SCI ENGINEERED MATERIALS, INC.
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SCHEDULE 14A
Information Required in Proxy
Statement
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934
Exchange Act of 1934
Filed by the
Registrant x
Filed by a Party
other than the Registrant o
| Check the appropriate box: | ||
| o | Preliminary Proxy Statement | |
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| x | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material Under Rule 14a-12 | |
SCI ENGINEERED MATERIALS,
INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
| Payment of Filing Fee (Check the appropriate box): | ||||
| x | No fee required. | |||
| o | 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: | |||
| o | Fee paid previously with preliminary materials. | |||
| o | 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: | |||
SCI ENGINEERED MATERIALS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
June 9, 2010
and
PROXY STATEMENT
IMPORTANT
Please mark, sign and date your proxy
and promptly return it in the enclosed envelope.
and promptly return it in the enclosed envelope.
SCI ENGINEERED MATERIALS, INC.
2839 Charter Street
Columbus, Ohio 43228
(614) 486-0261
2839 Charter Street
Columbus, Ohio 43228
(614) 486-0261
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 9, 2010
TO BE HELD JUNE 9, 2010
April 27, 2010
To Our Shareholders:
The Annual Meeting of Shareholders of SCI
Engineered Materials, Inc. (the “Company”) will be held at our offices located
at 2839 Charter Street, Columbus, Ohio 43228, on June 9, 2010, at 9:30 a.m.
local time, for the following purposes:
| 1. | To elect five directors of the Company, each to serve for terms expiring at the next Annual Meeting of Shareholders; | ||
| 2. | To transact any other business which may properly come before the meeting or any adjournment thereof. | ||
Accompanying this Notice of Annual
Meeting is a form of a Proxy, Proxy Statement, and a copy of our Form 10-K
Annual Report for the year ended December 31, 2009, all to be mailed on or about
April 27, 2010.
Our Board of Directors has fixed
April 20, 2010, as the record date for the determination of shareholders
entitled to notice and to vote at the annual meeting and any adjournment
thereof. A list of shareholders will be available for examination by any
shareholder at the annual meeting and for a period of 10 days before the annual
meeting at our executive offices.
You will be most welcome at the
annual meeting and we hope you can attend. Our directors and officers as well as
representatives of our registered independent public accounting firm are
expected to be present to answer your questions and to discuss the Company’s
business.
We urge you to execute and return
the enclosed proxy as soon as possible so that your shares may be voted in
accordance with your wishes. If you attend the annual meeting, you may cast your
vote in person and your proxy will not be used. If your shares are held in an
account at a brokerage firm or bank, you must instruct them on how to vote your
shares.
| By Order of the Board of Directors, | |
| Daniel Rooney | |
| Chairman of the Board of Directors, | |
| President and Chief Executive Officer |
|
PLEASE SIGN AND
MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES |
3
IMPORTANT NOTICE REGARDING
THE AVAILABILITY OF PROXY
MATERIALS FOR THE
SHAREHOLDER MEETING TO BE
HELD ON JUNE 9, 2010.
THE AVAILABILITY OF PROXY
MATERIALS FOR THE
SHAREHOLDER MEETING TO BE
HELD ON JUNE 9, 2010.
The proxy materials include this Proxy
Statement for the Annual Meeting and
our annual report on Form 10-K for the year ended December 31, 2009 and are
available at www.sciengineeredmaterials-proxy.com.
our annual report on Form 10-K for the year ended December 31, 2009 and are
available at www.sciengineeredmaterials-proxy.com.
The Annual Meeting of
Shareholders will be held at our executive offices located at 2839 Charter
Street, Columbus, Ohio 43228 on June 9, 2010 at 9:30 a.m. EDT for the following
purposes:
1. To elect five
directors of the Company, each to serve for terms expiring at the next Annual
Meeting of Shareholders;
We recommend that the
shareholders vote FOR the election of the nominees for director.
If you wish to attend
the shareholder meeting and vote in person you will find directions to our
corporate office on our website at http://www.sciengineeredmaterials.com/company/directions.htm.
4
SCI ENGINEERED MATERIALS,
INC.
2839 Charter Street
Columbus, Ohio 43228
_____________________________
Columbus, Ohio 43228
_____________________________
PROXY STATEMENT
_____________________________
_____________________________
ANNUAL MEETING OF SHAREHOLDERS
June 9, 2010
_____________________________
_____________________________
This proxy statement is furnished to the
shareholders of SCI Engineered Materials, Inc., an Ohio corporation (the
“Company”), in connection with the solicitation of proxies to be used in voting
at the Annual Meeting of Shareholders to be held at our executive offices
located at 2839 Charter Street, Columbus, Ohio 43228 on June 9, 2010 at 9:30
a.m., and at any adjournment or postponement thereof (the “Annual Meeting”). The
enclosed proxy is being solicited by our Board of Directors. This proxy
statement and the enclosed proxy will be first sent or given to our shareholders
on approximately April 27, 2010.
We will bear the cost of the solicitation of
proxies, including the charges and expenses of brokerage firms and others for
forwarding solicitation material to beneficial owners of stock. Representatives
of the Company may solicit proxies by mail, telegram, telephone, fax, or
personal interview.
The shares represented by the accompanying
proxy will be voted as directed if the proxy is properly signed and received by
us prior to the Annual Meeting. If no directions are made to the contrary, the
proxy will be voted FOR the election of
Daniel Rooney, Robert J. Baker, Jr., Walter J. Doyle, Robert H. Peitz, and
Edward W. Ungar as directors of the Company and to transact such other business
as may properly come before the meeting or any adjournment thereof. Any
shareholder voting the accompanying proxy has the power to revoke it at any time
before its exercise by giving notice of revocation to us, by duly executing and
delivering to us a proxy card bearing a later date, or by voting in person at
the annual meeting. The officers, directors, and nominees for directors of the
Company are the beneficial owners of 31.8% of the Company’s issued and
outstanding shares. The officers, directors and nominees for directors of the
Company have indicated that they will vote in favor of each nominee for
director.
Only holders of record of our common stock at
the close of business on April 20, 2010 will be entitled to vote at the Annual
Meeting. At that time, we had 3,723,775
shares of common stock
outstanding and entitled to vote. Each share of our common stock outstanding on
the record date entitles the holder to one vote on each matter submitted at the
Annual Meeting.
The presence, in person or by proxy, of a
majority of the outstanding shares of our common stock is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum. Broker non-votes occur when brokers, who hold
their customers’ shares in street name, sign and submit proxies for such shares
and vote such shares on some matters, but not others. Typically, this would
occur when brokers have not received any instructions from their customers, in
which case the brokers, as the holders of record, are permitted to vote on
“routine” matters, which typically include the election of directors.
The election of the director nominees requires
the favorable vote of a plurality of all votes cast by the holders of our common
stock at a meeting at which a quorum is present. Proxies that are marked
“Withhold Authority” and broker non-votes will not be counted toward such
nominee’s achievement of a plurality and thus will have no effect.
Each other matter to be submitted to the
shareholders for approval or ratification at the Annual Meeting requires the
affirmative vote of the holders of a majority of our common stock present and
entitled to vote on the matter. For purposes of determining the number of shares
of our common stock voting on the matter, abstentions will be counted and will
have the effect of a negative vote; broker non-votes will not be counted and
thus will have no effect.
5
ELECTION OF DIRECTORS
Our Restated Code of Regulations provides that
the number of directors shall be fixed by the Board. The total number of
authorized directors currently is fixed at five. The nominees for director, if
elected, will serve for one-year terms expiring at the next Annual Meeting of
Shareholders. Daniel Rooney, Robert J. Baker, Jr., Walter J. Doyle, Robert H.
Peitz, and Edward W. Ungar currently serve as directors of the Company and are
being nominated by the Board of Directors for re-election as
directors.
It is intended that, unless otherwise
directed, the shares represented by the enclosed proxy will be voted
FOR the election of Messrs. Rooney, Baker, Doyle,
Peitz, and Ungar as directors. In the event that any nominee for director should
become unavailable, the number of directors of the Company may be decreased
pursuant to the Restated Code of Regulations or the Board of Directors may
designate a substitute nominee, in which event the shares represented by the
enclosed proxy will be voted for such substitute nominee.
The Board of Directors recommends that the shareholders vote FOR the
election of the nominees for director.
The following table sets forth each
nominee’s name, age, and his position with the Company:
| Name | Age | Position |
| Daniel Rooney | 56 | Chairman of the Board of Directors, |
| President and Chief Executive Officer | ||
| Robert J. Baker, Jr. | 71 | Director |
| Walter J. Doyle | 75 | Director |
| Robert H. Peitz | 49 | Director |
| Edward W. Ungar | 74 | Director |
Daniel Rooney has served as a Director of our Company since
joining us in March 2002 as President and Chief Executive Officer. Mr. Rooney
was elected as the Chairman of the Board of Directors of our Company on January
8, 2003. Prior to joining us, Mr. Rooney was General Manager for Johnson
Matthey, Color and Coatings Division, Structural Ceramics Sector North America
from 1994 to 2001. Prior to that, Mr. Rooney held various management positions
at TAM Ceramics, Inc., a Cookson Group Company. Mr. Rooney has a Bachelor of
Science in Ceramic Engineering from Rutgers College of Engineering and an MBA
from Niagara University.
Robert J. Baker, Jr., Ph.D.
has served as a Director
of our Company since 1992. Dr. Baker is the President of Venture Resources
International, which he founded in 1974, and the co-founder of Business Owners
Consulting Group, which assists companies in the development of growth
strategies, including marketing position and competitive strategies. He has
co-lead group strategic planning programs (11 sessions of half day programs over
6 months with the participant’s strategic plan the result) for over 30 years
with over 1,400 companies participating. He has/does serve on a number of Boards
and Advisory Boards. Dr. Baker’s prior experience was with Battelle Northwest
and the Battelle Development Corporation managing technology, commercial
development of technology and technology licensing. Dr. Baker was graduated from
the University of Illinois with B.S., M.S., and Ph.D. degrees in Ceramic
Engineering. In addition, Dr. Baker is a Sloan Fellow at MIT where he earned a
Masters in Management Science.
Edward W. Ungar has been a Director of our Company since
1990. Mr. Ungar is the President and founder of Taratec Corporation, a
technology business-consulting firm in Columbus, Ohio. Prior to forming Taratec
Corporation in 1986, Mr. Ungar was an executive with Battelle Memorial
Institute. Mr. Ungar earned Ph.D. and M.S. degrees in Mechanical Engineering
from The Ohio State University and a B.M.E. in Mechanical Engineering from The
City College of New York, and completed the Executive Development Program at the
Kellogg School, Northwestern University. In his position at Battelle, Mr. Ungar
had profit and loss (P+L) responsibility for a major operation division. At
Taratec, Mr. Ungar has had extensive experience in treasury and P+L functions as
well as general management. Throughout his career, Mr. Ungar has been involved
in technology commercialization related to the principal business areas of our
Company.
6
Walter J. Doyle has served as a director of our Company since
2004. Mr. Doyle is the President of Forest Capital, an angel capital investment firm he
founded in 1997. He is a member and/or on the board of a number of business
organizations that he helps position for substantial growth and long term value.
His experience spans over 40 years of general management with direct (P+L)
responsibility as well as new product development and commercialization. Mr.
Doyle was founder, President and CEO of Industrial Data Technologies Corp. (IDT)
for 21 years and subsequently sold the company to the Eaton Corporation,
headquartered in Cleveland Ohio. IDT designed, developed, manufactured and
marketed high-tech products for factory automation projects in the metals,
automotive, food and chemical industries. Mr. Doyle earned an Electrical
Engineering degree from The City College of New York (CCNY) and an MBA from the
Harvard Business School.
Robert H. Peitz has served as a Director of our Company since
2004. Mr. Peitz is a private investor and portfolio manager who is very
experienced in meshing the capital needs of businesses with the investment
criteria of financial investors. Mr. Peitz is the former Managing Director and
Head of Financial Markets for PB Capital in New York, New York. Previously, Mr.
Peitz was a Managing Director at BHF Capital, Treasurer of BHF-Bank New York
Branch and an Associate at Morgan Stanley in International Operations. Mr. Peitz
graduated from the University of Cincinnati with a Bachelor of Arts in Economics
and has an MBA from the Thunderbird School of Global Management.
The Board of Directors is seeking an
individual(s) to strengthen our board.
INFORMATION CONCERNING THE BOARD OF DIRECTORS,
EXECUTIVE OFFICERS,
AND PRINCIPAL SHAREHOLDERS
AND PRINCIPAL SHAREHOLDERS
Board Leadership and Structure
Our Board of Directors believes that
the purpose of corporate governance is to ensure that we maximize shareholder
value in a manner consistent with legal requirements and the highest standards
of integrity. The Board has adopted and adheres to corporate governance
practices which the Board and senior management believe promote our corporate
purposes, are sound and represent best practices. We continually review these
governance practices to make sure we comply with state and Federal laws.
Our Board of Directors oversees all
business, property and affairs of the Company. Our officers keep the members of
the Board informed of our business through discussions at Board meetings and by
providing them with reports and other materials.
Meetings and Compensation of the Board of Directors
Our Board of Directors had a total of seven
meetings during the year ended December 31, 2009. During 2009, all directors
attended every meeting of the Board of Directors, held during the period for
which he was a director, and the total number of meetings held by all committees
of the Board of Directors in which he served. Directors who are employed by the
Company receive no compensation for serving as directors.
As compensation for their service non-employee
directors may periodically receive cash, grants of stock or grants of stock
options with an exercise price equal to the fair market value of our common
stock on the date of grant for up to a ten-year term. Directors are also
reimbursed for all reasonable out-of-pocket expenses. In the year ended December
31, 2009, each of Messrs. Baker, Jr., Doyle, Peitz and Ungar received
compensation of options to purchase 22,500 shares of the Company’s common stock.
In addition, Dr. Baker earned $2,500 as chairman of the Stock Option and
Compensation Committee (the “Compensation Committee”). Mr. Ungar earned $5,000
as chairman of the Audit Committee.
It is our expectation that all members of the
Board of Directors will attend the 2010 Annual Meeting of Shareholders. All
members of our Board of Directors were present at our 2009 Annual Meeting of
Shareholders.
Shareholder Communication
Our Board of Directors welcomes
communications from shareholders. Shareholders may send communications to the
Board of Directors or to any director in particular, c/o Gerald S. Blaskie, SCI
Engineered Materials, Inc., 2839 Charter Street, Columbus, Ohio 43228. Any
correspondence addressed to the Board of Directors or to any one of our
directors in care of our offices will be forwarded to the addressee without
review by management.
7
Board Leadership Structure
From 1987 to March 2002 the positions of
Chairman of the Board and Chief Executive Officer (CEO) were held by Dr. Edward
R. Funk, the founder of our Company. For a brief period from March 2002 until
January 2003 the positions of Chairman of the Board and CEO were held by
separate people, due in part to the fact that the CEO was recently hired in
March 2002. In January 2003, the Board reassessed this structure. Based in part
on the CEO’s performance since his hire date and the Board’s increasing
familiarity and comfort with the CEO and the potential efficiencies of having
the CEO also serve in the role of Chairman of the Board, the Board decided to
revise its structure. The Board appointed Mr. Rooney, our Chief Executive
Officer, as the Chairman of the Board. We have no Lead Independent
Director.
The Chairman of the Board provides leadership
to the Board and works with the Board to define its structure and activities in
the fulfillment of its responsibilities. The Chairman of the Board sets the
Board agendas with Board and management input, facilitates communication among
directors, and presides at meetings of the Board of Directors and
shareholders.
Risk Oversight
Our Board of Directors oversees an
enterprise-wide approach to risk management, designed to support the achievement
of organizational objectives, including strategic objectives, to improve
long-term organizational performance and enhance shareholder value. A
fundamental part of risk management is not only understanding the risks a
company faces and what steps management is taking to manage those risks, but
also understanding what level of risk is appropriate for the company. The
involvement of the full Board of Directors in setting the Company’s business
strategy is a key part of its assessment of management’s appetite for risk and
also a determination of what constitutes an appropriate level of risk for the
Company. Risk is assessed throughout the business, focusing on three primary
areas of risk: financial risk, legal/compliance risk and operational/strategic
risk.
While the Board of Directors has the ultimate
oversight responsibility for the risk management process, various committees of
the Board also have responsibility for risk management. In particular, the Audit
Committee focuses on financial risk, including internal controls, and receives
an annual risk assessment report from the Company’s internal auditors. In
addition, in setting compensation, the Compensation Committee strives to create
a combination of near term and longer incentives that encourage a level of
risk-taking behavior consistent with the Company’s business
strategy.
Committees of the Board of Directors
We have an Audit Committee and a
Stock Option and Compensation Committee.
The Audit Committee consults with our Chief
Financial Officer, other key members of our management and with our independent
auditors with regard to the plan of the annual audit. The Audit Committee
reviews, in consultation with the independent auditors, the report of audit, or
proposed report of audit and the accompanying management letter, if any. In
addition, the Audit Committee consults with our Chief Financial Officer, other
key members of our management and with our independent auditors with regard to
the adequacy of the internal accounting controls. The Chairman of the Audit
Committee is Mr. Ungar, and the members are Messrs. Baker and Doyle. The Audit
Committee met twice during 2009. The Board of Directors has not adopted a
charter for the Audit Committee. The Board of Directors has determined that
Messrs. Doyle and Ungar qualify as “audit committee financial experts” as that
term is defined in Item 401(e) of Regulation S-B. Messrs. Doyle and Ungar and
Dr. Baker each meet the criteria for audit committee independence as defined in
NASDAQ Rule 4350, and Rule 10A-3 promulgated under the Securities Exchange Act
of 1934, as amended.
The Compensation Committee of the Board of
Directors reviews executive compensation and administers our stock incentive and
incentive compensation performance plans. The Chairman of the Compensation
Committee is Dr. Baker and the members are Messrs. Doyle and Ungar. The
Compensation Committee met once during 2009.
Due to the limited size of our Board
of Directors, the Board of Directors has determined that it is not necessary to
establish a nominating committee. Nominations for directors are considered by
the entire Board of Directors. The directors take a critical role in guiding the
strategic direction and oversee the management of the Company. Director
candidates are considered based on various criteria, such as diversity in broad
based business and professional skills and experiences, a global business and
social perspective, concern for long term interests of shareholders, and
personal integrity and judgment. In addition, directors must have available time
to devote to Board activities and to enhance
8
their knowledge of
the industry. The Board seeks nominees with a broad diversity of experiences,
professions, skills and backgrounds. Nominees are not discriminated against on
the basis of race, religion, national origin, sexual orientation, disability or
any other basis proscribed by law.
Accordingly, we seek to attract and
retain highly qualified directors who have sufficient time to attend to their
substantial duties and responsibilities to the Company. Recent developments in
corporate governance and financial reporting have resulted in increased demand
for such highly qualified and productive public company directors.
The Board of Directors will consider
the recommendations of shareholders regarding potential director candidates. In
order for shareholder recommendations regarding possible director candidates to
be considered by the Board of Directors:
- such recommendations must be provided to the Board of
Directors, c/o Gerald S. Blaskie, SCI Engineered Materials, Inc., 2839 Charter
Street, Columbus, Ohio 43228, in writing at least 120 days prior to the date
of the next scheduled annual meeting;
- the nominating shareholder must meet the eligibility
requirements to submit a valid shareholder proposal under Rule 14a-8 of the
Securities Exchange Act of 1934, as amended; and
- the shareholder must describe the qualifications, attributes, skills or other qualities of the recommended director candidate.
Compensation Committee Interlocks and Insider Participation
None of our executive officers have
served:
- as a member of the Compensation Committee of another entity
which has had an executive officer who has served on our Compensation
Committee;
- as a director of another entity which has had an executive
officer who has served on our Compensation Committee; or
- as a member of the Compensation Committee of another entity which has had an executive officer who has served as one of our directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.13(E) of the Ohio
Revised Code gives a corporation incorporated under the laws of Ohio power to
indemnify any person who is or has been a director, officer or employee of that
corporation, or of another corporation at the request of that corporation,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, criminal or civil, to which he is or may
be made a party because of being or having been such director, officer, employee
or agent, provided that in connection therewith, such person is determined to
have acted in good faith in what he reasonably believed to be in or not opposed
to the best interest of the corporation of which he is a director, officer,
employee or agent and without reasonable cause, in the case of a criminal
matter, to believe that his conduct was unlawful. The determination as to the
conditions precedent to the permitted indemnification of such person is made by
the directors of the indemnifying corporation acting at a meeting at which, for
the purpose, any director who is a party to or threatened with any such action,
suit or proceeding may not be counted in determining the existence of a quorum
and may not vote. If, because of the foregoing limitations, the directors are
unable to act in this regard, such determination may be made by the majority
vote for the corporation’s voting shareholders (or without a meeting upon
two-thirds written consent of such shareholders), by judicial proceeding or by
written opinion of legal counsel not retained by the corporation or any person
to be indemnified during the five years preceding the date of determination.
Section 1701.13(E) of the Ohio
Revised Code further provides that the indemnification thereby permitted shall
not be exclusive of, and shall be in addition to, any other rights that
directors, officers, employees or agents have, including rights under insurance
purchased by the corporation.
9
Article 5 of the Company’s Restated
Code of Regulations contains extensive provisions related to indemnification of
officers, directors, employees and agents. The Company is required to indemnify
its directors against expenses, including attorney fees, judgments, fines and
amounts paid in settlement of civil, criminal, administrative, and investigative
proceedings, if the director acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company. When
criminal proceedings are involved, indemnification is further conditioned upon
the director having no reasonable cause to believe that his conduct was
unlawful.
Entitlement of a director to
indemnification shall be made by vote of the disinterested directors of the
Company. If there are an insufficient number of such directors to constitute a
quorum, the determination to indemnify directors shall be made by one of the
following methods: (1) a written opinion of independent legal counsel, (2) vote
by the shareholders, or (3) by the court in which the action, suit or proceeding
was brought.
The Company may pay the expenses,
including attorney fees of any director, as incurred, in advance of a final
disposition of such action, suit or proceeding, upon receipt by the Company of
an undertaking by the affected director(s) in which he (they) agree(s) to
cooperate with the Company concerning the action, suit or proceeding, and
agree(s) to repay the Company in the event that a court determines that the
director’s action, or failure to act, involved an act, or omission, undertaken
with reckless disregard for the best interests of the Company.
The indemnification provisions of
the Articles of Incorporation relating to officers, employees and agents of the
Company are similar to those relating to directors, but are not mandatory in
nature. On a case-by-case basis, the Company may elect to indemnify them, and
may elect to pay their expenses, including attorney fees, in advance of a final
disposition of the action, suit or proceeding, upon the same conditions and
subject to legal standards as relate to directors. These indemnification
provisions are also applicable to actions brought against directors, officers,
employees and agents in the right of the Company. However, no indemnification
shall be made to any person adjudged to be liable for negligence or misconduct
in the performance of his duty to the Company unless, and only to the extent
that a court determines, that despite the adjudication of liability, but in view
of all of the circumstances of the case, shall deem proper. The Company
currently carries directors and officers insurance in the amount of one million
dollars.
The above discussion of the
Company’s Restated Code of Regulations and of Section 1701.13(E) of the Ohio
Revised Code is not intended to be exhaustive and is respectively qualified in
its entirety by such documents and statutes.
Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the “Act”) may be
permitted to directors, officers and controlling persons of the Company issuer
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
REPORT OF AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
The Audit Committee consults with
our Chief Financial Officer, other key members of our management and with our
independent auditors with regard to the plan of the annual audit. The Audit
Committee reviews, in consultation with the independent auditors, the report of
audit, or proposed report of audit and the accompanying management letter, if
any. In addition, the Audit Committee consults with our Chief Financial Officer,
other key members of our management and with our independent auditors with
regard to the adequacy of the internal accounting controls.
In fulfilling its responsibilities,
the Audit Committee selected Maloney + Novotny LLC as our independent
accountants for purposes of auditing our financial statements for 2009. The
Audit Committee has reviewed and discussed with management and the independent
auditors our audited financial statements; discussed with the independent
auditors the matters required to be discussed by Codification of Statements on
Auditing Standards No. 61; received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No.
1; and discussed with the independent accountants their independence from our
Company.
Based on the reviews and discussions
with management and Maloney + Novotny LLC, the Audit Committee recommended to
the Board of Directors that our audited financial statements be included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed
with the Securities and Exchange Commission.
10
The Board of Directors evaluated the
independence of each member of the Audit Committee. As part of its evaluation,
the Board of Directors determined, in the exercise of its business judgment,
that Messrs. Ungar and Doyle, and Dr. Baker are independent under Rule 4350(d)
of the Nasdaq Stock Market and is financially literate each in his own capacity.
Based upon its work and the
information received in the inquiries outlined above, the Audit Committee is
satisfied that its responsibilities for the period ended December 31, 2009, were
met and that our financial reporting and audit processes are functioning
effectively.
|
Submitted by the
Audit Committee
of the Board of Directors: Robert J. Baker, Jr. Walter J. Doyle Edward W. Ungar |
Executive Officers
In addition to Mr. Rooney, the
following persons serve as executive officers of the Company:
Gerald S. Blaskie, age 52, has served as our Chief Financial
Officer since April 2001. On March 2, 2006, our Board of Directors appointed Mr.
Blaskie to the position of Vice President, Treasurer and Chief Financial
Officer. Prior to joining us, Mr. Blaskie was the Controller at Cable Link, Inc.
from February 2000 to March 2001. From 1997 to 2000, he was the Plant Manager at
Central Ohio Plastics Corporation, where he also served as Controller from 1993
to 1997. Mr. Blaskie earned a B.S. degree in Accounting from Central Michigan
University and passed the CPA exam in the State of Ohio.
Scott Campbell, Ph.D., age 52, has served
as our Vice President of Technology since March 2005. Dr. Campbell served as our
Vice-President of Research and Engineering from July 2004 to March 2005. Dr.
Campbell joined us in July 2002 as our Technical Director. Prior to joining us,
he was Senior Research Manager at Oxynet, Inc. for five years. Dr. Campbell
earned his Ph.D., Metallurgy, from the University of Illinois at Chicago. In
addition, he earned M.S. and B.S. degrees in Ceramic Engineering from The Ohio
State University. He is a member of the American Vacuum Society and the
Materials Research Society.
Michael K. Barna, age 53, has served as Vice President,
Sales-Photonics, since March 2, 2006. Mr. Barna joined us as Director of Sales
and Marketing in January 2004. Prior to joining us, Mr. Barna had more than 20
years of experience in thin film sales, including major account sales of
Physical Vapor Deposition equipment, high purity targets and evaporation
materials for these systems, hybrid microelectronic, telecommunications, and the
commercial glass coating markets. Mr. Barna earned a B.S. degree in Mechanical
Engineering from the University of Kentucky.
Officers are elected annually by our
Board of Directors and serve at its discretion.
Ownership of Common Stock by Directors and Executive Officers
The following table sets forth, as
of April 20, 2010, the beneficial ownership of the Company’s common stock by
each of the Company’s directors, each executive officer named in the Summary
Compensation Table, and by all directors and executive officers as a
group.
| Number of Shares | Percentage of | ||||
| Name of Beneficial Owner(1) | Beneficially Owned(2) | Class(3) | |||
| Robert H. Peitz(4) | 692,453 | 17.9 | % | ||
| Daniel Rooney(5) | 185,452 | 4.8 | % | ||
| Walter J. Doyle(6) | 135,738 | 3.6 | % | ||
| Robert J. Baker, Jr.(7) | 90,051 | 2.4 | % | ||
| Scott Campbell(8) | 86,100 | 2.3 | % | ||
| Michael K. Barna(9) | 81,600 | 2.1 | % | ||
| Gerald S. Blaskie(10) | 78,000 | 2.1 | % | ||
| Edward W. Ungar(11) | 71,188 | 1.9 | % | ||
| All directors and executive officers as | |||||
| a group (8 persons)(12) | 1,420,582 | 31.8 | % | ||
11
(1) The address for all
is c/o SCI Engineered Materials, Inc., 2839 Charter Street, Columbus, Ohio
43228.
(2) For purposes of the
above table, a person is considered to “beneficially own” any shares with
respect to which he exercises sole or shared voting or investment power or as to
which he has the right to acquire the beneficial ownership within 60 days of
April 20, 2010. Unless otherwise indicated, voting power and investment power
are exercised solely by the person named above or shared with members of his or
her household.
(3) “Percentage of
Class” is calculated by dividing the number of shares beneficially owned by the
total number of outstanding shares of the Company on April 20, 2010, plus the
number of shares such person has the right to acquire within 60 days of April
20, 2010.
(4) Mr. Peitz’ ownership
includes 199,162 shares of common stock beneficially owned by Park National Bank
(Trustee for the Ingeborg Funk Children’s Trust), of which 43,750 shares of
common stock can be acquired under stock purchase warrants exercisable within 60
days of April 20, 2010 (Mr. Peitz includes these shares because he has the power
to dispose of the shares). Mr. Peitz’ ownership also includes 111,763 shares of
common stock, which can be acquired by Mr. Peitz under stock options and
purchase warrants exercisable within 60 days of April 20, 2010.
(5) Includes 172,300 common shares, which may be acquired
by Mr. Rooney under stock options exercisable within 60 days of April 20, 2010
and 11,300 shares which are held in Mr. Rooney’s IRA.
(6) Includes 39,250 common shares, which may be acquired
by Mr. Doyle under stock options and stock purchase warrants exercisable within
60 days of April 20, 2010.
(7) Includes 65,000 common shares, which may be acquired
by Dr. Baker under stock options exercisable within 60 days of April 20, 2010,
and 16,063 shares which are held in Dr. Baker’s IRA.
(8) Includes 86,100
common shares, which may be acquired by Dr. Campbell under stock options
exercisable within 60 days of April 20, 2010.
(9) Includes 76,600
common shares, which may be acquired by Mr. Barna under stock options
exercisable within 60 days of April 20, 2010. and 2,000 shares which are held in
Mr. Barna’s IRA.
(10) Includes 77,000 common shares, which may be acquired
by Mr. Blaskie under stock options exercisable within 60 days of April 20,
2010.
(11) Includes 65,000
common shares, which may be acquired by Mr. Ungar under stock options
exercisable within 60 days of April 20, 2010.
(12) Includes 736,763 common shares, which may be acquired
under stock options and stock purchase warrants exercisable within 60 days of
April 20, 2010.
Ownership of Common Stock by Principal Shareholders
The following table sets forth information as
of April 20, 2010, relating to the beneficial ownership of common stock by each
person known by the Company to own beneficially more than 5% of the outstanding
shares of common stock of the Company.
| Number of Shares | Percentage of | ||||
| Name of Beneficial Owner(1) | Beneficially Owned(2) | Class(3) | |||
| Robert H. Peitz(4) | 692,453 | 17.9 | % | ||
| Laura Shunk(5) | 365,828 | 9.7 | % | ||
| Daniel Funk(6) | 358,179 | 9.5 | % | ||
| Curtis A. Loveland(7) | 334,956 | 8.9 | % | ||
| Windcom Investments SA(8) | 332,810 | 8.9 | % | ||
| Thomas G. Berlin(9) | 254,183 | 6.7 | % | ||
| Mid South Investor Fund L.P.(10) | 250,000 | 6.6 | % | ||
| Lake Street Fund L.P.(11) | 245,059 | 6.5 | % | ||
12
(1) The address of
Robert H. Peitz is c/o SCI Engineered Materials, Inc., 2839 Charter Street,
Columbus, Ohio 43228. The address of Laura Shunk is PO Box 490, Chesterland,
Ohio 44026. The address of Daniel Funk is 2123 Auburn Avenue, Suite 322,
Cincinnati, Ohio 45219. The address of Curtis A. Loveland is c/o Porter, Wright,
Morris & Arthur LLP, 41 South High Street, Columbus, Ohio 43215. The address
of Windcom Investments SA is Corso Elvezia 25, 6900 Lugan, CH. The address of
Thomas G. Berlin is c/o Berlin Financial Ltd., 1325 Carnegie Avenue, Cleveland,
Ohio 44115. The address of Mid South Investor Fund L.P. is 1776 Peachtree St.
NW, Suite 412 North, Atlanta, Georgia 30309. The address of Lake Street Fund
L.P. is 600 South Lake Avenue, Suite 100, Pasadena, California
91106.
(2) For purposes of this
table, a person is considered to “beneficially own” any shares with respect to
which he or she exercises sole or shared voting or investment power or as to
which he or she has the right to acquire the beneficial ownership within 60 days
of April 20, 2010. Unless otherwise indicated, voting power and investment power
are exercised solely by the person named above or shared with members of his or
her household.
(3) “Percentage of
Class” is calculated by dividing the number of shares beneficially owned by the
total number of outstanding shares of the Company on April 20, 2010, plus the
number of shares such person has the right to acquire within 60 days of April
20, 2010.
(4) Mr. Peitz’ ownership
includes 199,162 shares of common stock beneficially owned by Park National Bank
(Trustee for the Ingeborg Funk Children’s Trust), of which 43,750 shares of
common stock can be acquired under stock purchase warrants exercisable within 60
days of April 20, 2010 (Mr. Peitz includes these shares because he has the power
to dispose of the shares). Mr. Peitz’ ownership also includes 111,763 shares of
common stock, which can be acquired by Mr. Peitz under stock options and
purchase warrants exercisable within 60 days of April 20, 2010.
(5) Includes 34,202
common shares, which may be acquired by Ms. Shunk under stock options and stock
purchase warrants exercisable within 60 days of April 20, 2010.
(6) Includes 41,702
common shares, which may be acquired by Dr. Funk under stock options and stock
purchase warrants exercisable within 60 days of April 20, 2010.
(7) Includes 50,000 shares of common stock, which can be
acquired by Mr. Loveland under stock options exercisable within 60 days of April
20, 2010.
(8) Dr. Karl
Kohlbrenner, CEO of Windcom Investments SA, has voting and dispositive power
over the shares of common stock on behalf of the Company. Windcom Investments
SA’s ownership includes 8,623 shares of common stock, which can be acquired by
Windcom Investments SA under stock purchase warrants exercisable within 60 days
of April 20, 2010.
(9) Mr. Berlin’s
ownership includes 52,083 shares of common stock beneficially owned by Berlin
Capital Growth L.P., which can be acquired under stock purchase warrants
exercisable within 60 days of April 20, 2010. Mr. Berlin has shared voting and
dispositive power over the shares of common stock in this limited partnership as
the controlling principal of Berlin Capital Growth L.P. Mr. Berlin’s ownership
also includes 20,833 shares of common stock, which can be acquired by Mr. Berlin
under stock purchase warrants exercisable within 60 days of April 20,
2010.
(10) Includes 50,000
shares of common stock, which can be acquired by Mid South Investor Fund L.P.
under stock purchase warrants exercisable within 60 days of April 20,
2010.
(11) Includes 62,500
shares of common stock, which can be acquired by Lake Street Fund L.P. under
stock purchase warrants exercisable within 60 days of April 20,
2010.
13
Executive Compensation
The following summary compensation table sets
forth information regarding compensation earned during the last two years to our
Principal Executive Officer, our Principal Financial Officer and our two other
officers.
| SUMMARY COMPENSATION TABLE | ||||||||
| Name
and principal position |
Year | Salary | Bonus | Stock awards |
Option awards (b) |
Non-equity incentive plan compensation |
All
other compensation (c) |
Total |
| PEO | 2009 | $205,492 | $0 | $0 | $709,532 | $0 | $6,165 | $921,189 |
| Daniel | ||||||||
| Rooney | ||||||||
| 2008 | 198,922 | 0 | 0 | 0 | 7,518 (a) | 5,967 | 212,407 | |
| PFO | 2009 | 102,746 | 0 | 0 | 381,901 | 2,000 | 3,082 | 489,729 |
| Gerald S. | (i) | |||||||
| Blaskie | ||||||||
| 2008 | 99,691 | 0 | 0 | 0 | 3,759 (a) | 2,991 | 106,441 | |
| VP- Sales | 2009 | 100,385 | 0 | 3,750 | 373,861 | 73,212 | 3,012 | 554,220 |
| Photonics | (j) | (k) | ||||||
| Michael K. | ||||||||
| Barna | ||||||||
| 2008 | 97,424 | 0 | 6,000 | 0 | 62,518 (e) | 2,923 | 168,865 | |
| (d) | ||||||||
| VP- | 2009 | 161,869 | 0 | 0 | 343,711 | 7,000 | 4,856 | 517,436 |
| Technology | (m) | |||||||
| Scott | ||||||||
| Campbell | ||||||||
| 2008 | 153,115 | 0 | 0 | 0 | 7,758 (h) | 4,596 | 165,469 | |
| a- |
As approved by the
Compensation Committee; paid in 2009.
|
| b- |
Options granted
under our 2006 Stock Option Plan – Mr. Rooney 176,500 shares; Mr. Barna
93,000 shares; Mr. Campbell 85,500 shares and Mr. Blaskie 95,000 shares.
The shares vest 10% per year beginning January 2, 2009 and the fair value at date of
grant was $6.00 per share.
|
| c- |
All other
compensation consists of the Company Safe Harbor contribution under the
SCI Engineered Materials, Inc. 401(k) & Profit Sharing Plan.
|
| d- |
1,000 shares of
Company stock awarded based on stock price at December 31, 2008, paid in
2009.
|
| e- |
$22,012 deferred
under our incentive compensation plan; paid in 2009.
|
| h- |
$5,259 deferred
under our incentive compensation plan; paid in 2009.
|
| i- |
$500 deferred
under our incentive compensation plan; paid in 2010
|
| j- |
1,000 shares of
Company stock awarded based on stock price at December 31, 2009, paid in
2010
|
| k- |
$23,779 deferred
under our incentive compensation plan; paid in 2010
|
| m- |
$2,000 deferred
under our incentive compensation plan; paid in 2010
|
Salaries
The salaries of the Named Executive Officers
are reviewed on an annual basis. Increases in salary are based on an evaluation
of the individual’s performance and level of pay compared to general industry
peer group pay levels. Merit increases normally take effect on January 1st of each year.
Executive Annual Incentive Plan
Mr. Rooney was eligible to receive
4%, and Messrs. Blaskie, Barna and Campbell were each eligible to receive 2% of
adjusted net income as an incentive compensation award for services during 2009.
No incentive compensation was earned for this award. Adjusted net income was
defined as the 2009 actual net income as it appears on the Company’s audited
financial statements plus expenses related to non-cash director
compensation.
Mr. Blaskie received $2,000 for the
Company meeting specified on-time delivery goals.
14
Mr. Barna received $73,212 for attaining and exceeding quarterly booking
and gross profit goals.
Mr. Campbell received the following
incentive compensation award for services during 2009 (i) $2,000 for reducing
scrap a specified amount, (ii) $3,000 for achieving grant income of a specified
amount and (iii) $2,000 for the Company meeting specified on-time delivery
goals.
Employment Agreement for Principal Executive Officer
The Principal Executive Officer, Mr.
Daniel Rooney has an employment contract that entitles him to 100% of his
compensation for six months following his termination other than for fraud or
serious misconduct. Following the initial six-month period after his
termination, Mr. Rooney is entitled to receive six months of pay at a rate of
50% of his compensation at the time of his termination.
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | |||||||||
| ---------------OPTION AWARDS--------------- | ---------------STOCK AWARDS--------------- | ||||||||
| Name and | Number of | Number of | Equity | Option | Option | Number | Market | Total | Market or |
| Principal | securities | securities | incentive | exercise | expiration | of shares | value of | number of | payout |
| Position | underlying | underlying | plan awards: | price | date | or units | stock | unearned | value of |
| unexercised | unexercised | number of | of stock | that is | shares, | unearned | |||
| options (#) - | options (#) – | securities | that have | not | units or | shares, | |||
| exercisable | unexercisable | underlying | not | vested | other | units or | |||
| unexercised | vested | rights that | other | ||||||
| earned | have not | rights that | |||||||
| options (#) | vested | have not | |||||||
| vested | |||||||||
| PEO | 17,650 | 158,850 | 0 | $6.00 | 1-1-19 | 0 | $0 | 0 | $0 |
| Daniel | (b) | ||||||||
| Rooney | |||||||||
| 100,000 | 0 | 0 | 1.55 | 3-1-12 | 0 | 0 | 0 | 0 | |
| 10,000 | 0 | 0 | 2.60 | 1-21-14 | 0 | 0 | 0 | 0 | |
| 15,000 | 0 | 0 | 2.40 | 3-8-15 | 0 | 0 | 0 | 0 | |
| 9,000 | 6,000 (a) | 0 | 3.25 | 6-19-16 | 0 | 0 | 0 | 0 | |
| PFO | 9,500 | 85,500 | 0 | 6.00 | 1-1-19 | 0 | 0 | 0 | 0 |
| Gerald S. | (b) | ||||||||
| Blaskie | |||||||||
| 25,000 | 0 | 0 | 1.88 | 3-7-11 | 0 | 0 | 0 | 0 | |
| 20,000 | 0 | 0 | 1.55 | 5-9-12 | 0 | 0 | 0 | 0 | |
| 5,000 | 0 | 0 | 2.60 | 1-21-14 | 0 | 0 | 0 | 0 | |
| 5,000 | 0 | 0 | 2.40 | 3-8-15 | 0 | 0 | 0 | 0 | |
| 3,000 | 2,000 (a) | 0 | 3.25 | 6-19-16 | 0 | 0 | 0 | 0 | |
| VP- Sales | 9,300 | 83,700 | 0 | 6.00 | 1-1-19 | 0 | 0 | 0 | 0 |
| Photonics | (b) | ||||||||
| Michael K. | |||||||||
| Barna | |||||||||
| 40,000 | 0 | 0 | 2.85 | 4-28-14 | 0 | 0 | 0 | 0 | |
| 10,000 | 0 | 0 | 2.40 | 3-8-15 | 0 | 0 | 0 | 0 | |
| 6,000 | 4,000 (a) | 0 | 3.25 | 6-19-16 | 0 | 0 | 0 | 0 | |
| VP- | 8,550 | 76,950 | 0 | 6.00 | 1-1-19 | 0 | 0 | 0 | 0 |
| Technology | (b) | ||||||||
| Scott | |||||||||
| Campbell | |||||||||
| 50,000 | 0 | 0 | 1.55 | 7-15-12 | 0 | 0 | 0 | 0 | |
| 5,000 | 0 | 0 | 2.60 | 1-21-14 | 0 | 0 | 0 | 0 | |
| 10,000 | 0 | 0 | 2.40 | 3-8-15 | 0 | 0 | 0 | 0 | |
| 3,000 | 2,000 (a) | 0 | 3.25 | 6-19-16 | 0 | 0 | 0 | 0 | |
a – Options granted June
19, 2006 vest in five equal annual installments on each anniversary of the
date of the grant beginning June 19, 2007.
b - Options granted January 2, 2009 vest in ten equal annual installments on each anniversary of the date of the grant beginning January 2, 2009.
b - Options granted January 2, 2009 vest in ten equal annual installments on each anniversary of the date of the grant beginning January 2, 2009.
Stock Options
At our
2006 Annual Meeting, our shareholders approved our 2006 Stock Incentive Plan
(the “2006 Plan”). The purpose of the 2006 Plan was to further the growth and
profitability of the Company by providing increased incentives to and encourage
share ownership on the part of key employees, officers and directors, and
consultants and advisors who
15
render
services to the Company and any future parent or subsidiary of the Company. The
2006 Plan permits the granting of stock options and restricted stock awards
(collectively “Awards”) to eligible participants. The maximum number of shares
of common stock which may be issued pursuant to the 2006 Plan is 600,000 shares.
If an Award expires or is cancelled without having been fully exercised or
vested, the unvested or cancelled shares will be available again for grants of
Awards. The 2006 Plan is administered by the Company’s Stock Option and
Compensation Committee (the “Committee”). All the members of the Committee
qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange
Act of 1934 and as “outside directors” under Section 162(m) of the Internal
Revenue Code (the “Code”). Pursuant to the 2006 Plan, the Committee has the sole
discretion to determine the employees, directors and consultants who may be
granted Awards, the terms and conditions of such Awards and to construe and
interpret the 2006 Plan. The Committee is also responsible for making
adjustments in outstanding Awards, the shares available for Awards, and the
numerical limitations for Awards to reflect any transactions such as stock
splits or stock dividends. The Committee may delegate its authority to one or
more directors or officers; provided, however, that the Committee may not
delegate its authority and powers (a) with respect to any Section 16b-3 Persons,
or (b) in any way which would jeopardize the Plan’s qualifications under Section
162(n) of the Code or Rule 16b-3. The Board of Directors may amend to terminate
the 2006 Plan at any time and for any reason. To the extent required under Rule
16b-3 material amendments to the 2006 Plan must be approved by the shareholders.
Eligibility to participate in the 2006 Plan
extends to management, key employees, directors and consultants of the Company.
The estimated number of eligible participants is approximately 25 persons. The
actual number of individuals who may receive options of restrictive stock awards
under the 2006 Plan cannot be determined because eligibility for participation
of the 2006 Plan is at discretion of the Committee.
The Committee granted stock options
to each executive officer in January 2009 under our 2006 Stock Incentive Plan.
The executive officers were awarded incentive stock options with an exercise
price equal to the fair market value of our common stock on the date of the
grant. Accordingly, those stock options will have value only if the market price
of the common stock increases after that date. In determining the size of stock
option grants, the Committee considers Company performance against the strategic
plan and individual performance. The Named Executive Officers were awarded the
number of stock options shown in the table above. The stock options vest in ten
equal annual installments on each anniversary of the date of the grant beginning
January 2, 2009. Also shown in the table are the total stock options outstanding
and held by each Named Executive Officer.
Director Compensation
The
following Director Compensation table sets forth information regarding
compensation paid to our non-employee directors. Directors who are employed by
us do not receive any compensation for their board activities.
| DIRECTOR COMPENSATION - 2009 | |||||||
| Name | Fees | Stock | Option | Non-equity | Change in pension | All other | Total |
| earned | awards | awards | incentive plan | value and non- | compensation | ||
| or paid | compensation | qualified deferred | |||||
| in cash | compensation | ||||||
| earnings | |||||||
| Walter J. | $0 | $0 | $66,507 | $0 | $0 | $0 | $66,507 |
| Doyle, | |||||||
| Robert H. | |||||||
| Peitz | |||||||
| Robert J. | 2,500 | 0 | 66,507 | 0 | 0 | 0 | 69,007 |
| Baker, Jr. | |||||||
| Edward | 5,000 | 0 | 66,507 | 0 | 0 | 0 | 71,507 |
| W. Ungar | |||||||
1 – Compensation for Mr.
Doyle and Mr. Peitz is identical.
2 – Dr. Baker, Jr. is Chairman of the Stock Option and Compensation Committee.
3 – Mr. Ungar is Chairman of the Audit Committee.
4 – Each director listed above received 22,500 options granted January 2, 2009 which vest in three equal annual installments on each anniversary of the date of the grant beginning January 2, 2009.
5 – Daniel Rooney is the Principal Executive Officer and is Chairman of the Board of Directors. Mr. Rooney does not appear on this table and receives no director compensation.
2 – Dr. Baker, Jr. is Chairman of the Stock Option and Compensation Committee.
3 – Mr. Ungar is Chairman of the Audit Committee.
4 – Each director listed above received 22,500 options granted January 2, 2009 which vest in three equal annual installments on each anniversary of the date of the grant beginning January 2, 2009.
5 – Daniel Rooney is the Principal Executive Officer and is Chairman of the Board of Directors. Mr. Rooney does not appear on this table and receives no director compensation.
16
The following discloses
the aggregate number of stock option awards outstanding for all directors:
Mr. Peitz – Mr. Peitz’
ownership includes 199,162 shares of common stock beneficially owned by Park
National Bank (Trustee for the Ingeborg Funk Children’s Trust), of which 43,750
shares of common stock can be acquired under stock purchase warrants exercisable
within 60 days of April 20, 2010. Mr. Peitz’ ownership also includes 111,763
shares of common stock, which can be acquired by Mr. Peitz under stock options
and purchase warrants exercisable within 60 days of April 20, 2010.
Mr. Rooney – 172,300
common shares may be acquired by Mr. Rooney under stock options exercisable
within 60 days of April 20, 2010.
Mr. Doyle – 39,250
common shares may be acquired by Mr. Doyle under stock options and stock
purchase warrants exercisable within 60 days of April 20, 2010.
Dr. Baker – 65,000
common shares may be acquired by Dr. Baker under stock options exercisable
within 60 days of April 20, 2010.
Mr. Ungar – 65,000
common shares may be acquired by Mr. Ungar under stock options exercisable
within 60 days of April 20, 2010.
Non-Employee Director Reimbursement
Non-employee directors are reimbursed for travel and other out-of-pocket
expenses connected to Board travel.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth additional
information as of December 31, 2009, concerning shares of our common stock that
may be issued upon the exercise of options and other rights under our existing
equity compensation plans and arrangements, divided between plans approved by
our shareholders and plans or arrangements not submitted to our shareholders for
approval. The information includes the number of shares covered by, and the
weighted average exercise price of, outstanding options and other rights and the
number of shares remaining available for future grants excluding the shares to
be issued upon exercise of outstanding options, warrants, and other
rights.
| Number of securities | |||||
| remaining available for | |||||
| Number of Securities to | issuance under equity | ||||
| be issued upon exercise | Weighted-average exercise | compensation plans | |||
| of outstanding options, | price of outstanding | (excluding securities | |||
| warrants and rights | options, warrants and rights | reflected in column (a)) | |||
| (a) | (b) | (c) | |||
| Equity compensation plans | |||||
| approved by security holders (1) | 1,115,750 | $4.08 | 13,500 | ||
| Equity compensation plans not | |||||
| approved by security holders (2) | 17,500 | $2.88 | -- | ||
| Total | 1,133,250 | $4.07 | 13,500 | ||
| ____________________ |
| (1) | Equity compensation plans approved by shareholders include our 1995 Stock Option Plan and our 2006 Stock Option Plan. |
| (2) | Includes 17,500 stock purchase warrants that can be used to purchase 17,500 shares of our common stock, which were issued by us in exchange for consideration in the form of goods and services. |
17
REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM
Our audit committee selected Maloney + Novotny
LLC to perform the 2009 audit for SCI Engineered Materials, Inc. Maloney +
Novotny LLC served as the registered independent public accounting firm during
2009 and throughout the periods covered by our financial statements. A
representative of Maloney + Novotny LLC is expected to attend the Annual Meeting
of Shareholders in order to respond to appropriate questions from shareholders,
and will have the opportunity to make a statement.
FEES OF THE REGISTERED INDEPENDENT PUBLIC
ACCOUNTING FIRM FOR
THE YEAR ENDED DECEMBER 31, 2009 AND 2008
THE YEAR ENDED DECEMBER 31, 2009 AND 2008
Audit Fees
The aggregate fees billed and to be
billed by Maloney + Novotny for professional services rendered for the audit of
our annual financial statements and review of financial statements included in
our Form 10-Q were $60,250 for 2009 and $56,200 for 2008.
Tax Fees
We paid $2,825 in 2009 and $980 in
2008 for professional services rendered for tax compliance and tax advice in
connection with our internally prepared corporate tax return.
All Other Fees
The aggregate fees billed by Maloney
+ Novotny for professional services rendered in connection with Sarbanes Oxley
compliance and stock option disclosure was $17,580 in 2009. The total fees
billed regarding the issuance of consent and review of Form S-1 registration
statement and research was $7,780 in 2008.
Pre-Approval Policy
The Audit Committee is required to
pre-approve all auditing services and permitted non-audit services (including
the fees and terms thereof) to be performed for us by our independent auditor or
other registered public accounting firm, subject to the de minimis
exceptions for non-audit services described in Section 10A(i)(1)(B) of the
Securities Exchange Act of 1934 that are approved by the Audit Committee prior
to completion of the audit.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934 requires our officers, directors and greater than 10%
shareholders to file reports of ownership and changes in ownership of our
securities with the Securities and Exchange Commission (“SEC”). Copies of the
reports are required by SEC regulation to be furnished to us. Based on our
review of such reports, and written representations from reporting persons, we
believe that all reporting persons complied with all filing requirements during
the year ended December 31, 2008.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Notes Payable and Capital Lease
On October 14, 2005, we entered into
an agreement with the Estates of Edward R. Funk and Ingeborg V. Funk. We were
indebted to the Estates in the amount of $289,391.92. The Estates agreed to
cancel $288,000 of the indebtedness in exchange for 144,000 shares of common
stock and warrants to purchase an additional 36,000 shares of common stock at
$3.00 per share, which expire October 2010. We transferred $1,391.92 to the
Estates in full satisfaction of the remaining amount of the indebtedness.
Convertible Promissory Notes and Stock Purchase Warrants
On January 7, 2000, we issued common
stock purchase warrants at $2.50 per share for 150,000 shares of common stock
related to the subordinated notes payable to Edward R. and Ingeborg V. Funk. The
warrants are 100% vested and expire ten years from the date of grant. The Estate
of Edward R. Funk and the Estate of Ingeborg V. Funk
18
were
both greater than 5% beneficial owners of our Company. These common stock
purchase warrants were subsequently exercised in January 2010 which resulted in
proceeds of $375,000 for the Company.
On June 30, 2003, we issued a $100,000
convertible promissory note payable to Windcom Investments SA, a greater than 5%
beneficial owner of our Company. The interest on the convertible promissory note
was determined by the Prime Commercial Rate in effect at Bank One, N.A.,
Columbus, Ohio. In addition, we issued warrants to purchase 20,333 shares of our
common stock to Windcom Investments SA, at $1.00 per share expiring June 2008.
The warrants vested according to the following schedule: (1) 8,333 vested on the
date of grant; and (2) 12,000 vested at a rate of 333 per month for 32 months,
then 336 per month for 4 months. On May 13, 2004, in accordance with the terms
of the convertible promissory note, the balance and accrued and unpaid interest
owed automatically converted to 43,119 shares of common stock after we raised
over $500,000 in private equity financing. As of May 13, 2004, the vested
warrants were fixed at 11,633. These warrants were exercised in June 2008. In
connection with the private equity financing, we also issued 8,623 warrants to
Windcom Investments SA to purchase shares of common stock at $2.88 per share.
These warrants were due to expire in May 2009 but were extended to May 2010.
On June 30, 2003, we issued a
$166,666.67 convertible promissory note payable to Robert H. Peitz. Mr. Peitz is
a greater than 5% beneficial owner of the Company. Mr. Peitz currently serves on
our Board of Directors. The Prime Commercial Rate in effect at Bank One, N.A.,
Columbus, Ohio determined the interest on the convertible promissory note. In
addition, we issued warrants to purchase 33,889 shares of our common stock to
Mr. Peitz at $1.00 per share, expiring June 2008. The warrants vested according
to the following schedule: (1) 13,889 vested on the date of grant; and (2)
20,000 vested at a rate of 556 per month for 32 months, then 552 per month for
four months. On May 13, 2004, in accordance with the terms of the convertible
promissory note, the balance and accrued and unpaid interest owed on the note
automatically converted to 71,873 shares of common stock after we raised over
$500,000 in private equity financing. As of May 13, 2004, the vested warrants
were fixed at 19,449. These warrants were exercised in June 2008. In connection
with the 2004 private equity financing, we also issued 14,374 warrants to Mr.
Peitz to purchase shares of common stock at $2.88 per share. These warrants were
due to expire in May 2009 but were extended to May 2010.
On November 3, 2004, we entered into
a loan agreement between the Company, as borrower, and Robert H. Peitz, as
lender. Mr. Peitz agreed to loan us up to $200,000 for working capital, to be
drawn by us in increments of $50,000. The interest rate was Huntington National
Bank’s prime rate plus 2%, which accrued and compounded monthly. The loan was
secured by our assets and perfected by the filing of a UCC-1 financing
statement. For each $50,000 increment drawn on the loan Mr. Peitz received 5,000
warrants to purchase our common stock, without par value, at a purchase price of
$2.50 per share and were exercisable until November 2009. The expiration date
was extended until November 2010. The principal loan balance of $200,000 and
accrued interest was repaid in October 2005 and the UCC-1 financing statement
was terminated.
On April 14, 2005 we entered into a
loan agreement between the Company, as borrower, and Robert H. Peitz, as lender.
Mr. Peitz agreed to provide a $200,000 convertible secured loan to us for
working capital. The interest rate of 10% accrued and compounded monthly.
Because we completed equity financing of at least $500,000 during 2005, the
principal and accrued interest totaling $209,110 automatically converted on the
same basis as the new financing to 104,555 shares of common stock ($2.00 per
share) and warrants to purchase an aggregate of 26,139 shares of our common
stock at a purchase price of $3.00 per share exercisable until October 2010.
SHAREHOLDER PROPOSALS FOR 2011 ANNUAL
MEETING
Each year our Board of Directors
submits its nominations for election of directors at the annual meeting of
shareholders. Other proposals may be submitted by the Board of Directors or the
shareholders for inclusion in the proxy statement for action at the annual
meeting. Any proposal submitted by a shareholder for inclusion in the proxy
statement for the annual meeting of shareholders to be held in 2011 must be
received by us (addressed to the attention of the Secretary) on or before
January 5, 2011. Any shareholder proposal submitted outside the processes of
Rule 14a-8 under the Securities Exchange Act of 1934 for presentation at our
2011 annual meeting will be considered untimely for purposes of Rule 14a-4 and
14a-5 if notice thereof is received by us after March 20, 2011. Any such
proposal to be submitted at the meeting must be a proper subject for shareholder
action under the laws of the State of Ohio.
19
ANNUAL REPORT
Our annual report on Form 10-K for the year
ended December 31, 2009, containing financial statements for such year and the
signed opinion of Maloney + Novotny LLC, registered independent public
accounting firm, with respect to such financial statements, is being sent to
shareholders concurrently with this proxy statement. The Annual Report is not to
be regarded as proxy soliciting material, and we do not intend to ask, suggest
or solicit any action from the shareholders with respect to such
report.
OTHER MATTERS
The Board of Directors knows of no
other matters to be brought before the Annual Meeting. If other matters should
come before the meeting, however, each of the persons named in the proxy intends
to vote in accordance with his judgement on such matters.
20
 |
| Using a black
ink pen, mark your
votes with an X as shown in this example. Please do not write outside the designated areas. |
 |
| Annual Meeting Proxy Card |
| 6 PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. 6 |
 |
Proposals — The Board of Directors recommends a vote FOR all the nominees listed. |
| 1. Nominees: | For | Withhold | For | Withhold | For | Withhold | ||||||||||||||
| 01 - Robert J. Baker, Jr. * | c | c | 02 - Robert H. Peitz * | c | c | 03 - Edward W. Ungar * | c | c | ||||||||||||
| 04 - Walter J. Doyle * | c | c | 05 - Daniel Rooney * | c | c | |||||||||||||||
|
* To elect as directors the nominees
named above to serve for terms expiring at the 2011 Annual Meeting of
Shareholders and until their respective successors are duly elected and
qualified.
|
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| 2. To transact such other business as may properly come before the meeting or any adjournment thereof. | ||||||||||||||||||||
 |
Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |||||||||||||||||||
|
IMPORTANT: Please sign exactly as name(s) appears
hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, corporate officer, trustee, guardian, or custodian, please
give full title. Corporations should sign in their full corporate name by
their president or other authorized officer. If a partnership, please sign
in partnership name by an authorized person.
|
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|
Date
(mm/dd/yyyy) — Please print date below.
|
Signature 1 —
Please keep signature within the box.
|
Signature 2 —
Please keep signature within the box.
|
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| / | / | |||||
 |
1 U P X 0 2 5 2 3 3 2
|
 |
|
6 PLEASE FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
6
|
|
Proxy — SCI Engineered Materials,
Inc.
|
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS
The undersigned
shareholder of SCI Engineered Materials, Inc. (the “Company”) hereby appoints
Daniel Rooney, Gerald S. Blaskie, and Michael A. Smith, or any one of them, as
attorneys and proxies with full power of substitution to each, to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Shareholders of the Company to be held at the offices
of the Company, 2839 Charter Street, Columbus, Ohio, on June 9, 2010, at 9:30
a.m. local time, and at any adjournment or adjournments thereof, with all of the
powers such undersigned shareholder would have if personally present, for the
purposes stated on the reverse side.
The undersigned gives
unto said attorneys and proxies, or substitutes, full power and authority to do
whatsoever in their opinions may be necessary or proper to be done in the
exercise of the power hereby conferred, including the right to vote for any
adjournment, hereby ratifying all that said attorneys and proxies, or
substitutes, may lawfully do or cause to be done by virtue hereof. Any of the
said attorneys and proxies, or substitutes, who shall be present and shall act
at the meeting shall have and may exercise all powers of said attorneys and
proxies hereunder.
The undersigned
hereby acknowledges receipt with this Proxy of a copy of the Company’s Notice of
Annual Meeting and Proxy Statement dated April 27, 2010. Any proxy heretofore
given to vote said shares is hereby revoked.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 ON THE REVERSE
SIDE.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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