SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SENTRY TECHNOLOGY CORPORATION
(Name of Registrant as Specified in Its Charter)
PETER J. MUNDY, VICE PRESIDENT-FINANCE, SECRETARY AND TREASURER
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
NOTES:
<PAGE>
SENTRY TECHNOLOGY CORPORATION
350 WIRELESS BOULEVARD
HAUPPAUGE, NEW YORK 11788
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 2, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Sentry
Technology Corporation (the "Company") will be held at Sentry Technology
Corporation, 350 Wireless Boulevard, Hauppauge, NY 11788, on June 2, 1999, at
4:00 P.M., New York time, for the following purposes:
1. To elect one class of Directors for a term expiring in 2002;
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Common Stockholders of record at the close of business on May 7, 1999 will
be entitled to notice of and to vote at the meeting.
The Board of Directors of Sentry Technology Corporation hopes that you will
find it convenient to attend the meeting in person. In any event, please mark,
sign, date and return the enclosed proxy to make sure that your shares are
represented at the meeting. If you attend the meeting, you may vote your stock
personally even though you have sent in your proxy.
By Order of the Board of Directors,
PETER J. MUNDY
SECRETARY
Hauppauge, New York
May 11, 1999
PLEASE DATE, SIGN AND MAIL THE ACCOMPANYING FORM OF PROXY
AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
<PAGE>
SENTRY TECHNOLOGY CORPORATION
350 WIRELESS BOULEVARD
HAUPPAUGE, NEW YORK 11788
PROXY STATEMENT
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Sentry Technology Corporation, a Delaware corporation ("Sentry" or
the "Company"), for use at the Annual Meeting of Stockholders (the "Meeting") to
be held at Sentry Technology Corporation, 350 Wireless Boulevard, Hauppauge, NY
11788, on June 2, 1999, at 4:00 P.M., New York time, and any adjournments
thereof. Holders of record of Common Stock at the close of business on May 7,
1999, will be entitled to vote at the Meeting. Holders of the Company's Class A
Preferred Stock are not entitled to vote in the election of Directors.
The cost of solicitation will be borne by the Company. The Board of
Directors may use the services of the Company's Directors, officers and other
regular employees to solicit proxies personally or by telephone. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation material to the beneficial owners of the
shares held of record by such persons, and the Company will reimburse them for
reasonable expenses incurred by them in so doing.
The shares represented by the accompanying proxy will be voted as directed
with respect to the election of the Directors, or if no direction is indicated,
will be voted in favor of the election as Directors of the nominees listed
herein. Each proxy executed and returned by a Stockholder may be revoked at any
time thereafter by giving written notice of such revocation to the Secretary of
the Company or by attending the Meeting and electing to vote in person, except
as to any matter or matters upon which, prior to such revocation, a vote shall
have been cast pursuant to the authority conferred by such proxy.
A Stockholder may designate a person or persons to act as the Stockholder's
proxy other than those persons designated on the proxy card. The Stockholder may
do so by striking out the name or names appearing on the enclosed proxy card,
inserting the name or names of another person or persons, and delivering the
signed card to such person or persons. The person(s) designated by the
Stockholder must present the signed proxy card to the Secretary at the Meeting
in order for the shares to be voted.
If the Stockholder is a participant in the Company's Retirement Savings
401(k) Plan, then the proxy will also serve as a voting instruction for the
trustees of the plan for all accounts registered in the same name.
If voting by proxy with respect to the election of the Directors,
Stockholders may vote in favor of the nominees or withhold their vote as to the
nominees. With respect to any other proposal that comes before the Stockholders
at the Annual Meeting, Stockholders may vote for the proposal, vote against the
proposal or abstain from voting with respect to the proposal. Assuming a quorum
is present, (i) the affirmative vote of a plurality of the votes cast by the
holders of the shares of Common Stock entitled to vote will be required to act
with respect to the election of the Directors and (ii) the affirmative vote of a
majority of shares present in person or represented by proxy at the Meeting and
entitled to vote on the subject matter will be required to act on all other
proposals that come before the Annual Meeting. Abstentions and broker non-votes
(when a nominee holding shares for a beneficial owner has not received voting
instructions from the beneficial owner with respect to a particular matter and
such nominee does not possess or choose to exercise discretionary authority with
respect thereto) will be included for purposes of determining whether there are
represented at the meeting a sufficient number of shares to constitute a quorum.
Abstentions and broker non-votes will not be included, however, in the
tabulations of votes cast on proposals presented to Stockholders.
An Annual Report to Stockholders for the fiscal year ended December 31,
1998, including financial statements, accompanies this Proxy Statement. The date
of this Proxy Statement is the approximate date on which the Proxy Statement and
form of proxy were first sent or given to Stockholders.
The Board of Directors of the Company has selected the firm of Deloitte &
Touche LLP as the principal accountants for the current fiscal year, in which
capacity they have served since the Company commenced operations after the
merger of the Company's predecessors in February 1997. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting, at which
time they will have the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Sentry Common
Stock at May 7, 1999, as to each (i) beneficial owner of five percent or more of
the Common Stock, (ii) Sentry Director, (iii) executive officer of Sentry and
(iv) all Directors and executive officers as a group. On May 7, 1999, 9,750,760
shares of Common Stock and 5,333,334 shares of Preferred Stock were outstanding.
The Class A Preferred Stock is non-voting.
NAME AND ADDRESS OF SHARES OF PERCENT
BENEFICIAL OWNERS COMMON STOCK OF CLASS(1)
Walter & Edwin Schloss
Associates L.P.
52 Vanderbilt Avenue
New York, NY 10017 674,892 (2) 6.9%
<TABLE>
<CAPTION>
SHARES OF PERCENT
DIRECTORS AND SHARES OF PERCENT OF CLASS A OF
EXECUTIVE OFFICERS COMMON STOCK CLASS(1) PREFERRED STOCK CLASS(3)
<S> <C> <C> <C> <C>
Thomas A. Nicolette 400,878 (4) 4.0% 323,396 (5) 5.9%
Peter J. Mundy 120,222 (6) 1.2% 95,200 (7) 1.8%
John F. Whiteman 56,309 (8) * 41,771 (9) *
Peter Y. Zhou 106,968 (10) 1.1% 87,234 (11) 1.6%
Paul D. Mellin 3,600 (12) * - -
Robert L. Barbanell 11,600 (13) * 16,537 *
William A. Perlmuth
c/o Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038 908,968 (14) 9.3% 962,361 (15) 18.6%
Robert D. Furst, Jr.
3900 Walden Road
Deephaven, MN 55391 824,522 (16) 8.5% 35,910 *
All Sentry Directors
and executive
officers as a group (8 persons) 2,432,976 (17) 23.7% 1,593,030 (18) 27.9%
- ---------------------------
* Less than one percent
(1) Based on 9,750,760 shares of Common Stock outstanding as of May 7, 1999.
Each figure showing the percentage of outstanding shares beneficially
owned has been calculated by treating as outstanding and owned the shares
of Common Stock which could be purchased by the indicated person within 60
days upon exercise of stock options.
(2) Includes 10,070 shares of Common Stock beneficially owned solely by Mr.
Walter J. Schloss, and 8,022 shares of Common Stock beneficially owned
solely by Mr. Edwin W. Schloss.
(3) Based on 5,333,334 shares of Class A Preferred Stock outstanding as of May
7, 1999. Each figure showing the percentage of outstanding shares
beneficially owned has been calculated by treating as outstanding and
owned the shares of Class A Preferred Stock which could be purchased by
the indicated person within 60 days upon exercise of stock options.
(4) Excludes 41,590 shares of Common Stock held by a trust for the
benefit of Mr. Nicolette's wife, as to which shares Mr.
Nicolette disclaims beneficial ownership. Includes 74,862 shares
of Common Stock held by Mr. Nicolette as co-trustee under trusts
for the benefit of his minor children and as to which shares Mr.
Nicolette disclaims beneficial ownership. Also includes 247,139
shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days from the date hereof.
(5) Excludes 45,852 shares of Class A Preferred Stock held by a trust for the
benefit of Mr. Nicolette's wife, as to which shares Mr. Nicolette
disclaims beneficial ownership. Includes 82,536 shares of Common Stock
held by Mr. Nicolette as co-trustee under trusts for the benefit of his
minor children and as to which shares Mr. Nicolette disclaims beneficial
ownership. Also includes 197,138 shares of Class A Preferred Stock
issuable upon the exercise of stock options exercisable within 60 days
from the date hereof.
(6) Includes 93,614 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days from the date hereof.
(7) Includes 73,614 shares of Class A Preferred Stock issuable upon the
exercise of stock options exercisable within 60 days from the date hereof.
(8) Includes 40,716 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days of the date hereof.
(9) Includes 18,716 shares of Class A Preferred Stock issuable upon the
exercise of stock options exercisable within 60 days of the date hereof.
(10) Includes 89,203 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days from the date hereof.
(11) Includes 70,703 shares of Class A Preferred Stock issuable upon the
exercise of stock options exercisable within 60 days from the date hereof.
(12) Includes 3,600 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days from the date hereof.
(13) Includes 6,600 shares of Common Stock issuable upon exercise of stock
options exercisable within 60 days from the date hereof.
(14) Consists of (a) 750,729 shares of Common Stock held by Mr. Perlmuth as
Executor of the Estate of Arthur J. Minasy, (b) 130,010 shares of Common
Stock held by Mr. Perlmuth as trustee under trusts for the benefit of Mr.
Minasy's adult children, and (c) 3,327 shares of Common Stock
beneficially owned by Mr. Perlmuth. Also includes 24,900 shares of
Common Stock issuable upon the exercise of stock options exercisable
within 60 days from the date hereof. Under the policies of the law firm
of which he is of counsel, Mr. Perlmuth will share any economic
benefits of the options with the other members of such firm.
(15) Consists of (a) 827,678 shares of Class A Preferred Stock held by Mr.
Perlmuth as Executor of the Estate of Arthur J. Minasy, (b) 143,337
shares of Class A Preferred Stock held by Mr. Perlmuth as trustee under
trusts for the benefit of Mr. Minasy's adult children, and (c) 3,667
shares of Class A Preferred Stock beneficially owned by Mr. Perlmuth.
Also includes 18,300 shares of Class A Preferred Stock issuable upon the
exercise of stock options exercisable within 60 days from the date
hereof. Under the policies of the law firm of which he is of counsel, Mr.
Perlmuth will share any economic benefits of the options with
the other members of such firm.
(16) Includes 6,600 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days from the date hereof.
(17) Includes 512,372 shares of Common Stock issuable upon the exercise of
stock options exercisable within 60 days from the date hereof.
(18) Includes 378,471 shares of Class A Preferred Stock issuable upon the
exercise of stock options exercisable within 60 days from the date hereof.
</TABLE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes serving
staggered three-year terms, the term of one class of Directors to expire each
year. At the Annual Meeting, Stockholders will consider for election the
Directors whose class term expires in 2002. Mr. Paul D. Mellin and Mr. William
A. Perlmuth, the nominees of the Board of Directors, are presently serving as
Directors of the Company. If no direction to the contrary is given, all proxies
received by the Board of Directors will be voted "FOR" the election of Mr.
Mellin and Mr. Perlmuth as Directors. In the event that Mr. Mellin or Mr.
Perlmuth are unable to serve, the proxy solicited herewith may be voted for the
election of other persons in their stead at the discretion of the proxies. The
Board of Directors knows of no reason to anticipate that this will occur.
NOMINEES FOR DIRECTOR FOR A TERM
EXPIRING AT THE 2002 ANNUAL MEETING
PAUL D. MELLIN, age 35, has been a Director since August 1997, when he was
appointed to fill a vacancy on the Board of Directors. Mr. Mellin is a Managing
Director of BT Alex Brown Incorporated, which he joined in 1996. Prior to Mr.
Mellin's joining BT Alex Brown, he was a member of the mergers and acquisitions
group at Smith Barney.
WILLIAM A. PERLMUTH, age 69, has been Chairman of the Board of Directors of
the Company since January 1997. Prior thereto, Mr. Perlmuth served as a Director
of several predecessors of the Company from 1979 to February 1997. Mr. Perlmuth
has been a partner in the law firm of Stroock & Stroock & Lavan LLP in New York,
New York for more than five years and is presently of counsel to such firm. Such
firm and Mr. Perlmuth have performed legal services for the Company. The
aggregate amount of fees paid by the Company to Stroock & Stroock & Lavan LLP
was less than 5% of the law firm's gross revenues for the last fiscal year. The
Company believes that the billing rates for the foregoing legal services were no
less favorable to the Company than could have been obtained from unaffiliated
parties for comparable services.
DIRECTORS NOT PRESENTLY STANDING FOR REELECTION
ROBERT L. BARBANELL, age 68, has been Director since February 1997. He has
been President of Robert L. Barbanell Associates, Inc., a financial consultancy
firm, since July 1994. Prior thereto, Mr. Barbanell served in various capacities
at Bankers Trust New York Corporation, where he was Managing Director of the
European Merchant Bank of Bankers Trust International PLC from 1991 to 1994;
Managing Director of BT Securities Corporation from 1989 to 1991; Managing
Director of Bankers Trust Company from 1986 to 1989; Senior Vice President of
Bankers Trust Company from 1981 to 1986. Prior to his service with Bankers
Trust, Mr. Barbanell served in various executive capacities at Amcon Group, Inc.
and GI Export Corporation. Mr. Barbanell currently serves on the Boards of
Directors of Marine Drilling Companies, Inc., Kaye Group, Inc. and Cantel
Industries, Inc. Mr. Barbanell's term as a Director expires at the 2001 Annual
Meeting of Stockholders.
ROBERT D. FURST, JR., age 46, has been a Director of the Company since its
inception. Prior thereto he was a Director of Video Sentry Corporation ("Video
Sentry"), a predecessor of the Company, from January 1993 until February 1997.
He was Chairman of the Board of Video Sentry from July 1996 and Chief Executive
Officer from August 1996 until February 1997. Mr. Furst was one of the original
shareholders of Video Sentry. He is also the founder and owner of Furst Capital
Management, a firm specializing in trading government and equity securities as
well as commodity futures. Mr. Furst is a member of the Chicago Board of Trade
and has been a securities and commodities trader since 1980. Mr. Furst currently
serves on the Boards of Directors of Lucht, Inc., a privately-held manufacturer
of high volume photographic printers and other equipment; and Neighborhood
Marketing Corporation, a privately-held consumer promotion and database
marketing company utilizing proprietary patented technologies. Mr. Furst's term
as a Director expires at the 2000 Annual Meeting of Stockholders.
THOMAS A. NICOLETTE, age 48, has been President, Chief Executive Officer
and a Director of the Company since January 1997. Prior thereto, Mr. Nicolette
served in various capacities at several predecessors of the Company, including
Knogo North America Inc., where he was President, Chief Executive Officer and a
Director from December 1994 to February 1997, and Knogo Corporation, where he
was a Director from 1987 until December 1994, Chief Executive Officer from May
1994 to December 1994 and President and Chief Operating Officer from 1990 to May
1994. Prior thereto he served in other positions as an officer at Knogo
Corporation. Mr. Nicolette serves on the Board of Directors of SenTech EAS
Corporation and is Vice Chairman of the Board of Trustees of WLIW, the Long
Island-based affiliate of the Public Broadcasting System. Mr. Nicolette's term
as a Director expires at the 2000 Annual Meeting of Stockholders.
COMPENSATION OF DIRECTORS
Directors who are also full-time employees of Sentry receive no additional
compensation for their services as Directors. Each non-employee Director
receives $12,000 annually for services on the Board and $1,000 per Board meeting
(other than telephonic meetings) attended. In addition, each non-employee
Director who is a member of any committee of the Board receives $500 for
attendance at any meeting of such committee which is held neither immediately
before nor immediately after a Sentry Board meeting; PROVIDED, HOWEVER, that the
chairman of the Audit Committee of the Board receives $1,000 for attendance at
any such separately held meeting of the Audit Committee and $500 for attendance
at any meeting of such committee held either immediately before or immediately
after a Board meeting.
In addition, each non-employee Director is eligible to participate in the
1997 Stock Incentive Plan of Sentry. Options for 15,000 shares of Common Stock
at an exercise price of $3.00, vesting in equal portions over a five-year
period, were granted by the Board to each non-employee Director on February 13,
1997, and to Mr. Mellin on August 11, 1997 when he became a Director. On
February 13, 1998, each non-employee Director also received a grant of options
to purchase 3,000 shares of Common Stock at an exercise price of $2.37, vesting
in equal portions over a five year period.
COMMITTEE OF THE BOARD OF DIRECTORS; ATTENDANCE AT MEETINGS
The Board of Directors has an Audit Committee. The members of the Audit
Committee are Directors of Sentry who are neither officers nor employees of
Sentry. The members of the Audit Committee are Messrs. Barbanell and Mellin. Mr.
Barbanell is Chairman of the Audit Committee. During 1998 there were eight
meetings of the full Board and one meeting of the Audit Committee. Each
Director, other than Mr. Mellin (who was absent from one meeting of the Board of
Directors), attended all of the meetings of the Board and of each committee of
which he is a member.
<PAGE>
EXECUTIVE OFFICERS
The following sets forth information regarding the persons serving as
executive officers of the Company:
NAME AGE OFFICE
Thomas A. Nicolette........ 48 President, Chief Executive Officer
and a Director of the Company since
January 1997. Prior thereto, Mr.
Nicolette served in various
capacities at several predecessors of
the Company, including Knogo North
America Inc., where he was President,
Chief Executive Officer and a
Director from December 1994 to
February 1997, and Knogo Corporation,
where he was a Director from 1987
until December 1994, Chief Executive
Officer from May 1994 to December
1994 and President and Chief
Operating Officer from 1990 to May
1994. Prior thereto he served in
other positions as an officer at
Knogo Corporation. Mr. Nicolette
serves on the Board of Directors of
SenTech EAS Corporation and is Vice
Chairman of the Board of Trustees of
WLIW, the Long Island-based affiliate
of the Public Broadcasting System.
Peter J. Mundy............. 42 Vice President-Finance and Chief
Financial Officer of Sentry. Mr.
Mundy also serves as Secretary and
Treasurer of the Company. Mr. Mundy
was Vice President - Finance, Chief
Financial Officer, Secretary and
Treasurer of Knogo North America Inc.
from December 1994. Prior thereto,
Mr. Mundy served as an officer of
Knogo Corporation where he was Vice
President - Corporate Controller from
May 1994 and, prior to such time,
Corporate Controller and Controller
since 1982. Mr. Mundy is a Certified
Public Accountant.
Peter Y. Zhou.............. 59 Vice President - Technology of
Sentry. Dr. Zhou was Vice President -
Technology of Knogo North America
Inc. from December 1994. Prior
thereto, Dr. Zhou served as an
officer of Knogo Corporation where he
was Senior Vice President -
Technology from 1992 and Vice
President - Research from 1988.
John F. Whiteman........... 40 Mr. Whiteman became Senior Vice
President - Sales and Marketing of
Sentry in January 1998. Prior thereto
he was Senior Vice President - Sales
and Marketing of Knogo North America
Inc. since January 1997; Vice
President Sales - West of Knogo North
America Inc. and Knogo Corporation
from 1994 to 1996; and, prior to such
time, served in various sales
positions with Knogo Corporation
since 1986.
EMPLOYMENT AGREEMENTS AND COMPENSATION OF EXECUTIVE OFFICERS; CHANGE OF CONTROL
ARRANGEMENTS
The employment agreement between the Company and Mr. Nicolette is for a
term ending February 11, 2001. In addition to establishing Mr. Nicolette's
annual compensation of $200,000 per year, together with an opportunity to
receive up to an additional 50% of such amount, based upon certain
performance-based criteria, the use of an automobile and the receipt of life
insurance in the amount of $1,000,000, the agreement requires that the Company
grant to Mr. Nicolette options to acquire 100,000 shares of Common Stock, with
such options vesting at 20% per annum during the five year period commencing on
the date of the grant thereof. These options were granted in February 1997. The
employment agreements of Mr. Mundy and Dr. Zhou provide for an initial term of
two years, with subsequent automatic one year renewals, at annual salaries of
$120,000 and $130,000, respectively. In addition to their annual salaries, Mr.
Mundy and Dr. Zhou received options to purchase 40,000 shares of Common Stock,
vesting at 20% per annum during the five year period commencing on February 10,
1997. The employment agreement of Mr. Whiteman is for a term ending December 31,
1999 at an annual salary of $150,000. The employment agreements of Messrs.
Nicolette, Mundy, Whiteman and Dr. Zhou provide for a cost of living adjustment
to the base annual salary of each such executive calculated based upon the
percentage increase of the Consumer Price Index (as defined in such agreements).
The employment agreements of Messrs. Nicolette, Mundy, Whiteman and Dr.
Zhou provide that in the event of a change in control of the Company, the term
of each of their employment will be automatically extended for the period ending
two years in the case of Mr. Nicolette's agreement and one year in the case of
each of the other agreements, following the date of such change in control.
Following such change in control, each of such persons will have the right to
terminate his employment for good reason while continuing to receive the salary
and bonus otherwise payable thereunder for the remainder of the employment term.
Additionally, the employment agreements provide that in the event of a change in
control all options held by the employee, whether or not then vested, would
fully vest. If the change in control was not approved by a majority of the
Existing Directors (as defined in the Company's Certificate of Incorporation),
each such officer would be entitled to receive cash in cancellation of such
options in an amount equal to the difference between the exercise price of such
options and the market price of the Common Stock at the time of cancellation.
EXECUTIVE COMPENSATION
REPORT OF THE BOARD OF DIRECTORS WITH RESPECT TO COMPENSATION
The Board of Directors, without Mr. Nicolette's participation, sets the
compensation paid to the Chief Executive Officer and for final approval of the
compensation paid to the other executive officers of the Company, approving or
disapproving the recommendation of the Chief Executive Officer. The Board of
Directors also determines the amount of shares and exercise prices for any stock
option grants under the Company's 1997 Stock Incentive Plan, and the amount of
the Company's matching contribution percentage under the Company's Retirement
Savings 401(k) Plan, respectively.
Currently, the Company's executive officers, including the Chief Executive
Officer, are compensated pursuant to written employment agreements providing for
a base salary. These agreements provide for annual salary increases intended to
maintain the executive's base salary against increases in the cost of living as
measured by the United States Department of Labor.
STOCK OPTION AND OTHER EQUITY PLANS; COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Board of Directors endorses the view that the value of compensation
paid to the Company's executive officers, and the Chief Executive Officer in
particular, should be closely linked to increases in the value of the Common
Stock. Accordingly, the Board supports option awards under the Company's 1997
Stock Incentive Plan and participation by executive officers in the Retirement
Savings 401(k) Plan, which includes a Company Common Stock fund among its
investment alternatives. A substantial portion of the total compensation of the
executive officers, including the Chief Executive Officer, is wholly dependent
on increases in the value of the Common Stock.
The number of stock options granted to executive officers is not determined
by reference to any formulas but is determined by the Board's evaluation of the
particular officer's ability to influence the long-term growth and profitability
of the Company. The Board also considers the Company's performance against
certain of its competitors, its general performance against internal goals
established by management, and the executive's relative contribution thereto. To
provide further incentive to the Company's senior executive officers, options
granted in 1998 were granted at exercise prices in excess of the then current
market value of the Company's Common Stock.
This report is submitted by the Board of Directors of the Company.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation for the Company's fiscal
year ended December 31, 1998 of the Company's Chief Executive Officer and each
of three other executive officers of the Company:
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION (1) COMPENSATION (1) COMPENSATION (1) (2)
----------------------- ---------------- ---------------------
SECURITIES
NAME AND UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C> <C>
Thomas A. Nicolette, 1998 $198,380 - 50,000 $4,800
President and CEO 1997 194,167 - 100,000 4,390
1996 150,000 - 83,181 4,391
Peter J. Mundy, 1998 119,028 - 20,000 3,571
Vice President - Finance, 1997 118,110 - 40,000 3,543
Secretary and Treasurer 1996 103,800 - 33,272 3,114
John F. Whiteman 1998 145,476 - 30,000 4,364
Sr. Vice President Sales 1997 149,120 $30,943 40,000 3,586
and Marketing 1996 103,057 32,760 16,636 3,573
Peter Y. Zhou, 1998 128,947 - 12,500 3,868
Vice President - 1997 128,833 - 40,000 3,865
Technology 1996 120,000 - 33,272 3,600
- ------------------------
(1) Compensation information for 1996 reflects compensation paid to
the named executive officers by Knogo, the predecessor of the
Company. Share information is provided on a converted basis,
giving effect to the exchange of shares of such predecessors
for shares of the Company pursuant to the terms of the merger of
Knogo and Video Sentry into subsidiaries of the Company on
February 12, 1997.
(2) Amounts shown consist of the Company's matching contributions under the
Retirement Savings 401(k) Plan.
</TABLE>
As to various items of personal benefits, the Company has concluded that
the aggregate amount of such benefits with respect to each individual does not
exceed the lesser of $50,000 or 10% of the annual salary and bonus reported in
the table for such individual.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning options
granted during 1998 to each person named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Number Of
Securities % Of Total
Underlying Granted To Potential Realizable Value At
Options Employees Exercise Expiration Assumed Annual Rate Of Stock
Name Granted In 1998 Price(1) Date Price Appreciation For Option Term
- ---- -------- ------- --------- ----------- ------------------------------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Nicolette 50,000 18.5% $2.37 1/6/08 $60,934 $154,419
Peter J. Mundy 20,000 7.4% 2.37 1/6/08 24,374 61,768
John F. Whiteman 30,000 11.1% 2.37 1/6/08 36,561 92,651
Peter Y. Zhou 12,500 4.6% 2.37 1/6/08 15,234 38,605
- ---------------
(1) These options were granted with an exercise price greater than the
market value of the Common Stock on the date of the grant. The closing
price of the Common Stock on such date was $1 15/16.
</TABLE>
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth for each of the persons named in the Summary
Compensation Table the number of options exercised during 1998 and the amount
realized by each such officer. In addition, the table shows the number of
options that the named executive officer held as of December 31, 1998, both
exercisable (E) and unexercisable (U), and the value of such options as of that
date.
<TABLE>
<CAPTION>
Number Of Unexercised Value Of Unexercised In
Options At Year-End (#) The Money At Year End ($)
Shares
Acquired On Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Nicolette - - E 217,139 E -
U 130,000 U -
Peter J. Mundy - - E 81,614 E -
U 52,000 U -
John F. Whiteman - - E 26,716 E -
U 62,000 U -
Peter Y. Zhou - - E 78,703 E -
U 44,500 U -
</TABLE>
<PAGE>
PERFORMANCE GRAPH
The graph below provides an indicator of cumulative total stockholder
returns for the Company as compared with the S&P 600 Small Cap Index and the S&P
Electrical Equipment Index.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
2/13/97 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sentry Technology Corporation $100 $96 $114 $ 75 $ 43 $ 36 $ 30 $ 23 $ 18
S&P 600 Small Cap Index 100 93 110 127 123 136 130 102 120
S&P Elec. Equip. Index 100 92 118 124 131 153 157 139 174
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers, Directors and persons who own more than 10% of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Officers, Directors and greater than
ten-percent Stockholders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all such reports they file.
Based solely on a review of the copies of such reports furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the fiscal year ended December 31, 1998, all Section 16(a)
filing requirements applicable to its officers, Directors and greater than
ten-percent beneficial owners were complied with.
<PAGE>
OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the Board
of Directors intends to present, and knows that others will present, at the
meeting is that set forth herein. If any other matter or matters are properly
brought before the meeting or any adjournments thereof, it is the intention of
the persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their judgment.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the Company's 2000
Annual Meeting of Stockholders must be received by the Company on or prior to
January 12, 2000 to be eligible for inclusion in the Company's Proxy Statement
and form of proxy to be used in connection with the 2000 Annual Meeting.
The Company's Bylaws provide that a Stockholder of the Company who intends
to nominate persons for election as Directors or introduce other proposals from
the floor of an Annual Meeting of Stockholders follow certain notice and
disclosure requirements.
The Bylaw provision requires a Stockholder introducing a proposal at an
Annual Meeting to notify the Company of such intention not less than 60 days
prior to the date of the Annual Meeting. If the Company has given less than 75
days public notice of the date of the Annual Meeting, the Stockholder must give
such notice so that it is received by the Company not later than 10 days after
the public notice is given or the Proxy Statement is mailed. The Stockholder's
notice must give the information specified in the Bylaws, including information
about the Stockholder making the proposal, the number of shares such Stockholder
owns and any interest such Stockholder may have in the subject of the proposal.
If such Stockholder will be nominating persons for election as Directors,
certain information specified in the Bylaws must also be given about the nominee
and the nominee's interest in the Company.
The Bylaw provision grants to the Chairman of the Meeting the authority to
determine whether a proposal has been brought to the floor in accordance with
the provision.
By Order of the Board of Directors,
PETER J. MUNDY,
SECRETARY
Hauppauge, New York
May 11, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, MAY BE OBTAINED BY STOCKHOLDERS SOLICITED HEREBY, WITHOUT
CHARGE, UPON WRITTEN REQUEST SENT TO THE SECRETARY OF THE COMPANY, MR. PETER J.
MUNDY, SENTRY TECHNOLOGY CORPORATION, 350 WIRELESS BOULEVARD, HAUPPAUGE, NEW
YORK 11788.
<PAGE>
PROXY
SENTRY TECHNOLOGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS, JUNE 2, 1999
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas A. Nicolette, William A. Perlmuth and
Peter J. Mundy, or a majority of those present and acting, or if only one is
present, then that one, proxies, with full power of substitution, to vote all
shares of SENTRY TECHNOLOGY CORPORATION (the "Company") which the undersigned is
entitled to vote at the Company's Annual Meeting to be held at Sentry Technology
Corporation, 350 Wireless Boulevard, Hauppauge, NY 11788 on June 2, 1998, at
4:00 P.M., New York time, and at any adjournment thereof, hereby ratifying all
that said proxies or their substitutes may do by virtue hereof, and the
undersigned authorizes and instructs said proxies to vote as follows:
1. ELECTION OF DIRECTORS: To elect the nominees for one class of Directors
below for a term expiring in 2002.
/ / FOR the nominee listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for the nominee
listed below
NOMINEES FOR DIRECTORS FOR TERM EXPIRING IN 2002:
PAUL D. MELLIN
WILLIAM A. PERLMUTH
2. In their discretion, upon any other matters which may properly come before
the meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEE LISTED IN PROPOSAL 1.
Receipt of the Notice of Annual Meeting and Proxy Statement and of the Annual
Report of the Company preceding or accompanying the same is hereby acknowledged.
Dated , 1999
----------------------------
-----------------------------
(Signature of Stockholder)
------------------------------
(Signature of Stockholder)
Your signature should appear the same as your
name appears hereon. If signing as attorney,
executor, administrator, trustee or guardian,
please indicate the capacity in which signing.
When signing as joint tenants, all parties to
the joint tenancy must sign. When the proxy is
given by a corporation it should be signed by
an authorized officer.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
