SONICS & MATERIALS, INC.
53 Church Hill Road
Newtown, CT 06470
(203) 270-4600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on Thursday, November 19, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Sonics & Materials, Inc. (the "Company") which will be held at Sonics &
Materials, Inc., 53 Church Hill Road, Newtown, Connecticut on Thursday, November
19, 1998, at 10:00 a.m. local time. The meeting is to be held for the following
purposes:
1. To elect four 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 Schneider
Ehrlich & Wengrover LLP as independent accountants for the fiscal
year 1999; 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, 1998 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 at 53 Church Hill Road, Newtown, Connecticut 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., 53 Church Hill
Road, Newtown, Connecticut 06470.
By Order of the Board of Directors
Newtown, Connecticut Lauren H. Soloff
October 19, 1998 Secretary
<PAGE>
SONICS & MATERIALS, INC.
53 Church Hill Road
Newtown, CT 06470
--------------------
PROXY STATEMENT
--------------------
1998 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 Sonics & Materials, Inc., 53 Church Hill Road,
Newtown, Connecticut on Thursday, November 19, 1998, at 10:00 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., 53 Church Hill Road, Newtown,
Connecticut 06470. 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 53 Church
Hill Road, Newtown, Connecticut 06470. 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 Friday, October 23, 1998.
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, 1998
are entitled to vote at the meeting. On the record date there were outstanding
3,570,100 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 non-votes 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, four Directors will be elected by the stockholders to
serve until the next annual meeting or until their successors are elected and
qualified. On December 19, 1997, Stephen Drescher, a Director of the Company
since 1995, resigned as a Director. On December 29, 1997, Alan Broadwin, a
Director of the Company since 1995 resigned as a Director. In July 1998 the
Board of Directors reduced the number of Directors from five to four and
appointed Ronald Kalb to fill the vacancy created by Mr. Broadwin's resignation.
The accompanying form of proxy will be voted for the election as Directors of
the four 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: 59
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.
Jack Tyransky
Age: 53
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: 32
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.
Ronald Kalb
Age: 48
First Nominated for Director: July of 1998
Ronald Kalb is the Vice President and a principal owner of the Siegel
Agency, Inc., a Connecticut insurance agency. Mr. Kalb has been with the Siegel
Agency since 1977. Prior to that, he was employed as a civil engineer by Ebasco
Services, Inc. He holds a bachelor of civil engineering degree from the City
College of New York and received his masters in Engineering at the Brooklyn
Polytechnical Institute.
During the fiscal year ended June 30, 1998, 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.
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 1998, with one hundred percent of the Audit Committee members
in attendance. The members of the Audit Committee presently are Jack Tyransky,
Robert Soloff and Ronald Kalb.
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 1998.
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.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended June 30, 1998,
1997 and 1996, the annual and long-term compensation for the Company's Chief
Executive Officer (the "named executive"). This was the only employee officer,
who was serving as such on June 30, 1998, whose annual compensation exceeded
$100,000 for the fiscal year ended June 30, 1998.
Summary Compensation Table
Annual Compensation
Other Annual
Name and Base Compensation
Principal Position Year Salary Bonus (1)
Robert Soloff 1998 $114,000 $ 0 $ 18,273
Chairman of the Board, 1997 198,000 18,000 11,809
President, and CEO 1996 180,000 0 15,111
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(1) Represents compensation for excess life insurance premium and personal use
of company auto. Includes executive insurance benefits for Mr. Soloff.
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 which expired on June 30, 1998. The agreement provided for an annual base
salary of $180,000, $198,000 and $218,000 in each of the first three years of
the agreement. On June 30, 1998, the Board of Directors unanimously voted to
extend the term of the contract under the same terms and conditions. For fiscal
year 1998, Mr. Soloff voluntarily reduced his salary to $114,000. Under the
agreement, the 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 upon the
expiration of his contract.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's public offering in February 1996, Monroe
Parker Securities, the underwriter in the public offering, 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 nominate 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. Stephen Drescher was
recommended by Monroe Parker Securities for nomination to the Board. At the 1996
and 1997 Annual Meetings of Stockholders, Mr. Drescher was elected to the Board.
In December 1997, Mr. Drescher resigned as a director. 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.
<PAGE>
Upon the exercise of the Company's Warrants, the Company is obligated to
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 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 January 1998, Monroe Parker Securities withdrew as a broker dealer
registered with the NASD. The Company has not been notified of any assignment by
Monroe Parker Securities of any of the rights it received in connection with the
Company's public offering
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the Company's
Common Stock owned as of October 13, 1998 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 2,510,000 69.9% 0
Lauren H. Soloff 274,990(3) 7.1% 0 *
Jack Tyransky 3,000(2) * 0 *
Ronald Kalb 1,000(2) * 0 *
All directors and
executive officers as a
group (6 people) (2) (4) 2,830,976 74.0% 0 *
- ----------
* Indicates less than one percent.
(1) The address of each such person is c/o Sonics & Materials, Inc., 53 Church
Hill Road, Newtown, Connecticut 06470 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) Includes shares of Common Stock issuable upon exercise of currently
exercisable non-qualified stock options granted to Ms. Soloff.
(4) 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
Schneider Ehrlich & Wengrover 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, 1999
and the related consolidated statements of income and cash flows for the fiscal
year ending June 30, 1999, and for such other purposes incidental thereto as may
be required. The Board of Directors appointed Schneider Ehrlich & Wengrover the
Company's independent accountants on April 24, 1998.
The Company expects that a representative of Schneider Ehrlich & Wengrover
will be present at the meeting and will be available to respond to appropriate
questions from stockholders. The representative from Schneider Ehrlich &
Wengrover will have an opportunity to make a statement at the meeting if he or
she so desires.
Grant Thornton LLP previously served as the independent accountants of the
Company and performed the annual audit for fiscal year 1997. Grant Thornton LLP
served as the Company's independent accountants since 1995. The decision to
change accountants was not occasioned by any disagreement or advice given on any
matter by Grant Thornton. On April 24, 1998, the Company terminated Grant
Thornton LLP as the Company's principal accountants and engaged Schneider
Ehrlich & Wengrover LLP as the Company's principal accountants. The decision to
change accountants was recommended and approved by the Audit Committee of the
Board of Directors.
During the Company's two most recent fiscal years and the subsequent
interim periods preceding such termination, there were no disagreements with
Grant Thornton LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Grant Thornton LLP would
have caused it to make reference to the subject matter of the disagreements in
connection with its report.
The audit reports of Grant Thornton LLP on the financial statements of the
Company for either of the past two years did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles.
During the Company's two most recent fiscal years and the subsequent
interim periods preceding such termination, there were no events for which
disclosure is required pursuant to Item 304(a)(1)(iv) of Regulation S-B
promulgated under the Securities Exchange Act of 1934 as amended.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
RATIFICATION OF SCHNEIDER EHRLICH & WENGROVER 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 were complied with during
the fiscal year ended June 30, 1998.
<PAGE>
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, 1998 (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., 53 Church Hill Road,
Newtown, Connecticut 06470.
STOCKHOLDER PROPOSALS FOR 1999 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 Newtown, Connecticut, no later
than June 10, 1999.
By Order of the Board of Directors
Lauren H. Soloff
Secretary
Dated: October 19, 1998
