SONICS & MATERIALS, INC.
W. Kenosia Avenue
Danbury, CT 06810
(203) 744-4400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on Thursday, November 13, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Sonics & Materials, Inc. (the "Company") which will be held at the Ethan Allen
Inn, 21 Lake Avenue Ext., Danbury, Connecticut 06810, on Thursday, November 13,
1997, at 10 a.m. local time. The meeting is to be held for the following
purposes:
1. To elect five directors, each for a term of one year or until their
respective successors are elected and qualified;
2. To ratify the appointment by the Board of Directors of Grant
Thornton LLP as independent accountants for the fiscal year 1998; and
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
These items are fully discussed in the following pages, which will be made
part of this Notice. Only stockholders of record on the books of the Company at
the close of business on October 3, 1997 will be entitled to vote at the
meeting. The transfer books of the Company will not be closed. A list of
stockholders entitled to vote will be available for inspection at the offices of
the Company, W. Kenosia Avenue, Danbury, Connecticut 06810, for 10 days prior to
the Annual Meeting.
Stockholders are requested to sign, date and return the enclosed proxy as
soon as possible. A return envelope which requires no postage if mailed in the
United States is enclosed for your convenience. Stockholders who execute proxies
retain the right to revoke them at any time prior to the voting thereof by
filing written notice of such revocation with the Secretary of the Company, by
submission of a duly executed proxy bearing a later date or by voting in person
at the Annual Meeting of Stockholders. Attendance at the Annual Meeting will not
in and of itself constitute revocation of a proxy. Any written notice revoking a
proxy should be sent to Secretary, Sonics & Materials, Inc., W. Kenosia Avenue,
Danbury, Connecticut 06810.
By Order of the Board of Directors
/S/LAUREN H. SOLOFF
Danbury, Connecticut Lauren H. Soloff
October 8, 1997 Secretary
<PAGE>
SONICS & MATERIALS, INC.
W. Kenosia Avenue
Danbury, CT. 06810
--------------------
PROXY STATEMENT
--------------------
1997 ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy is solicited by the Board of Directors of Sonics &
Materials, Inc. (the "Company") for use in voting at the Annual Meeting of
Stockholders to be held at the Ethan Allen Inn, 21 Lake Avenue Ext., Danbury,
Connecticut 06810, on Thursday, November 13, 1997, at 10 a.m. local time, and at
any postponement or adjournment thereof, for the purposes set forth in the
attached notice.
Voting and Revocability of Proxies
The persons named in the enclosed form of proxy will vote the shares for
which they are appointed in accordance with the directions of the stockholders
appointing them. In the absence of such directions, such shares will be voted
FOR proposals 1 and 2 listed below and, in the best judgment of the persons
named in the enclosed proxy, will be voted on any other matters as may come
before the meeting. Any stockholder who executes a proxy has the power to revoke
the same at any time before it is voted by filing written notice of such
revocation with the Secretary of the Company, by submission of a duly executed
proxy bearing a later date or by voting in person at the Annual Meeting of
Stockholders. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy. Any written notice revoking a proxy should be
sent to Secretary, Sonics & Materials, Inc., W. Kenosia Avenue, Danbury,
Connecticut 06810. A return envelope which requires no postage if mailed in the
United States is enclosed for your convenience.
The principal executive offices of the Company are located at W. Kenosia
Avenue, Danbury, Connecticut 06810. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent or given to the
Company's stockholders is Tuesday, October 14, 1997.
Record Date and Share Ownership
Only holders of shares ("Shares") of Common Stock, par value $.03 per
share ("Common Stock"), of record at the close of business on October 3, 1997
are entitled to vote at the meeting. On the record date there were outstanding
3,590,100 Shares. Each outstanding Share is entitled to one vote upon all
matters to be acted upon at the meeting. The holders of a majority of the issued
and outstanding Shares, present in person or represented by proxy, shall
constitute a quorum.
The affirmative vote of a plurality of the votes cast by all stockholders
entitled to vote thereon is required to elect directors (Proposal No. 1).
Therefore, those nominees (up to the number of directors to be elected)
receiving the highest number of votes will be elected. The affirmative vote of a
majority of the votes cast by all stockholders entitled to vote thereon is
required to ratify the appointment by the Board of Directors of the independent
auditors (Proposal No. 2) and generally to act upon any other matter as may
properly come before the meeting or any adjournment thereof. Both abstentions
and proxy holders with authority to vote on at least one matter scheduled to
come before the meeting are counted as "present" for the purposes of determining
whether there is a quorum for the meeting. Abstentions have the effect of a
negative vote on proposals requiring the approval of a majority of the Common
Stock and, due entirely to the method of calculating a plurality, have no effect
on the election of directors. Because broker nonvotes are not entitled to a
vote, they are not considered in any way when determining whether any proposal
for which the broker withheld authority was approved.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, five Directors will be elected by the stockholders to
serve until the next annual meeting or until their successors are elected and
qualified. Carole Soloff, a Director of the Company since 1969, will resign at
the 1997 Annual Meeting. The Board of Directors has, effective as of the 1997
Annual Meeting, reduced the number of Directors from six to five. The
accompanying form of proxy will be voted for the election as Directors of the
five persons named below, unless the proxy contains contrary instructions.
Proxies cannot be voted for a greater number of persons than the number of
nominees named in the Proxy Statement. 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.
Information Regarding Each Nominee
Robert S. Soloff
Age: 58 First Elected Director: 1969
President and Chief Executive Officer of the Company
Member of Stock Option Committee and Audit Committee
Mr. Soloff joined the Company in 1969 and has served as its Chairman,
President and a Director since then. From 1960 to 1961, he was employed as an
Assistant Project Engineer by Kearfott-Singer, Inc. designing ultrasonic oil
burners and investigating the use of ultrasonic energy for various industrial
applications. From 1962 until 1969, Mr. Soloff held a variety of positions with
Branson Sonic Power Company, a major manufacturer of ultrasonic devices. These
positions included laboratory manager for new products and applications, New
York Metro district sales manager and manager of new product development. Mr.
Soloff is currently serving as a director of the Ultrasonic Industry
Association. He is a 1960 graduate of Cooper Union where he earned a bachelor of
science degree in mechanical engineering.
Alan Broadwin
Age: 62 First Elected Director: 1995
Medical Device Industry Consultant
Member of Audit Committee
Mr. Broadwin has acted as an independent consultant in the medical device
field from 1993 to date. He also currently serves the Company as a consultant on
medical products, focusing on its ultrasonic surgical instruments. In 1988, he
joined Valleylab, Inc. and continued in its employ until 1993 holding various
positions, including director of ultrasonic technology and director of
engineering. Mr. Broadwin holds both bachelor of arts and bachelor of science
(mechanical engineering) degrees from Columbia University and a masters in
science (industrial engineering) degree from the Stevens Institute of
Technology.
Jack Tyransky
Age: 52 First Elected Director: 1995
Partner, Allen & Tyransky
Member of Stock Option Committee and Audit Committee
Mr. Tyransky has been a partner in Allen & Tyransky, a Connecticut
certified public accounting firm since 1975. This firm served as the Company's
certified public accountants from 1988 to 1994. He holds a bachelor of science
degree in accounting from the University of Maryland and a masters degree in
science (taxation) from the University of Hartford.
<PAGE>
Lauren H. Soloff
Age: 31 First Elected Director: 1995
Vice President of Legal Affairs and Investor Relations of the Company
Secretary of the Company
Ms. Soloff, the daughter of Robert Soloff, joined the Company in early
1995 as Corporate Counsel, Secretary and a Director. In May of 1996, Ms. Soloff
was promoted to Vice President of Legal Affairs and Investor Relations. From
1993 to 1994, she was employed by the Connecticut law firm of Siegel, O'Connor,
Schiff and Zangari as an associate specializing in litigation for labor and
employment matters. From 1991 to 1993, she served as a staff attorney for the
Office of Solicitor of the U.S. Department of Labor where she was responsible
for all aspects of appellate litigation as well as other litigation and
counseling duties. Ms. Soloff is a member of the New York and Connecticut bars.
She has a bachelor of arts degree from Tufts University and a juris doctorate
from the Washington College of Law, American University.
Stephen J. Drescher
Age: 34 First Elected Director: 1996
Director of Corporate Finance, Monroe Parker Securities
Mr. Drescher is the Director of Corporate Finance for Monroe Parker
Securities. From 1993 to 1996, he was the President and Chief Executive
Officer of Judicate, Inc., (a diversified company). He holds a bachelor of
arts degree and his juris doctorate from the University of Miami.
During the fiscal year ended June 30, 1997, there was one regular meeting
of the Board of Directors and the Board acted by unanimous written consent once
during the same period. All of the directors of the Corporation attended the
meeting of the Board of Directors except for Stephen Drescher.
The Audit Committee, which was formed by the Board on February 8, 1996,
recommends for approval by the Board of Directors a firm of certified public
accountants whose duty it is to audit the financial statements of the Company
for the fiscal year in which they are appointed and monitors the effectiveness
of the audit effort, the Company's internal financial and accounting
organization and controls and financial reporting. The Audit Committee met once
during fiscal year 1997, with one hundred percent of the Audit Committee members
in attendance. The members of the Audit Committee are Jack Tyransky, Alan
Broadwin and Robert Soloff.
The Stock Option Committee, formed by the Board on September 29, 1995,
administers the Company's Incentive Stock Option Plan, as amended (the "Option
Plan"), including the review and grant of stock options to all eligible
employees under such Plan. Its members are Jack Tyransky and Robert Soloff. The
Stock Option Committee did not meet in fiscal 1997.
The Board of Directors does not have an executive committee, nominating
committee or compensation committee.
The Company's non-employee directors are paid a fee of $300 for attendance
at each of its Board of Directors meetings plus related expenses.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE ELECTION
OF THE ABOVE NAMED NOMINEES. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended June 30, 1997,
1996 and 1995, the annual and long-term compensation for the Company's Chief
Executive Officer and its Vice President of Marketing (the
<PAGE>
"named executives").
These were the only employees whose annual compensation exceeded $100,000 for
the fiscal year ended June 30, 1997. Summary Compensation Table
<TABLE>
Long Term
-----------
Annual Compensation Compensation
Awards
<S> <C> <C> <C> <C> <C> <C>
----- ------- ------- ----------- ----------- -----------
Securities
Name and Other Underlying
Principal Position Base Annual Options/ All Other
Year Salary Bonus Compensation SARs(#) Compensation
(1)
- --------------------
Robert Soloff 1997 $198,000 $18,000 $11,809 0 $ 0
- --------------------
Chairman of the 1996 180,000 0 15,111 0 0
Board
- --------------------
President, and CEO 1995 150,000 35,000 20,200 0 160,000(2)
- --------------------
- --------------------
Richard Berger (3) 1997 89,333 28,384 3,407 0 0
- --------------------
Vice President, 1996 87,000 58,766 5,878 10,000 0
Marketing
- --------------------
1995 83,600 36,900 6,000 0 150,000(4)
- --------------------
</TABLE>
- ---------------------------
(1) Represents compensation for excess life insurance premium and personal
use of company autos. Includes executive insurance benefits for Mr.
Soloff and profit sharing awards for Mr. Berger.
(2) Represents amounts paid to stockholder for taxes due on S corporation
income. This practice is now discontinued based on the Company's status as
a C corporation.
(3) Mr. Berger (age 54) joined the Company in 1983 as Product Manager and in
1984 became Vice President of Marketing and has continued in that capacity
since that date. From 1972 to 1983, he was employed by Branson Sonic Power
Company in a variety of positions, including Product Specialist, Product
Manager and Marketing Director for Fabric and Film Sealing, and Marketing
Director for Packaging and Textile Equipment. Mr. Berger holds a bachelor
of arts and masters degrees in business administration from the University
of New Haven.
(4) Represents amounts paid by the Company to repurchase non-qualified stock
options for 50,000 shares of the Company's Common Stock.
<PAGE>
Employment Contracts
Effective July 1, 1995, the Company entered into an employment agreement
with Robert S. Soloff, who is serving as the Company's President for an initial
term expiring June 30, 1998 at an annual base salary of $180,000, $198,000 and
$218,000 in each of the three years, respectively. Such base salary may be
increased at the discretion of the Board of Directors through (i) any bonus
arrangement provided by the Company in its discretion and (ii) other
compensation or employee benefit plans and arrangements, if any, provided to
other officers and key employees of the Company. Such bonuses will be determined
by the non-employee members of the Board of Directors who will take into account
the performance of Mr. Soloff and the Company in making such determination. Such
bonuses may not exceed 10% of Mr. Soloff's annual compensation for three years.
Mr. Soloff is subject to a two-year covenant not to compete with the Company
that begins July 19, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the Company's bank line of credit, Robert Soloff and Carole Soloff
had personally guaranteed all amounts outstanding under such line of credit.
Upon the successful completion of the Company's initial public offering in
February 1996, such personal guarantees were terminated.
On June 29, 1995, Sonics made a distribution of $500,000 to Mr. Soloff,
representing a portion of retained earnings accumulated by the Company while an
S corporation. Such $500,000 was used by Mr. Soloff to purchase a certificate of
deposit from the Company's bank. The certificate of deposit was pledged by Mr.
Soloff to the bank as additional security for the Company's $500,000 demand
note. Upon completion of the Company's initial public offering, such certificate
no longer served as security for the Company's borrowings. Upon completion of
the initial public offering, the remainder of the S corporation retained
earnings, approximately $2,509,000, was reclassified as paid-in capital as if
the earnings had been distributed to Mr. Soloff and then contributed to the
Company.
During the period July 1, 1995 through the termination of the Company's S
corporation status, the Company made distributions to Mr. Soloff of
approximately $496,000, including an adjustable note payable to Mr. Soloff of
$450,000, to cover estimated personal income taxes on the Company's S
corporation income.
Stephen Drescher, a nominee for Director, is the Director of Corporate
Finance for Monroe Parker Securities, which served as the underwriter for the
Company's initial public offering in February, 1996. In February 1996, Monroe
Parker Securities granted to Mr. Drescher an option to purchase 10,000 shares of
the Company's Common stock, and 10,000 Warrants to Purchase Common Stock (the
"Warrants"). Mr. Drescher's option is subject to the same terms and conditions
as Monroe Parker Securities' option discussed below. Mr. Drescher exercised his
option to purchase 10,000 Warrants to purchase Common Stock in fiscal year 1997.
In connection with the public offering, Monroe Parker Securities received
(i) an underwriting discount of $.50 per share and $.015 per Warrant, or
$525,925, (ii) an option to purchase 100,000 shares of Common Stock and 100,000
Warrants exercisable over a period of four years commencing February 26, 1997,
at exercise prices of $8.25 per share of Common Stock and $.25 per Warrant,
(iii) a 3% non-accountable expense allowance of $157,778, and (iv) a two-year
consulting agreement pursuant to which Monroe Parker Securities received fees
aggregating $100,000, together with possible finder's fees on certain future
transactions. The Company also granted to Monroe Parker Securities the right to
appoint one person to serve on its Board of Directors or to function as an
observer at meetings of the Board, subject to the Company's approval. Mr.
Drescher was recommended by Monroe Parker Securities for election to the Board.
At the 1996 Annual Meeting of Stockholders, Mr. Drescher was elected to the
Board. In addition, the Company and the underwriter agreed to indemnify each
other against certain liabilities under the Securities Act of 1933. Monroe
Parker Securities exercised its option to purchase 100,000 Warrants to purchase
Common Stock in fiscal year 1997.
Upon the exercise of the Company's Warrants, the Company will pay Monroe
Parker Securities a fee of 4% of the aggregate exercise price if (i) the market
price of its Common Stock on the date the Warrant is exercised is greater than
the then exercise price of the Warrants; (ii) the exercise of the Warrants was
solicited by a member of
<PAGE>
NASD; (iii) the Warrant is not held in a discretionary
account; (iv) disclosure of compensation arrangements was made both at the time
of the initial public offering and at the time of exercise of the Warrants; (v)
the solicitation of exercise of the Warrant was not in violation of Rule 10b-6
promulgated under the Securities Exchange Act of 1934; and (vi) no fee will be
paid on non-solicited exercises.
In fiscal 1997, the Company paid $73,959 to Alan Broadwin, a member of the
Board of Directors, for consulting services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the Company's
Common Stock owned as of October 3, 1997 by (i) each person who is known by the
Company to own beneficially more than 5% of its outstanding Common Stock, (ii)
each director and nominee for director, (iii) each named executive officer, and
(iv) all executive officers and directors as a group.
Warrants to Purchase
Common Stock Common Stock
------------------------ -------------------------
Amount and Amount and
Nature of Nature of
Name and Address of Beneficial Percentage Beneficial Percentage
Beneficial Owner (1) Ownership Owned Ownership Owned
- -------------------- --------- ----- --------- -----
Robert S. Soloff 2,500,000 69.6% 0 *
Richard H. Berger 10,000 (2) * 0 *
Lauren H. Soloff 274,390 (3) 7.1% 0 *
Carole Soloff 0 * 0 *
Jack T. Tyransky 2,000 (2) * 0 *
Alan Broadwin 1,100 (2) * 0 *
Stephen J. Drescher 10,000 (4) * 10,000 (5) *
All executive officers
and directors 2,830,466 73.7% 10,000 *
as a group (9
persons) (2) (6)
- ---------------------------
* Indicates less than one percent.
(1) The address of each such person is c/o Sonics & Materials, Inc., W.
Kenosia Avenue, Danbury CT 06810 and except as otherwise set forth in the
footnotes below, all shares are beneficially owned and the sole voting and
investment power is held by the persons named.
(2) Represents or includes qualified stock options granted under the Company's
Option Plan.
(3) Represents shares of Common Stock issuable upon exercise of
currently exercisable non-qualified stock options granted to Ms. Soloff.
(4) Represents options to purchase 10,000 shares of Common Stock and
Warrants (the "Options") that were granted to Mr. Drescher by Monroe
Parker Securities. See "Certain Relationships and Related
Transactions."
(5) Represents 10,000 Warrants received upon exercise of the Options. Such
options were exercised by Mr. Drescher with respect to the Warrants on
March 20, 1997.
(6) Includes 274,390 shares and 10,976 shares which are issuable upon exercise
of currently-exercisable non-qualified stock options granted to Lauren H.
Soloff and Daniel Grise, respectively, under the Company's Option Plan.
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Grant Thornton LLP has been designated by the Board of Directors, subject
to ratification by the Company's stockholders, to make an examination of the
consolidated balance sheet of the Company as of June 30, 1998 and the related
consolidated statements of income and cash flows for the fiscal year ending June
30, 1998, and for such other purposes incidental thereto as may be required.
Grant Thornton LLP has been the Company's independent accountants since 1995.
The Company expects that a representative of Grant Thornton LLP will be
present at the meeting and will be available to respond to appropriate questions
from stockholders. The representative from Grant Thornton LLP will have an
opportunity to make a statement at the meeting if he or she so desires.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
RATIFICATION OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers and persons who own more than 10%
of the Company's Common Stock or other equity securities to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company on Forms 3, 4 and 5. Officers, Directors and 10% shareholders are
required by SEC regulations to furnish the Company with copies of all Forms 3, 4
and 5 they file. Based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, the Company believes all Section 16(a) filing requirements applicable
to its officers, Directors and 10% beneficial owners, excluding Mr. Drescher,
were complied with during the fiscal year ended June 30, 1997. Mr. Drescher
failed to file a Form 4 reporting the exercise of options to purchase 10,000
Warrants on March 20, 1997 and a Form 5 reporting the same transaction that
should have been filed on or before August 14, 1997. See "Security Ownership of
Certain Beneficial Owners." Mr. Drescher intends to file a Form 4 and Form 5
prior to the 1997 Annual Meeting of Stockholders.
OTHER MATTERS
The management of the Company does not know of any matters other than
those stated in the Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, it is
intended that proxies in the accompanying form will be voted on any such matters
in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such matters is conferred by such proxies
upon the persons voting them.
The Company will bear the cost of preparing, assembling and mailing the
proxy, Proxy Statement and other material which may be sent to its stockholders
in connection with this solicitation. In addition to the solicitation of proxies
by use of the mails, officers and regular employees of the Company may solicit
the return of proxies. The Company may reimburse persons holding stock in their
names or in the names of other nominees for their expenses in sending proxies
and proxy material to principals. Proxies may be solicited by mail, personal
interview, telephone and fax.
The Company will provide without charge to each person being solicited by
this Proxy Statement, on the written request of any such person, a copy of the
Annual Report of the Company on Form 10-KSB for the year ended June 30, 1997 (as
filed with the Securities and Exchange Commission) including the financial
statements and the schedules thereto. All such requests should be directed to
Lauren H. Soloff, Secretary, Sonics & Materials, Inc., W. Kenosia Avenue,
Danbury, Connecticut 06810.
<PAGE>
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
All proposals of stockholders intended to be included in the proxy
statement to be presented at the next Annual Meeting of Stockholders must be
received at the Company's executive office in Danbury, Connecticut, no later
than June 16, 1998.
By Order of the Board of Directors
/s/Lauren H. Soloff
Lauren H. Soloff
Secretary
Dated: October 8, 1997
