VICON INDUSTRIES, INC.
89 Arkay Drive
Hauppauge, NY 11788
(516) 952-2288
Notice of Annual Meeting of Shareholders
To Be Held on April 22, 1999
To the Shareholders of Vicon Industries, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of Vicon
Industries, Inc. (the "Company"), a New York corporation, will be held at the
Company's corporate headquarters located at 89 Arkay Drive, Hauppauge, New York
11788, on April 22, 1999 at 10:00 a.m. local time for the following purposes,
all of which are more completely described in the accompanying proxy statement:
1. To elect two directors for terms expiring in 2002; and
2. To approve the 1999 Incentive Stock Option Plan covering 100,000
shares of Common Stock; and
3. To approve the 1999 Non-Qualified Stock Option Plan covering 100,000
shares of Common Stock; and
4. To ratify the selection of KPMG LLP, independent certified public
accountants, as auditors for the Company for the fiscal year ending
September 30, 1999; and
5. To receive the reports of officers and to transact such business as
may properly come before the meeting.
Shareholders entitled to notice of and to vote at the Annual Meeting are
shareholders of record at the close of business on February 26, 1999 fixed by
action of the Board of Directors.
The Company's proxy statement is submitted herewith. The Annual Report to
Shareholders for the year ended September 30, 1998 is included with the proxy
statement.
By Order of the Board of Directors,
Hauppauge, New York Arthur D. Roche
March 5, 1999 Secretary
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return your proxy so that your shares
may be voted in accordance with your wishes and in order that the presence of a
quorum may be assured. The prompt return of your signed proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional proxy solicitation. The giving of such proxy does not affect your
right to vote in person in the event you attend the meeting.
<PAGE>
VICON INDUSTRIES, INC.
89 Arkay Drive
Hauppauge, New York 11788
PROXY STATEMENT FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxy, for use only at the Annual Meeting of Shareholders to
be held on April 22, 1999 at 10:00 a.m., and any and all adjournments thereof,
is solicited on behalf of the Board of Directors of Vicon Industries, Inc. (the
"Company").
Any shareholder executing a proxy retains the right to revoke it by notice
in writing to the Secretary of the Company at any time prior to its use. The
cost of soliciting the proxy will be borne by the Company.
PURPOSES OF ANNUAL MEETING
The Annual Meeting has been called for the purposes of electing two
directors whose term of office expires in 2002; approving the 1999 Incentive
Stock Option Plan; approving the 1999 Non-Qualified Stock Option Plan; ratifying
the selection of auditors; receiving the reports of officers; and transacting
such other business as may properly come before the meeting.
The persons named in the enclosed proxy have been selected by the Board of
Directors and will vote shares represented by valid proxies. They have indicated
that, unless otherwise specified in the proxy, they intend to vote FOR the
election of two directors whose term of office expires in 2002; FOR the approval
of the 1999 Incentive Stock Option Plan; FOR the approval of the 1999
Non-Qualified Stock Option Plan; and FOR ratification of the selection of
auditors.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received at the Company's principal executive
office no later than November 1, 1999, and must comply with all other legal
requirements in order to be included in the Company's proxy statement and form
of proxy for that meeting. Proposals of security holders not meeting the
requirements of Rule 14a-8 of Regulation 14A must comply with the requirements
set forth in the Company's Bylaws relating to business conducted at the Annual
Meeting of Shareholders.
This proxy statement and the enclosed proxy card are being furnished to
shareholders on or about March 5, 1999.
2
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VOTING SECURITIES
The Company has one class of capital stock, consisting of common stock,
par value $.01 per share, of which each outstanding share entitles its holder to
one vote. Cumulative voting is not provided under the Company's Certificate of
Incorporation or Bylaws. Shareholders entitled to vote or to execute proxies are
shareholders of record at the close of business on February 26, 1999. As of
February 26, 1999, there were 4,510,618 shares outstanding.
The presence, in person or by proxy, of at least a majority of the total
number of shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. In the event that there are not sufficient votes
for a quorum or to approve any proposal at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit the further solicitation of
proxies.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a shareholder to vote for the election of the
nominees proposed by the Board, or to withhold authority to vote for one or more
of the nominees being proposed. Under New York law and the Company's Certificate
of Incorporation and Bylaws, directors are elected by a plurality of shares
voted, without regard to either (i) broker non-votes, or (ii) proxies as to
which authority to vote for one or more of the nominees being proposed is
withheld.
As to the matters being proposed for shareholder action as set forth in
Proposals 2 and 3, the proxy card being provided by the Board of Directors
enables a shareholder to check the appropriate box on the proxy card to: (i)
vote "FOR" for the plan; (ii) vote "AGAINST" the plan; or (iii) "ABSTAIN" from
voting on such plan. An affirmative vote of holders of a majority of the Common
Stock entitled to vote thereon is required to constitute shareholder approval.
Shares as to which the "ABSTAIN" box has been selected on the proxy card, or for
which there has been a broker non-vote, will have the effect of a vote against
the matter for which the "ABSTAIN" box has been selected.
Concerning the ratification of independent auditors and all other matters
that may properly come before the Annual Meeting, by checking the appropriate
box, a shareholder may (i) vote "FOR" the item; (ii) vote "AGAINST" the item; or
(iii) "ABSTAIN" with respect to the item. Under the Company's Certificate of
Incorporation and Bylaws, unless otherwise required by law, the ratification of
independent auditors and all other matters shall be determined by a majority of
the votes cast affirmatively or negatively, without regard to broker non-votes
or proxies marked "ABSTAIN" as to the matter.
Proxies solicited hereby will be returned to the Board, and will be
tabulated by inspectors of election designated by the Board, who will not be
employed, or a director of, the Company or any of its affiliates.
3
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to each person, known to the
Company to be a "beneficial owner" (as defined in regulations of the Securities
and Exchange Commission) of more than five percent of the Company's outstanding
Common Stock as of January 29, 1999 and the shares beneficially owned by the
Company's Directors and by all Executive Officers, Officers and Directors as a
group.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned (1) of Class
- ------------------- ---------------------- --------
CBC Co., Ltd.
And Affiliates
2-15-13 Tsukishima
Chuo-ku
Tokyo, Japan 104 548,715 11.5%
- ------------------------------------------------------------------------
C/O Vicon Industries, Inc.
Kenneth M. Darby 258,722 (2) 5.4%
Chu S. Chun 204,507 (7) 4.3%
Arthur D. Roche 153,967 (3) 3.2%
Donald N. Horn 88,328 1.8%
Kazuyoshi Sudo 21,125 (4) *
W. Gregory Robertson 19,025 (4) *
Milton F. Gidge 17,125 (6) *
Peter F. Neumann 15,125 (4) *
Peter F. Barry 12,725 (4) *
Total all Executive Officers,
Officers and Directors as
a group (13 persons) 916,399 (5) 19.1%
* Less than 1%.
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power over the shares of the
stock owned.
(2) Includes currently exercisable options to purchase 23,200 shares.
(3) Includes currently exercisable options to purchase 14,000 shares.
(4) Includes currently exercisable options to purchase 12,125 shares.
(5) Includes currently exercisable options to purchase 212,325 shares.
(6) Includes currently exercisable options to purchase 15,125 shares.
(7) Mr. Chun has voting and dispositive power over 204,507 shares
but disclaims beneficial ownership as to all but 48,400 shares.
100,707 shares are owned by International Industries, Inc.
Profit Sharing Plan and 55,400 by immediate family members.
4
<PAGE>
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
Mr. Donald N. Horn, founder and Chairman of the Board since inception of
the Company and Mr. Peter F. Barry, a member of the Board since 1984, will
retire from the Board at the expiration of their current term in April 1999.
Pursuant to a Resolution of the Board of Directors adopted December 10, 1998,
the number of Board members will be reduced to seven directors as of the Annual
Meeting. The Board will then consist of two directors whose terms expire in
2000; three directors whose terms expire in 2001; and two directors to be
elected for a term expiring in 2002. Directors serve for a term of three years
or until their successors are elected and qualified. No person being nominated
as a director is being proposed for election pursuant to any agreement or
understanding between any person and the Company, except that in connection with
the reduction in the number of directors to seven, Mr. Kenneth M. Darby, whose
term as a director would have expired in 2000, has agreed instead to be a
nominee in 1999 for a term expiring in 2002.
The nominees proposed for election to a term expiring in 2002 at the
Annual Meeting are Mr. Kenneth M. Darby and Mr. Arthur D. Roche. In the event
that either such nominee is unable or declines to serve for any reason, the
Board of Directors shall elect a replacement to fill the vacancy. The Board of
Directors has no reason to believe that either person named will be unable or
unwilling to serve.
Unless authority to vote for the nominees is withheld, it is intended that
the shares represented by the enclosed proxy will be voted FOR the
nominees named in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINEES NAMED IN THIS PROXY STATEMENT
Information with Respect to Nominee and Continuing Directors
The following sets forth the name of nominees and continuing directors,
their ages, a brief description of their recent business experience, including
present occupations and employment, certain directorships held by each and the
year in which each became a director of the Company.
Nominee and Their Director
Principal Occupations Since Age
- ------------------------------------------------------------------
Kenneth M. Darby
President
Vicon Industries, Inc. 1987 53
Arthur D. Roche
Executive Vice President
Vicon Industries, Inc. 1992 60
Continuing Directors whose Term of Office Expires in 2000
- ------------------------------------------------------------------
Peter F. Neumann
Retired President
Flynn-Neumann Agency, Inc. 1987 64
Kazuyoshi Sudo
Chief Executive Officer
CBC (AMERICA) Corp. 1987 56
5
<PAGE>
Continuing Directors whose Term of Office Expires in 2001
- ------------------------------------------------------------------
Chu S. Chun
Chairman and CEO
International Industries, Inc.
And Chun Shin Industries, Inc. 1998 64
Milton F. Gidge
Retired Director and Executive
Lincoln Savings Bank 1987 69
W. Gregory Robertson
President
TM Capital Corp. 1991 55
Mr. Darby has served as Chief Executive Officer since April, 1992 and as
President since October, 1991. Mr. Darby also served as Chief Operating Officer
and as Executive Vice President, Vice President, Finance and Treasurer of the
Company. He first joined the Company in 1978 as Controller after more than nine
years at Peat Marwick Mitchell & Co., a major public accounting firm.
Mr. Roche joined the Company as Executive Vice President and
co-participant in the Office of the President in August 1993. For the six
months earlier, Mr. Roche provided consulting services to the Company. In
October, 1991, Mr. Roche retired as a partner of Arthur Andersen & Co., an
international accounting firm which he joined in 1960.
Mr. Neumann is the retired President of Flynn-Neumann Agency, Inc., an
insurance brokerage firm. He has also served as a director of Reliance
Federal Savings Bank since 1978.
Mr. Sudo is Chief Executive Officer of CBC (AMERICA) Corp., a
distributor of electronic, chemical and optical products. From 1981 to 1996,
he was Treasurer of such company. He has also a director of CBC Co., Ltd.
since 1997.
Mr. Chun is the Chairman and CEO of International Industries, Inc. and
President of Chun Shin Industries, Inc., international trading and
manufacturing companies since at least 1988.
Mr. Gidge is a retired director and executive officer of Lincoln Savings
Bank for which he served from 1976 to 1994 as Chairman, Credit Policy. He has
also been a director since 1980 of Interboro Mutual Indemnity Insurance Co., a
general insurance mutual company, and a director of Intervest Bancshares
Corporation, a bank holding company.
Mr. Robertson is President of TM Capital, a financial services company,
which he founded in 1989. From 1985 to 1989, he was employed by Thompson
McKinnon Securities Inc., as head of investment banking and public finance. He
has also been a director since 1995 of Todhunter International, a producer of
spirits for the beverage alcohol industry.
6
<PAGE>
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors has a number of standing committees including the
executive committee, the compensation committee and the audit committee.
The executive committee consists of Messrs. Horn, Gidge, Darby, and Roche,
of whom Messrs. Horn and Gidge are nonemployee directors. The committee meets in
special situations when the full Board cannot be convened.
The Committee met once during the past year.
The compensation committee, consists of Messrs. Neumann, Gidge and
Robertson, all of whom are non-employee directors. The function of the
compensation committee is to establish and approve the appropriate compensation
for Mr. Darby, recommend the award of stock options, and to review the
recommendations of the President with respect to the compensation of all other
officers. The Committee met once during the last fiscal year.
The audit committee consists of Messrs. Gidge, Barry, and Sudo, all of
whom are non-employee directors. The audit committee reviews the internal
financial controls of the Company and the objectivity of its financial
reporting. The Committee meets with appropriate financial personnel from the
Company and independent certified public accountants in connection with their
audits. The committee recommends to the Board the appointment of independent
certified public accountants to serve as the Company's auditors, subject to
ratification by the shareholders. The independent certified public accountants
have complete and free access to the committee at any time. The committee met
twice during the last fiscal year.
The full Board of Directors considers candidates to the Board as nominees
for election at the Annual Meeting. Directors are selected on the basis of
recognized achievements and their ability to bring skills and experience to the
deliberations of the Board. The Board will consider written shareholder
recommendations for candidates at the next Annual Meeting of Shareholders, which
are submitted not later than November 1, 1999 to the Company's principal
executive offices and are addressed to the Chairman of the Board of Directors.
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company. Outside
members of the Board are kept informed of the Company's business through various
reports and documents sent to them, as well as through operating and financial
reports made at Board and committee meetings by Messrs. Darby and Roche and
other officers.
The Board of Directors held ten meetings in the Company's 1998 fiscal
year, including all regularly scheduled and annual meetings. With the exception
of Mr. Chun and Mr. Sudo, who only attended one and six Board meetings,
respectively, no other Board member attended fewer than 75% of the aggregate of
(1) the total number of meetings of the Board (held during the period for which
he was a director) and (2) the total number of meetings held by all committees
on which he served (during the periods that he served).
The Chairman of the Board and directors, are each compensated at the
annual rates of $10,000 and $6,000, respectively. Committee fees are $500 per
meeting attended in person. Employee directors are not compensated.
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and CBC Co., Ltd. and affiliates (CBC), a Japanese
Corporation, which beneficially owns 11.5% of the outstanding shares of the
Company, have been conducting business with each other for approximately
nineteen years. During this period, CBC has served as a lender, a product
supplier and sourcing agent, and a private label reseller of the Company's
products. CBC also acts as the Company's sourcing agent for the purchase of
certain video products. In 1998, the Company purchased approximately $5.3
million of video products from or through CBC. CBC has the exclusive right to
sell Vicon brand products in Japan and competes with the Company in various
markets, principally in the sale of video products and systems. Additionally,
the Company sells certain finished products to CBC under private label for
resale in Europe and Russia. Sales of all products to CBC were $4.1 million in
1998. Kazuyoshi Sudo, a director of the Company and of CBC, is Chief Executive
Officer of CBC (AMERICA) Corp., a U.S. subsidiary of CBC.
Chu S. Chun, a director beneficially owns 4.3% of the common stock of
the Company, also owns Chun Shin Industries, Inc. (CSI). CSI is the
Company's 50% partner in Chun Shin Electronics, Inc. (CSE), a joint venture
company that manufactures and assembles certain Vicon products in South
Korea. During fiscal 1998, CSE sold approximately $8.0 million of products
to the Company through International Industries, Inc. (I.I.I.), a U.S. based
company controlled by Mr. Chun. I.I.I. arranges the importation and provides
short-term financing on all the Company's product purchases from CSE. CSE
also sold approximately $748,000 of products to CSI, which resells the
Company's products in South Korea. In addition, I.I.I. purchased
approximately $344,000 of products directly from the Company during fiscal
1998 for resale to CSI.
The Company is currently negotiating with Mr. Chun to purchase all the
outstanding shares of CSI.
OTHER OFFICERS OF THE COMPANY
In addition to Messrs. Darby and Roche, the Company has four other officers.
They are:
John M. Badke, age 39 Vice President, Finance
John L. Eckman, age 49 Vice President, North American Sales
Peter A. Horn, age 43 Vice President, Compliance and
Quality Assurance
Yacov A. Pshtissky, age 47 Vice President, Technology and Development
Mr. Badke joined the Company in August 1992 as Controller. He was
promoted to Vice President, Finance in October 1998. Prior to joining the
Company, Mr. Badke was the Controller for NEK Cable, Inc. and an audit
manager with the international accounting firms of Arthur Andersen & Co. and
Peat Marwick Main & Co.
Mr. Eckman joined the Company in August 1995 as Eastern Regional
Manager. He was promoted to Vice President, U.S. Sales in July 1996. Prior
to joining the Company, he was Director of Field Operations for Cardkey
Systems, Inc. with whom he was employed for twelve years.
Mr. P. Horn joined the Company in January 1974 and has been employed in
various technical capacities. In 1986 he was appointed Vice President,
Engineering and in May 1990 as Vice President, New Products and Technical
Support Services; in September 1993, he was appointed Vice President, Marketing
and in 1994 as Vice President, Product Management; and in 1995 as Vice
President, Compliance and Quality Assurance.
Mr. Pshtissky, who joined the Company in September 1979 as an Electrical
Design Engineer, was promoted to Director of Electrical Product Development in
March 1988 and to Vice President, Technology and Development, May 1990.
8
<PAGE>
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee's compensation policies applicable to the
Company's officers for the last completed fiscal year were to pay a competitive
market price for the services of such officers, taking into account the overall
performance and financial capabilities of the Company and the officer's
individual level of performance.
Mr. Darby makes recommendations to the Compensation Committee as to the
base salary and incentive compensation of all officers other than himself. The
Committee reviews these recommendations with Mr. Darby, and after such review,
determines compensation. In the case of Mr. Darby, the Compensation Committee
makes its determination after direct negotiation with him. For each officer, the
Committee's determinations are based on its conclusions concerning each
officer's performance and comparable compensation levels in the CCTV Industry
and the Long Island area for similarly situated officers at comparable
companies. The overall level of performance of the Company is taken into account
but is not specifically related to the base salary of these officers. Also, the
Company has established an incentive compensation plan for all of the officers,
which provides a specified bonus to each officer upon the Company's achievement
of certain annual profitability targets.
The Compensation Committee grants options to officers to link compensation
to the performance of the Company. Options are exercisable in the future at the
fair market value at the time of grant, so that an officer granted an option is
rewarded by the increase in the price of the Company's stock. The Committee
grants options to officers based on significant contributions of such officers
to the performance of the Company.
In addition, in determining Mr. Darby's salary for service as Chief
Executive Officer, the Committee considered the responsibility assumed by him in
formulating and implementing a management and long-term strategic plan.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to the Company during 1998, 1997 and 1996 by the
Chief Executive Officer and the Company's most highly compensated executive
officers whose total annual salary and bonus exceeded $100,000 during any such
year.
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Restricted Securities
Name and All Other Stock Underlying
Principal Position Year Salary ($) Bonus ($) Compensation Award Options (#)
- ------------------ ---- ---------- --------- ------------ ----- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth M. Darby 1998 $225,000 297,525 (1) $ 3,000 (3) $344,640(4) -
Chief Executive Officer 1997 225,000 84,017 (1) 3,000 (3) - 58,000
1996 195,000 31,750 (2) 3,000 (3) - 95,000
Arthur D. Roche 1998 170,000 160,206 (1) - - -
Executive Vice President 1997 170,000 45,240 (1) - - 35,000
1996 150,000 15,875 (2) - - 25,000
</TABLE>
(1) Represents cash bonus equal to 4.55% and 2.45% of the sum of consolidated
pre-tax income and provision for officers' bonuses for Mr. Darby and Mr.
Roche, respectively, which bonus formula was adopted for years 1998 and
1997 by the Board of Directors upon the recommendation of its Compensation
Committee.
(2) Represents bonus in the form of 16,933 and 8,467 shares of Common Stock
issued from Treasury to Mr. Darby and Mr. Roche, respectively.
(3) Represents life insurance policy payment.
(4) Represents deferred compensation benefit of 45,952 shares of Common Stock
held by the Company in Treasury which vests upon Mr. Darby's retirement.
The value of such stock is based on the fair market value on the date of
grant.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants during fiscal 1998.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
At September 30, 1998
Number of
Number of Securities Value of
Shares Underlying Unexercisable
Acquired Value Unexercisable In-the-Money
Name On Exercise Realized (1) Options (2) Options (3)
- ---------------- ----------- ------------ ----------- -----------
Kenneth M. Darby 55,400 $257,725 23,200 $102,800
Arthur D. Roche 20,500 $ 93,688 14,000 $ 62,500
(1) Calculated based on the difference between the closing quoted market prices
per share at the dates of exercise and the exercise prices.
(2) No options were exercisable by the above named officers at September 30,
1998.
(3) Calculated based on the difference between the closing quoted market price
($7.125) and the exercise price.
EMPLOYMENT AGREEMENTS
Mr. Darby and Mr. Roche have each entered into employment agreements with
the Company that provide for annual salaries of $275,000 and $180,000,
respectively, through 2003 and 1999. Each of these agreements provides for
payment in an amount up to three times their average annual compensation for the
previous five years if there is a change in control of the Company without Board
of Director approval (as defined in the agreements). Mr. Darby's agreement also
provides for a deferred compensation benefit of 62,517 shares of common stock
held by the Company in treasury. Such benefit vests upon his retirement or
earlier under certain conditions. The market value of such benefit approximated
$457,000 at the date of grant. In addition, the Board of Directors upon
recommendation of its Compensation Committee, provided Messrs. Darby and Roche
incentive bonus arrangements for the fiscal year ended September 30, 1999 equal
to 3.25% and 1.75%, respectively, of the sum of pre-tax income and provision for
officers' bonuses.
Messrs. D. Horn and A. Wallace, a retired director, each have deferred
compensation agreements with the Company which provide that upon reaching
retirement age total payments of $917,000 and $631,000, respectively, will be
made in monthly installments over a ten year period. The full deferred
compensation payment is subject to such individuals' adherence to certain
non-compete covenants. Mr. Wallace began receiving payments under the agreement
in October, 1990 and Mr. Horn began receiving payments under the agreement in
January, 1994.
11
<PAGE>
STOCK PERFORMANCE GRAPH
This graph compares the return of $100 invested in the Company's stock on
October 1, 1993, with the return on the same investment in the AMEX Market Value
Index.
COMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN AMONG
VICON INDUSTRIES AND AMEX MARKET VALUE INDEX*
(The following table was represented by a chart in the printed material)
Vicon AMEX Market
Date Industries Inc. Value Index
---- --------------- -----------
10/01/93 100 100
10/01/94 104 100
10/01/95 107 118
10/01/96 143 124
10/01/97 479 152
10/01/98 407 135
* Fiscal years ended September 30th.
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<PAGE>
PROPOSAL 2. APPROVAL OF THE VICON INDUSTRIES, INC.
1999 INCENTIVE STOCK OPTION PLAN
The Board of Directors of the Company has adopted the Vicon Industries,
Inc. 1999 Incentive Stock Option Plan (the "Incentive Option Plan"). The purpose
of the Incentive Option Plan is to advance the interests of the Company and its
shareholders by providing certain officers and other key employees of the
Company, whose judgment, initiative and efforts are key to the successful
conduct of the business of the Company and its subsidiaries, with an additional
incentive to perform in a superior manner as well as to attract people of
experience and ability. Officers and other full time employees of the Company
and its subsidiaries are eligible to receive incentive stock options under the
Incentive Option Plan. Directors who are not employees of the Company or its
subsidiaries are not eligible to receive awards under the Incentive Option Plan.
The following is a summary of the material features of the Incentive Option
Plan.
The Incentive Option Plan authorizes the granting of incentive stock
options for 100,000 shares of Common Stock to such officers and full time
employees of the Company and its subsidiaries as the Committee (the "Committee")
may determine. The Committee consists of members of the Company's Compensation
Committee who are outside directors, none of whom are eligible to receive
options under the Incentive Option Plan. The Committee selects the officers and
employees to whom options are to be granted and the number of shares to be
granted. All awards of options by the Committee are subject to the approval of
the Board of Directors.
Pursuant to Section 422 of the Internal Revenue Code, options granted
under the Incentive Option Plan afford tax benefits upon compliance with certain
conditions and do not result in tax deductions to the Company. Shareholder
approval of the Incentive Option Plan is required for stock options granted
under this plan to qualify for incentive stock option treatment under the Code.
Incentive stock options granted under the Incentive Option Plan expire six
years from the date of grant and such exercise prices may not be less than 100%
of the fair market value on the date the option is granted or in the case of an
employee owning more than 10% of the Common Stock of the Company not less than
110% of the fair market value on the date the option is granted. Further, the
fair market value of stock with respect to which incentive stock options are
exercisable for the first time by any employee in any given calendar year may
not exceed $100,000, such value being determined at the time the options are
granted.
Options granted under the Incentive Option Plan may be exercised to the
extent of 30% of the shares covered after two years from the date of grant; an
additional 30% after three years from the date of grant and the remaining 40%
after four years from the date of grant.
Incentive stock options granted in connection with the Incentive Option
Plan must be exercised within three months after the date on which the optionee
ceases to perform services for the Company, except in the event of death, the
foregoing restriction does not apply. In the event of disability, options may be
exercised for up to one year after the optionee ceases to perform services.
Stock purchased through the exercise of options granted under the
Incentive Option Plan may be paid in whole or in part through the surrender of
previously held shares of Common Stock at the fair market value thereof. No
options may be granted under the Incentive Option Plan after ten years from the
effective date of the Incentive Option Plan.
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<PAGE>
The Board of Directors may amend the Incentive Option Plan in any respect,
provided, however, that stockholder approval shall be required for any amendment
which: (i) increases the maximum number of shares for which options may be
granted under the Incentive Option Plan; (ii) reduces the exercise price at
which incentive stock options may be granted; (iii) extends the period during
which options may be granted or exercised beyond the periods originally
prescribed; or (iv) changes the persons eligible to participate in the Incentive
Option Plan.
An optionee shall have no right as a stockholder with respect to any
shares covered by an option until the date of issuance of a stock certificate of
such shares. Nothing in the Incentive Option Plan or in any award of options
granted confers on any person any right to continue in the employ of the Company
or its subsidiaries, or to continue to perform services for the Company or its
subsidiaries, or interferes in any way with the right of the Company or its
subsidiaries to terminate such person's services as an officer or other employee
at any time.
Under current federal income tax regulations, income generated from the
sale of shares of common stock exercised under the plan will be afforded capital
gains treatment provided that the shares are held by the optionee for at least
one year after the date of exercise and two years after the date of grant.
Generally, no income tax deduction may be taken by the Company as a result of
the grant, exercise or sale of incentive stock option shares. However, should
the shares be sold prior to the required holding periods, the Company will be
afforded an income tax deduction equal to the amount by which the lesser of the
selling price or fair market value at exercise exceeds the exercise price of
such option shares. The resulting income will be treated as ordinary income to
the optionee. An optionee will not be deemed to have received taxable income
upon the grant or exercise of any incentive stock option. However, upon exercise
of such options, any unrealized gain measured by the excess of the then fair
market value over the cost basis in such exercised shares, is subject to
inclusion in federal income tax alternative minimum tax computations.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the approval of the 1999 Incentive Stock Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 1999 INCENTIVE STOCK OPTION PLAN.
PROPOSAL 3. APPROVAL OF THE VICON INDUSTRIES, INC.
1999 NON-QUALIFIED STOCK OPTION PLAN
The Board of Directors of the Company has adopted the Vicon Industries,
Inc. 1999 Non-Qualified Stock Option Plan (the "Non-Qualified Option Plan"). The
purpose of the Non-Qualified Option Plan is to advance the interests of the
Company and its shareholders by providing Directors, Officers and other key
employees of the Company, whose judgment, initiative and efforts are key to the
successful conduct of the business of the Company and its subsidiaries, with an
additional incentive to perform in a superior manner as well as to attract
people of experience and ability. Directors, Officers and other full time
employees of the Company and its subsidiaries are eligible to receive stock
options under the Non-Qualified Option Plan. The following is a summary of the
material features of the Non-Qualified Option Plan.
The Non-Qualified Option Plan authorizes the granting of non-qualified
options for a total of 100,000 shares of Common Stock to Directors, Officers and
full time employees of the Company and its subsidiaries as the Committee may
determine. The Committee consists of members of the Company's Compensation
Committee who are outside directors. Options granted to directors under this
plan must be ratified by the Board of Directors.
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The exercise price per share of each option will be equal to the fair
market value of the shares of Common Stock on the date the option is granted.
All options granted under the Non-Qualified Option Plan expire upon the earlier
of six years following the date of grant or three months following the date the
optionee ceases to provide services to the Company. Upon retirement or death,
all options previously granted become exercisable within one year.
Options under the Non-Qualified Option Plan granted to officers and key
employees may be exercised to the extent of 30% of the shares covered after two
years from the date of grant; an additional 30% after three years from the date
of grant and the remaining 40% after four years from the date of grant. Options
under the Plan granted to directors may be exercised 100% after one year from
date of grant.
Upon exercise of the stock option, an optionee will be deemed to have
received income in an amount equal to the amount by which the exercise price is
exceeded by the fair market value of the Common Stock. The amount of any
ordinary income deemed to have been received by an optionee upon the exercise of
a non-qualified stock option will be a deductible expense of the Company for tax
purposes.
No options have been granted under this plan.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the approval of the 1999 Non-Qualified Stock
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 1999 NON-QUALIFIED STOCK OPTION PLAN
PROPOSAL 4. APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG LLP as auditors
for the fiscal year ending September 30, 1999, and further directed that
management submit the Board's selection of auditors to the shareholders at the
Annual Meeting for ratification. KPMG LLP, an internationally known firm of
independent certified public accountants, has audited the Company's financial
statements since 1973. The Company is not aware of any relationship with KPMG
LLP or any of its associates, other than the usual relationship that exists
between independent certified public accountants and client.
KPMG LLP will have a representative at the Annual Meeting of Shareholders,
who will have an opportunity to make a statement, if they should so desire, and
will be available to respond to appropriate questions. KPMG LLP has provided no
services other than audit and tax services in connection with the examination of
the Company's financial statements. The Board of Directors of the Company
recommends that you vote in favor of the selection of KPMG LLP as the Company's
auditors.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the ratification of KPMG LLP as the independent
auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of this date, management is not aware of any matters to be presented
for action at the Annual Meeting, other than those referred to in the Notice of
Annual Meeting of Shareholders, but the proxy form included with this proxy
statement, if executed and returned, gives discretionary authority to management
with respect to any other matters that may come before the meeting.
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MISCELLANEOUS
Solicitation of proxies is being made by mail and may also be made in
person or by telephone or fax by officers, directors and regular employees of
the Company.
The cost of the solicitation will be borne by the Company.
By order of the Board of Directors
Hauppauge, New York Arthur D. Roche
March 5, 1999 Secretary
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