DEF 14A
1
proxy03.txt
PROXY DOCUMENT
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 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
SONO-TEK CORPORATION
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(Name of Registrant as Specified in its Charter)
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SONO-TEK CORPORATION
2012 Route 9W
Milton, New York 12547
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
AUGUST 21, 2003
The 2003 Annual Meeting of Shareholders of Sono-Tek Corporation (the "Company")
will be held at the Poughkeepsie Grand Hotel, Poughkeepsie, New York 12601 on
August 21, 2003 at 10:00 a.m., local time, for the following purposes:
1. To elect two (2) Directors of the Company to serve until the 2005 Annual
Meeting of Shareholders of the Company and to elect one (1) Director of the
Company to serve until the 2004 Annual Meeting of Shareholders of the Company.
2. To consider and approve the Company's 2003 Stock Incentive Plan.
3. To ratify the appointment of Radin, Glass & Co., LLP as the Company's
independent auditors for the fiscal year ended February 29, 2004.
4. To transact such other business as may properly come before the meeting or
any adjournments thereof.
The Board of Directors has fixed the close of business on June 27, 2003 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting or any adjournments thereof. A list of shareholders
entitled to vote will be available for examination by interested shareholders at
the offices of the Company, 2012 Route 9W, Milton, New York 12547 during
ordinary business hours until the meeting.
Claudine Y. Corda, Secretary
Dated: July 22, 2003
YOUR VOTE IS IMPORTANT. EVEN IF YOU DESIRE TO ABSTAIN,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE PAID ENVELOPE.
10
SONO-TEK CORPORATION
2012 Route 9W
Milton, New York 12547
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 21, 2003
The accompanying proxy is solicited by the Board of Directors of SONO-TEK
CORPORATION, a New York corporation (the "Company"), for use at the 2003 Annual
Meeting of Shareholders of the Company to be held on August 21, 2003.
All Proxies that are properly completed, signed and returned to the Company
prior to the Annual Meeting, and which have not been revoked, will be voted in
accordance with the shareholder's instructions contained in such Proxy. In the
absence of contrary instructions, shares represented by such proxy will be voted
(i) FOR approval of the election of each of the individuals nominated as
Directors set forth herein, (ii) FOR approval of the Company's 2003 Stock
Incentive Plan, and (iii) FOR the ratification of the appointment of Radin,
Glass & Co., LLP as the Company's auditors for the fiscal year ending February
29, 2004. A shareholder may revoke his or her Proxy at any time before it is
exercised by filing with the Secretary of the Company at its offices in Milton,
New York either a written notice of revocation or a duly executed Proxy bearing
a later date, or by appearing in person at the 2003 Annual Meeting and
expressing a desire to vote his or her shares in person. All costs of this
solicitation are to be borne by the Company.
Abstentions will be treated as shares present and entitled to vote for quorum
purposes but as not voted for purposes of determining the approval of any
matters submitted to the shareholders for a vote. Except as otherwise provided
by law or by the Company's certificate of incorporation or bylaws, abstentions
will not be counted in determining whether a matter has received a majority of
votes cast. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with respect
to that matter. Broker non-votes are not counted for quorum purposes.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders, the Proxy, and the 2003 Annual Report to Shareholders are intended
to be mailed on or about July 22, 2003 to shareholders of record at the close of
business on June 27, 2003. At said record date, the Company had 9,200,161
outstanding shares of common stock.
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is divided into two classes. The Directors in each class
are to serve for a term of two years, and until their respective successors are
duly elected and qualify. One (1) Director will be elected at the Annual Meeting
by plurality vote to hold office until the Company's 2004 Annual Meeting of
Shareholders and until his successor shall be duly elected and shall qualify.
Two (2) Directors will be elected at the Annual Meeting by plurality vote to
hold office until the Company's 2005 Annual Meeting of Shareholders and until
their successors shall be duly elected and shall qualify.
Management intends to vote the accompanying Proxy FOR election as Directors of
the Company, the nominees named below, unless the Proxy contains contrary
instructions. Proxies that direct the Proxy holders to withhold voting in the
matter of electing Directors will not be voted as set forth above. Proxies
cannot be voted for a greater number of persons than the number of nominees
named in the Proxy Statement. On all matters that may properly come before the
2003 Annual Meeting, each share has one vote. Management has no reason to
believe that any of the nominees will not be a candidate or will be unable to
serve. However, in the event that any of the nominees should become unable or
unwilling to serve as a Director, the Proxy will be voted for the election of
such person or persons as shall be designated by the Directors.
NOMINEES FOR DIRECTORS
Nominee for election to term expiring 2004
The following person is nominated for election as Director of the Company to
hold office until the Company's 2004 Annual Meeting of Shareholders.
DR. DONALD F. MOWBRAY, 65, has been an independent consultant since August 1997.
From September 1992 to August 1997 he was the Manager of the General Electric
Company's Corporate Research and Development Mechanical Engineering Laboratory.
From 1962 to 1992 he worked for the General Electric Company in a variety of
engineering and managerial positions. Dr. Mowbray received a B.S. in
Aeronautical Engineering from the University of Minnesota in 1960, a Master of
Science in Engineering Mechanics from the University of Minnesota in 1962 and a
Ph.D. from Rensselaer Polytechnic Institute in Engineering Mechanics in 1968.
Nominees for election to term expiring 2005
The following two (2) persons, currently serving as Directors, are nominated for
election as Directors of the Company to hold office until the Company's 2005
Annual Meeting of Shareholders.
DR. HARVEY L. BERGER, 64, has been a Director of the Company since June 1975 and
Treasurer since June 2003. He was President of the Company from November 1981 to
September 1984 and from September 1985 until April 2001. From September 1986 to
September 1988, he also served as Treasurer. He was Vice Chairman of the Company
from March 1981 to September 1985. Dr. Berger holds a Ph.D. in physics from
Rensselaer Polytechnic Institute and is a member of the Marist College Advisory
Board.
DR. CHRISTOPHER L. COCCIO, 62, has been a Director of the Company since June
1998. From 1964 to 1996, he held various engineering, sales, marketing and
management positions at General Electric Company, with P&L responsibilities for
up to $100 million in sales and 500 people throughout the United States. His
business experience includes both domestic and international markets and
customers. He founded a management consulting business in 1996, and worked with
the New York State Assembly's Legislative Commission on Science and Technology
from 1996 to 1998. From 1998 to 2001, he worked with Accumetrics Associates,
Inc., a manufacturer of digital wireless telemetry systems, as Vice President of
Business Development and member of the Board of Advisors. Dr. Coccio received a
B.S.M.E. from Stevens Institute of Technology, a M.S.M.E. from the University of
Colorado, and a Ph.D. from Rensselaer Polytechnic Institute in Chemical
Engineering. He was appointed President and Chief Executive Officer of Sono-Tek
on April 30, 2001.
DIRECTOR CONTINUING AS DIRECTOR
The following person named below is currently serving as a Director of the
Company. His term expires at the 2004 Annual Meeting of Shareholders.
SAMUEL SCHWARTZ, 83, has been a Director of the Company since August 1987, and
was Chairman of the Board from February 1993 to May 1999. In April 2001, he
accepted the position as Acting Chairman of the Board. He became Chairman in
August 2001. From 1959 to 1992, he was the Chairman and Chief Executive Officer
of Krystinel Corporation, a manufacturer of ceramic magnetic components used in
electronic circuitry. He received a B.CH.E. from Rensselaer Polytechnic
Institute in 1941 and a M.CH.E. from New York University in 1948.
DIRECTOR NOT STANDING FOR REELECTION
JEFFREY O. SPIEGEL, 44, has been a Director of the Company since November 2000.
He is the President and Chief Executive Officer of Randa Corp., a position he
has held since 1986. Randa Corp. is an international men's accessory company.
Mr. Spiegel received a B.A. from Brandeis University in 1979.
Directors are presently paid no fee for their service as directors. Commencing
March 1, 2002, each non-employee Director is reimbursed $100 per Board of
Directors meeting they attend for travel expenses. In May 1999, the Company's
Board of Directors adopted a program to award its non-employee directors 10,000
stock options in consideration of each year of service to the Company to
commence with the 1999 election of Directors. On August 22, 2002, Samuel
Schwartz and J. Duncan Urquhart, non-employee directors, were elected to the
Board of Directors. Each were granted 20,000 stock options, exercisable at fair
market value, which vest 50% after the completion of one year of service and 50%
after completion of the second year of service. On June 12, 2003, J. Duncan
Urquhart resigned from the Board of Directors.
The Board of Directors held five meetings in the fiscal year ended February 28,
2003. Each Director attended 100% of the meetings of the Board and committee
meetings of which he was a member.
The Board of Directors has a nominating committee to research and determine
candidates for nomination as Directors of the Company (the "Nominating
Committee"). The Nominating Committee did not meet during the fiscal year ended
February 28, 2003. The Nominating Committee will consider nominees recommended
by shareholders; no special procedure needs to be followed in submitting such
recommendation.
The compensation of the executive officers of the Company is set by the
Company's Board of Directors based upon the recommendations of the Compensation
Committee, composed of Messrs. Schwartz and Spiegel, non-employee Directors of
the Company. The Compensation Committee met two times during Fiscal Year 2003.
Compensation is set at levels believed to be competitive with executive officers
with similar qualifications, experience and responsibilities of similar
businesses. Such individuals receive a base salary and incentive compensation
based on the achievement of certain operating objectives. The Compensation
Committee serves an advisory function only.
The Company's Board of Directors has an Audit Committee composed of Messrs.
Schwartz and Spiegel, non-employee Directors of the Company. The charter of the
Audit Committee is included as Appendix 2 to this Proxy statement. The Audit
Committee is responsible for (i) selecting an independent public accountant for
ratification by the stockholders, (ii) reviewing material accounting items
affecting the consolidated financial statements of the Company, and (iii)
reporting its findings to the Board of Directors. The Audit Committee met four
(4) times during the fiscal year ended February 28, 2003.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee's job is one of oversight as set forth in its charter. It is
not the duty of the Audit committee to prepare the Company's financial
statements, to plan or conduct audits, or to determine that the Company's
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. The Company's management is
responsible for preparing the Company's financial statements and for maintaining
internal control and disclosure controls and procedures. The independent
auditors are responsible for auditing the financial statements and for
expressing an opinion as to whether those audited financial statements fairly
present the financial position, results of operations, and cash flows of the
Company in conformity with generally accepted accounting principles.
The Audit Committee has reviewed and discussed the Company's audited
consolidated financial statements with management and with Radin, Glass & Co.,
LLP, the Company's independent auditors for 2003.
The Audit Committee has discussed with Radin, Glass & Co., LLP the matters
required to be discussed by Statement on Auditing Standards No. 61.
The Audit Committee has received from Radin, Glass & Co., LLP the written
statements required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and has discussed Radin, Glass & Co.'s
independence with Radin, Glass & Co., and has considered the compatibility of
non-audit services with the auditor's independence.
Based upon the review and discussions referred to above, the Audit Committee has
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-KSB for the
year ended February 28, 2003 for filing with the Securities and Exchange
Commission. The Audit Committee and the Board of Directors have also
recommended, subject to stockholder approval, the selection of Radin, Glass &
Co., LLP as the Company's independent auditors for 2004.
This report of the Audit Committee shall not be incorporated by reference into
any of the Company's future filings made under the Exchange Act or the
Securities Act, and shall not be deemed to be soliciting material or to be filed
with the SEC under the Exchange Act or the Securities Act.
THE AUDIT COMMITTEE
Samuel Schwartz
Jeffrey O. Spiegel
OTHER EXECUTIVE OFFICERS
In addition to Dr. Christopher L. Coccio, CEO & President and Dr. Harvey L.
Berger, Treasurer, the following persons are executive officers of the Company.
VINCENT F. DEMAIO, 65, has been Vice President of Manufacturing of the Company
since March 2003. He joined the Company in August 1991 as Production Manager and
has served as Field Service Manager and Director of Operations. Prior to joining
the Company, Mr. DeMaio was an independent real estate developer from 1987 to
1991. From 1956 to 1987, Mr. DeMaio was employed by IBM Corporation in various
manufacturing positions, the last being Manufacturing Supervisor over 600
employees.
R. STEPHEN HARSHBARGER, 35, has been Vice President of the Company since June
2000. He joined the Company in October 1993 as a Sales Engineer and served in
various sales management capacities from 1997 to 2000. Prior to joining the
Company, Mr. Harshbarger was the Sales and Marketing Coordinator at Plasmaco,
Inc., a developer and manufacturer of state-of-the-art flat panel displays.
He is a graduate of Bentley College, with a major in Finance and a minor in
Marketing.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate remuneration paid or accrued by the
Company for Fiscal Years ended February 28, 2003, 2002 and 2001, for each named
officer of the Company. No other executive officer received aggregate
remuneration that equaled or exceeded $100,000 for the Fiscal Years ended
February 28, 2003, 2003 and 2001.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Name and Awards, Securities
Principal Position Year Salary ($) Bonus ($) Underlying All Other
Options (#) Compensation ($)1
-------------------------------------------------------------------------------
Christopher L. Coccio 2003 $124,462 $7,500 0 $1,260
CEO, President and 2002(2) $92,354 $40,000 0 $178
Director
1 Dollar amounts are Company contributions under the Company's retirement plan.
2 Dr. Coccio became an employee of the Company as of May 7, 2001.
STOCK OPTION PLAN
The Company has in effect the 1993 Stock Incentive Plan, as amended (the "1993
Plan"). As of June 20, 2003 there were outstanding options to purchase an
aggregate of 1,062,562 shares of common stock at prices ranging from $.09 to
$1.625 per share and 437,438 shares were reserved for option grants. After
October 12, 2003, there can be no further grants under this plan.
The following table sets forth information regarding option grants made during
the last completed fiscal year for each named officer of the Company.
Option/SAR Grants in Last Fiscal Year
Number of Perrcent of total
Securities options/SARs
Underlying granted to
Options/SARs employees in Exercise or base
Name granted (#) fiscal year price ($/Sh) Expiration date
Christopher L. Coccio 275,000 62% $.20 11/14/2012
The following table sets forth information regarding option exercises during the
Fiscal Years ended February 28, 2003, as well as any unexercised options held as
of February 28, 2003, by each named executive who received in excess of $100,000
in salary and bonus.
Aggregate Option/SAR Exercises in Last Fiscal Year and
Fiscal Year End Option/ SAR Values
Number of Securities Value of
Underlying Unexercised
Unexercised Options In-the Money
Shares at Fiscal Year Options
Acquired on Value End (#) At Fiscal Year
End ($)
Name Exercise (#) Realized ($) Exercisable Exercisable
Unexercisable Unexercisable
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Christopher Coccio 0 0 420,000 75,000 $1,000 $0
Description of 401 (k) Plan
Effective April 1, 2000, the Company instituted the Sono-Tek Corporation 401(k)
Plan ("401(k) Plan") for employees of the Company, its subsidiaries and
affiliates pursuant to the Internal Revenue Code. Under the 401(k) Plan an
eligible employee could elect to make a salary reduction of up to 20% of his
compensation as defined in the plan In January 2002 the Company instituted a
matching of up to 1% of an employee's compensation, depending upon a matching
formula. Employee contributions for any calendar year are limited to a specific
dollar amount that is indexed to reflect inflation.
Securities Authorized for Issuance Under Equity Compensation Plans:
Number of Weighted- Number of
securities average securities
to be exercise remaining
issued upon price of available for future
exercise of outstanding issuance under equity
outstanding options, compensation plans
options, warrants (excluding securities
warrants and rights reflected in
and rights column (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders
1993 Stock Incentive Plan 1,062,562 $.33 437,471
Equity compensation plans
not approved by security
holders:
Warrants issued to
individuals for
Monies loaned or
services rendered 905,000 $.36 -
Warrants issued in
conjunction with
Subordinated Mezzanine Debt 2,077,777 $.13 -
---------- ---- -------
Total 4,045,339 $.24 437,471
========= ==== =======
Description of Equity Compensation Plans:
1993 Stock Incentive Plan
Under the 1993 Stock Incentive Plan, as amended ("1993 Plan"), options can be
granted to officers, directors, consultants and employees of the Company and its
subsidiaries to purchase up to 1,500,000 of the Company's common shares. Options
granted under the 1993 Plan expire on various dates through 2012.
Under the 1993 Stock Incentive Plan, option prices must be at least 100% of the
fair market value of the common stock at time of grant. For qualified employees,
except under certain circumstances specified in the 1993 plan or unless
otherwise specified at the discretion of the Board of Directors, no option may
be exercised prior to one year after date of grant, with the balance becoming
exercisable in cumulative installments over a three year period during the term
of the option.
Warrants Issued to Individuals for Monies Loaned or Services Rendered:
Warrants were issued in Fiscal Year February 28, 2000 to five individuals,
including officers and directors, who loaned monies to the Company and one
individual who assisted in raising funds for the Company. These warrants are for
terms of five years with exercise prices ranging from $.30 per share to $1.00
per share. These warrants expire as follows; 5,000 in March 2004; 600,000 in May
2004; 225,000 in August 2004; 25,000 in January 2005; and 50,000 in May 2005.
Warrants Issued in Conjunction with Subordinated Mezzanine Debt:
Warrants were issued to Norwood Venture Corporation in conjunction with $850,000
in funding supplied to the Company. Stock purchase warrants (the "Put Warrants")
to purchase 1,100,000 shares of the Company's common stock at an exercise price
of $.30, the fair market value of the Company's common stock on September 30,
1999. In connection with the amendments, dated December 22, 2000 and April 30,
2001,an additional 244,444 and 733,333 warrant shares were granted at exercise
prices of $0.30 and $.10 per share, respectively. In connection with an
amendment to the Norwood Agreement, in October 2001, the exercise price of
certain of the warrants was reduced from $.30 to $.15 per share. The Put
Warrants can be put to the Company from May 29, 2006 to May 29, 2007 as defined
by the Agreement, and they expire on September 30, 2010.
Beneficial Ownership of Shares
The following information is furnished as of June 20, 2003, to indicate
beneficial ownership of the Company's Common Stock by each Director, by each
named executive officer who has a salary and bonus in excess of $100,000, by all
Directors and executive officers as a group, and by each person known to the
Company to be the beneficial owner of more than 5% of the Company's outstanding
Common Stock. Such information has been furnished to the Company by the
indicated owners. Unless otherwise indicated, the named person has sole voting
and investment power.
Name (and address if Amount
more than 5%) of Beneficially
Beneficial owner Owned Percent
Directors and Officers
*Harvey L. Berger 386,700(1) 4.2%
*Christopher L. Coccio 461,000(2) 4.8%
*Samuel Schwartz 997,083(3) 10.6%
*Jeffrey O. Spiegel 98,217(4) 1.4%
--------- ----
All Executive Officers and Directors
as a Group (6) 2,103,568(5) 21.0%
Additional 5% owners
Herbert Spiegel 513,692 5.6%
425 East 58th Street
New York, NY 10022
Norwood Venture Corporation 2,077,777(6) 18.4%
65 Norwood Avenue
Montclair, NJ 07043
*c/o Sono-Tek Corporation, 2012 Route 9W, Milton, NY 12547.
** Less than 1%
1 Includes 4,000 shares in the name of Dr. Berger's wife and 65,000 options
deemed exercisable issued under the 1993 Plan.
2 Includes 420,000 options deemed exercisable issued under the 1993 Plan. Does
not include 75,000 options that are not yet vested.
3 Includes 300,000 warrants deemed exercisable awarded by the Board of Directors
in May 1999 and 20,000 options deemed exercisable issued under the 1993 Plan.
Does not include 20,000 options that are not yet vested.
4 Includes 20,000 options deemed exercisable issued under the 1993Plan.
5 Includes 672,500 options deemed exercisable issued under the 1993 Plan,
300,000 warrants deemed exercisable awarded by the Board of Directors in May
1999. Does not include 112,5000 options that are not yet vested. Does not
include shares beneficially owned by Dr. Donald F. Mowbray who is a nominee for
the Board of Directors as a non-employee director.
6 Includes 1,100,000 warrants deemed exercisable issued on September 30, 1999,
244,444 warrants deemed exercisable issued on December 20, 2000, and 733,333
warrants deemed exercisable issued on April 30, 2001, all in conjunction with a
loan, as amended, made to the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Norwood loans - On April 30, 2001, in order to induce the advance of an
additional $300,000 by Norwood, certain of the Company's directors, an officer
and an affiliate of the Company participated in the amount of $216,750 in a
mezzanine financing. Interest expense of $103,416.64 was paid to Norwood and
$26,371 was forwarded to these individuals during Fiscal Year 2003.
Short-term loans - At Fiscal Year End 2002, loans from directors, former
officers and related parties in the amount of $286,084 plus accrued interest of
$62,728 were formalized into four-year notes bearing interest at 5% on the
unpaid balance. Repayments of these notes on a monthly basis commenced March 31,
2002. Interest expense of $16,468 was either paid or accrued to these parties
during this fiscal year.
Consulting agreement -
At February 28, 2003 prior years' consulting fees of $69,076 recorded from 1993
to 1996 to the Company's Chairman of the Board have been reclassified as
long-term. Accordingly, $4,145 in interest expense has been imputed and charged
to paid-in capital for the year then ended.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company is not aware that any reports required by Section 16(a) were not
filed on a timely basis.
ITEM 2. ADOPTION OF THE 2003 STOCK INCENTIVE PLAN
The Company currently has a Stock Incentive Plan that was adopted on October 12,
1993 (the"1993 Plan"). The 1993 Plan will expire on October 12, 2003 and no
further stock options can be granted under this plan. The 1993 Plan allows the
issuance of options to purchase up to 1,500,000 shares of common stock of which
1,062,562 have been issued. In order to facilitate the hiring and retention of
qualified personnel the Board of Directors believes that a new plan be adopted
by the shareholders (the "2003 Plan"). The Board of Directors has reserved
1,500,000 shares for issuance under the 2003 Plan
The 2003 Plan will cover all employees of the Company. All regular employees of
the Company, whether salaried or hourly, will be eligible for awards under the
Plan. The Board of Directors believes that stock options are integral to the
hiring and retention of all employees. Additionally, the Company may issue
non-qualified stock option awards to non-employee directors or consultants to
the Company.
This proposal must receive the affirmative vote of a majority of shares voting
in person or by proxy at the Annual Meeting, assuming a quorum is present.
The 2003 Plan
The 2003 Plan is intended to establish a policy of encouraging ownership of the
Company's Common Stock by employees, directors, and consultants of Sono-Tek, and
of providing incentives for them to put forth maximum efforts for the Company's
successful operations. By extending to such individuals the opportunity to
acquire proprietary interests in Sono-Tek and to participate in its success, the
Company believes that the 2003 Plan benefits the Company and its shareholders by
making it possible for the Company to attract and retain the best available
talent and by rewarding such individuals for their part in increasing the value
of the Company's stock.
The Board of Directors administers the 2003 Plan. The Board has full authority
in its discretion, but subject to the express provisions of the 2003 Plan, to
determine (i) the individuals to whom, and the time or times at which awards
shall be granted, (ii) the number of shares to be covered by each award, (iii)
the purchase price of the Common Stock covered by each option, and (iv) whether
options shall be of the Incentive Stock Option type, the Non-Qualified Stock
Option type, or both.
Incentive Stock Options or Non-Qualified Stock Options may be granted to any
person who, at the time the award is granted, is an employee of the Company. In
determining the employees to whom awards shall be granted, the number of shares
of Common Stock to be covered by each award, the term of any option, and whether
any such option shall be an Incentive Stock Option, a Non-Qualified Option, or
both, the Board shall take into account the duties of the respective employees,
their present and potential contributions to the success of the Company, and
such other factors as it shall deem relevant in connection with accomplishing
the purpose of the 2003 Plan. An individual who has been granted an award may be
granted and hold an additional award or awards, if the Board of Directors so
determines.
Non-Qualified Stock Options may be granted to non-employee directors and
consultants to the Company. At July 22, 2003, Mr. Schwartz and Mr. Spiegel and
were the only non-employee directors of the Company, and if elected, Dr. Mowbray
will also be a non-employee director. Upon election or re-election to the
Company's Board of Directors, non-employee directors are granted 20,000
non-qualified stock options at current market price, 50% of which are
exercisable after a period of one year and 50% of which are exercisable after a
period of two years.
The purchase price of common stock covered by each option shall be determined by
the Board od Directors, but shall not be less than 100% (or 110% in the case of
an Incentive Stock Option granted to a ten percent shareholder) of the fair
market value of the common stock at the time the option is granted. The fair
market value shall mean the closing sales price of the common stock on the date
on which the option is granted (or in the event of no trading, the last closing
stock price available).
The term of each option shall be for such period as the Board of Directors shall
determine, but not more than ten years (or 5 years in the case of an Incentive
Stock Option granted to a ten percent shareholder) from the date of the grant,
and may be subject to earlier termination under certain circumstances and may
extend beyond the termination of employment or other relationship.
The 2003 Plan provides that payment in full for shares purchased under an option
shall be made at the time or exercise in cash or certified check or by tendering
to the Company shares of the Company's common stock then owned by the optionee
valued at fair market value, or partly in cash and partly in shares. The 2003
Plan provides for acceleration of the exercisability of any option in the event
of a specified tender offer or exchange offer or in the event of a change in
control as defined by the 2003 Plan.
The 2003 Plan shall terminate on May 20, 2013. The Board of Directors may at any
time prior to that date terminate the 2003 Plan or make such modification or
amendment of the Plan as it shall deem advisable, provided, however, that no
amendment may be made without the approval by holders of voting stock of the
Company, except for adjustments upon changes in the capitalization of the
Company, which would (i) increase the maximum number of shares for which awards
may be granted under the 2003 Plan, (ii) change the manner of determining the
minimum option prices, (iii) extend the period during which an award may be
granted or an option exercised, or (iv) amend the requirements as to the class
of persons eligible to receive awards. No termination, modification, or
amendment of the 2003 Plan or any award under the 2003 Plan may, without the
consent of the person to whom an award shall theretofore have been granted,
adversely affect the rights of such person under such award.
Federal Tax Consequences
With respect to Non-Qualified Options, on exercise the difference between the
option exercise price and the fair market value of the stock on the measuring
date (normally the date of exercise of the option) will be taxable as ordinary
income to the optionee and will be deductible by the Company. Gain or loss on
the subsequent sale of the stock will be eligible for capital gain or loss
treatment by the optionee and will have no federal income tax consequences to
the Company.
If payment upon exercise of a Non-Qualified Option is made by tendering
previously owned shares, the exchange will be a tax-free exchange to the
optionee to the extent of a like number of new shares, with the new shares
retaining the basis and holding period of the old shares. The fair market value
of any additional shares transferred to the optionee (representing the excess of
the fair market value of all of the new shares over the fair market value of all
of the old shares) will constitute ordinary income to the optionee and be
deductible by the Company. This amount then becomes the optionee's basis in such
shares.
With respect to Incentive Stock Options, if the optionee does not make a
disqualifying disposition of stock acquired on exercise of such option, no
income for federal income tax purposes will result to such optionee upon the
granting or exercise of the option (except that the amount by which the fair
market value of the stock at time of exercise exceeds the option price may be
subject to the alternative minimum tax), and in the event of any sale thereafter
any amount realized in excess of his cost will be taxed as long term capital
gain and any loss sustained will be long term capital loss. In such case, the
Company will not be entitled to a deduction for federal income tax purposes in
connection with the issuance or exercise of the option. A disqualifying
disposition will occur if the optionee makes a disposition of such shares within
two years from the date of the granting of the option or within one year after
the transfer of such shares to him. If a disqualifying disposition is made, the
difference between the option price and the lesser of (i) the fair market value
of the stock at the time the option is exercised or (ii) the amount realized
upon disposition of the stock will be treated as ordinary income to the optionee
at the time of disposition and will be allowed as a deduction to the Company.
An exchange of Common Stock in payment of the option price in the case of an
Incentive Stock Option, if the exchange is not a disqualifying disposition of
the stock exchanged, is considered to be tax-free. Under proposed regulations, a
number of shares received upon exercise equal to the number of shares exchanged
will have a basis equal to the basis of the shares exchanged and the remaining
shares received will have a zero basis.
An exchange of statutory option stock to acquire other stock on exercise of an
Incentive Stock Option is a taxable recognition transaction with respect to the
stock disposed of if the minimum statutory holding period for such statutory
option stock has not been met. Statutory Option stock includes stock acquired
through exercise of a qualified stock option, an Incentive Stock Option, a
restricted stock option or an option granted under an employee stock purchase
plan. If there is such a premature disposition, ordinary income is attributed to
the optionee (and will be deductible by the Company) to the extent of his
"bargain" purchase on acquisition of the surrendered stock; and the
post-acquisition appreciation in value of such stock is taxed to him as a
short-term gain if held for less than the applicable holding period for
long-term capital gain, and long-term capital gain if held for such applicable
holding period, and will not be deductible by the Company.
A portion of the excess of the amount deductible by the Company over the value
of options when issued may be subject to the alternative minimum tax imposed on
corporations.
The described tax consequences are based on current laws, regulations and
interpretations thereof, all of which are subject to change. In addition, the
discussion is limited to federal income taxes and does not attempt to describe
state and local tax effects which may accrue to participants or the Company.
Each participant is advised to consult his or her own tax advisor as to the
specific tax effects which may accrue as a result of participation in the 2003
Plan. The 2003 Plan is not qualified under Section 401(a) of the Internal
Revenue Code.
New Plan Benefits
Since the benefits of stock option grants under the new plan (the 2003 Plan) are
not determinable, the benefits summarized below reflect the stock option grants
that were issued during the last fiscal year under the existing plan (the 1993
Plan). Grants indicated below may not be indicative of future grants under the
2003 Plan.
NEW PLAN BENEFITS
2003 Stock Incentive Plan
Name and Position Dollar Value ($) Number of Shares
----------------- ---------------- ----------------
Christopher L. Coccio, CEO & President $43,528 275,000
Harvey L. Berger, Treasurer 2,360 20,000
R. Stephen Harshbarger, Vice President 2,360 20,000
Vincent F. DeMaio, Vice President 2,360 20,000
------ ------
Executive Group $50,608 335,000
Non-Executive Director Group $11,583 40,000
Non-Executive Officer Employee Group $10,526 70,000
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE 2003 STOCK INCENTIVE PLAN AND AUTHORIZING 1,500,000 COMMON SHARES FOR
ISSUANCE THEREUNDER.
ITEM 3. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Radin, Glass & Co., LLP, Certified Public
Accountants, to audit the books of account and other records of the Company for
the fiscal year ending February 28, 2004. In the event of a negative vote, the
Board of Directors will reconsider its election. For the fiscal year ended
February 28, 2003 the Company paid or accrued fees of approximately $29,000 for
services rendered by Radin Glass & Co., LLP, its independent auditors. These
fees included audit services and tax return preparation. The Audit Committee of
the Company's Board of Directors determined the independence of the Company's
auditors.
A representative of Radin, Glass & Co., LLP is expected to be present at our
Annual Meeting, will have an opportunity to make a statement if he desires, and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF RADIN, GLASS & CO., LLP.
ITEM 4. OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except the matters set forth in the Notice and described in this
Proxy Statement. Unless otherwise directed, all shares represented by Proxies
will be voted in favor of the proposals of the Board of Directors described in
this Proxy Statement. If any other matters come before the Annual Meeting, the
persons named in the accompanying Proxy will vote on those matters according to
their best judgment.
Expenses
The entire cost of preparing, assembling, printing and mailing this Proxy
Statement, the enclosed Proxy and other materials, and the cost of soliciting
Proxies with respect to the Annual Meeting will be borne by the Company. The
Company will request banks and brokers to solicit their customers who
beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for the reasonable out-of-pocket expense of
such solicitations. The original solicitation of Proxies by mail may be
supplemented by telephone and facsimile by officers and other regular employees
of the Company but no additional compensation will be paid to such individuals.
Future Shareholders Proposals
Proposals of shareholders intended to be presented at the next annual meeting
(expected to be held in August 2004) under SEC Rule 14a-8 must be received by
the Company for inclusion in the Company's proxy statement and form of proxy
relating to that meeting (expected to be mailed in mid-July 2004) not later than
March 15, 2004.
Notice of shareholder matters intended to be submitted at the next annual
meeting outside the processes of Rule 14a-8 will be considered untimely if not
received by the Company by June 8, 2004. The discretionary authority described
above with respect to other matters coming before the meeting will be conferred
with respect to any such untimely matters.
Signed:
/s/Claudine Y. Corda
Claudine Y. Corda
July 22, 2003
FORM OF PROXY CARD Please mark your
votes as in this
example [ ]
FOR all nominees WITHHOLD AUTHORITY
listed at right to vote for
(except as marked) nominees listed at right
Nominees:
1. The election of three (3) [ ] [ ] Dr. Harvey Berger
Directors of the Company. [ ] Dr. Christopher L. Coccio
[ ] Dr. Donald F. Mowbray
(INSTRUCTION: To withhold authority to vote for any
individual nominee, strike a line through the nominee's
name in the list to the right)
FOR AGAINST ABSTAIN
2. Approval of the 2003 Stock Incentive Plan
and authorizing 1,500,000 common
shares for issuance thereunder. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of the appointment of
Radin, Glass & Co., LLP as the Company's
independent auditors. [ ] [ ] [ ]
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting. This proxy, when properly executed,
will be voted in the manner directed herein by the undersigned shareholder.
If no direction is made, this proxy will be voted FOR Proposals 1, 2 and 3.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
Your signature on this proxy is your acknowledgment of receipt of the Notice of
Meeting and Proxy Statement, both dated July 22, 2003.
SIGNATURE(S): __________________________ Date: ___________
(Signature)
SIGNATURE(S): __________________________ Date: ___________
(Signature if held jointly)
NOTE: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give title as such. If stockholder is a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
SONO-TEK CORPORATION
2012 Route 9W, Milton, New York 12547
This Proxy is solicited on behalf of the Board of Directors
The undersigned shareholder(s) of Sono-Tek Corporation, a corporation organized
under the laws of the State of New York, hereby appoints Claudine Y. Corda and
Samuel Schwartz and as my (our) proxies, each with the power to appoint a
substitute, and hereby authorizes them, and each of them individually, to
represent and to vote, as designated on the reverse side hereof, all of the
shares of Sono-Tek Corporation, which the undersigned is or may be entitled to
vote at the Annual Meeting of Shareholders to be held at The Poughkeepsie Grand
Hotel, 40 Civic Center Plaza, Poughkeepsie, New York 12601, at 10:00 A.M., New
York time, on August 21, 2003, or any adjournment thereof. The Board of
Directors recommends a vote FOR the proposals on the reverse side.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
Appendix 1
SONO-TEK CORPORATION 2003 STOCK INCENTIVE PLAN
MAY 20, 2003
1. OBJECTIVE OF THE PLAN.
The purpose of this 2003 Stock Incentive Plan [the "Plan"] is to enable Sono-Tek
Corporation [the "Company" or "Sono-Tek"] to compete successfully in attracting,
motivating, and retaining employees, directors, and consultants with outstanding
abilities by making it possible for them to purchase shares of Sono-Tek's Common
Stock on terms which will give them a more direct and continuing interest in the
future success of the Company's business.
This Plan is intended to establish a policy of encouraging ownership of the
Company's Common Stock by employees, directors, and consultants of Sono-Tek and
providing incentives for them to put forth maximum efforts for its successful
operations. By extending to such individuals the opportunity to acquire
proprietary interests in Sono-Tek and to participate in its success, the Plan
may be expected to benefit Sono-Tek and its shareholders by making it possible
for Sono-Tek to attract and retain the best available talent and by rewarding
such individuals for their part in increasing the value of the Company's stock.
2. DEFINITIONS.
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
2.1 "Award" shall mean Options granted pursuant to this Plan.
2.2 "Award Agreement" shall mean the agreement between the Award Recipient and
Sono-Tek setting forth the terms and conditions of an Award.
2.3 "Award Recipient" shall mean an individual who receives an Award pursuant to
this Plan.
2.4 "Board" and "Board of Directors" shall mean the board of directors of
Sono-Tek.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Common Stock" shall mean shares of the common stock of Sono-Tek with a par
value of $.0l.
2.7 "Company" means Sono-Tek Corporation, a New York corporation with its
principal offices at 2012 Route 9W, Bldg. 3, Milton, New York 12547.
2.8 "Continuous Employment" shall mean continuous regular employment by
Sono-Tek. A leave of absence granted in accordance with Sono-Tek's usual
procedure which does not operate to interrupt continuous employment for other
benefits granted by Sono-Tek shall not be considered a termination of employment
nor an interruption of Continuous Employment hereunder, and an employee who is
granted such a leave of absence shall be considered to be continuously employed
during the period of such leave; provided, that if regulations under the Code or
an amendment to the Code shall establish a more restrictive definition, of a
leave of absence, such definition shall be substituted herein.
2.9 "Non-Employee Director" shall mean any director who is not an employee of
the Company.
2.10 "Consultant" shall mean any individual or organization retained by the
Company to provide consulting services.
2.11 "Incentive Stock Options" shall mean those Options granted hereunder as,
and intended to be, Incentive Stock Options as defined in, and which by their
terms comply with, the requirements for such options set out in Section 422 of
the Code, and Treasury Regulations issued pursuant thereto.
2.12 "Non-Qualified Stock Options" shall mean those Options granted hereunder
which are not Incentive Stock Options as described in paragraph 2.11.
2.13 "Option" shall mean an option to purchase Common Stock granted pursuant to
the provisions of this Plan.
2.14 "Ten Percent Shareholder" shall mean an individual who owns, within the
meaning of Section 422 (b) (6) of the Code, stock possessing more than (10%)
percent of the total combined voting power of all classes of stock of Sono-Tek.
3. STOCK RESERVED FOR THE PLAN.
One million, five hundred thousand (1,500,000) shares of the authorized but
unissued Common Stock are reserved for issue and may be issued pursuant to
Awards under the Plan.
In lieu of such unissued shares, Sono-Tek may, in its discretion, transfer, on
the exercise of Options, reacquired shares or shares bought in the market for
the purposes of the Plan, provided that (subject to the provisions of paragraph
13) the total number of shares which may be granted or sold pursuant to Awards
granted under the Plan shall not exceed 1,500,000.
If any Awards granted under the Plan shall for any reason terminate or expire
without having been exercised, the Common Stock not issued under such Awards
shall be available again for the purposes of the Plan.
4. ADMINISTRATION OF THE PLAN.
4.1 The Board of Directors shall administer the Plan. The Board shall have full
authority in its discretion, but subject to the express Provisions of the Plan,
to determine: the individuals to whom, and the time or times at which, Awards
shall be granted; the number of shares to be covered by each Award; the purchase
price of the Common Stock covered by each Option; whether Options shall be of
the Incentive Stock Option type, or the Non-Qualified Stock Option type, or
both; and vesting schedule. The Board shall further have full authority at its
discretion to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to it; to determine the terms (which need not be identical)
of Award Agreements executed and delivered under the Plan, including such terms
and provisions as shall be requisite in the judgement of the Board to conform to
any change in any law or regulation applicable thereto; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Board's determination on the foregoing matters shall be conclusive.
4.2 Notwithstanding the provisions of paragraph 4.1, the selection of officers
and directors for participation in the Plan and decisions concerning the timing,
pricing and amount of an Award may, at any time and from time to time, be
delegated by the Board of Directors to a committee (the "Committee"). The
Committee shall be not less than two directors and shall be comprised solely of
Non-Employee Directors, as defined by Rule 16b-3(b)(3)(i) of the Securities
Exchange Act of 1934 ("1934 Act"), or any successor definition adopted by the
Securities Exchange Commission, and who shall each also qualify as an Outside
Director for purposes of Section 162(m) of the Code. Any vacancy occurring on
the Committee may be filled by appointment by the Board. The Board at its
discretion may from time to time appoint members to the Committee in
substitution of members previously appointed, may remove members of the
Committee and may fill vacancies, however caused, in the Committee."
5. ELIGIBILITY; FACTORS TO BE CONSIDERED IN GRANTING AWARDS.
5.1 Incentive Stock Options or Non-Qualified Stock Options may be granted to any
person who, at the time the Award is granted, is a regular, salaried employee
(which term shall include officers and Directors who are regular, salaried
employees) of Sono-Tek. A member of the Board of Directors of the Company who is
not also a regular, salaried employee of Sono-Tek, will not be eligible to
receive Incentive Stock Options. Further, no Incentive Stock Options may be
granted hereunder to an individual who, immediately after such Option is
granted, is a Ten Percent Shareholder, unless (i) the option price is at least
110% of the fair market value of such stock on the date of grant and (ii) the
Option may not be exercised more than 5 years after the date of grant. In
determining the employees to whom Awards shall be granted, the number of shares
of Common Stock to be covered by each Award, the term of any Option, and whether
any such Option shall be an Incentive Stock Option, a Non-Qualified Stock
Option, or both, the Board or committee, as the case may be, shall take into
account the duties of the respective employees, their present and potential
contributions to the success of Sono-Tek and such other factors as they shall
deem relevant in connection with accomplishing the purpose of the Plan. An
employee who has been granted an Award may be granted and hold an additional
Award or Awards if the Board or committee so determines.
5.2 Non-Qualified Stock Options may be granted to Non-Employee Directors and
Consultants to the Company. In determining the Non-Employee Directors and
Consultants to whom Awards shall be granted, and the term and the number of
shares of Common Stock to be covered by each Award, the Board or committee shall
take into account the duties of such individuals, their contributions to the
success of the Company, and other such factors as they shall deem relevant in
connection with accomplishing the purpose of the Plan. Such individuals or
organizations may be granted and hold an additional Award or Awards if the Board
or committee so determines.
6. OPTION PRICES.
The purchase price of Common Stock covered by each Option shall be determined by
the Board or committee, as the case may be, but shall not be less than 100% (or
110% in the case of an Incentive Stock Option granted to a Ten Percent
Shareholder) of the fair market value of the Common Stock at the time the Option
is granted. The fair market value shall mean the simple average of the high and
low sales prices of the Common Stock as reported in the report of composite
transactions (or other source designated by the Board or committee) on the date
on which the Option is granted.
7. TERM OF OPTIONS.
The term of each Option shall be for such period as the Board shall determine,
but not more than ten years (or five years in the case of an Incentive Stock
Option granted to a Ten Percent Shareholder) from the date of granting thereof,
and shall be subject to earlier termination as hereinafter provided. If the
original term of any Option is less than ten years (or five years in the case of
an Option granted to a Ten Percent Shareholder) from the date of granting, the
Option, prior to its expiration, may be amended, with the approval of the Board
and the employee, to extend the term so that the term as amended is not more
than ten years (or five years in the case of an Incentive Stock Option granted
to a Ten Percent Shareholder) from the original date of granting of such Option.
To the extent not otherwise prohibited by law, such extension shall not
constitute the grant of a new Option and the purchase price specified in such
Option need not be increased.
8. EXERCISE OF OPTIONS.
8.1 In the case of Awards granted to employees, each Option shall provide that
it may be exercised as to forty-five percent of the total number of shares
covered by such Option on or after the date on which the employee shall have
completed at least one year of Continuous Employment after the Option was
granted, and as to an additional thirty-five percent of the total number of
shares covered by such Option on or after the date on which the employee shall
have completed at least two years of Continuous Employment after the Option was
granted, and as to the final twenty percent of the total number of shares
covered by such Option on or after the date on which the employee shall have
completed at least three years of Continuous Employment after the Option was
granted, so that upon completion of the third year of such Continuous Employment
after granting the Option, the holder will have become entitled to purchase the
entire number of shares covered by the Option; provided that the Board shall
have authority to vary in advance of grant and from time to time after grant,
the period of Continuous Employment which shall be required for the exercise of
Options granted hereunder.
8.2 In the case of Awards granted to Non-Employee Directors each such Option
shall provide that it may be exercised as to one-half the total number of shares
covered by such Option on or after the date in which the Non-Employee Director
shall have completed at least one year of service after the Option was granted
and as to the remainder of the total number of shares covered by such option on
or after the date of which such Non-Employee Director will have completed at
least two years of continued service, provided that the Board shall have the
authority to vary in advance of grant and from time to time after grant the
period of service which shall be required for the exercise of Options granted
hereunder.
8.3 In the case of Awards granted to Consultants, each such Option shall provide
that it may be exercised as to one-half of the total number of shares covered by
such Option one year on or after the date the Option was granted and as to the
remainder of the total number of shares covered by such Option, two years after
the date the Option was granted, provided that the Board shall have the
authority to vary in advance of grant and from time to time after grant the
exercise period of such grant.
8.4 Unless otherwise provided in the Award Agreement, a holder of an Option may
purchase all or from time to time any part of, the shares for which the right to
purchase has accrued to him in accordance with the terms of this paragraph;
provided, however, that an Option shall not be exercised as to fewer than 50
shares, or all the remaining shares covered by the Option, if fewer than 50, at
any one time. The purchase price of the shares as to which an Option shall be
exercised shall be paid in full at the time of exercise. at the election of the
holder of an Option (i) in cash or currency of the United States of America, or
by certified check made payable to the Company in U.S. dollars, (ii) by
tendering to Sono-Tek shares of the Company's Common Stock, then owned at least
six months by him, having a fair market value equal to the cash exercise price
applicable to the purchase price of the shares as to which an Option is being
exercised, or (iii) partly in cash or certified check and partly in shares of
Sono-Tek's Common Stock valued at fair market value. Such fair market value
shall be determined as of the close of the business day immediately preceding
the day on which the Option is exercised, in the manner set forth in paragraph
6. Fractional shares of Common Stock will not be issued. Notwithstanding the
foregoing, the Board shall have the right to modify, amend or cancel the
provisions of clauses (ii) and (iii) above at any time upon prior notice to the
holders of Options. Except as provided in paragraphs 10 and 11 hereof, no Option
may be exercised at any time unless the holder thereof is then a regular
employee of Sono-Tek or any Subsidiary. The holder of an Option shall have none
of the rights of a stockholder with respect to the shares subject to option
until such shares shall have been registered upon the exercise of the Option on
the transfer books of the Company in the name of the person or persons
exercising the Option.
8.5 Notwithstanding any other provision of this Plan or any Option granted
hereunder, any Option granted hereunder and then outstanding shall become
immediately exercisable in full (i) in the event a tender offer or exchange
offer is made by any "person" within the meaning of Section 14 (d) of the
Securities Exchange Act of 1934 (the "Act") or (ii) in the event of a Change in
Control; provided that, if in the opinion of counsel to Sono-Tek the immediate
exercisability of such Option, when taken into consideration with all other
"parachute payments" as defined in Section 280G of the Code, would result in an
"excess parachute payment" as defined in such section, such Option shall not
become immediately exercisable except as and to the extent the Board in its
discretion otherwise determines. For purposes of this Section, a "Change in
Control" shall have occurred if (i) any "person" within the meaning of Section
14 (d) of the Act other than a holder of any Common Stock or Preferred Stock of
the Company on the date this Plan is approved by the Board becomes the
"beneficial owner" as defined in Rule 13d-3 thereunder, directly or indirectly,
of more than 25% of Sono-Tek's Common Stock, (ii) during any two-year period,
individuals who constitute the Board of Directors of Sono-Tek (the "Incumbent
Board") as of the beginning of the period cease for any reason to constitute at
least a majority thereof, provided that any person becoming a member of the
Board of Directors during such period whose election or nomination for election
by Sono-Tek's stockholders was approved by a vote of at least three-quarters of
the Incumbent Board (either by a specific vote or by approval of the proxy
statement of Sono-Tek in which such person is named as a nominee for the Board
of Directors without objection to such nomination) shall be, for purposes of
this clause (ii), considered as though such person were a member of the
Incumbent Board, or (iii) the approval by Sono-Tek's stockholders of the sale of
all or substantially all of the assets of Sono-Tek. The Board may adopt such
procedures as to notice and exercise as may be necessary to effectuate the
acceleration of the exercisability of Options as described above.
8.6 The aggregate fair market value (determined as of the date the Option is
granted) of the stock with respect to which Incentive Stock Options granted
under the Plan and all other stock option plans of Sono-Tek are exercisable for
the first time by any specific individual during any calendar year shall not
exceed $100,000.
9. NONTRANSFERABILITY OF OPTIONS
An Option granted under the Plan shall not be transferable otherwise than by
will or the laws of descent and distribution, and an Option may be exercised,
during the lifetime of the employee, only by him or her.
10. TERMINATION OF EMPLOYMENT
10.1 If an employee receiving an Option shall at any time not be an employee of
Sono-Tek, the Option shall at once terminate, except as provided hereinafter in
this paragraph. In the event that the employment of an employee to whom an
Option has been granted under the Plan shall be terminated (other than
termination by the Company for cause as determined by the Board, or by reason of
retirement, disability or death) such Option may, subject to the provisions of
paragraphs "8" and "11", be exercised, to the extent that the employee was
entitled to do so at the date of termination of his or her employment, at any
time within sixty (60) days after such termination, but in no event after the
expiration of the term of the Option. Options granted under the Plan shall not
be affected by any change of duties or position so long as the holder continues
to be an employee of Sono-Tek.
10.2 If a Non-Employee Director awarded an Option shall at any time cease to be
a Director of the Company, the Option shall at once terminate, except as
provided hereinafter in this paragraph. In the event the Non-Employee Director
awarded an Option under the Plan shall be terminated (other than termination by
the Company for cause as determined by the Board, or by reason of retirement,
disability, or death) such Option may, subject to the provisions of paragraphs
"8" and "11", be exercised, to the extent that the Director was entitled to do
so at the date of termination of his or her service, at any time within six
months after such termination, but in no event after the expiration of the term
of the Option.
10.3 An Option granted to a Consultant may, subject to the provisions of
paragraphs "8", and "11" be exercised, to the extent that the Consultant was
entitled to do so at the date of the termination of his or her consulting
services, at any time within one year after such termination, but in no event
after the expiration of the term of the Option.
11. RETIREMENT, DISABILITY OR DEATH OF EMPLOYEE.
If an employee to whom an Option has been granted under the Plan shall retire
from Sono-Tek at normal retirement date pursuant to any pension plan provided by
Sono-Tek, or if such retirement is earlier than the employee's normal retirement
date, and such retirement is with the prior consent of Sono-Tek, or if an
employee is totally and permanently disabled, such Option may be exercised,
notwithstanding the provisions of paragraphs "8" and "10" hereof, in full
without regard to the period of Continuous Employment after the Option was
granted at any time (a) in the case of an Incentive Stock Option within 90 days
after such retirement or disability retirement, but in no event after the
expiration of the term of the Option or (b) in the case of a Non-Qualified Stock
Option within 5 years after such retirement or disability retirement, but in no
event after the expiration of the term of the Option.
If a person to whom an Option has been granted under the Plan shall die while he
or she is employed by or in the service of Sono-Tek, such Option may be
exercised, subject to the provisions of paragraph "8", to the extent that such
person was entitled to do so at the date of his death, by his executor or
administrator or other person at the time entitled by law to such person's
rights under the Option, at any time within such period, not exceeding one year
after his or her death, as shall be prescribed in the Award Agreement, but in no
event after the expiration of the term of the Option.
12. NO LOANS TO HOLDERS OF OPTIONS.
Neither Sono-Tek, nor any company with which it is affiliated may directly or
indirectly lend money to any person for the purpose of assisting him or her to
acquire or carry shares of the Common Stock issued upon the exercise of Options
granted under the Plan.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provision of the Plan, the Award Agreements may
contain such provisions as the Board shall determine for the adjustment of the
number and class of shares covered by each outstanding Award, the option prices
and the minimum numbers of shares as to which Awards shall be exercisable at any
one time in the event of changes in the outstanding Common Stock by reason of
stock dividends, split-ups, spin-offs, recapitalizations, mergers,
consolidations, combinations or exchanges of shares and the like; and, in the
event of any such change in the outstanding Common Stock, the aggregate number
and class of shares available under the Plan and the maximum number of shares as
to which Awards may be granted to any employee shall be appropriately adjusted.
14. SHARE WITHHOLDING.
With respect to any Award, the Board may, in its discretion and subject to such
rules as the Board may adopt, permit the employee to satisfy, in whole or in
part, any withholding tax obligation which may arise in connection with an Award
by election to have Sono-Tek withhold Common Stock having a fair market value
(calculated in accordance with paragraph "6" on the date the amount of
withholding tax is determined) equal to the amount of the withholding tax.
15. NO RIGHT TO CONTINUED EMPLOYMENT.
Nothing in the Plan or in any Award granted or Award Agreement entered into
pursuant to the Plan shall confer upon any employee the right to continue in the
employ of Sono-Tek or interfere with the right of Sono-Tek to terminate his or
her employment at any time.
16. TIME OF GRANTING AWARDS.
Nothing contained in the Plan or in any resolution to be adopted by the holders
of voting stock of Sono-Tek shall constitute the granting of any Award
hereunder. An Award pursuant to the Plan shall be deemed to have been granted on
the date on which the name of the recipient and the terms of the Award are
determined by the Board.
17. TERMINATION AND AMENDMENT OF THE PLAN.
Unless the Plan shall have been terminated as hereinafter provided, no Award
shall be granted hereunder after May 20, 2013. The Board of Directors of
Sono-Tek may at any time prior to that date terminate the Plan or make such
modification or amendment of the Plan as it shall deem advisable; provided,
however, that no amendment may be made, without the approval by the holders of a
majority of voting stock of Sono-Tek, except as provided in paragraph 13 hereof,
which would (i) increase the maximum number of shares for which Awards may be
granted under the Plan, (ii) change the manner of determining the minimum option
prices, (iii) extend the period during which an Award may be granted or an
Option exercised, or (iv) amend the requirements as to the class of persons
eligible to receive Awards. No termination, modification, or amendment of the
Plan or of any Award under the Plan, may, without the consent of the person to
whom an Award shall theretofore have been granted, adversely affect the rights
of such person under such Award.
18. GOVERNMENT REGULATIONS.
The Plan and the granting and exercising of Awards thereunder, and the
obligation of Sono-Tek to issue, sell and deliver shares, as applicable, under
such Awards, shall be subject to all applicable laws, rules and regulations. In
particular, and without limiting the generality of the foregoing, as a condition
to the exercise of any Award, the Company may require the holder of an Option to
deliver to the Company (i) a written certificate of the holder (or his personal
representative, as the case may be) to the effect that he is purchasing such
shares for investment and not with a view to the sale or distribution of any
such shares and (ii) such other certificates, representations and agreements of
the holder (or his personal representative, as the case may be) as may be
required under the Plan or as the Company shall also require in order that the
Company may be reasonably assured that the issuance, delivery, and disposition
of such shares are being and will be effected in compliance with the Securities
Act of 1933, as amended (the "Act"), the Rules and Regulations thereunder, other
applicable law, and the rules of each stock exchange upon which the shares of
Common Stock are listed, if any; provided, however, that if the offer and sale
of shares of Common Stock upon exercise of Options granted under the Plan is
registered under the Act, the holder (or his personal representative, as the
case may be) need not furnish the certificate described in clause (i) of this
sentence. Certificates evidencing shares of Common Stock issued upon exercise of
the Option may contain such legends reflecting any restrictions upon sale or
transfer as in the view of counsel to the Company may be necessary to the lawful
and proper issuance of such certificates.
19. SHAREHOLDER APPROVAL.
The Plan shall become effective upon adoption by the Board. The Plan shall be
subject to approval by the affirmative vote of the holders of a majority of all
outstanding shares of capital stock of the Company entitled to vote thereon
within one (1) year before or after adoption of the Plan by the Board. In the
event such shareholder approval is withheld or otherwise not received within the
given time period, the Plan and all options which may have been granted
thereunder shall become null and void.
Appendix 2
SONO-TEK CORPORATION
AUDIT COMMITTEE
STATEMENT OF ITS DUTIES, RESPONSIBILITIES
AND ACTIVITIES
(AS AMENDED)
This document is intended to serve as the charter of the Audit
Committee of Sono-Tek Corporation. The primary duty of the Sono-Tek Corporation
Audit Committee is to exercise due care in assuring itself that management
fulfills its responsibility that the financial reporting process results in an
objective portrayal of the financial condition of the Corporation (the
"Corporation" includes Sono-Tek and any subsidiaries or affiliates, whether
directly or indirectly owned). The independent public accountants are ultimately
accountable to the Board of Directors and the Audit Committee, as
representatives of the stockholders.
The following are the major responsibilities of the Sono-Tek Audit
Committee:
1. Annually in advance of the annual meeting of stockholders selects the
independent public accountants to audit the books, records and accounts of the
Corporation and submits such selection to the stockholders for ratification or
rejection at such meeting, engages the independent public accountants and
ensures that the scope of the audit is sufficiently comprehensive.
2. Evaluates and, when appropriate, recommends to the Board of Directors the
replacement of the independent public accountants.
3. Reviews the quality and acceptability of each material accounting item
affecting the financial statements of the Corporation which, in the opinion of
the independent public accountants, might receive, under generally accepted
accounting principles ("GAAP"), treatment varying from the proposed for such
statements and transmits to the Board of Directors the Audit Committee's
decision on such accounting items.
4. Reports to the Board on each Committee meeting (orally through its Chairman)
and on a total year's activity in written form on an annual basis.
In undertaking the above-mentioned responsibilities, the Sono-Tek Audit
Committee undertakes the following activities:
1. Meets with the independent public accountants to review their proposed plan
for conducting the annual audit including its scope and degree of reliance on
internal controls, reviews and approves the proposed fees for the audit, and
approves any required special services; and
2. Obtains from the independent public accountants a formal written Statement of
Independence delineating all relationships with Sono-Tek, actively engages in a
dialog with the independent public accountants with respect to any disclosed
relationships or services that may affect their objectivity or independence and
takes appropriate action to ensure their independence; and
3. Receives reports from the management of Sono-Tek, which include material
changes in accounting policy and significant changes in the substance and format
of the financial statements.
In support of its primary duty, the Audit Committee also undertakes the
following responsibilities and activities:
1. Oversee the adequacy of the system of internal accounting controls of the
Corporation.
(a) The Committee ensures itself that actual implementation of the policies of
the Corporation, together with the procedures to be followed thereunder, assure
the safeguarding of assets and the reliability of financial records. In this
regard, the Committee reviews compliance with the Foreign Corrupt Practices Act
and The Sarbanes Oxley Act. The Committee also receives reports on audit
comments periodically from management, and annually from the independent public
accountants, and a report on thefts and defalcations at least annually from the
Chief Executive Officer and Chief Financial Officer of Sono-Tek.
(b) The Committee meets privately and individually with the Chief Executive
Officer and Chief Financial Officer and the independent public accountants to
determine that, among other items: (i) no outstanding differences of opinion
exist between the independent public accountants and management; (ii) no
material changes or modifications of accounting principles or practice exist
which either the independent auditor or management wished to make and the other
resisted; (iii) the internal auditor, if the company has created such a
function, confirms the continued encouragement and support from management; and
(iv) confirms that each has a right and duty of direct communication with the
audit committee at any time.
2. Receive a report annually on expenses reported by the top elected officers of
the corporation.
3. Review the corporation's annual financial statements and the independent
public accountants' report thereon prior to publication of the statements.
4. Ensures the delivery of a report from the Audit Committee to the Board of
Directors (the "Audit Committee Annual Report") disclosing whether or not, with
respect to prior fiscal year: (i) management has reviewed the audited financial
statements with the Audit Committee, including a discussion of the quality of
the accounting principles as applied and significant judgments affecting the
Corporation's financial statements; (ii) the independent public accountants have
discussed with the Audit Committee the independent public accountants' judgments
of the quality of those principles as applied and the judgments referenced in
(i) above under the circumstances; (iii) the members of Audit Committee have
discussed among themselves, without management or the independent public
accountants present, the information disclosed to the Audit Committee, in (i)
and (ii) above; and (iv) the Audit Committee, in reliance on review and
discussions conducted with management and the independent public accountants
pursuant to (i) and (ii) above, is satisfied that the Corporation's financial
statements are fairly presented in conformity with Generally Accepted Accounting
Principles (GAAP) in all material respects. Additionally, the Audit Committee
shall ensure that the Annual Report of the Audit Committee is included in the
Corporation's annual report to shareholders and Form 10-KSB Annual Report.
5. Reviews and discusses with the independent public accountants and a
representative of the Corporation's financial management the financial
information contained in the Corporation's Form 10-QSB Report prior to its
filing and the Corporation's earnings announcements prior to release, including
significant adjustments, management judgments and accounting estimates,
significant new accounting policies and outside auditor disagreements with
management.
6. Conducts special reviews at its own discretion within the parameters of its
basic responsibilities or in other areas at the request of the Chairman of the
Board or the Board of Directors.
7. Ensures the disclosure of the Audit Committee charter at least triennially in
the annual report to stockholders and in the next annual report to shareholders
after any significant amendment to that charter.
8. Reviews and updates the Audit Committee charter as conditions dictate, but at
least triennially.
9. Periodically review globalization issues, strategies, related risks and
controls related to foreign offices, joint ventures and alliances abroad.
In order to successfully execute its responsibilities, the Sono-Tek Audit
Committee maintains a high degree of independence both in establishing its
agenda and directly accessing various members of Sono-Tek and subsidiary
management. This ensures an independent and open exchange of views and confirms
the authority and responsibility of internal and external auditors and financial
management to inform the Audit Committee, formally and informally, of any such
matters within the duties and responsibilities of that Committee. Such
communication is achieved through both formal reports to the Committee and a
direct line of communication by the Chief Financial Officer, General Counsel,
independent public accountants, and others in the Corporation to the Chairman of
the Committee and the Committee itself.
By meeting its clearly delineated responsibilities through
informed and dynamic activity and communication processes, the Audit Committee
can enable the Board to fulfill its fiduciary responsibilities relative to the
Corporation's internal controls and financial reporting process.