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 LOGO]
2405 Maryland Road o Willow Grove, Pennsylvania 19090
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MARCH 8, 2000
--------------
The Annual Meeting of Stockholders (the "Meeting") of Quad Systems Corporation,
a Delaware corporation (the "Company"), will be held on Wednesday, March 8, 2000
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 four directors to hold office until the Annual Meeting of
Stockholders in 2001 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 10, 2000 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 Road,
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,
ANTHONY R. DRURY
Secretary
February 11, 2000
<PAGE>
[QUAD SYSTEMS CORPORATION LOGO]
2405 Maryland Road o Willow Grove, Pennsylvania 19090
--------------
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"), in connection with 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 8, 2000, 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 February 11,
2000.
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 matter properly comes 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 four 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.
<PAGE>
VOTING SECURITIES AND SECURITY OWNERSHIP
Voting Securities
At the close of business on January 10, 2000, the record date fixed for
the determination of stockholders entitled to notice of and to vote at the
Meeting, there were outstanding 4,474,062 shares of the Company's Common Stock,
$.03 par value ("Common Stock"). Each stockholder of record at the close of
business on January 10, 2000 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.
Security Ownership of Management and Principal Stockholders
The table below sets forth certain information as of January 10, 2000
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. No
filings have been made with the Securities and Exchange Commission pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended.
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 10, 2000 (60 days after the date above).
Number Percent
of of
Name and Address** Shares Class
- ------------------ ------ -----
Anthony R. Drury(1) 80,425 1.8%
Vahram V. Erdekian(2) 40,000 *
Roger E. Gower -- --
William M. Pease, Jr. 2,239 *
Robert P. Pinkas(1) 42,890 *
Craig C. Ramsey(1) 15,061 *
Lorin J. Randall(2) 36,338 *
Theodore J. Shoneck(1) 24,400 *
David H. Young(1) 50,000 1.1%
All Directors and Executive
Officers as a group(1) (9 persons) 291,353 6.3%
- ----------
* Less than 1%.
** The address of each director and executive officer of the Company is c/o
Quad Systems Corporation, 2405 Maryland Road, Willow Grove, Pennsylvania
19090.
(1) The amounts shown include shares covered by options exercisable within 60
days of January 10, 2000, as follows: 80,425 shares, Mr. Drury; 35,000
shares, Mr. Erdekian; 8,000 shares each, Messrs. Pinkas, Randall and Young;
9,489 shares, Mr. Ramsey; 22,000 shares, Mr. Shoneck; 2,089 shares, Mr.
Pease; and 173,003 shares, all directors and executive officers as a group.
(2) Mr. Erdekian's term as a director expires on March 8, 2000, upon the
election of directors at the Meeting. Mr. Randall resigned as a director of
the Company effective December 16, 1999 due to the requirements of other
business obligations.
2
<PAGE>
ELECTION OF DIRECTORS
Nominees for Election
At the Meeting, the stockholders will elect four directors to hold office
until the Company's Annual Meeting of Stockholders in 2001 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: Roger E. Gower, Robert P.
Pinkas, Theodore J. Shoneck and David H. Young. All of the nominees are
currently members of the Company's Board of Directors except for Mr. Shoneck.
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 will have no effect on the outcome of the election of
directors.
Set forth below is certain information concerning the nominees for
election as directors:
Director
Name Age Since Position with the Company
---- --- ----- -------------------------
Roger E. Gower(1),(2) 59 1999 Director
Robert P. Pinkas(2) 46 1982 Director
Theodore J. Shoneck 42 - President and Chief Executive
Officer
David H. Young(2) 52 1980 Director, Chairman of the Board
- ---------------
(1) Member of Audit Committee. (Mr. Erdekian, whose term as a director expires
at the Meeting, is the other current member of the Audit Committee).
(2) Member of Stock Option and Compensation Committee.
Mr. Gower has served on the Company's Board of Directors since May 1999.
Mr. Gower is currently Chairman, President and Chief Executive Officer of Micro
Component Technology, Inc. ("Micro"). Prior to his position at Micro, Mr. Gower
served as President and Chief Executive Officer of Datamedia Corporation from
1991 to 1995.
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 ten years. Since August 1996, Mr. Pinkas has
also been a general partner of Brantley Venture Management, L.P. Mr. Pinkas is
also a director of Gliatech, Inc., Pediatric Services of America, Inc.,
Medirisk, Inc. and Waterlink, Inc. Since November 1996, Mr. Pinkas has also been
the Chairman of the Board, Chief Executive Officer, Treasurer and Director of
Brantley Capital Corporation. Mr. Pinkas was the Company's Treasurer from March
1982 until October 1987 and the Company's Secretary from March 1982 until
October 1999.
Mr. Shoneck has been the Company's President and Chief Executive Officer
since January 2000. From April 1998 until January 2000, he was the Company's
President and Chief Operating Officer. From December 1997 until April 1998, he
was the Company's Chief Operating Officer. From May 1996 until December 1997, he
was the Chief Operating Officer of Cutting Edge Technologies, Inc. From April
1994 until May 1996, he was the Vice President and General Manager of KMI
Surgical Products, Inc.
Mr. Young is the founder of the Company and has served on the Company's
Board of Directors since the Company's inception. In March 1998, Mr. Young was
elected Chairman of the Board. Mr. Young has been the President of Two
Technologies, Inc., a company that manufactures hand-held computers, for more
than five years. Mr. Young served as the Company's President from the Company's
inception until October 1985.
3
<PAGE>
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 30, 1999, consisted of Messrs. Gower, Erdekian and Randall until
December 16, 1999, when Mr. Randall resigned from the Board. 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, which consisted of Messrs.
Gower, Young and Pinkas, held two meetings in the fiscal year ended September
30, 1999. 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 six meetings in the fiscal year ended September
30, 1999 and also acted through unanimous written consents.
Compensation of Directors
Non-employee directors of the Company are paid a $1,000 fee for attending
each meeting and a $250 fee for participating in 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. In addition, each
non-employee director in office on each October 1 is paid a $5,000 retainer for
services provided to the Company for the prior year or, to the extent such
person did not so serve for the entire prior year, such retainer payment is made
on a pro rata basis for the period served.
On November 16, 1999, the Plan was amended to allow non-employee directors
to elect to receive fully vested stock options in lieu of the cash compensation
described above.
Pursuant to the terms of the Company's 1993 Stock Option Plan (the "Plan"),
as amended, each non-employee director, upon first being elected to the Board of
Directors, is granted an option to purchase 6,000 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. In addition, each such director receives a grant of
2,000 shares with an exercise price determined on the same basis, every year
thereafter, which options become exercisable on the third anniversary of the
date of grant.
To date, each of Messrs. Pinkas, Randall and Young has received, under the
Plan, 14,000 options for their service as directors, at exercise prices ranging
from $1.91 to $11.25 and Mr. Erdekian has received a total of 41,000 options for
his services as a director, at exercise prices ranging from $1.69 to $10.00.
With respect to Messrs. Randall and Erdekian, such options remain exercisable
for 90 days after their respective service as a director terminates. Upon his
election as a director in 1999, Mr. Gower received, under the Plan, 6,000
options at an exercise price of $1.84.
4
<PAGE>
Employment Contracts
On April 27, 1998, the Company entered into a letter agreement with
Theodore J. Shoneck, covering the terms and conditions of Mr. Shoneck's
employment as President and Chief Operating Officer. The agreement provides for
a base salary of $170,000 per year, subject to annual review by the Stock Option
and Compensation Committee (the "Committee") and eligibility for an annual bonus
award at a target bonus level to be determined by the Committee in its sole
discretion. Under the agreement, Mr. Shoneck also received a one-time stock
option award to purchase an aggregate of 40,000 shares of the Company's Common
Stock. In the event his employment is terminated at any time after a change in
control (as defined in the employment agreement), Mr. Shoneck is entitled to
severance equal to twelve months of base salary and Company benefits. If his
employment is terminated by the Company at any time other than after a change of
control, Mr. Shoneck is entitled to severance equal to thirty-six weeks of base
salary including Company benefits, provided, however, that such amount shall be
limited to twenty-four weeks if at any time during the period in which Mr.
Shoneck is receiving severance, he commences full-time employment.
On April 27, 1998, the Company entered into a letter agreement with Anthony
R. Drury, covering the terms and conditions of Mr. Drury's employment as Senior
Vice President, Finance and Chief Financial Officer. The agreement provides for
a base salary of $140,000 per year, subject to annual review by the Committee
and eligibility for an annual bonus award at a target bonus level to be
determined by the Committee in its sole discretion. Under the agreement, Mr.
Drury also received a one-time stock option award to purchase an aggregate of
20,000 shares of the Company's Common Stock. In the event his employment is
terminated at any time after a change in control (as defined in the employment
agreement), Mr. Drury is entitled to severance equal to twelve months of base
salary and Company benefits. If his employment is terminated by the Company at
any time other than after a change of control, Mr. Drury is entitled to
severance equal to thirty weeks of base salary including Company benefits,
provided, however, that such amount shall be limited to twenty-four weeks if at
any time during the period in which Mr. Drury is receiving severance, he
commences full-time employment.
Compensation Committee Interlocks and Insider Participation
Robert P. Pinkas, a member of the Company's Stock Option and Compensation
Committee, was the Company's Treasurer from March 1982 until October 1987. David
H. Young, the other member of the Company's Stock Option and Compensation
Committee, was the Company's President from the Company's inception until
October 1985.
Certain Relationships and Related Transactions
During fiscal year 1999, the Company purchased from Two Technologies, Inc.
("Two Technologies") certain hand-held computers used in the Company's products
for a total of $35,853. David H. Young, a director of the Company, is the
President of Two Technologies. Also during fiscal 1999, Two Technologies
purchased surface mount technology process equipment from the Company in amounts
totaling $52,728. 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.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid and accrued during each of the last three fiscal years to the Company's
President and Chief Operating Officer, the Company's former President and Chief
Executive Officer and each of the Company's three other executive officers whose
salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- -------------------
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
- ------------------ ---- ---------- --------- ----------- ------
<S> <C> <C> <C> <C> <C>
Theodore J. Shoneck(2) 1999 166,731 - 25,000 1,000
President and 1998 121,924 48,000 67,000 850
Chief Operating Officer 1997 - - - -
David W. Smith(3) 1999 - - - -
Former President and 1998 101,614 - 10,000 96,968
Chief Executive Officer 1997 195,700 45,000 10,000 1,000
Anthony R. Drury 1999 137,308 - 12,500 1,000
Senior Vice President, 1998 134,375 24,000 25,000 1,000
Finance and 1997 128,750 20,000 5,000 1,000
Chief Financial Officer
William M. Pease, Jr. 1999 128,843 15,000 4,000 1,000
Vice President, 1998 166,938 - 7,353 1,000
North American Sales 1997 118,627 - - 1,000
Ian H. Henderson 1999 - - -
Senior Vice President, 1998 100,800 - 4,000 10,080
European Operations 1997 98,980 18,588 4,000 6,124
Craig C. Ramsey(4) 1999 112,852 - 12,500 1,000
Senior Vice President, 1998 101,000 12,500 10,785 1,000
Marketing 1997 101,000 11,250 2,500 1,000
</TABLE>
- ----------
(1) Consists of the Company's matching payments under its 401(k) Plan, except
for Mr. Smith for whom the amount shown for 1998 includes other
compensation related to his resignation and Mr. Henderson for whom the
amounts shown represent the Company's contribution under an English
personal pension plan.
(2) Mr. Shoneck joined the Company in December 1997 and his annualized base
salary was then expected to be approximately $128,000. Mr. Shoneck was
named President and Chief Operating Officer in April 1998 and his base
salary was increased to $170,000.
(3) Mr. Smith resigned from the Company in March 1998. His fiscal 1998
compensation includes severance payments of $90,323 and accrued vacation
payments of $5,645.
(4) Mr. Ramsey became an executive officer of the Company upon being named
Senior Vice President, Marketing in November 1998, subsequent to the
Company's 1998 fiscal year end.
6
<PAGE>
Stock Option Grants
The following table sets forth certain information with respect to
individual grants of stock options during the fiscal year ended September 30,
1999, to the Company's President and Chief Executive Officer and each of the
Company's three other executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
------------------------------------------------------- ---------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#)(2) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- -------------- ----------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Theodore J. Shoneck 25,000 12.7% $1.500 11/06/08 $23,584 $59,765
Anthony R. Drury 12,500 6.4% $1.500 11/06/08 $11,792 $29,883
William M. Pease, Jr. 1,000 0.5% $1.500 11/06/08 $ 943 $ 2,391
3,000 1.5% $1.500 11/06/08 $ 4,128 $10,461
Craig C. Ramsey 12,500 6.4% $1.500 11/06/08 $11,792 $29,883
</TABLE>
- ----------
(1) Potential realizable value is based on the assumed annual growth rates
compounded annually for the ten-year option term. The dollar amounts set
forth under this heading are the result of calculations at the 5% and 10%
assumed rates set by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, of the stock
price of the Company.
(2) The options listed above each vest and become exercisable in four equal
annual installments beginning one year after the date of grant.
Stock Option Exercises and Holdings
The following table sets forth information relating to options exercised
during the fiscal year ended September 30, 1999 by the Company's President and
Chief Executive Officer and each of the Company's three other executive officers
and presents the value of unexercised options held by such individuals as of
September 30, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($) (2)
---------------------------- ---------------------------
SHARES VALUE
ACQUIRED REALIZED
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Theodore J. Shoneck - $ - 15,750 76,250 $ - $ 3,125
Anthony R. Drury - $ - 72,300 51,250 $ - $ 1,563
William M. Pease, Jr. - $ - 1,839 9,514 $ - $ 125
Craig C. Ramsey - $ - 6,364 20,588 $ - $ 1,563
</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, Inc.'s National
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, Inc.'s National Market on September 24, 1999 ($1.625
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.
7
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 submitted to the Company
during and with respect to the fiscal year ended September 30, 1999, and written
representations that no other reports were required, to the Company's knowledge,
no other reports were required and all Section 16(a) filing requirements
applicable to the Company's directors, executive officers and each holder of
more than 10% of the Company's Common Stock were complied with.
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.
Annual Compensation
Annual cash compensation is comprised of a base annual salary and a bonus
award. 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. The Committee generally 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 current members of the
Stock Option and Compensation Committee, who have experience in setting
compensation for companies in similar stages of development, believe that
salaries of the Company's executive officers in fiscal 1999 were appropriate,
considering the scope of the Company's operations and the respective
responsibilities and achievements of the executive officers. For fiscal 1999,
Mr. Pease received an increase in base salary to reflect his promotion to Vice
President of North American Sales. No other salary increases for the executive
officers in fiscal 1999.
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 1999 fiscal year, is non-discretionary
and in 1999 was based upon the Company's achievement of specified levels of net
income determined by the Committee. The amount of bonus is subject to minimum
and maximum specified levels of net income. The Company incurred a net loss
during fiscal 1999; accordingly, the non-discretionary bonuses were not paid to
any of 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 21% to 94% of the
discretionary bonuses, based upon the Committee's assessment of the level of
achievement with respect to the stated objectives. For fiscal 1999, no
discretionary bonuses were paid to executive officers other than to Mr. Pease
for his promotion to Vice President of North American Sales.
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, as
the full benefit of stock option grants will be realized only by appreciation in
per share values over several years. In this regard, options have been granted
at fair market value on the date of grant. The number of shares subject to each
grant is set at a level intended to create an opportunity for stock ownership
based on the officer's current position with the Company and the individual's
personal performance in recent periods. In addition, Mr. Shoneck and the other
executive officers received options as part of the annual granting of options to
employees of the Company by the Committee in November 1998. The options granted
to each executive officer is detailed in the Option Grants in Last Fiscal Year
table.
8
<PAGE>
Deferred Compensation Plan
Prior to September 1998, the Company maintained a deferred compensation
plan, pursuant to which certain executive officers could elect to defer a
portion of their annual compensation. The Committee terminated this plan in
September 1998 at the request of the participants and the funds were distributed
to the participating executives.
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.
ROGER E. GOWER ROBERT P. PINKAS DAVID H. YOUNG
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return of the
Company with the cumulative total return on the Standard & Poor's 500 Stock
Index and the Hambrecht & Quist Technology Index. Information relating to the
Company begins on October 1, 1994.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG QUAD SYSTEMS CORPORATION, THE S & P 500 INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[GRAPH]
<TABLE>
<CAPTION>
9/94 9/95 9/96 9/97 9/98 9/99
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
QUAD SYSTEMS CORPORATION 100 63 64 56 15 11
S & P 500 100 130 156 219 239 306
HAMBRECHT & QUIST TECHNOLOGY 100 175 192 287 267 514
- ----------
* $100 invested on 9/30/94 in stock or index -- including
reinvestment of dividends. Fiscal Year Ending September 30.
</TABLE>
9
<PAGE>
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 - 2001 ANNUAL MEETING
Under Rule 14a-8 of the Securities Exchange Act of 1934, as amended ("Rule
14a-8") proposals of stockholders intended to be presented at the Company's
Annual Meeting of Stockholders in 2001 must be received by October 14, 2000 to
be considered for inclusion in the Company's Proxy Statement and form of proxy
relating to that annual meeting. Alternatively, stockholders who submit a
proposal for consideration by the Company outside the processes established by
Rule 14a-8 must do so by December 28, 2000 or face the possibility that
management proxies may use their discretionary voting authority if and when any
such proposal is raised at the 2001 Annual Meeting of Stockholders, without any
discussion of the matter at the meeting. If the 2001 Annual Meeting of
Stockholders date is more than 30 days away from the anniversary of the 2000
Annual Meeting date, the Company will disclose changes in the October 14 and
December 28 deadlines above in its earliest possible report on Form 10-Q.
Shareholder proposals should be directed to the Company's Secretary, at the
address of the Company set forth on the first page of this Proxy Statement.
SOLICITATION OF PROXIES
The accompanying form of proxy is being solicited on behalf of the Board
of Directors of the Company. The Company will pay the expense of solicitation of
proxies for the meeting. 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
ANTHONY R. DRURY
Secretary
February 11, 2000
10
<PAGE>
PROXY
QUAD SYSTEMS CORPORATION
2405 Maryland Road, 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 THEODORE J. SHONECK 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 8,
2000, 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 Nominee(s):
Robert P. Pinkas
[ ] WITHHOLD AUTHORITY to vote for nominee(s) Roger E. Gower
Theodore J. Shoneck
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.
- --------------------------------------------------------------------------------
SIGNATURE DATED
- --------------------------------------------------------------------------------
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.
