REVOCABLE PROXY
COMPUDYNE CORPORATION
This Proxy Is Solicited on Behalf of the Board of Directors
The undersigned holder of Common Stock of COMPUDYNE CORPORATION hereby appoints
David W. Clark, Jr. and Millard H. Pryor, Jr., and
each of them, proxies to represent the undersigned with full power of
substitution, as attorneys and proxies for the undersigned
to appear and vote all of the shares of Common Stock of CompuDyne Corporation
(the "Company") standing on the books of the Company
in the name of the undersigned at the 1995 Annual Meeting of Shareholders of
CompuDyne Corporation, to be held at 90 State House
Square, Tenth Floor, Hartford, Connecticut on the 24th day of May, 1995 at
10:30 a.m. (E.D.T.), and at any adjournments of said
Annual Meeting. A majority of such said attorneys and proxies as shall be
present and voting (or if only one shall be present and
voting, then that one) in person or by substitute or substitutes at said
meeting or any adjournment thereof, shall have and may
exercise all of the powers of such said attorneys and proxies hereunder. The
undersigned hereby acknowledges receipt of the Notice
of Annual Meeting and the Proxy Statement dated April 28, 1995 and instructs
its attorneys and proxies to vote as set forth on this
Proxy. The undersigned shareholder may revoke this proxy at any time before it
is voted by delivering to the Secretary of the
Company either a written revocation of the proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting
and voting in person:
1. Election of two directors to serve until the 1998 Annual Meeting of
Shareholders.
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for the nominees listed below
Marjorie E. Morrissey
Norman Silberdick,
Election of one director to serve until the 1996 Annual Meeting of
Shareholders.
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for the nominees listed
below
Philip M. Blackmon
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space provided below.)
_____________________________________________________________
2. To ratify the appointment of Coopers & Lybrand as independent auditors of
the Company for the fiscal year ending December 31,
1995.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
The shares represented by this Proxy will be voted as specified. IF NO CHOICE
IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF
EACH OF THE SPECIFIED NOMINEES IN PROPOSAL NO. 1, FOR PROPOSAL NO. 2, AND IN
THE DISCRETION OF THE PROXIES AS TO OTHER MATTERS.
HOWEVER, THIS PROXY CARD MUST BE PROPERLY COMPLETED, SIGNED, DATED AND RETURNED
TO THE COMPANY IN ORDER TO HAVE YOUR SHARES VOTED.
IF YOU DO NOT RETURN THIS CARD, YOUR SHARES WILL NOT BE REPRESENTED.
When signing as attorney, executor, administrator, trustee,
guardian, custodian, or the like, give title as such. If the
signer is a corporation, sign in the corporate name by a duly
authorized officer.
Dated______________________________________, 1995
Signature________________________________________
Signature________________________________________
(if held jointly)
COMPUDYNE CORPORATION
90 State House Square, 10th Floor
Hartford, Connecticut 06103-3720
(203) 247-7611
April 28, 1995
Dear CompuDyne Shareholders:
The following pages contain the formal notice of the 1995 Annual Meeting and
the Proxy Statement. Please be sure to complete, date,
sign and return the enclosed proxy card promptly to ensure that your shares
will be voted.
Enclosed is CompuDyne's Form 10-K Annual Report as filed with the Securities
and Exchange Commission for the year ended
December 31, 1994. This report describes in detail the Corporation's
operations and results for the past year.
You are invited to attend CompuDyne's Annual Meeting to be held on Wednesday,
May 24, 1995 at 10:30 a.m. at CompuDyne's
Corporate Office located at 90 State House Square, 10th Floor, in Hartford,
Connecticut.
Sincerely,
Norman Silberdick
Chairman COMPUDYNE CORPORATION
Notice of 1995 Annual Meeting of Shareholders
to be held on Wednesday, May 24, 1995
The 1995 Annual Meeting of Shareholders of CompuDyne Corporation (the
"Corporation") will be held on
Wednesday, May 24, 1995, at 10:30 a.m. (E.S.T.) at 90 State House Square, Tenth
Floor, Hartford, Connecticut
for the following purposes:
1. To elect two directors to serve until the 1998 Annual Meeting of
Shareholders and one director to
serve until the 1996 Annual Meeting of Shareholders;
2. To ratify the appointment by the Board of Directors of the firm of
Coopers & Lybrand as
independent auditors of the Corporation for the fiscal year ending
December 31, 1995; and
3. To transact such other business as may properly come before the
meeting or any adjournment or
adjournments thereof.
The Board of Directors has fixed the close of business on April 5, 1995 as
the record date for the
determination of shareholders entitled to notice of, and to vote at, the
meeting. The stock transfer books will not
be closed.
The accompanying proxy is solicited by the Board of Directors of CompuDyne
Corporation. Reference is made
to the following proxy statement for further information relating to the
business to be transacted at the meeting.
The Board of Directors urges you to execute and return promptly the enclosed
proxy. You are, of course,
cordially invited to attend the meeting and to personally vote your shares.
By Order of the Board of Directors
Diane W. Burns
Secretary
April 28, 1995
_______________________________________________________________________________
__________________IMPORTANT
To assure your representation at the meeting, please date and execute the
enclosed Proxy in accord with the
instructions contained therein and return immediately. A return envelope,
which requires no postage if mailed
in the United States, is enclosed for that purpose.
_______________________________________________________________________________
__________________
<PAGE>
COMPUDYNE CORPORATION
90 State House Square
Tenth Floor
Hartford, Connecticut 06103-3720
PROXY STATEMENT
1995 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to shareholders by the Board of Directors of
CompuDyne Corporation
("CompuDyne" or the "Corporation") in connection with the solicitation of
proxies for use at the 1995 Annual
Meeting of Shareholders of the Corporation to be held on Wednesday, May 24,
1995, at 10:30 a.m. (E.D.T.) at 90
State House Square, Tenth Floor, Hartford, Connecticut 06103-3720. The
approximate date on which this Proxy
Statement and the enclosed form of proxy are first to be sent to shareholders
is April 28, 1995.
SOLICITATION OF PROXIES
The expenses of the solicitation of the proxies for the meeting, including the
cost of preparing, assembling and
mailing the notice and Proxy Statement, proxy and return envelopes, the
handling and tabulation of proxies
received, and charges of brokerage houses and other institutions, nominees or
fiduciaries in forwarding such
documents to beneficial owners, will be paid by the Corporation. In addition
to the mailing of the proxy
material, such solicitation may be made in person or by telephone by directors,
officers or regular employees of
the Corporation.
The enclosed proxy is revocable at any time before it is exercised. A proxy
may be revoked by filing with the
Secretary of the Corporation a revoking instrument or a duly executed proxy
bearing a later date. The powers of
the proxy holders will be suspended if the person executing the proxy attends
the meeting in person and so
requests.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has fixed April 5, 1995 as the record date (the "Record
Date") for determining
shareholders entitled to notice of and to vote at the meeting. On the Record
Date, there were 1,603,372 shares
of Common Stock, par value $.75 per share ("Common Stock"), of the Corporation
outstanding and eligible to
vote.
The attendance, in person or by proxy, by the holders of a majority of the
outstanding shares entitled to vote will
constitute a quorum for the purpose of conducting the meeting.
The holders of Common Stock of record at the close of business on April 5, 1995
will be entitled to vote on all
matters presented at the meeting. Shareholders will be entitled to one vote
for each share of Common Stock
held. There will be no cumulative voting for the election of directors. The
affirmative vote of a majority of the
votes cast by all shareholders entitled to vote thereon is required to elect
directors (Proposal No. 1), to ratify the
appointment by the Board of Directors of the independent auditors (Proposal No.
2), and to act upon any other
matter as may properly come before the meeting or any adjournment thereof.
Abstentions, and shares not voted
on a particular matter on proxies returned to the Corporation, will be treated
as not represented at the meeting
as to such matter and, therefore, will have no effect on the vote.
ELECTION OF DIRECTORS (Proposal No. 1)
Pursuant to the By-laws of the Corporation, the Board of Directors has, by
resolution, fixed the number of
directorships at five. The directors are divided into three classes, each
class serving for a term of three years. To
the extent practical, one-third of the members of the Board of Directors are
elected by the shareholders
annually. Mr. Pryor was elected at the 1994 Annual Meeting of Shareholders.
Mr. Clark was elected at the 1993
Annual Meeting of Shareholders. Ms. Morrissey was appointed by the Board to
fill the vacancy created by the
resignation of Admiral Alfred Whittle in August 1991 and was subsequently
reelected at the 1992 Annual
Meeting of Shareholders. Mr. Silberdick was also elected as a director at the
1992 Annual Meeting of
Shareholders. Mr. Blackmon was appointed by the Board in January 1995 to fill
the vacancy created by the
resignation of Antoine I. Dominic in December 1994, whose term of office was to
expire at the 1996 Annual
Meeting of Shareholders. Pursuant to the By-laws of the Corporation, Mr.
Blackmon may hold such office until
the next annual meeting of the shareholders. Consequently, Mr. Blackmon is a
nominee for a director of the
Corporation whose term of office will expire at the 1996 Annual Meeting of
Shareholders, unless reelected by the
shareholders. Raymond F. Dean resigned from the Board in September 1994 for
personal reasons. His vacancy
will not be filled because the Board reduced the number of directorships from
six to five. The Board
recommends that shareholders re-elect Marjorie E. Morrissey and Norman
Silberdick to serve as directors of the
Corporation for a term of three years and to elect Philip M. Blackmon to serve
as a director of the Corporation
for a term expiring at the 1996 Annual Meeting, and, in each case, until their
successors are elected and
qualified.
Unless authority to vote is withheld, the enclosed proxy will be voted FOR the
election of Marjorie E. Morrissey,
Norman Silberdick and Philip M. Blackmon, whom management believes are willing
and available to serve the
Corporation in such capacities. There is no family relationship between Ms.
Morrissey, Mr. Silberdick or Mr.
Blackmon and any director or executive officer of the Corporation.
Information with respect to each person nominated for election as a director
and each other person who will
continue as a director after the meeting follows.
Age, Principal Occupation or Position, Year First
Directorships of Other Publicly Owned CorporationsElected Director
NOMINEES FOR TERM OF OFFICE TO EXPIRE IN 1995:
Norman Silberdick, 53,(1) 1992
Mr. Silberdick was elected Chairman of the Board of Directors of
CompuDyne and Corcap, Inc. ("Corcap") in June 1993. Since June 1992 he
has served as President, Chief Executive Officer and Treasurer of
CompuDyne and Corcap, having acted as a consultant to each company since
April 1989.
Marjorie E. Morrissey, 45 (2) 1991
Ms. Morrissey has been a Director of Marketing for Congress Rotisserie, Inc.,
a food franchising firm, since January 1994. Prior to joining Congress
Rotisserie, Ms. Morrissey was Corporate Communications Manager for
DataImage, Inc., a software products and service company, since April 1992.
From January 1988 to April 1992, she was President of Morrissey Associates,
Inc., a financial public relations firm.<PAGE>
Age, principal Occupation
or Position, Year First
Directorships of Other Publicly Owned CorporationsElected Director
NOMINEE FOR TERM OF OFFICE TO EXPIRE IN 1996:
Philip M. Blackmon, 471994
Mr. Blackmon was appointed Executive Vice President and Director of
CompuDyne in January 1995. Mr. Blackmon has been employed by Quanta
Systems Corporation ("Quanta"), a subsidiary of CompuDyne, for over five
years, having served as its President since 1992 and its Vice President since
1987.
DIRECTOR WHOSE TERM OF OFFICE TO EXPIRE IN 1996
David W. Clark, Jr., 55(1)(2)(3)(4) 1985
Mr. Clark is a Managing Director of Pryor & Clark Company, an investment
holding company. From October 1985 until his resignation in June 1993 he
served as Chairman of the Board of Directors of CompuDyne. From May
1989 until his resignation in June 1992, Mr. Clark served as President and
Chief Executive Officer of CompuDyne. Until June 1992, he was the
President, Chief Operating Officer and Treasurer of Corcap. He presently
serves as a Corcap Director. Prior to becoming President of CompuDyne,
Mr. Clark had been employed by Lydall, Inc. (manufacturing) for more than
five years, most recently as President. He also serves as a director of Acme
United Corporation (manufacturing), Northeast Savings (banking) and
Checkpoint Systems, Inc. (manufacturing).
DIRECTOR WHOSE TERM OF OFFICE TO EXPIRE IN 1997:
Millard H. Pryor, Jr., 61(1)(2)(3)(4) 1985
Mr. Pryor is a Managing Director of Pryor & Clark Company, an investment
holding company. From October 1985 until his resignation in June 1993 he
served as Vice Chairman of the Board of Directors of CompuDyne. He also
served as Treasurer of CompuDyne from June 1991 until his resignation in
June 1992. From June 1988 until his resignation in June 1993 he served as
Chairman and, until his resignation in June 1992, Chief Executive Officer of
Corcap. He presently serves as a Corcap director. Until October 1991, Mr.
Pryor was the Chairman and, until July 1988, the Chief Executive Officer of
Lydall, Inc. for more than five years. He also serves as a director of The
Hartford Funds (financial services), The Wiremold Company
(manufacturing), Pacific Scientific Company (manufacturing), Infodata
Systems Inc. (computer software) and Chairman and director of GEO
International Corporation (manufacturing).
__________________________________
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Compensation and Stock Option Committee of the Board of
Directors.
(4) Until June 3, 1993, Mr. Clark was Chairman, and Mr. Pryor was
Vice-Chairman and Director, of
CompuDyne, Inc., that filed a voluntary petition in bankruptcy under
Chapter 7 of the United States
Bankruptcy Code on December 31, 1991.
Since the date of the 1994 Annual Meeting of Shareholders, Messrs. Clark, Pryor
and Silberdick have served as
the Executive Committee of the Board of Directors which Committee, with certain
exceptions, has the powers
exercisable by the Board of Directors when it is not in session. Messrs. Pryor
and Clark and Ms. Morrissey have
served as the Audit Committee of the Board of Directors which Committee has the
responsibility to review the
overall control systems of the Corporation, to advise the Board of Directors
with respect to the engagement of
independent auditors who are to audit the books and records of the Corporation
and to approve the scope of any
audit to be conducted. Messrs. Pryor and Clark have served as the Compensation
and Stock Option Committee
of the Board of Directors which Committee has the authority to determine the
compensation of officers of the
Corporation and to grant restricted stock awards, stock options and stock bonus
awards to the employees of the
Corporation. The Board of Directors does not have a standing nominating
committee.
During 1994, the Board of Directors held one regular meeting and acted by the
unanimous written consent of its
members on one occasion. No meetings were held by the Executive Committee, but
such Committee acted by
the unanimous written consent of its members on one occasion, and the Audit
Committee held no meetings.
Ninety percent of the directors of the Corporation attended all of the meetings
of the Board of Directors.
Directors who are not salaried employees or officers of the Corporation are
entitled to receive $500 for each
Board of Directors meeting attended, plus reimbursement of reasonable expenses
for attending the meeting. On
October 29, 1993, an Operating Committee was established by the Board of
Directors with the main purpose of
the committee being to oversee the management and operation of CompuDyne.
Non-executive, non-employee
members of this committee were entitled to $5,000 compensation per quarter for
serving on such committee, but
would be ineligible for directors' fee compensation effective March 1, 1994.
Messrs. Pryor and Clark were
members of such committee but did not receive any compensation in 1994.
Subsequently, the committee
dissolved in January 1995.
EXECUTIVE OFFICERS
The following table sets forth information with respect to each executive
officer ("named executive officer") of
the Corporation who were serving as such at December 31, 1994. Mr. Silberdick
was elected Chairman of the
Board of Directors in June 1993 and President, Chief Executive Officer and
Treasurer in June 1992. Mr.
Blackmon was elected Executive Vice President of the Corporation in January
1995.
Name and Age Office
Business Experience
Norman Silberdick, 53 Chairman, President, See
previous table.
Chief Executive Officer
& Treasurer
Philip M. Blackmon, 47 Executive Vice President See previous
table
& President of Quanta
Systems Corporation
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS WITH MANAGEMENT
The following table sets forth the total annual compensation of the
Corporation's executive officers whose salary
and bonuses exceeded $100,000 in 1994:
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
Restricted Securities All Other
Name and Salary Bonus Stock Underlying
Compensation
Principal Position Year ($) ($) (2) Awards($)(3)
Options(#)(4) ($) (5)
Norman Silberdick (1) 1994 100,000 0 0 0
6,700
Chairman, President, 1993 100,006 50,000 0 0
2,608
CEO & Treasurer 1992 34,637 30,000 0 0
0
Philip M. Blackmon (6) 1994 85,000 25,000 0 0
10,748
President - Quanta 1993 84,656 20,000 0 0 2,093
Systems
(1) Mr. Silberdick was elected Chairman of the Board of CompuDyne in June 1993
and President, CEO and
Treasurer of CompuDyne in June 1992.
(2) Bonuses of $0 and $25,000 were awarded to Messrs. Silberdick and Blackmon,
respectively, by the
Compensation and Stock Option Committee of the Board of Directors of
CompuDyne in March 1995 for
services rendered in 1994. Bonuses of $50,000 and $20,000 were awarded to
Messrs. Silberdick and
Blackmon in February 1994 for services rendered in 1993. Mr. Silberdick
was awarded a bonus of $30,000
in January 1993 for services rendered in 1992. As of March 1995, no 1994
bonuses had been paid and 100%
of the 1993 and 1992 bonuses have been paid. The 1994 bonus will be paid
when funds become available.
(3) On November 12, 1992, the CompuDyne Board of Directors authorized the sale
of 100,000 shares of
CompuDyne Common Stock to Philip M. Blackmon at a price of $.40 per share,
the fair market value at such
time. The Board subsequently authorized the issuance of an additional
200,000 shares of CompuDyne
Common Stock to Mr. Silberdick at the same price and on the same terms as
those authorized on November
12, 1992. Under Stock Purchase Agreements dated August 1, 1993, entered
into pursuant to such
authorization, such executive may purchase 25% of such shares on each of
August 1, 1993, 1994, 1995 and
1996 at $.40 per share, provided certain conditions are met, including
continued employment by
CompuDyne, by paying cash for such shares or by giving CompuDyne a
five-year non-recourse promissory
note, collateralized by the stock and bearing interest at 2% per annum over
the rate designated by the
First National Bank of Maryland as its prime commercial rate. The Stock
Purchase Agreements further
provide that within 90 days of any Change of Control of CompuDyne, as
defined, the executives will be
entitled to purchase all of the shares of CompuDyne Common Stock not yet
purchased under such Agreements
by delivering a written notice to CompuDyne. On August 1, 1993 and August
1, 1994, Messrs. Silberdick
and Blackmon each purchased 50,000 and 25,000 shares, respectively, of
CompuDyne Common Stock, or an
aggregate of 100,000 shares and 50,000 shares, respectively, in exchange
for promissory notes pursuant
to the Stock Purchase Agreements. On March 8, 1994, Mr. Silberdick paid
$4,000 under his promissory
note. At December 31, 1994, the value of the 100,000 and 50,000 shares
issued to Messrs. Silberdick and
Blackmon was $275,000 and $137,500 respectively, based upon the median of
the high and low bids of
CompuDyne common stock as reported on the OTC Bulletin Board. At December
31, 1994, the value of the
remaining shares that may be issued to Messrs. Silberdick and Blackmon
under the Stock Purchase
Agreements, 100,000 and 50,000, respectively, was $275,000 and $137,500,
respectively. The holders of
any shares issued under the Stock Purchase Agreements are entitled to vote
and to receive any dividends
paid on the CompuDyne Common Stock. The Board of Directors, however, do
not intend to declare any
dividends in the foreseeable future.
(4) No stock options were granted in 1994.
(5) Includes matching contributions made by CompuDyne in CompuDyne's 401(k)
retirement savings plan.
CompuDyne matches dollar for dollar contributions up to 2% of each
employee's annual compensation.
Prior to July 1992, CompuDyne matched up to the first 4% contributed. In
1994, contributions of $,2000
and $1,700 were made for Messrs. Silberdick and Blackmon, respectively.
Additional benefits include
car allowances of $6,700 and $7,150 for Messrs. Silberdick and Blackmon,
respectively, and a life
insurance premium of $1,898 for Mr. Blackmon.
(6) Mr. Blackmon was elected Executive Vice President in January 1995.
Information is not provided for the
year 1992 because Mr. Blackmon did not receive salary and bonuses totaling
in excess of $100,000 for
such year.<PAGE>
OWNERSHIP OF COMMON AND PREFERRED STOCK
As of March 31, 1995, there were 1,603,372 shares of CompuDyne Common Stock
issued and outstanding.
The following table sets forth, as of March 31, 1995, the amount and nature of
the beneficial ownership of
Common Stock of CompuDyne by each person who is known by CompuDyne to hold of
record or beneficially
5% of any class of voting securities of CompuDyne and by each director, each
executive officers and by all
directors and executive officers as a group.
Amount and
Nature of
Beneficial Percentage
Name Ownership Owned
Corcap, Inc. 697,881 (1) 34.2%
90 State House Square
Hartford, CT 06103-3720
Norman Silberdick 100,000 6.2%
Philip Blackmon 50,000 3.1%
David W. Clark, Jr. 16,666 *
Millard H. Pryor, Jr. 16,667 *
Marjorie E. Morrissey None
All Directors and Executive Officers
as a group (6 persons) 220,833. 13.8%
* less than one percent
______________________________________
(1) Corcap, Inc., 90 State House Square, Hartford, Connecticut 06103-3720,
owns of record, as of April
5, 1995, 547,881 shares of Common Stock of the Corporation
representing 35% of the outstanding
shares of CompuDyne Common Stock. In addition, in November 1992,
Corcap was granted a
warrant (the "Corcap Warrant") to purchase 150,000 shares of CompuDyne
Common Stock at a
price of $.40 per share, as a condition to its conversion of CompuDyne
Series A Preference Stock
and Series C Preference Stock to CompuDyne Common Stock and the
relinquishment and waiver
of accrued dividends on such Preference Stock.
OTHER RELATED MATTERS
As of March 31, 1995 Corcap owned 547,881, or 34.2.%, of the issued and
outstanding shares of CompuDyne and
the Corcap Warrant to purchase up to 150,000 additional shares. See "Ownership
of Common and Preferred
Stock". In addition, a majority of the members of the CompuDyne and Corcap
Board of Directors, and senior
management, are the same. David W. Clark, Jr., Millard H. Pryor, Jr., and
Norman Silberdick are each directors
of CompuDyne and Corcap. Mr. Silberdick has been President, Chief Executive
Officer and Treasurer of
CompuDyne and Corcap since June 26, 1992. Mr. Pryor was Vice-Chairman of
CompuDyne and Chairman of
Corcap and Mr. Clark was Chairman of CompuDyne until their respective
resignations on June 3, 1993. They
were each succeeded as Chairman by Mr. Silberdick. As a result of the
significant control that Corcap exercises
over the operations of CompuDyne, Corcap has, since the third quarter of 1988,
included the accounts of
CompuDyne in its consolidated financial statements.
CompuDyne charged management advisory service fees to Corcap for the years
ended December 31, 1994 and
December 31, 1993 in the amounts of $36 thousand and $60 thousand,
respectively. Corcap has sublet to
CompuDyne all of the Corcap office space. Corporate office overhead costs are
allocated to CompuDyne. As of
December 31, 1994, Corcap owed CompuDyne $5 thousand for management fees.
Prior to July 1991,
CompuDyne owed Corcap a total of $3.7 million, consisting of loans of $1.3
million bearing interest at 10% and
$2.4 million of other indebtedness. In July 1991, $2.4 million of intercompany
indebtedness, which related to $1.9
million of unpaid management fees and accrued interest at 12.5% on the
management fees and other loans owed
by CompuDyne to Corcap, was cancelled. At the same time, CompuDyne repaid the
$1.3 million loan.
CompuDyne financed the loan repayment to Corcap by causing its subsidiary,
Quanta Systems Corporation
("Quanta"), to borrow $1.3 million on a five-year term basis accompanied by an
18-month, $300 thousand
working capital line of credit under a Loan and Security Agreement (the
"Clipper Loan Agreement"), from JM
Clipper Polymers Corporation ("Clipper"). In December 1993, CompuDyne
negotiated an extension of the
working capital line of credit to June 30, 1994. The original $300 thousand
line of credit initially expired on
December 31, 1992, was extended to June 30, 1993 and then extended again to
December 31, 1993 in the amount
of $150 thousand. As of December 31, 1993, Quanta had not used the line of
credit.
During 1993, Quanta paid four quarterly installments of $25 thousand each due
March 31, June 30, September 30
and December 31, 1993 under the terms of the Clipper Loan Agreement. Under
such Agreement, Quanta was
obligated to pay four quarterly installments of $37.5 thousand during 1994, $50
thousand each quarter in 1995,
$75 thousand each quarter in 1996 and 1997 and a final payment of $250 thousand
on January 1, 1998.
As a condition of its granting CompuDyne an extension to the Clipper Loan
Agreement, Clipper required that
(a) CompuDyne grant Clipper a warrant (the "Clipper Warrant") for 100,000
shares of CompuDyne Common
Stock; (b) the CompuDyne Preferred Stock owned by Corcap be converted into
CompuDyne Common Stock; (c)
the right to all dividends on the Preferred Stock be waived; and (d) that
options for 500,000 shares of
CompuDyne Common Stock be granted to key members of CompuDyne management. The
Board of Directors
of CompuDyne granted Clipper a warrant for 100,000 shares of CompuDyne Common
Stock with an exercise
price of $.40 per share, a price above the fair market value of CompuDyne
Common Stock at November 12,
1992. Such warrant was immediately exercisable and had an expiration date of
November 18, 1996.
Corcap required, as a condition of its conversion of the Preferred Stock to
CompuDyne Common Stock and the
relinquishment and waiver of accrued dividends on the Preferred Stock, that
CompuDyne issue a warrant (the
"Corcap Warrant") for 150,000 shares of CompuDyne Common Stock to Corcap. Such
warrants were
immediately exercisable and have an expiration date of November 18, 1996.
In May 1994, CompuDyne negotiated a modification to the Clipper Loan Agreement
whereby CompuDyne
agreed to pay $1 million in full satisfaction of its debt of $1.163 million.
On May 17, 1994, CompuDyne made a
payment of $700 thousand, established six quarterly payments of $50 thousand
for the balance due and
terminated its working capital line of credit of $150 thousand with Clipper.
Clipper further agreed to surrender
its warrant to purchase 100,000 shares of CompuDyne Common Stock upon final
payment of the outstanding
debt.
On July 27, 1994, Clipper, Corcap Eastern, Inc. ("CE"), a wholly owned
subsidiary of Corcap and Quanta entered
into an agreement. Under this agreement, CE as lessor under a lease to Clipper
for property located in Dayville,
Connecticut, terminated the lease in consideration for which Clipper cancelled
a promissory note from CE to
Clipper in the amount of $1.774 million and released a mortgage securing such
note. As further consideration
for the termination of the lease, Clipper forgave a further $250 thousand of
debt owing from Quanta to Clipper
under the Clipper Loan Agreement. Quanta's indebtedness to Clipper under the
Clipper Loan Agreement had
thereby been reduced to $50 thousand, payable in five quarterly installments of
$10 thousand commencing on
September 30, 1994 and ending on September 30, 1995. In July 1991, the
Dayville real estate and buildings were
leased to Clipper under a "triple net" lease at an annual rental of $250
thousand, with an option to renew for one
additional ten-year term and an additional option to purchase the facility for
an amount equal to the principal
amount of the mortgage plus $100 thousand.
As part of the foregoing transaction and as consideration for Corcap causing CE
to terminate the lease,
CompuDyne entered into an agreement with Corcap to provide to Corcap management
services and use of office
facilities and to absorb the cost of certain legal services for a period of
four years without charge to Corcap.
CompuDyne has been charging Corcap $4 thousand per month for such management
services and facilities and
approximately $2.5 thousand per month for reimbursement of the cost of outside
legal services.
On October 4, 1994, Clipper, CompuDyne and Corcap entered into a letter
agreement that provided for $20
thousand of obligations by Clipper for environmental costs associated with the
Dayville property be offset against
the indebtedness due Clipper from Quanta. CompuDyne, in turn, reduced the
amount of monies due it from
Corcap for $20 thousand and Corcap then established a liability for the
environmental costs.
On November 18, 1994, CompuDyne obtained a $350 thousand secured working
capital line of credit agreement
with the Asian American Bank and Trust Company of Boston, Massachusetts. As
part of the agreement,
CompuDyne paid the Clipper Loan in full. As a result, at December 31, 1994
CompuDyne had no debt and the
warrant issued to Clipper expired. During January 1995, CompuDyne borrowed
$200 thousand against the line
of credit and in February 1995, drew down an additional $150 thousand. All
loans were repaid by the end of
February, 1995.
On November 12, 1992, the CompuDyne Board authorized the issuance of 300,000
shares of CompuDyne
Common Stock to key employees of CompuDyne and Quanta at $.40 per share, the
fair market value at such
time. The Board subsequently authorized the issuance of an additional 200,000
shares of Common Stock to a
Norman Silberdick at the same price and on the same terms as those authorized
on November 12, 1992. Under
the Stock Purchase Agreements dated August 1, 1993, which were entered into
pursuant to such authorization,
the employees may purchase an aggregate of 125,000 shares of CompuDyne Common
Stock on each of August
1, 1993, 1994, 1995 and 1996, provided certain conditions are met, including
continued employment by
CompuDyne, by paying cash for such shares or by giving CompuDyne a five-year
non-recourse promissory note,
collateralized by the stock and bearing interest at 2% per annum over the rate
designated by the First National
Bank of Maryland as its prime commercial rate. The Stock Purchase Agreements
further provide that within 90
days of any Change of Control of CompuDyne, as defined, the employees will be
entitled to purchase all of the
shares of CompuDyne Common Stock not yet purchased under such Agreements by
delivering a written notice
to CompuDyne. As of August 1, 1994, an aggregate of 250,000 shares of
CompuDyne Common Stock had been
issued to five members of senior management, (the "Management Shares") pursuant
to the Stock Purchase
Agreements. Pursuant to such Agreements, the Management Shares were issued in
exchange for promissory
notes. The remaining 212,500 Management Shares will be offered to such
employees over the next three years in
equal amounts at $.40 per share so long as such persons are employed by
CompuDyne. With Mr. Dominic's
resignation, the number of shares to be issued to management has been reduced
by 37,500 shares representing
the amount of shares allocated to Mr. Dominic.
During the year ended December 31, 1994, Corcap sold 40,500 shares of its
holdings of CompuDyne Common
Stock pursuant to Rule 144 under the Securities Act of 1933, as amended (the
"1933 Act").
As a result of the sale by Corcap of the 40,500 shares pursuant to Rule 144
under the 1933 Act and the issuance
of 125,000 shares of Common Stock to management on August 1, 1994, Corcap's
ownership of CompuDyne
Common Stock decreased from 40.7% of the issued and outstanding shares of
CompuDyne Common Stock as of
December 31, 1993 to 35% as of December 31, 1994. After assuming the exercise
of the Corcap Warrant for
150,000 shares (which are presently exercisable), Corcap's ownership would
increase to 40.6.%. Pursuant to
Stock Purchase Agreements, dated August 1, 1993 and August 1, 1994, between
CompuDyne and five members
of management, such persons may purchase up to an additional 125,000 shares of
CompuDyne Common Stock
on each of August 1, 1993, 1994, 1995 and 1996, assuming certain conditions are
met. On August 1, 1994, the
stock ownership of all members of CompuDyne management (now four persons) was
13.3% of the issued and
outstanding shares of CompuDyne Common Stock and, after assuming the exercise
of the Corcap Warrants,
management's ownership, would amount to 12.1%. If such persons purchase all of
such shares, Corcap's
ownership, on a fully diluted basis, would be decreased to 36.2% and
management's ownership, on a fully diluted
basis, would be increased to 21.6%. If the promissory notes given pursuant to
such Stock Purchase Agreements
are not paid in full when due, CompuDyne, as the holder of such securities as
collateral for such notes, will
transfer such shares to itself and such members of management will no longer
own such shares.
In January 1995, Corcap sold an additional 13,500 shares of CompuDyne Common
Stock pursuant to Rule 144
under the 1933 Act, decreasing its ownership from 40.7% to 34.2%.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Corporation's directors and
executive officers, and persons who own more than 10% of the Corporation's
Common Stock, to file with the
SEC initial reports of ownership and reports of changes in ownership of Common
Stock and other equity
securities of the Corporation on Forms 3, 4 and 5. Officers, directors and 10%
shareholders are required by
SEC regulations to furnish the Corporation with copies of all Forms 3, 4, and 5
they file. Based solely on a
review of the copies of such reports furnished to the Corporation and written
representations that no other
reports were required, during the fiscal year ended December 31, 1994, the
Corporation believes all Section
16(a) filing requirements applicable to its officers, directors and 10%
beneficial owners were complied with.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (Proposal No. 2)
The Board of Directors has appointed Coopers & Lybrand to continue as
independent auditors for the
Corporation for the year ending December 31, 1995 subject to ratification of
such appointment by the
shareholders. Coopers & Lybrand has acted as the independent auditors of the
Company since June, 1988.
Unless otherwise indicated, properly executed proxies will be voted in favor of
ratifying the appointment of
Coopers & Lybrand, independent certified public accountants, to audit the books
and accounts of the
Corporation for year ending December 31, 1995.
Representatives of Coopers & Lybrand will be present at the Annual Meeting.
They will be given an opportunity
to make a statement if they desire to do so, and will be available to respond
to appropriate questions.
The Board of Directors recommends a vote FOR Proposal No. 2.
OTHER MATTERS
The Board of Directors does not intend to bring any other matter before the
meeting, and does not know of any
other matter which anyone else proposes to present for action at the meeting.
However, if any other matters
properly come before such meeting, or any adjournment thereof, the persons
named in the accompanying form
of proxy or their duly constituted substitutes acting at the meeting will be
deemed authorized to vote or
otherwise act thereon in accordance with their judgment on such matters.
<PAGE>
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Shareholder proposals for the 1996 Annual Meeting of Shareholders must be
received at the principal executive
offices of the Corporation, 90 State House Square, Tenth Floor, Hartford,
Connecticut 06103-3720, no later than
January 8, 1996 for inclusion in the 1995 Proxy Statement and form of proxy.
Shareholders are requested by the Board of Directors to execute and deliver the
enclosed proxy.
