FORM 10-K/A(1)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
.......................................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
...................................
Commission File Number 1-4245
..........................................
CompuDyne Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1408659
.............................. .................
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
120 Union Street, Willimantic, Connecticut 06226
.......................................... ........
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (860)456-4187
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
.................... .........................................
Common Stock $.75 par value Over-The-Counter
Securities registered pursuant to section 12(g) of the Act:
None
........................................
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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....
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-
K. [X].
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant was $2.5 million as of April 29, 1996 (based upon the
average of the bid and asked prices on the over-the-counter market for
CompuDyne common stock on April 29, 1996 which was $1.38 per share, as
quoted on the OTC Bulletin Board (see ITEM 5.).
As of April 29 1996 a total of 1,807,832 shares of Common Stock, $.75 par
value, were outstanding.
The undersigned registrant hereby amends Part III, Items 10, 11, 12 and
13 of its Annual Report for the year ended December 31, 1995 on Form 10-K
(the "Annual Report") filed on April 1, 1996, as set forth in the pages
attached hereto:
1.
.................
Part III of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 is hereby amended in its entirety to read as
follows:
PART III
................
DIRECTORS
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.
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 Corporations Elected
Director
........
David W. Clark, Jr., 56 (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) and Checkpoint Systems, Inc.
(manufacturing)
Philip M. Blackmon, 48 1995
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.
Martin A. Roenigk, 53 (1) 1995
Mr. Roenigk was elected Chairman of the Board of Directors, President and
Chief Executive Officer of CompuDyne in August 1995. He has also served
as a Director of Corcap, Inc. ("Corcap") since August 1995. Since March
1991 he has served as President of MicroAssembly Systems, Inc., a
manufacturer of proprietary automated fastening systems. He served as
Vice President of Travelers Corporation (financial services) until
December 1993.
Marjorie E. Morrissey, 46 (2) 1991
Ms. Morrissey has been President of Business for Downtown Hartford (non-
profit organization) since February 1996. Prior to that time she was a
Director of Marketing for Congress Rotisserie, Inc.(food franchising
firm) since January 1994. Prior to joining Congress Rotisserie, Ms.
Morrissey was Corporate Communications Manager for DataImage, Inc.,
(software products and service company) since April 1992.
Millard H. Pryor, Jr., 62(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) and Infodata Systems Inc. (computer software).
........................
(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.
(5) Ms. Morrissey has tendered her resignation effective as of the 1996
Annual Meeting of Shareholders.
Since August 1995, Messrs. Pryor and Roenigk 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. Mr. Pryor and Mr. Clark 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. Mr.
Pryor and Mr. Clark have also 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 1995, the Board of Directors held two regular meetings, two
telephonic meetings and acted by the unanimous written consent of its
members on four occasions. No meetings were held by the Executive
Committee, but such Committee acted by the unanimous written consent of
its members on four occasions, 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.
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, 1995. Mr. Roenigk was elected Chairman of the
Board of Directors, Chief Executive Officer and President in August 1995.
Mr. Blackmon was elected Executive Vice President of the Corporation in
January 1995.
Name and Age Office Business Experience
..................... ....................... ...................
Martin A. Roenigk, 53 Chairman, President, See previous table.
Chief Executive Officer
Philip M. Blackmon,48 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 Chairman, President and Chief Executive Officer and its
executive officer whose salary and bonuses exceeded $100,000 in 1995:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
................... ...........................
Restric- Securi- All
ted ties Other
Stock Under- Compen-
Name and Principal Salary Bonus Awards lying sation
Position Year ($) ($)(1) ($)(2) Options(#)(3) ($)(4)
................... .... ...... ...... ...... ............ .......
<S> <C> <C> <C> <C> <C> <C>
Martin A. Roenigk(5) 1995 19,054 25,000 0 200,000 0
Chairman, President
& CEO
Philip M. Blackmon(6)1995 98,880 33,345 16,656 0 10,462
President - Quanta 1994 85,000 25,000 0 0 8,850
Systems 1993 84,656 20,000 0 0 0
Norman Silberdick(7) 1995 74,524 0 0 0 5,481
1994 100,000 0 0 0 8,700
1993 100,000 50,000 0 0 0
(1) Bonuses of $25,000 and $25,000 were awarded to Messrs. Roenigk and
Blackmon, respectively, by the Compensation and Stock Option Committee of
the Board of Directors of CompuDyne in March 1996 for services rendered
in 1995. Mr. Blackmon also received a bonus of $8,345 on December 14,
1995 in connection with a restricted stock award (see Note 2 below). A
bonus of $25,000 in the form of part cash and part Restricted Stock Award
(see Note 3 below) was awarded to Mr. Blackmon in December 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. As of March 31, 1996, 100% of the 1994 and 1993 bonuses had been
paid. The 1995 bonus will be paid when funds become available and may
also be paid partly in common stock of the Corporation.
(2) 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 executives 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, August 1, 1994 and August 1, 1995, Mr. Blackmon purchased
25,000 shares of CompuDyne Common Stock, or an aggregate of 75,000
shares, in exchange for promissory notes pursuant to his Stock Purchase
Agreement. At December 31, 1995, the value of the 75,000 shares issued
to Mr. Blackmon was $103,125, based upon the median of the high and low
bids of CompuDyne common stock as reported on the OTC Bulletin Board. At
December 31, 1995, the value of the remaining shares that may be issued
to Mr. Blackmon under the Stock Purchase Agreement, 25,000, was $34,375.
On August 1, 1993 and August 1, 1994, Mr. Silberdick purchased 50,000
shares of CompuDyne Common Stock, or an aggregate of 100,000 shares in
exchange for promissory notes pursuant to the Stock Purchase Agreements.
On March 8, 1995, Mr. Silberdick paid $4,000 under his promissory note.
On August 21, 1995, Mr. Silberdick, in connection with his resignation
and the sale to him of Quanta's division, Suntec, turned into the Company
60,000 shares that he had purchased pursuant to his Stock Purchase
Agreement in exchange for the cancellation of his promissory note and
relinquished his right to purchase an additional 50,000 shares on August
1, 1995. See "Certain Relationships and Related Transactions." On
August 21, 1995, Mr. Blackmon waived any rights he may have had under the
Change of Control provisions in the Stock Purchase Agreements due to the
acquisition by CompuDyne of MicroAssembly Systems, Inc. See "Certain
Relationships and Related Transactions." In addition, on December 14,
1995, Mr. Blackmon was awarded a Restricted Stock Award in accordance
with the terms and conditions as set forth in a Restricted Stock Award
Agreement under the CompuDyne Corporation 1986 Incentive Compensation
Plan Benefit Plan under which Mr. Blackmon received 10,250 shares of
CompuDyne Common Stock at a fair market value on the date of grant of
$1.625 per share, or an aggregate fair market value of $16,656 on date of
grant and aggregate fair market value of $14,094 at December 31, 1995.
The holders of any shares issued under the Stock Purchase Agreements and
Restricted Stock Award Agreement 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.
(3) Mr. Roenigk was issued a Non-Qualified Stock Option to purchase up to
200,000 shares of the Corporation's Common Stock for $1.50 per share in
accordance with the terms and conditions as outlined in the Non-Qualified
Stock Option Agreement dated August 21, 1995. Such options are
immediately exercisable and shall expire on August 21, 2005.
(4) Includes matching contributions made by CompuDyne in CompuDyne's
401(k) retirement savings plan. CompuDyne matches dollar for dollar
contributions up to 2 percent of each employee's annual compensation. In
1995, 1994 and 1993, contributions of $1,491, $2,000 and $0,
respectively, were made for Mr. Silberdick and contributions of $2,662,
$1,700 and $0, respectively, were made for Mr. Blackmon. Additional
benefits included car allowances in 1995, 1994 and 1993 of $3,990, $6,700
and $0, respectively, for Mr. Silberdick and $7,800, $7,150 and $0,
respectively for Mr. Blackmon.
(5) Mr. Roenigk was elected Chairman of the Board, President and Chief
Executive Officer of CompuDyne on August 21, 1995.
(6) Mr. Blackmon was elected Executive Vice President of CompuDyne in
January 1995.
(7) Mr. Silberdick resigned as Chairman of the Board, President and
Chief Executive Officer of CompuDyne on August 21, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants (1)
Securities % of Total
Underlying Options Granted Exercise or
Option To Employees in Base Price Expiration
Name Granted (#) 1995 ($/Share) Date
.................. .......... ............... .......... ..........
Martin Roenigk (1) 200,000 88.9% $1.50 8/20/05
(1) On August 21, 1995 the Compensation and Stock Option Committee
awarded a Non-Qualified Stock Option for 200,000 shares of CompuDyne
Common Stock to Mr. Roenigk under the August 21, 1995 Non-Qualified Stock
Option Agreement at an exercise price of $1.50 (100% of the fair market
value of such shares at the date of grant). Such options are immediately
exercisable and shall expire on August 20, 2005.
FISCAL YEAR-END OPTION VALUES
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
At December 31, 1995 (#) At December 31, 1995 ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
................. ......................... .........................
Martin A. Roenigk 200,000/0 $0/$0 (1)
(1) The difference between the exercise price of the options ($1.50 per
share) and the fair market value of CompuDyne Common Stock at December
31, 1995 ($1.37 per share) based upon the median of the high and low bids
of CompuDyne common stock as reported on the OTC Bulletin Board.
OWNERSHIP OF COMMON AND PREFERRED STOCK
As of March 27, 1996, there were 1,807,832 shares of CompuDyne Common
Stock and 1,260,460 shares of Convertible Preference Stock, Series D
("Series D Preference Stock") issued and outstanding.
The following table sets forth, as of March 27, 1996, the amount and
nature of the beneficial ownership of Common Stock and Series D
Preference 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 officer and by all
directors and executive officers as a group.
Amount and
Nature of Title
Beneficial of Percentage of
Name Ownership Class Class Owned
..................... ........... ............ ............
Corcap, Inc.
120 Union Street
Willimantic, CT 06226 308,881 (1) Common Stock 17.1%
Corcap, Inc. Pooled
Pension Investment Trust
c/o Martin A. Roenigk,
Trustee
MicroAssembly Systems,
Inc.
120 Union Street
Willimantic, CT 06226 224,000 (2) Common Stock 12.4%
Lydall, Inc.
One Colonial Road
Manchester, CT 06040 120,000 Common Stock 6.6%
Martin A. Roenigk 945,345 (3) Series D Preference Stock 75%
1,345,345 (4) Common Stock 38.1%
Marjorie E. Morrissey None
Philip Blackmon 85,250 Common Stock 2.4%
David W. Clark, Jr. 16,666 Common Stock *
Millard H. Pryor, Jr. 16,667 Common Stock *
All Directors and
Executive Officers
as a group (8 persons) 945,345 Series D Preference Stock 75%
1,638,928 Common Stock 45%
* less than one percent
(1) Corcap, Inc. ("Corcap") owns of record, as of March 27, 1996,
308,881 shares of Common Stock of the Corporation representing 17.1% of
the issued and outstanding shares of CompuDyne Common Stock. On August
21, 1995, Corcap purchased 150,000 shares of CompuDyne Common Stock for
$.40 per share in accordance with the terms of a Warrant issued by
CompuDyne to Corcap on March 10, 1993 and amended as of April 1, 1993 and
August 15, 1995, and issued a note for $60 thousand to CompuDyne secured
by the stock. Pursuant to a Stock Option Agreement dated March 25, 1996
between Corcap and CompuDyne, Corcap has granted an option to CompuDyne
to purchase 16,666 shares of CompuDyne Common Stock at an exercise price
of $.01 per share. Such option is immediately exercisable and expires on
March 24, 2001.
(2) See "Certain Relationships and Related Transactions."
(3) Issued in exchange for all of Mr. Roenigk's shares of capital stock
of MicroAssembly Systems, Inc., in accordance with the terms and
conditions as set forth under the August 21, 1995 Stock Purchase
Agreement among CompuDyne, MicroAssembly Systems, Inc. and Martin
Roenigk. The Series D Preference Stock is convertible at any time on a
share for share basis.
(4) Assumes full conversion of all shares of Series D Preference Stock
which is convertible at any time on a share for share basis. Mr. Roenigk
holds 945,345 shares of Series D Preference Stock. Also assumes
conversion of Senior Convertible Promissory Notes, dated August 21, 1995,
of CompuDyne (the "Convertible Notes") which are convertible at any time
at a conversion rate of $1.50 per share into 200,000 shares of CompuDyne
Common Stock. Mr. Roenigk holds a Convertible Note in the principal
amount of $300 thousand. See "Certain Relationships and Related
Transactions" for a description of the Convertible Notes. Also assumes
exercise of non-qualified stock options granted to Mr. Roenigk for
200,000 shares of CompuDyne Common Stock at an exercise price of $1.50
per share. Such options are immediately exercisable and expire on August
21, 2005. See "Certain Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 21, 1995 CompuDyne entered into and consummated a Stock
Purchase Agreement by and among it, Martin A. Roenigk and Alan Markowitz
(Messrs. Roenigk and Markowitz are, collectively, the "Sellers") and
MicroAssembly Systems, Inc. ("MicroAssembly"), pursuant to which
CompuDyne issued to the Sellers 1,260,460 shares of its Convertible
Preference Stock, Series D ("Series D Preference Stock") in exchange for
all of the Sellers' shares of capital stock in MicroAssembly, which
shares represent all of MicroAssembly's issued and outstanding capital
stock. The issuance by CompuDyne of the Preference Stock, together with
the issuance of certain Convertible Notes, as defined below, and certain
options to purchase CompuDyne Common Stock, all as described below and in
accordance with the terms of the Stock Purchase Agreement, are referred
to as the "Transaction." As a result of the Transaction, MicroAssembly
is a wholly owned subsidiary of CompuDyne. Of the 1,260,460 shares of
Series D Preference Stock issued, 945,345 shares were issued to Mr.
Roenigk and 315,115 shares were issued to Mr. Markowitz. The Series D
Preference Stock has rights to vote on a share for share basis with
CompuDyne's common stock on all corporate issues other than the election
of directors; it is also convertible to common stock on a share for share
basis at any time prior to redemption by CompuDyne. On March 29, 1996,
the holders of the preference stock waived their rights to mandatory
redemption by the Company. For the election of directors, each share of
Series D Preference Stock is entitled to 1/3.08 of a vote as compared
with the Company's common stock, which is entitled to one vote per share.
Pursuant to the terms of the Series D Preference Stock, each share of
Series D Preference Stock will be entitled to one vote per share with
respect to the election of directors, effective as of August 1, 1996,
unless the Board of Directors of the Company, in its sole and absolute
discretion, approves a resolution prior to such date prohibiting such
change in voting rights, in which case each share of Series D Preference
Stock will continue to have 1/3.08 vote per share. In the event the
Board of Directors of the Company approves such a resolution, on May 1 of
subsequent year (until each share of Series D Preference Stock has one
vote with respect to the election of directors), each share of Series D
Preference Stock will continue to have 1/3.08 vote for directors. Each
share of Series D Preference Stock carries an annual aggregate dividend
equal to the lower of: (a) sixty percent (60%) of MicroAssembly's after-
tax net income in the previous calendar year, on an unconsolidated basis
with CompuDyne, divided by 1,260,460, or (b) eight percent (8%) of the
Redemption Value of $1.50 per share of the Series D Preference Stock,
provided, however, that the dividend rate for the first dividend payment
date only is adjusted for the period of 1995 that MicroAssembly was not a
wholly owned subsidiary of CompuDyne. Dividends may be paid on the
Series D Preference Stock, at the Company's option, in cash, CompuDyne
Common Stock, or a combination thereof, based upon the average closing
price of CompuDyne's Common Stock for the prior thirty (30) trading days.
No dividends were earned on the Series D Preference Stock for the fiscal
year ended December 31, 1995.
Beginning on August 21 in the year 2000, the Company may, at its option,
redeem all or any part of the Series D Preference Stock for a price of
$1.80 per share, that being one hundred twenty percent (120%) of the
Redemption Value, plus accrued and unpaid dividends. The Series D
Preference Stock provides that beginning on August 31, 2006, and on that
date in each of the four succeeding years, the Company shall redeem
252,092 shares of Series D Preference Stock, or such lesser number as may
be issued and outstanding, for their $1.50 per share Redemption Value.
On March 29, 1996, Messrs. Roenigk and Markowitz, as the holders of the
Series D Preference Stock, waived their rights to mandatory redemption by
the Company.
As part of the Transaction, in return for $400 thousand paid to CompuDyne
at the closing, CompuDyne issued to Sellers Senior Convertible
Promissory Notes (the "Convertible Notes") in the aggregate principal
amount of $400 thousand, which Convertible Notes are convertible, prior
to redemption by CompuDyne, into CompuDyne Common Stock at a conversion
rate of $1.50 per share of Common Stock, or 266,667 shares of Common
Stock if the entire principal amount of the Convertible Notes is
converted. Of the $400 thousand principal amount of Notes issued, $300
thousand principal amount of the Convertible Notes was issued to Mr.
Roenigk, and $100 thousand principal amount of the Convertible Notes was
issued to Mr. Markowitz. As described in a report filed by the Sellers
with the Securities and Exchange Commission and with the Company pursuant
to Section 13(d) of the Securities Exchange Act of 1934, the source of
the Sellers' $400 thousand investment in the Company was personal funds.
The Convertible Notes accrue interest at the rate of two percent above
the variable annual rate published in The WALL STREET JOURNAL as the
"Prime Rate." Interest on the Convertible Notes are payable quarterly
commencing on October 1, 1995. The Convertible Notes are senior
obligations of the Company. On October 1, 1995, January 1, 1996 and
April 1, 1996, the Company accrued an aggregate of $4,777, $15,867 and
$26,707, respectively, to the holders of the Convertible Notes.
As a further part of the Transaction, Norman Silberdick, the Company's
Chairman, President and Chief Executive Officer, resigned as such and as
a director of the Company. The Company's Board of Directors elected Mr.
Roenigk to fill Mr. Silberdick's seat on the Board of Directors, and to
become its Chairman, President and Chief Executive Officer. In
recognition of Mr. Roenigk's position as Chairman, President and CEO, the
Company issued to him options (the "Roenigk Options") to purchase up to
200,000 shares of the Company's Common Stock for $1.50 per share. The
Roenigk Options expire in ten (10) years. Mr. Silberdick, as part of a
related transaction described below, turned in to the Company 60,000
shares of the Company's Common Stock issued pursuant to a Stock Purchase
Agreement dated August 1, 1993 between the Company and Mr. Silberdick,
and he relinquished his rights to purchase an additional 50,000 shares
pursuant to such Agreement.
MicroAssembly, located in Willimantic, Connecticut, is a manufacturer of
a proprietary automated process called the "Stick-Screw System". The
Stick-Screw System provides for insertion of fasteners at a faster speed
than can be accomplished by competing systems or processes.
MicroAssembly operates out of owned facilities, utilizing automatic screw
machines to manufacture the Stick-Screws. MicroAssembly also assembles
the specially designed pneumatic drivers for inserting the screws. Sales
are primarily throughout the United States via a network of independent
sales representatives, with sales in Europe and South America.
In determining the consideration to be paid for the MicroAssembly stock,
certain officers and directors of CompuDyne, including Messrs.
Silberdick, Pryor and Clark, and Ms. Marjorie Morrissey, reviewed the
recent financial performance of MicroAssembly, visited its manufacturing
facilities, evaluated management and considered the strong balance sheet
of MicroAssembly. CompuDyne considered both the value of MicroAssembly
and the ability of MicroAssembly and its shareholders to bring
considerable additional financial strength to CompuDyne's operations.
As a result of the Transaction, on December 15, 1995, the corporate
offices of CompuDyne were moved to MicroAssembly, 120 Union Street,
Willimantic, Connecticut 06226.
Prior to the Transaction, but after the exercise by Corcap of a warrant
to acquire 150,000 shares of CompuDyne Common Stock, Corcap held 670,881
shares of CompuDyne's voting shares, or approximately 38.3% of
CompuDyne's 1,749,622 issued and outstanding shares of Common Stock.
After the transactions described above, Corcap's 670,881 shares
represented approximately 22.3% of the voting power of issued and
outstanding shares (including the Series D Preference Stock) on all
issues other than the election of directors, 31.1% of the voting power of
issued and outstanding shares for the election of directors, and
approximately 18.9% of the voting shares on a fully diluted basis.
Prior to the Transaction, the Sellers held no voting shares of CompuDyne,
although Mr. Roenigk held 70,000 shares of Corcap Common Stock, which is
approximately 2.4% of Corcap's voting shares. At December 31, 1995, the
Sellers held 1,260,460 shares of CompuDyne's voting stock (including the
Series D Preference Stock), or approximately 41.1% of the voting power of
issued and outstanding shares for all issues other than the election of
directors and 18.5% of the voting power of issued and outstanding shares
for the election of directors. Assuming conversion by the Sellers of all
of the shares of Series D Preference Stock, the conversion of the full
principal amount of the Notes and the exercise by Mr. Roenigk of his
options to purchase 200,000 shares of the Company's Common Stock, the
Sellers would hold 1,727,127 shares of the Company's voting stock, or
approximately 47.8% of the Company's voting stock on a fully diluted
basis. In addition, in connection with the Transaction, Mr. Roenigk
became a director of Corcap and was issued options to purchase 450,000
additional shares of Corcap Common Stock which, if exercised, would,
together with Mr. Roenigk's prior holdings, result in his holding
approximately 15.4% of Corcap's Common Stock.
The Sellers have, in their filing with the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities and Exchange Act
of 1934, disclaimed any arrangements or understandings among themselves
or their associates with respect to the future election of the Company's
directors or other matters in connection with the operation and
management of the Company. Upon consummation of the transaction, in
addition to Mr. Roenigk, CompuDyne's executive officers are,
respectively, Philip M. Blackmon, Vice President and Elaine Chen, Chief
Financial Officer and Treasurer.
On August 21, 1995, Quanta Systems Corporation ("Quanta"), a wholly-owned
subsidiary of CompuDyne, transferred all of the assets and liabilities of
Quanta's Suntec division to Suntec Service Corporation, a newly-formed
corporation ("Suntec"), in return for (i) all of Suntec's issued and
outstanding common stock and (ii) Suntec's agreement to pay to Quanta a
royalty of 2% of Suntec's net sales and other revenues for thirty (30)
years from the date of the closing. Quanta then sold all of Suntec's
common stock to Norman Silberdick, who resigned on that date as
CompuDyne's Chairman, President, CEO and Director.
As a condition precedent to the sale of the Suntec shares to Mr.
Silberdick, he turned in to CompuDyne 60,000 shares of CompuDyne Common
Stock and relinquished purchase rights held by him to acquire an
additional 50,000 shares of CompuDyne Common Stock.
As consideration for the shares of Suntec, Mr. Silberdick executed a non-
recourse promissory note in the initial principal amount of $79 thousand
(the "Silberdick Note"), payment of which is secured by a pledge of all
Suntec shares held by Mr. Silberdick, which shares must at all times
equal or exceed 33% of all outstanding shares of Suntec capital stock.
The Silberdick Note bears interest at an annual rate equal to THE WALL
STREET JOURNAL prime rate, plus 2%. Through August 31, 2000, the
principal of the Silberdick Note is payable annually in amounts equal to
25% of Suntec's net, after-tax income for the year in question.
Thereafter, the unpaid principal balance, as of that date, shall be paid
in five equal annual installments.
The amount of consideration determined by Quanta to be appropriate for
the sale of the Suntec common stock to Mr. Silberdick resulted from a
number of factors. While a division of Quanta, Suntec's business had
never produced a profit. As a result, and in light of Quanta's retention
of the 2% royalty on Suntec's net sales and other revenues for 30 years,
Quanta determined that the business should be valued at its net book
value at the Closing Date. The amount of the Silberdick Note was, at the
Closing Date, based upon Suntec's net book value at June 30, 1995 and was
subject to adjustment to its net book value based upon a closing date
balance sheet to be completed on or before September 20, 1995. A
subsequent review of the financial statements as of August 21, 1995
indicated that there was no equity in the assets transferred to Suntec
and Mr. Silberdick thereafter purchased the shares of Suntec for $100.
As part of the transaction, Quanta loaned $50 thousand to Suntec payable
at the end of three years at prime plus 2% with interest due at the
anniversary date of the loan. The loan is a senior obligation of Suntec
with rights of security granted to Quanta.
As of March 27, 1996, Corcap owned 308,881 or 17.1% of the issued and
outstanding shares of CompuDyne Common Stock. See "Ownership of Common
and Preferred Stock." In addition, a majority of the CompuDyne Board of
Directors, Martin Roenigk, David Clark and Millard Pryor, are also
members of the Corcap Board of Directors and constitute a majority of the
Corcap Board.
CompuDyne charged management advisory service fees to Corcap for the
years ended December 31, 1995, December 31, 1994 and December 31, 1993 in
the amounts of $0, $36 thousand and $60 thousand, respectively. On
December 15, 1995 Corcap and CompuDyne corporate offices were moved to
and combined with the existing MicroAssembly office at 120 Union Street,
Willimantic, CT. Corporate office overhead costs are allocated to
CompuDyne. In consideration for Corcap causing one of its subsidiaries
to terminate a lease with JM Clipper Polymers which benefitted CompuDyne,
Corcap and CompuDyne entered into an agreement whereby, for a period of
four years commencing in May 1994 and expiring in May 1998, CompuDyne
provides to Corcap, without charge, management services and use of office
facilities and absorbs the cost of certain legal services. As part of
the settlement with Lydall described below, Corcap agreed to limit this
support to $1 thousand per month for 24 months.
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 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 December 31, 1995, an aggregate of 296,250 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. Due to the resignation of two of
the employees who were parties to the Stock Purchase Agreements, 56,250
shares of CompuDyne Common Stock remain to be issued under the Stock
Purchase Agreements. See Note 2 to the Summary Compensation Table under
"Executive Compensation and Other Transactions with Management."
On December 9, 1995 the Compensation and Stock Option Committee granted a
Restricted Stock Award of 58,210 shares of CompuDyne Common Stock to key
employees of Quanta as partial bonus for services rendered in 1994. The
value of the stock at the time of the award was $1.625 per share, for an
aggregate value of $95 thousand. The second part of the bonus was
distributed in cash, in an aggregate amount of $40 thousand. See
"Executive Compensation and Other Transactions With Management" for
description of the bonus paid to Mr. Blackmon.
In addition, on February 2, 1996 the Compensation and Stock Option
Committee granted options to purchase 16,290 shares of CompuDyne Common
Stock to key employees of CompuDyne's subsidiary, MicroAssembly, at a
price of $1.81 per shares (100% of the fair market value of such shares
at the date of grant) and in accordance with the terms and conditions of
the 1986 Stock Incentive Compensation Plan.
During the year ended December 31, 1995, 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"). On September 15,
1995, Corcap also transferred 224,000 shares of its holding of CompuDyne
Common Stock to the Trustee of the Corcap, Inc. Pooled Pension Investment
Trust (the "Pension Trust") in consideration of funding requirements for
the years 1992, 1993 and 1994. On February 15, 1996 Corcap sold an
additional 18,000 shares pursuant to Rule 144 under the 1933 Act.
On August 21, 1995 Corcap purchased 150,000 shares of CompuDyne Common
Stock for $.40 per share in accordance with the terms of a Warrant issued
by CompuDyne to Corcap on March 10, 1993 and amended as of April 1, 1993
and August 15, 1995.
On March 25, 1996, Corcap entered into a Settlement Agreement, dated as
of March 25, 1996 (the "Settlement Agreement"), with Lydall, Inc.
("Lydall") pursuant to which Corcap transferred 120,000 shares (the
"Transferred Shares") of CompuDyne Common Stock to Lydall in settlement
of certain claims made by one another.
As part of the Settlement Agreement, Lydall required as a condition to
signing, that CompuDyne enter into a registration rights agreement with
Lydall obligating CompuDyne to register the Transferred Shares upon
demand of Lydall two years following the date of the Agreement or in a
"piggyback registration" at any time upon the proposed registration by
CompuDyne of its stock. In order to induce CompuDyne to enter into such
agreement, Corcap agreed to issue an option (the "Corcap Option") to
CompuDyne to purchase 16,666 shares of CompuDyne Common Stock at an
exercise price of $.01 per share exercisable immediately for a period of
five years under a Stock Option Agreement, dated as of March 25, 1996,
between Corcap and CompuDyne. In addition, Corcap agreed to limit
CompuDyne's support of its legal services to $1 thousand per month for 24
months as described below.
As a result of the sale by Corcap of 40,500 shares in 1995 and 18,000
shares in 1996 pursuant to Rule 144 under the 1933 Act, the transfer of
224,000 shares to the Pension Trust, the transfer of 120,000 shares to
Lydall, the granting of 16,666 options to CompuDyne and the exercise of
the warrant for 150,000 shares, Corcap's ownership of CompuDyne Common
Stock decreased from 561,381 shares, or 35.0% of the issued and
outstanding shares of CompuDyne Common Stock as of December 31, 1994, to
308,881 (including the 16,666 options) shares, or 17.1% of the issued and
outstanding shares as of March 27, 1996. After assuming (i) the
conversion of 1,260,460 shares of Series D Preference Stock to Messrs.
Roenigk and Markowitz, which shares are convertible by the holders into
1,260,460 shares of CompuDyne Common Stock, (ii) the conversion of $400
thousand principal amount of Convertible Notes to Messrs. Roenigk and
Markowitz, which promissory notes are convertible by the holders into
266,667 shares of CompuDyne common stock, (iii) the exercise of the
Roenigk Options to purchase 200,000 shares of CompuDyne Common Stock at
an exercise price of $1.50 per share, (iv) the purchase of up to an
additional 56,250 shares of CompuDyne Common Stock on August 1, 1996
pursuant to Stock Purchase Agreements, dated August 1, 1993, between
CompuDyne and certain members of CompuDyne management assuming certain
conditions are met, (v) the exercise of stock options for 25,000 and
16,290 shares of CompuDyne Common Stock issued to Elaine Chen and key
employees of MicroAssembly, respectively, and (vi) the exercise by
CompuDyne of its option to purchase 16,666 shares of CompuDyne Common
Stock from Corcap, Corcap's ownership would be decreased to 8.1% on a
fully diluted basis and Mr. Roenigk's and Mr. Markowitz' ownership would
be increased to 37.2% and 10.6%, respectively, on a fully diluted basis.
Due to the declining ownership interest Corcap has in CompuDyne Common
Stock and a diminished overlapping of directors and officers, the
financial statements of Corcap and CompuDyne are no longer consolidated.
Beginning with the year ended December 31, 1994 until the quarter ended
June 30, 1995, Corcap had included the accounts of CompuDyne in Corcap's
consolidated financial statements in light of the significant ownership
interest Corcap had in CompuDyne stock and interlocking directors and
officers.
2.
...........................
The Registrant's Annual Report on Form 10-K for the year ended December
31, 1995 is hereby amended to include the report of Coopers & Lybrand
L.L.P as set forth in Appendix A attached hereto.
..........
.......................................................................
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
COMPUDYNE CORPORATION
Date: April 30, 1996 By:/s/Martin A. Roenigk
Martin A. Roenigk
Chairman, President and
Chief Executive Officer
........................................................................
APPENDIX A
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board
of Directors of CompuDyne Corporation
We have audited the consolidated financial statements of CompuDyne
Corporation and Subsidiaries ("the Company") as of December 31, 1994 and
for the years ended December 31, 1994 and 1993 prior to the restatement
for the divestiture of the Suntec division, as listed in Item 14(a) of
this Form 10-K. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement are
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to the above present
fairly, in all material respects, the consolidated financial position of
CompuDyne Corporation and Subsidiaries as of December 31, 1994 and the
consolidated results of their operations and their cash flows for the
years ended December 31, 1994 and 1993, in conformity with generally
accepted accounting principles.
/s/COOPERS & LYBRAND L.L.P.
Washington, D.C.
March 29, 1995
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