that any nominee will be
unable or will decline to serve as a director.
The Board's nominees for the first four positions as director are
Messrs. Weaver, Varon, Harrison, and Koppelman. If the Bylaw
amendment is approved, the Board has set the number of directors at
five and its additional nominee is Mr. Schwartz.
VOTE REQUIRED - Each director who receives a plurality of the votes
of the shares present or represented by proxy at the meeting and
entitled to vote will be elected a director. If a quorum is not
present the meeting will be adjourned to a later date and no vote
will be taken.
RECOMMENDATION - The Board recommends that shareholders vote for the
Board's first four nominees, Messrs. Weaver, Varon, Harrison, and
Koppelman, and, if the Bylaw amendment is passed, also vote for Mr.
Schwartz.
CUMULATIVE VOTING - Under the Company's Restated Certificate of
Incorporation, each stockholder is "entitled to cast as many votes as
equal the number of votes which such stockholder would be entitled to
cast for the election of directors with respect to such stockholder's
shares multiplied by the number of directors to be elected by such
stockholder, and that such stockholder may cast all of such votes for
a single director or, may distribute them among the number to be
voted for, or for any two or more of them as such stockholder sees
fit."
The Board is requesting, as part of this proxy solicitation, that
each stockholder give the proxy holder discretionary authority to
cumulate his or her votes. The Board intends to use such
discretionary authority to promote the election of all of the Board's
nominees.
<PAGE>
PROPOSAL NO. 3 - APPROVAL OF QUALITY PRODUCTS, INC.'S 1997 STOCK
OPTION PLAN AND GRANT OF OPTIONS
The Board requests that shareholders approve the Company's 1997 Stock
Option Plan and, under that plan, the grant of options to certain
employees to purchase 150,000 shares of the Company's common stock as
described below.
In August 1997, the Board, subject to shareholder approval, adopted
Quality Products, Inc.'s 1997 Stock Option Plan. The plan provides
for the issuance of options to purchase up to 150,000 shares of the
Company's common stock to employees only. The Board determines the
exercise price and the terms of the options at the time they are
granted. The Board has also approved the grant of options to
purchase all 150,000 shares under the Plan and is requesting that
stockholders approve the Plan and approve the grant under the plan of
options to purchase (a) 100,000 shares to Bruce Weaver, President,
(b) 35,000 shares to William Harrison Jr., Vice President of
Operations of QPI Multipress, and 15,000 shares to Tac Kensler,
accounting manager for the Company. The exercise price for the
options are $1.00 per share and they expire September 30, 2000. The
closing sale price of Common Stock as reported on the NASDAQ National
Market on the Record Date of March 10, 1998, was $1.15625 per share.
PURPOSE - The 1997 Stock Option Plan was adopted to enable the
Company to attract, retain, and motivate its employees by increasing
their interest in the Company's success through stock ownership.
TERMINATION OF EMPLOYMENT - If any of the employees granted options
under the Stock Option Plan ceases to be employed by the Company for
any reason other than Good Cause (as defined in the Plan), disability
(as defined in the Plan), or death, such employee will have three
months from the date of termination to exercise his options. To the
extent the options are not exercised within that period, the options
terminate. If an employee is terminated for Good Cause (as defined
in the Plan), his options terminate immediately.
VOTE REQUIRED - If a quorum is present, the affirmative vote of the
majority of shares present in person or represented by proxy at the
meeting and entitled to vote is required to approve this Proposal. A
quorum is present if a majority of the outstanding shares are present
or represented by proxy at the meeting. If a quorum is not present
the meeting will be adjourned to a later date and no vote will be
taken.
RECOMMENDATION - The Board has approved the Quality Products, Inc.'s
1997 Stock Option Plan. The Board highly recommends shareholder
approval of Quality Products, Inc.'s 1997 Stock Option Plan and the
grant of options to certain employees to purchase 150,000 shares
under that plan.
<PAGE>
PROPOSAL NO. 4 - RATIFICATION OF GRANTS OF OPTIONS TO MR. WEAVER AND
MR. REUBEN
The Board requests that shareholders ratify the Board's grant of
options to purchase 225,000 shares of the Company's common stock to
Bruce Weaver, President, and Jonathon Reuben, Chief Financial
Officer, as described below.
In February 1996, Mr. Weaver and Mr. Reuben were each granted stock
options to purchase 175,000 shares of the Company's common stock at
$.10 per share as an incentive for these two gentlemen to manage the
Company's turn around. Effective October 1, 1997, Mr. Weaver and Mr.
Reuben each agreed to increase the exercise price of their respective
options from $.10 per share to $1.00 per share. In consideration for
this agreement, the Board agreed to pay Mr. Weaver and Mr. Reuben
$75,000 each in 1998 and granted them new options to purchase 50,000
shares each at $2.00 per share during the period September 15, 1999
through June 30, 2000. The closing sale price of the Company's
Common Stock as reported on the NASDAQ National Market on the Record
Date of March 10, 1998, was $1.15625 per share.
PURPOSE OF OPTION GRANTS - The grants of options to Mr. Weaver and
Mr. Reuben in 1996 and 1997 for a total of 225,000 shares each were
to retain and motivate these two gentlemen to successfully manage the
Company's turn around.
VOTE REQUIRED - If a quorum is present, the affirmative vote of the
majority of shares present in person or represented by proxy at the
meeting and entitled to vote is required to approve this Proposal. A
quorum is present if a majority of the outstanding shares are present
or represented by proxy at the meeting. If a quorum is not present
the meeting will be adjourned to a later date and no vote will be
taken.
RECOMMENDATION - The Board highly recommends that stockholders ratify
the Board's grant of options to Mr. Weaver and Mr. Reuben to purchase
225,000 shares each of the Company's common stock.
PROPOSAL NO. 5 - RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Farber & Hass, LLP, Certified
Public Accountants, 741 South A Street, Oxnard, California,
independent auditors, to audit Quality Products, Inc.'s consolidated
financial statements for fiscal year ending September 30, 1998. At
the Annual Meeting, shareholders are being asked to ratify the
appointment of Farber & Hass, LLP as the Company's independent
auditors for fiscal year 1998. In the event of a negative vote on
such ratification, the Board will reconsider its selection.
<PAGE>
Farber & Hass, LLP served as the Company's independent auditor for
fiscal years ended 1995, 1996 and 1997. In connection with the audit
of the Company's consolidated financial statements for those years,
there were no disagreements between the Company and Farber & Hass,
LLP on any matters of accounting principles or practices, financial
statement disclosure, or audit scope and procedures which, if not
resolved to the satisfaction of Farber & Hass, LLP would have caused
Farber & Hass, LLP to make reference to the matter in its reports.
VOTE REQUIRED - The affirmative vote of the majority of shares
present in person or represented by proxy at the meeting and entitled
to vote if a quorum is present is required to ratify Farber & Hass,
LLP as the Company's independent auditor for fiscal year 1998. A
quorum is present if a majority of the outstanding shares are present
or represented by proxy at the meeting. If a quorum is not present
the meeting will be adjourned to a later date and no vote will be
taken.
RECOMMENDATION - The Board recommends that shareholders vote for
ratification of the appointment of Farber & Hass, LLP as the
Company's independent auditors for fiscal year 1998.
OTHER MATTERS
The Company is not aware of any other matters to be submitted to the
shareholders at the Annual Meeting. If any other matters properly
come before the shareholders at the Annual Meeting, it is the
intention of the persons named on the enclosed proxy card to vote the
shares they represent as the Board may recommend.
THE BOARD OF DIRECTORS
Date: March 25, 1998
<PAGE>
Preliminary Copy
PROXY CARD
QUALITY PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 8, 1998.
The undersigned shareholder of Quality Products, Inc., a Delaware
Corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders, Annual Report, and Proxy Statement
relating to the Annual Meeting of Shareholders of Quality Products,
Inc., to be held at 560 Dublin Avenue, Columbus, Ohio 43215, on
Friday, May 8, 1998, at 10:00 a.m. hereby appoints Bruce C. Weaver
and Jonathon P. Reuben, and each of them, proxies and attorneys-in-
fact, each with power of substitution and revocation, and each with
all powers that the undersigned would possess if personally present
to vote the undersigned's Quality Products, Inc., common stock at
such meeting and at any postponements or adjournments of such
meeting, as set forth below, and in their discretion upon any other
business that may properly come before the meeting (and any such
postponements or adjournments).
THIS PROXY WILL BE VOTED AS THE UNDERSIGNED SPECIFIES BELOW OR, IF
NO CHOICES ARE SPECIFIED, FOR PROPOSALS 1, 3, 4 AND 5, FOR THE
ELECTION OF THE BOARD'S NOMINEES FOR DIRECTORS INCLUDING CUMULATING
THE VOTES FOR DIRECTORS IN A MANNER DETERMINED SOLELY IN THE
DISCRETION OF THE BOARD, AND AS THE BOARD DEEMS ADVISABLE ON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF.
IMPORTANT - PLEASE SIGN AND DATE ON THE REVERSE SIDE
PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN THIS CARD
1. To approve an amendment to FOR AGAINST ABSTAIN
the Company's Bylaws to set the
number of directors at not less / / / / / /
than three nor more than seven and
to permit the Company's Board to
determine the exact number within
that range.
2. To elect the GRANT DISCRETION- VOTE FOR ALL WITHHOLD
Board's nominees ARY AUTHORITY TO NOMINEES EXCEPT VOTE FOR
to the Company's . CUMULATE VOTES AS NOTED BELOW ALL
Board IN ANY MANNER (NO CUMULATIVE NOMINEES
FOR NOMINEES AUTHORITY GRANTED)
/ / / / / /
<PAGE>
If you desire to cumulate your votes in a certain manner, please
indicate below the number of your total votes to be cast for each
director. The total number of votes you may cast in column 1 for
four directors is the number of shares you own times 4. The total
number of votes you may cast in column 2 for five directors is the
number of shares you own times 5.
NOMINEES NO. OF VOTES FOR EACH NO. OF VOTES FOR EACH
OF FOUR NOMINEES OF FIVE NOMINEES
Bruce C. Weaver _____________________ _____________________
Edward Varon _____________________ _____________________
William Harrisson,
Jr. _____________________ _____________________
Murray Koppelman _____________________ _____________________
Theodore P. Schwartz XXXXXXXXXXXXXXXXXXXX _____________________
TOTAL NO. _____________________ _____________________
3. To approve Quality Products, Inc.'s FOR AGAINST ABSTAIN
1997 Stock Option Plan, and the grant
of options to purchase 150,000 shares of / / / / / /
the Company's common stock, par value
$.00001, to certain employees.
4. To ratify the grant to Messrs. Weaver FOR AGAINST ABSTAIN
and Reuben of options to purchase 225,000
shares each of the Company's common stock / / / / / /
for a total of 450,000 shares, 350,000
shares at $1.00 per share and 100,000
shares at $2.00 per share.
5. To ratify the appointment of Farber & FOR AGAINST ABSTAIN
Hass, LLP as independent auditors of the
Company for fiscal year 1998. / / / / / /
This proxy card should be signed by the shareholder(s) exactly as
his or her name(s) appear(s) hereon, dated and returned promptly in
the enclosed envelop. Persons signing is a fiduciary capacity
should so indicate. If shares are held by joint tenants or as
community property, both persons should sign.
Date: _________ Signature ___________
Date: _________ Signature ___________
