<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
INTEGRATED SECURITY SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
INTEGRATED SECURITY SYSTEMS, INC.
8200 SPRINGWOOD DRIVE, SUITE 230
IRVING, TEXAS 75063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 1, 1997
To the Holders of Common Stock of
INTEGRATED SECURITY SYSTEMS, INC.:
Notice is hereby given that the 1997 Annual Meeting of Stockholders of
Integrated Security Systems, Inc., a Delaware corporation (the "Company"), will
be held at the Company's executive offices, 8200 Springwood Drive, Suite 230,
Irving, Texas 75063, on Thursday, May 1, 1997 at 10:00 A.M., Dallas, Texas
time, for the following purposes:
(1) To elect five persons to serve as directors until the
Company's 1998 Annual Meeting of Stockholders or until their
successors are duly elected and qualified;
(2) To consider and act upon a proposal to amend the Company's
Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of common stock from 18,000,000 to
30,000,000;
(3) To consider and act upon a proposal to approve the adoption of
the Company's 1997 Omnibus Stock Plan;
(4) To transact any other business properly brought before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed Monday, March 10, 1997, at the close
of business, as the record date for the determination of stockholders entitled
to notice of, and to vote at, the meeting and any adjournments or postponements
thereof. Only holders of record of the Company's common stock on that date are
entitled to vote on matters coming before the meeting and any adjournments or
postponements thereof. A complete list of stockholders entitled to vote at the
meeting will be maintained in the Company's offices at 8200 Springwood Drive,
Suite 230, Irving, Texas 75063, for the ten days prior to the meeting.
Please advise the Company's transfer agent, American Stock Transfer,
6201 15th Avenue, Third Floor, Brooklyn, NY 11218, of any change in your
address.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED
STATES. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT ADDRESSES, EACH SUCH PROXY CARD
SHOULD BE SIGNED AND RETURNED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
THE PROXY CARD SHOULD BE SIGNED BY ALL REGISTERED HOLDERS IN THE EXACT NAMES AS
THE SHARES ARE SO REGISTERED. ANY PERSON GIVING A PROXY HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE AND, IF PRESENT AT THE ANNUAL
MEETING, MAY WITHDRAW IT AND VOTE IN PERSON.
By Order of the Board of Directors,
Gerald K. Beckmann
Chairman, President
and Chief Executive Officer
Irving, Texas
April 9, 1997
<PAGE> 3
INTEGRATED SECURITY SYSTEMS, INC.
8200 Springwood Drive, Suite 230
Irving, Texas 75063
---------------
PROXY STATEMENT
---------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 1, 1997
The accompanying proxy, mailed with this Proxy Statement to
stockholders on or about April 9, 1997, is solicited by Integrated Security
Systems, Inc. (the "Company"), in connection with the Annual Meeting of
Stockholders to be held on May 1, 1997 (the "Annual Meeting").
As stated in the Notice to which this Proxy Statement is attached,
matters to be acted upon at the Annual Meeting include (i) election to the
Board of Directors of five directors to serve as directors until the Company's
1998 Annual Meeting of Stockholders or until their successors are duly elected
and qualified, (ii) consideration of a proposal to amend the Company's
Certificate of Incorporation ("Certificate of Incorporation") to increase the
number of authorized shares of common stock from 18,000,000 to 30,000,000,
(iii) consideration of a proposal to approve the adoption of the Company's 1997
Omnibus Stock Plan; and (iv) to transact any other proper business brought
before the Annual Meeting or any adjournments or postponements thereof.
All holders of record of shares of common stock at the close of
business on March 10, 1997 (the "Record Date") are entitled to notice of and to
vote at the Annual Meeting. On the Record Date, the Company had outstanding
6,908,842 shares of common stock. Each share of common stock is entitled to
one vote. The presence, in person or by proxy, of holders of a majority of the
outstanding shares of common stock entitled to vote as of the Record Date is
necessary to constitute a quorum at the Annual Meeting.
With regard to the election of directors, votes may be cast in favor
or withheld; votes that are withheld will be excluded entirely from the vote
and will have no effect. Abstentions on the proposal to amend the Certificate
of Incorporation or to approve the adoption of the Omnibus Stock Plan, if any,
will have the effect of a negative vote because this proposal requires the
affirmative vote of holders of a majority of outstanding shares. Brokers who
hold shares in street name for customers and do not receive voting instructions
from such customers are entitled to vote on the election of directors. Under
applicable Delaware law, a broker non-vote resulting from the failure to
deliver voting instructions to a broker will have no effect on the outcome of
the election of directors.
Each stockholder has the unconditional right to revoke his or her
proxy at any time before it is voted. Any proxy given may be revoked either by
a written notice duly signed and delivered to the Secretary of the Company
prior to the exercise of the proxy, by execution of a subsequent proxy or by
voting in person at the Annual Meeting (although attending the Annual Meeting
without executing a ballot or executing a subsequent proxy will not constitute
revocation of a proxy). All properly executed, unrevoked proxies received
before the Annual Meeting will be voted in accordance with the directions
contained therein. When no direction has been given by a stockholder returning
a proxy, the proxy will be voted (i) FOR the election as directors of the
nominees named in this Proxy Statement, (ii) FOR the proposal to amend the
Certificate of Incorporation, and (iii) FOR the approval of the adoption of the
Company's Omnibus Stock Plan.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of outstanding shares
of Common Stock beneficially owned as of February 28, 1997, by (i) each
director and named executive officer of the Company, (ii) all officers and
directors of the Company as a group, and (iii) all persons who are known by the
Company to be beneficial owners of 5% or more of the Company's outstanding
Common Stock. Unless otherwise noted, each of the persons listed below has
sole voting and investment power with respect to the shares indicated as
beneficially owned by such person.
<TABLE>
<CAPTION>
Number of Shares
Beneficially
Name and Address of Beneficial Owner Owned(1) Percent
------------------------------------ -------- -------
<S> <C>
Philip R. Thomas(2)(4) 1,625,127 23.5%
Seabeach & Company(11) 1,120,000 16.2%
Gerald K. Beckmann(2)(3)(5) 868,940 10.4%
ProFutures Bridge Capital Fund LP(12) 475,000 6.9%
James W. Casey(2)(3)(6) 120,373 1.7%
Frank R. Marlow(2)(3)(7) 60,522 0.9%
Tony C. Lisotta(2)(3)(8) 57,662 0.8%
Richard P. Shortz(2)(3)(9) 41,921 0.6%
Holly J. Burlage(2)(3)(10) 13,128 0.2%
Robert M. Galecke(2)(3) 00.0%
All current directors and executive officers as a group (7 persons) 1,162,546 16.9%
</TABLE>
- ---------------
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
of Common Stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are deemed
to be outstanding for the purpose of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person shown
in the table.
(2) The address for this person is 8200 Springwood Drive, Suite 230, Irving,
Texas 75063.
(3) Mr. Beckmann is a Director, the Chairman of the Board of Directors, the
President and the Chief Executive Officer of the Company. Mr. Casey is a
Director, Vice President, Secretary and Chief Financial Officer of the
Company. Mr. Marlow and Mr. Galecke are Directors of the Company. Mr.
Lisotta and Mr. Shortz are Vice Presidents of the Company. Ms. Burlage
is Controller and Assistant Secretary of the Company.
(4) Includes 146,850 shares of Common Stock owned by Thomas Group Holding
Company, a company owned by Mr. Thomas; 200,007 shares of Common Stock
issuable upon the conversion of preferred stock; and 53,802 shares of
Common Stock issuable upon the exercise of warrants within 60 days.
(5) Includes 177,237 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; 395,682 shares of Common
Stock issuable upon the conversion of preferred stock; and 146,021 shares
of Common Stock issuable upon the exercise of warrants within 60 days.
(6) Includes 63,281 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; 50,346 shares of Common
Stock issuable upon the conversion of preferred stock; and 6,746 shares
of Common Stock issuable upon the exercise of warrants within 60 days.
2
<PAGE> 5
(7) Includes 52,059 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; 7,463 shares of Common
Stock issuable upon the conversion of preferred stock; and 1,000 shares
of Common Stock issuable upon the exercise of warrants within 60 days.
(8) Includes 46,545 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; 9,803 shares of Common
Stock issuable upon the conversion of preferred stock; and 1,314 shares
of Common Stock issuable upon the exercise of warrants within 60 days.
(9) Includes 10,440 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; 27,761 shares of Common
Stock issuable upon the conversion of preferred stock; and 3,720 shares
of Common Stock issuable upon the exercise of warrants within 60 days.
(10) Includes 2,634 shares of Common Stock issuable upon the exercise of
outstanding options exercisable within 60 days; 9,254 shares of Common
Stock issuable upon the conversion of preferred stock; and 1,240 shares
of Common Stock issuable upon the exercise of warrants within 60 days.
(11) The address for this company is c/o State Street Bank and Trust Co.,
Corporate Action Unit, 1778 Heritage Drive, North Quincy, MA 02171.
(12) The address for this company is 1720 South Bellaire Street, Suite 500,
Denver, CO 80222.
ELECTION OF DIRECTORS
The nominees for director listed below will stand for election at this
Annual Meeting for a one-year term of office expiring at the 1998 Annual
Meeting of Stockholders or until their successors are duly elected and
qualified. Messrs. Beckmann, Casey, Galecke and Marlow are currently members
of the Board of Directors.
The following table sets forth certain information as to the nominees
for director of the Company:
<TABLE>
<CAPTION>
Name and Age Positions and Offices With the Company Director Since
------------ -------------------------------------- --------------
<S> <C> <C>
Gerald K. Beckmann, 54 Director, Chairman of the Board, President and 1991
Chief Executive Officer
James W. Casey, 55 Director, Vice President and Chief Financial Officer 1995
Robert M. Galecke, 55 Director 1996
Frank R. Marlow, 57 Director 1995
James E. Jack, 55 Director --
</TABLE>
While it is not anticipated that any of the nominees will be unable to
serve, if any nominee should decline or become unable to serve as a director
for any reason, votes will be cast instead for a substitute nominee designated
by the Board of Directors or, if none is so designated, will be cast according
to the judgment of the person or persons voting the proxy.
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
GERALD K. BECKMANN, 54, Director, Chairman, President and Chief
Executive Officer, has served as a director and Chief Technical Officer of the
Company since its inception in 1991 and Chairman of the Board of Directors
since February 1993. On May 1, 1995, Mr. Beckmann became President and Chief
Executive Officer of the Company. From 1991 to 1994 Mr. Beckmann was
President and Chief Operating Officer of Thomas Group Holding Company, a
private investment company. In 1985, Mr. Beckmann joined Thomas Group, Inc., a
publicly-held management consulting firm, and currently serves as a director.
Mr. Beckmann also serves as a director on the board of CTC Holdings, an
electronic funds transfer systems supplier. Mr. Beckmann is also a manager in
Celerity Partners, LLC, the general partner of Celerity Partners I, LP, an
acquisition limited partnership. Mr. Beckmann holds a B.S.E.E. from Virginia
Polytechnic Institute and University.
HOLLY J. BURLAGE, 33, Controller and Assistant Secretary, joined the
Company in February 1994 and became Controller and Assistant Secretary in May
1995. Prior to joining the Company, Ms. Burlage was Controller of Signature
Home Care Group, Inc., a home health care company, from 1993 to 1994, and
Controller and Chief Accounting Officer of National Heritage, Inc., a
publicly-traded long-term care company, from 1989 to 1993. Ms. Burlage holds a
B.B.A. from Baylor University.
JAMES W. CASEY, 55, Director, Vice President, Secretary and Chief
Financial Officer, has served as General Manager of B&B, the Company's
manufacturing subsidiary, from April 1994 to May 1995. Mr. Casey became
Director, Vice President and Chief Financial Officer of the Company on May 1,
1995. Prior to joining the Company, Mr. Casey was President and Chief
Executive Officer of PROTECH, Inc., a publicly-held automatic test equipment
manufacturer from 1990 to 1993. Mr. Casey holds a B.B.A. from Iona College and
an M.S. from the State University of New York. He is a Certified Public
Accountant.
ROBERT M. GALECKE, 55, Director, is Vice President for Finance and
Administration for the University of Dallas. Prior to that he was a principal
in the corporate consulting firm of Pate, Winters & Stone, Inc. from 1993 to
1996. He also served as Executive Vice President, Chief Operating Officer and
Chief Financial Officer of Southmark Corporation from 1986 to 1992. From 1989
to 1995, Mr. Galecke served as Chairman of the Board, President and Chief
Executive Officer of National Heritage, Inc. and was also Chairman of the
Board, President and Chief Executive Officer of USTrails, Inc., during that
period. Mr. Galecke received a graduate degree from the School of Banking at
the University of Wisconsin, Madison, Wisconsin, and a BS in Economics from the
University of Wisconsin Stevens Point.
JAMES E. JACK, 55, nominated for Director position. Mr. Jack is
currently retired. From 1991 to 1996 Mr. Jack was Director, Senior Executive
Vice President and Chief Financial Officer of Associates First Capital
Corporation, a publicly traded consumer and commercial finance organization.
Prior to that, Mr. Jack was Director, Executive Vice President and Chief
Financial Officer from 1981 to 1993 of the same company. Mr. Jack received a
graduate degree from the Southern Methodist University School of Business and a
BBA from the University of Notre Dame.
TONY C. LISOTTA, 55, Vice President, Sales and Marketing, IST, a
subsidiary of the Company, joined the Company in October 1993. Mr. Lisotta
previously served as Senior Vice President for Fults Associates, Inc., a
commercial real estate firm from 1988 to 1992, and Executive Vice President for
The Consolidated Companies, a surety bond company from 1992 to 1993. Mr.
Lisotta has over 14 years of sales and management experience with IBM. Mr.
Lisotta holds a B.B.A. from Lamar University.
FRANK R. MARLOW, 57, Director, has been a director of the Company
since May 1995. Mr. Marlow served as Vice President, Sales and Marketing for
the Company from October 1993 to February 1995. Mr. Marlow has been a Vice
President of Hogan Systems, a publicly-traded company, since March of 1995.
Previously, Mr. Marlow was with IBM, Docutel Corporation, UCCEL Corporation and
Syntelligence Corporation in executive sales and training positions.
RICHARD P. SHORTZ, 42, Vice President and Chief Technical Officer,
IST, joined the Company in May 1994 and is responsible for Intelli-Site
software development. Prior to IST, Mr. Shortz was a Software Developer for
Thomas Group, Inc. from 1988 to 1994. Mr. Shortz holds a B.S.C.S. from the
University of Maryland.
4
<PAGE> 7
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established two committees: a Compensation
and Stock Option Committee, and an Audit Committee. The Company's Board of
Directors acts as the nominating committee to nominate persons for election to
the Board of Directors.
The Compensation and Stock Option Committee is currently composed of
Messrs. Galecke and Marlow. The Compensation and Stock Option Committee met
one time during the fiscal year ended December 31, 1996. The Compensation and
Stock Option Committee determines the amount and form of compensation and
benefits payable to all officers and employees, and advises and consults with
management regarding the benefit plans and compensation policies of the
Company. The Compensation and Stock Option Committee also reviews and approves
stock option grants to directors, executive officers and employees of the
Company.
The Audit Committee is currently composed of Messrs. Casey, Galecke
and Marlow. The Audit Committee met twice during the fiscal year ended
December 31, 1996. This committee recommends to the Board of Directors the
appointment of independent auditors, reviews the plan and scope of audits,
reviews the Company's significant accounting policies and internal controls,
and has general responsibility for related matters. Prior to the mailing of
this Proxy Statement to the stockholders of the Company, this committee met
with the Company's independent auditors to review the 1996 audit and the
significant accounting policies and internal controls.
The Board of Directors held five meetings during the fiscal year ended
December 31, 1996. None of the directors attended fewer than 90% of the
meetings of the Board of Directors and its committees on which they served.
The Directors of the Company did not receive compensation for their service to
the Company as such, although all directors are reimbursed for their
out-of-pocket expenses incurred in connection with their attendance at Board
meetings.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- -----------------------------
Other Annual Restricted Stock Option/
Name and Principal Position Year Salary Bonus Compensation Awards SARS
- --------------------------- ---- ------ ----- ------------ ------ ----
<S> <C> <C> <C> <C> <C> <C>
Gerald K. Beckmann 1996 $281,875 -- -- -- --
Chairman, CEO & President 1995 $114,583 -- -- $68,750(4) $14,473
1994 -- -- -- -- --
James W. Casey 1996 $94,163 $ 6,812 -- -- $50,000
Vice President & CFO 1995 $115,145 $ 7,750 -- $33,333(4) $23,395
1994 $94,125 $17,125 -- -- $34,333
Ferdinand A. Hauslein, Jr.(2) 1996 $228,471 -- -- -- --
former CEO & President 1995 $233,333 -- $32,845(4) -- $20,000
1994 $154,167 $56,250 -- $ 4,284(2) $16,271
Tony C. Lisotta 1996 $120,892 -- -- -- --
Vice President, IST 1995 $116,000 $2,850 -- $ 3,550(4) $10,150
1994 $111,500 $16,90 -- -- $ 8,627
Richard P. Shortz 1996 $123,166 $8,400 -- -- $15,120
Vice President, IST 1995 $96,000 $3,000 -- $18,600(4) $ 2,880
1994 $64,000 -- -- -- $12,000
</TABLE>
5
<PAGE> 8
(1) No longer employed by the Company.
(2) Mr. Hauslein holds 2,448 shares of restricted common stock valued at
$8,874 at December 31, 1996.
(3) Outplacement services.
(4) Convertible preferred stock issued for forgiveness of deferred salary
amounts. No other executive officer's salary and bonus exceed $100,000
during any of the indicated periods.
No other executive had any form of long-term incentive plan compensation
arrangement with the Company during any of the indicated periods.
STOCK OPTION GRANTS
The following table provides information concerning the grant of stock
options during the year ended December 31, 1996 to the named executive
officers:
<TABLE>
<CAPTION>
Number of Securities % of Total Options
Underlying Options Granted to Employees Exercise Expiration
Granted(1) in Fiscal Year Price Date
-------------------- -------------------- ------- ----------
<S> <C> <C> <C> <C>
Gerald K. Beckmann -- -- -- --
James W. Casey 50,000 27% $.81 11/3/03
Tony C. Lisotta -- -- -- --
Richard P. Shortz 15,120 8% $1.96 8/1/06
---------------
</TABLE>
(1) The options for all listed vest with respect to 25% of the shares
issuable thereunder six months after the date of grant and with
respect to cumulative increments of 25% of the shares issuable
thereunder on each anniversary of the date of grant.
OPTION EXERCISES AND HOLDINGS
The following table provides information related to the number of
shares received upon exercise of options, the aggregate dollar value realized
upon exercise, and the number and value of options held by the named executive
officers of the Company at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS/SARS AT VALUE OF UNEXERCISED IN-THE-MONEY
FISCAL YEAR END OPTIONS/SARS AT FISCAL YEAR END
------------------------------------- --------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gerald K. Beckmann 177,237 7,237 $ 200,296 $ 9,046
James W. Casey 63,281 44,448 135,903 121,141
Ferdinand A. Hauslein, Jr. 184,212 -- 230,890 --
Tony C. Lisotta 46,545 7,232 69,509 12,626
Richard P. Shortz 10,440 19,560 $ 19,845 $ 34,383
</TABLE>
DIRECTOR COMPENSATION
Currently, directors who have served as directors for at least six months
prior to the calculation of an award are eligible to receive grants of options
under the Stock Option Plan. Awards are made pursuant to a formula that is
based on the Company's net income per share. All directors are reimbursed for
their out-of-pocket expenses incurred in connection with their attendance at
Board meetings.
The Company has entered into two-year employment agreements with Mr.
Gerald K. Beckmann and Mr. James W. Casey that provide for annual base salaries
of $283,250 and $120,000, respectively. If either Mr. Beckmann or Mr. Casey is
terminated by the Company, each of them is entitled to receive a severance
payment of six months; base salary upon termination.
6
<PAGE> 9
CERTAIN TRANSACTIONS
In 1984, Mr. Philip R. Thomas, the Company's principal stockholder,
who was then sole owner of B&B Electromatic, Inc.("B&B"), a wholly-owned
subsidiary of the Company, purchased the land, building, and equipment of B&B
for a $1,500,000 note payable (bearing interest at 10%) to B&B. In December
1991, the portion of the above transaction related to the land and building was
rescinded, which decreased the note balance to $795,000. This note became an
asset of the Company upon its acquisition of B&B in 1992. The note was being
paid over a five-year period beginning in 1992. The gain on the sale had been
deferred and offset against the note receivable, which had been classified in
stockholders' equity. The net note receivable balance at December 31, 1994 was
$144,062. As a result of these transactions, B&B leased from Mr. Thomas
substantially all of the manufacturing equipment used at B&B's facility in
Norwood, Louisiana at the current rate of $6,725 per month during 1993 and
1994. On March 31, 1995, this transaction was closed with Mr. Thomas
contributing Common Stock and equipment and canceling the related equipment
lease with the Company in exchange for forgiveness of the note payable to the
Company and related interest. This resulted in an increase to stockholders'
equity of $87,000.
During the period from January 1990 to December 1992, the Company
incurred aggregate indebtedness of $786,373 to Thomas Group Holding Company
("TGHC"), Mr. Lynn R. Causey, and Mr. Ferdinand A. Hauslein, Jr. (both former
executive officers of the Company), all in separate transactions. From the
total amount of this debt, $636,531 was exchanged for 141,451 shares of Common
Stock on April 20, 1993, $40,000 was repaid out of the proceeds of the
Company's initial public offering on April 20, 1993, and the maturity date of
the remaining $109,842 in loans to the Company was extended until January 1,
1995. This amount has been paid in full.
Effective as of February 16, 1994, the Company entered into a
five-year agreement for $120,000 annually with TGHC for TGHC to provide
services including but not limited to the services of Mr. Gerald K. Beckmann to
serve as Chairman of the Board and as a Director of the Company. Pursuant to
such agreement, the Company was obligated to nominate Mr. Beckmann as a
director during the term of the agreement. This agreement was terminated May
1, 1995, the date Mr. Beckmann became the Chief Executive Officer and
President.
On January 1, 1995, Mr. Thomas and Mr. Beckmann loaned the Company
$69,088 and $90,000, respectively. On December 29, 1995 Mr. Thomas and Mr.
Beckmann converted their loans along with additional amounts owed them for
interest and miscellaneous expenses into 14,539 shares of Series B $20
Convertible Preferred Stock. During 1995, Mr. Thomas loaned the Company
$40,000 which was secured by certain receivables. On December 29, 1995, Mr.
Thomas converted this loan into 2,000 Series B $20 Convertible Preferred Stock.
Also on December 29, 1995, Mr. Beckmann, Mr. James W. Casey (a director and
executive officer of the Company), Mr. Tony C. Lisotta (Vice President of IST),
Mr. Richard P. Shortz (Vice President of IST), Ms. Holly J. Burlage (Controller
of the Company), and Mr. Frank R. Marlow (a director of the Company), converted
unpaid compensation totaling $138,451 into 6,922 Series B $20 Convertible
Preferred Stock.
During 1995 and 1996, Mr. Beckmann loaned the Company approximately
$400,000. As of December 31, 1996, no loans were outstanding. On March 11,
1996, Mr. Beckmann loaned the Company $100,000 as part of a $250,000 bridge
loan. These bridge loans were converted in June 1996 into $20 Series C
Preferred Stock convertible to 30 shares of Common Stock and Warrants to
purchase 15 shares of Common Stock at $1.00 per share. These warrants expire
five years from date of issue. During the second and third quarters of 1996,
Mr. Beckmann loaned the Company $90,000 and Mr. Casey loaned the Company
$75,000. Both of these loans have been repaid. In 1996, Mr. Beckmann
guaranteed loans to the Company in the aggregate amount of $1,050,000.
The Company believes that the terms of the foregoing transactions were
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors, executive officers and persons who own more
than ten percent of the Company's common stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the
Company. Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) reports they file. Based solely upon a review
of Forms 3, 4
7
<PAGE> 10
and 5 and amendments thereto provided to the Company pursuant to Rule 16a-3,
the following individuals did not file on a timely basis reports required by
Section 16(a) of the 1934 Act during the period from January 1, 1996 to
December 31, 1996: Late filings: 2=Casey, 1=Beckmann, 1=Galecke.
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee,
has appointed Price Waterhouse as the independent accountants of the Company
for the fiscal year ending December 31, 1997.
Representatives of Price Waterhouse are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and to be available to respond to appropriate questions.
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
BACKGROUND
Currently, the Company's Certificate of Incorporation authorizes the
issuance of up to 18,000,000 shares of common stock. On the Record Date,
6,908,842 shares of common stock were outstanding and 11,762,500 shares were
subject to future issuance pursuant to outstanding warrants, convertible
preferred stock, convertible debt, and options, 500,000 of which were granted
pursuant to the 1993 Stock Option Plan. Therefore, as of the Record Date, no
shares of common stock were available for future issuance, and 800,000 shares
of common stock issuable pursuant to outstanding securities may not be
exercised until and if sufficient additional shares are authorized by the
shareholders of the Company.
The Board by unanimous written consent has adopted resolutions
approving and recommending that the stockholders adopt an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of common stock from 18,000,000 to 30,000,000.
DESCRIPTION OF NEWLY AUTHORIZED SHARES
If the proposed amendment to the Certificate of Incorporation is
approved by the Company's stockholders, the additional shares of authorized
common stock will have the same terms and rights as the currently authorized
shares of common stock. Holders of common stock do not have preemptive rights
to purchase shares of common stock or preferred stock issued by the Company.
REASONS FOR AND EFFECT OF THE AMENDMENT
The increase in the number of shares of common stock has been
recommended by the Board to cover the shortage created by the acquisition in
December 1996, to assure that an adequate supply of authorized unissued shares
is available for issuance from time to time in connection with possible
acquisitions or mergers, to obtain and retain key personnel, to take advantage
of future opportunities for public or private equity financing, and for other
general corporate purposes. The common stock will be available for issuance
without further action of the stockholders, unless required by applicable laws
or the policy of any stock exchange or registered securities association on
which the shares of stock of the Company are listed, if any.
The Company is continuing to review acquisition and merger candidates.
The Company anticipates that, if it completes a merger or acquisition, shares
of common stock or preferred stock may be issued in connection with any such
transaction. The Company has no present plans or proposals for the issuance of
the additional shares of common stock, however, the Company may issue
additional shares of such common stock at any time and at prices which the
Board of Directors deems advisable.
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PROPOSED AMENDMENT
It is proposed that Article Fourth of the Company's Certificate of
Incorporation be amended to read as follows:
"Fourth: The total number of shares of stock which the Corporation
shall have authority to issue is 30,750,000 shares, of which 30,000,000 shares
shall be common stock, par value $.01 per share ("Common Shares"), and 750,000
shares shall be Preferred Stock, par value $.01 per share ("Preferred Stock")."
APPROVAL OF THE COMPANY'S 1997 OMNIBUS STOCK PLAN
The Board of Directors has adopted, subject to stockholder approval,
the Company's 1997 Omnibus Stock Plan (the "Omnibus Plan") with the total
number of shares issuable thereunder of 1,500,000. The purpose of the plan is
to permit the continuing grant of stock options, which the Board of Directors
believes is necessary to continue to attract and retain key employees,
consultants and directors. The Omnibus Plan is the successor to the 1993
Employee Stock Option Plan pursuant to which no further stock options may be
granted. Options previously granted under the predecessor plan and currently
outstanding remain subject to the provisions of that plan.
Approval of the stockholders is sought under the terms of the Omnibus
Plan and in order to meet the stockholder approval requirements of (i) Section
422 of the Internal Revenue Code of 1986 (the "Code"). The Board of Directors
recommends the plan because it believes that the continuing availability of
grants under the Omnibus Plan is an important factor in the Company's ability
to attract and retain experienced employees, consultants and directors.
DESCRIPTION OF THE OMNIBUS PLAN
The Omnibus Plan provides for the grant of incentive stock options
("ISO's") within the meaning of the Code, non-statutory stock options
("NSO's"), stock appreciation rights ("SAR's"), awards of stock ("Awards") and
stock purchase opportunities ("Purchase Rights") to directors, employees and
consultants of the Company and its present and future subsidiaries. The
Omnibus Plan will remain in effect until May 1, 2007, subject to the Board's
right to terminate it earlier.
Under the plan, ISO's may only be granted to employees or directors of
the Company; NSO's, SAR's, Awards and Purchase Rights may be granted to any
director, employee or consultant of the Company. Recipients of options, Awards
and Purchase Rights are selected by the Compensation Committee. A copy of the
full text of the Omnibus Plan us attached as Exhibit A to this Proxy Statement.
BOARD OF DIRECTORS' RECOMMENDATIONS; VOTE REQUIRED
The Board of Directors unanimously recommends a vote FOR the election
as director of each of the nominees named in the proxy, FOR the amendment to
the Company's Certificate of Incorporation, and FOR the adoption of the
Company's Omnibus Stock Plan. Nominees for director receiving a plurality of
the votes cast will be elected as directors. The affirmative vote of the
holders of a majority of the outstanding shares of common stock is required to
approve the amendment to the Certificate of Incorporation. The affirmative
vote of the holders of a majority if the shares of common stock present at the
Annual Meeting is required to approve the adoption of the Omnibus Plan.
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STOCKHOLDER PROPOSALS
In order for stockholder proposals to receive consideration for
inclusion in the Proxy Statement for the Company's 1998 Annual Meeting of the
Stockholders, such proposals must be received by March 15, 1998, at the
Company's offices at 8200 Springwood Drive, Suite 230, Irving, Texas 75063,
Attention: Secretary.
The Company's by-laws contain a provision which requires that a
stockholder may nominate a person for election as a director only if written
notice of such stockholder's intention to make such nomination has been given
to the Secretary of the Company not earlier than 60 days nor later than 30 days
prior to a meeting of stockholders. However, in the event that notice or
public disclosure of a meeting of stockholders is first given or made to the
stockholders less than 40 days prior to such meeting, then notice of a
stockholder's intention to nominate a person for election as a director will be
timely if given in writing to the Secretary before the close of business on the
tenth day following the date on which the notice of the meeting was mailed or
the public disclosure of the meeting was made. The by-laws also require that
the notice set forth, among other things, a description of all arrangements or
understandings between the nominating stockholder and the nominee pursuant to
which the nomination is to be made or the nominee is to be elected and such
other information regarding the nominee as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated by the Company's Board.
This provision is intended to give the Company the opportunity to obtain all
relevant information regarding persons nominated for director. The Board may
disqualify any nominee who fails to provide the Company with complete and
accurate information as required by this provision.
SOLICITATION OF PROXIES
The Company will pay the expenses of this proxy solicitation. In
addition to solicitation by mail, some of the officers and regular employees of
the Company may solicit proxies personally or by telephone, if deemed
necessary. The Company will request brokers and other fiduciaries to forward
proxy soliciting material to the beneficial owners of shares which are held of
record by the brokers and fiduciaries, and the Company may reimburse them for
reasonable out- of-pocket expenses incurred by them in connection therewith.
OTHER MATTERS
The Board is not aware of any matter, other than the matters described
above, to be presented for action at the Annual Meeting. However, if any other
proper items of business should come before the Annual Meeting, it is the
intention of the person or persons acting under the enclosed form of proxy to
vote in accordance with their best judgment on such matters.
The Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996 is enclosed herewith.
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED POSTAGE PAID RETURN ENVELOPE. A PROMPT RETURN OF
YOUR PROXY CARD WILL BE APPRECIATED, AS IT WILL SAVE THE EXPENSE OF FURTHER
MAILINGS.
By Order of the Board of Directors,
Gerald K. Beckmann
Chairman, President
and Chief Executive Officer
Irving, Texas
April 9, 1997
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EXHIBIT A
INTEGRATED SECURITY SYSTEMS, INC.
1997 LONG-TERM INCENTIVE PLAN
I. PURPOSE
The purpose of the Integrated Security Systems Incorporated. 1997
Long-Term Incentive Plan (the "Plan") is to provide a means whereby Integrated
Security Systems Incorporated.., a Delaware corporation (the "Company"), and
its Subsidiaries may attract able persons to enter the employ of the Company
and to provide a means whereby those key employees upon whom the
responsibilities of the successful administration and management of the Company
rest, and whose present and potential contributions to the welfare of the
Company are of importance, can acquire and maintain stock ownership, thereby
strengthening their concern for the long-term welfare of the Company and their
desire to remain in its employ. A further purpose of the Plan is to provide
such key employees with additional incentive and reward opportunities designed
to enhance the profitable growth of the Company over the long term.
Accordingly, the Plan provides for granting Incentive Stock Options, options
which do not constitute Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Performance Share Awards, Stock Value Equivalent
Awards, or any combination of the foregoing, is as best suited to the
circumstances of the particular employees as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option,
Stock Appreciation Right, Restricted Stock Award, or Performance Share
Award or Stock Value Equivalent Award.
(b) "Board" means the board of directors of Integrated Security
Systems Incorporated.
(c) "Change of Control" means, for the purposes of Clause (B) of
Paragraph (e) of Article XII and Clause (B) of Paragraph (f) of Article
XII, the amount determined in Clause (i), (ii) or (iii), whichever is
applicable, as follows: (i) the per share price offered to stockholders
of the Company in any merger, consolidation, sale of assets or
dissolution transaction, (ii) the price per share offered to
stockholders of the Company in any tender offer or exchange offer
whereby a Corporate Change takes place or (iii) if a Corporate Change
occurs other than as described in Clause (i) or Clause (ii), the fair
market value per share determined by the Committee as of the date
determined by the Committee to be the date of cancellation and
surrender of an Option or Stock Appreciation Right. If the
consideration offered to stockholders of the Company in any transaction
described in this Paragraph or Paragraphs (d) and (e) of Article XII
consists of anything other than cash, the Committee shall determine the
fair cash equivalent of the portion of the consideration offered which
is other than cash.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any Section of the Code shall be deemed to
include any amendments or successor provisions to such Section and any
regulations under such Section.
(e) "Committee" means the committee selected by the Board to
administer the Plan in accordance with Paragraph (a) of Article IV of
the Plan.
(f) "Common Stock" means the common stock, par value $.01 per
share, of Integrated Security Systems Incorporated.
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(g) "Company" means Integrated Security Systems Incorporated.
(h) "Corporate Change" means one of the following events: (i) the
merger, consolidation or other reorganization of the Company in which
the outstanding Common Stock is converted into or exchanged for a
different class of securities of the Company, a class of securities of
any other issuer (except a direct or indirect wholly-owned subsidiary
of the Company), cash or other property; (ii) the sale, lease or
exchange of all or substantially all of the assets of the Company to
any other corporation or entity (except a direct or indirect
wholly-owned subsidiary of the Company); (iii) the adoption by the
stockholders of the Company of a plan of liquidation and dissolution;
(iv) the acquisition (other than acquisition pursuant to any other
clause of this definition) by any person or entity, including without
limitation a "group" as contemplated by Section 13(d)(3) of the
Exchange Act, of beneficial ownership, as contemplated by such Section,
of more than twenty percent (based on voting power) of the Company's
outstanding capital stock; or (v) as a result of or in connection with
a contested election of directors, the persons who were directors of
the Company before such election shall cease to constitute a majority
of the Board.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(j) "Fair Market Value" means, as of any specified date, the
closing price of the Common Stock on the NASDAQ Stock Exchange (or, if
the Common Stock is not listed on such exchange, such other national
securities exchange on which the Common Stock is then listed) on that
date, or if no prices are reported on that date, on the last preceding
date on which such prices of the Common Stock are so reported. If the
Common Stock is not then listed on any national securities exchange but
is traded over the counter at the time a determination of its Fair
Market Value is required to be made hereunder, its Fair Market Value
shall be deemed to be equal to the average between the reported high
and low sales prices of Common Stock on the most recent date on which
Common Stock was publicly traded. If the Common Stock is not publicly
traded at the time a determination of its value is required to be made
hereunder, the determination of its Fair Market Value shall be made by
the Committee in such manner as it deems appropriate.
(k) "Holder" means an employee of the Company who has been
granted an Award.
(l) "Incentive Stock Option" means an Option within the meaning
of Section 422 of the Code.
(m) "Option" means an Award granted under Article VII of the Plan
and includes both Incentive Stock Options to purchase Common Stock and
Options which do not constitute Incentive Stock Options to purchase
Common Stock.
(n) "Option Agreement" means a written agreement between the
Company and an employee with respect to an Option.
(o) "Optionee" means an employee who has been granted an
option.
(p) "Parent Corporation" shall have the meaning set forth in
Section 424(e) of the Code.
(q) "Performance Share Award" means an Award granted under
Article X of the Plan.
(r) "Plan" means the Integrated Security Systems Incorporated
1997 Long-Term Incentive Plan.
(s) "Restricted Stock Award" means an Award granted under Article
IX of the Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the general Rules and
Regulations of the Securities and Exchange Commission under the
Exchange Act, as such rule is currently in effect or as hereafter
modified or amended.
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(u) "Spread" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share
of Common Stock on the date such right is exercised over the exercise
price of such Stock Appreciation Right.
(v) "Stock Appreciation Right" means an Award granted under
Article VIII of the Plan.
(w) "Stock Appreciation Rights Agreement" means a written
agreement between the Company and an employee with respect to an Award
of Stock Appreciation Rights.
(x) "Stock Value Equivalent Award" means an Award granted under
Article XI of the Plan.
(y) "Subsidiary" means a company (whether a corporation,
partnership, joint venture or other form of entity) in which the
Company, or a corporation in which the Company owns a majority of the
shares of capital stock, directly or indirectly, owns a greater than
twenty percent equity interest, except with respect to the issuance of
Incentive Stock Options the term "Subsidiary" shall have the same
meaning as the term "subsidiary corporation" as defined in Section
424(f) of the Code.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the Board,
provided the Plan is approved by the stockholders of the Company within twelve
months thereafter and on or prior to the date of the first annual meeting of
stockholders of the Company held subsequent to the acquisition of an equity
security by a Holder hereunder for which exemption is claimed under Rule 16b-3.
Notwithstanding any provision of the Plan or in any Option Agreement or Stock
Appreciation Rights Agreement, no Option or Stock Appreciation Right shall be
exercisable prior to such stockholder approval. No further Awards may be
granted under the Plan after ten years from the date the Plan is adopted by the
Board. Subject to the provisions of Article XIII, the Plan shall remain in
effect until all Options and Stock Appreciation Rights granted under the Plan
have been exercised or expired by reason of lapse of time, all restrictions
imposed upon Restricted Stock Awards have lapsed and all Performance Share
Awards and Stock Value Equivalent Awards have been satisfied.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan shall be administered by a
committee which shall be (i) appointed by the Board and (ii)
constituted so as to permit the Plan to comply with Rule 16b-3.
(b) Powers. The Committee shall have sole authority, in its
discretion, to determine which employees of the Company and its
subsidiaries shall receive an Award, the time or times when such Award
shall be made, whether an Incentive Stock Option, nonqualified Option
or Stock Appreciation Right shall be granted, the number of shares of
Common Stock which may be issued under each Option, Stock Appreciation
Right and Restricted Stock Award, and the value of each Performance
Share Award and Stock Value Equivalent Award. In making such
determinations the Committee may take into account the nature of the
services rendered by the respective employees, their present and
potential contribution to the Company's success and such other factors
as the Committee in its discretion shall deem relevant.
(c) Additional Powers. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan.
Subject to this express provisions of the Plan, the Committee is
authorized to construe the Plan and the respective agreements executed
thereunder, to prescribe such rules and regulations relating to the
Plan as it may deem advisable to carry out the Plan, and to determine
the terms, restrictions and provisions of each Award, including such
terms, restrictions and provisions as shall be requisite in the
judgement of the Committee to cause designated Options to qualify as
Incentive Stock Options, and to make
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all other determinations necessary or advisable for administering the
Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in
the manner and to the extent it shall deem expedient to carry it into
effect. The determinations of the Committee on the matters referred to
in this Article IV shall be conclusive.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE SHARE AWARDS AND
STOCK VALUE EQUIVALENT AWARDS, SHARES SUBJECT TO THE PLAN
(a) Award Limits. The Committee may from time to time grant
Awards to one or more employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Article
VI. The aggregate number of shares of Common Stock that may be issued
under the Plan shall not exceed 1,500,000 shares. Any of such shares
which remain unissued and which are not subject to outstanding Options
or Awards at the termination of the Plan shall cease to be subject to
the Plan but, until termination of the Plan, the Company shall at all
times reserve a sufficient number of shares to meet the requirements of
the Plan. Shares shall be deemed to have been issued under the Plan
only to the extent actually issued and delivered pursuant to an Award.
To the extent that an Award lapses or the rights of its Holder
terminate or the Award is paid in cash, any shares of Common Stock
subject to such Award shall again be available for the grant of an
Award. The aggregate number of shares which may be issued under the
Plan shall be subject to adjustment in the same manner as provided in
Article XII with respect to shares of Common Stock subject to Options
then outstanding. Separate stock certificates shall be issued by the
Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the
exercise of any Option which does not constitute an Incentive Stock
Option.
(b) Stock Offered. The stock to be offered pursuant to the
grant of an Award may be authorized but unissued Common Stock or Common
Stock previously issued and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted only to individuals
who, at the time of grant, are key employees of the Company or any Subsidiary
of the Company. Awards may not be granted to any director of the Company who is
not an employee of the Company or to any member of the Committee. An Award made
pursuant to the Plan may be granted on more than one occasion to the same
person, and such Award may include an Incentive Stock Option, an Option which
is not an Incentive Stock Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Share Award, a Stock Value Equivalent
Award or any combination thereof. Each Award shall be evidenced by a written
instrument duly executed by or on behalf of the Company.
VII. STOCK OPTIONS
(a) Stock Option Agreement. Each Option shall be evidenced by an
Option Agreement between the Company and the Optionee which shall
contain such terms and conditions as may be approved by the Committee.
The terms and conditions of the respective Option Agreements need not
be identical. Specifically, an Option Agreement may provide for the
payment of the option price, in whole or in part, by the delivery of a
number of shares of Common Stock (plus cash if necessary) having a Fair
Market Value equal to such option price. Each Option Agreement shall
provide that the Option may not be exercised earlier than six months
from the date of grant and shall specify the effect of termination of
employment of the exercisability of the Option.
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(b) Option Period. The term of each Option shall be as
specified by the Committee at the date of grant.
(c) Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as
determined by the Committee.
(d) Special Limitations on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of Common Stock with
respect to which Incentive Stock Options are exercisable for the first
time by an individual during any calendar year under all incentive
stock option plans of the Company and its Parent Corporation and
Subsidiaries exceeds $100,000, such excess Incentive Stock Options
shall be treated as Options which do not constitute Incentive Stock
Options. The Committee shall determine, in accordance with applicable
provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of an Optionee's Incentive Stock Options will not
constitute Incentive Stock Options because of such limitation and shall
notify the Optionee of such determination as soon as practicable after
such determination. No Incentive Stock Option shall be granted to an
individual if, at the time the Option is granted, such individual owns
stock possessing more than 10% of the total combined voting power of
the total combined voting power of all classes of stock of the Company
or of its Parent Corporation or a Subsidiary, within the meaning of
Section 422(b)(6) of the Code, unless (i) at the time such Option is
granted the Option price is at least 110% of the Fair Market Value of
the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the
date of grant.
(e) Option Price. The purchase price of Common Stock issued under
each Option shall be determined by the Committee, but such purchase
price shall, in the case of Incentive Stock Options, not be less than
the Fair Market Value of Common Stock subject to the Option on the date
the Option is granted.
(f) Options and Rights in Substitution for Stock Options Granted
by Other Corporations. Options and Stock Appreciation Rights may be
granted under the Plan from time to time in substitution for stock
options held by employees of corporations who become, or who became
prior to the effective date of the Plan, key employees of the Company
or of any Subsidiary as a result of a merger or consolidation of the
employing corporation with the Company or such Subsidiary, or the
acquisition by the Company or a Subsidiary of all or a portion of the
assets of the employing corporation, or the acquisition by the Company
or a Subsidiary of stock of the employing corporation with the result
that such employing corporation becomes a Subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share
of Common Stock upon the exercise of such Stock Appreciation Right.
Stock Appreciation Rights may be granted in connection with the grant
of an Option, in which case the Option Agreement will provide that
exercise of Stock Appreciation Rights will result in the surrender of
the right to purchase the shares under the Option as to which the Stock
Appreciation Rights were exercised. Alternatively, Stock Appreciation
Rights may be granted independently of Options in which case each Award
of Stock Appreciation Rights shall be evidenced by a Stock Appreciation
Rights Agreement between the Company and the Holder which shall contain
such terms and conditions as may be approved by the Committee. The
terms and conditions of the respective Stock Appreciation Rights
Agreements need not be identical. The Spread with respect to a Stock
Appreciation Right may be payable either in cash, shares of Common
Stock with a Fair Market Value equal to the Spread or in a combination
of cash and shares of Common Stock. With respect to Stock Appreciation
Rights that are subject to Section 16 of the Exchange Act, however, the
Committee shall, except as provided in Paragraphs (e) and (f) of
Article XII, retain sole discretion (i) to determine the form in which
payment of the Stock Appreciation Right will be made (i.e., cash,
securities or any combination thereof) or (ii) to
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approve an election by a Holder to receive cash in full or partial
settlement of Stock Appreciation Rights. Upon the exercise of any Stock
Appreciation Rights. Upon the exercise of any Stock Appreciation Rights
granted hereunder, the number of shares reserved for issuance under the
Plan shall be reduced only to the extent that shares of Common Stock
are actually issued in connection with the exercise of such Right. Each
Stock Appreciation Rights Agreement shall provide that the Stock
Appreciation Rights may not be exercised earlier than six months from
the date of grant and shall specify the effect of termination of
employment on the exercisability of the Stock Appreciation Rights.
(b) Exercise Price. The exercise price of each Stock Appreciation
Right shall be determined by the Committee, but such exercise price
shall not be less than the Fair Market Value of a share of Common Stock
on the date the Stock Appreciation Right is granted.
(c) Exercise Period. The term of each Stock Appreciation
Right shall be as specified by the Committee at the date of grant.
(d) Limitations on Exercise of Stock Appreciation Right.
A Stock Appreciation Right shall be exercisable in whole or in such
installments and at such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) Restricted Period to be Established by the Committee. At the
time a Restricted Stock Award is made, the Committee shall establish a
period of time (the "Restriction Period") applicable to such Award.
Each Restricted Stock Award may have a different Restriction Period, in
the discretion of the Committee. The Restriction Period applicable to a
particular Restricted Stock Award shall not be changed except as
permitted by Paragraph (b) of this Article or by Article XII.
(b) Other Terms and Conditions. Common Stock awarded pursuant to
a Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Restricted Stock Award or,
at the option of the Company, in the name of a nominee of the Company.
The Holder shall have the right to receive dividends during the
Restriction Period, to vote the Common Stock subject thereto and to
enjoy all other stockholder rights, except that (i) the Holder shall
not be entitled to possession of the stock certificate until the
Restriction period shall have expired, (ii) the Company shall retain
custody of the stock during the Restriction Period, (iii) the Holder
may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of the stock during the Restriction Period and (iv) a breach of
the terms and conditions established by the Committee pursuant to the
Restricted Stock Award shall cause a forfeiture of the Restricted Stock
Award. At the time of such Award, the Committee may, in its sole
discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to,
rules pertaining to the termination of employment (by retirement,
disability, death or otherwise) of a Holder prior to expiration of the
Restriction Period.
(c) Payment for Restricted Stock. A Holder shall not be required
to make any payment for Common Stock received pursuant to a Restricted
Stock Award, except to the extent otherwise required by law and except
that the Committee may, in its discretion, charge the Holder an amount
in cash not in excess of the par value of the shares of Common Stock
issued under the Plan to the Holder.
(d) Miscellaneous. Nothing in this Article shall prohibit the
exchange of shares issued under the Plan (whether or not then subject
to a Restricted Stock Award) pursuant to a plan of reorganization for
stock or securities in the Company or another corporation a party to
the reorganization, but the stock or securities so received for shares
then subject to the restrictions of a Restricted Stock Award shall
become subject to the restrictions of such Restricted Stock Award. Any
shares of stock received as a result of a stock split or stock dividend
with respect to shares
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then subject to a Restricted Stock Award shall also become subject to
the restrictions of the Restricted Stock Award.
X. PERFORMANCE SHARE AWARDS
(a) Performance Period. The Committee shall establish, with
respect to and at the time of each Performance Share Award, a
performance period over which the performance applicable to the
Performance Share Award of the Holder shall be measured.
(b) Performance Share Awards. Each Performance Share Award
may have a maximum value established by the Committee at the time of
such Award.
(c) Performance Measures. A Performance Share Award may be
awarded to an employee contingent upon future performance of the
employee, the Company or any Subsidiary, division or department thereof
by or in which he is employed during the performance period, the Fair
Market Value of Common Stock or the increase thereof during the
performance period, combinations thereof, or such other provisions are
the Committee may determine to be appropriate. The Committee shall
establish the performance measures applicable to such performance prior
to the beginning of the performance period but subject to such later
revisions as the Committee shall deem appropriate to reflect
significant, unforeseen events or changes.
(d) Awards Criteria. In determining the value of Performance
Share Awards, the Committee may take into account an employee's
responsibility level, performance, potential, other Awards and such
other considerations as it deems appropriate.
(e) Payment. Following the end of the performance period, the
Holder of a Performance Share Award shall be entitled to receive
payment of an amount, not exceeding the maximum value of the
Performance Share Award, if any, based on the achievement of the
performance measures for such performance period, as determined by the
Committee in its sole discretion. Payment of a Performance Share Award
(i) may be made in cash, Common Stock or a combination thereof, as
determined by the Committee in its sole discretion, (ii) shall be made
in a lump sum or in installments as prescribed by the Committee in its
sole discretion and (iii) to the extent applicable, shall be based on
the Fair Market Value of the Common Stock on the payment date. If a
payment of cash is to be made on a deferred basis, the Committee shall
establish whether interest shall be credited, the rate thereof and any
other terms and conditions applicable thereto.
(f) Termination of Employment. The Committee shall determine the
effect of termination of employment during the performance period on an
employee's Performance Share Award.
XI. STOCK VALUE EQUIVALENT AWARD
(a) Stock Value Equivalent Awards. Stock Value Equivalent Awards
are rights to receive an amount equal to the Fair Market Value of
shares of Common Stock or rights to receive an amount equal to any
appreciation or increase in the Fair Market Value of Common Stock over
a specified period of time, which vest over a period of time as
established by the Committee, without payment of any amounts by the
Holder thereof (except to the extent otherwise required by law) or
satisfaction of any performance criteria or objectives. Each Stock
Value Equivalent Award may have a maximum value established by the
Committee at the time of such Award.
(b) Award Period. The Committee shall establish, with respect to
and at the time of each Stock Value Equivalent Award, a period over
which the Award shall vest with respect to the Holder.
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(c) Awards Criteria. In determining the value of Stock Value
Equivalent Awards, the Committee may take into account an employee's
responsibility level, performance, potential, other Awards and such
other considerations as it deems appropriate.
(d) Payment. Following the end of the determined period for a
Stock Value Equivalent Award, the Holder of a Stock Value Equivalent
Award shall be entitled to receive payment of an amount, not exceeding
the maximum value of the Stock Value Equivalent Award, if any, based on
the then vested value of the Award. Payment of a Stock Value Equivalent
Award (i) shall be made in cash, (ii) shall be made in a lump sum or in
installments as prescribed by the Committee in its sole discretion and
(iii) shall be based on the Fair Market Value of the Common Stock on
the payment date. Cash dividend equivalents may be paid during, or may
be accumulated and paid at the end of, the determined period with
respect to a Stock Value Equivalent Award, as determined by the
Committee. If payment of cash is to be made on a deferred basis, the
Committee shall establish whether interest shall be credited, the rate
thereof and any other terms and conditions applicable thereto.
(e) Termination of Employment. The Committee shall determine the
effect of termination of employment during the applicable vesting
period of an employee's Stock Value Equivalent Award.
XII. RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Share Awards,
Stock Value Equivalent Awards and any agreements evidencing such Awards
shall be subject to adjustment by the Committee at its discretion as to
the number and price of shares of Common Stock or other consideration
subject to such Awards in the event of changes in the outstanding
Common Stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in capitalization
occurring after the date of the grant of any such Options or Awards.
(b) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of debt or equity securities having any priority or
preference with respect to or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets
or business or any other corporate act or proceeding.
(c) The shares with respect to which Options may be granted are
shares of Common Stock as presently constituted but if, and whenever,
prior to the expiration of an Option theretofore granted, the Company
shall effect a subdivision or consolidation of shares of Common Stock
or the payment of a stock dividend on Common Stock without receipt of
consideration by the Company, the number of shares of Common Stock with
respect to which such Option may thereafter be exercised (i) in the
event of an increase in the number of outstanding shares shall be
proportionately reduced, and (ii) in the event of a reduction in the
number of outstanding shares shall be proportionately reduced, and the
purchase price per share shall be proportionately increased.
(d) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore
granted the Optionee shall be entitled to purchase under such Option,
in lieu of the number of shares of Common Stock as to which such Option
shall then be exercisable, the number and class of shares of stock and
securities, and the cash and other property to which the Optionee would
have been entitled pursuant to the terms of the recapitalization if,
immediately prior to such recapitalization, the Optionee had been the
holder of such record of the number of shares of Common Stock then
covered by such Option.
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(e) In the event of a Corporate Change, then no later than (i)
two business days prior to any Corporate Change referenced in Clause
(i), (ii), (iii) or (v) of the definition thereof or (ii) ten business
days after any Corporate Change referenced in Clause (iv) of the
definition thereof, the Committee, acting in its sole discretion
without the consent or approval of any Optionee, shall act to effect
one or more of the following alternatives with respect to outstanding
Options which acts may vary among individual Optionees and, with
respect to acts taken pursuant to Clause (i) above, may be contingent
upon effectuation of the Corporate change: (A) accelerate the time at
which Options then outstanding may be exercised so that such Options
may be exercised in full for a limited period of item on or before a
specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all unexercised Options and all
rights of Optionees thereunder shall terminate, (B) require the
mandatory surrender to the Company by selected Optionees of some or all
of the outstanding Options held by such Optionees (irrespective of
whether such Options are then exercisable under the provisions of the
Plan) as of a date (before or after such Corporate Change) specified by
the Committee, in which event the Committee shall thereupon cancel such
Options and pay to each Optionee an amount of cash per share equal to
the excess, if any, of the Change of Control Value of the shares
subject to such Option over the exercise price(s) under such Options
for such shares, (C) make such adjustments to Options then outstanding
as the Committee deems appropriate to reflect such Corporate Change
(provided, however, that the Committee may determine in its sole
discretion that no adjustment is necessary to Options then outstanding)
or (D) provide that thereafter upon any exercise of an Option
theretofore granted the Optionee shall be entitled to purchase under
such Option, in lieu of the number of shares of Common Stock as to
which such Option shall then be exercisable, the number and class of
shares of stock or other securities or property (including, without
limitation, cash) to which the Optionee would have been entitled
pursuant to the terms of the agreement of merger, consolidation or sale
of assets or plan of liquidation and dissolution if, immediately prior
to such merger, consolidation or sale of assets or any distribution in
liquidation and dissolution of the Company, the Optionee had been the
holder of record of the number of shares of Common Stock then covered
by such Option.
(f) In the event of a Corporate Change, then no later than (i)
two business days prior to any Corporate Change referenced in Clause
(i), (ii), (iii) or (v) of the definition thereof or (ii) ten business
days after any Corporate Change referenced in Clause (iv) of the
definition thereof, the Committee, acting in its sole discretion
without the consent or approval of any Holder of a Stock Appreciation
Right, shall effect one or more of the following alternatives with
respect to outstanding Stock Appreciation Rights which acts may vary
among individual Holders, may vary among Stock Appreciation Rights held
by individual Holders and, with respect to acts taken pursuant to
Clause (ii) above, may be contingent upon effectuation of the Corporate
Change: (A) accelerate the time at which Stock Appreciation Rights then
outstanding may be exercised so that such Stock Appreciation Rights may
be exercised in full for a limited period of time on or before a
specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all unexercised Stock
Appreciation Rights and all rights of Holders thereunder shall
terminate, (B) require the mandatory surrender to the Company by
selected Holders of Stock Appreciation Rights of some or all of the
outstanding Stock Appreciation Rights held by such Holders
(irrespective of whether such Stock Appreciation Rights are then
exercisable under the provisions of the Plan) as of a date (before or
after such Corporate Change) specified by the Committee, in which event
the Committee shall thereupon cancel such Stock Appreciation Rights and
pay to each Holder an amount of cash equal to the Spread with respect
to such Stock Appreciation Rights with the Fair Market Value of the
Common Stock at such time to be deemed to be the Change of Control
Value or (C) make such adjustments to Stock Appreciation Rights then
outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine
in its sole discretion that no adjustment is necessary to Stock
Appreciation Rights then outstanding).
(g) Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class or securities convertible
into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefore, or upon conversion of shares or obligations of the
Company convertible into such shares or other
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securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of Common Stock subject to Options or Stock
Appreciation Rights theretofore granted, the purchase price per share
of Common Stock subject to Options or the calculation of the Spread
with respect to Stock Appreciation Rights.
(h) Plan provisions to the contrary notwithstanding, with respect
to any Stock Value Equivalent Awards which have been approved but which
are unpaid at the time a Corporate Change occurs, the Committee may, in
its sole discretion, provide (i) for full vesting of such Awards as of
the date of such Corporate Change and (ii) for payment of the then
value of such Awards as soon as administratively feasible following the
Corporate Change with the value of such Awards to be based on the
Change of Control Value of the Common Stock.
(i) Plan provisions to the contrary notwithstanding, with respect
to any Performance Share Awards which have been approved but which are
unpaid at the time a Corporate Change occurs, the Committee may, in its
sole discretion, provide (i) for full vesting of such Awards as of the
date of such Corporate Change, (ii) for payment of the then value of
such Awards as soon as administratively feasible following the
Corporate Change, with the value of such Awards to be based, to the
extent applicable, on the Change of Control Value of the Common Stock,
(iii) that any provisions in Awards regarding forfeiture of unpaid
Awards shall not be applicable from and after a Corporate Change with
respect to Awards made prior to such Corporate Change and (iv) that all
performance measures applicable to unpaid Awards at the time of a
Corporate Change shall be deemed to have been satisfied in full during
the performance period upon the occurrence of such Corporate Change.
(j) Plan provisions to the contrary notwithstanding, with respect
to any Restricted Stock Awards outstanding at the time a Corporate
Change occurs, the Committee may, in its sole discretion, provide (i)
for full vesting of all Common Stock awarded to the Holders pursuant to
such Restricted Stock Awards as of the date of such Corporate Change
and (ii) that all restrictions applicable to such Restricted Stock
Award shall terminate as of such date.
XIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan or alter or amend
the Plan or any part thereof from time to time; provided that no change in any
Award therefore granted may be made which would impair the rights of the Holder
without the consent of the Holder, and provided further, that the Board may
not, without approval of the Stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be
issued pursuant to the provisions of the Plan on exercise
or surrender of Options or Stock Appreciation Rights or
pursuant to Restricted Stock Awards or Performance Share
Awards, except as provided in Article XII;
(b) to change the minimum Option price;
(c) to change the class of employees eligible to receive Awards
or increase materially the benefits accruing to employees
under the Plan;
(d) to extend the maximum period during which Awards may be
granted under the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee
hereunder in contravention of Rule 16b-3.
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XIV. OTHER
(a) No Right to an Award. Neither the adoption of the Plan nor
any action of the Board or of the Committee shall be deemed to give an
employee any right to be granted an Option to purchase Common Stock, a
Stock Appreciation Right, a right to a Restricted Stock Award or a
right to a Performance Share Award or Stock Value Equivalent Award or
any other rights hereunder except as may be evidenced by an Award or by
an Option Agreement duly executed on behalf of the Company, and then
only to the extent of and on the terms and conditions expressly set
forth therein. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of funds or assets to assure the payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the Plan
or in any Award made hereunder shall (i) confer upon any employee any
right with respect to continuation of employment with the Company or
any Subsidiary or (ii) interfere in any way with the right of the
Company or any Subsidiary to terminate his or her employment at any
time.
(c) Other Laws; Withholding. The Company shall not be obligated
to issue any Common Stock pursuant to any Award granted under the Plan
at any time when the offering of the shares covered by such Award has
not been registered under the Securities Act of 1933 and such other
state and federal laws, rules or regulations as the Company or the
Committee deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of
such laws, rules or regulations available for the issuance and sale of
such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company
shall have the right to deduct in connection with all Awards any taxes
required by law to be withheld and to require any payments necessary to
enable it to satisfy its withholding obligations. The Committee may
permit the Holder of an Award to elect to surrender, or authorize the
Company to withhold, shares of Common Stock (valued at their Fair
Market Value on the date of surrender or withholding of such shares) in
satisfaction of the Company's withholding obligation, subject to such
restrictions as the Committee deems necessary to satisfy the
requirements of Rule 16b-3.
(d) No Restriction of Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company or any Subsidiary from
taking any corporate action which is deemed by the Company or such
Subsidiary to be appropriate or in its best interest, whether or not
such action would have an adverse effect on the Plan or any Award made
under the Plan. No employee, beneficiary or other person shall have any
claim against the Company or any Subsidiary as a result of such action.
(e) Restrictions on Transfer. An Award shall not be transferable
otherwise than by will or the laws of the descent and distribution and
shall be exercisable during the lifetime of the Holder only by such
Holder or the Holder's guardian or legal representative. The Option
Agreement, Stock Appreciation Rights Agreement or other written
instrument evidencing an Award shall specify the effect of the death of
the Holder on the Award.
(f) Rule 16b-3. It is intended that the Plan and any grant of an
Award made to a person subject to Section 16 of the Exchange Act meet
all of the requirements of Rule 16b-3. If any provisions of the Plan or
any such Award would disqualify the Plan or such Award under, or would
otherwise not comply with Rule 16b-3, such provision or Award shall be
construed or deemed amended to conform to Rule 16b-3.
(g) Governing Law. This Plan shall be construed in accordance
with the laws of the State of Delaware, except to the extent that it
implicates matters which are the subject of the General Corporation Law
of the State Delaware which matters shall be governed by the latter
law.
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