UNITES STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]Preliminary Proxy Statement
[ ]Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Section 240.14a-11(c)or
Section 240.14a-12
SCIENTIFIC INDUSTRIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
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[X] No fee required.
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(3) Per unit price or other underlying value of transaction
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
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the offsetting fee was paid previously. Identify the previous
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SCIENTIFIC INDUSTRIES, INC.
70 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
TEL. (631)567-4700
October 9, 2002
Dear Fellow Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of Scientific Industries, Inc. which will be held at
10:30 a.m. (New York time) on Monday, November 18, 2002 at the
Princeton Club, 15 West 43rd Street, New York, New York 10036.
Information concerning the matters to be considered and voted
upon at the Annual Meeting is set out in the attached Notice of
2002 Annual Meeting and Proxy Statement.
It is important that your shares be represented at the 2002
Annual Meeting, regardless of the number of shares you hold and
whether or not you plan to attend the meeting in person.
Accordingly, please complete, sign and date the enclosed proxy card
and return it as soon as possible in the accompanying business
reply envelope so that your shares will be represented at the
Annual Meeting. This will not limit your right to vote in person or
to attend the meeting.
Thank you for your continued support.
Sincerely,
/s/Joseph I. Kesselman
______________________
Joseph I. Kesselman
Chairman
SCIENTIFIC INDUSTRIES, INC.
70 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
_____________
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, NOVEMBER 18, 2002
Notice is hereby given that the 2002 Annual Meeting of
Stockholders (the "Annual Meeting") of Scientific Industries, Inc.,
a Delaware Corporation (the "Company"), will be held on Monday,
November 18, 2002, at 10:30 a.m. (New York time) at the Princeton
Club, 15 West 43rd Street, New York, New York 10036, for the
following purposes:
1. To elect two Class C Directors to the Company's Board of
Directors to serve until the Company's annual meeting of
stockholders with respect to the year ending June 30,
2005 and until the election and qualification of their
respective successors.
2. To consider and act upon a proposal to approve the 2002
Stock Option Plan of the Company.
3. To ratify the appointment of Nussbaum Yates & Wolpow,
P.C. as the Company's independent auditors for the fiscal
year ending June 30, 2003.
4. To transact such other business as may properly come
before the Annual Meeting and any adjournments or
postponements thereof.
The foregoing items of business are more fully described in
the accompanying proxy statement.
The Board of Directors has fixed the close of business on
September 27, 2002, as the record date for determination of
stockholders entitled to notice of and to vote at, the Annual
Meeting and at any adjournments or postponements thereof.
A complete list of the stockholders entitled to vote at the
Annual Meeting will be available for inspection by any stockholder
of the Company at the Annual Meeting. In addition, the list will
be open for examination by any stockholder of the Company, for any
purpose germane to the Annual Meeting, during ordinary business
hours, for a period of ten days prior to the Annual Meeting at the
offices of the Company.
YOU ARE REQUESTED TO FILL IN AND SIGN THE ENCLOSED FORM OF
PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY, AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. ANY PROXY MAY BE REVOKED BY DELIVERY OF A LATER DATED
PROXY.
By Order of your Board of Directors,
/s/Robert P. Nichols
____________________
Robert P. Nichols
Secretary
Bohemia, New York
October 9, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE KINDLY
REQUEST THAT YOU PLEASE COMPLETE, SIGN, DATE, AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD IN THE POSTAGE PAID ENVELOPE PROVIDED. IF
YOU ARE A STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL MEETING,
YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
YOUR VOTE IS IMPORTANT
SCIENTIFIC INDUSTRIES, INC.
70 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
PROXY STATEMENT
_________________
FOR THE
2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2002
_________________
SOLICITATION OF PROXIES
This proxy statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors
(the "Board") of Scientific Industries, Inc., a Delaware
Corporation (the "Company"), for use at the 2002 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Princeton
Club, 15 West 43rd Street, New York, New York 10036, on Monday,
November 18, 2002, at 10:30 a.m. (New York time), and at any
adjournments or postponements thereof.
At the Annual Meeting, stockholders of the Company will be
asked to: (1) elect two Directors of the Company to serve until
the Company's annual meeting of stockholders with respect to the
fiscal year ending June 30, 2005, and until the election and
qualification of their respective successors; (2) approve the
adoption by the Board of Directors of the Company's 2002 Stock
Option Plan; (3) ratify the appointment of Nussbaum Yates & Wolpow,
P. C., the Company's independent accountants, as its auditors for
the fiscal year ending June 30, 2003; and (4) transact such other
business as may properly come before the Annual Meeting and any
adjournments or postponements thereof.
RECORD DATE, VOTING RIGHTS
Only stockholders of record of the Company's Common Stock, par
value $0.05 per share (the "Common Stock"), as of the close of
business on September 27, 2002 (the "Record Date"), are entitled to
notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof. On the Record Date, there were 953,541
shares of Common Stock issued and outstanding. Each share of
Common Stock is entitled to one vote.
With respect to all matters expected to be presented for a
vote of stockholders, the presence at the Annual Meeting, in person
or by properly executed proxy, of the holders of a majority of the
Company's Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Abstentions and broker "non-
votes" are included in the determination of the number of shares of
Common Stock present at the Annual Meeting for quorum purposes but
are not counted in the tabulations of the votes cast for election
of the directors. A broker "non-vote" occurs when a nominee
holding shares of Common Stock for a beneficial owner does not vote
on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. The affirmative
vote of the holders of a majority of the shares of Common Stock of
the Company present or represented and entitled to vote is required
to approve the proposal to approve the 2002 Stock Option Plan and
to approve the proposal to ratify the appointment of independent
auditors. Abstentions will be included in determining the number
of shares of Common Stock present or represented and entitled to
vote for purposes of approval of a proposal and will therefore have
the effect of votes "against" such proposal. Broker "non-votes"
will not be counted in determining the number of shares of Common
Stock present or represented and entitled to vote to approve a
proposal and will therefore not have the effect of votes either
"for" or "against".
VOTING OF PROXIES, REVOCATION, SOLICITATION
All stockholders who deliver properly executed and dated
proxies to the Company prior to the Annual Meeting will be deemed
present at the Annual Meeting regardless of whether such proxies
direct the proxy holders to vote for or against, or to abstain from
voting. The proxies, when properly executed and returned to the
Company, unless otherwise indicated, will be voted in accordance
with the instructions given therein by the person executing the
proxy. In the absence of instructions, properly executed proxies
will be voted FOR (1) the election of the Board's nominees, Roger
B. Knowles and Joseph G. Cremonese, as Directors of the Company;
(2) the approval of the Company's 2002 Stock Option Plan; and (3)
the ratification of the appointment of Nussbaum Yates & Wolpow,
P.C., independent accountants, as the Company's auditors for the
fiscal year ending June 30, 2003.
Any stockholder who executes and delivers a proxy may revoke
it at any time before it is voted by delivering a written notice of
such revocation to the Secretary of the Company at the address of
the Company set forth in this proxy statement, by submitting a
properly executed proxy bearing a later date, or by appearing at
the Annual Meeting and requesting the return of the proxy or by
voting in person. In accordance with applicable rules, boxes and
a designated space are provided on the proxy card for stockholders
to mark if they wish either to vote for or withhold authority to
vote for the Board's nominees for Directors, and to vote for,
against or abstain from the votes to approve the proposals to
approve the Company's 2002 Stock Option Plan and to ratify the
appointment of Nussbaum Yates & Wolpow, P.C., as the Company's
independent auditors. A stockholder's attendance at the Annual
Meeting will not, by itself, revoke a proxy given by that
stockholder. Stockholders vote at the Annual Meeting by casting
ballots (in person or by proxy) which are tabulated by a person who
is appointed by the Board of Directors before the Annual Meeting to
serve as inspector of election at the Annual Meeting and who has
executed and verified an oath of office.
It is anticipated that this proxy statement, the enclosed
proxy card and the Annual Report to Stockholders will be mailed to
the Company's stockholders on or about October 18, 2002.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 27, 2002
certain information as to each person who to the Company, based
upon such person's representations or publicly available filings,
beneficially owned more than 5% of the shares of the Company's
Common Stock as of that date:
Name and Address of Shares Beneficially Percent of
Beneficial Owner Owned** Class***
___________________ ___________________ __________
James S. Segasture* 176,757 (1) 18.5
Lowell A. Kleiman 139,581 14.7
16 Walnut Street
Glen Head, NY 11545
Roger B. Knowles* 91,705 (2) 9.3
Joseph I. Kesselman 63,520 (3) 6.5
6 Angora Road
Westport, CT 06880
Arthur M. Borden* 62,540 (4) 6.4
______________
* His address is c/o Scientific Industries, Inc., 70 Orville
Drive, Bohemia, New York 11716.
** Beneficial ownership, as such term is used herein, is
determined in accordance with Rule 13d-3(d)(1) promulgated under
the Securities Exchange Act of 1934, as amended, (the "Exchange
Act") and includes voting and/or investment power with respect to
shares of Common Stock of the Company. Unless otherwise indicated,
the named person possesses sole voting and investment power with
respect to the shares. The shares shown include shares issuable
pursuant to options held by the named person that may be exercised
within 60 days of the date indicated above.
*** Percentages of ownership are based upon the number of shares
of Common Stock issued and outstanding. Shares of Common Stock
that may be acquired pursuant to options that are exercisable
within 60 days of the date indicated above are deemed outstanding
for computing the percentage ownership of the person holding such
options, but are not deemed outstanding for the percentage
ownership of any other person.
(1) Includes 132,757 shares held jointly with his wife and 4,000
shares issuable upon exercise of options.
(2) Includes 44,158 shares owned by his wife and 1,337 shares
owned by a trust of which Mr. Knowles is a trustee, beneficial
ownership of which he disclaims, and 32,000 shares of Common
Stock issuable upon exercise of options.
(3) Includes 32,000 shares issuable upon exercise of options, and
735 shares owned jointly with his wife.
(4) Includes 26,000 shares issuable upon exercise of options.
PROPOSAL 1
__________
ELECTION OF DIRECTORS
GENERAL INFORMATION
The Company's Certificate of Incorporation provides for a
classified Board of Directors, consisting of three classes, each
class serving a three year term on a staggered basis. The Board of
Directors is currently comprised of five members, of whom two are
Class A Directors, one is a Class B Director and two are Class C
Directors. At the Annual Meeting, two Class C Directors are to be
elected to serve until the annual meeting of stockholders with
respect to the fiscal year ending June 30, 2005, and until their
respective successors are duly elected and qualified. Shares of
Common Stock represented by proxies solicited by the Board of
Directors will be voted for the nominees hereinafter named, if
authority to do so is not specifically withheld. If for any reason
s nominee shall become unavailable for election, which is not now
anticipated, the proxies will be voted for a substitute nominee
designated by the Board of Directors.
Directors of the Company are elected by the affirmative vote
of the holders of a plurality of the shares of Common Stock present
in person or represented by proxy at the Annual Meeting and
entitled to vote. A plurality means that the nominee with the
largest number of votes is elected a director. In tabulating the
vote, abstentions and broker "non-votes" will be disregarded and
will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES IDENTIFIED BELOW TO THE BOARD OF
DIRECTORS.
NOMINEES FOR ELECTION AS DIRECTORS
The Board of Directors has designated Mr. Roger B. Knowles, a
current Class C Director, and Mr. Joseph G. Cremonese as its
nominees for election as Class C Directors. Mr. Lowell A. Kleiman,
a Director since 1970 and the President and Chief Executive Officer
of the Company from September 1974 to August 29, 2002 has been the
other Class C Director.
Joseph G. Cremonese (age 67), has been a marketing consultant
to the Company since 1996. Mr. Cremonese had been from 1974 to
1984 employed by Fisher Scientific (the Company's principal
distributor) where he was Vice President, Director of Corporate
Planning, and Chairman of the New Products Committee. He has been
since 1985 President of Laboratory Innovation Company, Ltd., a
Pennsylvania corporation, which is a vehicle for technology
transfer and consulting services for companies engaged in the
production and sale of products for science and biotechnology.
Roger B. Knowles (age 77), a Director since 1965, is
semi-retired. During the past five years, he was President of
various corporations, including Conductive Systems, Inc., a
manufacturer of EMI and RFI shielding material, and G.H. Realty
Company, a real-estate company, and a director of Ionic, Inc., an
investment company.
DIRECTORS WHOSE TERMS DO NOT EXPIRE AT THIS ANNUAL MEETING
Arthur M. Borden, Esq. (age 81), a Director since 1974, has
been counsel to the law firm of Katen Muchin Zavis Rosenman during
the past five years. His current term as Director expires at the
Annual Meeting for fiscal 2003.
Joseph I. Kesselman (age 77), a Director since 1961 and
Chairman of the Board since August 29, 2002, is a consultant to
various corporations, and a director of Nuclear and Environmental
Protection Inc., Perrot Duval Holding S.A. (a Swiss public
company), Hopare Holding, S.A. (a Swiss company), and Infranor
Inc., a developer and manufacturer of servo systems. Prior to
November 1994, he was both Chairman and Chief Executive Officer of
Greentree Software, Inc., a developer and provider of proprietary
inventory control software, and during the last year of his tenure,
he acted as a consultant to that company. His current term as
Director expires at the Annual Meeting for fiscal 2004.
James S. Segasture (age 65), a Director since 1991, has been
a private investor since February 1990. His current term as
Director expires at the Annual Meeting for fiscal 2003.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND DIRECTOR
NOMINEES
The following table sets forth, as of October 4, 2002, the
number of shares of Common Stock beneficially owned by (i) each
director of the Company, (ii) each nominee for director, (iii) each
named executive officer of the Company identified in the Summary
Compensation Table under "Executive Officers-Annual Compensation",
and (iv) all directors and executive officers as a group.
Number Percentage
__________ __________
Arthur M. Borden 62,540 (1) 6.4%
Joseph I. Kesselman 63,520 (2) 6.4%
Roger B. Knowles 91,705 (3) 9.3%
James S. Segasture 176,757 (4) 18.4%
Joseph G. Cremonese 5,000 .5%
Lowell A. Kleiman 139,581 14.6%
Helena R. Santos 25,000(5) 2.6%
All current directors and 586,903 (6) 53.7%
executive officers as a group
(1) See note (4) to table under "Principal Stockholders".
(2) See note (3) to table under "Principal Stockholders".
(3) See note (2) to table under "Principal Stockholders".
(4) See note (1) to table under "Principal Stockholders".
(5) Includes 24,000 shares of Common Stock issuable upon exercise
of currently exercisable options.
(6) Includes 138,000 shares of Common Stock issuable upon
exercise of currently exercisable options of which options
to purchase 44,000 shares of Common Stock are held by
Ms. Santos and Mr. Nichols.
BOARD COMMITTEES
The Company currently has no option, audit, compensation,
nominating or similar committees.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 2002, the Board of
Directors held four meetings with all directors present.
DIRECTORS' COMPENSATION
The Company currently pays each non-employee Director a
quarterly retainer of $750 and a fee of $500 for each meeting
attended, plus reimbursement for out-of-pocket expenses incurred in
connection with attendance at board meetings in the amount of $50
or the Director's itemized expenses, whichever is greater. During
fiscal 2002, the Company paid fees in the aggregate amount of
$20,000 to the four non-employee Directors, Messrs. Arthur M.
Borden, Joseph I. Kesselman, Roger B. Knowles and James S.
Segasture.
On February 11, 1992, before the adoption of the Company's
1992 Stock Option Plan, (the "1992 Plan"), the Company issued to
each of the foregoing non-employee Directors, ten year non-
qualified options to purchase, at a price of $0.35 per share,
12,000 shares of Common Stock, which were exercisable in three
annual installments. All the options were exercised prior to June
30, 2002.
The 1992 Plan authorized the grant of options to purchase
3,000 shares of Common Stock at the then fair market value to each
non-employee Director who was so serving on the first business day
of each March in 1993, 1994, 1995, and 1996. In addition, in
December 1997, the Board of Directors approved annual grants under
the 1992 Plan beginning in December 1997 with the last such grant
made in December 2001 of options to purchase 4,000 shares of Common
Stock for each non-employee Director exercisable at the fair market
value on the date of grant. As of June 30, 2002, the Company had
granted under the 1992 Plan in the aggregate to the foregoing four
non-employee Directors options to purchase 128,000 shares of Common
Stock, or options to purchase 32,000 shares of Common Stock to
each.
The fair market value per share of Common Stock on the dates
of grant under the 1992 Plan were in each of the relevant fiscal
years: $2.40 in 2002, $1.328 in 2001, $.829 in 2000, $1.875 in
1999, $2.00 in 1998, $1.2813 in 1996, $1.3125 in 1995, $.9375 in
1994, and $.50 in 1993. All options were immediately exercisable,
except for the options granted on December 31, 2000 with respect to
834 shares each (an aggregate of 3,336 shares) which became
available and exercisable on July 1, 2001. As of September 30,
2002, Mr. Segasture had exercised all his options except for the
options granted in December 2001 with respect to 4,000 shares and
Mr. Borden had exercised the options granted in March 1993 and
March 1994 with respect to an aggregate of 6,000 shares.
The Company has engaged Mr. Joseph G. Cremonese as an
independent marketing consultant since 1996. The Company paid him
fees for his consulting services for the years ended June 30, 2002,
June 30, 2001 and June 30, 2000 in the respective amounts of
$11,400, $6,500 and $5,100, plus reimbursement of expenses.
PROPOSAL 2
__________
PROPOSAL TO APPROVE
THE 2002 STOCK OPTION PLAN
On September 26, 2002 the Board of Directors adopted the 2002
Stock Option Plan of the Company (the "2002 Plan") subject to
stockholder approval. The 2002 Plan is basically a restatement of
the Company's Stock Option Plan which was adopted in 1992 (the
"1992 Plan") with certain revisions, principally as to the number
of shares and termination date. The 2002 Plan authorizes the grant
of options to employees and directors of the Company or its
subsidiaries and individuals performing consulting services to the
Company or a subsidiary.
The number of shares of Common Stock subject to the 1992 Plan
was 300,000. It terminated on February 10, 2002; thereby
terminating the authority to grant options under the Plan after
such date. As of October 7, 2002, an aggregate of 161,000 shares
were reserved for issuance upon exercise of outstanding options
which were granted under the 1992 Plan prior to its termination
date.
The 2002 Plan relates to 100,000 shares of Common Stock plus
such number of shares, not to exceed 161,000, which are currently
subject to outstanding options granted under the 1992 Plan, but
which are not subsequently required to be issued under the 1992
Plan because of the termination or expiration of such options
without their having been exercised.
The Company believes that the 2002 Plan will be important in
attracting and retaining individuals with good ability to service
the Company, motivating their efforts and serving the business
interests of the Company, while reducing the cash payments which
the Company would otherwise be required to make to accomplish such
purposes.
The following table sets forth information regarding options
granted under the 1992 Plan to each of the Company's executive
officers named under the Summary Compensation Table under
"Executive Compensation", all current executive officers as a
group, all current Directors who are not executive officers as a
group and all employees other than executive officers as a group:
Number of
Stock Options
Name and Position Granted
_________________ _____________
Lowell A. Kleiman (1)...................... 80,000
Helena R. Santos (1)....................... 25,000
Executive Officer Group (2 persons)........ 45,000
Non-Executive Directors Group (4 persons).. 128,000
Non-Executive Officer Employee
Group (3 persons).......................... 23,000
________________________
(1) Mr. Kleiman's employment as President and Chief Executive
Officer terminated on August 29, 2002 at which time Ms. Santos who
had been Vice President, Controller and Secretary was appointed
President and Chief Executive Officer.
The last reported sale price of the Company's Common Stock
(symbol SCND) on the NASD Electronic Bulletin Board on September
20, 2002 was $1.15 per share. The proceeds received upon the
exercise of the stock options granted under the 2002 Plan will be
used for general corporate purposes.
SUMMARY OF THE 2002 PLAN
The full text of the 2002 Plan is set forth in Appendix A to
this Proxy Statement. The following summary of the provisions of
the 2002 Plan is qualified in its entirety by reference to the text
of the 2002 Plan.
OPTIONS AUTHORIZED
The 2002 Plan permits, as did the 1992 Plan, the Company to
grant both incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Code, and other options
which do not qualify as Incentive Stock Options ("Non-Qualified
Options").
The aggregate number of shares of Common Stock reserved for
issuance under the 2002 Plan is 261,000, which includes 161,000
shares which, as of October 7, 2002, were reserved for issuance
upon the exercise of outstanding stock options granted pursuant to
the 1992 Plan. To the extent that any of the stock options
previously granted under the 1992 Plan expire or terminate for any
reason without having been exercised, then stock options
exercisable for that same number of shares of Common Stock may be
granted under the 2002 Plan. Accordingly, to the extent any of the
outstanding options granted under the 1992 Plan are exercised, the
number of shares for which options may be granted under the 2002
Plan will be reduced.
Unless earlier terminated by the Board of Directors, the 2002
Plan (but not outstanding options) will terminate on February 10,
2012, after which no further awards may be granted under the 2002
Plan. The 2002 Plan will be administered by the full Board of
Directors or, at the Board's discretion, by a committee of the
Board (the "Committee") consisting of at least two persons who are
"disinterested persons" as defined under Rule 16b-2(c)(i) under the
Exchange Act.
Recipients of options under the 2002 Plan ("optionees") are
selected by the Board or the Committee. Unless otherwise provided
by the Board or the Committee, options shall be exercisable in
three equal, cumulative installments commencing respectively on the
first, second, and third anniversary of the date of grant. The
Board or the Committee determines the terms of each option grant
including (1) the purchase price of shares subject to options, (2)
the dates on which options become exercisable and (3) the
expiration date of each option (which may not exceed ten years from
the date of grant). The minimum per share purchase price for
Incentive Stock Options and options granted to any director of the
Company or a subsidiary who is not an employee of the Company or
subsidiary (an "Outside Director") is the fair market value (as
defined in the 2002 Plan)or 110% of the fair market value for an
Incentive Stock Option granted to an employee who owns at least 10%
of the outstanding shares of Common Stock, and for Non-Qualified
Options is 85% of the fair market value of one share of Common
Stock on the date the option is granted.
Optionees will have no voting, dividend or other rights as
stockholders with respect to shares of Common Stock covered by
options prior to becoming the holders of record of such shares.
The purchase price upon the exercise of options may be paid in
cash, by certified bank or cashier's check or by tendering stock
held by the optionee or by cashless exercise through a broker. The
total number of shares of Common Stock available under the 2002
Plan, and the number of shares and per share exercise price under
outstanding options will be appropriately adjusted in the event of
any reorganization, merger or recapitalization of the Company or
similar corporate event.
The Board of Directors may at any time terminate the 2002 Plan
or from time to time make such modifications or amendments to the
2002 Plan as it may deem advisable and the Board or Committee
(other than with respect to options held by an Outside Director)
may adjust, reduce, cancel and regrant an unexercised option if the
fair market value declines below the exercise price. In no event
may the Board, without the approval of stockholders, amend the 2002
Plan to increase the maximum number of shares of Common Stock for
which options may be granted under the 2002 Plan or change the
class of persons eligible to receive options under the 2002 Plan,
or change the manner of determining the option prices, or extend
the period during which an option may be granted or exercised.
Subject to limitations set forth in the 2002 Plan, the terms
of option agreements will be determined by the Board or Committee,
and need not be uniform among optionees.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief
discussion of the Federal income tax consequences of transactions
under the 2002 Plan. This discussion is not intended to be
exhaustive and does not describe state or local tax consequences.
INCENTIVE STOCK OPTIONS
No taxable income is realized by the optionee upon the grant
or exercise of an Incentive Stock Option. If Common Stock is
issued to an optionee pursuant to the exercise of an Incentive
Stock Option, and if no disqualifying disposition of such shares is
made by such optionee within two years after the date of grant or
within one year after the transfer of such shares to such optionee,
then (1) upon sale of such shares, any amount realized in excess of
the option price will be taxed to such optionee as a long-term
capital gain and any loss sustained will be a long-term capital
loss, and (2) no deduction will be allowed to the optionee's
employer for Federal income tax purposes.
Except as noted below for corporate "insiders," if the Common
Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding period described
above, generally (1) the optionee will realize ordinary income in
the year of disposition in an amount equal to the excess (if any)
of the fair market value of such shares at exercise (or, if less,
the amount realized on the disposition of such shares) over the
option price paid for such shares and (2) the Company will be
entitled to deduct such amount for Federal income tax purposes if
the amount represents an ordinary and necessary business expense.
Any further gain (or loss) realized by the optionee will be taxed
as short-term or long-term capital gain (or loss), as the case may
be, and will not result in any deduction by the Company.
Subject to certain exceptions for disability or death, if an
Incentive Stock Option is exercised more than three months
following termination of employment, the exercise of the option
will generally be taxed as the exercise for a Non-Qualified Option.
For purposes of determining whether an optionee is subject to
any alternative minimum tax liability, an optionee who exercises an
Incentive Stock Option generally would be required to increase his
or her alternative minimum taxable income, and compute the tax
basis in the stock so acquired, in the same manner as if the
optionee had exercised a Non-Qualified Option. Each optionee is
potentially subject to the alternative minimum tax. In substance,
a taxpayer is required to pay the higher of his/her alternative
minimum tax liability or his/her "regular" income tax liability.
As a result, a taxpayer has to determine his potential liability
under the alternative minimum tax.
NON-QUALIFIED OPTIONS
Except as noted below for corporate "insiders," with respect
to Non-Qualified Options: (1) no income is realized by the optionee
at the time the option is granted; (2) generally, at exercise,
ordinary income is realized by the optionee in an amount equal to
the difference between the option price paid for the shares and the
fair market value of the shares, if unrestricted, on the date of
exercise, and the Company is generally entitled to a tax deduction
in the same amount subject to applicable tax withholding
requirements; and (3) at sale, appreciation (or depreciation) after
the date of exercise is treated as either short-term or long-term
capital gain (or loss) depending on how long the shares have been
held.
SPECIAL RULES APPLICABLE TO CORPORATE INSIDERS
As a result of the rules under Section 16(b) of the Exchange
Act, "insiders" (as defined in the Exchange Act), depending upon
the particular exemption from the provisions of Section 16(b)
utilized, may not receive the same tax treatment as set forth above
with respect to the grant and/or exercise of options. Generally,
insiders will not be subject to taxation until the expiration of
any period during which they are subject to the liability
provisions of Section 16(b) with respect to any particular option.
Insiders should check with their own tax advisers to ascertain the
appropriate tax treatment for any particular option.
BENEFITS. Compensation paid and other benefits granted in
respect of the fiscal year ended June 30, 2002 to the named
executive officers are set forth under "Executive Officers".
PROPOSED ACTION. Approval of the adoption of the 2002 Plan
will require the affirmative vote of the holders of a majority of
the shares of the Common Stock of the Company present, in person or
by proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE THEIR SHARES FOR THE PROPOSAL TO APPROVE THE 2002
STOCK OPTION PLAN.
PROPOSAL 3
__________
INDEPENDENT AUDITORS
Nussbaum Yates & Wolpow, P.C. ("NY&W") served as the Company's
independent auditors during fiscal year ended June 30, 2002. The
Board of Directors has approved the appointment of NY&W as
independent auditors of the Company for its financial statements
for the fiscal year ending June 30, 2003 and directed that the
appointment be submitted for ratification by the stockholders at
the Annual Meeting. NY&W has audited the consolidated financial
statements of the Company since 1991. A representative of that
firm is expected to be present at the Annual Meeting, will have an
opportunity to make a statement to the stockholders and will be
available to respond to appropriate questions.
The ratification of the appointment will require the
affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present in person or represented by proxy at
the Annual Meeting and entitled to vote.
Stockholder ratification of the appointment is not required by
the Company's Certificate of Incorporation or By-laws or otherwise.
The Board of Directors is submitting the appointment of NY&W to
stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the appointment, the
Board of Directors will reconsider whether to retain that firm.
Even if the appointment is ratified, the Board of Directors in its
discretion may direct the appointment of a different independent
accounting firm at any time during the year if the Board of
Directors determines that such a change would be in the best
interests of the Company and its stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
NUSSBAUM YATES & WOLPOW, P.C. AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JUNE 30, 2003.
AUDITOR FEES
The following is a description of the fees billed to the
Company by NY&W during and for the fiscal year ended June 30, 2002:
Audit Fees: The Company paid fees of approximately $27,000 to
NY&W in connection with NY&W's audit of the Company's financial
statements for the fiscal year ended June 30, 2002, NY&W's review
of the Company's interim financial statements included in the
Company's Quarterly Reports on Form 10-QSB during the fiscal year
ended June 30, 2002, and preparation of the corporate tax returns.
Financial Information Systems Design and Implementation Fees:
The Company did not engage NY&W during the year to provide advice
to the Company regarding financial information systems design and
implementation.
Other fees: The Company paid $1,875 to NY&W to perform other
non-audit services, principally tax and accounting advice in
connection with the Company's search for external business
opportunities.
EXECUTIVE OFFICERS
The executive officers of the Company are elected annually by
the Board of Directors and hold office until their respective
successors are elected and qualified. There is no arrangement or
understanding between any executive officer and any other person
regarding election as an officer. There are no family
relationships between any Director and any executive officer of the
Company.
On August 29, 2002, after the failure of the Company and
Mr. Lowell A. Kleiman to negotiate an extension of his employment
contract which expired on June 30, 2002, the Company determined to
discontinue the employment of Mr. Kleiman as President, Chief
Executive Officer and Treasurer of the Company and appointed two
executive officers, Ms. Helena R. Santos as President, Chief
Executive Officer and Treasurer to supervise operations and
administration, and Mr. Robert P. Nichols as Executive Vice
President and Secretary to supervise product development and
engineering.
Helena R. Santos, CPA (age 38) has been employed by the
Company since 1994, and served as Vice President and Controller
since 1997 and Secretary since May 2001. Prior to joining the
Company, she was an internal auditor with a major defense
contractor from March 1991 to April 1994. Prior to March 1991 she
was employed in public accounting.
Robert P. Nichols (age 41) has been employed by the Company
since February 1998, and served as Vice President, Engineering
since May 2001. Prior to joining the Company, he was an Engineer
Manager with Bay Side Motion Group, a precision motion equipment
manufacturer from January 1996 to February 1998.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the
Company to Mr. Kleiman in each of the three most recently completed
fiscal years ended June 30, 2002, for services in all capacities as
the Company's President, Chief Executive Officer and Treasurer. No
other executive officer earned in excess of $100,000 in any of such
fiscal periods.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
All
Other
Compen-
Name and Principal Salary Bonus sation
Position Year $ $ $
__________________ ____ ________ _____ _________
Lowell A. Kleiman 2002 $160,000 $ 0 $3,200(2)
CEO, President (1) 2001 $160,000 $ 0 $3,200(2)
2000 $160,000 $ 0 $3,200(2)
(1) Mr. Kleiman's employment terminated on August 29, 2002 at
which time Ms. Santos was appointed Chief Executive Officer
and President. Ms. Santos's compensation for the year ended
June 30, 2002 was approximately $83,000.
(2) Represents the Company's matching contribution to
Mr. Kleiman's account under the Company's 401(k) Plan.
Neither Mr. Kleiman nor Ms. Santos received or exercised any stock
options during fiscal 2002.
EMPLOYMENT AGREEMENT
Mr. Kleiman had been employed by the Company pursuant to an
employment contract which expired on June 30, 2002. The contract
provided for an annual salary of $160,000 beginning in fiscal 1998.
It also provided for the grant to Mr. Kleiman of a five-year stock
option for 10,000 shares of Common Stock exercisable at $1.50 per
share under certain circumstances and a "golden parachute"
provision providing for payment to Mr. Kleiman in the event of
termination of his employment within three years of a change of
control resulting from a tender offer for the shares of the
Company's stock in an amount that is 2.99 times his base annual
salary and benefits. Other benefits provided for in the employment
contract included continued use of a Company car, four weeks paid
vacation each year and certain death benefits. Pursuant to the
employment contract, a portion of the compensation was deferred at
Mr. Kleiman's option and placed in a separate investment account
with all earnings and losses to be for his benefit. As of June 30,
2002, $74,400 was segregated into such an account. The balance due
to him is payable out of (but not secured by) the account, in five
equal annual installments commencing after the termination of
employment.
OPTIONS
OPTION GRANTS
No options were granted during the year ended June 30, 2002 to
any of the persons set forth in the Summary Compensation Table
under "Executive Compensation" (the "Named Executive Officers").
OPTION EXERCISES AND FISCAL YEAR-END VALUE
The following table provides information regarding stock
option exercises by the Named Executive Officers during the year
ended June 30, 2002, and the number and value of the Named
Executive Officers' unexercised options at June 30, 2002.
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options Options
On Value At FYE(1) At FYE(2)
Exercise Realized Exercisable/ Exercisable/
Name $ Unexercisable Unexercisable
_________________ ________ ________ _____________ ____________
Lowell A. Kleiman 0 0 0/10,000 $0/$0
Helena R. Santos 0 0 25,000/0 $10,900/$0
(1) Represents the aggregate number of shares subject to options
as of June 30, 2002 which can and cannot be exercised
pursuant to the terms and provision of the applicable stock
option agreements and the 1992 Plan.
(2) The dollar values have been calculated by determining the
difference between the fair market value of the securities
underlying the options and the exercise price of the
options. The fair market value of in-the-money options was
calculated on the basis of the average of the closing bid
and ask prices per share for Common Stock on the Over-the-
Counter Bulletin Board of $1.53 on June 30, 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth under "Proposal 1-Election of Directors"
and "Executive Compensation", during the last two fiscal years,
there were no transactions or proposed transactions between the
Company and any director, executive officer, nominee for election
as a director, security holder, or any member of their immediate
families.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
Based solely on the Company's review of Forms 5 furnished to
the Company during its most recent fiscal year, the Company
believes that, for the year ended June 30, 2002, all filing
requirements of Section 16(a) of the Securities Act of 1934, as
amended, applicable to its officers, directors and 10% stockholders
were complied with timely.
OTHER MATTERS
The Board of Directors is not aware of any matters other than
those set forth in this proxy statement that will be presented for
action at the Annual Meeting; however, if any other matters
properly come before the Annual Meeting, the persons named as
proxies intend to vote the shares of Common Stock they represent in
accordance with their judgment on such matters.
ADDITIONAL INFORMATION
THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL
YEAR ENDED JUNE 30, 2002, INCLUDES ITS ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR WHICH WAS FILED WITH THE EXCHANGE ACT ON SEPTEMBER 30,
2002. THE ANNUAL REPORT TO STOCKHOLDERS IS NOT PART OF THIS PROXY
MATERIAL, BUT IS BEING MAILED TO STOCKHOLDERS WITH THIS PROXY
SOLICITATION.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company intended to be
presented at the Company's 2003 annual meeting of stockholders must
be received by the Secretary of the Company for inclusion in the
appropriate proxy materials no later than June 20, 2003.
EXPENSES AND SOLICITATION
The entire cost of soliciting proxies will be borne by the
Company. In addition to the use of the mails, proxies may be
solicited by officers, directors and regular employees of the
Company personally or by telephone. No additional compensation
will be paid to such persons for any additional solicitations. The
Company will also request securities brokers, custodians, nominees
and fiduciaries who hold shares of Common Stock of record to
forward solicitation material to the beneficial owners of such
shares, and will reimburse them for their reasonable out-of-pocket
expenses in forwarding such soliciting materials.
APPENDIX A
SCIENTIFIC INDUSTRIES, INC.
2002 STOCK OPTION PLAN
(Effective as of February 11, 2002)
1. Purpose.
The purposes of this 2002 Stock Option Plan (the "Plan") are to induce
certain individuals to remain in the employ or service of Scientific
Industries, Inc. (the "Company") and its present and future subsidiary
corporations (each a "Subsidiary"), as defined in Section 425(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), to attract new
individuals to enter into such employment and service and to encourage
such individuals to secure or increase on reasonable terms their stock
ownership in the Company. The Board of Directors of the Company (the
"Board") believes that the granting of stock options (the "Options")
under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company and aid
in securing its continued growth and financial success. Options will
be either (a) "incentive stock options" (which term, when used herein,
shall have the meaning ascribed thereto by the provisions of Section
422 (b) of the Code) or (b) options which are not incentive stock options
("non-incentive stock options"), as determined at the time of the grant
thereof by the Administrator referred to in Section 3(A) hereof.
2. Shares Subject to Plan.
Options may be granted to purchase up to one hundred thousand (100,000)
shares of the common stock, par value $0.05 per share (the "Common Stock")
of the Company. To the extent that options previously granted under the
1992 Stock Option Plan of the Company (the "Prior Plan") expire or
terminate for any reason without having been exercised, then options
exercisable for that same number of shares of Common Stock, up to a
maximum of one hundred sixty one thousand (161,000) shares, may be
granted pursuant to the Plan. For the purpose of this section 2, the
number of shares purchased upon the exercise of an Option shall be
determined without giving effect to the use by a Participant of the
right set forth in Section 8(C) hereof to deliver shares of the Common
Stock in payment of all or a portion of the option price or the use by
a Participant of the right set forth in Section 12(C) hereof to cause
the Company to withhold from the shares of the Common Stock otherwise
deliverable to him upon the exercise of an Option shares of the Common
Stock in payment of all or a portion of his withholding obligation
arising from such exercise. If any Options expire or terminate for any
reason without having been exercised in full, new Options may thereafter
be granted to purchase the unpurchased shares subject to such expired
or terminated Options. Subject to the provisions of Section 11, the
maximum number of shares of Common Stock which may be issued in
accordance with the provisions of this Section 2 shall be two hundred
sixty one thousand (261,000) shares.
3. Administration.
(A) The Plan shall be administered by either the Board or, at the option
of the Board, a Committee which shall consist of two or more members of
the Board, both or all of whom shall be "disinterested persons" within
the meaning of Rule 16b-3(c)(2)(i) promulgated under Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act").
The Committee, if appointed, shall be appointed annually by the Board,
which may at any time and from time to time remove any member or members
of the Committee, with or without cause, appoint additional members to
the Committee and fill vacancies, however caused, in the Committee.
A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its
members present at a meeting duly called and held. Any decision or
determination of the Committee reduced to writing and signed by all
of the members of the Committee shall be fully as effective as if it
had been made at a meeting duly called and held. The Committee, or if
a Committee has not been appointed, the Board, in its capacity as
administrator of the Plan, is hereinafter referred to as the
"Administrator".
(B) Subject to the express provisions of the Plan, the Administrator
shall have complete authority, in its discretion, to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating
to it, to determine the terms and provisions of the respective option
agreements or certificates (which need not be identical), to determine
the individuals (each a "Participant") to whom and the times and the
prices at which Options shall be granted, the periods during which
each Option shall be exercisable, the number of shares of the Common
Stock to be subject to each Option and whether such Option shall be
an incentive stock option or a non-incentive stock option and to make
all other determinations necessary or advisable for the administration
of the Plan. In making such determinations, the Administrator may take
into account the nature of the services rendered by the respective
Participants, their present and potential contributions to the success
of the Company and the Subsidiaries and such other factors as the
Administrator in its discretion shall deem relevant. The Administrator's
determination on the matters referred to in this section 3(B) shall
be conclusive. Any dispute or disagreement which may arise under or
as a result of or with respect to any Option shall be determined by
the Administrator, in its sole discretion, and any interpretations
by the Administrator of the terms of any Option shall be final,
binding and conclusive.
4. Eligibility.
An Option may be granted only to (1) employees and key consultants of
the Company or a Subsidiary, (2) directors of the Company or a Subsidiary
who are not employees of the Company or a Subsidiary ("Outside Directors")
and (3) employees and key consultants of a corporation which has been
acquired by the Company or a Subsidiary, whether by way of exchange or
purchase of stock, purchase of assets, merger or reverse merger, or
otherwise, who hold options with respect to the stock of such corporation
which the Company has agreed to assume.
5. Option Prices.
(A) Except as otherwise provided in Sections 5(C) and 17 hereof, the
initial per share option price of any Option which is an incentive stock
option shall not be less than the fair market value of a share of the
Common Stock on the date of grant; provided, however, that, in the case
of a Participant who owns more than 10% of the total combined voting power
of the Common Stock at the time an Option which is an incentive stock
option is granted to him, the
initial per share option price shall not
be less than 110% of the fair market value of a share of the Common Stock
on the date of grant.
(B) Except as otherwise provided in Sections 5(C) and 17 hereof, the
initial per share option price of any Option which is a non-incentive
stock option shall not be less than 85 % of the fair market value of a
share of the Common Stock on the date of grant.
(C) The initial per share option price of any Option which is granted
to an Outside Director shall be equal to the fair market value of a share
of the Common Stock on the date of grant.
(D) For all purposes of this Plan, the fair market value of a share of
the Common Stock on any date shall be equal to, if the Common Stock is
listed on a national securities exchange or traded on the NASDAQ National
Market System, the closing sale price of a share of the Common Stock on
such date or, if there is no sale of the Common Stock on such date, the
average of the bid and asked prices on such exchange or system at the
close of trading on such date or, if the shares of the Common Stock are
not listed on a national securities exchange or such system on such date,
the last per share sales price of Common Stock on the market or system
of the NASD on which the Common Stock is then traded or listed (the
"Relevant Market System") during the three business days ending on the
date of grant or exercise as reported in the market report for the
Relevant Market System or if no sale has been reported for such period,
the higher of the (i) closing bid price on the Relevant Market System on
the date of grant or exercise or (ii) the average of the closing bid prices
on the Relevant Market System for the three business days immediately
preceding the date of grant or exercise, in each case as reported in the
Market Report for the Relevant Market System or, if the shares of the
Common Stock are not traded or listed on a market or system of the NASD,
as shall be determined in good faith by the Administrator.
6. Option Term.
Options shall be granted for such term as the Administrator shall
determine, not in excess of ten years from the date of the granting
thereof; provided, however, that, except as otherwise provided in
Section 17 hereof, in the case of a Participant who owns more than
10% of the total combined voting power of the Common Stock at the
time an Option which is an incentive stock option is granted to him,
the term with respect to such Option shall not be in excess of five
years from the date of the granting thereof; and provided, further,
however, that the term of an Option granted to an Outside Director
shall be ten years form the date of the granting thereof.
7. Limitation on Amount of Incentive Stock Options Granted.
Except as otherwise provided in Section 17 hereof, the aggregate fair
market value of the shares of the Common Stock for which any Participant
may be granted incentive stock options which are exercisable for the
first time in any calendar year (whether under the terms of the Plan
or any other stock option plan of the Company) shall not exceed $100,000.
8. Exercise of Options.
(A) Except as otherwise provided in Section 17 hereof and, in the case
of an Option granted to an employee or key consultant, except as
otherwise determined by the Administrator at the time of the grant
thereof, a Participant may (i) during the period commencing on the
first anniversary of the date of the granting of an Option to him
and ending on the day preceding the second anniversary of such date,
exercise such Option with respect to one-third of the shares granted
thereby, (ii) during the period commencing on such second anniversary
and ending on the day preceding the third anniversary of the date of
the granting of such Option, exercise such Option with respect to such
number of shares as when added to the number of shares previously
purchased under the Option does not exceed two-thirds of the shares
granted thereby, and (iii) during the period commencing on such third
anniversary, exercise such Option with respect to all of the shares
granted thereby.
(B) To the extent exercisable, an Option may be exercised either in
whole at any time or in part form time to time.
(C) An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of
Common Stock and payment to the Company of the amount of the option
price for the number of shares of the Common Stock so specified;
provided, however, that all or any portion of such payment may be
made in kind by the delivery of shares of the Common Stock having
a fair market value on the date of delivery equal to the portion
of the option price so paid; provided, further, however, that,
subject to the requirements of Regulation T promulgated under
the Exchange Act, the Administrator may implement procedures to
allow a broker chosen by a Participant to make payment of all or
any portion of the option price payable upon the exercise of an
Option and receive, on behalf of such Participant, all or any
portion of the shares of the Common Stock issuable upon such exercise.
(D) Except in the case of an Option granted to an Outside Director,
the Administrator may, in its discretion, permit any Option to be
exercised, in whole or in part, prior to the time when it would
otherwise be exercisable.
9. Transferability.
No Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any
Participant, each Option granted to him may be exercised only by him.
10. Termination of Service.
(A) In the event that prior to his 65th birthday, other than by reason
of death, a Participant leaves the employ or service of the Company and
the Subsidiaries or, in the case of an Outside Director, does not stand
for re-election or is not reelected, whether voluntarily or otherwise,
each Option theretofore granted to him shall be exercisable to the extent
exercisable immediately prior to the date of termination of employment
or service (or the date the Director does not stand for reelection or
is not reelected) within the period ending the earlier to occur of
(i) the expiration of the period of three months after the date of such
termination of services or failure to stand for or be reelected a
Director and (ii) the date specified in such Option.
(B) In the event a Participant's employment or service (including the
service of an Outside Director) with the Company and the Subsidiaries
terminates by reason of his death, each Option theretofore granted to
him shall become immediately exercisable in full and shall terminate
upon the earlier to occur of (i) the expiration of the period of one
year after the date of such Participant's death and (ii) the date
specified in such Option.
(C) In the event that on or after his 65th birthday, a Participant
leaves the employ or service of the Company and the Subsidiaries by
reason of his or her disability (as such term is defined in Section
22(e)(3) of the Code) leaves the employ or service of the Company
and the Subsidiaries or, in the case of an Outside Director, resigns
or does not stand for re-election or is not reelected, each Option
theretofore granted to him shall become immediately exercisable in
full and shall terminate upon the earlier to occur of (i) the expiration
of the period of three months after the date of such termination,
resignation or failure to stand for election or to be reelected and
(ii) the date specified in such Option.
11. Adjustment of Number of Shares.
(A) In the event that a dividend shall be declared upon the Common
Stock payable in shares of the Common Stock, the number of shares of
the Common Stock then subject to any Option and the number of shares
of the Common Stock which may be purchased upon the exercise of Options
granted under the Plan but not yet covered by an Option shall be adjusted
by adding to each share the number of shares which would be distributable
thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock dividend.
In the event that the outstanding shares of the Common Stock shall be
changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in
which the Company is the surviving corporation, then, there shall
be substituted for each share of the Common Stock then subject to
any Option and for each share of the Common Stock which may be purchased
upon the exercise of Options granted under the Plan but not yet covered
by an Option, the number and kind of shares of stock or other securities
into which each outstanding share of the Common Stock shall be so changed
or for which each such share shall be exchanged.
(B) In the event that there shall be any change, other than as specified
in Section 11(A) hereof, in the number or kind of outstanding shares of
the Common Stock, or of any stock or other securities into which the
Common Stock, shall have been changed, or for which it shall have been
exchanged, then, if the Administrator shall, in its sole discretion,
determine that such change equitably requires an adjustment in the
number or kind of shares then subject to any Option and the number or
kind of shares available for issuance in accordance with the provisions
of the Plan but not yet covered by an Option, such adjustment shall be
made by the Administrator and shall be effective and binding for all
purposes of the Plan and of each Option.
(C) In the case or any substitution or adjustment in accordance with
the provisions of this Section 11, the option price in each Option for
each share covered thereby prior to such substitution or adjustment
shall be the option price for all shares of stock or other securities
which shall have been substituted for such share or to which such share
shall have been adjusted in accordance with the provisions of this
Section 11.
(D) No adjustment or substitution provided for in this Section 11 shall
require the Company to sell a fractional share under any Option.
(E) In the event of the dissolution or liquidation of the Company, the
Board, in its discretion, may accelerate the exercisability of each
Option and/or terminate the same within a reasonable time thereafter.
12. Purchase for Investment, Withholding and Waivers.
(A) Unless the delivery of the shares upon the exercise of an Option
by a Participant shall be registered under the Securities Act of 1933,
such Participant shall, as a condition of the Company's obligation to
deliver such shares, be required to give a representation in writing
that he is acquiring such shares for his own account as an investment
and not with a view to, or for sale in connection with, the
distribution of any thereof.
(B) In the event of the death of a Participant, an additional
condition of exercising any Option shall be the delivery to the
Company of such tax waivers and other documents as the Administrator
shall determine.
(C) An additional condition of exercising any non-incentive stock
option shall be the entry by the Participant into such arrangements
with the Company with respect to withholding as the Administrator
shall determine; provided, however, that such Participant may direct
the Company to satisfy all or a portion of such withholding obligation
by withholding from the shares of the Common Stock issuable to him on
such exercise shares of the Common Stock having a fair market value
equal to the portion of the withholding obligation so satisfied.
13. Declining Market Price.
Except in the case of an Option granted to an Outside Director, in the
event the fair market value of the Common Stock declines below the
option price set forth in any Option, the Administrator may, subject
to the approval of the Board, at any time, adjust, reduce, cancel and
re-grant any unexercised Option or take any similar action it deems to
be for the benefit of the Participant in light of the declining fair
market value of the Common Stock.
14. No Stockholder Status; No Restrictions on Corporate Acts; No
Employment Right.
(A) Neither any Participant nor his legal representatives, legatees or
distributees shall be or be deemed to be the holder of any share of the
Common Stock covered by an Option unless and until a certificate for
such share has been issued. Upon payment of the purchase price therefore,
a share issued upon exercise of an Option shall be fully paid and
non-assessable.
(B) Neither the existence of the Plan nor any Option shall in any way
affect the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business,
or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting
the Common Stock or the rights thereof, or dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding whether
of a similar character or otherwise.
(C) Neither the existence of the Plan nor the grant of any Option
shall require the Company or any Subsidiary to continue any Participant
in the employ or service of the Company or such Subsidiary.
15. Termination and Amendment of the Plan.
(A) The Board may at any time terminate the Plan or make such
modifications of the Plan as it shall deem advisable; provided,
however, that the Board may not, without further approval of the
holders of the shares of the Common Stock, increase the number of
shares of the Common Stock as to which Options may be granted under
the Plan (as adjusted in accordance with the provisions of Section
11 hereof), or change the class of persons eligible to participate
in the Plan, or change the manner of determining the Option prices,
or extend the period during which an Option may be granted or exercised.
Except as otherwise provided in Section 16 hereof, no termination or
amendment of the Plan may, without the consent of the Participant to
whom any Option shall theretofore have been granted, adversely affect
the rights of such Participant under such Option.
(B) The provisions of Section 5(C) hereof may not be amended except
by the vote of the majority of the members of the Board and by the
vote of the majority of the members of the Board who are not Outside
Directors, and the provisions of said Section 5(C) shall not be
amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of
1974 or the Rules and Regulations thereunder.
16. Expiration and Termination of the Plan.
The Plan shall terminate on February 10, 2012 or at such earlier
time as the Board may determine. Options may be granted under the
Plan at any time and from time to time prior to its termination.
Any Option outstanding under the Plan at the time of termination
of the Plan shall remain in effect until such Option shall have
been exercised or shall have expired in accordance with its terms.
17. Options Granted in Connection With Acquisitions.
The Administrator may determine, in connection with the acquisition
by the Company or a Subsidiary of another corporation which will
become a Subsidiary or division of the Company (such corporation
being hereafter referred to as an "Acquired Subsidiary"), that
Options may be granted hereunder to employees and other personnel
of an Acquired Subsidiary in exchange for
then outstanding options to purchase securities of the Acquired
Subsidiary. The Administrator, at its discretion shall determine
as to such Options, the option prices, may be exercisable
immediately or at any time or times either in whole or in part,
and such other provisions not inconsistent with the Plan, or the
requirements set forth in Section 15 hereof that certain
amendments to the Plan be approved by the stockholders of the Company.
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ x ] No [ ]
_______________________________________________________________________
SCIENTIFIC INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
November 18, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph I. Kesselman and Arthur M. Borden,
and each of them, with full power of substitution, to vote, as a holder of
the common stock, par value $0.05 per share ("Common Stock"), of Scientific
Industries, Inc., a Delaware corporation (the "Company"), all the shares of
Common Stock which the undersigned is entitled to vote, through the execution
of a proxy with respect to the 2002 Annual Meeting of Stockholders of the
Company (the "Annual Meeting"), to be held at the Princeton Club, 15 West
43rd Street, New York, New York, on Monday, November 18, 2002 at 10:30 a.m.
New York time, and any adjournments or postponements thereof, and authorizes
and instructs said proxies to vote in the manner directed below.
1. Election of Class C Directors: Roger B. Knowles Joseph G. Cremonese
FOR both Nominess [ ] WITHHOLD for both Nominess [ ]
If you do not wish your shares voted FOR a nominee, draw a line through that
person's name above.
2. Proposal to approve the Company's 2002 Stock Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to ratify the appointment of Nussbaum, Yates & Wolpow, P.C., as
independent auditors of the Company for the fiscal year ending June 30, 2003.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before such meeting or adjournment or
postponement thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE, PLEASE VOTE,
SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY.
PROPERLY EXECUTED AND RETURNED PROXY CARDS WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTIONS TO THE
CONTRARY ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE
NOMINEES AS DIRECTORS AND APPROVAL OF PROPOSALS NO. 2, 3, AND 4 LISTED ON
THE REVERSE SIDE.
You may revoke this proxy at any time before it is voted by (i) filing a
revocation with the Secretary of the Company, (ii) submitting a duly executed
proxy bearing a later date or time than the date or time of the proxy bing
revoked; or (iii) attending the Annual Meeting and voting in person. A
stockholder's attendance at the Annual Meeting will not by itself revoke a
proxy given by the stockholder.
(Please sign exactly as the name appears
below. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign with full
corporate name by president or other
authorized officer. If a partnership,
please sign in the partnership name
by authorized person.)
Dated:_____________________ ______________________________________________
Signature
PLEASE COMPLETE, SIGN, DATE
AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED
ENVELOPE. ______________________________________________
Signature, if held by joint owners