UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) Of
The Securities Exchange Act Of 1934
Filed by the Registrant[X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commissions Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
CVD EQUIPMENT CORPORATION
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CVD EQUIPMENT CORPORATION
1860 Smithtown Ave.
Ronkonkoma, New York 11779
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 12, 2007
Dear Shareholders:
NOTICE IS HEREBY GIVEN, that the 2007 Annual Meeting of Shareholders of CVD
Equipment Corporation (the "Company") will be held at 10:00 A.M., Eastern
Standard Time on December 12, 2007 at the Company's headquarters located at 1860
Smithtown Avenue, Ronkonkoma, New York 11779. At the meeting, you will be asked
to vote on:
1. The election of five directors to the Board of Directors of the
Company to serve until the 2008 Annual Meeting of Shareholders;
2. The ratification of the appointment by the Audit Committee of the
Board of Directors of the Company in appointing Moore Stephens, P.C.
as the Company's independent registered public accountants for the
year ending December 31, 2007;
3. To approve the 2007 Share Incentive Plan; and
4. The transaction of such other and further business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed October 31, 2007 as the record date for
determining Shareholders entitled to receive notice of, and to vote at, the
Annual Meeting or any adjournment or postponement thereof. Only Shareholders of
record at the close of business on October 31, 2007 are entitled to notice of,
and to vote at, the meeting.
Your vote is important to us. Whether or not you intend to be present at the
meeting, please sign and date the enclosed proxy card and return it in the
enclosed envelope.
The foregoing items of business are more fully described in the accompanying
proxy statement.
By Order of the Board of Directors,
/s/ Leonard A. Rosenbaum
--------------------------------
Leonard A. Rosenbaum
Chairman, President and Chief Executive Officer
Dated: October 31, 2007
Ronkonkoma, New York
CVD EQUIPMENT CORPORATION
1860 Smithtown Avenue
Ronkonkoma, New York 11779
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
December 12, 2007
INTRODUCTION
This proxy statement and the accompanying proxy card is furnished in connection
with the solicitation by the Board of Directors of CVD Equipment Corporation, a
New York corporation (the "Company"), of proxies for use at the 2007 Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the Company's
headquarters at 1860 Smithtown Avenue, Ronkonkoma, New York 11779 at 10:00 A.M.
Eastern Standard Time, on December 12, 2007, or at any adjournment or
postponement thereof, for the purposes set forth in this proxy statement and the
accompanying Notice of Annual Meeting of Shareholders. This proxy statement and
the accompanying proxy card is first being mailed to Shareholders on or about
November 5, 2007 to all Shareholders entitled to vote at the Annual Meeting.
VOTING PROCEDURES AND SOLICITATION
Your Vote Is Important
Whether or not you plan to attend the meeting, please complete and return the
enclosed proxy card. Your prompt voting may save the Company the expense of the
following up with a second mailing. A return envelope (postage paid if mailed in
the United States) is enclosed for that purpose.
Methods of Voting
You may vote by signing and returning the enclosed proxy card or by voting in
person at the meeting. If you send in a proxy card, and also attend the meeting
in person, the proxy holders will vote your shares as you instructed on your
proxy card, unless you inform the Secretary at the meeting that you wish to vote
in person.
Revoking a Proxy
You may revoke your proxy by:
[X] Signing and returning another proxy card at a later date;
[X] Sending written notice of revocation to the attention of the Secretary to:
CVD Equipment Corporation
1860 Smithtown Avenue,
Ronkonkoma, NY 11779; or
[X] Informing the Secretary and voting in person at the meeting.
To be effective, a later-dated proxy or written revocation must arrive at the
above address before the start of the meeting.
1
Proxy Solicitation
The enclosed proxy card is being solicited on behalf of the Board of Directors.
The Company will pay all costs of preparing, assembling and mailing the proxy
materials. In addition to mailing out proxy materials, the Company's directors,
officers and employees may, without being additionally compensated, solicit
proxies by telephone or fax. The Company has requested brokers, banks and other
fiduciaries to forward proxy materials to the beneficial owners of the Company's
common stock. No additional compensation will be paid for such solicitation. The
Company does not expect to employ anyone else in the solicitation of proxies.
How Proxy Cards Are Voted
The proxy holders named on the proxy card are Leonard Rosenbaum, the Company's
Chairman, President and Chief Executive Officer, and Glen R. Charles, the
Company's Chief Financial Officer and Secretary. The proxy holders will vote
shares according to the Shareholder instructions on the proxy card. If a signed
proxy card does not contain instructions, then the proxy holders will vote the
shares (1) "FOR" the election of the director nominees listed on the card; (2)
"FOR" ratifying the appointment of Moore Stephens, P.C. as the Company's
independent public accountants for the year ending December 31, 2007; (3)"FOR"
the approval of the 2007 Share Incentive Plan; and (4) in their discretion, on
any other business that may properly come before the meeting.
Broker Non-Votes
A broker non-vote occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary voting power for that particular item, and has not received
instructions from the beneficial owner. Broker non-votes count for quorum
purposes but not for voting purposes.
Quorum and Votes Required
A majority of the outstanding shares of common stock entitled to vote
represented at the Annual Meeting in person or by proxy constitute a quorum.
Only votes "FOR" or "AGAINST" a proposal count. Abstentions and broker non-votes
will count towards the quorum but not for voting purposes.
Directors are elected by a plurality of the votes cast, so the five nominees
receiving the most votes will be elected. Shareholders who do not wish to vote
for one or more of the individual nominees may withhold authority as directed in
the proxy card.
The proposal to ratify the appointment of the independent auditors for the year
ending December 31, 2007 requires the affirmative vote of the holders of a
majority of shares of common stock present or represented by proxy at the Annual
Meeting and entitled to vote.
Voting Rights, Shares Outstanding and Votes Per Share
Holders of common stock at the close of business on the record date of October
31, 2007 are entitled to vote at the meeting.
As of the close of business on October 31, 2007, there were 4,715,000 shares of
common stock outstanding.
Each share of common stock is entitled to one vote.
2
Householding of Annual Meeting Materials
Some banks, brokers and other nominee record holders may be participating in the
practice of "householding" proxy statement and annual reports. This means that
only one copy of our proxy statement and annual report to Shareholders may have
been sent to multiple Shareholders in your household. The Company will promptly
deliver a separate copy of either document to you if you contact the Secretary
at the following address or telephone number: CVD Equipment Corporation, 1860
Smithtown Avenue, Ronkonkoma, NY 11779; telephone: (631) 981-7081. If you want
to receive separate copies of the proxy statement or the annual report to
Shareholder in the future, or if you are receiving multiple copies and would
like to receive only one copy per household, you should contact your bank,
broker or other nominee record holder, or you may contact the Company at the
above address or telephone number.
3
PROPOSAL 1: ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
At the time of the Annual Meeting, the Board of Directors will consist of five
incumbent members who are seeking to be elected at the meeting to serve until
the next annual meeting or special meeting of Shareholders at which a new Board
of Directors is elected and until their successors shall have been elected and
qualified. The accompanying proxy card will be voted in favor of the following
persons to serve as directors, unless the Shareholder indicates to the contrary
on the proxy card. Each of the nominees is currently one of the Company's
directors. See "Information Regarding Executive Officers and Directors" for
biographical information as to each nominee.
The Board of Directors has nominated Leonard A. Rosenbaum, Alan H. Temple, Jr.,
Martin J. Teitelbaum, Conrad J. Gunther and Bruce T. Swan for election as the
Company's directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL 1 TO ELECT
AS DIRECTORS THE FIVE NOMINEES PROPOSED BY THE BOARD OF DIRECTORS.
Information Regarding our Board of Directors
Our Board of Directors consists of five members, four of which have been
determined to be "independent" as defined by the applicable rules of the NASDAQ
Capital Market ("NASDAQ"). These "independent" directors are Messrs. Gunther,
Temple, Teitelbaum and Swan. Consistent with NASDAQ requirements, we require
that a majority of our Board of Directors be "independent" directors.
The Company's common stock is listed on the NASDAQ. The Company is a small
business issuer under the rules and regulations of the Securities and Exchange
Commission.
The primary responsibilities of our Board of Directors are to provide oversight,
strategic guidance, counseling and direction to our management. Our Board of
Directors meets on a regular basis and additionally as required. Written or
electronic materials are distributed in advance of meetings as a general rule
and our Board of Directors schedules meetings with, and presentations from,
members of our senior management on a regular basis and as required.
Directors are elected at the Annual Meeting of Shareholders and hold office
until our next Annual Meeting and until their successors are elected and
qualified. Officers are appointed by the Board of Directors and serve at the
pleasure of the Board of Directors.
The Board of Directors held five meetings during the 2006 fiscal year. All of
the directors attended at least 75% of the meetings of the Board of Directors
and of the committees on which they served. While we encourage all members of
the Board of Directors to attend annual meetings of Shareholders, there is no
formal policy as to their attendance. At last year's annual meeting of
Shareholders, all five members of the Board of Directors attended the meeting.
INFORMATION REGARDING EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, ages and positions within the Company
of each of our directors and executive officers.
Name Age Position(s) with the Company
---- ---- ----------------------------
Leonard A. Rosenbaum 61 Chairman of the Board of Directors,
Chief Executive Officer and President
Alan H. Temple, Jr. 74 Director and Chairman - Compensation
Committee
4
Name Age Position(s) with the Company
---- ---- ----------------------------
Martin J. Teitelbaum 57 Director and Assistant Secretary
Conrad J. Gunther 61 Director and Chairman-Audit Committee
Bruce T. Swan 75 Director and Chairman-Nominating, Governance
and Compliance Committee
Glen R. Charles 54 Chief Financial Officer, and Secretary
Business Experience:
The principal occupation and business experience of each of the Directors and
executive officers are as follows:
Leonard A. Rosenbaum
--------------------
Leonard A. Rosenbaum founded the Company in 1982 and has been our President,
Chief Executive Officer and has served as Chairman of the Board of Director
since that time. From 1971 until 1982, Mr. Rosenbaum was President, Director and
a principal Shareholder of Nav-Tec Industries, a manufacturer of semiconductor
processing equipment similar to the type of some of the equipment that we
currently manufacture. From 1966 to 1971, Mr. Rosenbaum was employed by a
division of General Instrument Corporation, a manufacturer of semiconductor
materials and equipment.
Alan H. Temple, Jr.
-------------------
Alan H. Temple, Jr. has served as a member of our Board of Directors since 1987.
Mr. Temple earned an MBA at Harvard University and has been President of
Harrison Homes Inc., a building and consulting firm located in Pittsford, New
York since 1977.
Martin J. Teitelbaum
--------------------
Martin J. Teitelbaum has served as a member of our Board of Directors since
1985. Mr. Teitelbaum is an attorney, who, since 1988, has conducted his own
private practice, the Law Offices of Martin J. Teitelbaum. Prior to establishing
his own firm, Mr. Teitelbaum was a partner at Guberman and Teitelbaum from 1977
to 1987. Mr. Teitelbaum currently acts as our Assistant Secretary. Mr.
Teitelbaum earned a B.A. in Political Science from the State University of New
York at Buffalo and a Juris Doctor from Brooklyn Law School.
Conrad J. Gunther
-----------------
Conrad J. Gunther has served as a member of our Board of Directors since 2000.
Mr. Gunther has extensive experience in mergers and acquisitions and raising
capital through both public and private means. He also has extensive experience
in executive management in the banking industry. He also serves on the board of
directors of GVC Venture Corp., a public company. For the past five years, Mr.
Gunther has been the President of E-Billsolutions, Inc., a company that provides
credit card processing to internet, mail order and telephone order merchants.
Bruce T. Swan
-------------
Bruce T. Swan has served as a member of our Board of Directors since 2003. Mr.
Swan has extensive banking, export and international credit experience and has
been retired for more than five years. Mr. Swan has held the positions of Deputy
Manager at Brown Brothers Harriman and Co., Assistant Treasurer at Standard
Brands Incorporated, Assistant Treasurer at Monsanto Corporation, Vice President
and Treasurer at AM International Inc. and President and Founder of Export
Acceptance Company, LLC. Mr. Swan received his MBA from Harvard University and
is a former adjunct faculty member of New York University's Stern School of
Business Administration.
5
Glen R. Charles
---------------
Glen R. Charles has been our Chief Financial Officer and Secretary since January
2004. From 2002 until 2004, he was the Director of Financial Reporting for
Jennifer Convertibles Inc., the owner and licensor of the largest group of
sofabed specialty retail stores in the United States. From 1994 to 2002, Mr.
Charles was the Chief Financial Officer of Trans Global Services, Inc., a
provider of temporary technical services to the aerospace, aircraft, electronics
and telecommunications markets. Mr. Charles has also had his own business in the
private practice of accounting. Mr. Charles is a Certified Public Accountant and
earned his B.S. in Accounting from the State University of New York at Buffalo.
COMMITTEES OF OUR BOARD OF DIRECTORS
We have a standing Stock Option and Compensation Committee, Audit Committee and
Nominating, Governance and Compliance Committee.
Audit Committee. The members of the Audit Committee are Conrad J. Gunther, Alan
H. Temple, Jr. and Bruce T. Swan. Our Board of Directors has determined that
Messrs. Gunther, Temple and Swan are "independent" under Rule 10A-3(b) of the
Exchange Act. The Board of Directors has determined that Mr. Gunther is an
"audit committee financial expert" within the meaning of Item 407(d)(5) of
Regulation S-K promulgated under the Exchange Act.
Our Audit Committee recommends our independent accountants for appointment to
audit our financial statements and to perform services related to the audit,
reviews the scope and results of the audit, reviews with management and the
independent accountants our annual and quarterly operating results, considers
the adequacy of the internal accounting procedures and controls, considers the
effect of such procedures and controls on the accountant's independence and
establishes policies for business values, ethics and employee relations. During
the fiscal year ended December 31, 2006, the Audit Committee held five meetings.
A copy of the Audit Committee Charter, as amended, is available on the Company's
web site at www.cvdequipment.com and will be provided to any person without
charge upon written request to the Company's address to the attention of the
Secretary.
Stock Option and Compensation Committee. The Stock Option and Compensation
Committee was formed through the merger in 2006 of the Stock Option Committee
and the Compensation Committee. The Stock Option and Compensation Committee
currently consists of Conrad J. Gunther, Alan H. Temple, Jr., Bruce T. Swan and
Martin J. Teitelbaum. The Stock Option and Compensation Committee has broad
discretion in determining the persons to whom equity incentives are to be
granted and the terms and conditions of the award, including the type of award,
the exercise price and term and restrictions and forfeiture conditions. The
Committee also reviews, approves and makes recommendations regarding our
compensation policies, practices and procedures. All of the member of the Stock
Option and Compensation Committee currently qualify as independent under the
rules of the NASDAQ. During the fiscal year ended December 31, 2006, the Stock
Option and Compensation Committee held one meeting.
Nominating, Governance and Compliance Committee. The Nominating, Governance and
Compliance Committee consists of Bruce T. Swan, Conrad J. Gunther, Martin J.
Teitelbaum and Alan H. Temple, Jr. This Committee's role is to make
recommendations to the full Board of Directors as to the size and composition of
the Board of Directors and to make recommendations as to particular nominees.
All members of the Nominating, Governance and Compliance Committee currently
qualify as independent under the rules of the NASDAQ. During the fiscal year
ended December 31, 2006, the Nominating, Governance and Compliance Committee
held one meeting.
The Nominating, Governance and Compliance Committee may consider candidates
recommended by Shareholders as well as from other sources such as other
directors or officers, third party search firms or other appropriate sources.
6
For all potential candidates, the Nominating Governance and Compliance Committee
may consider all factors it deems relevant, such as a candidate's personal
integrity and sound judgment, business and professional skills and experience,
independence, knowledge of the industry in which we operate, possible conflicts
of interest, diversity, the extent to which the candidate would fill a present
need on the Board, and concern for the long-term interests of the Shareholders.
Candidates recommended by Shareholders will be considered on the same basis as
candidates from other sources. If a Shareholder wishes to nominate a candidate
to be considered for election as a director at the 2008 Annual Meeting of
Shareholders, he or she must submit nominations in accordance with the
procedures set forth in "Shareholder Proposals For Next Annual Meeting." If a
Shareholder wishes simply to propose a candidate for consideration as a nominee
by the Nominating, Governance and Compliance Committee, he or she should submit
any pertinent information regarding the candidate to the members of the
Nominating, Governance and Compliance Committee of CVD Equipment Corporation,
c/o Secretary, 1860 Smithtown Ave., Ronkonkoma, New York 11779.
A copy of the Nominating, Governance and Compliance Committee Charter is
available on the Company's website at www.cvdequipment.com. and will be provided
to any person without charge upon written request to the Company's address to
the attention of the Secretary.
Shareholder Communications
The Board of Directors provides a process by which Shareholders may communicate
with the Board, including non-management members. Shareholders who wish to
communicate with the Board may do so by sending written communications addressed
to any member or the entire Board of Directors of CVD Equipment Corporation, c/o
Secretary, 1860 Smithtown Ave., Ronkonkoma, New York 11779. All mail received at
the above address that is addressed to the Board of Directors or any member of
the Board will be relayed by the Company to the Board of Directors or Board
member. On a periodic basis, all such communications will be compiled by the
Secretary and submitted to the Board of Directors or the specific Board member
to whom the communications are addressed.
Code of Conduct and Ethics
The Board of Directors has adopted a Corporate Code of Conduct and Ethics, which
applies to all directors, officers and employees, including the Company's
principal executive officer and principal financial officer. A copy of the Code
of Conduct and Ethics is available on the Company's web site at
www.cvdequipment.com and will be provided to any person without charge upon
written request to the Company's address to the attention of the Secretary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 25, 2007 information regarding the
beneficial ownership of the Company's common stock by (a) each person who is
known to the Company to be the owner of more than five percent of the Company's
common stock, (b) each of the Company's directors, (c) each of the named
executive officers, and (d) all directors and executive officers and executive
employees as a group. For purpose of this table, a person or group of persons is
deemed to have beneficial ownership of any shares that such person has the right
to acquire within 60 days of October 25, 2007.
Amounts and Nature of
Name and Address of Beneficial Owner (1) Beneficial Ownership (2) Percent of Class
---------------------------------------- ------------------------ ----------------
Leonard A. Rosenbaum 1,355,850 (3) 28.6%
Alan H. Temple, Jr. 174,000 (5) 3.8
Martin J. Teitelbaum 65,000 (6) 1.4
Conrad J. Gunther 39,000 (7) *
Bruce T. Swan 28,000 (8) *
Glen R. Charles 7,500 (9) *
Directors and executive officers and
executive employees as a group (six (6)
persons) 1,669,350 35.8
7
Amounts and Nature of
Name and Address of Beneficial Owner (1) Beneficial Ownership (2) Percent of Class
---------------------------------------- ------------------------ ----------------
Michael A. Roth 400,000 (4) 8.5
3600 South Lake Drive
St. Francis, Wisconsin 53235
Brian J. Stark 400,000 (4) 8.5
3600 South Lake Drive
St. Francis, Wisconsin 53235
Five (5) percent owners as a group 1,755,850 37.0
--------------------------------------------------------------------
*Less than 1% of the outstanding common stock or less than 1% of the voting
power.
(1) Except as otherwise noted, the address of all parties listed is c/o CVD
Equipment Corporation, 1860 Smithtown Avenue, Ronkonkoma, New York 11779.
(2) All of such shares are owned directly with sole voting and investment
power, unless otherwise noted below.
(3) Includes options to purchase 29,000 shares of common stock. Does not
include options to purchase 7,000 shares of common stock.
(4) Mr. Roth and Mr. Stark share voting and investment power over and
beneficially own a total of 400,000 shares of common stock. Mr. Roth and
Mr. Stark are the managing members of Stark Offshore Management LLC, which
acts as investment manager and has sole power to direct the management of
Stark Master Fund Ltd. which directly owns 400,000 shares of common stock.
The address of Stark Master Fund Ltd. is 3600 South Lake Drive, St.
Francis, Wisconsin 53235.
(5) Includes options to purchase 17,500 shares of common stock. Does not
include options to purchase 7,000 shares of common stock.
(6) Includes 2,000 shares held by Mr. Teitelbaum's wife as to which Mr.
Teitelbaum disclaims beneficial ownership and options to purchase 29,000
shares of common stock. Does not include options to purchase 7,000 shares
of common stock.
(7) Includes options to purchase 29,000 shares of common stock. Does not
include options to purchase 7,000 shares of common stock.
(8) Includes options to purchase 14,000 shares of common stock. Does not
include options to purchase 7,000 shares of common stock.
(9) Includes options to purchase 7,500 shares of common stock. Does not include
options to purchase 7,500 shares of common stock.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for each of the named executive officers:
(i) the dollar value of base salary and bonus earned during the years ended
December 31, 2006 and 2005; (ii) the aggregate grant date fair value of stock
and option awards granted during such year; (iii) the dollar value of earnings
under non-equity incentive plans; (iv) the change in pension value and
non-qualified deferred compensation earnings for such year; (v) all other
compensation for the year; and (vi) the dollar value of total compensation for
such year.
8
Name and Option All Other
Principal position Year Salary Awards(1) Compensation ($) Total ($)
------------------ ----------- --------- --------- ------------------ ----------
Leonard A. Rosenbaum 2006 $162,742 $28,138 -- $190,880
President and Chief 2005 162,742 -- -- 162,742
Executive Officer
Glen R. Charles 2006 115,337 5,063 -- 120,400
Secretary and Chief 2005 110,000 -- -- 110,000
Financial Officer
------------------------------------
(1) Amounts shown do not reflect compensation actually received by the
named executive officer. Instead, the amounts shown are the
compensation costs recognized by us in 2006 for option awards as
determined pursuant to FAS 123(R). See additional information
regarding the Option Awards under the section of this proxy entitled
"Our Stock Option Plans" below.
Grants of Plan-Based Awards
We did not grant any stock options or stock awards to the named executive
officers during 2006.
Outstanding Equity Awards at Year-End
The following table sets forth the outstanding equity awards to our named
executive officers at the end of 2006.
Option Awards
------------------------------------------------------------------------------------------
Number of Number of
Securities Underlying Securities Underlying Option Option
Unexercised Options Unexercised Options Exercise Price Expiration
Name (#) Exercisable (#) Unexercisable ($) Date
----------------------------------------------------------------------------------------------------------------------
Leonard A. Rosenbaum, 10,000 -- 2.00 8/1/2007
President and Chief 15,000 -- 1.40 9/23/2010
Executive Officer 7,000 14,000 4.10 9/13/2012
----------------------------------------------------------------------------------------------------------------------
Glen R. Charles, Chief 3,750 11,250 2.26 6/16/2012
Financial Officer and
Secretary
Pension Benefits
We did not provide any pension benefits to the named executive officers during
2006.
Nonqualified Deferred Compensation
We did not pay nonqualified deferred compensation to any named executive officer
during 2006.
9
Director Compensation
The following table represents director compensation for 2006.
Option
Name Awards Total
---- ------ -----
Alan H. Temple, Jr. $28,138 $28,138
Martin J. Teitelbaum 28,138 28,138
Conrad J. Gunther 28,138 28,138
Bruce T. Swan 28,138 28,138
(1) Amounts shown do not reflect compensation actually received by the named
director. Instead, the amounts shown are the compensation costs recognized by us
in 2006 for option awards as determined pursuant to FAS 123(R) These
compensation costs reflect option awards granted prior to 2006. The assumptions
used to calculate the value of option awards are set forth under the section of
this proxy entitled "Our Stock Option Plans" below.
Our directors are not regularly compensated for being on the Board of Directors
and the directors did not receive any compensation in 2006. Leonard A.
Rosenbaum, a director and employee of the company, is compensated by the Company
in connection with his employment as our President and Chief Executive Officer.
Mr. Rosenbaum's compensation as President and Chief Executive Officer is set
forth in the summary compensation table above. The Stock Option and Compensation
Committee, which is comprised of all of the members of the Board of Directors
with the exception of Leonard A. Rosenbaum, has the authority to grant stock
options to members from time to time. In September, 2005, the Stock Option and
Compensation Committee granted non-qualified stock options to purchase 21,000
shares of the company's common stock to each member of the Board of Directors.
These options were issued at a grant price equal to the then current market
price of $4.10. These options became exercisable as to 33.3% of the underlying
shares with options to purchase 1,750 shares becoming exercisable every three
months beginning January 13, 2007. These options expire on September 13, 2012.
EQUITY COMPENSATION PLANS
The following table provides information about shares of our common stock that
may be issued upon the exercise of options under all of our existing
compensation plans as of December 31, 2006.
Number of securities
to be issued upon Weighted-average
exercise of exercise price of Number of securities
outstanding options, outstanding options, remaining available
warrants and rights warrants and rights for future issuance
Plan Category
Equity compensation
plans approved by
security holders (1) 248,500 $ 2.73 345,250
Equity compensation
plans not approved by
security holders 0 0 0
Total 248,500 $2.73 345,250
-------------------------
(1) Reflects aggregate options outstanding under our Non-Qualified Stock Option
Plan.
10
Our Stock Option Plans
The Company maintains two stock option plans.
1989 "Key Employee" Stock Option Plan. On June 15, 1989, we instituted the 1989
"Key Employee" Stock Option Plan, a non-qualified stock option plan (the
"Plan"). In connection therewith, 700,000 shares of the Company's common stock
are reserved for issuance pursuant to options that may be granted under the Plan
through June 30, 2009. The purchase price of the common stock under each option
granted under the Plan shall be no lower than the average bid price per share,
calculated on a monthly basis, than the common stock (as reported by NASDAQ)
traded during the calendar year immediately preceding the year in which the
option is granted. On June 3, 1996, the Company issued 84,000 options which
expire ten years from the date of grant. None of these options were exercisable
until June 3, 1999. The option price was less than the fair market value per
share on the date the 1996 options were granted. On April 15, 1998, 140,000
options were granted to employees under the Plan. Options granted in 1998 vest
straight-line over a four-year period following the date of grant and expire
five years after the date of grant. On July 16, 1999, 52,500 options were
granted to employees under this Plan. Options granted in 1999 vest incrementally
over four-year periods following the date of grant and expire seven years after
the date of grant. On February 2, 2000, 242,000 options were granted to
employees under the Plan. On May 7, 2000 and August 8, 2000, a total of 80,000
options were granted to employees. On October 26, 2000, 3,500 options were
granted to employees. All options vest over a four-year period. All options
granted in 2000 expire seven years after the date of grant. The option price for
options granted in 1999 and 2000 were not less than the fair market value per
share on the date the options were granted. On April 1, 2003, the Company
granted 12,500 options to employees under the Plan which expire April 1, 2008,
and on September 23, 2003, granted 75,000 options to members of the Board of
Directors which expire on September 23, 2010. On June 17, 2005 and August 4,
2005, 56,500 and 15,000 options respectively, were granted to employees under
the Plan, which expire on June 16, 2012 and August 3, 2012, respectively. All of
these options vest equally over a four-year period. On September 13, 2005,
105,000 options were granted to members of the Board of Directors which vest
over three years and expire on September 12, 2012. On June 22, 2006, 10,000
options which vest equally over a four-year period were granted to an employee
which expire on June 21, 2013.
2001 Stock Option Plan. In November 2006, we registered a non-qualified stock
option plan (the "2001 Plan") shareholders approved in July 2001, covering key
employees, officers, directors and other persons that may be considered as
service providers to the Company. Options may be awarded by the Board of
Directors or by a committee appointed by the Board of Directors. Under the 2001
Plan, an aggregate of 300,000 shares of our common stock are reserved for
issuance or transfer upon the exercise of options which are granted. Unless
otherwise provided in the option agreement, options granted under the 2001 Plan
are exercisable in 25% installments commencing one year from the anniversary
date of the grant. The purchase price of the common stock under each option
granted under the 2001 Plan is established by the Board of Directors provided,
that the exercise price per share shall not be less than the closing price of
the Company's common stock on the date the option is granted. The stock options
generally expire five years after the date of grant. The 2001 Plan shall
terminate on July 22, 2011. No options have been granted under the 2001 Plan.
CHANGE IN CONTROL OR OTHER ARRANGEMENTS
Except for the foregoing, there are no other arrangements for compensation of
Directors and there are no employment contracts between the Company and its
Directors or any change in control arrangements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the equity securities of the Company ("Reporting Persons")
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the Securities and Exchange Commission and NASDAQ. In addition, Reporting
Persons are required to furnish the Company with copies of all Forms 3, 4 and 5
they file. Based solely on the Company's review of (a) the copies of such
reports and amendments thereto furnished to the Company by the Reporting Persons
and (b) written representations from the Reporting Persons that no other reports
11
were required, during the Company's fiscal year ended December 31, 2006, all of
the filings for such Reporting Persons were made on a timely basis, except for
the following: (i) two reports filed by Mr. Bruce Swan - one filed on Form 4 on
March 16, 2006 to report an exercise of options; and one filed on Form 4 on
December 13, 2006 to report a sale of common shares; (ii) one report filed by
Mr. Alan J. Temple, Jr. on Form 4 on September 27, 2006 to report an exercise of
options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Company's officers or employees serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Martin J. Teitelbaum serves as a director and our outside general counsel. The
company incurred legal fees for Mr. Teitelbaum's professional services of
approximately $34,000 and $35,000 for the years ended December 31, 2006 and
2005, respectively. As of December 31, 2006 and 2005, unpaid legal fees of
approximately $43,000 and $35,000 respectively were due Mr. Teitelbaum for
services rendered.
PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED ACCOUNTING FIRM
The Audit Committee has appointed Moore Stephens P.C. as the Company's
independent public accountants for the fiscal year ending December 31, 2007. The
submission of the appointment of Moore Stephens P.C. is not required by law or
by the Company's Bylaws. The Board of Directors is nevertheless submitting it to
the Shareholders to ascertain their views. If the Shareholders do not ratify the
appointment, the selection of other independent public accountants will be
considered by the Audit Committee. If Moore Stephens P.C. shall decline to
accept or become incapable of accepting its appointment, or if its appointment
is otherwise discontinued, the Audit Committee will appoint other independent
public accountants. Moore Stephens P.C. has served as the Company's independent
public accountants since 2005. The Board expects that a representative of Moore
Stephens P.C. will be present at the Annual Meeting to respond to appropriate
questions from Shareholders, and the Board will provide this representative with
an opportunity to make a statement if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL 2 TO APPROVE
THE SELECTION OF MOORE STEPHENS, P.C. AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2007.
Audit and Non-Audit Fees
The following table sets forth the fees billed to us by Moore Stephens, P.C.
during the years ended December 31, 2006 and 2005 for: (i) services rendered for
the audit of our financial statements and the review of our quarterly financial
statements, (ii) services by Moore Stephens, P.C. that are reasonably related to
the performance of the audit or review of our financial statements and that are
not reported as audit fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning and (iv) all other fees for services
rendered.
Year Ended Year Ended
Dec. 31, 2006 Dec. 31, 2005
------------- -------------
Audit Fees $68,250 $77,250
Audit-Related Fees (1) -- --
Tax Fees 8,500 10,215
All Other Fees 750 --
----------------- -----------------
Total Fees $77,500 $87,465
-------------------------
(1) Accounting and reporting advisory services related to regulatory filings
and acquisition activities.
12
Pre-Approval Policy
The Company pre-approved all of the above described audit and non-audit services
provided by Moore Stephens, P.C. and has pre-approved similar services to be
rendered during fiscal year 2007. The Audit Committee believes the rendering of
these services is not incompatible with Moore Stephens, P.C. maintaining their
independence.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee Report that follows shall not be deemed to be incorporated
by reference into any filing made by the Company under the Securities Act of
1933 or the Securities Exchange Act of 1934, notwithstanding any general
statement contained in any such filing incorporating this proxy statement by
reference, except to the extent the Company incorporates such Report by specific
reference.
We have reviewed and discussed the audited financial statements for the year
ended December 31, 2006 with the Company's management and have discussed with
Moore Stephens, P.C., the Company's independent public accountants, the matters
required to be discussed by Statement on Auditing Standards No. 61,
(Codification of Statements on Auditing Standards) as amended. In addition, we
have received from Moore Stephens, the written disclosures and the letter
required by the Independence Standards Board Standard No. 1, (Independence
Discussions with Audit Committees), and have discussed Moore Stephens, P.C.'s
independence with them.
Based on these reviews and discussions, we recommended to the Board of Directors
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2006.
The Audit Committee
Conrad J. Gunther
Alan H. Temple, Jr.
Bruce T. Swan
PROPOSAL 3: APPROVAL OF THE 2007 SHARE INCENTIVE PLAN
At the Annual Meeting, shareholders will be asked to approve the Company's 2007
Share Incentive Plan (the "2007 Plan"), which was adopted by the Board of
Directors subject to approval by the Company's shareholders. The Company's Board
of Directors considers the 2007 Plan to be important to: (i) aid in maintaining
and developing key employees capable of assuring the future success of the
Company and to offer such personal incentives to put forth maximum efforts for
the success of the Company's business; (ii) to enhance the Company's ability to
attract and retain the services of experienced and knowledgeable outside
directors; and (iii) to afford such key employees and outside directors an
opportunity to acquire a proprietary interest in the Company, thereby aligning
their interests with the interests of the Company's shareholders.
Summary of the New Plan
The following summary of the main features of the 2007 Plan is qualified in its
entirety by reference to the complete text of the 2007 Plan, which is set forth
as Exhibit A to this Proxy Statement. For purposes of the discussion contained
in this Proposal No. 3, all capitalized terms shall have the meaning proscribed
to such terms in the 2007 Plan, except as otherwise provided.
The 2007 Plan authorizes the grant and issuance of two different types of
Awards: Options ("Stock Options"), which can qualify as "incentive stock
options" under the Internal Revenue Code (the "Code"), or as "non-qualified
13
stock options;" and Restricted Stock, which is stock that is contingent on an
employee satisfying conditions, including without limitation continued
employment, passage of time or satisfaction of performance criteria.
o The 2007 Plan has a number of special terms and limitations, including:
o The exercise price for Stock Options granted under the 2007 Plan must at
least equal the Shares' fair market value at the time the Stock Option is
granted;
o The 2007 Plan expressly states that Stock Options granted under it can not
be "repriced," as defined in the 2007 Plan, without shareholder approval;
o 750,000 shares, are proposed to be available for granting any Award under
the 2007 Plan; and
o Shareholder approval is required for certain types of amendments to the
2007 Plan.
Eligibility
Any Key Employee, including any Key Employee who is an officer or director of
the Company or any Affiliate, any Outside Director or a third party consultant
to the Company or any Affiliate shall be eligible to be designated a
Participant; provided however, that an Incentive Stock Option shall not be
granted to: (1) an Outside Director; or (2) an employee of an Affiliate unless
such Affiliate is also a "subsidiary corporation" of the Company within the
meaning of Section 424(f) of the Code.
Administration
The 2007 Plan will be administered by the Committee, although the Board of
Directors may exercise any authority of the Committee under the 2007 Plan in
lieu of the Committee's exercise therof.
Subject to the terms of the Plan and applicable law, the Committee shall have
full power and authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by (or with respect to which
payments are to be calculated in connection with) Awards; (iv) determine the
terms and conditions of any Award or Award Agreement; (v) amend the terms and
conditions of any Award or Award Agreement and accelerate the exercisability of
Options or the lapse of restrictions relating to Restricted Stock; (vi)
determine whether to, to what extent and under what circumstances Awards may be
exercised in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended; (vii) determine whether, to what extent and
under what circumstances cash or Shares payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the Plan;
and (x) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Shares Available for Awards
The aggregate number of Shares that can be issued under the 2007 Plan may not
exceed 750,000 (including pursuant to Incentive Stock Options). If any Shares
covered by an Award or to which an Award relates are not purchased or are
forfeited or if an Award otherwise terminates without the delivery of any shares
or cash payments to be received thereunder, then the number of Shares counted
against the aggregate number of Shares available under the Plan with respect to
such Award, to the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan. In addition, any shares that are
used by a Participant as full or partial payment to the Company of the purchase
price of Shares acquired upon exercise of an Option or satisfy applicable tax
withholding requirements (including social insurance requirements) upon the
exercise or vesting of an Award shall again be available for granting Awards.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
14
merger, consolidation, split-up, spin-off, combination, repurchase or exchange
of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or securities
or other property) which thereafter may be made the subject of Awards, (ii) the
number and type of Shares (or securities or other property) subject to
outstanding Awards and (iii) the exercise price with respect to any Award;
provided, however, that the number of Shares covered by any Award or to which
such Award relates shall always be a whole number.
Awards
The 2007 Plan authorizes the grant and issuance of the following types of
Awards: Stock Options and Restricted Stock.
Stock Options
Subject to the express provisions of the 2007 Plan and as discussed in this
paragraph, the Committee has discretion to determine the vesting schedule of
Stock Options, the events causing a Stock Option to expire, the number of shares
subject to any Stock Option, the restrictions on transferability of a Stock
Option, and such further terms and conditions, in each case not inconsistent
with the 2007 Plan, as may be determined from time to time by the Committee. The
2007 Plan expressly provides that the Company cannot "reprice" Stock Options
without shareholder approval. The exercise price for Stock Options may not be
less than 100% of the fair market value of the Common Stock (as determined
pursuant to the 2007 Plan) at the time the Stock Option is granted. The term of
each Option shall be fixed by the Committee, but such term shall not exceed 10
years from the date on which such Option is granted. The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms (including,
without limitation, cash and or shares having a Fair Market Value on the
exercise date equal to the relevant exercise price) in which payment of the
exercise price with respect thereto may be made or deemed to have been made.
Restricted Stock
The Committee may make Awards of restricted stock to participants, which will be
subject to restrictions on transferability and other restrictions as the
Committee may impose, including, without limitations on the right to vote
restricted stock or the right to receive dividends, if any, on the restricted
stock. These Awards may be subject to forfeiture and reacquired by the Company
upon any conditions or criteria established by the Committee, including without
limitation termination of employment or upon resignation or removal as an
Outside Director during the applicable restriction period.
Amendments and Termination
The Board of Directors of the Company may amend, alter, suspend, discontinue or
terminate the Plan; provided, however, that, notwithstanding any other provision
of the Plan or any Award Agreement, without the approval of the shareholders of
the Company, no such amendment, alteration, suspension, discontinuation or
termination shall be made that:
o change the maximum number of shares of Common Stock for which Awards may be
granted under this Plan;
o extend the term of this Plan; or
o change the class of persons eligible to participate in the Plan.
The Committee may amend, alter or discontinue an Award made under the Plan which
would impair the rights of any Award holder, without such holder's consent,
under any Award theretofore granted; provided that no such consent shall be
required if the Committee determines in its sole discretion and prior to the
date of any change in control, recapitalization, stock dividend, stock split,
reorganization, merger, consolidation or similar type transaction that such
amendment or alteration either is required or advisable in order for the
15
Company, the Plan or any Award granted to satisfy any law or regulation or to
meet the requirements of any accounting standard.
No Award granted under the 2007 Plan shall be granted pursuant to the 2007 Plan
more than 10 years after the date of the Company's Shareholder's adoption of the
2007 Plan.
Income Tax Withholding; Tax Bonuses
Withholding. In order to comply with all applicable federal, state or foreign
income tax or social insurance contribution laws or regulations, the Company may
take such action as it deems appropriate to ensure that all applicable federal,
state or foreign payroll, withholding, income, social insurance contributions or
other taxes, which are the sole and absolute responsibility of a Participant,
are withheld or collected from such Participant. In order to assist a
Participant in paying all federal, state and foreign taxes to be withheld or
collected upon exercise or receipt of (or the lapse of restrictions relating to)
an Award, the Committee, in its discretion and subject to such additional terms
and conditions as it may adopt, may permit the Participant to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes or (ii) delivering to the Company Shares other than Shares
issuable upon exercise or receipt of (or the lapse of restrictions relating to)
such Award with a Fair Market Value equal to the amount of such taxes. The
election, if any, must be made on or before the date that the amount of tax to
be withheld is determined.
Tax Bonuses. The Committee, in its discretion, shall have the authority, at the
time of grant of any Award under this Plan or at any time thereafter to approve
bonuses to designated Participants to be paid upon their exercise or receipt of
(or the lapse of restrictions relating to) Awards in order to provide funds to
pay all or a portion of federal, state and foreign taxes due as a result of such
exercise or receipt (or the lapse of such restrictions). The Committee shall
have full authority in its discretion to determine the amount of any such tax
bonus.
Tax Effect to Company
The Company generally will be entitled to a tax deduction in connection with an
Award under the 2007 Plan in an amount equal to the compensation income
(ordinary income) realized by a Participant and at the time the Participant
recognizes such income (for example, the exercise of a NQSO). Special rules
limit the deductibility of compensation paid to certain Covered Employees of the
Company (as defined by Section 162(m) of the Code, the annual compensation paid
to any of these Covered Employees will be deductible only to the extent that
does not exceed $1,000,000 or if the compensation is paid solely on account of
attaining one or more pre-established, objective performance goals. The 2007
Plan has been constructed such that some Awards in the Committee's discretion
may qualify as "performance-based compensation" under Section162(m) of the Code
and thus would be deductible even if the total compensation paid to the Covered
Employee is in excess of $1,000,000. However, whether an Award will qualify
under Section 162(m) as "performance-based compensation" will depend on the
terms, conditions and type of the Award issued to the Covered Employee. For
example, grants of Stock Options or Restricted Stock often vest only according
to the optionee's or grantee's length of employment rather than pre-established
performance goals. Therefore, the compensation derived from the Awards made to
Covered Employees may not be deductible by the Company to the extent the Covered
Employee's total compensation exceeds $1,000,000.
Vote Required
Assuming a quorum is present at the Annual Meeting, the affirmative vote of a
majority of votes cast by the holders of Common Stock represented and entitled
to vote at the Annual Meeting is required to approve the 2007 Plan.
The Board believes that the approval of the 2007 Plan is in the Company's and
the shareholder's best interests. The Company's non-employee directors have an
interest in the proposal to adopt the 2007 Plan since each is an eligible
Participant in Awards under the 2007 Plan.
16
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL 3 TO APPROVE
THE 2007 EMPLOYEE SHARE INCENTIVE PLAN.
DEADLINE FOR SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the Company's 2008 Annual Meeting of Shareholders
must be received at the Company's offices at 1860 Smithtown Avenue, Ronkonkoma,
New York 11779, no later than April 14, 2008 for inclusion in the Company's
proxy statement and proxy card relating to such meeting. Such proposals must
comply with applicable SEC rules and regulations.
In order for any proposal that is not submitted for inclusion in next year's
proxy statement (as described in the preceding paragraph) to be presented
directly at next year's annual meeting, we must receive notice of the proposal
prior to June 28, 2008. If such notice is received, proxies may be voted at the
discretion of management if we advise Shareholders in next year's proxy
statement about the nature of the matter and how management intends to vote on
such matter.
OTHER MATTERS
The Board of Directors is not aware of any other matter other than those set
forth in this proxy statement that will be presented for action at the Annual
Meeting. If other matters properly come before the Annual Meeting, the persons
appointed as proxies intend to vote the shares they represent in accordance with
their best judgement in the interest of the Company.
17
DOCUMENTS INCLUDED WITH THIS PROXY STATEMENT
WE ARE PROVIDING HEREWITH, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB,
WITHOUT EXHIBITS, FOR THE YEAR ENDED DECEMBER 31, 2006, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES FILED THEREWITH. IF ANY PERSON RECEIVES THIS PROXY
WITHOUT THE FOREGOING DOCUMENTS, THE COMPANY UNDERTAKES TO PROVIDE, WITHOUT
CHARGE, UPON A WRITTEN OR ORAL REQUEST OF SUCH PERSON AND BY FIRST CLASS MAIL OR
OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
31, 2006, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES FILED THEREWITH.
WRITTEN REQUESTS FOR SUCH REPORTS SHOULD BE ADDRESSED TO THE OFFICE OF THE
SECRETARY, CVD EQUIPMENT CORPORATION, 1860 SMITHTOWN AVENUE, RONKONKOMA, NEW
YORK 11779. THE COMPANY'S TELEPHONE NUMBER AT SUCH OFFICE IS (631) 981-7081.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE.
By Order of the Board of Directors
18
EXHBIT A
CVD EQUIPMENT CORPORATION
2007 SHARE INCENTIVE PLAN
Section 1. Purpose.
The purposes of the CVD Equipment Corporation Share Incentive Plan (the
"Plan") are to: (i) aid in maintaining and developing key employees capable of
assuring the future success of CVD Equipment Corporation (the "Company"), and to
offer such personnel incentives to put forth maximum efforts for the success of
the Company's business; (ii) to enhance the Company's ability to attract and
retain the services of experienced and knowledgeable outside directors; and
(iii) to afford such key employees and outside directors an opportunity to
acquire a proprietary interest in the Company, thereby aligning their interests
with the interests of the Company's shareholders.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, as determined by
the Committee.
(b) "Award" shall mean any Option or Restricted Stock granted under the
Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of Directors of the
Company designated by such Board to administer the Plan and composed of not less
than three directors, each of whom is a "Non-Employee Director" within the
meaning of Rule 16b-3.
(f) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
for purposes of the Plan, the Fair Market Value of Shares on a given date shall
be the closing price of the Shares on such date on The Nasdaq Capital Market
("NASDAQ").
(g) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.
(h) "Key Employee" shall mean any employee of the Company or any Affiliate
who the Committee determines to be a key employee.
(i) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(k) "Outside Director" shall mean each member of the Board of Directors of
the Company that is not also an employee of the Company or any Affiliate of the
Company.
(l) "Participant" shall mean either (i) a Key Employee, (ii) an Outside
Director, or (iii) a third party consultant to the Company or any Affiliate
designated to be granted an Award under the Plan.
(m) "Person" shall mean any individual, corporation, partnership,
association or trust.
(n) "Restricted Stock" shall mean any Share granted under Section 6(b) of
the Plan.
(o) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, or
any successor rule or regulation thereto.
(p) "Shares" shall mean shares of Common Stock, $.01 par value, of the
Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.
Section 3. Administration.
(a) Power and Authority of the Committee. The Plan shall be administered by
the Board of Directors, or if the Board of Directors shall so designate, by the
Committee. For purposes of this Plan, references to the Committee shall mean
either the Board of Directors or the Committee if the Committee has been
designated by the Board of Directors to administer the Plan. Subject to the
terms of the Plan and applicable law, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to each Participant under the Plan; (iii) determine the
number of Shares to be covered by (or with respect to which payments are to be
calculated in connection with) Awards; (iv) determine the terms and conditions
of any Award or Award Agreement; (v) amend the terms and conditions of any Award
or Award Agreement and accelerate the exercisability of Options or the lapse of
restrictions relating to Restricted Stock; (vi) determine whether, to what
extent and under what circumstances Awards may be exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited or
suspended; (vii) determine whether, to what extent and under what circumstances
cash or Shares payable with respect to an Award under the Plan shall be deferred
either automatically or at the election of the holder thereof or the Committee;
(viii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (ix) establish, amend, suspend or
waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (x) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon any Participant, any holder or beneficiary of
any Award and any employee of the Company or any Affiliate.
(b) Meetings of the Committee. The Committee shall select one of its
members as its chairman and shall hold its meetings at such times and places as
the Committee may determine. A majority of the Committee's members shall
constitute a quorum. All determinations of the Committee shall be made by not
less than a majority of its members. Any decision or determination reduced to
writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable.
Section 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(c),
the number of Shares available for the granting of Awards under the Plan shall
be 750,000. If any Shares covered by an Award or to which an Award relates are
not purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares or cash payments to be received thereunder, then the
number of Shares counted against the aggregate number of Shares available under
the Plan with respect to such Award, to the extent of any such forfeiture or
termination, shall again be available for granting Awards under the Plan. In
addition, any Shares that are used by a Participant as full or partial payment
to the Company of the purchase price of Shares acquired upon exercise of an
Option or to satisfy applicable tax withholding requirements (including social
insurance requirements) upon the exercise or vesting of an Award shall again be
available for granting Awards.
(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan.
(c) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
securities or other property) which thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or securities or other property)
subject to outstanding Awards and (iii) the exercise price with respect to any
Award; provided, however, that the number of Shares covered by any Award or to
which such Award relates shall always be a whole number.
Section 5. Eligibility.
Any Key Employee, including any Key Employee who is an officer or director
of the Company or any Affiliate, any Outside Director or a third party
consultant to the Company or any Affiliate shall be eligible to be designated a
Participant; provided, however, that an Incentive Stock Option shall not be
granted to: (1) an Outside Director; or (2) an employee of an Affiliate unless
such Affiliate is also a "subsidiary corporation" of the Company within the
meaning of Section 424(f) of the Code.
Section 6. Awards.
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that such
purchase price shall not be less than the Fair Market Value of the Shares
on the date such option is granted.
(ii) Option Term. The term of each Option shall be fixed by the
Committee, but such term shall not exceed 10 years from the date on which
such Option is granted.
(iii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property,
or any combination thereof, having a Fair Market Value on the exercise date
equal to the relevant exercise price) in which payment of the exercise
price with respect thereto may be made or deemed to have been made.
(b) Restricted Stock. The Committee is hereby authorized to grant Awards of
Restricted Stock. to Participants with the following terms and conditions and
with such additional terms and conditions not inconsistent with the provisions
of the Plan as the Committee shall determine:
(i) Restrictions. Shares of Restricted Stock shall be subject to such
restrictions as the Committee may impose (including, without limitation,
any limitation on the right to vote a Share of Restricted Stock or the
right to receive any dividend or other right or property with respect
thereto), which restrictions may lapse separately or in combination at such
time or times, in such installments or otherwise as the Committee may deem
appropriate.
(ii) Stock Certificates. Any Restricted Stock granted under the Plan
shall be evidenced by issuance of a stock certificate or certificates. Such
certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock.
Forfeiture; Delivery of Shares. Except as otherwise determined by the Committee,
upon termination of employment or upon resignation or removal as an Outside
Director (as determined under criteria established by the Committee) during the
applicable restriction period, all Shares of Restricted Stock at such time
subject to restriction shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a waiver would be
in the best interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to Shares of Restricted Stock. Shares
representing Restricted Stock that are no longer subject to restrictions shall
be delivered to the holder thereof promptly after the applicable restrictions
lapse or are waived.
(c) General.
22
(i) No Cash Consideration for Awards. Except as otherwise determined
by the Committee, Awards shall be granted for no cash consideration or for
such minimal cash consideration as may be required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments to be made by the Company
or an Affiliate upon the grant, exercise or payment of an Award may be made
in Shares, cash or a combination thereof as the Committee shall determine,
and may be made in a single payment, in installments or on a deferred
basis, in each case in accordance with rules and procedures established by
the Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installments or deferred payments.
(iv) Limits On Transfer of Awards. No Award and no right under any
such Award shall be assignable, alienable, salable or transferable by a
Participant otherwise than by will or by the laws of descent and
distribution; provided, however, that a Participant may, in the manner
established by the Committee,
(A) designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant, or
(B) transfer a Non-Qualified Stock Option to any "family member"
(as such term is used in Form S-8 under the Securities Act of 1933) of
such Participant, provided that (1) there is no consideration for such
transfer or such transfer is effected pursuant to a domestic relations
order in settlement of marital property rights, and (2) the
Non-Qualified Stock Options held by such transferees continue to be
subject to the same terms and conditions (including restrictions or
subsequent transfers) as were applicable to such Non-Qualified Stock
Options immediately prior to their transfer.
Each Award or right under any Award shall be exercisable during the
Participant's lifetime only by the Participant, by a transferee pursuant to a
transfer permitted by clause (B) of this Section 6(c)(iv), or, if permissible
under applicable law, by the Participant's or such transferee's guardian or
legal representative. No Award or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(v) Term of Awards. Subject to the terms of the Plan, the term of each
Award shall be for such period as may be determined by the Committee.
(vi) Rule 16b-3 Six-Month Limitations. To the extent required in order
to comply with Rule 16b-3 only, (a) any equity security offered pursuant to
the Plan may not be sold for at least six months after acquisition, except
in the case of death or disability, and (b) any derivative security issued
pursuant to the Plan shall not be exercisable for at least six months,
except in case of death or disability. Terms used in the preceding sentence
shall, for the purposes of such sentence only, have the meanings, if any,
assigned or attributed to them under Rule 16b-3.
(vii) Restrictions; Securities Exchange Listing. All certificates for
Shares delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission and any applicable federal, state or foreign securities laws,
and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares are traded on a securities exchange, the Company shall not be
required to deliver any Shares covered by an Award unless and until such
Shares have been admitted for trading on such securities exchange.
Section 7. Amendment and Termination; Adjustments.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the shareholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that:
(i) absent such approval, would cause Rule 16b-3 to become
unavailable with respect to the Plan;
(ii) requires the approval of the Company's shareholders under
any rules or regulations of NASDAQ, or, if applicable National
Association of Securities Dealers, Inc. or any securities exchange
that are applicable to the Company; or
(iii) requires the approval of the Company's shareholders under
the Code in order to permit Incentive Stock Options to be granted
under the Plan.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively, subject to Section 7(c) of the Plan. The Committee may not amend,
alter, suspend, discontinue or terminate any outstanding Award, prospectively or
retroactively, without the consent of the Participant or holder or beneficiary
thereof.
(c) Prohibition on Option Repricing. The Committee shall not reduce the
exercise price of any outstanding Option, whether through amendment,
cancellation or replacement grants, or any other means, without shareholder
approval.
(d) Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
Section 8. Income Tax Withholding; Tax Bonuses.
(a) Withholding. In order to comply with all applicable federal, state or
foreign income tax or social insurance contribution laws or regulations, the
Company may take such action as it deems appropriate to ensure that all
applicable federal, state or foreign payroll, withholding, income, social
insurance contributions or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all federal, state and
foreign taxes to be withheld or collected upon exercise or receipt of (or the
lapse of restrictions relating to) an Award, the Committee, in its discretion
and subject to such additional terms and conditions as it may adopt, may permit
the Participant to satisfy such tax obligation by (i) electing to have the
Company withhold a portion of the Shares otherwise to be delivered upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes or (ii) delivering to the Company
Shares other than Shares issuable upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes. The election, if any, must be made on or before the date
that the amount of tax to be withheld is determined.
(b) Tax Bonuses. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter to approve bonuses to designated Participants to be paid upon their
exercise or receipt of (or the lapse of restrictions relating to) Awards in
order to provide funds to pay all or a portion of federal, state and foreign
taxes due as a result of such exercise or receipt (or the lapse of such
restrictions). The Committee shall have full authority in its discretion to
determine the amount of any such tax bonus.
Section 9. General Provisions.
(a) No Rights to Awards. No Key Employee, Participant or other Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Key Employees, Participants or holders
or beneficiaries of Awards under the Plan. The terms and conditions of Awards
need not be the same with respect to different Participants.
(b) Delegation. The Committee may delegate to one or more officers of the
Company or any affiliate or a committee of such officers the authority, subject
to such terms and limitations as the Committee shall determine, to grant Awards
to Key Employees who are not officers or directors of the Company for purposes
of Section 16 of the Securities Exchange Act of 1934, as amended.
(c) Terms of Awards. The specific terms of an Award pursuant to the Plan
shall be set forth in an Award Agreement duly executed (by manual, facsimile or
electronic signature) on behalf of the Company.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(e) No Right to Employment or Directorship. The grant of an Award shall not
be construed as giving a Participant the right to be retained in the employ of
the Company or any Affiliate or any right to remain as a member of the Board of
Directors, as the case may be. In addition, the Company or an Affiliate may at
any time dismiss a Participant from employment (or remove an Outside Director),
free from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of New York, without regard to its conflicts of laws
principals.
(g) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash shall be paid in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(j) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
Section 10. Effective Date of the Plan.
The Plan shall be effective as of the date of its approval by the
shareholders of the Company.
Section 11. Term of the Plan.
Awards shall be granted under the Plan during a period commencing the date
the Plan was approved by the shareholders of the Company, through a date which
is ten (10) years from the date of such shareholder approval. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond the ending date of the period
stated above, and the authority of the Committee provided for hereunder with
respect to the Plan and any Awards, and the authority of the Board of Directors
of the Company to amend the Plan, shall extend beyond the end of such period.
CVD EQUIPMENT CORPORATION
Annual Meeting of Shareholders
December 12, 2007
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned Shareholder of CVD Equipment Corporation (the "Company") hereby
constitutes and appoints Leonard A. Rosenbaum and Glen R. Charles, and each of
them, his true and lawful attorneys and proxies, with full power of substitution
in and for each of them, to vote all of the shares of common stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Company's headquarters
located at 1860 Smithtown Avenue, Ronkonkoma, New York 11779 at 10:00 A.M.,
Eastern Standard Time, on December 12, 2007 or at any postponement or
adjournment thereof, on any and all of the proposals contained in the Notice of
Annual Meeting of Shareholders (the "Notice"), with all the powers the
undersigned would possess if present personally at said meeting, or at any
postponement thereof.
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" ALL PROPOSALS.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
Please Detach and Mail in the Envelope Provided
[X] Please mark your votes
as in this example using
dark ink only.
1. The election of the following nominees to the Company's Board of Directors
to serve until the 2008 Annual Meeting of Shareholders: Leonard A.
Rosenbaum, Martin J. Teitelbaum, Alan H. Temple, Jr., Conrad J. Gunther and
Bruce T. Swan.
FOR [ ] WITHHOLD [ ]
all nominees AUTHORITY
listed at right to vote for all
(except as marked nominees listed at right
to the contrary above)
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
draw a line through the name of the nominee(s) above.
2. The ratification of the appointment of Moore Stephens, P.C. as the
Company's independent public accountants for the year ending December 31,
2007.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. The approval of the 2007 Employee Share Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the proxyholders are authorized to vote upon such
other business as may properly come before the meeting or any adjournment
thereof, all as set out in the Notice and Proxy Statement relating to the
Annual Meeting, receipt of which are hereby acknowledged.
Please sign exactly as your name appears and return this proxy card immediately
in the enclosed stamped self-addressed envelope.
Signature(s) ____________________ Signature _____________________
Dated: _________________
NOTE:Please mark, date and sign exactly as name(s) appear on this proxy and
return the proxy card promptly using the enclosed envelope. If the signer
is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. Executives, administrators, trustees,
etc. should state full title or capacity. Joint owners should each sign. If
signer is a partnership, please sign in partnership name by authorized
person.