COMPUDYNE CORPORATION
120 Union Street
Willimantic, CT 06226
(860) 456-4187
April 17, 1998
Dear CompuDyne Shareholders:
The following pages contain the formal notice of the 1998 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 Annual Report for the year ended December 31,
1997. 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 20, 1998 at 11:00 a.m. at CompuDyne Corporation, 120 Union
Street, Willimantic, CT 06226.
Sincerely,
/s/ Martin A. Roenigk
---------------------
Martin A. Roenigk
Chairman
- -------------------------------------------------------------------------
COMPUDYNE CORPORATION
Notice of 1998 Annual Meeting of Shareholders
to be held on Wednesday, May 20, 1998
The 1998 Annual Meeting of Shareholders of CompuDyne Corporation (the
"Corporation") will be held on Wednesday, May 20, 1998, at 11:00 a.m.
(E.D.T.) at CompuDyne Corporation, 120 Union Street, Willimantic, CT
06226, for the following purposes:
1.To elect two directors to serve until the 2001 Annual Meeting of
Shareholders;
2.To vote to amend the CompuDyne Corporation 1996 Stock Option Plan for
Non-Employee Directors; and
3.To ratify the appointment by the Board of Directors of the firm of
Deloitte & Touche LLP as independent auditors of the Corporation for the
fiscal year ending December 31, 1998; and
4.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 March 23, 1998
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
/s/ Diane W. Burns
------------------
Diane W. Burns
April 17, 1998 Secretary
- ------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------
COMPUDYNE CORPORATION
120 Union Street
Willimantic, CT 06226
---------
PROXY STATEMENT
---------
1998 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to shareholders by the Board of
Directors of CompuDyne Corporation, a Nevada corporation ("CompuDyne" or
the "Corporation"), in connection with the solicitation of proxies for use
at the 1998 Annual Meeting of Shareholders of the Corporation to be held
on Wednesday, May 20, 1998 at 11:00 a.m. (E.D.T.) at CompuDyne
Corporation, 120 Union Street, Willimantic, CT 06226. The approximate
date on which this Proxy Statement and the enclosed form of proxy are
first to be sent to shareholders is April 17, 1998.
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 March 23, 1998 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 4,045,906 shares of
Common Stock, par value $.75 per share ("Common Stock"), of the
Corporation outstanding and eligible to vote on all corporate issues.
A majority of the issued and outstanding shares entitled to vote will
constitute a quorum for the purpose of conducting the meeting.
Abstentions and broker nonvotes are counted as present in determining
whether the quorum requirement is satisfied.
The holders of Common Stock of record at the close of business on March
23, 1998 will be entitled to vote on all matters presented at the meeting.
Common Stock 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. A plurality of the votes cast by all shareholders entitled to
vote thereon is required to elect directors (Proposal No. 1). The
affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon is required to amend the CompuDyne Corporation
1996 Stock Option Plan for Non-Employee Directors (the "Plan"); to ratify
the appointment by the Board of Directors of the independent auditors
(Proposal No. 3) and to act upon any other matter as may properly come
before the meeting or any adjournment thereof. Abstentions and broker
nonvotes will not be included in the vote total in the election of
directors and will have no effect on the outcome of the vote. An
abstention from voting will have the practical effect of voting against
any of the other matters since it is one less vote for approval.
ELECTION OF DIRECTORS (Proposal No. 1)
--------------------------------------
Pursuant to the By-laws of the Corporation, the Board of Directors, by
resolution, fixed the number of directorships at six. 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. Martin A. Roenigk
was nominated by the Board of Directors in August 1995 for a term of three
years expiring at the 1998 Annual Meeting. Mr. Alan Markowitz was elected
in August 1995 for a term of three years expiring at the 1998 Annual
Meeting.
The Board recommends that shareholders elect nominees Martin A. Roenigk
and Alan Markowitz to serve as directors of the Corporation for a term of
three years until the 2001 Annual Meeting of Shareholders and until their
successor is elected and qualified.
Unless authority to vote is withheld, the enclosed proxy will be voted FOR
the election of Martin A. Roenigk and Alan Markowitz, who management
believes is willing and available to serve the Corporation in such
capacities. There is no family relationship between Mr. Roenigk, Mr.
Markowitz 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 Corporations Elected Director
- -------------------------------------------------- ---------------
NOMINEES FOR TERM OF OFFICE TO EXPIRE IN 2001:
Martin A. Roenigk, 55 (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. (a holding company) ("Corcap") since August
1995. Since January 1994, he has served as President of MicroAssembly
Systems, Inc., a manufacturer of proprietary automated fastening systems,
now a wholly-owned subsidiary of CompuDyne. He served as a Vice President
of Travelers Corporation (financial services) until December 1993.
Alan Markowitz, 47 (1)(3) 1995
- ------------------
Mr. Markowitz is President of Paragon Financial Services (financial
services) since 1990. From 1978 to 1990 he was Chairman and CEO of the
Travelers Mortgage Services (financial services).
DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 2000:
Miles P. Jennings, Jr., 53 (2) 1997
- ---------------------------
Mr. Jennings is a Vice President-Investments of Advest, Inc., a brokerage
firm, and has served in such capacity since May 1996. Prior to that time
he was Vice President-Investments of Prudential Securities, Inc.
(investment brokerage) from September 1992 until May 1996. From April
1989 to September 1992 he was Vice President-Investments of Kidder,
Peabody & Co., Inc. (investment brokerage) .
Millard H. Pryor, Jr., 64 (1)(2)(3) 1985
- -------------------------
Mr. Pryor is a Managing Director of Pryor & Clark Company, an investment
holding company, and has served in such capacity since June 1993. 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. He also serves as a
director of The Hartford Funds (financial services), Pacific Scientific
Company (manufacturing) and Infodata Systems Inc. (computer software).
DIRECTORS WHOSE TERM OF OFFICE EXPIRES IN 1999:
David W. Clark, Jr., 60 (2)(3) 1985
- ------------------------
Mr. Clark is a Managing Director of Pryor & Clark Company, an investment
holding company, and has served in such capacity since June 1993. 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. He
also serves as a director of Acme United Corporation (manufacturing),
Checkpoint Systems, Inc. (manufacturing) and SS&C Technologies Corp.
(software development).
Philip M. Blackmon, 50 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.
- -------------------------------
(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.
Since August 1995, Messrs. Pryor, Roenigk and Markowitz 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, Clark and Jennings 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, Clark and Markowitz 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 1997, the Board of Directors held two regular meetings, one
telephonic meeting and acted by the unanimous written consent of its
members on three occasions. No meetings were held by the Executive
Committee, but such Committee acted by the unanimous written consent of
its members on three occasions, and the Audit Committee held one meeting.
No meetings were held by the Compensation and Stock Option Committee, but
such Committee acted by the unanimous written consent of its members on
one occasion. All directors of the Corporation attended at least 75% of
the meetings of the Board of Directors, excluding Mr. Markowitz..
On February 2, 1996, the Board of Directors adopted the 1996 Stock Option
Plan for Non-Employee Directors ("Director Plan") (see "Option Grants in
the Last Fiscal Year"), subject to shareholder approval which was granted
at the 1996 Annual Meeting of Shareholders. The purpose of the Director
Plan is to promote the interests of CompuDyne and its shareholders by
encouraging Non-Employee Directors of the Corporation to have a direct and
personal stake in the performance of the Corporation's Common Stock.
Under the current Director Plan, each Non-Employee Director of the
Corporation is granted an option to purchase 350 shares of CompuDyne
Common Stock for each Board of Directors meeting attended. The Board of
Directors has approved an amendment to the Director Plan to increase the
number of options granted to each Non-Employee Director as more fully
described under "Proposal to Amend Director Stock Option Plan." The grant
of options is in lieu of any other cash paid to the directors. The
directors will continue to be reimbursed for reasonable expenses incurred
for attending the meeting.
EXECUTIVE OFFICERS
- ------------------
The following table sets forth information with respect to each executive
officer of the Corporation who were serving during 1997. Mr. Roenigk was
elected Chairman of the Board of Directors, Chief Executive Officer and
President of CompuDyne in August 1995. Mr. Blackmon was appointed
Executive Vice President of the Corporation in January 1995. Mr. Robison
was appointed President of Quanta SecurSystems, Inc., ("SecurSystems"), a
wholly owned subsidiary of CompuDyne, in July 1996. Mr. Rock was
appointed Chief Financial Officer of CompuDyne and Chief Financial
Officer and Secretary of SecurSystems in July 1996.
Name and Age Office Business Experience
- ---------------------- --------------------- -------------------
Martin A. Roenigk, 55 Chairman, President, See Previous Table
Chief Executive Officer
of:
CompuDyne Corporation
Chairman of:
Quanta Systems, Inc.
Quanta SecurSystems, Inc.
President of:
MicroAssembly Systems, Inc.
Philip M. Blackmon,50 Executive Vice President of: See previous table
CompuDyne Corporation
President of:
Quanta Systems, Inc.
J. Kevin Robison, 48 President of: (1)
Quanta SecurSystems
William C. Rock, 49 Chief Financial Officer of: (2)
CompuDyne Corporation
Quanta SecurSystems, Inc.
Secretary of:
Quanta SecurSystems, Inc.
(1) Prior to being appointed President of SecurSystems, Mr. Robison
served as President of Shorrock Electronic Systems, Inc. (now
SecurSystems) since May 1990.
(2)Prior to being appointed Chief Financial Officer of CompuDyne, Mr. Rock
served as Chief Financial Officer and Secretary of Shorrock Electronic
Systems, Inc. (now SecurSystems), since April 1992.
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 officers whose salary and bonuses exceeded $100,000 in 1997
("named executive officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term Compensation
Annual ----------------------------
Compensation Awards Payouts
--------------- ------------------ ---------
Restricted Securities All Other
Stock Underlying Compen-
Name and Salary Bonus Awards Options/ sation
Principal Position Year ($) ($)(1) ($)(2) SARs(#)(3) ($) (4)
- --------------- ---- ------- ------ ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Martin A. Roenigk (5) 1997 120,000 40,000 0 0 3,944
Chairman, President 1996 79,698 25,000 0 0 1,933
& CEO 1995 19,054 0 0 200,000 0
Philip M. Blackmon (6) 1997 109,990 30,000 0 0 2,945
Executive Vice Presi- 1996 99,973 25,000 0 0 3,030
dent; President - 1995 98,880 8,345 16,656 0 2,662
Quanta
J. Kevin Robison (7) 1997 125,000 0 0 0 2,957
President - Secur- 1996 116,273 0 0 40,000 2,907
Systems
</TABLE>
(1) Bonuses of $40,000 and $30,000 were awarded in March 1997 for services
rendered in 1996 to Messrs. Roenigk and Blackmon, respectively, by the
Compensation and Stock Option Committee of the Board of Directors of
CompuDyne. Such Committee also awarded bonuses of $25,000 and $25,000 to
Messrs. Roenigk and Blackmon, respectively, in March 1996 for services
rendered in 1995. Mr. Blackmon's 1995 bonus, for services rendered in
1994, was in the form of part cash, $8,345, and part Restricted Stock
Award, 10,250 shares of CompuDyne Common Stock (see Note 2 below). As of
March 31, 1997, 100% of the 1996, 1995 and 1994 bonuses had been paid.
(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. Under a
Stock Purchase Agreement, dated August 1, 1993, entered into pursuant to
such authorization, Mr. Blackmon purchased 25% of such shares on each of
August 1, 1993, 1994, 1995 and 1996 at $.40 per share by giving CompuDyne
five-year non-recourse promissory notes in the amount of $10,000,
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 fair market value of the 25,000 shares issued to Mr.
Blackmon on each of August 1, 1993, 1994, 1995 and 1996 was $28,125,
$46,875, $46,875 and $31,250, respectively, based on the median of the
high and low bids of CompuDyne Common Stock as reported on the OTC
Bulletin Board on each respective date. At December 31, 1997, the value
of the 100,000 shares sold to Mr. Blackmon was $237,500 based upon the
median of the high and low bids of CompuDyne Common Stock as reported on
the OTC Bulletin Board.
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 $24,344 at December 31,
1997 Mr. Blackmon, as the holder of shares issued under the Stock Purchase
Agreement and Restricted Stock Award Agreement, is entitled to vote and to
receive any dividends paid on the CompuDyne Common Stock. The Board of
Directors, however, does 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 set forth in a Non-Qualified
Stock Option Agreement dated August 21, 1995. Such options are
immediately exercisable and shall expire on August 21, 2005. In July
1996, Mr. Robison was awarded a non-qualified option to purchase up to
40,000 shares of the Corporation's Common Stock for $1.625 per share in
accordance with the terms and conditions of the Corporation's 1996 Stock
Incentive Compensation Plan for Employees. Such options will be fully
exercisable in 2000 and shall expire on July 10, 2006.
(4) Includes matching contributions made by CompuDyne in CompuDyne's
401(k) retirement savings plan. CompuDyne matches dollar for dollar
contributions up to 2.5% of each employee's annual compensation. In 1997,
1996 and 1995, contributions of $3,944, $1,933 and $0, respectively, were
made for Mr. Roenigk and $2,945, $3,030 and $2,662 respectively, were made
for Mr. Blackmon. Contributions of $2,957 and $2,907 were made in 1997
and 1996, respectively, for Mr. Robison.
(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. Robison was elected President of SecurSystems in July 1996.
SecurSystems was acquired by CompuDyne in July 1996. Prior to the
acquisition it was named Shorrock Electronic Systems ("Shorrock").
All compensation reported in the table for Mr. Robison reflect
monies paid by Shorrock and CompuDyne for the 12-month period
ended December 1996. CompuDyne's portion of the salary paid from
July 1996 through December 1996 was $58,137 and the 401-(k)
contribution was $1,453.
FISCAL YEAR-END OPTION VALUES
-----------------------------
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
At December 31, 1997 (#) At December 31, 1997 ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------- ------------------------- -------------------------
<S> <C> <C>
Martin A. Roenigk 200,000/0 $175,000/$0(1)
J. Kevin Robison 8,000/32,000 $6,000/$24,000(2)
</TABLE>
(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,
1997 ($2.375 per share) based upon the median of the high and low bids of
CompuDyne Common Stock as reported on the OTC Bulletin Board.
(2)The difference between the exercise price of the options ($1.625 per
share) and the fair market value of CompuDyne Common Stock at December 31,
1997 ($2.375 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 23, 1998, there were 4,045,906 shares of CompuDyne Common
Stock issued and outstanding. In addition, there are 78,636 Treasury
Shares held by the Company which are not considered outstanding under
Nevada law. In November 1997, all of the issued and outstanding shares of
CompuDyne's Convertible Preference Stock, Series D ("Series D Preference
Stock") were converted by the holders thereof on a share for share basis.
Consequently, 1,260,460 shares of CompuDyne Common Stock were issued in
November 1997. See Note 2 below and "Certain Relationships and Related
Transactions."
The following table sets forth, as of March 23, 1998 the amount and nature
of the beneficial ownership of CompuDyne Common Stock by each person who
is known by CompuDyne to hold of record or beneficially more than 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.
<TABLE>
<CAPTION>
Amount and
Nature of Title
Beneficial of Percentage of
Name and Address (1) Ownership Class Class Owned
- --------------------------- --------- ------------ -----------
<S> <C> <C> <C>
Miles P. Jennings, Jr. 181,100 Common Stock 4.5%
Martin A. Roenigk 1,895,345 (2) Common Stock 44.6%
Alan Markowitz 565,465 (2)(3) Common Stock 13.9%
Philip Blackmon 110,250 (4) Common Stock 2.7%
David W. Clark, Jr. 17,716 (3) Common Stock *
Millard H. Pryor, Jr. 17,717 (3) Common Stock *
J. Kevin Robison 8,000 Common Stock *
William C. Rock 4,000 Common Stock *
All Directors and Executive
Officers as a group
(8 persons) 2,799,593 Common Stock 65.7%
* less than one percent
</TABLE>
- -----------------------------
(1) The address of each person listed in the table above is CompuDyne
Corporation, 120 Union Street, Willimantic, Connecticut 06226.
(2)Includes all shares of Series D Preference Stock which were converted
into shares of Common Stock in November, 1997 on a share for share basis.
Mr. Roenigk held 945,345 shares of Series D Preference Stock and Mr.
Markowitz held 315,115 shares of Series D Preference Stock. A $0.246 per
share early conversion adjustment was paid to Mr. Roenigk and Mr.
Markowitz amounting to $232,555 and $77,518, respectively. Also includes
300,000 and 100,000 shares of Common Stock converted by Mr. Roenigk and
Mr. Markowitz, respectively, on July 12, 1996 pursuant to the Senior
Convertible Promissory Notes, dated August 21, 1995, of CompuDyne (the
"Convertible Notes"). Also includes 450,000 shares and 150,000 shares
purchased by Mr. Roenigk and Mr. Markowitz, respectively, in connection
with the Shorrock acquisition. 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" for descriptions of the early
conversion adjustment, the Convertible Notes, the Shorrock acquisition,
and the 200,000 options.
(3) Includes options to purchase 350 shares each, or an aggregate of 3,150
shares, of CompuDyne Common Stock granted to Messrs. Markowitz, Clark,
Pryor and Jennings on September 18, 1996, May 21, 1997 and November 17,
1997 under the 1996 Stock Option Plan for Non-Employee Directors at an
exercise price of $1.625, $2.81 and $1.69 per share, respectively. Of the
above shares to the directors, 50% become vested after the second year and
the remaining 50% after the third year.
(4) See Note 2 to the Summary Compensation Table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
On 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 Series D Preference Stock in exchange
for all of the Sellers' shares of capital stock in MicroAssembly, which
shares represented all of MicroAssembly's issued and outstanding capital
stock. The issuance by CompuDyne of the Series D 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 was converted to Common Stock with full voting rights and
on a share for share basis in November, 1997. Prior to conversion, the
CompuDyne Board of Directors offered the holders of the Series D
Preference Stock an early conversion adjustment of $0.246 per share as an
incentive to convert the Series D Preference Stock to Common Stock. The
Board believed that the conversion of the Series D Preference Stock would
simplify and strengthen the Company's balance sheet, facilitate future
acquisitions using non-cash consideration and avoid the payment of future
dividends on such preference stock. An aggregate of $310,073 was paid to
Messrs. Roenigk and Markowitz.
The Series D Preference Stock had equal voting rights as the holders of
Common Stock. Each share of Series D Preference Stock carried an annual
aggregate dividend equal to the lower of: (a) 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) 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 only was
adjusted for the period of 1995 that MicroAssembly was not a wholly owned
subsidiary of CompuDyne. Dividends could 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 30 trading days. No dividends were
earned on the Series D Preference Stock for the fiscal years ended
December 31, 1995, 1996 and 1997. Beginning on August 21 in the year
2000, the Company could, at its option, redeem all or any part of the
Series D Preference Stock for a price of $1.80 per share, that being 120%
of the Redemption Value, plus accrued and unpaid dividends. The Series D
Preference Stock provided that beginning on August 31, 2006, and on that
date in each of the four succeeding years, the Company would redeem
252,092 shares of Series D Preference Stock 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 $400,000 paid by the Sellers to
CompuDyne at the closing, CompuDyne issued to the Sellers Senior
Convertible Promissory Notes (the "Convertible Notes") in the aggregate
principal amount of $400,000, 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 was
converted. Of the $400,000 principal amount of Notes issued, $300,000
principal amount of the Convertible Notes was issued to Mr. Roenigk, and
$100,000 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 Corporation pursuant to
Section 13(d) of the Securities Exchange Act of 1934, the source of the
Sellers' $400,000 investment in the Corporation 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." Under the terms of the Convertible Notes, interest was due
quarterly in arrears, commencing October 1, 1995, at prime plus 2% with
principal due August 21, 2005. The Convertible Notes were senior
obligations of CompuDyne. On October 1, 1995, January 1, 1996 and April
1, 1996, the Corporation accrued an aggregate of $4,777, $15,867 and
$26,707, respectively, to the holders of the Convertible Notes.
On May 23, 1996, the CompuDyne Board of Directors approved an amendment to
the Convertible Notes that reduced the conversion price to $1.00 per share
based upon the price of CompuDyne Common Stock at the time, the restricted
nature of the stock issued upon conversion, the market for CompuDyne
Common Stock existing at the time, an evaluation of CompuDyne's balance
sheet and the need to strengthen CompuDyne's balance sheet in view of the
proposed acquisition of Shorrock Electronic Systems, Inc., ("Shorrock")
(now SecurSystems).
In July 1996, prior to the acquisition of Shorrock, Messrs. Roenigk and
Markowitz, as the holders of the Convertible Notes, converted the Notes
into 400,000 shares of Common Stock. Interest payments of $29,436 and
$9,822 were paid to Mr. Roenigk and Mr. Markowitz, respectively, on the
day of conversion. Messrs. Roenigk and Markowitz also purchased 450,000
and 150,000 additional shares of Common Stock, respectively, for $1.00 per
share, or an aggregate of $600,000. This financing and conversion, which
was completed on July 12, 1996, added $1 million to the Corporation's
equity, reduced interest charges, provided the cash required to make the
Shorrock acquisition and provided working capital for SecurSystems
operations.
As a further part of the August 21, 1995 MicroAssembly Transaction, Norman
Silberdick, the Corporation's Chairman, President and Chief Executive
Officer, resigned as such and as a director of the Corporation. The
Corporation'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 Corporation issued to him
options (the "Roenigk Options") to purchase up to 200,000 shares of the
Corporation's Common Stock for $1.50 per share. The Roenigk Options
expire in ten (10) years.
Prior to the MicroAssembly Transaction, the Sellers held no voting shares
of CompuDyne. At December 31, 1996, the Sellers held 2,260,460 shares of
CompuDyne's voting stock (including the Series D Preference Stock), or
approximately 55.0% of the voting power of issued and outstanding shares
or 54.8% on a fully diluted basis.
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 Corporation's
directors or other matters in connection with the operation and management
of the Corporation.
On November 12, 1992, the CompuDyne Board authorized the issuance of
shares of CompuDyne Common Stock to Mr. Blackmon, President of Quanta and
a director of the Corporation, and other key employees of CompuDyne and
Quanta at $.40 per share, the fair market value at such time. See Note 3
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 Mr.
Blackmon and other key employees of Quanta Systems as a 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 $95,000. The second
part of the bonus was distributed in cash, in an aggregate amount of
$40,000. See Note 3 to the Summary Compensation Table under "Executive
Compensation and Other Transactions With Management."
On July 11, 1996, the Compensation and Stock Option Committee granted
options for 121,000 shares of CompuDyne Common Stock to J. Kevin Robison,
William C. Rock and key employees of the newly acquired company,
SecurSystems, and to a key employee of Data Control Systems, in accordance
with the terms and conditions of the 1996 Stock Incentive Compensation
Plan for Employees at a price of $1.625 per share in accordance with the
Plan. Of the 121,000 shares granted, 40,000 shares and 20,000 shares were
awarded to Messrs. Robison and Rock, respectively.
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, 1996, the Corporation
believes all Section 16(a) filing requirements applicable to its
officers, directors and 10% beneficial owners were complied with.
PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(Proposal No. 2)
-----------------------------------------------------------------------
The Board of Directors recommends that the shareholders approve an
amendment to the CompuDyne Corporation 1996 Stock Option Plan for Non-
Employee Directors (the "Director Plan"). The Director Plan was adopted
by the Board of Directors on February 2, 1996 and approved by the
shareholders of the Company at the 1996 Annual Meeting. The Company
believes that the Director Plan facilitates the acquisition of Company
Common Stock by non-employee directors and enhances the Company's ability
to attract and retain qualified, experienced directors. The current
Director Plan provides that, on the date of each meeting of the Board of
Directors during the term of the Plan, each Non-Employee Director of the
Company attending such meeting (in person or by telephone) will
automatically be granted a stock option to purchase 350 shares of Common
Stock upon the terms and conditions specified in the Plan, provided,
however, that the maximum number of options that may be granted in any one
calendar year to any one Non-Employee Director pursuant to the Plan shall
be options for 2,100 shares of Common Stock.
The proposed amendment to the Director Plan provides that during the term
of the Director Plan on each date that a Non-Employee Director is (x)
first elected as a director of the Company by the shareholders of the
Company or appointed as a director by the Board of Directors in accordance
with the Bylaws of the Company and (y) subsequently reelected as a
director by the shareholders of the Company, such Non-Employee Director
shall automatically be granted a stock option to purchase 1,000 shares of
Common Stock. Furthermore, the proposed amendment provides that on the
date of each meeting of the Board of Directors, each Non-Employee Director
of the Company attending such meeting (in person or by telephone) shall
automatically be granted a stock option to purchase 500 shares of Common
Stock.
The proposed amendment also provides that the maximum number of options
that may be granted in any one calendar year to any one Non-Employee
Director pursuant to the Director Plan will be options for 4,000 shares of
Common Stock. Under the current Director Plan and the proposed amendment,
no options will be granted for action taken by the Board of Directors by
unanimous written consent and the maximum number of shares of Common Stock
that may be issued pursuant to the Director Plan is 100,000 shares. In
all other respects, the terms and conditions of the Director Plan would
remain in full force and effect.
The Board has proposed the amendment because it believes that increased
share ownership by directors more closely aligns shareholder and director
interests by encouraging a greater focus on profitability of the Company
and its Common Stock. The Company believes that the grant of options to
Non-Employee Directors upon election, appointment or reelection to the
Board further enhances the Company's ability to attract and retain
qualified, experienced directors.
A copy of the Director Plan as proposed to be amended is included in this
Proxy Statement as Appendix A.
VOTE REQUIRED FOR APPROVAL OF THE PROPOSED AMENDMENT
- ----------------------------------------------------
The Director Plan provides that the approval of a majority of the holders
of the Common Stock is required to increase the total number of shares
which may be granted annually under the Director Plan or to materially
increase the benefits accruing to grantees through awards under the
Director Plan. Holders of the Corporation's Common Stock are therefore
entitled to vote on the proposal. The affirmative vote of at least a
majority of the votes that all shareholders re entitled to cast at the
meeting is required for approval of the proposed amendment.
The Board of Directors recommends a vote FOR Proposal No. 2.
NEW PLAN BENEFITS TABLE
-----------------------
The following table sets forth the number of options to be received by the
named individuals and groups of executive officer, directors and
employees that will accrue, assuming that all the grantees continue in
their current directorships through the minimum vesting and award
periods.
CompuDyne Corporation
1996 Stock Option Plan For
Non-Employee Directors
--------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Options for No. of Shares Dollar
Name and Position Of Common Stock (1) Value (2)
- ------------------------------------------------------------------------
<S> <C> <C>
Martin A. Roenigk
Chairman, President
& CEO 0 0
Philip M. Blackmon
Executive Vice-
President; President-
Quanta 0 0
J. Kevin Robison
President - SecurSystems 0 0
Current Executive
Officers as a Group 0 0
Current directors who
are not executive
officers as a group 8,000 18,620
All employees, including
all current officers who
are not executive
officers as a group 0 0
</TABLE>
(1) Since the number of options granted is partially dependent upon the
number of meetings held in any one year, the number of options listed is
the number of options that non-employee directors would have received in
1997 if the Director Plan, amended as so proposed, had been in effect.
The actual number of options that were granted in 1997 to non-employee
directors under the Director Plan was 2,100.
(2) Based upon the fair market value of $2.81, $2.81, $2.00 and $1.69 of
CompuDyne Common Stock on the grant dates, which would have been the date
of the reelection of Messrs. Jennings and Pryor to the Board, and the
meeting dates of the CompuDyne Board of Directors in 1997.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No.3)
---------------------------------------------------
On November 17, 1997, the Board of Directors approved the appointment of
Deloitte & Touche LLP as independent auditors for the Corporation for the
year ending December 31, 1998 subject to ratification of such appointment
by the shareholders. On January 2, 1996, Deloitte & Touche LLP replaced
Coopers & Lybrand who had acted as the independent auditors of the
Corporation since June, 1988.
Coopers & Lybrand was dismissed on recommendation of the Audit Committee
and approved by the Board of Directors on February 2, 1996 because the
estimate given by Deloitte & Touche LLP for their annual fees and expenses
was considerably lower than that given by Coopers & Lybrand. Coopers &
Lybrands' reports for the fiscal years ended December 31, 1993 and 1994
did not contain an adverse opinion or a disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope or accounting
principles. Prior to such dismissal, there had been no disagreements
between the Corporation and Coopers & Lybrand on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the
satisfaction of Coopers & Lybrand, would have caused it to make reference
to the subject matter of the disagreement in connection with its report.
Unless otherwise indicated, properly executed proxies will be voted in
favor of ratifying the appointment of Deloitte & Touche LLP, independent
certified public accountants, to audit the books and accounts of the
Corporation for year ending December 31, 1998. Representatives of
Deloitte & Touche LLP 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.3.
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.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
---------------------------------------------
Shareholder proposals for the 1999 Annual Meeting of Shareholders must be
received at the principal executive offices of the Corporation, 120 Union
Street, Willimantic, CT 06226, no later than December 18, 1998 for
inclusion in the 1998 Proxy Statement and form of proxy.
Shareholders are requested by the Board of Directors to execute and
deliver the enclosed proxy.
APPENDIX A
----------
COMPUDYNE CORPORATION
1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose
- ----------
The purpose of the CompuDyne Corporation 1996 Stock Option Plan for
Non-Employee Directors (the "Plan") is to promote the interests of
CompuDyne Corporation (the "Company") and its shareholders by encouraging
Non-Employee Directors of the Company to have a direct and personal stake
in the performance of the Company's Common Stock.
2. Definitions
- --------------
Unless the context clearly indicates otherwise, the following terms have
the meanings set forth below. Whenever applicable, the masculine pronoun
shall include the feminine pronoun and the singular shall include the
plural.
"Board of Directors" or "Board" means the Board of Directors of the
Company.
"Business Day" shall mean any day except Saturday, Sunday or a legal
holiday in the State of Connecticut.
"Code" means the Internal Revenue Code of 1986, as amended, now in effect
or as amended from time to time and any successor provisions thereto.
"Committee" means the Compensation and Stock Option Committee of the Board
of Directors of two or more members appointed by the Board of Directors
and selected from those directors who are not employees of the
Corporation, its parent or any Subsidiary, as defined in Section 424(e)
and (f) of the Code. The Board may at any time and from time to time
remove any member of the Committee, with or without cause, appoint
additional members to the Committee and fill vacancies, however caused, in
the Committee. A majority of the members of the Committee shall constitute
a quorum. All determinations of the Committee shall be made by a majority
of its members. Any decision or determination of the Committee reduced to
writing and signed by all of the members of the Committee shall be fully
as effective as if it had been made at a meeting duly called and held.
"Common Stock" means the common stock, par value $0.75 per share, of the
Company.
"Company" means CompuDyne Corporation.
"Disability", as applied to a Grantee, shall have the meaning set forth in
Section 22(e)(3) of the Code.
"Fair Market Value" of a share of Common Stock on any particular date
shall be based upon the average closing sale price for the Common Stock
for the prior thirty (30) trading days as quoted on a national securities
exchange, or, if not so quoted, on the National Association of Securities
Dealers Automated Quotation System, or, if not so quoted, on the OTC
Bulletin Board, an interdealer quotation medium maintained by the
National Association of Securities Dealers, Inc., or, if not so quoted, by
the average closing sale price quoted by three dealers regularly making a
market or maintaining bid and asked prices on the Common Stock (or such
fewer number of dealers which may be making a market or maintaining bid
and asked prices). If there was no closing sale price on a particular
day, the mean between the bid and asked prices per share will be
substituted for the closing sale price on that day.
"Grant Date", as used with respect to a particular Option, means the date
on which such Option is granted pursuant to the Plan.
"Grantee" means the Non-Employee Director to whom an Option is granted
pursuant to the Plan.
"Immediate family members" of a Grantee means the Grantee's children,
grandchildren and spouse.
"Option" means an option granted pursuant to the Plan to purchase shares
of Common Stock which shall be a non-qualified stock option not intended
to qualify as incentive stock options under Section422 of the Code.
"Non-Employee Director" shall mean a member of the Board of Directors who
is not an employee of the Company or any Subsidiary.
"Plan" means the CompuDyne Corporation 1996 Stock Option Plan for
Non-Employee Directors as set forth herein and as amended from time to
time.
"Retirement", as applied to a Non-Employee Director, shall mean when a
Grantee resigns as a member of the Board at any time after attaining
sixty-five (65) years of age.
"Subsidiary" shall mean a "subsidiary corporation" of the Company as
defined in Section425(f) of the Code.
"The 1934 Act" means the Securities Exchange Act of 1934, as amended, now
in effect or as amended from time to time and any successor provisions
thereto.
3. Administration
- -----------------
(a) General. The Plan shall be administered by the Committee, which shall
have full power and authority, subject to the provisions of the Plan, to
supervise administration of the Plan and interpret the provisions of the
Plan and any Options granted hereunder. Any decision by the Committee
shall be final and binding on all parties. No member of the Committee
shall be liable for any determination, decision or action made in good
faith with respect to the Plan or any Options under the Plan. The
Committee may delegate any of such responsibilities to one or more agents
and may retain advisors to advise it. No Grantee shall participate in the
decision of any question relating exclusively to an Option granted to that
Grantee.
(b) Rules and Interpretation. The Committee shall be vested with full
authority to make such rules and regulations as it deems necessary to
administer the Plan and to interpret and administer the provisions of the
Plan in a uniform manner. Any determination, decision or action of the
Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive and
binding on all parties. The Committee's administrative functions shall be
ministerial in nature in view of the Plan's explicit provisions, including
those related to eligibility for, timing, price and amount of Option
grants.
4. Eligibility
- --------------
The persons eligible to receive Options under the Plan are the
Non-Employee Directors of the Company.
5. Effective Date of the Plan and Term of Option Period
- -------------------------------------------------------
The Plan shall become effective upon its adoption by the Board of
Directors, provided, that no Option granted pursuant to the Plan shall be
exercised or will vest prior to the approval of the Plan by the Company's
shareholders within twelve (12) months of its adoption by the Board. The
term during which awards may be granted under the Plan shall expire on the
tenth anniversary of the adoption of the Plan by the Board of Directors.
Subject to the provisions of Article12 hereof, the period during which an
Option granted under the Plan may be exercised shall expire on the tenth
anniversary of the Grant Date of the Option.
6. Shares Subject to the Plan
- -----------------------------
The shares of Common Stock that may be delivered upon the exercise of
Options under the Plan shall be shares of the Company's authorized Common
Stock and may be unissued shares or reacquired shares, as the Board of
Directors may from time to time determine. Subject to adjustment as
provided in Article 14 hereof, the aggregate number of shares to be
delivered under the Plan shall not exceed one-hundred thousand (100,000)
shares. If any shares are subject to an Option which for any reason
expires or terminates during the term of the Plan prior to the issuance of
such shares, the shares subject to but not delivered under such Option
shall be available for issuance under the Plan.
7. Options
#(a)Grant of Options. On the date of each meeting of the Board of
Directors (or, if such date is not a Business Day, the first preceding
Business Day) during the term of the Plan, each Non-Employee Director of
the Company attending such meeting (in person or by telephone) shall
automatically be granted a stock option to purchase three hundred fifty
(350) shares of Common Stock upon the terms and conditions specified in
the Plan, provided, however, that the maximum number of options that may
be granted in any one calendar year to any one Non-Employee Director
pursuant to this Plan shall be options for two thousand one hundred
(2,100) shares of Common Stock. No options shall be granted for action
taken by the Board of Directors by unanimous written consent.
Notwithstanding the foregoing, no Non-Employee Director shall be entitled
to receive any Options if the granting of such options would exceed the
maximum number of shares that may be delivered under the Plan pursuant to
Article 6 hereof.#
(a) Grant of Options. During the term of the Plan:
----------------------------------------------------
(i) on each date that a Non-Employee Director is (x) first
- -------------------------------------------------------------------------
elected as a director of the Company by the shareholders of the Company
- -------------------------------------------------------------------------
or appointed as a director by the Board of Directors in accordance with
- ------------------------------------------------------------------------
the Bylaws of the Company and (y) subsequently reelected as a director by
- -------------------------------------------------------------------------
the shareholders of the Company, such Non-Employee Director shall
- ------------------------------------------------------------------------
automatically be granted a stock option to purchase one thousand (1,000)
- ------------------------------------------------------------------------
shares of Common Stock of the Company upon the terms and conditions
- -------------------------------------------------------------------------
specified in the Plan; and
- --------------------------
(ii) on the date of each meeting of the Board of Directors (or, if
- -------------------------------------------------------------------------
such date is not a Business Day, the first preceding Business Day) each
- ------------------------------------------------------------------------
Non-Employee Director of the Company attending such meeting (in person or
- ------------------------------------------------------------------------
by telephone) shall automatically be granted a stock option to purchase
- -------------------------------------------------------------------------
five hundred (500) shares of Common Stock of the Company in the Plan;
- -------------------------------------------------------------------------
provided, however, that the maximum number of options that may be
- -------------------------------------------------------------------------
granted in any one calendar year to any one Non-Employee Director pursuant
- ------------------------------------------------------------------------
to this Plan shall be options for four thousand (4,000) shares of Common
- ------------------------------------------------------------------------
Stock. No options shall be granted for action taken by the Board of
- -------------------------------------------------------------------------
Directors by unanimous written consent. Notwithstanding the foregoing,
- ------------------------------------------------------------------------
no Non-Employee Director shall be entitled to receive any Options if the
- -------------------------------------------------------------------------
granting of such options would exceed the maximum number of shares that
- ------------------------------------------------------------------------
may be delivered under the Plan pursuant to Article 6 hereof.
- ------------------------------------------------------------
[Underscored material constitutes the proposed amendment material, struck
through (#) is the current language in the Plan.]
(b) Terms of Options. Each Option granted under the Plan shall have
the following terms and conditions:
(i)Price. The exercise price per share of each Option shall equal
the greater of the Fair Market Value of a share of Common Stock on the
Grant Date or the par value per share of the Common Stock, if any, on the
date of exercise of such option;
(ii)Term. The term of each Option shall be for a period of ten
(10) years from the Grant Date unless terminated earlier in accordance
with the Plan;
(iii)Time of Exercise. Unless an Option is terminated or the time
of its exercisability is accelerated in accordance with the Plan, each
Option shall be exercisable only to the extent of one-half of the number
of shares of the Common Stock to which it relates on or after the second
anniversary of its Grant Date and shall be exercisable to the extent of
the remaining one-half of such shares only on or after the third
anniversary of the Grant Date, so that the Options shall be exercisable in
full only on or after the third anniversary of the Grant Date.
(iv)Acceleration of Exercisability. Notwithstanding the schedule
provided in subparagraph (iii) hereof, an Option shall become fully
exercisable upon the occurrence of the Grantee's death or withdrawal from
the Board of Directors by reason of such Non-Employee Director's
Disability or Retirement; and
(v)Option Agreement. Each Option shall be evidenced by an Option
Agreement substantially in the form attached to this Plan as Appendix A.
8. Exercise of Options
- ----------------------
(a)Each Option granted shall be exercisable in whole or in part at
any time, or from time to time, during the Option term as specified in the
Plan, provided that the election to exercise an Option shall be made in
accordance with applicable Federal laws and regulations. Each Option may
be exercised by delivery of a written notice to the Company stating the
number of shares to be exercised and accompanied by the payment of the
Option exercise price therefor in accordance with this Article. The
Grantee shall furnish the Company, prior to the delivery of any shares
upon the exercise of an Option, with such other documents and
representations as the Company may require, to assure compliance with
applicable laws and regulations.
(b)No Option may at any time be exercised with respect to a
fractional share. In the event that shares are issued pursuant to the
exercise of an Option, no fractional shares shall be issued and cash equal
to the Fair Market Value of such fractional share on the date of the
delivery of the exercise notice shall be given in lieu of such fractional
shares.
(c)No shares shall be delivered pursuant to the exercise of any
Option, in whole or in part, until qualified for delivery under such
securities laws and regulations as the Board of Directors may deem to be
applicable thereto and until payment in full of the Option price is
received by the Company in cash, by check or in shares of Common Stock as
provided in Article 9 hereof. Neither the holder of an Option nor such
holder's legal representative, legatee, or distributee shall be or be
deemed to be a holder of any shares subject to such Option unless and
until a certificate or certificates therefor is issued in his or her name
or a person designated by him or her.
9. Stock as Form of Exercise Payment
- ------------------------------------
A Grantee who owns shares of Common Stock may elect to use the previously
acquired shares, valued at the Fair Market Value on the last Business Day
preceding the date of delivery of such shares, to pay all or part of the
exercise price of an Option, provided, however, that such form of payment
shall not be permitted unless at least one hundred shares of such
previously acquired shares are required and delivered for such purpose and
the shares delivered have been held by the Grantee for at least six
months.
10. Withholding Taxes for Awards
- ---------------------------------
Each Grantee exercising an Option as a condition to such exercise shall
pay to the Company the amount, if any, required to be withheld from
distributions resulting from such exercise under applicable Federal and
State income tax laws ("Withholding Taxes"). Such Withholding Taxes shall
be payable as of the date income from the award is includable in the
Grantee's gross income for Federal income tax purposes (the "Tax Date").
The Grantee may satisfy this requirement by remitting to the Company in
cash or by check the amount of such Withholding Taxes or a number of
previously owned shares of Common Stock having an aggregate Fair Market
Value as of the last Business Day preceding the Tax Date equal to the
amount of such Withholding Taxes.
11. Transfer of Awards
- ----------------------
(a) Options granted under the Plan may not be transferred or
disposed of except by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order, as defined in the Code
or Title I of the Employee Retirement Income Security Act or the rules
thereunder, and, during the Grantee's lifetime, may be exercised only by
said Grantee or by said Grantee's guardian or legal representative.
(b)Any Common Stock acquired by exercise of an Option must be held until
at least two (2) years have passed from the date of grant of such Option.
12. Death, Disability, Retirement and Termination of Director Status
- --------------------------------------------------------------------
(a)An Option which has not theretofore expired shall terminate at the
time of the death of the Grantee or if the Grantee ceases to be a member
of the Board, and no shares may thereafter be delivered pursuant to such
Option, except that, subject to the condition that no Option may be
exercised in whole or in part after the tenth anniversary of its Grant
Date:
(i)Upon the termination of Board membership of any such Grantee
due to Disability or Retirement, the Grantee may, within a period of three
years after the date of such termination, purchase some or all of the
shares covered by the Grantee's Options which were exercisable
immediately prior to such termination; and
(ii)Upon the termination of Board membership of any such Grantee
due to any reason other than the Grantee's death, Disability or
Retirement, the Grantee may, within three months after the date of such
termination, purchase some or all of the shares covered by the Grantee's
Options which were exercisable immediately prior to such termination,
provided that, notwithstanding the foregoing, the Options of a Grantee
shall automatically terminate as of the date his or her directorship is
terminated, if terminated on account of any act of (a) fraud or
intentional misrepresentation, or (b) embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any Subsidiary;
and
(iii)Upon the death of any such Grantee while serving on the Board
or of any such disabled or retired Grantee within the above-referenced
period, the person or persons to whom the rights under the Option are
transferred by will or the laws of descent and distribution may, within
twelve months after the date of the Grantee's death, exercise some or all
of the Grantee's Options which were exercisable on the date of death by
the Grantee.
13. Change of Ownership
- -----------------------
In the event of (a) a dissolution or liquidation of the Company, (b) a
merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization in which more than
fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to each Non-Employee Director, at the
time of adoption of the plan for liquidation, dissolution, merger,
consolidation or reorganization, either (i) a reasonable time thereafter
within which to exercise the Option, prior to the effectiveness of such
liquidation, dissolution, merger, consolidation or reorganization, at the
end of which time the Option shall terminate, or (ii) the right to
exercise the Option (or a substitute Option) as to an equivalent number of
shares of stock of the corporation succeeding the Company or acquiring its
business by reason of such liquidation, dissolution, merger,
consolidation or reorganization.
14. Adjustment Upon Changes in Capitalization
- ---------------------------------------------
(a)Changes in Capitalization. If the number of shares of Common
Stock of the Company as a whole are increased, decreased or changed into,
or exchanged for, a different number or kind of shares or securities of
the Company, whether through merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure
or the like, an appropriate and proportionate adjustment shall be made in
the number and kind of shares subject to this Plan, and in the number,
kind, and per share exercise price of shares of Common Stock subject to
unexercised Options or portions thereof granted prior to any such change.
Any such adjustment in an outstanding Option, however, shall be made
without a change in the total price applicable to the unexercised portion
of the Option but with a corresponding adjustment in the price for each
share covered by the Option.
(b)Acquisition. Upon a reorganization, merger or consolidation in
which the Company is not the surviving corporation, or upon the sale of
all or substantially all of the property of the Company to another
corporation, provision shall be made in connection with such transaction
for the assumption of the Plan and the Options theretofore granted by the
successor corporation. Provision may, alternatively, be made for the
substitution for such Options of new options of the successor corporation
or a parent or subsidiary thereof. In any such case, appropriate
adjustment as to the number and kind of shares and the per share exercise
prices shall be made. No fractional shares of stock shall be issued under
the Plan on account of any adjustment specified above.
(c)Dissolution or Liquidation. Upon the dissolution or liquidation
of the Company, this Plan and the Options issued thereunder shall
terminate.
15. Legal Restrictions
- ----------------------
The Company will not be obligated to issue shares of Common Stock or make
any payment if counsel to the Company determines that such issuance or
payment would violate any law or regulation of any governmental authority
or any agreement between the Company and any national securities exchange
on which the Common Stock is listed. In connection with any stock
issuance or transfer, the person acquiring the shares shall, if requested
by the Company, give assurances satisfactory to counsel to the Company
regarding such matters as the Company may deem desirable to assure
compliance with all legal requirements. The Company shall in no event be
obliged to take any action in order to cause the exercise of any award
under the Plan.
16. No Rights as Shareholders
- -----------------------------
No Grantee, and no beneficiary or other person claiming through a Grantee,
shall have any interest in any shares of Common Stock allocated for the
purposes of the Plan or subject to any award until such shares of Common
Stock shall have been transferred to the Grantee or such person.
Furthermore, the existence of awards under the Plan shall not affect: the
right or power of the Company or its stockholders to make adjustments,
recapitalizations, reorganizations or other changes in the Company's
capital structure; the dissolution or liquidation of the Company, or the
sale or transfer of any part of its assets or business; or any other
corporate act, whether of a similar character or otherwise.
17. Board Membership
- --------------------
Nothing in the Plan or in any Option shall confer upon any Grantee any
right to continue as a director of the Company or interfere in any way
with the right of the Company's shareholders to remove a director at any
time.
18. Choice of Law
- -----------------
The validity, interpretation and administration of the Plan and of any
rules, regulations, determinations or decisions made thereunder, and the
rights of any and all persons having or claiming to have any interest
therein or thereunder, shall be determined exclusively in accordance with
the laws of the State of Connecticut.
19. Amendment and Discontinuance
- --------------------------------
Subject to the limitation that the provisions of the Plan shall not be
amended more than once every six months other than to comport with changes
in the Code or regulations thereunder, the Board of Directors may alter,
suspend, or discontinue the Plan, but may not, without the approval of a
majority of the holders of the Common Stock, make any alteration or
amendment thereof which operates (a) to increase the total number of
shares which may be granted annually under the Plan, (b) to extend the
term of the Plan or the Option periods provided in the Plan, (c) to
decrease the Option price provided in the Plan, or otherwise materially
increase the benefits accruing to Grantees through awards under the Plan,
or (d) to modify the eligibility requirements for participation in the
Plan.
20. Effective Date and Duration of Plan
- ---------------------------------------
The effective date of the Plan is February 2, 1996, (subject to approval
by the shareholders of the Company on or before February 1, 1997), the
date on which the Plan was adopted by the Board of Directors. Any
amendment to this Plan will become effective upon approval by the Board of
Directors, unless shareholder approval is deemed necessary in which case
such amendment shall become effective upon approval by the shareholders.
Unless previously terminated by the Board of Directors, this Plan shall
terminate at the close of business on February 1, 2006 and no Option may
be granted under it thereafter, but such termination shall not affect any
Option theretofore granted.
Attest:
Secretary
Adopted by the Shareholders of the Company at their meeting of June 5,
1996.
Attest:
Secretary
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APPENDIX A (To Option Plan)
STOCK OPTION AGREEMENT
UNDER THE
COMPUDYNE CORPORATION 1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Pursuant to Article 7 of the CompuDyne Corporation 1996 Stock Option Plan
for Non-Employee Directors (the "Plan"), CompuDyne Corporation (the
"Company"), this ---- day of ------------, 199- (the "Grant Date"), hereby
grants to ----------------("Director") a non-qualified stock option to
purchase an aggregate of -------- shares of the Common Stock of the
Company at $----- per share, on the terms and conditions hereinafter set
forth and set forth in the Plan. This option will expire at the Company's
close of business on -------, 19--, unless sooner terminated in accordance
with the terms of the Plan.
1. The Company hereby grants to Director a non-qualified stock option (the
"Option") to purchase on or before the expiration date indicated above, at
the purchase price stated above, the number of shares of the Company's
Common Stock set forth above. No option granted under the Plan shall be
exercised or will vest unless and until the Plan is approved by the
Company's shareholders.
2. The term of this Option shall commence on the date of this Agreement
and shall terminate, unless sooner terminated by the terms of the Plan, at
the close of business on the day preceding the tenth anniversary of the
date of this Agreement as set forth above, if the Company is open for
business on such day, or the close of the Company's business on the next
preceding day that the Company is open for business. Unless the Option is
terminated or the time of its exercisability is accelerated in accordance
with the Plan, the Option shall be exercisable only to the extent of one-
half of the number of shares of the Common Stock to which it relates on or
after the second anniversary of its Grant Date set forth above and shall
be exercisable to the extent of the remaining one-half of such shares only
on or after the third anniversary of the Grant Date, so that the Option
shall be exercisable in full only on or after the third anniversary of the
Grant Date.
This Option shall become immediately exercisable under the circumstances
described in Section 7(b)(iv) of the Plan.
3. This Option may be exercised, in whole or in part, by written
notification delivered in person or by mail to the Secretary of the
Company at its offices at 120 Union Street, Willimantic, Connecticut.
Such notification shall specify the number of shares with respect to which
the Option is being exercised and shall be accompanied by payment for such
shares. The Secretary of the Company will provide Director with a form of
exercise notice upon request. The Option may not be exercised with
respect to a fractional share. Payment is to be made by check payable to
the order of the Company or by one of the alternative methods of payment
described in the Plan. No shares shall be sold or delivered hereunder
until full payment for such shares has been made and all checks delivered
in payment therefor have been collected. Director shall not have any
rights of a shareholder with respect to any Common Stock received upon
exercise of the Option until certificates for such Common Stock have been
actually issued to Director in accordance with the terms hereof.
4. The Company shall not be required to issue or deliver any certificate
or certificates for shares of its Common Stock purchased upon the exercise
of any part of this Option prior to (i) the admission of such shares to
listing on any stock exchange on which the stock may then be listed,
(ii) the completion of any registration or other qualification of such
shares under any applicable law, rule or regulation, (iii) the obtaining
of any consent or approval or other clearance from any governmental agency
which the Company determines to be necessary or advisable, and (iv) the
payment to the Company, upon its demand, of any amount requested by the
Company for the purpose of satisfying its liability, if any, to withhold
federal, state or local income or earnings tax or any other applicable tax
or assessment (plus interest or penalties thereon, if any, caused by a
delay in making such payment) incurred by reason of the exercise of this
Option or the transfer of such shares thereupon. The Option shall be
exercised and shares of the Company's Common Stock issued only upon
compliance with the Securities Act of 1933, as amended (the "Act"), and
any other applicable securities laws, and Director agrees to comply with
any requirements imposed by the Committee. Because Director is an
"affiliate" of the Company (as that term is defined in Rule 144
promulgated under the Act, and which generally includes directors), by
accepting this Agreement, you agree that you will dispose of the stock
acquired upon exercise of the Option only in compliance with Rule 144 or
in such other manner as will not violate the Act and the rules and
regulations promulgated thereunder, and any other applicable securities
law.
5. This Option is not transferrable by Director otherwise than by will or
by the laws of descent and distribution or pursuant to a qualified
domestic relations order, as defined in the Code or Title I of the
Employee Retirement Income Security Act or the rules thereunder, and is
exercisable, during Director's life, only by Director or by Director's
guardian or legal representative. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof shall be null and void. This Option does not confer
upon Director any right with respect to continuation of Director's service
as a director of the Company or any of its subsidiaries, and will not
interfere in any way with the right of the Company's shareholders or the
shareholders of any of its Subsidiaries to terminate Director's service as
a director.
6. Upon the termination of Director's service as a member of the Board of
Directors, the Director may exercise this Option, provided that it has
vested, to the full extent of the number of the shares of Common Stock
remaining under such Option, regardless of whether such Option was
previously exercisable, in accordance with the conditions of Article 12 of
the Plan.
7. This Option shall be irrevocable during the Option period and its
validity and construction shall be governed by the laws of the State of
Connecticut. The terms and conditions herein set forth are subject in all
respects to the terms and conditions of the Plan, which shall be
controlling. You agree to execute such other agreements, documents or
assignments as may be necessary or desirable to effect the purposes of
this Agreement.
8. The grant of this Option shall be binding and effective only if this
Agreement is executed by or on behalf of the Company and by you and a
signed copy is returned to the Company.
9. All capitalized terms used in this Agreement which are not defined
herein shall have the meaning given to them in the Plan unless the context
clearly requires otherwise.
COMPUDYNE CORPORATION
By
---------------------
Its
- ------------------------------------------------------------------
I hereby acknowledge receipt of the Stock Option (the "Option") granted on
the date shown above, which has been issued to me under the terms and
conditions of CompuDyne Corporation 1996 Stock Option Plan for
Non-Employee Directors. I agree to conform to all of the terms and
conditions of the Option and the Plan.
Date: Your Signature:
----------------- ---------------------
- -------------------------------------------------------------------------
APPENDIX B
REVOCABLE PROXY
COMPUDYNE CORPORATION
---------------------
This Proxy Is Solicited on Behalf of the Board of Directors.
PLEASE MARK VOTES
AS IN THIS EXAMPLE [X]
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 1998
Annual Meeting of Shareholders of CompuDyne Corporation, to be held at
CompuDyne's Corporate Office, 120 Union Street, Willimantic, Connecticut
06226 on May 20, 1998 at 11:00 a.m. (E.D.T.) and at any adjournment 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 17, 1998 and instructs its attorneys and proxies to
vote as set forth on this Proxy.
1. ELECTION OF DIRECTORS
Nominees for three-year term: Martin A. Roenigk
Alan Markowitz
For All
For Hold Except
[ ] [ ] [ ]
(INSTRUCTIONS: To withhold authority to vote for any individual nominee
mark the box "For All Except" and write that nominee's name in the space
provided below.)
-------------------------------------------
2. Proposal to amend the CompuDyne For Against Abstain
Corporation 1996 Stock Option Plan
for Non-Employee Directors [ ] [ ] [ ]
3. Proposal to ratify the appointment For Against Abstain
of Deloitte & Touche LLP as indepen-
dent auditors of the Company for the [ ] [ ] [ ]
fiscal year ending December 31, 1998
4. In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before
the Meeting and any adjournment thereof.
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 or any adjournment thereof and voting
in person.
The shares represented by this Proxy will be voted as specified. IF NO
CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF THE SPECIFIED
NOMINEES IN PROPOSAL NO. 1, IN FAVOR OF PROPOSALS NO.2 AND 3, 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.
Please be sure to sign and date Date
this Proxy in the box below ---------
- ---------------------- ----------------------------
Stockholder sign above Co-Holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
COMPUDYNE CORPORATION
- -------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on this Proxy. Only one
signature is required in the case of a joint account. 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.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
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