SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14(A) INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Tech Laboratories, Inc.
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TECH LABORATORIES, INC.
955 BELMONT AVENUE
NORTH HALEDON, NEW JERSEY 07508
Notice of Annual Meeting of Shareholders
To Be Held on December 17, 2001
To the Shareholders:
The Annual Meeting of Shareholders of Tech Laboratories, Inc. (the
"Company") will be held at the Holiday Inn & Conference Center, 50 Kenney Place,
Saddle Brook, New Jersey 07663 on December 17, 2001, at 4:30 p.m. to consider
and act upon the following matters:
1. To elect four (4) directors to serve until the next Annual
Meeting and until their successors are chosen and qualified.
2. To ratify and approve the selection by the Board of Directors
of Charles J. Birnberg as the Company's independent public
accountant for the fiscal year ending December 31, 2001.
3. To adopt an incentive stock option plan for employees of the
Company.
4. To adopt a stock option plan for non-employee directors of the
Company.
5. To approve an amendment to the Certificate of Incorporation of
the Company to increase the number of authorized shares of the
Company's Common Stock from 10,000,000 to 25,000,000.
6. To consider and act upon such other matters as may properly
come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on November 1, 2001,
will be entitled to notice of and to vote at the meeting. The stock transfer
books of the Company will remain open.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors
Carmine O. Pellosie, Jr., Secretary
November 9, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES.
TECH LABORATORIES, INC.
955 BELMONT AVENUE
NORTH HALEDON, NEW JERSEY 07508
Proxy Statement for
Annual Meeting of Shareholders
December 17, 2001
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Tech Laboratories, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held on December 17, 2001,
and at any adjournment of that meeting. In considering whether or not to have an
adjournment, management will consider what is in the best interest of the
shareholders. All proxies will be voted as marked. Proxies marked as abstaining
(including proxies containing broker non-votes) on any matters to be acted upon
by shareholders will be treated as present at the meeting for purposes of
determining a quorum, but will not be counted as votes cast on such matters. Any
proxy may be revoked by a shareholder at any time before it is exercised by
written or oral request to Carmine Pellosie, Secretary of the Company. The date
of mailing of this Proxy Statement is expected to be on or about November 9,
2001.
The Board of Directors has fixed November 1, 2001, as the record date
for the determination of shareholders entitled to vote at the Annual Meeting. At
the close of business on October 3, 2001, there were outstanding and entitled
to vote 4,785,110 outstanding shares of common stock, par value $.01 (the
"Common Stock"), of the Company. Each share is entitled to one vote.
The Company's 2000 Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission, which includes financial statements for the
fiscal year ended December 31, 2000, and the Company's Quarterly Reports on Form
10-QSB for the periods ending March 31, 2001, and June 30, 2001, are being
mailed to shareholders with this Proxy Statement, but are not incorporated into
this Proxy Statement and are not to be considered a part of the Proxy Statement
or soliciting materials.
The following table sets forth information concerning ownership of the
Company's Common Stock as of October 3, 2001, by each person known by the
Company to be the beneficial owner of more than five percent (5%) of the Common
Stock.
Percent of
Common Stock Common Stock
Name and Address Beneficially Owned Outstanding
---------------- ------------------ -----------
Bernard M. Ciongoli 953,334(1) 18.27%
Tech Laboratories, Inc.
955 Belmont Avenue
North Haledon, New Jersey 07508
Earl Bjorndal 248,444(2) 5.14%
c/o Tech Laboratories, Inc.
955 Belmont Avenue
North Haledon, New Jersey 07508
Libra Finance, S.A. 275,000(3) 5.82%
P.O. Box 4603
Zurich, Switzerland
Celeste Trust Reg 532,270(4) 9.99%
c/o Trevisa-Treuhand-Anstalt Landstrasse
8 Furstentums
99996 Balzers
Liechtenstein
Percent of
Common Stock Common Stock
Name and Address Beneficially Owned Outstanding
---------------- ------------------ -----------
The Endeavor Capital Investment Fund, S.A. 532,270(4) 9.99%
Cumberland House 27
Cumberland Street
Nassau New Providence
Bahamas
Esquire Trade & Finance, Inc. 532,270(4) 9.99%
Trident Chambers
P.O. Box 146, Road Town
Tortolu, BVI
The persons listed in the above table have sole voting and investment
power with respect to their respective shares.
All of the persons listed above, for as long as they continue to hold
five percent (5%) or more of the Company's outstanding Common Stock, will be
deemed "affiliated persons" of the Company, as such term is defined in the
Securities Act of 1933, as amended (the "Act").
------------------------------------
(1) See Note 1 on page 3.
(2) See Note 2 on page 4.
(3) See Note 5 on page 4.
(4) See Note 6 on page 4.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's By-Laws provide that there shall be up to five (5)
members of the Board of Directors. Currently, the Board consists of four (4)
directors. The Board has nominated a total of four (4) individuals to serve as
directors until the next Annual Meeting and until their successors are chosen
and qualified. Vacancies on the Board may be filled by a majority of the
remaining members.
The Board's slate of nominees are the four (4) individuals currently
serving on the Board. The affirmative vote of the holders of a majority of the
Common Stock present or represented at the meeting is required for the election
of directors. The persons named in the proxy will vote, as permitted by the By-
Laws of the Company, to elect as directors the four (4) nominees named below,
unless authority to vote for the election of directors is withheld by marking
the proxy to that effect or the proxy is marked with the names of directors as
to whom authority to vote is withheld. The proxy may not be voted for more than
four (4) directors.
Directors are elected for a one (1) year term or until their
resignation, disqualification, or removal from office. If a nominee becomes
unavailable, the person acting under the proxy may vote the proxy for the
election of a substitute. It is not presently contemplated that any of the
nominees will be unavailable.
The following sets forth the name of each nominee and the positions and
offices held by him or her, his or her age, the date on which he or she became a
director of the Company, as applicable, his or her principal occupation and
business experience for the last five (5) years, and the names of other
publicly-held companies in which he or she serves as a director:
-2-
Officer and Director Biographies
Bernard M. Ciongoli, 54, became our president and a director in late
1992 and became treasurer in 1998. From 1990 through 1991 he served as president
of HyTech Labs, a company engaged in sales and servicing of electronic test
equipment. During the years of 1987 to 1990, he acted as the principal owner and
president of Bernco Developers, a real estate developer. Mr. Ciongoli holds a
degree in electronic engineering from Paterson Institute of Technology.
Earl M. Bjorndal, 49, has been with us in various capacities since
1981. He has been a director since 1985, and became a vice president in 1992. He
is a graduate of the New Jersey Institute of Technology with both bachelor's and
master's degrees in industrial engineering.
Carmine O. Pellosie, Jr., 58, has been a director since 1997. Since
January 1, 1999, he has been the controller of the Passaic County Department of
Health and Human Services. Prior to January 1999, he was, for more than five (5)
years, president of International Logistics, Inc.
Salvatore Grisafi, 71, has been a director since 2000. He is the
president of MPX Network Solutions, Inc., a privately held telecommunications/
networking business development and marketing consulting company. Mr. Grisafi
has served as a consultant to the Company since 1998, and assisted the Company
in the acquisition of the DynaTrax(TM) technology from NORDX/CDT and in
identifying other opportunities and business strategies. Mr. Grisafi is a
graduate of the New York Institute of Technology.
Security Ownership of Principal Stockholders and Management
The following table sets forth certain information as to those persons
who, to the knowledge of the Company, owned 5% or more of the outstanding Common
Stock of the Company as of October 3, 2001, and as to the officers and directors
of the Company as a group:
Number of Shares % of Outstanding
Name Owned Beneficially* Shares Owned
---- ------------------ ------------
Bernard M. Ciongoli (1) 953,334 18.27%
Earl Bjorndal (2) 248,444 5.14%
Carmine O. Pellosie, Jr. (3) 60,000 1.27%
Salvatore Grisafi (4) 100,000 2.07%
Libra Finance, S.A. (5) 275,000 5.82%
Celeste Trust Reg. (6) 532,270 9.99%
The Endeavor Capital Investment Fund, S.A. (6) 532,270 9.99%
Esquire Trade & Finance, Inc. (6) 532,270 9.99%
All officers and directors as a group 1,361,778 26.75%
(4 persons)
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* Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock that an individual or entity has a
right to acquire within 60 days pursuant to the exercise of options or
warrants are deemed to be outstanding for the purposes of computing the
percentage ownership of such individual or entity, but are not deemed
to be outstanding for the purposes of computing the percentage
ownership of any other person or entity shown in the table.
(1) The information for Mr. Ciongoli includes 87,000 shares that may be
acquired within 60 days pursuant to the exercise of options granted
under our 1996 stock option plan, 46,334 shares issuable upon exercise
of a non-plan option, and 300,000 shares issuable upon exercise of
options earned under our employment agreement with Mr. Ciongoli.
-3-
(2) The information for Mr. Bjorndal includes 50,000 shares that may be
acquired within 60 days pursuant to the exercise of options granted
under our 1996 stock option plan.
(3) The information for Mr. Pellosie includes 20,000 shares issuable upon
the exercise of immediately exercisable options granted under our 1996
stock option plan.
(4) The information for Mr. Grisafi includes 50,000 shares that are owned
by MPX Network Solutions, Inc., a company that Mr. Grisafi controls and
in which Mr. Grisafi's wife holds all of the outstanding shares, and
50,000 shares of the Company that may be acquired within 60 days
pursuant to the exercise of two (2) non-plan stock options.
(5) The number of shares listed as beneficially owned by Libra Finance,
S.A. comprise of a warrant that may be immediately exercised to
purchase up to 275,000 shares at a price of $4.80 per share.
(6) The number of shares beneficially owned by each of Celeste Trust Reg.,
The Endeavour Capital Investment Fund, S.A., and Esquire Trade &
Finance may not exceed, by the terms of their Subscription Agreement
with Tech Labs, 9.99% of the outstanding number of shares of Common
Stock of Tech Labs. Beneficial ownership is calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended,
and Regulation 13d-3 thereunder. Assuming a conversion price for the
notes of $0.2312, which is based on a conversion date of October 3,
2001, no more than an amount equal to 532,270 shares may be converted
by Celeste Trust Reg., Esquire Trade & Finance, and The Endeavour
Capital Investment Fund, S.A. at any one time; provided, however, each
of the above mentioned parties is not precluded from converting the
maximum amount permissible under the notes, immediately disposing of
some or all of those shares and subsequently converting additional
amounts remaining under the notes.
Compliance with Section 16(a) of the 1934 Act
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's officers and directors, and persons who own more than ten
percent (10%) of the Company's Common Stock, to file initial reports of
beneficial ownership and changes in beneficial ownership with the Commission and
to furnish the Company with copies of all reports filed. All filing requirements
applicable to its officers, directors, and greater than ten percent (10%)
shareholders were complied with in a timely manner.
Management
Directors and Executive Officers
The following table sets forth certain information concerning the
directors and executive officers of the Company:
Name Address Position
---- ------- --------
Bernard M. Ciongoli c/o Tech Laboratories, Inc. President, Treasurer, Chief
955 Belmont Avenue Financial Officer, and
North Haledon, New Jersey 07508 Chairman of the Board of
Directors
Earl M Bjorndal c/o Tech Laboratories, Inc. Vice President and
955 Belmont Avenue Director
North Haledon, New Jersey 07508
Carmine O. Pellosie, Jr. c/o Tech Laboratories, Inc. Secretary and Director
955 Belmont Avenue
North Haledon, New Jersey 07508
Salvatore Grisafi c/o Tech Laboratories, Inc. Director
955 Belmont Avenue
North Haledon, New Jersey 07508
-4-
Committees of the Board
The Company has a standing audit committee composed of Bernard Ciongoli
and Carmine Pellosie, and a compensation committee composed of Carmine Pellosie
and Salvatore Grisafi. Both committees were formed in August, 2001.
The function of the audit committee is to review our internal
accounting control procedures, review our financial statements, and review with
the independent public accountants the result of their audit.
The compensation committee reviews the employment and compensation
agreements of the Company's senior employees. The committee has held one formal
meeting since it was formed.
Meetings of the Board
The Company held one (1) meeting of the Board in 2000. All of the
Company's directors participated in the meeting.
Executive Compensation
The following table summarizes the compensation paid to or earned by
our president. No other officer has received compensation in excess of $100,000
in any recent fiscal year.
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------------------- -------------------------------
Name and 2000 Shares of Common Stock Issuable
Principal Position Year Salary Bonus($) Upon Exercise of Options
------------------ ---- ------ -------- -------------------------------
Bernard M. Ciongoli 2000 $125,000 0 250,000
President, Treasurer 1999 $125,000 0 0
1998 $125,000 0 300,000
The Company has entered into an employment agreement for a term of five
(5) years with Mr. Ciongoli, dated as of August 1, 2001, which agreement
supersedes the employment agreement that was in effect with Mr. Ciongoli dated
October 1, 1998, as amended June 18, 1999, and February 21, 2001. Mr. Ciongoli
is currently compensated under the terms of the employment agreement at the base
salary rate of $150,000 per annum. Mr. Ciongoli is also entitled to receive two
percent (2%) of our sales in excess of $1,000,000 during any year he is employed
by us. In addition, Mr. Ciongoli was granted an option, exercisable for five (5)
years from the date of grant, to purchase 500,000 shares of stock at $.43 per
share, such option to vest in increments of 100,000 shares every six (6) months
commencing February 1, 2002. The agreement is automatically renewable for three
(3) years unless either party terminates the agreement in writing at least 180
days prior to the expiration of the initial term period.
In addition, in 2000 we granted to Mr. Ciongoli an option to purchase
up to 111,000 shares of Common Stock under our 1996 stock option plan
exercisable for five (5) years at $2.68125 per share which vests over a period
of three (3) years. In 2001, we granted to Mr. Ciongoli an option to purchase up
to 100,000 shares under our 1996 stock option plan exercisable for five (5)
years at $0.9625 per share which vest over a period of two (2) years. We also
granted to Mr. Ciongoli a non-plan option in consideration and in recognition of
his services to the Company to purchase up to 139,000 shares exercisable over
five (5) years at $2.4375 and which vests over the course of three (3) years
from the date of grant.
The Company does not have any employment agreements with any other
named executive officer.
Board Compensation
The members of the Board are not presently compensated.
Stock Option Plans
On December 11, 1996, the board of directors adopted a stock option
plan for officers, directors, and other key employees. Options issued pursuant
to the stock option plan to qualified key employees are meant to qualify as
incentive stock options within the meaning of Section 422A of the Internal
Revenue Code. A total of 450,000 shares were set aside for this purpose.
Currently outstanding under this plan are grants of options for an aggregate of
306,000 shares, of which 100,000 were granted at an exercise price of $0.9625,
111,000 were granted at an exercise price of $2.68125, 25,000 were granted at an
exercise price of $2.4375 and 70,000 were granted at an exercise price of
$0.875.
The 1996 Plan is administered by a committee appointed by the board of
directors, which is comprised of two or more members of the board. The
committee's interpretation and construction of the stock option plan is final
unless otherwise determined by the board.
Options granted under the 1996 Plan shall have an option price not less
than 100% of the fair market value of the shares of Tech Labs' common stock on
the date of the granting of the option, or 110% of the fair market value for
stockholders who, at the time of grant, posses more than 10% of the total voting
power of all classes of stock. If the aggregate fair market value of the shares
of stock, determined as of the date of grant, during any calendar year exceeds
$100,000 then only the first $100,000 of such shares exercised will be treated
as incentive stock options.
Any option must be granted within 10 years of the date the plan was
adopted or approved by the shareholders, whichever is earlier. The option, by
its terms, must be exercisable within 10 years of the date it is granted. If,
however, options are granted to an optionee who, at the time of grant, posseses
more than 10% of the total voting power of all classes of stock, the options
granted shall be exercisable no more than 5 years from the date of grant.
Options generally may be exercised only if the optionee remains continuously
associated with Tech Labs from the date of grant to the date of exercise.
However, options may be exercised upon termination of employment or upon death
of any employee within certain specified time periods.
-5-
Certain Relationships and Related Transactions
Salvatore Grisafi is the president of MPX Network Solutions, Inc.
("MPX"). The Company entered into a consulting agreement with MPX which, as
amended, expires on March 21, 2002. Pursuant to the agreement, MPX provides
consulting services in the areas of marketing, customer relations, and strategic
and product development planning, and is paid an annual fee of $52,000 and
commissions on sales of telecommunications products during the term of the
agreement ranging from 3% of the first $2,000,000 of the net sale prices to 1/2%
of the net sale prices over $4,000,000.
As additional compensation, MPX received 50,000 shares of the Company's
Common Stock and may be entitled to options to purchase up to, depending on net
sales of telecommunications products during the term of the agreement, 50,000
shares of Common Stock at a purchase price of $1.25 per share which are
exercisable upon the satisfaction of certain conditions, as to 25,000 shares
after the expiration of the initial term period of the agreement and the other
25,000 shares after the expiration of the automatic extention period. MPX has
also been granted options to purchase up to 25,000 shares exercisable for 3
years at $0.75 per share and options to purchase up to 25,000 shares exercisable
for 4 years at $0.75 per share but which do not vest until the "Positive Network
Access Security" patent filed by Tech Labs is approved by the U.S. Patent and
Trademark office.
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 2001
The Board of Directors, including a majority of directors who are not
interested persons of the Company, subject to shareholder approval, has selected
Charles J. Birnberg as independent public accountant to be employed by the
Company for the fiscal year ending December 31, 2001, to sign or certify such
financial statements, or any portions thereof, as may be filed by the Company
with the Commission or any other authorities at any time. The employment of such
independent public accountant for such purpose is subject to the approval by the
shareholders at this meeting. Neither Charles J. Birnberg nor any associate of
Mr. Birnberg has a direct or indirect material financial interest in the
Company or any of its affiliates.
The affirmative vote of a majority of the Common Stock present or
represented at the meeting is required to ratify and approve the selection of
Charles J. Birnberg as independent public accountant for the Company for fiscal
2001.
Charles J. Birnberg will be present at the Annual Meeting of
Shareholders for the purpose of answering shareholder questions and making any
other appropriate statement.
The fees for services provided by the independent accountants are as
follows:
Audit Fees
Fees for the last fiscal year's annual audit were $10,000, and other
fees for the accountant's review of the financial statements included the
Company's Form 10-Q for the last fiscal year were $10,000.
Audit-Related Fees
Fees for audit-related services for the last fiscal year's annual audit
were $0.
Financial Information Systems Design and Implementation Fees
Fees for professional services by the accountants related to financial
information systems design and implementation were $0.
All Other Fees
Fees for services rendered by the accountants for services other than
the services provided in the above paragraphs were $2,000.
The Board of Directors of the Company recommends a vote FOR Proposal
No. 2.
PROPOSAL NO. 3
APPROVAL OF AN INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors, including a majority of the
non-interested directors, has adopted, subject to shareholder approval, an
employee stock option plan (the "2001 Employee Plan") in order to link the
personal interests of key employees to the long-term financial success of the
Company and the growth of shareholder value. The 2001 Employee Plan authorizes
the grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code for the purchase of an aggregate of 300,000 shares
(subject to adjustment for stock splits and similar capital changes) of Common
Stock to employees of the Company. By adopting the 2001 Employee Plan, the Board
believes that the Company will be better able to attract, motivate, and retain
as employees people upon whose judgment and special skills the success of the
Company in large measure depends. No options have, as of yet, been granted under
the 2001 Employee Plan. Accordingly, as of such date, 300,000 shares of Common
Stock are available for future awards under the 2001 Employee Plan.
The 2001 Employee Plan will be administered by the Compensation
Committee of the Board of Directors, which is comprised of one or more of the
independent members of the Board of Directors (the "Committee"). The Committee
can make such rules and regulations and establish such procedures for the
administration of the 2001 Employee Plan as it deems appropriate.
-6-
The exercise price of an incentive stock option must be at the fair
market value of the Company's Common Stock on the date of grant (110% of the
fair market value for shareholders who, at the time the option is granted, own
more than 10% of the total combined classes of stock of the Company or any
subsidiary). No employees may exercise more than $100,000 in options held by
them in any year.
No option may have a term of more than ten (10) years (five (5) years
for 10% or greater shareholders). Options generally may be exercised only if the
option holder remains continuously associated with the Company or a subsidiary
from the date of grant to the date of exercise. However, options may be
exercised upon termination of employment or upon death or disability of any
employee within certain specified periods.
The following is a general summary of the federal income tax
consequences under current tax law of incentive stock options ("ISOs"). It does
not purport to cover all of the special rules, including special rules relating
to persons subject to the reporting requirements of Section 16 under the 1934
Act who do not hold the shares acquired upon the exercise of an option for at
least six (6) months after the date of grant of the option and special rules
relating to the exercise of an option with previously-acquired shares, or the
state or local income or other tax consequences inherent in the ownership and
exercise of stock options and the ownership and disposition of the underlying
shares.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of an ISO.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the exercise
of an ISO more than two (2) years after the date of grant and more than one (1)
year after the transfer of the shares to him or her, the optionee will recognize
long-term capital gain or loss and the Company will not be entitled to a
deduction. However, if the optionee disposes of such shares within the required
holding period, all or a portion of the gain will be treated as ordinary income
and the Company will generally be entitled to deduct such amount.
In addition to the federal income tax consequences described above, an
optionee may be subject to the alternative minimum tax.
The description of the 2001 Employee Plan set forth herein is qualified
in its entirety by reference to the text of the 2001 Employee Plan, a copy of
which is attached as Appendix 1 to this Proxy Statement.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for the approval of the 2001 Employee Plan.
The Board of Directors of the Company recommends a vote FOR Proposal No. 3.
PROPOSAL NO. 4
APPROVAL OF NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company's Board of Directors has adopted, subject to shareholder
approval, a stock option plan for non-employee directors (the "Director Plan")
in order to link the personal interests of such non-employee directors to the
long-term financial success of the Company and the growth of shareholder value.
By adopting the Director Plan, the Board believes that the Company will be
better able to attract, motivate, and retain as directors people upon whose
judgment and special skills the success of the Company in large measure depends.
The total number of shares for which options may be granted from time
to time under the Director Plan is 300,000 shares.
The Director Plan will be administered by a committee of directors who
are not eligible to participate in the Director Plan (the "Compensation
Committee"). Options become exercisable with respect to such shares granted on
the date on which the option was granted, so long as the optionee remains an
eligible director. No option may be exercised more than five (5) years after the
date on which it is granted. The number of shares available for options, the
number of shares subject to outstanding options, and their exercise price will
be adjusted for changes in outstanding shares such as stock splits and
combinations of shares. Shares purchased upon exercise of options, in whole or
in part, must be paid for in cash or by means of unrestricted shares of Common
Stock or any combination thereof.
-7-
The following is a general summary of the federal income tax
consequences under current tax law of non-qualified stock options ("NQSOs"). It
does not purport to cover all of the special rules, including special rules
relating to persons subject to the reporting requirements of Section 16 under
the 1934 Act who do not hold the shares acquired upon the exercise of an option
for at least six (6) months after the date of grant of the option and special
rules relating to the exercise of an option with previously-acquired shares, or
the state or local income or other tax consequences inherent in the ownership
and exercise of stock options and the ownership and disposition of the
underlying shares.
Upon the exercise of a non-qualified stock option ("NQSO"), the
optionee will recognize ordinary income in an amount equal to the excess, if
any, of the fair market value of the shares acquired on the date of exercise
over the exercise price thereof, and the Company will generally be entitled to a
deduction for such amount at that time. If the optionee later sells shares
acquired pursuant to the exercise of an NQSO, he or she will recognize long-term
or short-term capital gain or loss, depending on the period for which the shares
were held. Long-term capital gain is generally subject to more favorable tax
treatment than ordinary income or short-term capital gains.
If the option does not have a readily ascertainable fair market value,
an optionee will not recognize taxable income for federal income tax purposes
upon the grant of an NQSO.
Options granted under the Director Plan will not be transferable other
than by the laws of descent, and during the optionee's life may be exercised
only by the optionee.
The Director Plan may be terminated at any time by the Board of
Directors or the Compensation Committee, and will terminate ten (10) years after
the effective date of the Director Plan. The Board of Directors may not
materially increase the number of shares authorized under the plan or materially
increase the benefits accruing to participants under the plan without the
approval of the shareholders of the Company.
The exercise or conversion price of the options issued pursuant to the
Director Plan shall be not less than current fair market value at the date of
issuance.
The description of the Director Plan set forth herein is qualified in
its entirety by reference to the text of the Director Plan, a copy of which is
attached as Appendix 2 to this Proxy Statement.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for the approval of the Director Plan. The
Board of Directors of the Company recommends a vote FOR Proposal No. 4.
PROPOSAL NO. 5
APPROVAL OF AMENDMENT TO CHARTER
Pursuant to the Company's Certificate of Incorporation, the Company is
presently authorized to issue 10,000,000 shares, $.01 par value, of Common
Stock, of which 4,785,110, as of October 3, 2001, were issued and outstanding.
There are approximately 252 holders of the Common Stock.
The Board of Directors, including a majority of the non-interested
directors, has authorized, subject to shareholder approval, an amendment to the
Company's Certificate of Incorporation that would increase the number of shares
of Common Stock the Company is authorized to issue from 10,000,000 to 25,000,000
shares (the "Amendment"). The text of the proposed Amendment is attached hereto
as Appendix 3.
-8-
Description of Common Stock
---------------------------
Each share of Common Stock is entitled to one vote on all matters
submitted to a vote of shareholders. The Common Stock does not have cumulative
voting rights, which means that the holders of a majority of the outstanding
shares may elect all of the directors of the Company. Stockholders holding a
majority of the voting power of the capital stock issued and outstanding and
entitled to vote, represented in person or by proxy, are necessary to constitute
a quorum at any meeting of our stockholders, and the vote by the holders of a
majority of such outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger or amendment of our Certificate of
Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata
based on the number of shares held, when, as and if declared by the Board of
Directors, from funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the affairs of the Company, all assets
and funds of the Company remaining after the payment of all debts and other
liabilities shall be distributed, pro rata, among the holders of the Common
Stock.
The reason for the proposal is to provide the Company with a sufficient
number of authorized shares (i) to issue shares upon the exercise of presently
outstanding convertible notes, stock options, and warrants, (ii) to enable the
Company to grant options for up to 300,000 shares of Common Stock to be issued
under each of the proposed stock option plans described in Proposal Nos. 3 and
4, and (iii) to enable the Company to sell additional shares in the future
should the Board of Directors determine such sale to be in the best interest of
the Company.
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for the approval of the proposed Amendment to
the Certificate of Incorporation.
The Board of Directors of the Company recommends a vote FOR Proposal
No. 5.
PROPOSAL NO. 6
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the meeting. However, if any other matters are properly presented to
the meeting, it is the intention of the persons named in the accompanying proxy
to vote, or otherwise to act, in accordance with their judgment on such matters.
All costs of solicitation or proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers, and
regular employees, may, without additional remuneration, solicit proxies by
telephone and personal interview.
Deadline for Submission of Shareholder Proposals
Proposals of shareholders intended to be presented at the 2002 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices not later than May 1, 2002, for inclusion in the proxy
statement for that meeting. Mere submission of a proposal does not guarantee its
inclusion in the Proxy Statement or its presentation at the meeting, since
certain federal rules must also be met.
The Board of Directors invites shareholders to attend the Annual
Meeting. Whether or not you plan to attend, you are urged to complete, date,
sign, and return the enclosed proxy in the accompanying envelope. Prompt
response will greatly facilitate arrangements for the meeting, and your
cooperation will be appreciated. Shareholders who attend the meeting may vote
their stock personally even though they have sent in their proxies.
By Order of the Board of Directors
CARMINE O. PELLOSIE, JR., Secretary
November 9, 2001
-9-
PROXY FOR HOLDERS OF COMMON STOCK
TECH LABORATORIES, INC.
The undersigned holder of shares of common stock, $.01 par value
("Common Stock"), of Tech Laboratories, Inc. (the "Company") hereby constitutes
and appoints Bernard M. Ciongoli, proxy and attorney of the undersigned, with
full power of substitution to each, for and in the name of the undersigned, to
vote and act upon all matters (unless and except as expressly limited below) at
the Annual Meeting of Shareholders of the Company to be held on December 17,
2001, at the Holiday Inn & Conference Center, 50 Kenney Place, Saddle Brook, New
Jersey 07666 at 4:30 p.m., and at any and all adjournments thereof, in respect
of all Common Stock of the Company held by the undersigned or in respect of
which the undersigned would be entitled to vote or act, with all the powers the
undersigned would possess if personally present. All proxies heretofore given by
the undersigned in respect of said meeting are hereby revoked.
PROPOSAL 1. To Elect Directors
FOR electing all nominees listed (as recommended in the proxy
statement) except as marked below ___________________.
Bernard M. Ciongoli, Earl Bjorndal, Carmine O. Pellosie, Jr., and
Salvatore Grisafi.
WITHHOLD AUTHORITY to vote for all nominees listed ______________.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that person's name in the space provided.)
PROPOSAL 2. To ratify and approve the appointment of Charles J. Birnberg as
the Company's independent public accountant for the fiscal year
ending December 31, 2001.
_____FOR _____AGAINST _____ABSTAIN
PROPOSAL 3. To adopt an incentive stock option plan for employees of the
Company.
_____FOR _____AGAINST _____ABSTAIN
PROPOSAL 4. To adopt a stock option plan for non-employee directors of the
Company.
_____FOR _____AGAINST _____ABSTAIN
PROPOSAL 5. To approve an amendment to the Certificate of Incorporation of the
Company to increase the number of authorized shares of the
Company's Common Stock from 10,000,000 to 25,000,000.
_____FOR _____AGAINST _____ABSTAIN
PROPOSAL 6. Such other matters as may properly come before the meeting.
_____FOR _____AGAINST _____ABSTAIN
(continued and to be signed on reverse side)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Specify desired action by checkmarks in the appropriate spaces. The Proxy will
be voted as specified. If no specification is made, the Proxy will be voted for
the nominees named in the Proxy Statement to represent the holders of Common
Stock and in favor of Proposals 2, 3, 4, and 5. The persons named as proxies
have discretionary authority, which they intend to exercise in favor of the
proposals referred to and according to their best judgment as to other matters
which properly come before the meeting.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE AS
SOON AS POSSIBLE.
No. of Shares: _____________________ Dated: _____________________________
____________________________________ ____________________________________
(Print Name) (Signature of Shareholder)
____________________________________ ____________________________________
(Print Name) (Signature of Shareholder)
The signature(s) on this Proxy should correspond exactly with the shareholder's
name as stencilled hereon. In the case of joint tenancies, co-executors, or
co-trustees, both should sign. Person(s) signing as Attorney, Executor,
Administrator, Trustee, or Guardian should provide full title.
APPENDIX 1
TECH LABORATORIES, INC.
2001 INCENTIVE STOCK OPTION PLAN
1. PURPOSE.
The purpose of the 2001 Incentive Stock Option Plan (the "Plan") is to
provide an incentive to selected directors, officers and employees of Tech
Laboratories, Inc., and any subsidiaries of Tech Laboratories, Inc.
(collectively, the "Company"), to acquire a proprietary interest in the Company,
to continue as directors, officers and employees and to increase their efforts
on behalf of the Company.
2. THE PLAN.
The Plan provides for the grant of Options to acquire shares of the
Company's common stock, par value $.01 (the "Stock"). Options granted under the
Plan are intended to qualify as incentive stock options (the "Incentive Stock
Options" or "Options") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
3. ADMINISTRATION.
(a) The Plan shall be administered by a committee (the "Committee")
composed of one or more of the independent members of the Board of Directors of
the Company (the "Board") to operate and administer the Plan in its stead. A
member of the Board shall be ineligible to receive an Option under the Plan
unless he is an employee of the Company.
(b) The Committee shall have plenary authority in its discretion,
subject only to the express provisions of the Plan and, in reference to the
Options, of Code Section 422;
(i) to select the eligible persons who shall be granted
Options (the "Grantees"), the number of Shares subject to each Option and terms
of the Option granted to each Grantee, provided that, in making its
determination, the Committee shall consider the position and responsibilities of
the employee, the nature and value to the Company, of his or her services and
accomplishments, the employee's present and potential contribution to the
success of the Company and any other factors that the Committee may deem
relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the instruments evidencing
Options;
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection with the Plan;
and
(vi) to amend certain terms of the Plan as provided in Section
9. All decisions, determinations and interpretations with respect to the
foregoing matters shall be made by the Committee and shall be final and binding
upon all persons.
(c) EXCULPATION. No member of the Committee or the Board shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, wilful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
(d) INDEMNIFICATION. Each member of the Committee and the Board shall
be entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he or she may be involved by reason of
being or having been a member of the Committee or the Board at the time of the
action, suit or proceeding.
4. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of August 20, 2001, the date of its
adoption by the Board, provided that the Plan is approved by the stockholders of
the Company within one year of its adoption. Any Option outstanding under the
Plan at the time of termination under the Plan shall remain in effect in
accordance with its terms and conditions and those of the Plan. The Plan shall
terminate on the earliest of:
(a) August 20, 2011; or
(b) the date when all shares of Stock reserved for issuance
under the Plan shall have been acquired through exercise of Options granted
under the Plan; or
(c) such earlier date as the Board or Committee may determine.
5. THE STOCK.
The aggregate number of shares of Stock issuable under the Plan shall
be three hundred thousand (300,000) shares or the number and kinds of shares of
capital stock or other securities substituted for the Stock as provided in
Section 8. The aggregate number of shares of Stock issuable under the Plan may
be set aside out of the authorized but unissued shares of Stock not reserved for
any other purpose or out of shares of Stock held in or acquired for the treasury
of the Company. All shares of Stock subject to an Option that terminates
unexercised for any reason may thereafter be subjected to a new Option under the
Plan.
6. OPTION AGREEMENT.
Each Grantee shall enter into a written agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of agreement to evidence Options may be
established at any time or from time to time by the Committee. No Grantee shall
have rights in any Option unless and until a written option agreement is entered
into with the Company.
7. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Committee or the Board at any time and
from time to time prior to the termination of the Plan. Except as hereinafter
provided, Options granted under the Plan shall be subject to the following terms
and conditions:
(a) GRANTEES. The Grantees shall be those employees of the Company
(including officers and directors) and any subsidiaries of the Company, selected
by the Committee, provided that no Incentive Stock Options shall be granted to
(i) any person owning Stock or other capital stock in the Company possessing
more than 10% of the total combined voting power of all classes of capital stock
of the Company, unless such Grantee meets the requirements of 7(b) and 7(e); or,
(ii) any director who is not an employee. The maximum number of Options which
may be granted to a Grantee within a calendar year is one hundred thousand
(100,000) shares of the Company's Stock.
-2-
(b) PRICE. The exercise price of an Option shall be no less than the
fair market value of the Stock, without regard to any restriction, at the time
the Option is granted. If a Grantee owns more than 10% of the total combined
voting power of all classes of stock of the Company, the share price of any
Options granted to such individual shall be 110% of the fair market value of the
Stock. The Committee shall establish procedures to determine the fair market
value of the Stock.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Committee or the Board
may approve.
(d) LIMITATION. Notwithstanding any provision of the Plan to the
contrary, an Option shall not be treated as an Incentive Stock Option to the
extent to which the aggregate fair market value (determined as of the time an
Incentive Stock Option is granted) of Stock for which Incentive Stock Options
are exercisable for the first time buy a Grantee during any calendar year
exceeds $100,000.
(e) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for
terms of up to but not exceeding ten years from the date of grant. Subject to
the foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Board or Committee at the time of
grant. If an Option granted under the Plan is exercisable in installments the
Board or Committee shall determine what events, if any, will make it subject to
acceleration. If an Option is granted to an employee who owns more than 10% of
the combined voting power of all classes of stock of the Company, the Option
must be exercised within 5 years.
(f) TERMINATION OF EMPLOYMENT. Upon the termination of the Grantee's
employment, the right to exercise an Option shall be set forth in the agreement
entered into between the Company and the Grantee.
(g) TRANSFERABILITY OF OPTION. No Option shall be transferable except
by will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Committee or
Board may modify, extend or renew outstanding Options granted under the Plan, or
accept the surrender of outstanding Options (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution thereof.
Notwithstanding the foregoing, however, no modification of an Option shall,
without the consent of the Grantee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan or adversely affect the
status of an Incentive Stock Option.
(i) OTHER TERMS AND CONDITIONS. Option agreements may contain any other
provision not inconsistent with the Plan that the Committee or Board deems
appropriate.
8. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into which the Stock shall have been changed or for which it
shall have been exchanged, if the Committee or Board shall, in its sole
discretion, determine that the change equitably requires an adjustment in any
Option theretofore granted or which may be granted under the Plan, then
adjustments shall be made in accordance with its determination.
-3-
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 8 may be settled in cash or otherwise as the Committee or the
Board shall determine. Notice of any adjustment shall be given by the Company to
each holder of an Option that shall have been so adjusted, and the adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the plan.
(c) Notwithstanding Section 8(a), the Committee or the Board shall have
the power, in the event of the disposition of all or substantially all of the
assets of the Company, or the dissolution of the Company, or the merger or
consolidation of the Company, or the making of a tender offer to purchase all or
a substantial portion of outstanding Stock of the Company, to amend all
outstanding Options (upon such conditions as it shall deem fit) to (i) permit
the exercise of Options prior to the effective date of the transaction and to
terminate all unexercised Options as of that date, or (ii) require the
forfeiture of all Options, provided the Company pays to each Grantee the excess
of the fair market value of the Stock subject to the Option (determined in
accordance with Section 7(b)) over the exercise price of the Option, or (iii)
make any other provisions that the Committee or the Board deems equitable.
9. AMENDMENT OF THE PLAN.
The Committee or the Board may amend the Plan, may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
Option in the manner and to the extent deemed desirable to carry out the Plan
without action on the part of the stockholders of the Company; provided,
however, that, except as provided in Section 8 and this Section 9, unless the
stockholders of the Company shall have first approved thereof (i) the total
number of shares of Stock subject to the Plan shall not be increased, (ii) no
Option shall be exercisable more than ten years after the date it is granted,
(iii) the expiration date of the Plan shall not be extended and (iv) no
amendment shall permit the exercise price of any Option to be less than the fair
market value of the Stock at the time of grant, increase the number of shares of
Stock to be received on exercise of an Option, materially increase the benefits
accruing to a Grantee under an Option or modify the eligibility requirements for
participation in the Plan.
10. INTERPRETATION AND CONSTRUCTION. The interpretation and construction of
any provision of the Plan by the Committee or the Board shall be final, binding
and conclusive for all purposes.
11. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
12. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
13. PLAN NOT A CONTRACT OF EMPLOYMENT.
The Plan is not a contract of employment, and the terms of employment
of any Grantee shall not be affected in any way by the Plan or related
instruments except as specifically provided therein. The establishment of the
Plan shall not be construed as conferring any legal rights upon any Grantee for
a continuance of employment; nor shall it interfere with the right of the
Company to discharge Grantee.
14. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the
Company.
-4-
15. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Committee or the
Board may require, as a condition of the issuance and delivery of certificates
and in order to ensure compliance with those laws, regulations and requirements,
that the Grantee make such covenants, agreements and representations as the
Board or Committee, in its sole discretion, deems necessary or desirable. Each
Option shall be subject to the further requirement that if at any time the
Committee or the Board shall determine in its discretion that the listing or
qualification of the Shares of Stock subject to the Option, under any securities
exchange requirements or under any applicable law, or the consent or approval of
any regulatory body, is necessary in connection with the granting of the Option
or the issuance of stock thereunder, the Option may not be exercised in whole or
in part unless the listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee or
the Board.
16. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New Jersey.
-5-
APPENDIX 2
TECH LABORATORIES, INC.
2001 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Tech Laboratories, Inc. ("Tech Labs" or the
"Company") 2001 Non-employee Director Stock Option Plan (the "Plan") is to
provide for the grant of stock options as an incentive to selected non-employee
directors of Tech Labs and any Subsidiary of the Company, to acquire a
proprietary interest in the Company, to continue as directors, and to increase
their efforts on behalf of the Company.
2. THE PLAN.
The Plan provides for the grant of options to acquire shares of the
Company's common stock, par value $.01 (the "Stock"). Options granted under the
Plan are not intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended.
3. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(c) "Company" shall mean Tech Labs, a New Jersey corporation, and any
successor corporation.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(e) "Fair Market Value" means, as of any date, the value of Stock or
other property determined as follows:
(i) If the Stock is listed on any established stock exchange
or a national market system, including without limitation the Bulletin Board,
the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination;
(ii) If the Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Stock on the
last market trading day prior to the day of determination; or
(f) "Grantee" shall mean a non-employee director of the Company to whom
an Option has been granted under the terms of the Plan.
(g) "Nonemployee Director" shall mean a director of the Company who is
a "nonemployee director" within the meaning of Rule 16b-3.
(h) "Option" shall mean the option to purchase the common stock of the
Company pursuant to this Plan.
(i) "Option Agreement" shall mean a written agreement between the
Company and a Grantee as described in Section 6.
(j) "Outside Director" shall mean a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code.
(k) "Plan" shall mean this Tech Labs 2001 Non-employee Director Stock
Option Plan, as amended from time to time.
(l) "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.
(m) "Stock" shall mean shares of Common Stock, $.01 par value, of the
Company or such other securities or property as may become subject to Options
pursuant to an adjustment made under Section 8.
(n) "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns more
than 50% of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
4. ADMINISTRATION.
(a) The Plan shall be administered the Board or a committee of the
Board, composed of one or more of the independent members of the Board of
Directors (the "Committee").
(b) The Board Committee shall have plenary authority in its discretion,
subject only to the express provisions of the Plan:
(i) to select the Grantees, the number of shares of Stock
subject to each Option and terms of the Option granted to each Grantee
(including without limitation the period during which such Option can be
exercised and any restrictions on exercise), provided that, in making its
determination, the Committee shall consider the value and accomplishment of the
individual to the Company, the individual's present and potential contribution
to the success of the Company, and any other factors that the Committee may deem
relevant.
(ii) to determine the dates of the Option grants;
(iii) to prescribe the form of the Option Agreements;
(iv) to adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings;
(v) to decide all questions and settle all controversies and
disputes of general applicability that may arise in connection with the Plan;
and
(vi) to modify or amend any outstanding Option as provided in
Section 8(h).
All decisions, determinations and interpretations with respect to the
foregoing matters shall be made by the Committee or by the Board and shall be
final and binding upon all persons.
(c) EXCULPATION. No member of the Board and/or Committee shall be
personally liable for monetary damages for any action taken or any failure to
take any action in connection with the administration of the Plan or the
granting of Options under it unless such action or failure to take action
constitutes self-dealing, willful misconduct or recklessness; provided, however,
that the provisions of this subsection shall not apply to the responsibility or
liability of a director pursuant to any criminal statute or to the liability of
a director for the payment of taxes pursuant to local, state or federal law.
-2-
(d) INDEMNIFICATION. Each member of the Board and/or Committee shall be
entitled without further act on his part or her part to indemnity from the
Company to the fullest extent provided by applicable law and the Company's
Certificate of Incorporation or Bylaws in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he or she may be involved by reason of
being or having been a member of the Board at the time of the action, suit or
proceeding.
5. EFFECTIVENESS AND TERMINATION OF THE PLAN.
The Plan shall become effective as of August 20, 2001, the date of its
adoption by the Board, provided that the Plan is approved by the stockholders of
the Company within one year of its adoption. Any Option outstanding at the time
of termination of the Plan shall remain in effect in accordance with its terms
and conditions and those of the Plan. The Plan shall terminate on the earliest
of:
(a) August 20, 2011; or
(b) the date when all shares of Stock reserved for issuance under
Section 6 of the Plan shall have been acquired through exercise of Options
granted under the Plan; or
(c) such earlier date as the Committee or the Board may determine.
6. THE STOCK.
The aggregate number of shares of Stock issuable under the Plan shall
be three hundred thousand (300,000) shares or the number and kinds of shares of
capital stock or other securities substituted for the Stock as provided in
Section 9. The aggregate number of shares of Stock issuable under the Plan may
be set aside out of the authorized but unissued shares of Stock not reserved for
any other purpose, or out of shares of Stock held in or acquired for the
treasury of the Company. All shares of Stock subject to an Option that
terminates unexercised for any reason may thereafter be subjected to a new
Option under the Plan.
7. OPTION AGREEMENT.
Each Grantee shall enter into an Option Agreement with the Company
setting forth the terms and conditions of the Option issued to the Grantee,
consistent with the Plan. The form of Option Agreement may be established at any
time or from time to time by the Committee. No Grantee shall have rights in any
Option unless and until an Option Agreement is entered into with the Company.
8. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted by the Committee or the Board at any time and
from time to time prior to the termination of the Plan. Except as hereinafter
provided, Options granted under the Plan shall be subject to the following terms
and conditions:
(a) GRANTEES. The Grantees shall be those non-employee directors of the
Company or its Subsidiaries selected by the Committee or the Board. The maximum
number of shares of Stock which may be issued pursuant to Options granted to a
Grantee within a calendar year is 100,000.
(b) PRICE. The exercise price of an Option shall be set by the
Committee or the Board but shall be no less than the Fair Market Value of the
Stock at the time the Option is granted.
(c) PAYMENT FOR STOCK. The exercise price of an Option shall be paid in
full at the time of the exercise in (i) cash, or (ii) by certified check payable
to the Company, or (iii) by other mode of payment as the Committee may approve.
(d) DURATION AND EXERCISE OF OPTIONS. Options may be exercised for
terms of up to but not exceeding ten years from the date of grant. Subject to
the foregoing, Options shall be exercisable at the times and in the amounts (up
to the full amount thereof) determined by the Committee or the Board at the time
of grant. If an Option granted under the Plan is exercisable in installments the
Committee or the Board shall determine what events, if any, will make it subject
to acceleration.
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(e) STATUS OF NON-EMPLOYEE DIRECTOR. Upon the happening of any event
which causes Grantee to lose status as a non-employee director, Options held by
the Grantee may only be exercised to the extent and during the period, if any,
set forth in the Option Agreement.
(f) TRANSFERABILITY OF OPTION. No Option shall be transferable except
by will or the laws of descent and distribution. An Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(g) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions and within the limitations of the Plan, the Committee or
the Board may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
thereof. Notwithstanding the foregoing, however, no modification of an Option
shall, without the consent of the Grantee, alter or impair any rights or
obligations under any Option theretofore granted under the Plan.
(h) OTHER TERMS AND CONDITIONS. Option Agreements may contain any other
provision not inconsistent with the Plan that the Committee or the Board deems
appropriate.
9. ADJUSTMENT FOR CHANGES IN THE STOCK.
(a) In the event the shares of Stock, as presently constituted, shall
be changed into or exchanged for a different number or kind of shares or other
securities of the Company (whether by reason of merger, consolidation,
recapitalization, reclassification, split, reverse split, combination of shares
or otherwise), then there shall be substituted for or added to each share of
Stock theretofore or thereafter subject to an Option the number and kind of
shares of capital stock or other securities into, which each outstanding share
of Stock shall be changed, or for which each such share shall be exchanged, or
to which each such share shall be entitled, as the case may be. The price and
other terms of outstanding Options shall also be appropriately amended to
reflect the foregoing events. In the event there shall be any other change in
the number or kind of outstanding shares of the Stock, or of any capital stock
or other securities into which the Stock shall have been changed or for which it
shall have been exchanged, if the Board or Committee shall, in its sole
discretion, determine that the change equitably requires an adjustment in any
Option theretofore granted or which may be granted under the Plan, then
adjustments shall be made in accordance with its determination.
(b) Fractional shares resulting from any adjustment in Options pursuant
to this Section 9 may be settled in cash or otherwise as the Board or Committee
shall determine. Notice of any adjustment shall be given by the Company to each
holder of an Option that shall have been so adjusted, and the adjustment
(whether or not notice is given) shall be effective and binding for all purposes
of the plan.
(c) Notwithstanding Section 9(a), the Committee or the Board shall have
the power, in the event of the disposition of all or substantially all of the
assets of the Company, or the dissolution of the Company, or the merger or
consolidation of the Company, or the making of a tender offer to purchase all or
a substantial portion of outstanding Stock of the Company, to amend all
outstanding Options (upon such conditions as it shall deem fit) to (i) permit
the exercise of Options prior to the effective date of the transaction and to
terminate all unexercised Options as of that date, or (ii) require the
forfeiture of all Options, provided the Company pays to each Grantee the excess
of the Fair Market Value of the Stock subject to the Option over the exercise
price of the Option, or (iii) make any other provisions that the Committee or
the Board deems equitable.
10. AMENDMENT OF THE PLAN.
The Committee or the Board may amend the Plan, may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in any
Option in the manner and to the extent deemed desirable to carry out the Plan
without action on the part of the stockholders of the Company; provided,
however, that, except as provided in Section 9 and this Section 10, unless the
stockholders of the Company shall have first approved thereof (i) the total
number of shares of Stock subject to the Plan shall not be increased, (ii) no
Option shall be exercisable more than ten years after the date it is granted,
(iii) the expiration date of the Plan shall not be extended and (iv) no
amendment shall permit the exercise price of any Option to be less than the Fair
Market Value of the Stock at the time of grant, increase the number of shares of
Stock to be received on exercise of an Option, materially increase the benefits
accruing to a Grantee under an Option or modify the eligibility requirements for
participation in the Plan.
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11. INTERPRETATION AND CONSTRUCTION.
The interpretation and construction of any provision of the Plan by the
Committee or the Board shall be final, binding and conclusive for all purposes.
12. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
this Plan will be used for general corporate purposes.
13. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Grantee
to exercise an Option.
14. NO RIGHT TO CONTINUE AS DIRECTOR.
Neither the Plan nor any Option Agreement shall constitute an agreement
or understanding, expressed or implied, that the Company will retain a Grantee
as a Director for any period of time.
15. EXPENSE OF THE PLAN.
All of the expenses of administering the Plan shall be paid by the
Company.
16. COMPLIANCE WITH APPLICABLE LAW.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates for shares of
Stock issuable upon exercise of an Option unless and until the Company is
advised by its counsel that the issuance and delivery of the certificates is in
compliance with all applicable laws, regulations of government authorities and
the requirements of any exchange upon which shares of Stock are traded. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take
any other action in order to cause the issuance and delivery of certificates to
comply with any of those laws, regulations or requirements. The Committee or the
Board may require, as a condition of the issuance and delivery of certificates
and in order to ensure compliance with those laws, regulations and requirements,
that the Grantee make such covenants, agreements and representations as the
Committee or the Board, in its sole discretion, deems necessary or desirable.
Each Option shall be subject to the further requirement that if at any time the
Committee or the Board shall determine in its discretion that the listing or
qualification of the shares of Stock subject to the Option, under any securities
exchange requirements or under any applicable law, or the consent or approval of
any regulatory body, is necessary in connection with the granting of the Option
or the issuance of Stock thereunder, the Option may not be exercised in whole or
in part unless the listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee or
the Board.
17. GOVERNING LAW.
Except to the extent preempted by federal law, this Plan shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New Jersey.
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APPENDIX 3
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TECH LABORATORIES, INC.
Under Section 14A: 9-4 of Title 14A
It is hereby certified that:
FIRST: The name of the corporation is TECH LABORATORIES, INC. (the
"Corporation").
SECOND: Article FIFTH of the Certificate of Incorporation of the
Corporation is hereby deleted in its entirety, substituting the following new
Article FIFTH in its place:
The total authorized capital stock of this Corporation is twenty-five
million (25,000,000) shares of common stock with a par value of $.01
per share.
No shareholder shall, because of his ownership of stock, have a
preemptive right to purchase, subscribe for, or take part of any
securities convertible into or carrying options or warrants to purchase
stock, issued, optioned, or sold by the Corporation.
Any part of the capital stock and any part of the notes, debentures,
bonds, or other securities convertible into or carrying options or
warrants to purchase stock authorized by any amended certificate duly
filed, may at any time be issued, optioned for sale, sold, or disposed
of by the Corporation pursuant to the Resolution of its Board of
Directors to such persons and upon such terms as may, to such Board,
seem proper, without first offering such stock or securities or any
part thereof to existing shareholders.
THIRD: The amendment to the Certificate of Incorporation was approved
by a majority of the outstanding shares of the Corporation entitled to vote on
said amendment on the ________ day of ______________________, 2001.
FOURTH: The number of shares of the Corporation entitled to vote on the
amendment was ___________________.
FIFTH: The vote approving of the said amendment was _____________
shares for said amendment to _______________ shares against said amendment.
IN WITNESS WHEREOF, this Certificate of Amendment to the Certificate of
Incorporation has been subscribed to this ________ day of ___________________,
2001, by the undersigned who affirm that the statements made herein are true
under penalties of perjury.
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Bernard M. Ciongoli, President
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Carmine O. Pellosie, Jr., Secretary