UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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:
[ ] 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 ss. 240.14a-11(c) or ss. 240.14a-12
QUAD SYSTEMS CORPORATION-
(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
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(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):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] 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>
Quad Systems Corporation
2405 Maryland Avenue * Willow Grove, Pennsylvania
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MARCH 5, 1997
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders (the "Meeting") of Quad Systems
Corporation, a Delaware corporation (the "Company"), will be held on Wednesday,
March 5, 1997 at 10:00 a.m., local time, at Williamson's Restaurant, Route 611
and Blair Mill Road, Horsham, Pennsylvania, for the following purposes:
1. To elect six directors to hold office until the Annual Meeting of
Stockholders in 1998 and until their respective successors are duly
elected and qualified.
2. To transact such other business as may properly come before the
meeting and any and all adjournments and postponements thereof.
The Board of Directors has fixed the close of business on January 6, 1997
as the record date for the meeting. Only stockholders of record at that time are
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the meeting.
A complete list of the stockholders entitled to vote at the Meeting will
be open to the examination of any stockholder, for any purpose germane to the
Meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, at the principal executive offices of the Company, 2405 Maryland
Avenue, Willow Grove, Pennsylvania 19090.
The Board of Directors urges you to date, sign and return the enclosed
proxy promptly. The return of the enclosed proxy will not affect your right to
vote in person if you do attend the meeting.
By Order of the Board of Directors,
ROBERT P. PINKAS
Secretary
January 28, 1997
<PAGE>
Quad Systems Corporation
2405 Maryland Avenue * Willow Grove, Pennsylvania
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Quad Systems Corporation, a Delaware
corporation (the "Company"), for use at the Company's Annual Meeting of
Stockholders (the "Meeting"), which is scheduled to be held at 10:00 a.m., local
time, on Wednesday, March 5, 1997, at Williamson's Restaurant, Route 611 and
Blair Mill Road, Horsham, Pennsylvania, for the purposes set forth in the
accompanying notice of the Meeting. This Proxy Statement, the foregoing notice
and the enclosed proxy are being sent to stockholders on or about January 28,
1997.
The Board of Directors knows of no matters that are likely to be brought
before the Meeting, other than the matters specifically referred to in the
notice of the Meeting. If any other matters properly come before the Meeting,
however, the persons named in the enclosed proxy, or their duly constituted
substitutes acting at the Meeting, will be authorized to vote or otherwise act
thereon in accordance with their judgment on such matters. If the enclosed proxy
is properly executed and returned prior to voting at the Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. In the absence of instructions, executed proxies will be voted "FOR"
the six nominees of the Board of Directors for election as directors.
Any proxy may be revoked at any time prior to its exercise by notifying
the Secretary of the Company in writing, by delivering a duly executed proxy
bearing a later date, or by attending the Meeting and voting in person.
VOTING SECURITIES AND SECURITY OWNERSHIP
Voting Securities
At the close of business on January 6, 1997, the record date fixed for the
determination of stockholders entitled to notice of and to vote at the Meeting,
there were outstanding 4,257,654 shares of the Company's Common Stock, $.03 par
value ("Common Stock"). Each stockholder of record at the close of business on
January 6, 1997 is entitled to one vote for each share held. The presence at the
meeting, in person or by proxy, of stockholders entitled to cast at least a
majority of the votes that all stockholders are entitled to cast will constitute
a quorum for the meeting.
<PAGE>
Security Ownership of Management and Principal Stockholders
The table below sets forth certain information as of January 6, 1997
regarding the beneficial ownership (as defined in regulations issued by the
Securities and Exchange Commission) of Common Stock of (i) each director and
executive officer of the Company; (ii) each nominee for director; (iii) all
directors and executive officers as a group; and (iv) each person known to the
Company to own beneficially 5% or more of the outstanding Common Stock. Unless
otherwise specified, the named beneficial owner has sole voting and investment
power. The information in the table below was furnished by the owners listed.
Shares issuable pursuant to the exercise of stock options are included in the
table below if such options are currently exercisable or exercisable by March 7,
1997 (60 days after the date above).
Number Percent
Name of Shares of Class
- ---- --------- --------
James R. Bergman(1).................................. 52,254 1.2%
Anthony R. Drury(1).................................. 65,556 1.5%
Vahram V. Erdekian................................... 1,000 *
Joseph L. Gasper(1).................................. 48,159 1.1%
Ian H. Henderson(1).................................. 13,334 *
Stanley R. Luboda, Jr................................ -- *
Lorin J. Randall(1).................................. 31,338 *
Robert P. Pinkas(1).................................. 37,890 *
David W. Smith(1).................................... 148,684 3.5%
David H. Young(1).................................... 45,000 1.1%
All Directors and Executive Officers as a group(1)
(10 persons)....................................... 443,215 10.4%
FMR Corp.(2,4)
82 Devonshire Street
Boston, MA 02109................................... 421,700 9.9%
Cowen & Company(3,4)
Financial Square
New York, NY 10005................................. 227,000 5.3%
- ----------
* Less than 1%.
(1) The amounts shown include shares covered by options exercisable within 60
days of December 18, 1996, as follows: 3,000 shares each, Messrs. Bergman,
Randall, Pinkas and Young; 49,300 shares, Mr. Drury; 47,833 shares, Mr.
Gasper; 10,001 shares, Mr. Henderson; 138,333 shares, Mr. Smith; and
257,467 shares, all directors and executive officers as a group.
(2) FMR Corp., as the parent holding company of Fidelity Management and
Research Company, its wholly-owned subsidiary, owns the shares reported.
FMR Corp. has sole dispositive power with respect to all of the shares
reported.
(3) Cowen and Company has both shared dispositive and voting power with respect
to all of the shares reported.
(4) Based solely on information contained in filings with the Securities and
Exchange Commission pursuant to Section 13(d) or 13(g) of the 1934 Act and
other information available to the Company from The Nasdaq Stock Market.
2
<PAGE>
ELECTION OF DIRECTORS
Nominees for Election
At the Meeting, the stockholders will elect six directors to hold office
until the Annual Meeting of Stockholders in 1998 and until their respective
successors are duly elected and qualified. Unless contrary instructions are
given, the shares represented by a properly executed proxy will be voted "FOR"
the election of the following nominees: James R. Bergman, Vahram V. Erdekian,
Robert P. Pinkas, Lorin J. Randall, David W. Smith and David H. Young. All of
the nominees are currently members of the Company's Board of Directors.
The Board of Directors believes that the nominees will be able to serve as
directors. If any nominee is unable to serve, the persons named in the enclosed
proxy will vote the shares they represent for the election of such other persons
as the Board of Directors may recommend, unless the Board of Directors reduces
the number of directors.
Directors will be elected by a plurality of votes cast. Abstentions and
broker non-votes are not treated as votes cast, and thus are not the equivalent
of votes against.
Set forth below is certain information concerning the nominees for
election as directors:
Director
Name Age Since Position with the Company
- ---- --- ----- -------------------------
David W. Smith.......... 54 1992 President, Chief Executive Officer
and Director
James R. Bergman(1)..... 54 1982 Director
Vahram V. Erdekian(1)... 48 1996 Director
Robert P. Pinkas(1)..... 43 1982 Director, Secretary
Lorin J. Randall(2)..... 53 1988 Director
David H. Young(2)....... 49 1980 Director
- ----------
(1) Member of Stock Option and Compensation Committee. Effective July 1996, Mr.
Pinkas resigned from the Committee and Mr. Erdkekian was elected to fill
the resulting vacancy.
(2) Member of Audit Committee.
Mr. Smith has been President and Chief Executive Officer of the Company
since May 1992. From February 1992 until May 1992, he was President and Chief
Operating Officer of the Company, and from August 1991 until February 1992 he
was Vice President, Engineering and Chief Operating Officer of the Company. He
has been a member of the Board of Directors of the Company since October 1992.
Mr. Bergman has served on the Board of Directors of the Company since 1982.
He has been a general partner responsible for venture capital investments of DSV
Partners III, L.P. and DSV Partners IV, L.P., venture capital firms, for more
than five years. Since August 1996, Mr. Bergman has been a limited partner of
Brantley Venture Management, Ltd. Since November 1996, he has also been a Vice
President of Brantley Capital Corporation. Mr. Bergman is also a director of
Maxim Integrated Products, Inc.
Mr. Erdekian has served on the Board of Directors of the Company since
July 1996. Since October 1994, he has been Vice President, Manufacturing Product
Operations of Bay Networks, Inc., a leader in the computer network industry.
From September 1993 until October 1994, Mr. Erdekian was the Vice President,
Manufacturing Operations of Wellfleet Communications, which merged with
Synoptics Corporation to form Bay Networks, Inc. in August 1994. Prior to
September 1993, he was an operations consultant to private and public
corporations.
Mr. Pinkas has served on the Board of Directors of the Company since 1982.
Mr. Pinkas has been a general partner of Brantley Venture Partners, L.P., a
venture capital firm, for more than five years. Since August 1996, Mr. Pinkas
has also been a general partner of Brantley Venture Management, Ltd. Mr. Pinkas
is also a director of Gliatech, Inc., Pediatric Services of America, Inc. and
Medirisk, Inc. Since November 1996, Mr. Pinkas has also been the Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, Treasurer and Director
of Brantley Capital Corporation. Mr. Pinkas was the Company's Treasurer from
March 1982 until October 1987.
3
<PAGE>
Mr. Randall has served on the Board of Directors of the Company since
January 1988. Since January 1995, he has been the Vice President, Finance and
Chief Financial Officer of CFM Technologies, Inc. From May 1994 until June 1995,
Mr. Randall was the President and Chief Executive Officer of Greenwich
Pharmaceuticals Incorporated ("GPI") (now known as Boston Life Sciences, Inc.).
From September 1991 until May 1994, he was the Chief Financial Officer and Vice
President of GPI. Mr. Randall was the Company's President and Chief Executive
Officer from August 1988 until January 1990 and was the Company's Vice
President, Operations and Chief Financial Officer from May 1985 until July 1988.
Mr. Young is the founder of the Company and has served on the Company's
Board of Directors since its inception. Mr. Young has been the President of Two
Technologies, Inc., a company which manufactures hand-held computers, for more
than five years. Mr. Young served as the Company's President from its inception
until October 1985.
Meetings and Committees of the Board of Directors
The Company has an Audit Committee and a Stock Option and Compensation
Committee, but does not have an Executive Committee or a Nominating Committee.
The Audit Committee, which held two meetings in the fiscal year ended
September 29, 1996, consists of Messrs. Randall and Young. The functions of the
Audit Committee generally include reviewing with the Company's independent
auditors the scope and results of their engagement and reviewing the adequacy of
the Company's system of internal accounting controls.
The Stock Option and Compensation Committee held five meetings in the
fiscal year ended September 29, 1996, which consists (as of January 28, 1997) of
Messrs. Bergman and Erdekian. During July 1996, upon Mr. Erdekian's election to
the Board, Mr. Pinkas resigned from the Committee and Mr. Erdekian was elected
to fill the resulting vacancy. The Stock Option and Compensation Committee is
responsible for establishing salaries, bonuses and other compensation, including
the grant of stock options under the Company's stock option plans.
The Board of Directors held five meetings in the fiscal year ended
September 29, 1996.
Compensation of Directors
Non-employee directors of the Company are paid a $1,000 fee for attendance
at each meeting and a $250 fee for each telephonic meeting of the Board of
Directors. The directors are also reimbursed for their out-of-pocket expenses
incurred in connection with the meetings.
Pursuant to the terms of the Company's 1993 Stock Option Plan (the
"Plan"), each non-employee director, upon first being elected to the Board of
Directors, is granted an option to purchase 3,000 shares of Common Stock,
exercisable in three equal installments on the first three anniversary dates of
the date of grant, at an exercise price equal to the fair market value of the
shares on the date of grant, and each such director receives a grant of 1,000
shares with an exercise price determined on the same basis every year
thereafter, which options becomes exercisable on the third anniversary of the
date of grant. To date, each of Messrs. Bergman, Pinkas, Randall and Young has
received under the Plan 6,000 options for their service as directors, at
exercise prices ranging from $7.00 to $11.25. Upon the election of Mr. Erdekian
to the Board of Directors, pursuant to the terms of the Plan, Mr. Erdekian was
granted 3,000 options at an exercise price of $7.50.
Certain Relationships and Related Transactions
During fiscal 1996, the Company purchased from Two Technologies, Inc.
("Two Technologies") certain hand-held computers used in the Company's products
for $82,208. David H. Young, a director of the Company, is the President of Two
Technologies. Also during fiscal 1996, Two Technologies purchased SMT process
equipment from the Company in amounts totaling $11,570. The Company's
transactions with Two Technologies were made at prices and on terms comparable
to other arms'-length purchases and sales by the Company and the Company
believes that such was also the case with respect to Two Technologies'
transactions with the Company.
During fiscal 1996, the Company received general contracting services for
leasehold improvements at its Horsham facilities from a son of Joseph L. Gasper,
the Senior Vice President, Operations of the Company.
4
<PAGE>
The amount paid in fiscal 1996 totaled $72,310. Mr. Gasper has informed the
Company that, other than his familial relationship with his son, who does not
reside in Mr. Gasper's household, Mr. Gasper has no direct or indirect interest
in the services provided by his son to the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid and accrued during each of the last three fiscal years to the Company's
Chief Executive Officer and each of the Company's other executive officers
during such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- -------------------
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($)(1)
- ------------------ ---- ---------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
David W. Smith 1996 190,000 154,875 20,000 1,000
President and Chief 1995 169,731 22,500 10,000 1,000
Executive Officer 1994 158,210 148,000 7,500 300
Joseph L. Gasper 1996 130,000 88,500 10,000 1,000
Senior Vice President, 1995 119,885 20,000 5,000 1,000
Operations 1994 115,402 85,000 3,750 300
Anthony R. Drury 1996 125,000 88,500 10,000 1,000
Senior Vice President, 1995 113,885 11,000 5,000 1,000
Finance and Chief 1994 109,287 85,000 3,750 300
Financial Officer
Stanley R. Luboda, Jr. (2) 1996 64,423 40,000 35,000 38,236
Vice President, Sales and
Strategic Planning
</TABLE>
- ----------
(1) Consists of the Company's matching payments under its 401(k) Plan, except
for Mr. Luboda, for whom the amount shown represents relocation benefits
paid to him in connection with his joining the Company.
(2) Mr. Luboda joined the Company in March 1996, and his annualized base salary
was then expected to be approximately $125,000. In March 1996, Mr. Luboda
was also granted 30,000 options in connection with his acceptance of
employment with the Company.
5
<PAGE>
Stock Option Grants
The following table sets forth certain information with respect to
individual grants of stock options during the fiscal year ended September 29,
1996, to the Company's Chief Executive Officer and each of the Company's other
executive officers during such periods.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
------------------------------------------------------------- ---------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#)(2) Fiscal Year ($/SH) Date 5% ($) 10% ($)
- ---- -------------- ----------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
David W. Smith 10,000 4.4% $9.00 11/2/05 $ 56,600 $143,437
10,000 4.4% $7.50 7/18/06 $ 47,167 $119,531
------ ---- ----- ------- -------- --------
20,000 8.8% $103,767 $262,968
Joseph L. Gasper 5,000 2.2% $9.00 11/2/05 $ 28,300 $ 71,718
5,000 2.2% $7.50 7/18/06 $ 23,584 $ 59,765
------ ---- ----- ------- -------- --------
10,000 4.4% $ 51,884 $131,483
Anthony R. Drury 5,000 2.2% $9.00 11/2/05 $ 28,300 $ 71,718
5,000 2.2% $7.50 7/18/06 $ 23,584 $ 59,765
------ ---- ----- ------- -------- --------
10,000 4.4% $ 51,884 $131,483
Stanley R. Luboda, Jr. 30,000 13.3% $6.63 3/19/06 $124,993 $316,756
5,000 2.2% $7.50 7/18/06 $ 23,584 $ 59,765
------ ---- ----- ------- -------- --------
35,000 15.5% $148,577 $376,521
</TABLE>
- ----------
(1) Potential realizable value is based on the assumed annual growth rates
compounded annually for the ten-year option term. The dollar amounts set
forth under this heading are the result of calculations at the 5% and 10%
assumed rates set by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, of the stock
price of the Company.
(2) The options granted in November 1995 and July 1996, with terms of 10
years, vest and become exercisable on November 2, 2000 and July 18, 2001,
respectively. The 30,000 options granted to Mr. Luboda in March 1996 vest
in five equal annual installments beginning one year after the date of
grant.
6
<PAGE>
Stock Option Exercises and Holdings
The following table sets forth information relating to options exercised
during the fiscal year ended September 29, 1996 by the Company's Chief Executive
Officer and each of the Company's other executive officers during the period and
presents the value of unexercised options held by such individuals as of
September 29, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
Fiscal Year End (#) Fiscal Year End ($) (2)
------------------- -----------------------
Shares Value
Acquired Realized
Name on Exercise ($) (1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Smith -- $ -- 121,667 85,833 $500,419 $182,081
Joseph L. Gasper -- $ -- 42,167 36,083 $159,544 $ 62,331
Anthony R. Drury 5,000 $18,750 42,300 38,750 $160,375 $ 79,000
Stanley R. Luboda, Jr. -- $ -- -- 35,000 $ -- $ 87,500
</TABLE>
- ----------
(1) Value realized is based upon the difference between the last sale price of
the Company's Common Stock on The Nasdaq Stock Market on the dates of
exercise and the exercise price of the options, multiplied by the number
of shares acquired on exercise of the option.
(2) Total value of "in-the-money" unexercised options is based upon the
difference between the last sale price of the Company's Common Stock on
The Nasdaq Stock Market on September 30, 1996 ($9.25 per share) and each
exercise price of the various "in-the-money options" held by such person,
multiplied by the number of "in-the-money" option shares.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE
The Company's compensation policy with respect to its executive officers
reflects two basic principles. First, compensation should, to a significant
extent, reflect the financial performance of the Company. Second, a portion of
an executive officers' compensation should provide long-term incentives that
will tie long-term rewards for the executive officers to increases in
stockholder values. The Company has traditionally attempted to effect its
compensation policy through three separate components: salary, bonus and stock
options.
During July 1996, upon Mr. Erdekian's election to the Board, Mr. Pinkas
resigned from the Committee and Mr. Erdekian was elected to fill the resulting
vacancy. Annual salary increases were determined by the Committee consisting of
Messrs. Bergman and Pinkas and bonus awards were determined after July 1996 by
the committee consisting of Messrs. Bergman and Erdekian.
Annual Compensation
Annual cash compensation is comprised of a base salary and a bonus award.
The Committee establishes annual salaries by evaluating individual performances
and the level of the executive's responsibility and experience. In addition, the
Committee considers marketplace valuations of comparable executives of other
companies in related industries, comparable in size with the Company, although
salary determinations have not been based upon any specific criteria of
compensation. Nevertheless, the members of the Stock Option and Compensation
Committee, who either are affiliated with venture capital firms (Messrs. Bergman
and Pinkas) or a NYSE company (Mr. Erdekian) and have experience in setting
compensation for companies in similar stages of development, believe that
salaries of the executive officers in fiscal 1996 were modest, considering the
scope of the Company's operations and the respective responsibilities and
achievements of the executive officers. Annual adjustments in base salaries
typically are made effective at the beginning of the fiscal year for which they
are intended to apply and therefore reflect in large part prior year's business
and individual performance achievements. During fiscal 1996, David W. Smith,
President and Chief Executive Officer of the Company, received a salary increase
of approximately twelve percent. Among the factors
7
<PAGE>
considered by the Committee were the following: the Company's recent improved
results of operations; comparable compensation information from other public
company CEO's, which indicated that Mr. Smith's salary was significantly below
market; and the absence of any significant increase in Mr. Smith's base salary
in the several preceding years. During fiscal 1996, salary increases for the
other executive officers were between eight and ten percent, based on factors
similar to those mentioned above.
Bonus awards are made pursuant to criteria established toward the
beginning of each fiscal year. A portion of the bonus, which comprised
approximately 70% of the maximum bonus payable during the 1996 fiscal year, is
non-discretionary and in 1996 is based upon the Company's achievement of
specified levels of net income determined by the Committee in the relevant
fiscal year. The amount of bonus is subject to minimum and maximum specified
levels of net income. The Company's net income was slightly less than the
maximum net income level determined by the Committee; accordingly, approximately
90% of non-discretionary bonus levels were paid to the executives.
The remaining portion of the bonus is discretionary and is based on the
Committee's judgment concerning the achievement by the executive officer of
certain stated objectives specifically related to that executive's functional
responsibilities. The executive officers received a range from 85% to 100% of
the discretionary bonuses, based upon the Committee's assessment of the level of
achievement with respect to the stated objectives. If maximum bonuses are
awarded, the amounts are reduced by the amount of the Company's contributions to
its 401(k) and profit sharing plans for the employee. The discretionary bonus
for Mr. Smith was based on criteria that included, among others, (i) completion
of new product developments; (ii) completion of a marketing and distribution
restructuring strategic plan and (iii) improvement of working capital.
Long Term Compensation -- Stock Options
The stock option component of the executive officers' compensation package
is designed to provide incentive for the enhancement of stockholder value, since
the full benefit of stock option grants will not be realized unless there has
been appreciation in per share values over several years. In this regard,
options have been granted at fair market value on the date of grant and vest in
five years. The increase in options during fiscal 1996 was due to a change in
the timing of the grant of options to the executive officers. Historically, the
Committee had granted options annually in November but this year, the options
originally scheduled for grant in November 1996 were granted in July 1996.
Deferred Compensation Plan
The Company maintains a deferred compensation plan, pursuant to which
certain executive officers may elect to defer a portion of their annual
compensation. The participant's funds are invested among various investment
vehicles designated by the plan administrators. Upon the death or retirement of
a participant, the funds attributable to the participant (including any earnings
on contributions) are distributed to the participant or the participant's
beneficiary in a lump sum or in annual installments over various selected
periods.
Qualifying Executive Compensation for Deductibility Under Provisions of the
Internal Revenue Code
The Internal Revenue Code of 1986, as amended (the "Code"), provides that
a publicly held corporation generally may not deduct compensation for its chief
executive officer or each of certain other executive officers to the extent that
such compensation exceeds $1,000,000 for the executive. The Committee intends to
take such actions as are possible and appropriate to qualify compensation paid
to executives for deductibility under the Code. In this regard, the Committee
notes, however, that base salary and bonus levels are expected to remain well
below the $1,000,000 limitation in the foreseeable future.
JAMES R. BERGMAN ROBERT P. PINKAS VAHRAM V. ERDEKIAN
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
No officer, director or beneficial owner of more than 10% of the Company's
Common Stock failed to file on a timely basis any report required by Section
16(a) of the Securities Exchange Act of 1934, as amended, based on
representation received by the Company from such persons and review of Forms 3
and 4 furnished to the Company under Rule 16a-3 under such act.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return of the
Company with the cumulative total return on the S & P 500 Stock Index and the
Hambrecht & Quist Technology Index. Information relating to the Company begins
on May 12, 1993 (the first date on which the Company's Common Stock was publicly
traded).
COMPARISON OF 41 MONTH CUMULATIVE TOTAL RETURN*
AMONG QUAD SYSTEMS CORPORATION, THE S & P 500 INDEX AND
THE HAMBRECHT & QUIST TECHNOLOGY INDEX
5/12/93 9/93 9/94 9/95 9/96
------- ---- ---- ---- ----
Quad Systems Corporation......... 100 197 200 126 128
S & P............................ 100 104 108 140 169
H & Q TECHNOLOGY................. 100 104 119 199 220
* $100 invested on 5/12/93 in stock or on 4/30/93 in index -- including
reinvestment of dividends. Fiscal year ending September 30.
INFORMATION CONCERNING INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP to serve
as independent auditors for the Company for the current fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the meeting
and will have the opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual Meeting
of Stockholders in 1998 must be received by the Company at its principal office
in Willow Grove, Pennsylvania, no later than October 1, 1997 in order to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
SOLICITATION OF PROXIES
The accompanying form of proxy is being solicited on behalf of the Board
of Directors of the Company. The expense of solicitation of proxies for the
meeting will be paid by the Company. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone or telecopy by
directors, officers or regular employees of the Company.
By Order of the Board of Directors
ROBERT P. PINKAS
Secretary
January 28, 1997
9
<PAGE>
PROXY
QUAD SYSTEMS CORPORATION
2405 Maryland Avenue, Willow Grove, Pennsylvania 19090
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of QUAD SYSTEMS CORPORATION hereby constitutes
and appoints DAVID W. SMITH and ANTHONY R. DRURY, and each of them acting
individually, as the attorney and proxy of the undersigned, with full power of
substitution, for and in the name and stead of the undersigned, to attend the
Annual Meeting of Stockholders (the "Meeting") to be held at Williamson's
Restaurant, Route 611 and Blair Mill Road, Horsham, Pennsylvania, on March 5,
1997, at 10:00 a.m., and any adjournment or postponement thereof, and thereat to
vote all shares of Common Stock of QUAD SYSTEMS CORPORATION held by the
undersigned which the undersigned would be entitled to vote if personally
present, with respect to the matters described on the reverse side of this proxy
card:
(To be Signed on Reverse Side)
Please mark your votes as in this example. [ X ]
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed at right
[ ] WITHHOLD AUTHORITY to vote for nominee(s)
Nominee(s):
James R. Bergman, Vahram V. Erdekian, Robert P. Pinkas, Lorin J. Randall,
David W. Smith, David H. Young
INSTRUCTIONS: To withhold your vote for any individual nominee(s), write the
name of the person(s) for whom your vote is withheld on the line immediately
below. If the "Withhold Authority" box is marked and you do not provide any
individual name(s) below, you will withhold authority to vote for all nominees
as a group.
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2. Upon such other matters as may properly come before the Meeting or any
adjournment or postponements thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned. If no direction is made, the shares will be voted "FOR" the
election of the listed nominees for director. This Proxy also delegates
discretionary authority to vote with respect to any other business that may
properly come before the Meeting or any adjournment or postponement thereof.
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF QUAD SYSTEMS CORPORATION.
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SIGNATURE DATED
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SIGNATURE IF JOINTLY OWNED DATED
Note: Please sign your name exactly as it appears hereon. When signing as
attorney-in-fact, executor, administrator, trustee or guardian, please add
your title as such. When signing as joint tenants, all parties in the
joint tenancy must sign. If signer is a corporation, please sign in full
corporate name by duly authorized officer or officers and affix the
corporate seal.
